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Technology was becoming so much cheaper and easier in the talent was becoming so much more plentiful. That true differentiation and where the real challenge was was not building the product but selling it, you know it was that starting a company, but scaling it and yet venture was still primarily pouring into prototype and products an over rotation towards a minimally viable product with kind of not enough attention paid to viability.
Jay Clouse: 00:31
The investment landscape is changing and world class companies are being built outside of Silicon Valley. We find them talk with them and discuss the upside of investing in them. Welcome to upside.
Eric Hornung: 00:58
Hello. Hello. Hello and welcome to the upside podcast, the first podcast finding upside outside of Silicon Valley. I’m Eric Hornung and I’m accompanied by my cohost, Mr. startup weekend, Columbus himself, Jay Clouse. Jay. How’s it going man?
Jay Clouse: 01:14
It’s going well. Yeah, I’m excited. This weekend we have a new, a new format of a startup weekend here in Columbus, a community that we’ve been doing startup weekends in since circa 2007 I think, or maybe 2008, one of the first communities, but yeah, these days I don’t do a lot of the regular organizing duties of a startup weekend organizer. I am what they call a facilitator and I kinda paratrooped into the weekend parachute paratrooper. Doesn’t matter.
Eric Hornung: 01:41
Whatever you want to do
Jay Clouse: 01:43
into the weekend and act as the master of ceremonies. The MC. Here’s a question for you, Eric. See could stand for master of ceremonies, but also people spell mc e, m, c, ee which does not seem like an acronym,
Eric Hornung: 01:59
so I always thought it was from microphone controller.
Jay Clouse: 02:02
Eric Hornung: 02:03
All of those could be wrong potentially.
Jay Clouse: 02:06
They could all be right.
Eric Hornung: 02:07
That’s true too. Well, today we are going to do something a little bit different here on upside. Jay, we promised the listeners that we would have a different podcast format. We would not be an interview podcast. What are we doing today?
Jay Clouse: 02:19
That’s right. And so today we are doing an interview podcast, we are speaking with a venture capitalist and a, I would call him also a community builder. Eric and I have been discussing ways that we can accelerate our learning and sort of offline from the podcast we’ve been reaching out to venture capitalists and community builders and people who are deeply ingrained in their ecosystems to ask them questions about their ecosystems and also about their processes and it’s been amazing for us and we said we should be recording these things and sharing them as well. So Eric, you wanna talk a little bit more about the format of that.
Eric Hornung: 02:55
This podcast is a selfish endeavor in its own right, but it would be extremely, an aggressively selfish to not share these awesome conversations we’re having with our listeners. So the format here, we’re going to dive right into the interview in a second. We are going to talk with Andrew about his background, what makes growth x different and how he’s finding upside outside of Silicon Valley. So Jay, with that, do you want to jump in?
Jay Clouse: 03:24
Yeah, a little foreshadowing there. Today’s guest is Andrew Goldner. A founding partner of growth ex Andrew has been in the technology sector since 1998 based in New York City, Hong Kong, Singapore in Palo Alto. He, he’s a Kauffman fellow. He’s a trustee at Nashville children’s theater. He’s a founding organizer of natural entrepreneur week. He’s a regional board member for venture of America. Growth X is a hybrid vc plus corporate innovation partner and we had a blast talking with Andrew and we just really got excited to share with you this conversation, so we hope you enjoy this conversation with Andrew and after the interview, Eric and I are going to come back on here to talk about our thoughts and takeaways from that conversation, so stick around through the interview and we’d love to hear from you as well. So throughout the interview or after the interview if you have any thoughts on what Andrew was saying, feel free to tweet at us @upsidefm or comment on breaker. All right, let’s get into that interview. Andrew, welcome to the show.
Andrew Goldner: 04:28
Thank you. I’m grateful to be here.
Jay Clouse: 04:29
We like to start by asking our guests to give us a little bit of background about how they got to where they are now.
Andrew Goldner: 04:36
I was technology transactions so I was a new group that was formed in the nineties or it was skadden, his reaction to the tech transaction that started happening in San Francisco where venture law group and Cooley and others were kind of running away with that and they decided they wanted to get into another business and so they formed a new. At the time it was called, and this will date me and the group, it was called the Internet ecommerce and technology transactions practice group and it was a mix of m and a corporate finance and licensing and so I was, you know, working with Altavista and priceline. I was there when salesforce was founded, you know, some of the earlier Yahoo Aol. Really interesting time.
Eric Hornung: 05:27
Yeah, I mean that’s crazy. Like I feel like that’s kind of what’s happened. What’s happening now in the blockchain space is all these law firms are rushing, rushing towards it and they’re all. They’re all trying to create these new areas where they can kind of capitalize on it. I don’t know if there’s been any clear winners yet, but it will be coming. I’m sure
Jay Clouse: 05:44
there are i cant think of them off the top of my head. There definitely are some law firms whose names are being mentioned in the blockchain space. Kind of over and over. But yeah, you’re right. And listen. Good for them. I, that’s business development, right?
