Jeffery: Welcome to the Supporters Fund Ask An Investor. I’m your host Jeffery Potvin and let’s please welcome Jacques-Alexandre Gerber, Agave Partners Capital, as our investor today. Welcome Jacques. It’s a real pleasure to have you join us today.
Gerber: thank you Jeffery. pleasure meeting you and thanks for having me.
Jeffery: super excited to have you here man. there’s so many great things that you’ve done over your career and I love just unpacking all this great stuff so we’re going to jump right into it. and the best way for us to jump in is if you could share a little bit about your background all the way back to your school days in Lyon to the startups and to what you’re doing today at Agave Partners Capital and we’ll jump in from there. then one thing about you that nobody would know.
Gerber: All right. I don’t know about that. But, yeah. Thanks a lot. So, back to Lyon. Wow, that’s a while ago. I graduated as a computer scientist in France as everybody will hear from my accent. And actually after that, I went on to my military service. that was still required at the time per French Law. but you could do that as a civil servant for French embassies or French companies around the world and that led me to go to Cairo, Egypt where I worked for 18 months on educational programs around French of course and as a computer scientist. I was very happy to work on very innovative online programs for Egyptian teachers teaching French which back in the mid late 90s was very innovative. So, it was a fantastic experience. I mentioned it because it was very informative for me to spend so much time in such a different and foreign country for a variety of reasons that I really appreciated. and it was really instrumental in my career I think. and at the end of this, I was actually called by a friend of mine. We did our studies together. we just arrived in San Francisco and he called me pretty much out of the blue saying, hey Jacques, I’m in San Francisco. I’ve just started the company. we’re doing some amazing things. You’ll love it. come on board, etc. and I was not prepared for this as a computer scientist. Going to see Silicon Valley was a dream. So, he followed me to pay for my flight ticket to come visit him. So, I said, okay, there’s nothing to lose. So, I came there with my small suitcase to check it out. and almost 25 years later, I’m still in the San Francisco area. So, that’s how it started. we started this company called Intalio and it was started back in 1998, end of 98. I joined at the end of 99 and initially as a software engineer, then very quickly we had a first client. we are not ready for that. We are developing a lot of technologies where a bunch of nerds are writing code and nobody with any business or sales experience. We did a lot of open source projects. So, we became pretty visible online and some companies started pinging us about those technologies and what they mean, how to use them, etc. then we got a client willing to pay us to get services. So, one of us had to go check it out and help that customer and that was me and that’s how I moved from software development to the business side, where I actually spent most of my career. So, we developed that company together. it grew pretty significantly. You can imagine that, starting in 2000, we went through a lot of ups and downs. we went through the dot-com crash. 9-11 are resuming businesses after that. even the financial crisis that was not as extreme. but still in 2007 to 2008, we did many rounds of financing, raised quite a bit of capital for history and developed the business internationally. In 2012, we had 1500 clients in 65 countries. I was managing all the business side, sales, technical support, etc. growing pretty well and starting to negotiate really significant contracts with really big companies. and the board decided that at the time, it was probably the right time to do an exit. They had been supported by the company for 13 years. At that point in time and some for a very good time, some investors were more recently of course on board. and I thought it was a good time to leverage those discussions and those partnerships to negotiate an exit. it was less interesting for us. We had been with the company for 12 to 13 years. we had very small percentages of the shareholding given that we’ve been diluted many times. So, it was not very exciting to do that. So, we left the company more or less willingly and started a new company that we called, STOIC (Sutoiku, Inc.) in reference to the stoic philosophy that tells you that when things don’t go your way, it’s not in your control. you can just live through it and learn the good out of it and try to make better from it. So, I can pause here if you have some questions. but that’s how we left our first company and started our second company. We were in 2012 then. and of course, it was a very different story than when we started our first company because we had 12 years of experience. We had raised funding before we had developed relationships, especially in Silicon Valley. We knew what it meant to do software. So, it was a very different story. So, we had no problem getting capital very quickly, hiring the best resources at the time, and having the right processes and methodologies to develop software. and we worked on ideas that came to us through our experience very quickly, so good. striping and finding what we wanted to do was much easier the second time given the experience we had from the first time. So, we started working on an idea of bringing simple tools. The idea we had really of Jeffery was that as computer scientists, we found that computer scientists had done a pretty bad job at really supporting business people. we spend. businesses have spent enormous amounts of money in IT. But, at the end of the day, does it really hurt them? Of course, it does. There are a lot of things. nothing we couldn’t do with all those systems. But, especially big companies’ IT departments have become enormous, really hard to manage, and the value for the business is not always obvious. and we thought, there was a contradiction here because automation computer science should be there to really make your life easier, to automate things and to let you focus on the good things and not get in the way right. So, we thought that we wouldn’t quit as computer scientists. we didn’t quite achieve that promise of really making the world much better and easier to manage for business, not having to think about a lot of things. They don’t want to spend time on it so we worked around those ideas of bringing the best of what computers could bring but making it really accessible to business people by removing lots of the struggles that you have in the United States. and we came up with an online solution targeting business users doing very sophisticated things and we played with quite a