JE012: the fourfront // four trends we are watching develop

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Jay Clouse 0:12
Hello, hello, hello, and welcome to the upside podcast, the first podcast finding upside outside of Silicon Valley. I’m Jay Clouse, and I’m accompanied by my co-host, Mr. Air-table-extraordinaire himself, Eric Hornung.

Eric Hornung 0:24
Jay, we did it, we made the transition. I didn’t think it would happen in 2019, I’m not gonna lie to you. But we had some, actually, you know what, let’s tell the people what we did. What did we do, Jay?

Jay Clouse 0:34
I am just excited that you’re giving me partial credit for having done that.

Eric Hornung 0:38
You’re the one who pulled the trigger, I just set up the infrastructure, got us 60% of the way there and said this might work enough.

Jay Clouse 0:45
That’s true. So, to the listeners, we have been working out of a Google Sheet for a long time for our production schedule. And Eric and our interns this summer, Sammy and Izzy, took the initiative of moving everything over to Airtable, and not just moving our production schedule over to Airtable, building out a CRM for our show in Airtable. It is a thing of beauty and a lot of work to move an entire process over to Airtable from Google Sheets.

Eric Hornung 1:10
Would have been so much easier to do this from the beginning because it’s so, I mean, we we’re at 85 episodes, I think, of recorded content at the time that we moved this information over to Airtable. And, if you’re not familiar with Airtable, it’s not a seamless drag and drop process from Google Sheets. You really, especially the way we had our Google Sheets set up, because it was very customized, and… Jay was very annoyed at the way that you had to move things around.

Jay Clouse 1:39
It was a good sheet. For a sheet, it was doing a really good job.

Eric Hornung 1:42
Yeah, I mean, it did its job. But now we are an Airtable and we are flying. We can update. While we’re on the mics. It’s that easy.

Jay Clouse 1:50
It’s great. And today we have a very special episode, one of our talking heads co-hosted episode which, today, Eric, what are we naming this episode?

Eric Hornung 1:59
We are calling it “On the Fourfront.” Yeah. How about that?

Jay Clouse 2:04
Well, I thought we we’re calling it “Fourfront.”

Eric Hornung 2:06
Oh, I thought you said on the forefront.

Jay Clouse 2:08
Well, all right. Well, what we should have had anyway was “Four on the Fore,” f-o-u-r on the f-o-r-e. That would have been the brilliant episode title, but I was out-voted one to one.

Eric Hornung 2:21
You were out-voted, and we still don’t have a title as we’re recording this. So guys, it’s either going to be “On the Fourfront” or “The Fourfront.” But it will not be “Four on the Fore,” which sounds like a bad community news segment.

Jay Clouse 2:32
It will not be “Four on the Fore.” But we are talking about four leading themes that we see coming up time and time again here recently on the pod. Eric, what are those four themes?

Eric Hornung 2:43
So the four themes are talent, information accessibility, specialized funding, and remote work. I think we should just dive in right in that order, Jay. What do you got for talent? What have you been seeing in the talent world?

Jay Clouse 2:57
Let’s talk about talent. Talent is something that comes up with just about every founder if we get anywhere close to it, because it’s become increasingly apparent to me just how important your first handful of hires are. And as the company scales, and we see that here in Columbus and other cities across the country, finding a lot of talent becomes its own exercise and challenge. For communities that are outside of Silicon Valley, like we like to focus on, it’s difficult for a company to hire 200, 300, 400 employees without going toe-to-toe, both with the existing sort of industry players in their location, as well as the other startups. So here in Columbus, we see it with companies like Route Insurance, and Cover My Meds, and Olive, and Updocs, and Aware, and Bold Penguin. All of these companies are hiring now into the several hundreds. And it’s just difficult for them to compete with each other for the same type of roles. But luckily, for Columbus, a lot of knowledge workers here from Fortune 500 companies like Nationwide, Cardinal Health, AEP, JPMorgan Chase. I’m not sure how that maps to other cities in the country, if they have quite as many knowledge workers. But that’s something I’m going to keep an eye on here, as we continue through our search of different communities.