Eric Hornung: 06:00
Andrew Goldner: 06:01
I’m not sure. You know, and I, I think it has to happen. You know, there are definitely a piece of it and I think the more entrepreneurial the attorneys are being, and it’s often the young ones, right, who are smartly thinking about where they can make their mark and become very well versed. I mean, that’s really where I was able to kind of launch my career in the direction that I wanted it to be in is I just made it clear that I wanted to only do technology law because unlike most seasoned partners at Skadden, arps, I actually knew what the Internet was and so I didn’t know anything about being a lawyer, but I was able to be pretty helpful to my clients because I actually knew what the Internet was developing and so yeah. Anyway, it was an interesting route to take.
Eric Hornung: 06:46
And then you parlayed that into actually getting into the venture scene right by heading west or how did, how did that transition happen?
Andrew Goldner: 06:56
My journey was that I went so far east. I actually ended up West. I went from New York to Hong Kong to Singapore, to Palo Alto and I know, you know, like a lot of lawyers. I just kept my head down looking for an opportunity to do something entrepreneurial. Go in house. I didn’t want to be followers. I mean like all lawyers that don’t want to be partners big. It was great training. I’m glad to have done it, but it was never my interest is a law firm partner wherever, because any business model that’s premised on the time you spend and that the value you bring is not a profession for me. And so I kept my head down and went in house with double click and that kind of took me on a really interesting journey. I ended up going from double click to over after we got acquired by google to a very wealthy family that operated a bunch of co, owned a bunch of companies and was trying to figure out how to begin operating them in Canada. The wealthiest family in Canada had a portfolio of companies that they own like we own stock and they started the synergies and said, okay, well how can we actually begin to operate these things together? Not just hold them as a holding company. And I joined them to do sophisticated fintech transactions as their lawyer and through that, you know, ended up pitching them on starting their own news business instead of relying on people like Jones for the news. And so I got to leave the legal profession and start a news business for the Thompson’s that led to the acquisition of Reuters. And so when we became Thompson Reuters in my little fledgling startup news business got folded into, I became publisher of Reuters news and I just had decided to do that and it was after that and it was many, many, many years that I. I said it was time to just turn myself into a true startup and not pretend to be one of the big. I used to refer to myself at Thomson Reuters is Vic and entrepreneur in captivity. And it was a very comfortable perch to do it from, but you know, it wasn’t the same as the gut wrenching glass chewing experience of being a true entrepreneur. And so the only way I knew how to do that was to turn myself into a startup. So I went out on a high note, resigned counseling Royders, move my family jobless to one of the most expensive zip codes in the country so that I could get crack, a lack or whatever. My next thing was some pressure behind me. And that’s what led me to do a bunch of different things ultimately to find need by now cofounders and we found a growth x about four years ago. So that’s like a reader’s digest on my journey.
Jay Clouse: 09:42
Yeah, super, super interesting. So you, you really got to the point where you said I want to do the startup thing full time, whereas the best area in the world to do that and that guided your move to Palo Alto?
Andrew Goldner: 09:54
I mean, yes and no. I mean, so I, yeah, I definitely got to the point where I started calling bullshit on myself in the mirror and I always said I was an entrepreneur. I always had it in my belly. I always talked that game inside of the big company. But here I was just an employee, you know, every two weeks when he showed up for my account is we’re really got to the point where I said this, need this. Either you’re doing this, you’re not either. You stopped talking about how you’re an entrepreneur, but we’re actually be an entrepreneur. And that’s when I talked to my wife and made the plans to quit. And give myself a couple of years of runway to figure out what was next. We came from New York and I didn’t want to go back there partially because of the weather, partially because it felt like we went back to New York where we started from the adventure within the adventure to go somewhere we hadn’t ever lived before. And yes, I mean if I’m going to go into entrepreneur is and why not just crawl right into the belly of the beast. And you know, I didn’t start from scratch. I went back to the relationships that I was blessed to have been formed when I was a lawyer in the nineties. And even though I made a bad judgment call not to join some of these startups that would go on to turn a lot of people into multimillionaires. I was working with the people that did so the early founding team at salesforce and so by example. And so it was time to come back. I called on those people and so this is what I’m thinking about. And they, you know, really invited me with warm hearts and open arms to come to silicon valley and they started using their network and advising me on the best way to go about building a brand for myself in the valley premise on healthfulness, so where can I be helpful and just, you know, get busy doing it and all the introductions that this small kernel of people made for me that ended up turning into a diaspora, pretty amazing people who helped me along the way. And so for that reason and for the many that helped me before that I am very much a, it person, spent a lot of time doing work that has nothing really directly related to my opportunity to find companies to invest in. But it’s helping you know, early entrepreneurs and helping others that are trying to get into venture capital and it’s because of, of, of the health that I was given. So that’s, that was really why I decided to go to silicon valley. It’s the belly of the beast. That’s where it’s all happening. That’s where I was going to be able to study and learn, build relationships. I’m, you know, very much, uh, uh, the analytical mind, very much that journalist that I learned to be as publisher of 3000 of the best journalists at Reuters. And so what better way to collect the most amount of data in a short period of time, but where all the real action, you know, relative let’s say to rest of the world, there’s just no question that the density of volume, you know, the trajectory is in the valley and to me it was very much like joining skadden, arps. Like if I’m going to be a lawyer for a short period of time and I want to be around, you know, great practitioners that are doing a lot of deals so I could learn fast and then go do what I really wanted to do was a good place to do that. And I felt the value was as well.
Jay Clouse: 13:11
And If I’m reading your linkedin here correctly, thats probably about 2013 that you moved to the valley?