few people. We did something pretty innovative at the time. Again, it was early 2013, we actually ran a Kickstarter campaign. and not to raise capital or to sell a product as most of those campaigns were and as a software company, we had not found any software company doing that outside of the gaming era. certainly not for business. but our goal was actually to get access to an early adopters’ community that wanted to be very early on involved in our project and willing to prove. So, by actually giving us a little bit of money to put some skin in the game, as I mentioned earlier, we have done a lot of open-source projects. We have done a lot of projects involving people who are involved in those projects, but at no cost to them. It has a lot of benefits. but also, a lot of inconvenience. you get a lot of dollars but a lot of people who are involved just because it’s free and not because they are really involved. and one way to get people really personally involved is to ask them to put their own money into it. So, we didn’t ask for much Kickstarter, anybody can put any amount of money they want. some people just put 10 bucks in there. Some people put in a few thousand dollars. but we raised, I believe 60,000 from about 300 people and that gave us a committee of 300 paying users for a product that didn’t exist yet and spending the remaining of the year working with us to build that product together. That was a fascinating experience. We built fantastic technology demonstrating the ability to perform some typical functions you do in excel. but imagine Excel with billions of lines of rows in your spreadsheet. I’m not even talking hundreds of thousands, but billions of them and doing it as naturally as fast as you’re doing it in Excel when you have just a few hundreds of lines. and it was unbelievable, never seen before at the time. and we thought about who could use such a technology to process so much computing capacity on so much data at the time. and we talked to different people we think would be good candidates in particular banks and they were very receptive. and we were able to very quickly sign contracts with very big banks and those paid us to finish building a product on the promise that we could help them help their users who are bankers, traders, risk managers. People like that perform the same type of computation they do in Excel, but on much larger data sets and we delivered on that promise with a very impressive product. We, of course, initially worked back on the engineering side of it, developing some of the products. Then, once we had that working, that had shifted focus on the customers, acquiring customer base, endeavoring projects, and of course, hiring the team to do that. so, we very quickly had quite a few engagements, very exciting stuff. and something very interesting happened then. The customers’ big banks told us, because we were showing impressive performance, we were basically a thousand times faster than any competition compared to any tools that banks have tried. and believe me, bankers try a lot of tools homemade and elsewhere to gain the energy of their competition. So, they tried a lot of things. but we are much faster. and for a bank, being able to process information to give you some ideas of where the market can go, what risk you’re taking a thousand times faster is huge. It’s really existential. So, they were fascinated by that. That’s why we could assign interesting engagements so quickly. So, interesting. but then, they told us, and that’s the fascinating thing, is that for them, speed was of the essence. and if we could go even 10 times, 100 times, another thousand times faster, they will always have money to spend to go faster and compete more data ever faster. then we say, well that’s interesting, we would love that. but we are trying to do some very innovative stuff in software. I don’t want to go into the technical details, but could if necessary. but I was pretty extreme on that path and said, we don’t see how we can go ten times faster, maybe two times, three times, but not more than that at least on existing hardware architecture with standard computers. We are using standard PCs, either on desks or in data centers, and that is out of our control. But in our software, we had developed some specific understanding of the type of computation that we are doing and what was expensive in processing big data sets in that manner and we thought that if we had computers better designed for that computation, we could design big data sets, maybe we could do it faster. I said, well, that’s very interesting. we would love you to work on that. So, we negotiated a contract where they basically paid us for around a six-month contract to think about a different type of hardware architecture that could enable such a speed on big data sets. and in fact, after six months, we found something very interesting, some really good ideas. We talked to a hardware specialist as computer scientists. We had a good understanding of hardware conceptually, but not any experiments actually, building or developing very low-level technology. So, we talked to people who had that expertise, worked with them and defined an idea and something to prove it and showed that. Yeah, we could probably do something very interesting. Then we created a new company because we were still a young software company. Adding hardware on top of very advanced software is probably not the best advice for an entrepreneur. and maybe, we’ll talk about that later on. So, we created a new company called Fermat. Then, as my partner continued on developing STOIC, I took over the management of a Fermat to take it off the ground, so building the team, getting the roadmap secured, getting your first version, getting first clients and partners to work on, bringing the right co-founders to make it work, and did that for some time. Then in 2017, I had been developing startup companies for almost 20 years. and now at the rim, with my co-founders of a new young company that was now going to market, I needed to grow and I felt like I needed to do something a little bit different. I was not so excited anymore to go again into five to ten years of development of a short company. I had done that. I’ve been there. and really what changed my mind is, which can be interesting for entrepreneurs listening to us is that, when you’re running your startup company, you’re extremely focused and you see the world entirely through the lenses of your company and everything else disappears. you have no idea whatsoever and you want to spend any of your brain cells thinking about other fields that are remote to everything that’s connected. of course, you want to follow your competition, your market and technologies and innovation around your space and you become an expert in those. but anything else that goes beyond, you have no