Just like in our fashion, David, we’re right into things, so we’ll just keep going. But thank you, and very much for joining us. So welcome to Supporters Fund, Ask An Angel. And today we’re really excited that we get to dive into everything that you’re doing in Los Angeles, David. So maybe the best way to start is if you can give us a bit of a background idea on kind of where you’ve come from, the things that you’re currently working on, and then one thing about you that nobody would know.
David: Yeah, cool. I, I’ll do like a quick two minute. Started my, you know, career at Microsoft, came to LA to go to the engineering route and work for a couple startups that exited, and eventually found myself at Red Bull in a senior engineering role. Held a senior title for about three years and after three years, launched my corporate innovation studio called POGx, and from there made a couple annual investments. And in 2020, I attended (inaudible 1:06) University to kind of fulfill a little bit more of my investing capability because I, you know, I think it’s just like anyone else that’s just jumping into angel investing. Didn’t really know exactly what they were doing right off the bat, but had a lot of network, had a lot of, you know, friends that are founders. So that was, it was easy to learn from them and then (inaudible 1:26) university kind of took that to the next level and they also helped me to launch Action Ventures. So Action Ventures is a boutique syndicate made up of LPs, mixed family offices, and other business owners we invest in high performance ventures, we like to say. High performance just means something of an incredible unfair advantage, you know, very, it could be a really strong engineering team, it could be a really strong financial engineering perspective. So we’re just kind of looking for unfair advantages in that sense and that’s what we consider ‘high performance’. And then we write check sizes, in the size of 250k through a syndicate and then all throughout kind of this angel investing thing, I’ve been writing a bunch of small checks. So it’s, that’s actually been pretty fun as well. So it’s we can get into that but yeah definitely.
Jeffery: I love it. Well, I kind of want to and one thing about you before we jump. I always, almost forget this but one thing about you nobody will know.
David: Nothing really out there that says it, but I grew up in a small village in Alaska called Barrow Alaska. They recently changed their name back to the first people’s name called (inaudible 2:43), but yeah. I grew up in a small Alaskan town.
Jeffery: That’s amazing! That’s very cool, so you’re almost Canadian then.
David: Almost. I mean, there’s like, there’s definitely some, you know, first people’s, you know, culturals that I like, that I really took in. I can escort that so..
Jeffery: I like it. We’re going to call you Canadian. Anyways, so probably who’s out there, meet David. He’s Canadian and he’s growing up in the snow. So we’re welcoming you in. That’s amazing, that’s pretty cool. I still think Alaska should be totally 100% part of the Canadian side of everything because it doesn’t make a lot of sense to me but I’m gonna go with it anyways.
David: I know that, that would be an interesting kind of like, history analysis to look at, but yeah it’s interesting. Oh, by the way, Alaska does have one of the most active, you know, LP, like endowments as a sovereign nation and such, so pretty interesting. I’d love to see their BC performance but they’re pretty active.
David: Oh yeah, that’d be pretty cool.
Jeffery: I’m going to guess that during the winter months which are longer. They may have some time on their hands and they’re probably looking at maybe getting into ventures. So I can see a big opportunity there. I think I’m going to have to start finding some people there. Well, you know, some people in, let’s work together on this one. I love it.
David: Yeah, cool.
Jeffery: Very good, very good. So I kind of want to go back to some of the past and some of the things that you did throughout the Red Bull and the Microsoft days, how much of that do you think is really built into what you’re doing today?
David: Yeah, it’s, that’s a pretty good question. I came to Microsoft as an analyst. Yeah, I thought that I was going to go with the business route. When in fact, a couple of mentors at Microsoft kind of deterred me and said it kind of convinced me to go toward the engineering route. I actually loved the immediate, you know, incentive. So when you launch something, you release something. You write a little bit of code, you kind of get that like, quick hit of feedback and you ship it. And so learning how to code was a really interesting thing while working a full-time job. But we did it and then also at Microsoft and, you know, with my entrepreneur mindset, I always knew that I wanted to build something but in Microsoft, we built, I put on the intrapreneur hat and we built tools that helped us, you know, transfer data to sales teams, and that, you know, so and so forth. The team that I was on, specifically, was called the ‘traffic quality team’ and it was click advertising, and it’s at, its like peak thing had just acquired the yahoo click feed. We’re at this like peak moment where they’re getting so much data, just tons of data on the platform and in the process we had to figure out, you know, algorithms and things that are happening that prevented huge fraudulent activity, and so in order to do that we had to come up with tools and processes internally. That’s what really got me excited. Fast forward, a lot of that work that was done for click forensics and such was somewhat rewarded because the digital crimes unit at Microsoft was able to solve a big, I think 90 million dollar or so case, and that was a lot of the work and analytics that we did. Came to LA because I also found that it was peak Windows phone, it was peak iPhone. So I realized that, you know, I could either create a career or build technologies that were, you know, simple, fast, and easy to get out there and it was amazing. It was easy to do. Kind of as a first stepping stone and then you start to get into the full stack, and you start to get into data. And so, the start that I came to LA for was a, it was an inventory management product and, you know, built everything top to bottom. Me and another engineer, and then we shipped it, and 18 months later, they were required, moved into another type of aspect which was streaming. So streaming is what got me into Red Bull, we kind of did a lot of digital streaming, and at the time, it was, it hadn’t been figured out yet. Like holding data and holding content on a phone was, you know, whether you encrypted it on the phone and like prevented people from stealing the movie, for example. Those were little things that we had to figure out and then I think after that, it was just mostly distributed and mobile, so like how else can you figure out, you know, putting out a, I think the last thing actually, I worked on, code wise, was a react native, you know, application that was distributing content, 4k content. So it was pretty interesting and then that leads to my investing, you know, kind of thesis which is I can take apart consumer internet products. I can take apart distributed cloud products and anything that has to do with mobile and experiences. So that leads to marketplaces, you know, apps and like technology stack development where you’re looking at edge products, IOT. I think that I’m actually really excited. One of the companies I invested in was, is called Macrometa. You know, one of my fourth or fifth markups right now. Really excited about that but it was it’s edge software. So it was, I was able to understand the problem that they’re trying to solve at the enterprise level as well. So to shorten that up, it does give the engineering side, does definitely give you a lens into what might be coming in terms of technology and as innovation just kind of keeps going like at a ridiculous rate. I’m really excited for, you know, the kids that are entering engineering right now, what they’re going to come up with, what they’re going to identify as opportunity. So it might be way far from where I ended for my engineering career and that’s kind of exciting for me. So I don’t actually have to be an engineer to understand it anymore. I think it’s, I think things are way farther now than where I ended, to be honest as well. So..