Andrew Goldner: 13:17
Yeah, that’s right. It would have been about five or five and a half years or something like that.
Jay Clouse: 13:23
At that point you met through that period of time where that small kernel people, we’re introducing you to different people some time throughout there you met your co founders of growth x. can you talk about the beginning of growth x?
Andrew Goldner: 13:36
Um, one of my earliest observations when I landed on the valley in the valley and was meeting people and jumping in as an advisor or jumping into an early member of a team, you know, focusing on tech law, which is where I started my career and I could add instant value was that if you are a product developer and you start a company, they call you a founder. If you’re a market developer and you start a company, they call you a nontechnical founder and it’s meant to be a pejorative second class status. And I wonder about that because I had always been, you know, of the mind that nothing happens until someone sells something. And so as I dug in, I began to forum certain hypotheses, one of them, which was that the valley is beginning to slow down its opportunity because it’s continuing to act as if we live in the age of develop technology. When technology was very expensive and very complex and very few people knew how to build it. That’s certainly not the time now and frankly, even five and half, six years ago, it was really starting to shift. Technology is becoming so much cheaper and and the talent was becoming so much more plentiful. That true differentiation and where the real challenge was was not building the product but selling it, you know, it was not starting a company but scaling it. And yet venture was still primarily pouring into prototyping products. An over rotation towards a minimally viable product with kind of not enough attention paid to viability. And the ecosystem itself was really being built still around the deification of the developers. You know, since you will packard. And yet almost the vilification of the marketer, the salesperson. And we started to see all of the empirical evidence forming right then in CB insights that yet just now again reaffirmed that without even a close second, the leading cause of death among seed stage startups is no more market need.
Jay Clouse: 15:51
Andrew Goldner: 15:53
Yeah, exactly. Thank you for having that stat there though. And we live and breathe by that stat and we felt that as angel investors when our portfolios were doing poorly and we knew it as expert sales and Ux design and growth marketers, we saw that it was happening. And so that’s how I met my co founders is just striking up conversations about that and finding that we might use different words. We may have come from different places or careers in different. What brought us together was that same belief that the problem and this and oh by the way, at the same time, you know the series a crunch was happening, you know, tons more seed capital with no more if not less, series a. and so there was this trough of disillusionment forming. We knew the leading cause of death and yet you had all these coding boot camps. You have less than 10 percent of colleges and universities even teaching a course on sales, including MBA programs. You have accelerators now, 7,500 of them in the world and they’re focused on helping founders to build products and raise money, but nobody’s teaching them how to market their product and make money and so we decided to form growth x to see if we could do something about that. You know, could we form a fun that was loosely modeled on Andris and but do it at the seed stage and that the series a do it as proud micro vcs and never wanting to raise a billion or more of asset center management and also to stay true to our expertise in the lane in which we drive in which is commercialization or what silicon valley refers to is product market fit and not go broader than that. And that was really the Genesis of growth. X is coming up with a differentiated thesis coming up with a track record so that we could prove that as a group of people, we were able to inflect the growth curve of seed stage startups beyond just writing them checks for undifferentiated dollars and then could we go on the road and sell that to limited partners if we knew what we were itching for them and come up with an ecosystem around it that was transparent, rewarded everybody equally in the process and that’s really where it came from
Eric Hornung: 18:26
and you guys kind of have these three pillars which I find is unique. It’s on your guys’ homepage. It’s like startups, corporations and countries. I think that’s like a different kind of strategy when you look at it from a VC perspective to have a focus on corporations and countries. Do you find that to be the case and why were those two kind of…
Andrew Goldner: 18:46
Its definitely different than this. This is just a maturization of growth x until roughly four years later. Now, as we have continued to build that are connected ecosystem, as we’ve seen strategic tissue connecting everything that we do and we’re responding to the demands of the market, so we’re growth x star who was a fun night inside the fund at a private market acceleration program and it was a reverse pay wall. We can only help you if we gave you money. It was pr. It is to this day private and only available to select companies that we have already invested in and that’s because we have a very unique relationship with our lps who are excited to have indirect exposure to the asset class through our fun, but really one direct exposure and they want to write bigger checks at the series a and so they pay any management fee and they share me some of the profits essentially so they can get access to our deal flow and we have a deal which means that we will only help companies in the portfolio because they as lps helped pay for the program and we will also give them unlimited direct investment rights without charging them additional Carry and without charging them additional management fees, some people think that’s naive of us. We think it’s on the vanguard to do it, to not transactional relationships that we have with our lps and after all what I sold them when I formed this on with when we formed the front was the only form of legal insider trading in America because when I’m inside of a startup rolling up my sleeves and helping teach them and helping them find the truth, whether that be product market fit or a pivot towards product market fit that’s valuable information far beyond a pitch deck and a couple of conversations and we share that with our lps and our startups like that and we invite them to meet each other so that our lps can directly invest and that’s our model. Well, we were suffering like any other fund in the system that that leading cause of death didn’t change. It’s still the lack of market need and it’s still the talent that understands how to develop a market and not just develop a product. We couldn’t find enough startups to invest in because we require that we couldn’t scale our own market acceleration program because we didn’t have the talent to do it and so that’s where we launched growth x academy. It will be modeled after general assembly good. Instead of an intense bootcamp teaching Java and graduating project product developers, we’d teach growth market and user experience design and entrepreneurial sales and we’re raising an army of developers and through that process which has flipped classroom and project based learning, we started getting not just other startups who wanted to free growth help