idea what’s going on and you don’t have time for it. and I found that after almost 20 years, it was a bit frustrating that I knew so much about a certain field where I focused my energy and my intellect. I knew nothing about everything else that was going on in the world and I was becoming a little bit frustrated. I was getting really thirsty to hear about other entrepreneurs and their ideas and what they are doing and what are the problems they’re facing and how they’re solving them. and I wanted to basically share my experience in developing startup companies with entrepreneurs that were starting their own journeys doing different things and I saw it as an exchange. They would educate me on what’s going on in the world and I will help them avoid some of the loopholes and challenges and mistakes that you make as an entrepreneur. and believe me, we’ve made a lot of mistakes as entrepreneurs learning from them. but there are some that are better to avoid when you have not thought about them. So, I decided to shift gears a little bit, took a little bit time to find the right way of doing that, starting a little bit of a freelance business to talk to companies and find a lot of interested entrepreneurs willing to work with me until I met my partner today. His name is Robert Troy, who’s also a former entrepreneur, but mostly a venture capitalist, an investment banker and he was running Agave Partners, which at the time was an investment bank. and what we were doing is helping high-tech companies grow internationally by developing strategic partnerships with bigger companies that are already established in the business, which is one-way companies can really accelerate their growth. because building your own global sales and marketing arm can be very challenging, can take a lot of time, a lot of capital and you have to go against established competitions that already have a lot of money and ways to win your business. So, it’s very hard to do and it can sometimes be best for companies to be connected with a company that’s already in the market, already has a customer relationship. it already has the support and sales and marketing resources to access the market. So, we are fascinated in the best way. to do that, and again, is to have the bigger company putting some skill in the game. So, there’s always a financial transaction involved. it can take different shapes, and can be an investment. it can be outright acquisition. It can be a joint venture. It can be staged on a multi-year program where eventually the bigger company will acquire the smaller ones. but not right away. and we were advising companies on their strategy to attract the best partner for them, to have the right attraction to build the interest of developing the company. So, we did a lot of transactions, like taking mandates from high-tech companies to access global markets. and we did a lot of that in China. Actually, because in those years. It’s changed a little bit in the past few years. But China was of course a very fast-growing market, a huge market becoming the second, if not the first, market for certain areas. certainly today, the first market for many high-tech areas. So, not a market that entrepreneurs today could ignore. but accessing it is very difficult for western companies. they don’t have the skills; the donation expertise and we were bringing that capacity. So, we took quite a few companies to China very successfully in the form of JV investment and acquisitions. Then we had another frustration which is that, in that process, we were creating a lot of value for the companies we were representing. but most of the value would come after those transactions take place. thanks to that transaction and we were only interested of course in that transaction which is nice. but it’s a little bit frustrating because especially as former entrepreneurs, we want to see what the company does after it signs those contracts and continues supporting it. but we couldn’t do that as an investment banker. and that’s what took us to venture capitalism, which was natural for my partner because he had been a VC before. less for me because I’d never been a VCR before. I’ve worked a lot with VCs obviously, but always from the other side. and it was quite of a challenge for me to adapt to that. but I had a great mentor with my partner. and for the past year and a half, we’ve been focused exclusively on venture capital. We do it in a slightly non-traditional way. even though that’s becoming more and more common. instead of having a whole fund, we decide how to invest money from the advantage. different opportunities along the way, we do the opposite. We do what are called SPVs which means special purpose investment vehicles. and we raise funds to invest in one specific round of financing. So, each time, we spent a lot of time sourcing deals, obviously educating ourselves on the opportunity, qualifying them. and when we convince ourselves here that would be a great opportunity then we establish a small fund and we raise money for that fund only to participate in that round of financing. that allows us to look at many more, companies not being dependent on the strategy of a whole fund. We are completely free to do what we want from one deal to another as long as we manage of course to raise the funds to invest. Of course, it enables us to access investors and discuss with them in the context of a very specific deal which is a different discussion than when you raise a traditional fund. It also allows us to participate in later stage companies because we found that based on our experience in development our best value add is when companies need to grow and need to scale up so they already have a product, they already have revenue. They already have clients and it’s about scaling up the business. and at that point, especially in the past few years, companies are typically, especially in Silicon Valley, pretty expensive. So, the round of financing is pretty significant, the valuations are pretty significant so if you want to participate you need to build pretty significant tickets. So, that allows us to participate with a bigger round of financing with bigger contributions than if you were to raise a traditional fund. So, that’s what we’re doing. We are focusing on our main topic. it is the big topic of energy transition which impacts everything in our world in industries from mobility to data centers to health care and whatnot so it’s really a diverse in terms of industries but it’s all about the new technologies that help us shift the way we live to have a bigger impact on the environment on society on our life on the on our health, etc. that’s what we’re really excited about. that’s the companies we focus on.
Jeffery: I love it, Jacques. That’s amazing. That was a great dialogue. and now we’re going to try to dive into some of these.