Jeffery: And you still go in to, dive into the code side, so when you’re looking at these companies and you’re potentially going to make an investment, do you go into the code? Do you ask for that aspect of it and say, “Hey, you know what? I can do all this.” Or you’re just envisioning based on where they’re going and just using that as your kind of ground level to get everybody else interested from an investment side?
David: That’s a good point. I think with the way I look at a business in total is, you know, kind of the business and so if it is based on an engineering problem, then yeah. I’ll definitely dig into the stack and have more of an engineering conversation. But I think the reality is what we’re seeing, is companies can get to parity very quickly without having to do a huge engineering campaign right away. And so, I think when you and I connected, you know, as professional service providers in this world, you can do so much now with, you know, no code and low code tools to get your business up to parity, and that includes like internal things like, you know, how are you handling your accounts receivable? How are you handling your, you know, your tax and performance? All these tools, you can do without, you know, having to create anything from scratch, customer acquisition tools, and so the challenge that I see is, if you’re going to a deeper kind of engineering route and you’re really trying to figure out a big engineering problem, that’s super attractive. But if you’re attempting to do something in, you know, for example, consumer a lot of the problems have been figured out. So what I’m looking for in terms of that is, how fast you can move along your stack? How quickly can you get to parity using off-the-shelf tools, off-the-shelf code, you know, off-the-shelf stacks? Just move quickly. So there’s two kind of, you know, two categories I’m looking at there.
Jeffery: Well, that’s amazing and it’s kind of cool that you get the opportunity to actually understand the code, jump in, decide if this is hack or this is good, and then from there, you can also envision where something’s going to go. So you’re actually tying in other investors into that mainstream idea that you know this is where things are today. But I can totally envision that this can get to this extra stage with some engineering and the capabilities. So I guess that kind of goes into your investment thesis which is really based around, you know, what is that hidden gem that they’ve got built into their company and can it be engineer based? Can it be product based? Whatever that might be, and this is where it’s going to end up. So you have to really be able to foresee that future which I think brings a really good element to any investment group because sometimes, we can’t see further far enough out. So we can’t see that this could be successful and that it’s just going to end up being a big cost squeeze, and end up failing. So you’ve probably got a good vision in that because you can understand code.
David: Yeah, I think it helps and I think very rarely though do I jump in unless I get true access and, you know, it is interesting though because right now, at this very moment, I will say that a lot of companies I’ve looked at have raised, not that I’ve invested in, but there’s a lot of companies that have raised at incredibly high valuations and they have zero tech, whatsoever. It’s like they have processes and, you know, they have things in place but they’re a zero tech. Like zero tech stack which is really interesting so..
Jeffery: And how do you guys evaluate a type of company like that? And I’ve gone through some of your, some of the investments you guys have made from one of them that sound pretty interested which was Trash Warrior.
David: Yeah, yeah.
Jeffery: They’re probably not heavily code based. They’re more services slash code. You’re still doing something but it’s allocating maybe a vehicle or anything else that’s going to kind of help you move and get things out of the space, but what makes you decide to go into that versus diving into a super heavy code based investment?
David: Yeah, I would love to explain a little bit about Lily. And it’s a good time to kind of like, uplift the company but Trash Warrior, surprisingly, they actually had a really sophisticated back end, and they lifted that up by having a really easy and simple front-facing product and to kind of harp on Lily’s personal experience. She had a lot of product experience as well as data science experience, and she was partly responsible for bringing niantic’s curve the other way around. So they had a drop curve in their growth and she turned that growth around from her data science experiment experience, and so I think the way that she was approaching this whole thing from the beginning was a marketplace with a really strong data science, you know, perspective and lens. And then the ability to move very quickly on the engineering side, so they kind of hid the fact that it was very complex and your customer experience was just a three-step experience. That’s all it was, you put in your name, you put in your information, and you hit send, and it, they made it so simple that now I, you know, they’re at six million GMV, and they just started there. So they just started their kind of like rise. So it’s very, it was very impressive that they were able to do that and without me actually having to jump into the code. I could definitely tell that there was a lot of complexity behind the scenes and that’s what gave me a lot of conviction there, too. It’s like they did it, they figured that out.
Jeffery: Well, that’s pretty cool. So now kind of taking this the investment side of, and how you guys are going after different spaces, can you give us an idea of where you fit in with making that investment? Are you guys just money in and keep working? Do you work with them after? Do you just go on to the next deal? How do you kind of structure that?
David: But I mean, it’s kind of funny that, you know, the deals that you really want to get in, they almost don’t need you, and so they don’t need you very much. So with the smaller checks, we like to do the capital but we try to bring in some value added right away. So if it’s a matter of, you know, finding human resources or, you know, bringing in some human capital, if there’s any way that we could, you know, use our network of builders to help build or getting an engineering side, we do. I think one company that I’d like to talk about in particular is Bow or Stands for backup house. I heard, I knew that there was a really strong, you know, force behind the founder but I just had to match him up with a CTO because his tech, his current tech for his prior technical co-founder had left, and so just jumping in and bringing in and getting him in front of the technical people to see if they had a fit in a very very short amount of time. That’s where we kind of come in, you know, we’ll get on the phones. We’ll roll our things up. We’ll do a bunch of tactical work with you, so it helps.
Jeffery: And there are a couple of things that you look at when, now talking with these different founder groups where you feel you fit best? Like things that you can actually tackle for them.