from our students and our lead instructors, but those graduate started also getting hired into innovation teams at companies and the late stage companies said, well, we’re failing it. Innovation at the same rate as the startups even though we have more time and money to waste and it’s for the same reason. We take mature product stage, mature markets, stage talent and processes and kpis and we layer them on innovation and we kill it. And so they said, well, can you help us? We don’t need your capital obviously, but we need your talent and your knowhow and so growth x academy started to shift from B to c to b to b and then we launched growth ex corporate to be able to respond to the demand from corporations again who don’t know how to commercialize innovation. They also don’t know how to deploy and manage corporate venture capital. And so we do that for them as well. And Lo and behold, in the process of doing that, we had inbound interest from the country of Malaysia saying that we need to prepare our economy. We need to, you know, the UC co corporations go through a digital transformation. What countries are doing the same thing. They need to shift from a energy based economy to an energy plus economy and thoughtful forward thinking economies are doing it proactively. Malaysia being one of them and they reached out through their public private partnership when other economic development commissions and they licensed our academy model and they licensed our market acceleration program. And now growth x academy is live in Kuala Lumpur and we are helping them understand how to manage sovereign wealth in the same way we help manage corporate venture for corporations and of course our own fund for other high net worth individuals. We’re retraining and upscaling their workforce to be prepared to win in the innovation economy and we’re offering them a profitable business model to do it so they’re not constantly going back to the public well for more funding to do it and that’s what attracted them to growth x academy. Effectively we have license growth x to Malaysia and now we’re working with South Korea and now we’re working, looking at having conversations with the nation of Qatar. I’m working with folks in certain provinces in Canada and so that’s where it gained from a fund than a market acceleration program for early product stage startups to help in startups, companies and countries. Commercializing innovation
Jay Clouse: 24:27
These are three validated pillars of markets that developed in front of you.
Andrew Goldner: 24:33
We stopped wanting to say no to people.
Jay Clouse: 24:36
Are you finding, and maybe this is really inside baseball, but are you finding that those two additional pillars outside of working with early stage companies themselves are more profitable for your business or you know, there could be an argument, I’m sure too focused on one of these three, so how do you, how do you weigh keeping all three going at once?
Andrew Goldner: 24:59
Great questions. Really great question. Transparency is one of our core values. I’m happy to share all of it and that’s because we have an abundance mindset. We don’t think any of this is really what’s making the difference. So happy to help you guys think about where you’re going to and of course your audience. Listen to the venture capital is a get rich slow scheme. No, don’t go into vc. You know, if you’re looking to make wealth in the short term, the management fees are abysmal. The business model is broken. We get a two percent management fee, like just about everybody else in the entire industry globally. Two percent. Just do the math. Let’s say you’re lucky enough, fortunate enough, good enough to raise $50, million dollar fund. That’s a million dollars of overhead. Now let me tell you what it takes to deploy $50, million dollars so that you’re really a get the irr, the cash on cash and the public, the private market equivalent return that they’re going to insist on. Otherwise, guess what? You don’t get to be a VC anymore, right? The amount of people, the amount of time, the amount of resources generally to responsibly deploy $50 million dollars in your budget is only two percent of that annually. Let me tell you, when you break it down and see what it actually is to do that on a day to day basis, that’s what we call an ass beating. and the model By the way, your longterm capital gain or in very uncertain because your lps get all of their money back before you see a dime and once they get all of their money back, you only get twenty cents on the dollar yourself. And if you’ve ever looked at the mining Carlo and if you run an actual model on what it actually takes to deploy $50 million and how to get that one company that is going to return all of your fun because that’s the power law distribution, I got to tell you, there are a lot of reasons to get into doing this that have nothing to do with the financial returns because it’s an ass beating and most people are bad at it and they fail at it and the competition is greater than an overcast and don’t forget, we started this journey trying to fix that model and be proudly micro vcs. We didn’t want to be slave assets under management. So yes, our corporation and our country consulting business is highly profitable. It is current income that affords us the opportunity to have highly paid partners that do that work as well as to fund all of the things that we do as micro vcs that we could never afford on a two percent management fee. It just is impossible. It just doesn’t happen. I mean, if I write you a $500,000 check as a startup, guess what? I am paid a $100,000 a year to give a shit about you. That’s my management fee. Two percent. Well, you know what? Seven phone calls in one trip and you will need money, so how can you be really useful, which is what we care about. How can you be really useful as a micro vc at the seed stage with a broken model of two percent efficiency? You’re either independently wealthy, which means you’re a white man and we don’t believe white men should be the only people who participate in this ecosystem. Or you got to get crack Alacran on current income, and so we built a model that does, does it. Now, how do you scale it? Well, that’s hard. Humans don’t scale, right? Humans don’t scale, so if you look at, if you’re on our website and you go to our corporations that our country’s page and you slide all the way down to the bottom, take a look at that network of amazing people that we have dozens
Jay Clouse: 29:00
I saw that
Andrew Goldner: 29:00
of amazing people that are helping countries and countries commercialize their innovation. By the way, most of them are not employees of growth x. We have four partners and one associate and that’s all we’ll ever have and when that associate is ready, if she wants to be a partner, she will be that Kendall. She’s amazing, but that’s it. That’s all we’re going to ever be. We’re, we’re scaling. We’re building through our growth as corporate partners who believe as entrepreneurs that they can grow their own business quicker and better sharing our platform and working with us and they can on their own. And one of our core philosophies as individuals and as now as partners, is that fastest path to creating wealth for ourselves is to create wealth for others. So that’s how we’re doing it. Otherwise, it would be simply impossible. Uh, the, I guess the only other choice would be to, to start hiring, but then you’re the rat race consultant. I, I have more work so I need to hire more. I have more headcount, so I need more work
Jay Clouse: 30:04
Thats the agency model.
