The Exchanges

Q um, I would consider Austin as a place I would want to live. Um, and I felt that way for the last few years. Then again, I haven't really seen too much of the U S maybe like 10 of the 50 states. So don't have much to go on. Um, although, uh, yeah, Austin was pretty cool. So I'm, I'm curious what makes you excited about working with startups?

A Yeah, I think there's a lot that gets me excited. Uh, and, and, you know, I think over, over time it's less excitement and more purpose that really, really drives me. Um, it's actually a lot of times startups are The opposite of exciting. They're, they're a big pain in the ass. And you got, you know, interesting co-founders with, with, you know, ambitious views on the world that, that don't align with investors who want to get their, their money back and protect their interests. And, you know, there's all kinds of things that go wrong in startups I've learned. And, uh, but, but really it's about making an outsized impact on the world. And, and, you know, History shows us that small teams are the ones that really make a difference and, and, you know, create solutions at scale, uh, and, and, you know, startups are the modern day manifestation of that. So I choose to be involved and, and, you know, here and here in Austin, where most of us are, a lot of us are longhorns and the university of Texas at Austin, our slogan is what starts here, changes the world. And I think that's a big, big part of the purpose that I get involved with, uh, startups for.

AI assessment note: “really it's about making an outsized impact on the world.”

Q You said small teams make a difference. If small teams are better at making a difference than large teams and large companies, why are small teams pushed to grow so big and so fast?

A That's a good question. I, I will speak to venture funded startups specifically. Um, you know, and there's a lot of other types of small teams, whether it be a nonprofit or just a project or, you know, any, any other type of group, but a venture funded startup is. Predicated on, on outsized returns, as well as outsized impact. Right. And, and, you know, meaning this is the riskiest asset you can invest in a startup startup company on the spectrum of Assets to invest in, you know, startups are, you know, the highest chance of losing your money, but it's also because of that, the highest chance that, that you'll, you'll get a huge return. And so, um, it's, it's the investors who fund these, these companies that, you know, they need to generate high growth to justify, uh, a 10 X, 100 X return on their investment in these companies to go raise money for their next fund. Right. And it's like a lot of these investors, they're raising money too. And so, you know, they need to see you grow. They need to at least see your valuation get marked up on paper by raising additional funding, because that's the information they're going to go to their investors, their limited partners, their LPs. Uh, to try to raise their next fund. And so that drives this, this growth cycle. Um, and, and, and yeah, and so without the need to grow or the, the, the impetus to become super big, you wouldn't be ab…

AI assessment note: “it's the investors who fund these, these companies that, you know, they need to generate high growth”

Q What do you see the investor's responsibility as being?

A I mean, the investor's responsibility is to steward the investment. You know, the key word is like the investment, not the company, although they're very, you know, intertwined obviously in the success of the company is the success of the investment investor. Investor most of the time, although, you know, in some key times it's not, and, you know, they've got to get money back to their LPs if they're a, if they're a VC and they have a fund. So they, you know, that's, that's their job and their customer is not the entrepreneur, the customer is the, the, The LP, the limited partner that's investing in their fund and the entrepreneur is more of a, a strategic partner for that. So, um, yeah, I think investors, good investors do have a responsibility in the company, um, to make introductions, to, uh, provide key pieces of insights. Investors get to see a lot of different companies, a lot of different ventures. And so it's usually easy for them to help. Connect the dots across them and, and, you know, bring ideas from other ventures that are, that are novel into, uh, you know, another, another one in their portfolio. So I think that's a big, big piece of it to add value. But I think, you know, one thing you want to know as an, as an entrepreneur is like, Hey, they're, they're looking to make money and looking to get an investment back. And that's how this, that's how it works.

AI assessment note: “the investor's responsibility is to steward the investment.”

Q What are some things startups can do? To make themselves look more attractive to investors in this environment, preferably without having to do that down round.

A I think as, as much as you can grow into your britches as a company, the better. And so, you know, really focusing on growing your customers and your product and, you know, everything, you know, outside of the fundraising will, will make fundraising easier and really prepare you for the time That, that the market comes back and, you know, it's the classic conundrum, you know, when you're running out of money and you're trying to fundraise, as an entrepreneur, you feel like this is very important. You really, you know, we're doing something interesting. You know, you can make a big difference by investing in the company. You know, we won't go out of business. We won't lose, it won't run out of runway, but really that's the last thing an investor wants to hear. Investors don't want to invest in companies that are running out of money or don't have any money. They want to invest in companies that don't need to raise money because that's the safest opportunity. And so I think, you know, as soon as you put yourself in a position where you can raise money To take advantage of a market opportunity, but you can also operate indefinitely if you don't. And that puts you in a position of power to where you really don't need the fundraising and that will actually make you a more attractive investment for, for the companies. And I, you know, generally I'd be looking, you know, how do you po…

AI assessment note: “put yourself in a position where you can... operate indefinitely if you don't”

Q What are some of the mistakes that founders make in preparing to talk to investors?

A Well, one, they don't prepare. I think it's like, you know, you know, you should know everything you can know about the investor you're talking to. Like I, You know, I've had founders show up for meetings that we've set up that don't know who they're meeting with, you know, and like, I feel like a lot of founders get, they like overpack their schedules. So they walk into everything blind and they're not very effective in the meetings. Um, and so, you know, like every investor I'm meeting with, I'm at least reading through all of their LinkedIn, but I'm, You know, if I have time, I'm trying to find a podcast like this or a YouTube video where they open up, they go a little deeper so I can really get inside their head, know how they think, know how they talk. Um, you know, that, that type of thing. Uh, you know, the other thing that happens, there's like this, for whatever reason, people like to bash on investors and get the, like, oh, like, VCs like don't fund me. They're, you know, they think of a bunch of reasons that like VCs aren't great or investors aren't great, or they kind of like put themselves against the investors and, but they still need to raise money. And it's just like, it just comes across bad meetings. It's like, if you have that, that undertone, like it's the investors are really good at picking up on, on like emotional cues and thoughts. And it's not like they…

AI assessment note: “Well, one, they don't prepare.”

Q the army, let's like teach you how to do a bunch of really cool stuff, but rather use the stuff we already have, and maybe the people that are building the tech for the Department of Defense, the military army, have nothing to do with being a soldier. Maybe they've never been a soldier, so they don't know how the, the, you know, complex works. Would you say that's accurate?

A I don't have a good perspective on the Israel side of it. I'd, I'd say, you know, certainly to, you know, I think very, we're in a very unique spot when it comes to technology being the United States. Um, and it's, you know, I, I generally, I think I agree with your, your statements. Um, but what I, what, what I can say that I know is that the, the, you know, the, Armed Forces in the US want to speed up the rate of innovation, right? And I'd say here, we, we grew up with technology probably more than anywhere else in the world. And, you know, and I see a lot of the people who are, you know, Working for these, these DOD innovation groups, Army Applications Lab, AFWorks, it's, they're kind of at the end of their career. And this is kind of like a retirement method for them. And, and, and there's inside, you know, I think what you're talking about is like, you know, doing it outside of the DOD, but this is actually, you know, groups in kind of these innovation units, which are kind of separate from the operating, you know, bases. Right. And it's really thinking about where is the army? You know, the future and, and really connecting with all of the startup ecosystem, not just a capital factory, but all over the country and, and, you know, being able to very quickly source technology. And so I, I think, yeah, there's certainly, you know, some, I think a lot of the people after they…

AI assessment note: “I generally, I think I agree with your, your statements.”