David: Yeah I think what’s interesting is as much as this information is out there, in terms of raising money, you realize that a lot of founders, I guess, don’t have a process in place for raising money or raising capital. And that process needs to be somewhat of a sales engineered process, so that is something I jump in with immediately. It’s like, “All right, let’s get your narrative down. Let’s get your sales, your investor funnel kind of set up, and we’ll start doing the introductions. We’ll do the road show.” I feel like sometimes that’s new information for some people, but it’s like once you have a solid process and more meetings you could do, the better. The more relationships you can build early, the better. And so that’s one thing we help them with prior to even getting in with anything else, so the ones that actually raise very well and very quickly. I think that’s where we kind of have a challenge to bring in additional value. So, you know, again tactical strategic work, connections to more engineers, yeah like any computer vision, any computer vision type of, you know, ideas. I direct them immediately to opencv.ai and that, you know, Dr. Malik is a great, you know, founder himself. But he basically managed, manages the code for opencv and so coming up with processes, connecting the dots, like immediately, like on the spot, without second guesses, without question, helps that early founder go in. oh also in terms of stage because I keep, I think to clarify on the stage. It’s pre-seed, so we’re dealing with a lot of early stuff, you know, pre-rev, pre-product, of just ideas and so we like to kind of set those up and tee it up for other investors too. So I think that’s the other thing is, we kind of add that extrinsic value to make sure that that company has some clarity with other investors.
Jeffery: We’re bringing in a lot of that early push. So they kind of need a little bit of everything. So you really do have to wear this tool belt that is very open-ended. It can really be the swiss army knife of everything because being in that pre-revenue, pre-anything. Ideation is that you’re almost a mini-accelerator for finding these obscure businesses that you can take, build up, get them some traction, and then throw them out to market, and start finding investor relations, and people that will want to invest in it. But if you’re finding ones, that ones like we talked about that aren’t on the same path as everybody else. You kind of have to be creative in a way to get them funded or get them moving forward in that funnel because they are going to be a little bit different off the beaten path, and you’re trying to find what that, what makes them exceptional, right?
David: Yeah and if you kind of said it right there, it’s definitely that exceptional thing because we already know that in that stage, there’s a lot of missing parts. So we’re just looking for really unique unfair competitive advantages and that could be completely, you know, subjective but it’s how we build that fit, with that founder really early and you’re right, like there’s a ton of gaps in the beginning. But we like, I think that’s it’s pretty fun to fill those things into the game as well.
Jeffery: So how important are, I guess, the main little fundamentals like: sales, or governance, or maybe inventory management, based on the type of customer, what kind of things do you guys have to really hone in on to make sure that you can move them to that seed round investing? Like what things are really important to you guys? Is it just get everything organized? Start building your company, get your product done? Or is it sell, sell, sell? Like what kind of things do you have to focus on in this really early stage of helping a company work their way up?
David: I think it’s different in each case and, you know, we approach everything kind of individually. So each deal is different but where the founder comes in, you know, with certain aspects of their company, we like to, I, at least, I like to evaluate. Like what I could do immediately today that makes them look better for the next, you know, for the next fundraise. So that’s kind of the milestone. It’s like what are these things you could do today that can help them prepare for the next fundraise coming up? And so a lot of times that’s actually the team, you know, and I don’t know what people’s personal thoughts are on, you know, solo founders these days because it’s actually going to change quite a bit for solo founders. But for me, it starts with a team, then it starts with kind of like finding where the connected tissue is with that founder. So if there are sales, if they already have sales as their prior career down, doesn’t make any sense for me to bring in advisors for their sales teams. But if they are a, for example, if they’re an enterprise solution and they don’t have a great sales engineering team down, I teach them about pipeline. Like what does that pipeline look like? How can we get a million dollar pipeline established before your next race? It doesn’t have to be closed. It just needs to be, you know, optically good and get your 10 logos in there. At least to kind of get your pipeline and so these concepts are like, I mean, these are things that we’ve all covered in venture university, and I kind of borrow a lot of that but I think where I really hone in on my conviction is like, how much connective tissue do I have with that founder? And are they coachable? Are they able to accept what I’m bringing to the table? And if we have a good fit, then it kind of keeps going from there. I don’t really have that operationalized it by any means. But, you know, that’s why it takes kind of these one-off long relationship building processes.
Jeffery: I love that and because you’re in so early, there is a real coach mentorship build up here that’s going on because you’re going in and I feel the same way because we work in the same space. We’re early stage pre-seed companies that when you’re working with these the founders and the founding teams that they are leaning on you for a lot more things in this early stage and less, like you said, they’re getting money thrown at them everywhere, then you kind of feel like an outsider just waving some money and trying to throw it in. But you’re really not part of the mix. So it’s kind of a pullback. It’s almost not as exciting because you’re like, “I’m just throwing money in.” And, you know, because you look like you’re going to do well but it doesn’t carry the same weight, and it’s so, I’d love to get your thoughts on, you know, you mentioned the co-founder and single founder side, and we’re going to touch on that in a second. But I’m more interested on this part of, how valuable does the accelerator or the incubator side that you’ve kind of are doing this without calling it that, but that you’re accelerating these businesses, and what you’re getting out of this is you’re building this real strong relationship with the founder, guiding them through. How valuable do you think that piece of it really is compared to how other VC groups are really handling startups? Especially, as they start moving through it, just becomes about money, money, and value later on, but they don’t really have that early on what they had, which was that connection with investors, that connection with guiding, and making choices, and directions? So how valuable do you think that this piece is that you’re doing right now compared to, you know, that all the way up to a series d and e, and going public? How valuable do you think this part is in the ecosystem for startups?