Andrew Goldner: 30:05
Yeah exactly that the agency model. No, thank you. That’s not interesting to us. And everything we do is strategically aligned, right? I mean the fact that we have corporations that we also help them scout startups. Well, if a large global multinationals interested in our portfolio, that’s good for everybody involved as first customer and maybe as an acquire and if they’re not in our portfolio, well maybe they ought to be if this global multinationals looking closely at them and wanting to do work with them. So we trade on inside information.
Jay Clouse: 30:38
So Andrew, I want to switch gears a little bit here and go towards something else that is part of the fabric of growth x, which is this belief that founders shouldn’t have to leave their homes to build great companies. Now that your company was started in Palo Alto, what was it that gave you that belief and that operating principle?
Andrew Goldner: 30:59
Well, founded in San Francisco because Silicon Valley owns much capital, they don’t own entrepreneurs and that’s a really important distinction and it does have to do with your question and our core belief that you correctly stated, but silicon valley does own venture capital, over 50 percent of global venture dollars come from Silicon Valley, you know, that’s changing rapidly, especially with some of the megaphone that are out of the East Far East, but that’s very different. Very, very different. And so the reality is the trends, you know, the best practices, the volume, you know, the density of venture capital and venture invest in startups is the valley and so it’s the greatest amount of learning, the greatest amount of relationships, but each of the founding partners of growth, ex knee will bunker founder of what became match.com. Sean Sheppard, former professional golfer, five times sales founder and Max Manky, the first student that we ever taught through our program. We all made success outside of the valley and just happened to meet there. I was raised in Cleveland where I was raised in beachwood.
Eric Hornung: 32:13
Okay I’m from Westlake
Andrew Goldner: 32:14
Oh, brilliant. Okay. Yeah. My a long time. College girlfriend was Westlake, but um, certain, certain, much older than you, but in any case, well, you know how it is in Westlake, if your mother started a company while you were being raised and she built it to like 5 million of annual revenue, she would have created wealth for you and your sisters or brothers and she would have helped you guys become a respected member of your community and in Silicon Valley you’d have been known as failure. That’s just the reality of the asset class now. That’s how I was raised and that’s how all of my partners were raised and that is our belief system. And so we knew we wanted to be based in silicon valley, but from the moment we started deploying capital, we made it clear we were proudly investing outside of the valley and should we have the opportunity we would invest most of the opportunity outside of the valley. That’s part of the pitch. We sold our LPS and this was before Steve case was using his wealth and his huge megaphone and God bless him. I’m glad he’s doing it and we’re a big follower of his, but I will say we were doing it before it was as cache as it is currently. And so that’s just part of our belief system. Right? And and it’s part of the type of people that we invest in. We don’t invest in products. We don’t invest in markets. We invest in people and I know that is a, you know, that’s something that you hear a lot from investors, but that is one of the promises of experience of growth x that is our brand and we try to employ that in everything that we do because everything communicates and we’re fallible. People and sometimes we don’t make our own values, but we are attempting to do that not because it sounds interesting nowadays because of its people and how we’re people first and how the people are the ones that are going to make this succeed or fail. And yes, after doing this in Palo Alto and San Francisco and having living in Palo Alto for a little while, it started to feel disingenuous to sit in the ivory tower in Palo Alto and tell everybody why they should start their companies elsewhere. And so I decided I once again to live my beliefs and take a risk and picked up and moved my family two years ago to Nashville as part of the reason why. And it really wasn’t. It was somewhat of a professional move that was more of a personal one in terms of their belief system that we have and the types of people that we’re trying to meet and health and the community that we want to be a part of. And so in the future you may see other partners do the same thing.
Eric Hornung: 34:57
Andrew Goldner: 34:58
Great question. You know what, I, I just was blessed to be able to discover Nashville. I feel like people say, why’d you choose Nashville? And my standard response I did. And it shows me. I’m not trying to be silly about it, but you know, I was starting to travel around the country, you know, once you know, developing ecosystems like Nashville and Chattanooga and Kansas City and Cleveland and others heard that we had a value fund with capital to deploy and we wanted to avoid outside of the valley. I started getting invited to speak and to meet with these communities and I was fortunate enough that one of those places, Nashville and I found myself coming back here more than any of the other places that I was getting invited to. At the same time, I got accepted into the conference fellowship and spent two years doing it intentionally and not just in this country but around the world and I just fell in love with the hopefulness, the faithfulness, and the happiness of Nashville. Which first and foremost is really important when you’re raising two daughters, which I am, but it’s also really important when you’re raising startups. It’s a great. It’s great nourishment for an ecosystem and the soil here is rich, rich, rich, with that. In addition to the creative class here that rivals the startups in Silicon Valley, now, entrepreneurs here labeled themselves as musicians and songwriters and publishers, but make no mistake, that is the creative class of entrepreneurs here with a density rival in silicon valley in addition to a long history of entrepreneurism that predates Hewlett and Packard in Silicon Valley and oh by the way, companies that have world class sales training programs and so we might not rival silicon valley in product development, no question about it, but we have a pretty strong base and a DNA and market development here in that soil that nurtures entrepreneurs so I can go on and on and on and on. But it was all those things and yeah, a lot of personal stuff, proximity to family and proximity to most of the GDP in this country and you know, quality of life and all those things. So it just kind of came together.
