The Exchanges

Q Pretty good. That's pretty good. All right, good stuff, Scott. Let's wrap up here with the famous five. Number one, what's your favorite business book?

A Uh, favorite business book. So this one's a little bit cliche, but there's a reason. And I'm going to say crossing the chasm. Okay. By Jeffrey Moore. Um, you know, he kind of invented the technology life cycle adoption curve and, you know, his diffusions of innovations model and, you know, choosing a target market, understanding the whole product concept and positioning the product, all that good stuff. But the thing that really, really connected me with that book is that I actually had an opportunity to work with Jeffrey Moore. Uh, while I was at Salesforce and he is as brilliant or more brilliant in person than he comes off in that book. And the book is one of those quintessential publications that it just sort of transcends all of these, uh, bubble bubbles and trends and technologies. It just applies broadly. And ever since he published it, it's, it's still relevant even today. And so I, that's, that's one of my top, it's just a classic, but more recently, Steve, Steve blank and the four steps to the epiphany I mean, that is just, if you want to learn how to build a lean startup, I mean, that is the book to read. And so it's kind of a mod. It's like a template you can apply to a startup. You know, he always, he says, you know, you're not a special snowflake. I think I'm, I think I'm paraphrasing when I say that, but you know, there's always a way to model a group, how to bui…

AI assessment note: “I'm going to say crossing the chasm. Okay. By Jeffrey Moore.”

Q Both good ones. Number two, is there a CEO you're following or studying right now?

A Um, so, you know, I, I study every CEO that we look at, um, but that's not the right answer. The right answer is, uh, CEOs that I admire quite a bit, um, that have been around for a while. Tony Hsieh is one of my, uh, all-time heroes, you know, CEO of Zappos. He wrote the book, Delivering Happiness. And for me personally, I think customer service is going to, is, it's already, and is going to continue to be one of the key transformational drivers for business To actually grow, you know, customer service used to be viewed as a cost center for these comp for a lot of companies, but now it's actually viewed as an opportunity to drive, uh, innovation, customer satisfaction, and ultimately top, uh, bottom line profit. And so Tony is, uh, you know, he's brilliant. He's also, he gives back to the community. You know, he's, he's revitalizing, uh, downtown Las Vegas, um, and just generally a really great guy. The other one that I would mention though, and I'm sure you've heard this one a million times is Satya Nadella. I, the thing I like about Satya is he asks all of his employees to embrace the learn it all rather than the know it all, which was kind of the old Microsoft. So the new Microsoft is more empathetic. Um, he embraces collaboration and openness. And I mean, look at the numbers. I mean, this guy has driven 200 over two hundred fifty billion dollars in market cap value since h…

AI assessment note: “Tony Hsieh is one of my, uh, all-time heroes, you know, CEO of Zappos.”

Q A lot of these BD departments at large companies are going to have more money to play with. They might be doing more of their own investing. Does that make it harder for a traditional VC firm like you? That's not necessarily specialized in one category, at least to the degree that the actual company is. Does that make it harder for you to get into those kinds of deals?

A I don't think so. I think what we end up doing at Northwest is we end up, uh, co-investing with strategics quite a bit. And I think there's a lot of value for, you know, companies to come in who can bring a lot of value to a company. So just as an example, um, you know, we have companies in our venture portfolio that are looking to break into new markets. And if you've got a strategic investor that already has easy access to those markets, It's a perfect way for us to co-invest. Now, Norwest usually leads a round, but then a strategic can come in and participate in that round, and we're always open to doing that. If it's actually, if it makes sense for the company, um, and it can actually help accelerate, uh, the growth. So finding a true strategic isn't always easy, but, uh, you know, we're at Norwest, we're very open to it.

AI assessment note: “I don't think so. I think what we end up doing at Northwest is we end up, uh, co-investing”

Q only raised about a million bucks and he pays himself and all the employees a great dividend at the end of the year. And it is like enough money to make them very comfortable way above average. And that's an alternative to raising capital to go for something big to get everyone a big payout. Um, how do you manage these diverse incentive structures between a VC and a founder?