Eric Hornung 4:16
So this war on talent has got me thinking about the way that we scale businesses, which is essentially, eventually you throw more bodies at the problem to get bigger. That’s just a way that this kind of whole blitzscaling model has worked. And I’m curious if, because the talent war, as people call it, is just getting so competitive, that people figure out a different way to scale to a billion dollars. I don’t know what that looks like. But our friend, David Sherry, had a really interesting conversation on Twitter about the first one-person, billion-dollar company, and what will that look like? And I wonder if that’s the way the billion dollar market kind of turns, at least temporarily?

Jay Clouse 5:03
Yeah, the shining example of this, I think, is still Instagram. I think they were 40 people when they got acquired by Facebook for a billion dollars. And that’s kind of the model of very small, very lean, very valuable teams. One-person, billion-dollar company seems a little bonkers to me. But it’s totally possible. I could see where it’s happening. The difficult thing about different communities outside of Silicon Valley hiring really great talent that I didn’t touch on, this is something that Caleb Dimmock brought up in his episode with Integrity Power Search, coastal companies are now hiring remote teams in areas across the middle of the country. And they can pay the same coastal salaries to those individuals, which a lot of companies here in the middle the country can’t compete with or don’t want to compete with. So that’s its own challenge as well. And I’m sure we’ll talk a little bit more about remote work in our fourth theme on the fore, Eric.

Eric Hornung 5:54
Well, here’s the thing, if you’re going to dive right in remote work, I think we just kick four up to two, we jump on. Let’s do some remote work talk.

Jay Clouse 6:00
All right, let’s do it.

Eric Hornung 6:01
So what you just mentioned was the mullet strategy of remote work, which is you have your front facing people where the money is, which is in San Francisco or New York or Boston. And then you have your back office, where the party is, out in the midwest or the southeast or wherever. Have you ever heard the term mullet strategy?

Jay Clouse 6:19
No, there’s no way; you made that up.

Eric Hornung 6:23
No, I didn’t make that up. That’s a real thing that people say, I think.

Jay Clouse 6:25
I’ve never heard of that. That’s fantastic. Party in the back office.

Eric Hornung 6:29
It’s interesting, because you see very few VC firms have mullet strategies, and I’ve always wondered why.

Jay Clouse 6:35
It’s, yeah, on the comeback cities bus that I rode from Youngstown to, or I should say, Cleveland to Columbus couple months back, and we have that episode in the feed if you want to look at the comeback cities bus, there was an individual I spoke to — Nope, I take it back, it was Capital Camp. Take it back. Let me just name drop two cool things I did. Only one of them being correct. Capital Camp, there was a firm in Chicago that was talking about their interest in investing in different areas of the country, but they couldn’t figure out how to do it without doing, like, a very expensive and time-intensive tour, which kind of blew my mind. Like, there’s certainly ways that you can explore different communities. I mean, we’re doing it here, you know?

Eric Hornung 7:15
This is very expensive, Jay. We are putting a ton of time into this time.

Jay Clouse 7:20
But still, but…

Eric Hornung 7:21
We’re not actually putting a ton of money into this, just to be clear.

Jay Clouse 7:24
No, and to do it over a distributed, you know, length of time, where, we’re dropping in, we’re becoming good friends with different community builders in different in different areas of the country, and they are sending us companies that we should talk to. That seems like a very replicable strategy to me. So, VC firms doing the mullet strategy seems like something that’s plausible.

Eric Hornung 7:44
But I think the idea here for remote work isn’t the mullet strategy. That’s kind of a half-in, half-out strategy. Let’s talk about fully distributed teams. I think we’re seeing more and more people go to this fully distributed model. And that’s possibly related to talent. But I think it’s also just a driver of the workforce wanting to have the option to be remote. What do you think about fully distributed teams?