Eric Hornung: 37:11
I have A general question just about like the health of the ecosystem in general. And then I don’t want to take up too much of your time. So maybe Jay, if you have one more after that we can kind of wrap it up. So you’ve, you’ve talked about how there’s kind of this movement of companies being built outside of Silicon Valley, how there’s great entrepreneurs there, how there’s a lot of capital being raised. It’s the most competitive time ever. We see that the stock market is shrinking in terms of market cap and number of companies listed. And then something that kind of just popped to me with your corporate pillar is this idea that another venture capitalists who jay and I both follow named Josh Wolfe said that when you see excessive amounts of corporations getting involved in venture capital, that’s a good time to think about it being a peak or a peaking process. So I’m just curious because it does feel like there is a lot of momentum and it’s I think sitting on top of a wave and sitting on top of a bubble feel very similar. So what’s kind of your general take on the venture capital ecosystem as a whole rather that’s across the United States or the world?
Andrew Goldner: 38:14
Well, I would definitely disagree with Josh on that point, I appreciate the perspective he was probably sharing with his comment, although I would say that, uh, there’s, there’s a lot of depth there that his comment doesn’t reveal. I’ve spent the last two years as a Kauffman fellow, focus on corporate venture capital, building relationships with dozens and dozens of cvcs around the world. I probably have the very weird and pretty irrelevant label of one of the foremost experts on CBC now because of my geeky interest in it and that work that I’ve done and he is right in terms of the meteoric rise of corporate venture capital. There was 40 percent more CDC last year deploying the year before it is becoming a profession. Part of it is just because of the massive and unprecedented amount of cash that corporations are having on the balance sheet, but make no mistake. Corporations are getting serious and intentional about the innovation economy. Their boards, their executives, their shareholders are no longer forgiven about them. You know, becoming, or potentially becoming the next yellow cab in the age of Uber. And it’s no longer about beanbags and foosball tables. It is a very serious and real interest in alignment in order to get it into understand it until I figure it out and corporate venture capital is a part of it now. There are still more corporate vcs in the system globally that do not understand the asset class, have no experience with it, are deploying capital no less irresponsibly than the wealthy angel investor who just wants to seem interesting at a cocktail party that is still happening. The non market terms which are causing financial vcs to turn away. Those are out there still, but it’s less. I’m just a pure naive at k and a disregard and more of just a a rush to to want to be a part of what cvt brings to the overall innovation agenda at a corporation. I won’t so I won’t bore you with it because I could for hours, but I think Josh is wrong and I think there absolutely is an opportunity for there to be better content and better community and better training for that burgeoning classes. CVCS and it’s something that I’m working on with others, but I don’t think that, you know, the end of days or a bubble is a consequent indicator of the amount of CVC. That’s just it. That’s just misunderstands the many of the underlying causes of the rise of cdcs.
Eric Hornung: 41:21
One thing I love about venture capital, venture capitalists and investing is the ability to have such different opinions about things and I’m a lot. I figured you’d be the person to ask that question too because I’ve obviously heard it from Josh aside and I really want to get it. The other, the other side of things, so thanks for that.
Andrew Goldner: 41:39
I’ll give you an amen on that. Anecdotally, I just recently graduated and finished up my two year fellowship and as part of the survey to the to the fellows to kind of share out what they’re learning on their overall experience of the fellowship, which is really just amazing for me. One of the most amazing things I’ve had the opportunity to do in my life, but my principal share back to them exactly what you just said. Literally, almost word for word is I spent two years meeting with some of the best vcs in the world who take diametrically opposed views on the same subject and yet they are both extremely successful. That makes it a challenge. It also makes it an extraordinary progression.
Jay Clouse: 42:29
This has been great. Andrew, I appreciate your time. So thanks again for taking the time. After the show, if people want to learn more about you or growth x, where should they go?
Andrew Goldner: 42:37
Growthx.com. What they, what they see that like they should, they can reach out to us. Obviously we love hearing from people and hearing what they’ve enjoyed about what we’re doing. We’re producing a significant amount of content at growthx, you know, our collective is not just, you know, our insights and wisdom that those from our community and as well as our presence on social media and we’d welcome the opportunity to be of help to people.
Jay Clouse: 43:03
Great. All right, Eric. So we just spoke with Andrew Goldner of growth ex. That was a really fun and enlightening conversation. What did you think?