Gerber: I wanted to share though one thing. that, oh, one thing about you that nobody knows. then we’re going to dive into all this. There are not many things nobody knows about me because I’m pretty public and open, what I do, etc. but something pretty cool that I’ve done in the years, I was in Egypt with a bunch of friends. We spent three days hiking in Sinai and you have to understand that Egypt at the time, it’s the case as well today even though a lot of things happen in between, it’s a military country. It’s not an open country. The whole country is military. So, everything is protected by the army. and even maps were forbidden because maps are military secrets. So, interestingly, we had a map. but it was the map that went back to the 60s, late 60s when Sinai was part of Israel. So, we had an Israeli map from the late 60s to find our way in the middle of Sinai desert. and we are there for three days. and a lot of interesting things happened. one is that, at some point, we were actually two maps or one right to universal, they’re very old, we couldn’t see very well on them. and after a day and a half, we didn’t realize that the second map was actually on a different scale, and all the distances were actually twice bigger than we thought compared to the first map. So, a lot of crazy things happened during that trip in a country where there was no GPS, no cell phone, nothing. and you don’t want to be completely lost because you could really die there. So, it was very eventful. but it was an amazing experience.
Jeffery: Oh, that’s awesome. a very cool story. and I’m a huge fan of Egypt. I did spend some time not too long ago traveling through there. and there’s so many amazing areas to visit. and I guess doing it with a 1960s map would really add a little extra flavor into it. So, that’s pretty cool. Well, we’re going to jump back to a few things and back to some earlier ones. The start-up side that you worked in one that really interested me is that the business that you’re of course building out of these billion lines of Excel . One of our investors is Renee Pardo. And actually, Renee was the one that created this. the spreadsheet digitally back to the 1960s. So, I think he sold it. I’m guessing he must have sold it at some point to Microsoft or whoever picked that up. but I thought that was pretty cool because they saw a video of him the other day talking about that. So, it’s a pretty fascinating space and pretty cool on obviously what you did. but when you were putting this all together and you were going in it from the development side and switching over the product side, how did you find that transition went? And did you find yourself? You said you’ve obviously moved from Cairo to now being in San Francisco for a good 20 to 30 years. When you transitioned over to the business side, did you miss coding? Do you miss that side of business? because it is an element. but what do you find you’re more comfortable in? and what did you really gain from that switch? Did you find that it just allowed you to better see into what developers are working for and what they see on their side versus what you’re looking at? And what are some of the learnings that you got from that transition?
Gerber: yeah. that was very interesting. Yes, there was sometimes some frustration. and still today, every once in a while, I feel like, oh, coding is fun. and I like to do things. but as time goes by, you lose your skills and I become a more and more terrible developer. back in those days, two things. One is that I was overwhelmingly excited about going outside of my cubicle and spending time with real people talking about their problems and how it could deliver them solutions. It was a surprise to me because I was more of a shy person. I was very comfortable in my cubicle with my computer and happy not having to talk to too many people. So, I had to go outside of my zone of comfort. but I was surprised at what I discovered and how fun it was to do that, completely. and I tend to be more of an optimistic and positive person and like to see what I appreciate in new experiences and forget about the rest. So, that was really what I returned most from that experience. it was not also completely all-or-nothing in terms of our development skills because obviously, initially. When working with those clients, there was a lot of technical work involved and work that we had no resources to do that the clients could not do because they didn’t have the knowledge of the technology. So, I was essentially, initially at least, an outsourced developer for clients doing the connection between our technologies, our engineers and the client. So, I was really in between the two worlds. and I loved being in that position. So, it was a smooth transition until we hired a first salesperson. He was an amazing person. He was one of the top sales people in the west, had worked with really big companies like Oracle and SAP and had been awarded for his success for those companies in the bay area. and I went around the world with him, pitched our product competing against others, doing proof concepts, etc. and I saw him in action. and I was really impressed by how a salesperson can pitch and convince others and read how clients perceive our presentations, our offering in a competitive environment and take advantage of it to best position our product. That was fascinating. and that’s over a period of two years how I learned the business and sales skills that I didn’t have from education. So, the transition was relatively smooth because it was initially still a very technical job. and it just became more business guaranteed with the fascination of a sales person who basically became a mentor for me as I learned those skills.
Jeffery: oh, I love that.
Gerber: and it’s interesting because I also did the same in the early 2000s transition from being a developer on the business side. and I remember one person asked me one time. they said, do you like it better? and I actually liked the development side better. I will lie because I enjoyed the zoning out and working for days on problems. but the difference was that a problem on tech I would say can take you anywhere from one to three to five days to solve a problem. but on business, I felt like you could solve it in a matter of minutes or moments. it was never elongated. it was always something you could resolve quickly. So, I think the difference for me is that on the code side, it took a lot longer to fix things than it did on the business side. So, I just enjoyed the transition that I could solve things quicker and be more productive than I felt when I was days on code.
Jeffery: So, I guess as you started to progress, you also mentioned a lot of great parts here, where in your transition, everybody was a mentor to you. So, you mentored capital into ventures you ventured into on the business side. So, there’s always this mentoring part that’s really driven and helped you progress forward. and to almost go back a little bit more again. but it’s during that time where you mentioned that there were three major issues that you went through as a business. and the reason I bring this up is because today people are going through COVID and you had to manage through as you mentioned 911.com, but then the financial crisis. Can you share a little bit about, maybe one two three points, on what you had to go through in order to balance these out? Because you have ups and downs normally in business but you don’t exactly have an entire economy crash in dot com, then of course 9-11. you had the same thing which was pretty much almost identical to dot com crash, then the financial crisis was a little bit different. I think that was just more of a slower recession. but what were a couple of points that really stood out and how did you guys prepare yourselves for the next one? so it didn’t occur again? or at least that you were in a better position for it?