Jay Clouse 8:11
Love it. And I think as long as the team is well versed in digital communication, I mean, tools like Slack are phenomenal for this. But then you also have Zoom, so you can get on a quick video call. Good old fashioned phone calls, you know if things need to happen quickly. But this came up a lot in our conversation on Earnest Capital with Tyler Tringas and Kevin McArdle, one of my favorite episodes. I am a big fan of the fully distributed team. I see a lot of my friends participating as part of full distributed teams really enjoying that. They’ll do an annual or a bi-annual summit. If I were an employer, and I could pull it off, I would certainly try to be a fully distributed team because, for my lifestyle, I’d prefer to be able to control more of where and when and how I’m working. And at some point, as an employer, if you have a whole team, you’re kind of beholden to that construct. You know, you want to be the first in the office, and you want to be the last out, and you want to show good leadership. But a lot of that is total, like, heuristic and putting up a front, I think, when you have an office space, and I think you can be a very effective leader and a very effective CEO conducting a fully distributed team without needing to have this dedicated space where everyone’s showing up for this kind of arbitrary period of time.

Eric Hornung 9:25
Yeah, I think it’s definitely a large part of the future of work. I’m not sure that it’s going to be as large of a presence as people kind of feel in the next five to ten years. I think that there is still too much baked into the culture of people that are over 45 years old, that just have always had this office presence, office culture, that it’ll be too hard to migrate a huge portion of the workforce. That being said, it’s definitely an emerging trend that we want to keep our eye on. And something that people care a lot about, because Kevin McArdle’s article that he wrote for the update volume two actually went to number one on Hacker News, and it was about best practices in remote work.

Jay Clouse 10:05
There’s got to be something to be said about having a fully distributed team in different coordinated areas of the country or world so that you have people close to your customers all over the place. And also, there’s got to be something to be said about having part of your team in a totally different time zone, like a 12 hour shifted time zone, so you can kind of be operating around the clock if you coordinate well. You know, there’re some teams I know who outsource a lot of their development. And so, they’ll wake up in the morning, they’ll have a lot of work that has been done, they can look at it, they can provide feedback and notes, go through their day, and by the time their workday is over, the development team is waking back up, seeing the notes, starting to get back into work, and it’s just this constant 24 hour cycle where there’s no real downtime. I think there’s some real efficiencies there that more teams can take advantage of.

Eric Hornung 10:53
At the top, you called it information accessibility.

Eric Hornung 10:53
Definitely agree. It’s an emerging trend. And we will continue to check on remote work and see if some of those efficiencies are coming to light or if this all falls apart. And it’s just the trend de jour. Oh, how about that, trend de jour. But let’s jump into our third of the four points in our forefront here today, which was originally the second, so really mixing you guys up here. But that is information inaccessibility.

Eric Hornung 11:25
Well, sometimes when something isn’t accessible, it is inaccessible, Jay, you know.

Jay Clouse 11:30
Pretty much all the time.

Eric Hornung 11:33
Pretty much all the time. So what do we mean by information accessibility, or information inaccessibility. In the space that we are kind of playing in here on Upside, information is not constant, transparent, or easy to come by. That’s information for the entrepreneurs, it’s information for the VCs, it’s information for us when we’re trying to get guests on, its information for the guests when we’re trying to recruit them to come on the show. There is just so much information ambiguity in this space. And I think that means there’s a ton of opportunity. But I’d love to take a little time to walk through some of the places we find that there is a information gap between parties on either side of the table.

Jay Clouse 12:17
And now for a segment called, “Jay and Eric complain about where they can’t find information.”

Eric Hornung 12:22
Crunchbase. Done.

Jay Clouse 12:26
It is difficult. It is difficult to find funding information on our typical gas, which is a pre-series a company. A lot of times, you know, we go to Crunchbase because it’s… I mean, frankly, we shouldn’t rag on Crunchbase because it’s the best place that we can go.

Eric Hornung 12:40
We could go to PitchBook, but I don’t have 20k lying around.