David: I think from the founders perspective, it’s extremely valuable, you know, the mistake that I kind of make sometimes is that I assume that founders have already watched all the wise, cool videos, or they have already watched all the, you know, there’s a lot of information out there, and I’m like, you kind of don’t know that if they, you don’t have any reference to. If they’ve already done the baseline work but what I’m also looking at is, you know, I don’t want to have to evangelize that your company needs to be a billion dollar business. Like I think that you should be able to understand that with inflation and everything, you know, and gas being ten dollars. Having a million dollars in the bank, in the next couple years is almost gonna be the same as having a hundred thousand dollars in the bank because of inflation. So I think sometimes people are afraid to say that they’re going to be a billion dollar company, but not really taking in the fact that with inflation, you know, our billion dollar companies today are going to be multi-trillion dollar companies. And so we’re big, we’re small fish being billionaires or big billion dollar companies. So first and foremost, they just need to be open to the fact that, that value creation isn’t for them. It’s actually a lot broader and a lot more people value a public company if you can create something from scratch. And so they need to be on that trajectory mentally or at least have a mental, you know, framework to know that that’s a trajectory that requires this type of capital. The next thing is, you know, that’s not, it’s not all about the returns, right? So I think in order to to think in a, what we like to say like a 3D chess perspective. If the founder has at least one or two or three of these concepts and these frameworks in, and we see that there’s a gap in their thinking about a go to market or a, you know, a product idea or marketing, that’s where I want the founder to understand that it’s, you know, 80% them, 20% the rest of the team. Like we’ll bring in other talent, other things for you to figure out, but it’s really your job to keep that to like to own that vision and arc. And so it’s challenging. I mean, that that alone, those little things alone, are actually quite challenging for a lot of people and it takes practice, takes reps of a bunch of different failures, a bunch of different experiences, in order to do that, and I’d like to, I’m not plugging it by anyway, but I’ve read, I just finished Super Founders by Ali Tamaseb. And the the book references a lot of statistics on billionaire company or billion dollar companies, and the majority that stuck out or the little highlight that stuck out to me was the fact that the founders that built billion dollar companies had already had experience building smaller companies, and so it lends to the fact that that might be a great opportunity. So as an early angel investor, the way that I translate that is, “Okay, you, if you had some companies prior, that’s actually really helpful. But if you show this unique, if you’re young, and you’re 19, and you’re showing this really, really unique, you know, perspective that no one else has, I honestly think that you should put some, you know, put a small ticket in there and see if there’s some conviction.” It, there could be an opportunity, right? Like you’re just, you’re just buying the opportunity to get into their next business, not, it might not be that one but it might be the next one. That’s actually a conversation, too.
Jeffery: For sure. If they’re a great founder and you really get behind them even if, you know, the first company may be successful or not. Successful or whatever you deem as being success, you’re buying your way into that person’s next steps. So it is something that certainly makes a big difference as an investor because, and I’ll give an example, I invested in a company I think six years ago and they went on and sold their company in November and the founder came back and said, “Hey, look. This is where things are at. This is how it’s worked out.” Super fan of this investor or this founder and I said, “Hey, when everything’s all said and done, when everything is exited, those dollars are yours for your next company.”
Jeffery: And he’s like, “Really?” I’m like, “Yeah, because one, I already looked at those dollars as being gone, meaning that they were moving through the funnel to wherever they’re getting to. But I’m more interested in the next company that you build because it’s going to be crushing it, and you don’t even know what it is yet. I don’t even know what it is yet, but I’m that excited for whatever you decide to do next. So you let me know. And that’s what we’re going to do.” So it, is, it fits along the mindset because like you said, there’s, you know, it doesn’t matter if it’s a unicorn or if it’s just a billion dollar company, but how someone builds that makes a big difference. It’s how they, what the learning they went through, the struggles they went through that they learned from that, when they go do their next business, you know, it would be quicker, faster, and more efficient. And they’re going to be able to find different ways to solve different problems in a better, more conducive way that will save time, effort, money and then that means they’re going to move quicker into that bigger build of a company. But their energy is still there, their excitement is still going to be there, and that’s what you’re in a way paying for, right? You’re paying for learning.
David: And that’s our reward, too. As I think the enthusiasm is, you know, it’s like you kind of attach yourself to that enthusiasm, you know, it keeps you going as an investor. I think the energy is exactly what you spoke about and I, you know, I honestly think that the mental frameworks are there just so you don’t get blinded from the enthusiasm.
Jeffery: It’s true. I was on a call today or I was pitching an accelerator, so I was doing a talk. So it’s two hours, very long talk, but when I was going through it, all there was a message that came up in chat and it was of a founder that was going through this accelerator that said, “Hey, I met you four years ago and we talked about this. So great to see you again and now I’m building my company.” So it’s a touch point, right? So that person came to an event. They, we talked, now it came here and so forth. So those touch points make a big difference in when that founder is going to reach out and then I’m in my email, and I’ve got someone saying, “Hey, we talked four years ago. Here’s where my company is. I’m ready for you to come and invest.” So you made a little bit of a progress and a difference then, and now today, they’re coming back, looking for more. So there’s always a touch point of value that you’re going to bring in even if you don’t invest versus you do invest. You’re always going to try and figure out those great founders. I had a call last week which was interesting and it was kind of nervous. The founder, you could tell, and then he’s like, “So why are you reaching out to me?” And I said, “Because I think you’re a rock star and I’m interested in where you’re at and what you’re doing next and what you’re going to be doing today.” And he was like, “Oh,” and then he just went on and talked about everything, just like it dropped everything, he opened up, and just boom! Dropped everything out what he was doing, right? And that excited me because I think his concern was, maybe I don’t even know what the concern was, but the interest was, again, the learning of ‘when I first saw you. The second time I saw you, I got more interested and baked into you as a brand and as a business. So I don’t know where you’re gonna end up today and it might not be the right investment, but I’ll be there again in six months or a year. So if you decide to stop this business that I’m not super excited about but, and go into the next one, you know, reach out to me. I’ll be there even closer because I really like what you’re doing.’
Jeffery: So I love that. It’s a great way to share a way to tie into a value and then let that person run with it.
David: Yeah I think, I don’t want to drop too many references but this could go in the links. I just finished a course from Chris Fralick who’s, who was one of the managing partners for first round capital but there was a program that he put together just really quick called ‘Building Relationships’. And in the program, you know, he goes into the details and I’ll piggyback on this, but, you know, Baszucki was the founder of Roblox and it wasn’t until year two, they were able to get a check into the company. So from an initial introduction to, you know, around year two, was when they actually invested. It was just a constant, you know, relationship building exercise over that amount of time and some people aren’t patient enough even to consider that, you know, that length of time. So I think that’s actually a pretty good thing you bring up because, you know, when you’re younger, I don’t think you actually realize how much you know how important it is to kind of keep those relationships and kind of like use, try really hard to kind of keep those relationships going, and don’t shut yourself off from them because you never know, four years later again, they might be, you know, super valuable and, you know, you can build together with something that you’ve established with someone. So it’s, yeah. I agree in that. I agree with that 100%.