Eric Hornung: 43:16
I thought it was awesome. I came in with head having done a little bit of research, but I had very limited expectations or true understanding of the story. We had some good back and forth around being a lawyer and seeing the world. A lot of kind of parallels that I see in my life is. I’m not a lawyer, but I work with them a lot. His trips to Hong Kong. I spent some time there. I thought it was like just very fascinating. His path through life, starting in Cleveland, kind of going literally around the world and coming back to Nashville.
Jay Clouse: 43:46
This is something you and I have been talking about all week because it came from an episode of a podcast that you and I both listened to. You turned me onto this podcast. The invest like the best podcast with Patrick O’shaughnessy. He had an episode with Boyd Vardi who is a native South African who grew up in the bush and literally takes people on retreats where you go out in the wilderness and you don’t have anything between you and the wilderness or you and the earth, and they put themselves in situations where they’re actually in relative danger for the purpose of reconnecting with some of your more primal instincts and getting in touch with some of your internal drivers and curiosity. All that as context to say a point that he makes is often you start down a path like tracker following your curiosity and your destination kind of emerges or comes from that you don’t know the full pathway that you’re gonna be taking and it seems like Andrea was definitely followed a similar path in his career to this point.
Eric Hornung: 44:43
Yeah, absolutely. He had a lot of first track moments where he found kind of that first thing and rather than predefining the path just took that to its next logical step. Then it’s the next logical step and that’s. I like the idea of the first track. I’m kind of finding the clue as going to take you down a path that you would never get to if you didn’t follow that first path.
Jay Clouse: 45:03
Yeah. Talk about an accomplished guy being at doubleclick, leading up to the Google acquisition, being at Thompson when it was acquired by Reuters and then working with a network of publishers before moving to San Francisco and starting growth x, which start as a proud micro vc and then branched into these other two pillars of operation. I mean you and I just threw this podcast, have really seen where this path could go and have come to similar conclusions and to hear a lot of candor from Andrew frankly was great for me. Especially, you know, in the realm of micro vc. He. He just laid the math out there and said this is not. This is a get rich slow scheme is the way he put it and I’ve seen similar models here for accelerators that start and find, oh, this is a really longterm play. How do we diversify our revenue streams and our services so that we can actually cover the costs of operations for the hopeful eventual outcome of that longterm play?
Eric Hornung: 46:03
Yeah. The math was fascinating. I mean, you think about it and you think, oh, a million dollars a year. I can, you know, two, three, four or five people seems very doable to do a million dollars a year. But when you are, especially in the Midwest, I think, and outside of just silicon valley where that density is there, although there’s different costs that are associated in silicon valley, this idea that, you know, you have to go travel and see your companies, your portfolio companies, you have to go. There’s just more budgeted into that two percent figure that he calculated a million dollars if you wrote raise $50 million and it’s just something to think about that is, I guess it has never been so bluntly to me, which is awesome.
Jay Clouse: 46:41
there was another great post by hunter walk. It was titled Something Like Old Man Shouting at clouds and maybe the reality of micro vc or something that said essentially the same thing and even a $50 million dollar fund is a larger sized micro vc that most micro vcs have. So as he said, even if you are lucky and good enough to raise that level of funding, here’s what you can expect. So that was, that was really eyeopening, but there was, there was a lot that Andrew brought up that I think were really resonated with us in terms of the company mission and culture.
Eric Hornung: 47:17
I always feel so and I want to get the company culture and mission in a second, but I always feel so almost underqualified and we’re talking to people of this caliber who are just so smart and notice such like amazing things. Like. And they’re so crystal clear to them. Like hit one example that was. So that was offhand was Nashville has this entire community of creators and yeah, they don’t look like the entrepreneurs in silicon valley, but they’re, they’re making music and they’re working in healthcare and it’s like all of these things that like I just, I think that I don’t whole into one cohesive thought so quickly, succinctly and powerfully. I love having these conversations because of insights like that.
Jay Clouse: 47:59
Totally. And that was a, that was a switch that got flipped for me a couple of years ago and I lived with several musicians. I just looked around around me and I was like, you guys are consummate entrepreneurs and some of you are acting like it and some of you aren’t. But that’s often the difference between a starving artist and not as the ones who understand art as a business, but to the point of creating these distilled concise thoughts. I’ve been thinking about this a lot lately too, in terms of making assertions, creating original content. It seems like the more that you play at the forefront of something and you are at the bleeding edge of understanding the realities around you, the more able you are to make assertions because you’re not just repeating what other people have said or that you already agree with. You’re at the edge and you’re at the frontier and you have to make decisions for yourself and that’s what I love about talking to these individuals that were having these quote unquote coffee chats with is there at that edge and they really excel accelerate our learning because now by learning from them, we are at the edge of ourselves and a lot of ways.
Eric Hornung: 49:00
Absolutely. So let’s go back to the principles and pillars of growth X. I think it’s fascinating that they kind of have these three pillars and that the business model was an evolution over time where you have this micro vc, then you have company consulting and now you have country consulting and while he says that, that expanded because I didn’t want to say no to people. They also minimize their scope to make out all the synergies between those three pillars. Better, so he said that they were doing b to c before and growth x, now they only do b to b and because they know that they can give more value to B to b companies because of the other pillars they have and the type of lps they have. So this ecosystem, while it has gotten maybe looks broader, has actually gotten narrower so it can provide more value.
Jay Clouse: 49:47
Legal insider trading. What a concept.
Eric Hornung: 49:50
Yeah. That’s something that uh, you know, maybe need the new rebrand.