Jay Clouse 12:43
That’s what I’m saying. Best place we can go, I should say, putting an emphasis on us in this moment in time where we don’t have a PitchBook subscription. And…

Eric Hornung 12:53
Hey PitchBook, if you’re listening, we will take a free subscription. We’re very into that.

Jay Clouse 12:58
Very unlikely PitchBook is listening. But if so, call me out on that comment in the email. Crunchbase does a pretty good job for us most of the time. And when it fails us, it fails us pretty hard, because I mean, really, it seems like it’s a lot on the founder to update that in the early days. Sometimes, you know, we talked to founders who are totally bootstrapped, and they don’t have a Crunchbase profile at all. And I can’t say that I totally blame them. I mean, I wouldn’t necessarily want my private information public through Crunchbase. But that makes it difficult. Eric, you did a lot of work on the VC landscape, and I know that’s been a bear to create. So if you want to talk about that a little bit, give a little bit of a — what do I want to say — a red herring? Foreshadowing? Foreshadowing to update issue three?

Eric Hornung 13:37
Yeah, little foreshadowing to issue three here, we’ve been busy in the background, creating a VC landscape, trying to find every venture capital firm in the United States. It’s no easy task. There is no master list that I can find. That being said, we’re just trying to compile a bunch of information and make this easier for anyone who wants to find a universe of basic information and can go and do their own research a little deeper. That being said, it is a compilation of dozens of lists, at this point, of random Twitter encounters at this point. And the information is absolutely not vetted in any way.

Jay Clouse 14:18
Very close to having 1,000 data points or 1,000 companies.

Eric Hornung 14:22
Very close to 1,000 firms, yeah.

Jay Clouse 14:23
Which are firms for the most part. And there are tons of private investors, angel investors, family offices, that we have no idea how to get any type of line of sight into for the benefit of companies we have on the show that we like to introduce to people like that, for the benefit of us potentially finding guests. But imagine us, as founders, and I’ve talked to a lot of founders…if you are coming at starting a company from the standpoint of, I’ve been practicing an industry over here, or I found this problem and I’m obsessed with solving it, but being in the quote-on-quote startup scene has not been my history, it’s really difficult to find who to talk to, direct yourself to a strategic investor, whether a firm or more likely someone who’s an individual, especially in the early beginnings, it’s just difficult. You have to look for introductions and connections that a lot of founders just don’t have.

Eric Hornung 15:15
I feel like there’s a best practice. And I feel like you can get that a couple of ways. One is through your law firm. I feel like when your law firm has a good emerging companies practice, and you go in to get all of your initial paperwork done, they probably have some connections with a handful of venture capitalists and angel investors who are looking to make early stage investments. That’s probably a good place to start that I don’t know if a lot of founders utilize. I think that also accelerators have their kind of own little cohort of investors that want to invest in companies coming out of that accelerator that they have good relationships with. But there is no way for you to kind of go about it other than just Google searching to create your own list. So you’re kind of constricted by the law firm you meet, the first angel investors you bring on, the first accelerator you join, and their universe of contacts, as opposed to hey, here’s the total universe, maybe that universe, maybe that first universe that you’re talking about has 10% consumer investors, but you’re a consumer company, so why wouldn’t you go to a universe where there’s five times that amount? So to me, it’s just like, I don’t know if we’re aligning interest perfectly, because of the relationship nature of early stage investing.

Jay Clouse 16:35
I can’t believe how many times you just said universe.

Eric Hornung 16:37
Well, I mean, it was a pretty universal comment.

Jay Clouse 16:40
Uh. All right, we’re trying to get into our fourth and final four on the fore.

Eric Hornung 16:47
What is that?

Jay Clouse 16:48
Specialized funding. We spent a little bit of time here on the pod talking about alternative financing, which is a subject I like, but we’re rolling that up into a larger umbrella, which we’re calling specialized funding. Eric, you want to kick us off and talk a little about that?