Jeffery: I love it, and I think that touch point is figuring out what that’s going to look like but trying to do something. If it’s a reach out in a year, but if you’ve got some interest in that founder or in that business from an investor standpoint, try to find a way to stay connected even if it is your own drip campaign that you’re doing with other investment emails you’re sending out. But doing something just to keep in the purview of what they’re doing and then doing a touch point every once in a while, brings a lot of value back to them and I think I’ve heard this a million times, founders feel like they’re alone at the top. And you know, I don’t know why but they shouldn’t if they’re that busy driving their business but maybe they do, and if they do, you know, what it feels good sometimes just to have an outside investor reach out and say, “Hi,” and just want to learn more, and keep that pulse going. So I think there’s a lot of value in what you’re sharing there and I think that’s brilliant. Let’s kind of revert back to that first initial comment that you made about founders and co-founders. I know there’s a lot of funds out there in the world that tend to only invest in co-founders and they can come up with a million reasons why they want co-founders for not every like, not having all the smarts of the business in one person, being able to do more with two people, you know. What are your thoughts on the single versus the double? And if it was investing in a single co-founder or single founder, and then versus a two co-founders or three, what’s kind of that look like for you and versus one versus the other? And how do you position yourself?
David: I guess, how you diligence it is different than how you kind of perceive it when you first run into them. I think that, you know, I’ll say like, so Trash Warrior. She was a solo founder but had an amazing engineering team, and a team backing her up. Not a problem. Like no one, you know, really flinched at it at all, and I think it was actually a really cool thing to see you doing. So I think that as long as it’s not a hindrance. As long as you don’t present it as a hindrance. Like I think sometimes founders might self-sabotage themselves by having that chip on their shoulder and saying, “Oh, I don’t have a technical co-founder,” and it’s kind of a droop in their lane, you know, and they’re talking, and they’re in their rhythm, and their energy instead just bring that energy up, and say, “Hey, it’s really just that energy that you kind of put out when you’re presenting the fact that you are a solo founder,” and it should be great because I think right now, with all the tools out there, there’s a lot of companies that are trying to reduce that amount of time, that getting to know you phase, and you know, whether they’re co-founders or not, you know, getting you’re, getting in front of these people faster should help you build your teams. But going back to the question, it was more so an observation from institutions because the more that I listened to like, you know, the industry podcast and such the more, I realized like, “Wow, this is actually pretty new. I didn’t realize how new it was in terms of the dynamics. So in addition to being, you know, in addition to diversity entering our industry, it’s also the fact that, you know, solo founders is a new concept and they’re open to it. So I think it’s mostly just a industry observation, personally, and the fact that I have, you know, one investment that who’s also a solo founder and a woman, I think that’s pretty cool. So yeah, I mean, I think that we’ll definitely run into more as we start to, you know, engage this new kind of cohorts of businesses coming in.
Jeffery: For sure. You get a lot of people that tend, I find that from what I’ve seen is that a lot of non-technical people will find a co-founder. So that they can build that strength right away of having that tech resource side versus going in and trying to manage it themselves and in that case, I find that, that is a real benefit to helping that company win. I think there’s also the other side where they’re engineers or they’re too technical. They really do need a co-founder on the business side because they may not be able to speak the acumen or drive that out in the way that maybe most on the business side will. So I think that’s also very helpful. It’s kind of a rare that you get them in between but that in between also, you just you got to hold more and do more work when you’re going in as a single founder. So you really have to have a lot of drive and push, and bring in like you said, a fantastic team to support you and that’s going to really help that move forward. So kudos to on the investment side in that team and all the other ones. So that’s pretty exciting. Well, we kind of taken this real nice little journey here and I got me all excited about this, that whole side of it. The co-investing are sort of the co-founders and the vendors, there’s so many good little pieces of insight and information on that, and diving into code and, you know, just fantastic. And I’ve got one question before we transition here but on the venture school that you took, how valuable was that for you as being an investor, having the experiences that you’ve already gone through? How valuable was this just to kind of layer in something new for you? Just for the investors out there listening.
David: Yeah, I mean, personally, I’m a huge advocate for it. So coming from the engineering side that you, that comes, that kind of naturally comes with this like, you know, individual contributor mindset and, you know, as much as you want to believe, you’re a great engineer. That doesn’t necessarily translate to being a great investor, of course. You could look at some code, of course, you could look at a company, but I also find that, you know, because being a long time software engineer, the majority of my peers are nihilistic in a way. So as an engineer, you kind of have this kind of like problem to problem approach. You don’t really have an opportunity to be super optimistic and so as an investor, what you have to be is, you have to be delusionally optimistic. You have to be somewhat delusionally optimistic so that kind of goes a little bit against kind of, you know, the engineering mindset. So what VU did for me particularly was, it gave me the frameworks to think by not only to evaluate a deal, the technical, the technical stuff, you pick up very quickly, obviously, as an engineer. But it’s the relationships that I realized was like, “Oh shoot, I’ve been in the cave. I’ve been in an engineering cave for the last 10 years and I really didn’t, I didn’t really build that many relationships that, you know, would actually grow into things.” And so that’s why they say investing is a relationship business and it really is, it’s really like how you go about building those relationships early on and it gives you a lot of context to do that, and then how to approach it because, you know, no one told me like what a double opt-in was. And so, you know, making introductions to people like, “Hey, this is a double opt-in you have to get the opt-in from, you know, the recipient, and then also the target, you know, introduction. And so really getting into that, there’s an art to this. There’s really an art to how you engage these relationships and no one ever wants to get a cold email like, “Hey, I’m raising money. Check this out. Look at what we’re doing.” People don’t want it to be transactional, and so I would say that that definitely helped in that perspective, too, is that, you know, he got into a lot of case studies where if you approach a relationship from the do’s and don’ts, just pretty much like, right? Like there’s a lot of do’s and don’ts in terms of relationship handling and building. So definitely not there but the technical stuff you can get that really easy. Like, you know, what’s a two and twenty, or what’s a, you know, what’s a good deal, and what’s not a good deal on paper? What does this term sheet look like? Those things are all available but what’s not available on google or otherwise is like, how do you actually, you know, handle these relationships? And then how do you actually formalize a relationship? And how do you then scale the amount of relationships that you have to go through as an investor? Because part of our job is 98% we say no to 2% we agree to. It’s like how do you manage that, you know, mentally, emotionally, and otherwise? So yeah I would say that it definitely helped with a lot of that.