Gerber: Yeah, actually. I quickly use what you just said. That was the biggest lesson is to learn to be prepared for the next thing that’s going to hit you. and when you don’t expect it. that’s another mentor who’s been an investor in all three of our companies and business central who told us that lesson that in business, especially when you’re a startup, even if you do the best job and you do everything right, which almost never happens, something is going to hit you six months down the road. and what are you doing to be ready for it? and it’s really hard to think about that because you don’t have time for that when you’re in a startup. It’s like being a cyclist and looking just in front of you and making sure not to hit a small gravel on the road that could take you off-road. And you don’t have the luxury of bigger companies to feel the strategy and inertia of the economy and stuff like that. but in reality, those things happen as well. there’s a lot of things that move around you that you have no control of, and they’re going to catch up with you one day or another. So, what do you do to be prepared for that? and that’s a very big challenge that I think all entrepreneurs have to face all of the time. and maybe we’ll get back to that. but to go back to your questions and those big challenges, the challenge there then maybe I’ll have a small degradation on COVID crisis. but the key there was about financing. Really obviously, as a company doing big projects, we were building cash every month. So, we were dependent on venture capital to continue developing the company. We wanted to grow fast. We are pushed by our investors to grow fast. it’s all about capturing the market as quickly as possible. So, you’re not taking money from venture capital to let it sit in the bank. you’re spending it and you’re spending as quickly as possible to go as fast as possible. and the problem is that, when a crisis hits like this, well all of a sudden, you don’t have the financial resources to maybe survive that crisis. So, what happens there, the double edge or the double problems we face is that one you’re running out of capital. but two, your investors are also running out of capital. The venture capitalists you would normally go to when you need capital are no longer picking the phone. They don’t have any cash. In fact, they’re in crisis mode. they’re closing down their portfolio companies. our main investor that had over 100 companies under its portfolio closed every single of its companies and diaphragm except ours. we’re the single company that didn’t close at the time for that venture capital group. That’s a big VC in Silicon Valley that’s still operating today. So, that was very brutal. companies were closing. VC funds were closing. those who were not closing at, normally whatsoever, if they had, they were keeping it for the few top companies they had and that they thought would be able to survive the crisis. So, it was really hard and in fact we found ourselves with less than two weeks of cash left. One of our founders had an exit from Prabhu’s company and had a little bit of money on the side and took on his own money to pay for an extra week. So, we could cover the employee’s salary and not lay off any people to give us an extra week. but basically, had three weeks to find money or shut down the company. and we had talked to every VCs we knew about every bank we could think about to get some loans, etc. with running out of options there was one investor, one angel that was very interested to work with him for a long time. but our boat was not very keen on having us working with him. for whatever reasons, we never fully understood. And it was and we thought, well, this guy, he always wanted to invest and maybe he can do something and we actually had to spend a bit of time convincing the board. They were against us doing that. but I don’t know what else to do. and we went there. and after some effort to convince the board to do that, he put some money in and he put the money within a few days. and that really served the company. but I was really at the end of the rope. it could have gone either way and we were lucky that it worked pretty well. and it was the hardest time we had for the company right at that time. but we managed to get out very successfully. So, that was very positive. So, that’s what happened in those days.
Jeffery: You mentioned COVID, that’s an interesting thing. It is because everybody seemed to be discovering what it’s like to work from home. but the company has hired people globally, tech people the best we could. we didn’t care where they were located. So, most of our employees were working from home. and one of the skills we developed was how do you manage companies where all our employees are remote. they almost never meet or very few of them. We’ve always had headquarters with some core, the management and some local people will be there. but sometimes, even key managers were not at headquarters. They were in a very remote area. So, we always had from the get-go to manage teams that were distributed that rely on their own home infrastructure to work with us using all tools. zoom didn’t invent a web conference. it’s just a better tool, easier tool to do it. but it was possible even in the early 2000s and it turns out that it was a great skill. because when COVID hits and you have to adapt to that, well you’ve already done it. and that’s back to that. What were you saying earlier about what you do when something like that happens? When something happens, how are you equipped? and it can be very hard if you don’t have the right process, the right methodology to be agile enough to adapt to the circumstances. it can be a life-or-death issue. and I guess if we tie in the edge, the agility part or being agile, I think that you guys were able to obviously meet that. and obviously, this was heavily influenced by capital. How would you recommend companies start to protect themselves? Is that looking at their runway a lot tighter and instead of being profitable in 18 months? They try to keep their profitability levels anywhere between say five and six months. So, this way, if something does happen, they’re not far off from reducing and getting to break. Even so, they’re not over burning or that they’ve already been planning their next raise. What key insights can you share that would prevent them from being down to week two or down to week three without any capital?