Jay Clouse: 49:56
Yeah. Um, I, I just really resonate with a lot of their core values here in what Andrew was saying earlier in the interview is something that I’ve thought a lot about as well, which is the point of companies that start by making sales. There’s a point on the Growthx website that talks about the best investors are your customers, and he mentioned this CB insights insight that I talk about all the time in the realm of product validation. The number one cause for failed companies, 42 percent is that there is no market need that is bonkers and completely unavoidable if you’re following a good product validation process.
Eric Hornung: 50:37
Yeah, and I think we see a lot of those on upside where people aren’t just building a product and saying this is a massive market. They’re saying, look, I found this customer need. I mean I think about Mobius when they went out and talked to 100 farmers or I think about fresh fried when he just drove around the entire Midwest and talk to people who used frying oil or talk to the People in Louisville. I just think that we see a lot of those on upside and it is AmI don’t know if it’s a silicon valley versus outside of Silicon Valley thing at this point. There’s not enough data points for me, but I have definitely noticed more of a focus on what some people would call the lean startup model. You’re on upside.
Jay Clouse: 51:11
Well in a lot of it comes from Mrs. Come up with conversations with our guests. Most companies outside of the valley don’t have the luxury otherwise or the option. Really. That’s why we have companies like Moebius who are literally funding things in step with partners who have such a vested interest in the solution that they’re willing to put some skin in the game early. You have to get what people in the valley may call creative with your fundraising by working with a real problem and having customers put some skin in the game early on and I love that as a focus. I also think that is risk mitigation on the part of the investors themselves. So love that approach as well.
Eric Hornung: 51:49
All right, so let’s hit one last point which is the last, which is the way we ended the interview talking about divergent thoughts in vc and how it. The entire industry is encapsulated by extremes.
Jay Clouse: 52:04
Totally. Well man, I have a lot of thoughts on this. Mostly, you know, divergent thoughts are possible here because while hindsight is 20 20, you just never really know what’s going to work in this space. That’s why the whole model of vc is one in 10, maybe two in 10 take hold and really make your return your fund. And that’s why we’re talking about this recently offline, I often hear when investors talk about their biggest returns on companies, they say that it’s usually the companies that split the room the most and there’s somebody just pounding the table and saying we’ve got to invest in this company as opposed to when people come to a consensus. Usually that could be a sign of danger and warning in the VC space. So I don’t know what. What are your thoughts here?
Eric Hornung: 52:55
Yeah, I think that, I mean the most recent Nike Advertisement, which is the Colin Kaepernick advertisement like plays to this idea of split reaction yielding the most probably whether it’s good or not, I’m not sure I’m not. I don’t know if this is going to be like a takeoff for Nike or if it’s going to crash Nike. I just know that the reaction is going to be extreme. So when you’re in a VC meeting and someone is doing that pound the table and someone else’s pounding the table the other way, it just feels like that isn’t going to be a scenario where there’s just a middle of the road outcome. It’s going to be extreme one way or the other.
Jay Clouse: 53:34
It’s fun though. It’s definitely more fun to have discussions and discussions really only happen when there are differing viewpoints. Right?
Eric Hornung: 53:44
Jay Clouse: 53:44
So that’s the fun part of conversations like this.
Eric Hornung: 53:47
All right, Jay. Well this was a fun one to all the audience out there. We hope to be doing more of these coffee chats. They will be released on Fridays ad hoc, so not every week, but as we talk to more and more vcs, we want to let you guys in a to be a fly on the wall and some of those conversations.
Jay Clouse: 54:04
Yeah, we’re excited about this series and some of them maybe less ranging about the pathways of these vcs. They may be deeper dives on specific subjects, so if you have ideas or things that you would love to hear about, again, tweet at us @upsidefm or email us Hello@upside.FM. We make the show for you so let us know and we’ll talk to you guys on Wednesday. That’s all for this week. Thanks for listening. We’d love to hear your thoughts on today’s guests. So shoot us an email at firstname.lastname@example.org, or find us on twitter @upsideFM will be back here next week at the same time talking to another founder and our quest to find upside outside of Silicon Valley. If you or someone you know would make a good guest for our show, please email us or find us on twitter and let us know. And if you love our show, please leave us a review on itunes. That goes a long way in helping us spread the word and continue to help bring high quality guests to the show. Eric and I decided there were a couple of things we wanted to share with you at the end of the podcast. And so here we go. Eric Hornung and Jay Clouse are the founding parties of the upside podcast. At the time of this recording, we do not own equity or other financial interest in the companies which appear on this show. All opinions expressed by podcasts. Participants are solely their own opinions and do not reflect the opinions of Duff and Phelps Llc and its affiliates on your collective llc and its affiliates or any entity which employ us. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. We have not considered your specific financial situation nor provided any investment advice on the show. Thanks for listening and we’ll talk to you next week.
Andrew is a Kauffman Fellow, Trustee at the Nashville Children’s Theatre, Founding Organizer of Nashville Entrepreneur Week, Regional Board Member of Venture for America, and a proud Mentor at Alchemist Accelerator in Palo Alto, Matter in San Francisco, WeWork in Nashville, and, nationally, at Galvanize. Andrew received his undergraduate degree from the University of Cincinnati and his law degree from Georgetown University.