Jeffery: I like it and just to touch on that point of the 2% success rate of investing. Like moving forward and the other 98% of having to say no or when you drop something, or let it go through the cracks, or however it’s ghosting, or whatever they call it these days in relationships. But it is, you’re right. There becomes a mental capacity issue on that as well because you try to appeal and appease as much as you can but can’t do that with everything and everyone, and it does become a bit of a tough go sometimes when you are becoming attached to a business, the founder, and what they’re doing. I’ve had a few of those in the past where you’re just like, “Oh my god, I want to invest in this company and I can’t figure out how to find the capital to do it or what. Ah! Man, this is choking me. I can’t get into this one. It doesn’t fit our thesis.” So there is that and you’re like, “Well, could I make the exception?”, and then when you fall out of your exceptions, then you think you didn’t do it the right way. You didn’t judge it properly. So it becomes tough all around, but I think it’s a great learning, and you’re right, the whole thing at the end of it all comes down to relationships. Every conversation you have, everything you start, everything you finish, starts with one relationship, builds on, and grows, and I think that makes a big difference in as you mentioned the problem solving and being able to be linear or being super communicative. However, you phrase that out but a lot of it comes down to is, you, and what you need to do in order to get to the next stage and help those with you or the companies you’re investing get to that same stage be on the same page, and grow, and move forward. So it’s pretty incredible that you’ve taken a lot of this early stage learning, helped accelerate these companies, dived into the ones that looked exceptional, maybe in the background but didn’t look so great on paper, found the wins, drove it forward, and hopefully all of those keep driving out some great successes.
David: Yeah. And the ones that you have, you know, the ones that don’t have a problem, you know, raising and don’t really need you, there’s always angel list. That’s what I was going to jump into now. Just like if you’re an angel investor and you want to get great deal flow that you might not have seen on your desk. I mean write the small checks, you know, you may run into that company, you know, some way, somehow, and it’s like, it’s amazing kind of, I guess, to throw some optionality in your, you know, your own personal portfolio. Yeah. I guess, how you diligence it is different than how you kind of perceive it when you first run into them. You don’t always have to. So that’s another thing you don’t always have to lead the deal, right? You don’t, you can get in and other people’s deals and be a smart investor. So it’s interesting, the landscape is really amazing right now.
Jeffery: Agreed. It’s just like the stock market, right? You can either let things ride, and go up, and down, and one day be a billionaire, and the next day be broke, or you can be one that just takes cells, and takes and knows, that you can jump on the low wave when it comes back again. So it’s interesting but there’s lots of options. You just have to play smart on it.
Jeffery: Well, all that’s very valuable. So now we’re going to jump into one question that has you sharing a little bit about something that really emphasized, totally just knocks out of the park for what it takes to be an entrepreneur. So I’m kind of looking for a story that kind of like, one of those heartstring pullers or one of those ones that just really blew your way that you couldn’t believe that this person went from a to b. You didn’t think that they had it in them. Didn’t think they were going to succeed or you thought they were going to succeed and they didn’t, whatever that is. Just looking for, you know, a story that you really see that defines what it takes to be an entrepreneur.
David: Oh man. I think that’s like, that’s an interesting one. So in the beginning let me speak a little bit like broadly first, and then I’ll go into like a story that fits because I think it has a lot to do with me personally growing up in a small village in Alaska like that, you know. I think out of that group, you wouldn’t really imagine how many people go off and, you know, go graduate college and go pursue other things, but surprisingly, I had a lot of, you know, classmates that did. I think that there’s like, I think that there’s a lot of emphasis on the valley right now. Like Silicon Valley is like this place but it’s not because everyone’s great, you know. I think it’s just because the exposure is high, right? So and that’s in that place where you can get incredible exposure as a little kid into, you know, seeing Steve Jobs or early home exposure is a big thing. But to me, when I came, when my parents came to this country, they were entrepreneurs already, and so the fallback for me, for us was always like, “All right, go create your own thing or go add some value.” And the little attachment that I have for investors that are listening to this or in the room is we get sometimes, we get so caught up with how we can add value. But I think that, I think people try to think of tangible things, when in reality, it’s like kind of self-searching and finding out like how you connect with that human at a human level, and anyway, so the entrepreneurial journey is that, you know, both my parents were entrepreneurs here and in order for us to exist, they had to become entrepreneurs and build businesses, small businesses that, you know, raised us. So our fallback naturally is like, “Oh we go build a business around what you want to learn.” And so that’s what got me to this point and I think the challenge that, you know, that a lot of people are going to have right now, especially, in this current like environment, but that’s, but what’s changing is that you’re not going to need, you know, the ivy league education any longer to call yourself an entrepreneur. I think that there’s so many resources and information out there to identify as an entrepreneur when even just 10 years ago. If you identified as an entrepreneur, you’re just like, you’re looked at a little weird. So today, you can identify as an entrepreneur and I think this kind of like trajectory that we all are having, you know, if you’re a fund manager, you’re somewhat of an entrepreneur. If you’re in this kind of other environment, any environment, you can be entrepreneurial, and so it’s not as looked down upon anymore in a societal sense. I would say, but in order to really get success, I guess, that’s another story that’s like part two of our story. So we will both come back to that and I think to allude to that though this entrepreneurial journey is like filled with discomfort. It’s filled with, you know, constantly, you know, preparing there’s a little bit of self-sabotage, and I think the best entrepreneurs actually just, they, you know, they assume that they take it and then they keep going like it’s just this weird persistence that, you know, I don’t know why it hits me every day. But it’s like you constantly just have to keep pushing and keep going. So that’s kind of the, it’s not a story arc by any means but it’s something relative that we’re all going through, right now, and it’s something relative that everyone’s kind of like wondering about themselves. Am I an entrepreneur? You know, do I want comfort? Do I want easy, you know, do I want it easy? Do I want it easier or is there a problem that I can solve that’s bigger than me? Or do I just need to go and feed my family for the week? You know, it’s like there’s different contexts of entrepreneurship, and it fits all of those things. It’s not just, it’s just not, just like, you know, the Bill Gates of the world. Like there’s a contextual entrepreneurship that we all kind of have to embrace, especially, if we’re paying it forward to, you know, other entrepreneurs as investors. So I try to identify on those, I try to identify those connected tissues with my entrepreneurs.