Gerber: yeah, it’s a very hard judgment call to make because being too safe is also not a good option. That means slowing things down. and if you slow down, and you have a good opportunity, the competition will take advantage of it. So, you want to go fast. you want to mitigate risks but being too safe is taking a risk right. So, you also have to balance that. and that’s a very difficult thing to challenge. There’s no silver bullet answer to that. The one thing I can say is that the economy typically goes in cycles. There are some boom years and some really tough years. It looks like we’re entering a difficult time. and numbers for the first quarters are showing a big decrease in capital investment. there is some inertia in the system. So, it’s not going to happen right away. but it might be time to think about buckling up for some companies. So, if you can try to get a sense of how those economic cycles are evolving, then in a bullish market it’s probably a good idea to spend. and capital is easy to get. and it’s cheap to get, so you want to go as fast as possible. but when you see signs that things are changing and nobody can predict the future, you can be wrong on those signs and that can be a problem. but when you see those, then you want to maybe have a bigger question and be careful of what you do. one rule of thumb that I learned from another member who’s a business angel and invested in our companies very early on is that when you get cash on the table from investors, take the money. and sometimes we want to optimize too much, avoiding dilution, not getting too much capital, etc. and there are plenty of examples of people who are massively successful and protect their interest that way. So, that’s by no means saying you should not do this. but one thing that can sometimes make your life easier back to the problems we are talking about is that when you have money, when you have people willing to put money, take the money even if it means taking more money that you really need. That extra money can make the difference between you surviving or not surviving the next crisis. I hope that’s some very valuable advice. and sometimes we look too much at wanting to have the right investor in versus having investors in that can help support you regardless. and just being able to utilize them better instead of looking at them as if they’re just bad money or not the right capital. all capital is good. you just have to figure out how to utilize it and work with the people that are putting it in.
Jeffery: But that’s great advice. Well, there are a few other things that I would love to unpack but due to the time, we’re going to shift things a little bit. we’re probably going to have to do a number two follow-up interview because again, lots of great stuff on all the things you’ve done and tremendous background of course and working startups and now investing. but maybe I will ask one more question, just for the timing side. because I want to break through all of the myths and all this other stuff that comes from this. What do later stage VDCs really look for? What do they need in order to make an investment? So let’s just say real quickly, I’m a Series A company moving into Series B, you’re going to get ready to invest. you have an interest somewhere in that Series B or C area. What things do a startup need to be ready for to be able to have you step at the table and make that large investment that’s going to help them move their business forward? maybe two or three points that you think are going to help them clearly understand better what they need to be doing.
Gerber: yeah. actually there’s four. So, there are four pillars for us. we look at that. I think everybody will tell you about that, but we look at all four very deeply and we want to have great answers to them. and by great answers, it doesn’t mean that you’re perfect. We expect every company to have some weaknesses, but what we don’t like is companies who don’t know their weaknesses or deny all other weaknesses or hide their weaknesses or try to make too much marketing work in trying to paint a bigger picture than it really is. we normally find it and that impacts the trust we have in the team when we see that. So, the four pillars for us are in no specific order because they are equally important. but maybe the last one is the most important. One is the market. What’s your market? What’s the market, the competition? What’s your market opportunity? How do you differentiate? what’s the competitive landscape, etc. and you don’t have to be the best one. There are so many examples where the ultimate winner was the number two and the number three. it might even be a rule that you don’t want to be number one given how often that happens. So, you don’t have to be the best, but you have to know where you are, what you’re playing with, what are your strengths and weaknesses and how that plays out. we need to have a clear picture on that. The second one is the product and technology. What’s your product? How is it differentiated? What’s really unique about it? Where’s your IEP? How do you defend it? That’s of course typically where we start. Okay, we really start with that. if we don’t see that very quickly, we pass. we are not interested in companies that don’t have a clear unique value that nobody else is apparently ringing a third thing. Obviously, that’s very important. it is the finance at that stage. you are in operation. What’s the health of your finances? What’s your business plan? How is it built? What are the assumptions behind them? Do they make sense? Are you in control of them? what happens if they don’t go the way you expect? and we go very deep into analyzing those financial models. it’s not unusual for us to rebuild our own model before we invest from our perspective. see if it can really work and operate regardless of how it’s presented by the company. Last and I think, you’re not only not the least, but probably the most important is the team. It is the people. because at the end, and that’s my experience in everything, if you try to summarize everything we talked about today, Jeffery, I think that’s really the big lesson. It’s all about people. everything you do, whether it’s the coding, the business side, selling, raising capital, a developing company inventing new technologies, at the end, we’re people. We work together. We do that for each other and we depend on each other. and it’s all about the people. So, the quality of the executing team, who they are, do they have what it takes to take the company to the next level? If they don’t, are they aware of it and are they willing to hire the right resources that are going to make the difference? or are they in denial? Are they going to be obstructive to hiring the right talent that could really make the difference? Those are essential things that we should look into. So, we look at all those things. they’re all extremely important and we don’t invest if we don’t have good answers to all of those four things. and again, a good answer doesn’t mean that the company has nailed it. but it means that we know what the challenges are. We know that there is a way to address them and we’re confident the company can take the right decisions to address those risks.