A I think it depends on the company and the timing. Um, you know, some companies are at a moment in time where all of a sudden something fundamentally changed, right? So it may have been that for the last decade, um, they've been able to be very successful in a bootstrap situation, and yeah, maybe they're, they've been incenting their employees with cash, but a lot of times we turn a corner. Either there's a new technology opportunity, Or the market itself changes. And they say, wow, if we had more capital to work with, we can actually take a much faster growth curve. And guess what? There's still going to be great incentives for the employees and the shareholders, but employees, you know, obviously you want to keep everybody excited and motivated, but maybe it shifts. Maybe instead of taking some sort of a dividend, like you called it, Maybe there's a great equity upside, um, and, and that sort of scenario that they can, that they can start to paint. And I think a lot of the companies in our portfolio, we have a 140 active portfolio companies right now. A lot of those companies are thinking about that. They're thinking about how do we keep everyone super excited and motivated for, you know, in the next five years while we build toward that next liquidity event. So I think there's always a lot of options there.

AI assessment note: “Maybe instead of taking some sort of a dividend... Maybe there's a great equity upside”

Q the two interviews, I think together they've raised about four hundred million dollars together. It was data stacks and Trenda, right? Which went public in 2016. And so I always wonder, Right. As a, as a capitalist minded founder, and you've been there in your mid twenties when you decided to raise, is it a quicker way? If you're only optimizing for getting rich, raise capital or don't raise capital.

A No, that is, that is the billion dollar question, isn't it? Um, great example, um, a company that I invested in, uh, based out of Vancouver called ACL. This is a company that's a thirty-year-old company, had never raised a penny of capital to date. They bootstrapped for 30 years. Extremely successful. Um, you know, a nice steady growth path over, you know, since the late eighties. And, uh, you know, they were at a moment In time where they said, you know what, we think there's an opportunity to strike. They're, they're in, uh, arguably, you know, not the sexiest area. It's governance, risk, and compliance. But when you look at the opportunity and how every single large enterprise company in the world needs it, it actually starts to look pretty sexy. And if they want to get a path to, you know, this hockey stick effect, um, and infusion of capital and bringing a company like Norwest into the picture where we can really help them You know, craft the right strategy and the right execution to get them to potentially an IPO one day, potentially another form of liquidity. Um, the timing was right. And for them, it was a combination of bootstrap for as long as you can and do, do as well as you can. And now the right decision was let's infuse some, um, let's infuse some capital, um, in kind of a private, uh, growth equity type of arrangement. And, uh, it's so far so good. Working out r…

AI assessment note: “for them, it was a combination of bootstrap for as long as you can”

Q I'm not familiar with that company, but I imagine that founder was very comfortable if he's been doing this for 30 years, and it took a little bit of convincing on your end for him to take this deal. I'm, I'm assuming here him or her to take this deal. Was any of that round secondary where he or she took money off the table?

A Well, you know, the, the whole way that, that founders like this tend to think about these deals is they think about their company first, and they think about their employees first, and they think about, you know, how can, how can they actually, after 30 years of success, how can they really take this to sort of this quantum leap next level? And so, uh, the founder, he's, you know, he's brilliant, um, but he really cares a lot about the company. And he cares a lot, but he thinks that there's a great opportunity. Um, so for him, he wanted to bring as much capital to the company as he possibly could, um, so that we can potentially make some really strategic moves that are, that are going to be capital intensive along the way. We want to grow faster. We possibly want to grow, um, in creative ways that are going to, they're going to require some additional capital. So he is, you know, he's a very, uh, humble, Uh, but smart, uh, founder. And I think it, I think it takes a lot for a founder to do, to make that mental switch from, Hey, you know what? It's almost like a family run bootstrap business to, Hey, you know what? We're going to go big and we're going to bring a firm like Norwest in to help us superpower that next, uh, that next change.

AI assessment note: “for him, he wanted to bring as much capital to the company as he possibly could”