Jeffery: I love it and I like the fact that you come from a different perspective, too, is that your family were entrepreneurs. So you learned right away what that was like, how hard they had to work in order to make things work, what you needed to do. You already had the mindset, you already knew that if I’m gonna get into this space, I’m gonna have to work hard. I remember teaching a class and I went in, and said, “Hey, how many people here want to be entrepreneurs?” And I think one hand was like this “Yeah.” And that was it, and I was like, “Wow, that’s crazy!” Well when I’m done talking, we’re going to ask this question again and then when I was done, the talk, I think there was, maybe, I don’t know, six hands that went up and then I went back to the person that was shaking their hand, and wasn’t sure if they wanted to and I said, “You know what, was the reason why you weren’t sure?” Oh I hear all these stories that you got to work 20 hours a day. ‘I don’t want to work 20 hours a day, that’s crazy!’ So it was, you know, but maybe if their family had that exposure, they could see that man. I can get all this if I work this hard or I can go this far and do these things if I work this hard. And you know, maybe that’s a short window of 10 years and people think that’s a long time. Who knows. But it’s interesting that the learning you take from your childhood all the way through your the workspace and all the way through how that sets a stage for where you are today, and where you’re going to keep going, but you already know what the measure of risk and work is because you live it. So I think that’s pretty cool and I’ll support it with your line, ‘go start a business on what you want to learn’ and I think that’s brilliant because I can self reflect on that and say that I always wanted to build a VC. So I did, and I think that you can set goals in your mind and direction you want to take, but if you don’t challenge yourself and get out of your comfort zone, you won’t get there.
David: Yeah, I, oh man, there’s a tweet that I retweeted the other day. But it was saying, you know, “Getting wealthy isn’t about working hard because if ever, if everyone worked hard, would have a lot more billionaires in the world.” It’s just about, you know, leverage, at the end of the day. So it’s an interesting perspective, too. It’s, I think we all have a little bit of entrepreneurship in this. We just have to like, you know, like really embrace it and just lead into it because I tell you what, sometimes I feel like, you know, I’ve been off the nine to five drug for like, you know, going on five years and it’s like sometimes, I do wish that it’s like, “Oh yeah, I would love to apply for that,” or you get this role or do that. I realize a lot of VCs do have full-time roles sometimes while doing their funds, but it’s also interesting, too. When immediately, I just kind of switch that off and figure out, “Okay, you know, I can do, I can do this client work right now. I can do this thing,” and it really just, it’s like you move past certain things, buy a business, you know, get into certain, ‘we bought and sold a business.’ So it’s just interesting. It’s just interesting. I think we’ll jump into that another time. I think that the fallback like, again, it’s like, ‘okay, cool.’ Let’s go start a business you and me. We’re gonna end up starting another business, and-
Jeffery: It’s all timing. It’s knowledge, it’s direction, it’s pretty cool. So I love all the things you’ve shared, we’re going to kind of transition now into the rapid fire questions. We’ll do these real quick and then we got a couple questions left and, but man, so far amazing! And love the deep dive. It’s been great. All right, start it off. What’s your favorite part of investing?
David: The relationships, the energy, the enthusiasm, and you know, turning entrepreneurs every day like making everyone I know entrepreneurs. Making my friends rich.
Jeffery: I love it. I love it. I have to throw this in there but I used to be, I used to say, I went out, this was 10, 20 years ago, I’ve been working with startups for so long and people are like, ‘why are you always pushing this?’ and I said, “You know what, I’m like the biggest cheerleader for startups. I don’t know why I do it. But I just love the fact that you have to have this drive to get into this space.” Like “Yeah, but you’re always,” I’m like, “That’s right. Be an entrepreneur.” So I love that, great on you for that. It’s beautiful. How many companies do you invest in per year?
David: I try to do 10, to 12 per year. So last year we did a, closed off of 10, now 12. Q1 was a little slow this year but yeah, we’re gonna make up for that on some angel list investments, small checks, and then we’re gonna try to leave a few more. So I’m not, I don’t have an ego around leading deals. That’s another kind of thing to talk about but yeah, I’m definitely supportive of the ecosystem and I want to get in as many deals as possible. I think 12 is what kind of allocates you.
Jeffery: Awesome! Well, you’re three times the average, so it’s brilliant! Any verticals you like to focus on?
David: I can tell you what, I don’t focus on so no bio, no health tech, I just, you know, like if there’s a consumer-facing health tech component, for sure. But I’d leave that to the professionals. I think that there’s like a whole world of that I will have to spend another lifetime to learn.
Jeffery: Perfect! Anything that on a due diligence side? Either paperwork or team, is there anything that you really emphasize that know, you mentioned team before, so is there anything on that side that you really have to have to make an investment?
David: I mean, I think it’s about team optics and narrative. So shaping your narrative is really important. You’re not trying to fool anyone, but you’re trying to synthesize it the best way and telling your story around your team is somewhat challenging. It’s because a lot of times people don’t like talking about themselves, you know, especially if you don’t have, you know, there’s people with chips on their shoulders and you actually should look into where they, you know, where they have chips on their shoulders, and that’s actually, it uncovers a lot about founders which is actually incredible. So yeah, learn how to shape the narrative. The narrative is very important. Learn how to storytell.