Jeffery: I love it. Those are four great points. and from that, I’m going to say every investor should look at this and startups should really focus on this, especially when they start to get to that Series A. come up with clean books, understand your model, understand your markets and build great people into what you’re doing because that’s what’s going to help you go and scale quite quickly. It is having the right people, running the right lines of business to help you grow. So, again, mic drop. great value. great points. Thank you for that. we’re going to transition now into storytelling time. Maybe, you can share a story in your past, either through your own experience or through others, that you’re working with any companies that you can share that really took an understanding of what it takes to be an entrepreneur. she or he went really above and beyond and you thought they were going to fail or you thought it wasn’t going to work out and you made the investment, and they just took off like a rocket ship and you’re proud of that entrepreneur. Is there a story that lines up to that ideal?
Gerber: Well, there are many amazing entrepreneurs and I get to meet some every day. just a few hours ago, because it’s still early in California. I was a jury at a Pitch Day where we listened to a selection of 18 entrepreneurs presenting their projects and a couple were not that good. but the majority of them were very impressive. I also had a chance to attend your OPN last picture session. I think you had 46 companies there. It’s amazing. the diversity of people, of ideas, of projects or problems, they think about and they solve. So, I continue to be, even if I’ve been doing that for a long time, I’m still surprised every day to meet entrepreneurs with fascinating ideas and new things. So, it’s hard to take one. I wouldn’t think the first thing that came to my mind when you asked the question is actually the latest investment we’ve made. It’s a company called IR Labs. It’s really deep technology. They had 10 years of research, most of it at MIT and also at Berkeley. They have over 100 patents doing very extremely technical things that combine physics and computer technology and optics because there are photo electronics in there. It’s massively complex and we met them over four years ago. they were just coming back out of their startup accelerator and there was a one-year program where there were scientists from their lab going through that program to become a company, an entrepreneur. and we met one of the co-founders. She was running the company at the time. fantastic individual. on top of the technology with great ambition, but in a market that’s phenomenally complex and impossible to get into. and it was truly, for us, a series at the time. We couldn’t invest, but she used the money to hire a CEO which is always something really hard when you’re the founder of such a big complex company for such a long time. and hiring a professional CEO to take over and lose control of your baby. That’s a very hard thing to do. A lot of entrepreneurs fail to do that and sometimes it works out. Sometimes it doesn’t. and She hired a fantastic CEO. he was really the best in class. He came from Intel and he’s a really solid guy who bought his own team of professional CFO and CEO and whatnot. and That completely took the company to the next level. It takes courage to do that. and it doesn’t always work. I’ve had some negative experience hiring professional CEOs that really don’t understand the business and the company and destroy it. but it was a massive success. This year, they are invested into their Series C. we’re very proud of that and happy of that. and that’s a good example of an entrepreneur that worked really hard. She was extremely talented, extremely smart, and had a lot of skills, but understood that the best way for a company to succeed was to bring an even better person that she is and that’s maybe the best quality you can hope for and that’s very hard from an entrepreneur. It is because you want people to hire people who are better than they are. and a lot of people are not comfortable. it’s more comfortable to hire people who are not as good as you are because you can control them and you do better than they do. but that’s typically a recipe for failure. You want to hire the best people and you want to have people who are better than you who are going to challenge you every step on the way, but of course you have to trust them. you have to trust that they’re challenging you for the good cause, not to play politics or go in a different direction.
Jeffery: I love it. great story. and I love hearing a story that has some change to it and has somebody succeed, but also bring in a strong team above them. I’ve seen that a few times and you’re right. it doesn’t always work. but in this case, I think strategically, they found the right fit and they’re now taking off like a rocket ship. and hopefully, they have continued success. but it sounds like the founder really understood them, the product, the market and the best fit for them to move forward. So, great story. Yeah. Okay, now we’re going to jump into rapid fire questions. So, the way this works, business and personal. business side. pick one or the other. coming in it from obviously the investor lens, so we’ll get started. Ready?
Gerber: All right. Yep.
Jeffery: Okay, founder or co-founder?
Gerber: founder.
Jeffery: unicorn or a four-year 10x exit?
Gerber: unicorn.
Jeffery: tech or CPG?
Gerber: tech.
Jeffery: first time founder or second third time founder?
Gerber: second full-time founder.
Jeffery: first money in or Series A?
Gerber: Well, Series B. I’ll see.
Jeffery: fair enough. Yes. board seat or observer seat?
Gerber: same.
Jeffery: lead or follow?
Gerber: lead.
Jeffery: equity or interest payments?
Gerber: equity.
Jeffery: favorite part of investing?
Gerber: Is that a binary question?
Jeffery: correct, yes. you can throw some dialogue behind it again for it.
Gerber: Favorite part of investing? this question. working with entrepreneurs on strategy.
Jeffery: okay. number of companies invested per year?
Gerber: sorry.
Jeffery: So, again I will answer the question. number of companies invested per year.
Gerber: five.
Jeffery: preferred terms?
Gerber: nothing special. standard industry standards.
Jeffery: you mentioned the verticals of focus. but one last time, just the verticals that you guys focus on for investments.
Gerber: everything on Energy Transition.
Jeffery: two qualities a startup needs to stand out for you guys.
Gerber: again, being really rounder on DNGs, showing that they understand the challenges, the risks and have good plans about all of those.
Jeffery: I love it. good plans are free, yeah. First personal question, all right. book or movie?
Gerber: ah, book.
Jeffery: Superman or batman?
Gerber: batman.
Jeffery: restaurant or picnic?
Gerber: restaurant.
Jeffery: pay five minutes with Bezos or Oprah?
Gerber: Oprah.
Jeffery: mountain or beach?
Gerber: mountain.
Jeffery: bike or run?
Gerber: bike.
Jeffery: Big Mac or Chicken McNuggets?
Gerber: Big Mac.
Jeffery: trophy or money?
Gerber: money.
Jeffery: beer or wine?
Gerber: beer.
Jeffery: camera or mobile phone?
Gerber: mobile phone.
Jeffery: king or rich?
Gerber: rich.
Jeffery: concert or amusement park?
Gerber: concert.
Jeffery: fortune cookie or birthday cake?
Gerber: birthday cake.
Jeffery: Ted Talk or book reading?
Gerber: book reading.
Jeffery: most famous person that pops into your mind.
Gerber: Obama.
Jeffery: favorite book?
Gerber: June.
Jeffery: ooh, I don’t know that one. June.
Gerber: yeah, maybe it’s my accent. D-U-N-E, dune.
Jeffery: oh, Dune. Oh, yeah. That’s awesome. That’s great. All right, fair enough. That’s a good one. Okay. favorite movie and what character would you play in the movie?
Gerber: favorite movie? Once Upon a Time in America. and what characters? all characters have terrible lives. So, there’s no good character in that. but probably Robert de Niro as the most interesting and closer character, even though he’s a failure in the movie.
Jeffery: okay. I gotta watch that. I can’t remember if I’ve seen it or not.
Gerber: Okay. It’s a fantastic, long movie. take the long edition. It’s three hours and a half hours.
Jeffery: Okay, I’ll do that. All right. Next question, the first brand that pops into your mind.
Gerber: Nike.
Jeffery: okay. favorite sports team?
Gerber: Really, I don’t have any. I have no idea.
Jeffery: Okay. That’s okay. We both know that when it gets to that, not everybody’s a sports watcher.
Gerber: I will say from the France side of things, they do have a great football club. I did watch a few of the games there and was a big fan. So, Paris Saint-Germain.
Jeffery: favorite app you’re using on your mobile phone?
Gerber: Medi.
Jeffery: Medi. oh yeah, that’s good, very good for reading. I love it. Yep, we’re getting close. What is the meaning of success to you?
Gerber: making an impact.
Jeffery: I like that. making an impact. Brilliant. What is your superpower?
Gerber: listening.
Jeffery: I would concur that you have a very strong listening skill from my learning experience, but I also think you have a very good way of breaking between different sides of the business which means that very few people can understand tech and understand the philosophies and drive of business.
Gerber: So, I would say you’re very good at interpreting multiple languages and helping people get to the end result which was to your point about helping people with strategy. I think when you can understand really how code works and how the business works off of that, I think that really does help you scale a business and better understand the environment you’re in as well.
Jeffery: yeah. Thanks. That’s a better answer, I think. [Laughter] perfect. Well, either way, I think Jacques we’re at our time. we blasted through all of that. It’s been amazing to dive in and learn more about yourself today. and the way we like to end our show is that we want to give you the last word and we would love for you to share any insights to the community from the investors to the startups, anything that you want to share, they can really help them move their business forward, I turn it over to you. But again, thank you very much for your time today.
Gerber: Well, thanks a lot. I had a great time as well. So, we really love working with entrepreneurs. For us, it’s of course about making money. but just not that. We also want to bring value to helping companies grow and have an impact. These are really the things that matter the most for us. and as we talked about, if there’s one thing I learned and it’s a paradox, but as an entrepreneur, you want to be ready for what you cannot be ready for. you will be ready for the unpredictable and it’s a mission impossible. but that’s the mission that you have as an entrepreneur.
Jeffery: I love that line. mission impossible. be ready for the unknowns again Jacques. Thank you very much for your date. Thank you. Have a great day.
Gerber: Have a great day. bye-bye.
Jeffery: Okay. That was fantastic. Jacques really opened up a lot up there. He shared a lot of great details around how he got into this space, the startups that he worked on and all the great things that he did. and I think that he really, even though he broke down what it was taking to be a VC and coming in at a Series C, I think a lot of the things that they look for are the same things that we have to look for at every stage and that is on the market side, where are they fitting in on the market side, sharing and showing their weaknesses on the product tech, how great that is, can they defend their IP on the finance, how healthy is the financial side of their business. Then, the biggest number one that you look at from day one which is going to change all the way through to Series C is the team and how strong is that team and how well are they going to be able to adapt and grow and be that driver behind the scaling of your business. Again, lots of great details. Thank you again for all of that. and wow, it would have changed when you’ve got to go through three global crises in the world to keep your business running. So, great stories again from that. So, thank you everybody for joining us today. If you enjoyed the conversation, please feel free to share with your friends or subscribe to our YouTube channel. follow us on Spotify, Apple Podcast and or Stitcher. Your support and comments are truly appreciated. You can also check us out at supportersfund.com, or for startup events visit opn.ninja. Thank you and have a fantastic day.