Jeffery: I love it. Do you, you mentioned about the lead rounds, you don’t have to do that, do you have any preferred terms? Like do you like prep shares, safes, anything that you like to stick to when you’re making an investment?
David: No, I mean as long as the deal terms are right. Like so pre-seed, I think for a very short time in the beginning of this year, we were able to say great sub six, post money, right? Like we can participate. That’s a great deal. Oh, it’s a safe, it’s a verbal note, that’s fine. Great, but I think what we’re seeing is a little bit of a tiny bit of inflation on the, you know, on the valuation side. So we have to dig more deeper into the technology. So if you’re going to present it, just kind of as a reaction in the, in this founders market as a reaction. You have to dig deeper on the technology on the, you know, on the potential multiples other than, rather than ownership.
Jeffery: So okay, love it. Do you take board seats and do you do follow-up investments?
David: No board seats, and you know, I wish I could play with pro rada but, you know, since we’re dealing with, you know, uncommitted capital. You know, we prefer not to do the pro riders.
Jeffery: Perfect. All right. Well. we’re good on that. Thank you very much! Couple questions, we’re almost there, we’re pushing through.
Jeffery: All right, first question: favorite sports team?
David: Favorite sports team? Oh man. That’s, I, so I’m into unconventional sports. An action sport, so if you go to my website now, it’s like a guy at a motocross bike but I used to work for Red Bull. So any team in rally and racing. I’m team Red Bull all the way.
Jeffery: Yeah, Red Bull’s pretty exciting. I like their base jumpers and all of the stunts they do high in the sky which is pretty sick. So yeah a big fan of that as well. So very good, cool. Favorite movie and which character would you play?
David: Oh shoot. I think favorite movie was, I can’t remember the name but Keyser Soze. It was a, man, I can’t remember this just because it’s a fast question, but it’s where Keyser Soze. It’s what Keyser Soze, remind me the name, you know, name Jack. Come on. Oh, I, I’m it, it’s killing me right now. So yeah Kevin Spacey. I’ll have to google it damn. Darn it is my favorite movie, the Unusual Suspects, there you go. Shoot! See, I get stuck on quizzes reason. I would love reason. I loved it was just the masterful storytelling and the character that I would play. I would probably play the detective, the main detective.
Jeffery: I’m trying to remember what the main detective’s name was but I like that. Yeah, and now I’m gonna have to watch this movie again. It’s just been a while.
David: Oh, second major, second favorite is that Moneyball.
David: It had to do with investing, right? So yeah check that out.
Jeffery: Yeah for sure.
David: And which character I would play, Jonah. Like I would be that guy. I would be the data scientist. I mean, I’m kind of, you know, I’d be the nerd in that scenario.
Jeffery: It’s funny but yesterday I had a picture of Jonah and he had this blonde hair slicked back. Like I know the guy or something and I sent it off and I said he has to have a bigger head than I do and it was literally yesterday. So I have to share that because, you know, big head, small bodies. So I’m like yeah it has to be true.
David: So man, I mean, I have a huge head, too man. So I know the feeling.
Jeffery: Yeah, so I thought it was entertaining but Jonah, if one day when you do listen, don’t take it badly but yeah disproportionate. We all are but crazy anyhow, that was a great movie. I totally agree with that. Okay, last question, what is your superpower?
David: So to me, super power is like a recipe of things. I like to motivate people. I can get people stoked. I’m good at energizing and getting people appreciative of ideas, but it can also, you know, can also scare people away. So I think my thing is translating, you know, all these technical things and making them very approachable and easy to consume, especially, in investing, and then the last part of that is, I think that, you know, I think that I can, I don’t know. I’m a good connector in a sense. So like, I will easily think of two or three people that I think you should meet when I meet here and that’s immediately what I do, and sometimes it gets a little annoying to people. But I, it’s like I kind of find some of that connective tissue without even having to think about it, and so that’s what I do naturally. So I like to kind of lean in on that.
Jeffery: I love it! Well those are all great characteristics. We shared a ton. As I always say, I don’t take notes but man I always take notes. So I go in every day thinking I’m not taking notes today, and you know what, I just can’t help it. I’ve got stacks and stacks, but I love it. This is all valuable information. I love the conversation. I think we went into some great spaces and again, thank you very much David, today, for joining me. We’re going to, as we like to do, leave you with the last word. So anything that you want to share to the investor community, to startups, we give you the last word, but again thank you very much for joining us today and sharing all this great insight.
David: Yeah, thanks everybody for joining. Thanks for Jeffrey for having me. I like to say, no cold email. So you know, feel free to reach out to me firstname.lastname@example.org, happy to talk about anything, you know, founder, tech startup, investing related, even motorcycles and cars. So happy to do it.
Jeffery: I love it and you got a great URL. It’s fantastic, easy to remember. Well, thank you very much again, David. Give me one second. Okay, that was an awesome discussion. Again, so much value in there, man. It’s incredible, loved everything that David kind of went over. I think there’s some great pieces around him being a technologist, an engineer being able to dive into code. I love the discussion around the co-founder versus the single founder, how they’ve tried both but there really is a lot of new potential coming into single founder side of things but being able to to solve problems, build relationships, communicate, you know, and I love this line of ‘go start a business on what you want to learn’, incredible! That’s just 100% exactly where life should be, is that everything should be about ‘I want to learn something. I’m going to dive into it and take my background and build something cool, and I’m doing this because I want to learn first and build up everything around it.’ I love that. It’s all around tech technology, motivate, and connect, you know, he’s got a great skill set, great mindset, it was fantastic talking with you David. Again, you know, thank you for sharing so much and all about the university and learning about code and venture investing. Incredible! Great things, so thank you very much again for your time. Thank you for joining us today. If you enjoyed this conversation, please subscribe to our YouTube channel, or follow us on Spotify, Apple Podcast and or in Stitcher, you can also check us out at supportersfun.com, or for startup events visit opn.ninja. Thank you very much everybody! Like, feed, share, join, see you guys all next week!