Eric Hornung 17:03
So, when you’re talking about specialized funding, I think you could talk about it in three ways. You can say, Hey, we’re going to invest very specifically at this very specific stage. So we’re only going to make seed investments of $50,000. That’s one way you can be specialized, and we’re not gonna lead rounds, or we’re only gonna make seed investments of $2 million, and we’re only going to lead rounds. You can also be specialized by investing specifically in one geography. So the Ohio and Innovation Fund, which we had on last year, invest only in Ohio.

Jay Clouse 17:34
Yes, and only in a couple of different disciplines, which I think is another way that you can specialize by saying, we’re doing b2b SAS, we’re doing healthcare, we’re doing consumer, that type of specialization. We’ve even seen some firms specializing in minority or diverse founders.

Eric Hornung 17:52
Yeah, you just jumped right in and stole my third pillar. What was that all about?

Jay Clouse 17:56
Well, you know, you gave me a pause, you gave me a break in the action, I’m going to join in and fill in the gaps that you missed.

Eric Hornung 18:02
All right, that’s fair. Well, those are my three pillars anyway. So I think you hit it, you can specialize by stage, you can specialize by geography, you can specialize by type of early stage company. And that does include things like minority founders, or immigrant founders, like our friends Unchained VC are doing out in San Francisco. Or, it’s more about the founder approach and the industry perspective on that last one.

Jay Clouse 18:28
Here comes a quick shadow. Wah.

Eric Hornung 18:31
Wow, I didn’t know we were doing shadows here.

Jay Clouse 18:33
I can do a shadow.

Eric Hornung 18:34
I know, I love it.

Jay Clouse 18:35
I think the specialized funding…Well, I think that very niche types of founders that you invest in may be a fad, frankly. I think that when you specialize so much, whether it’s geography or industry, or whatever market you’re going for, I think we’re seeing a lot of micro-VCs specializing for the sake of marketing their fund. And I don’t know that’s the best way to deploy capital.

Eric Hornung 19:02
I believe that is partially true. I would go on the other side, though. I think if we expect VC in early stage investing to grow and continue to grow as an asset class as a percentage of overall invested assets in the United States and abroad, then you will see more and more specialization of financing because you will see more and more institutions investing and thinking about portfolio construction, and they want to know what’s in that basket of goods that they’re buying. So here’s my b2b SAS portfolio, here’s my alternative meets portfolio, here’s my revenue based financing portfolio. If I’m going to break down that 10% that I’m allocating to, as an institutional money manager, if I’m allocating that to alternative financing of any sort, I want to know what the return portfolios are. And if I just give it to someone who’s a generalist, though that volatility is a lot wider, and I have less predictability — not saying you have any real predictability in VC anyway — but less predictability of what’s going to happen.

Jay Clouse 20:05
Well, we won’t really know how those bets play off for another five to ten years and see if those specialized portfolios are returning well. But if I’m a money manager, I would rather put my money behind firms that have a longer history, that have already shown a history of returning things well, even if they are a generalist. I don’t know how big the total pool is for a lot of these specializations. And I think that it’s betting on companies and horses by necessity of being inside that pool and precluding some really potentially good investments.

Eric Hornung 20:38
I think the structure of the venture capital industry says that the people that are around the longest move upstream the most. So, what I’m talking about is early stage specialization. If you’re talking series B, C, D specialization, I agree with you then. But early stage, I think there will be a need for specialization.

Jay Clouse 20:55
Alright, well, we made it through our four on the fore, starting with talent followed by remote work, which was number four, became number two; followed by information inaccessibility, which was number two became number three; and specialized funding, which was number three became number four. Eric our four on the fore. Anything that we missed?

Eric Hornung 21:14
Sticking to our structure. We missed sticking to our structure.

Jay Clouse 21:19
We missed agreeing on the title before we got on the mics. We’d love to hear from you guys what types of themes you’re seeing in the venture and startup landscape across the country, what you’re thinking about these four on the fore, and anything you think we may have missed. You can tweet at us @upsidefm or email us, we’d love to hear from you there.

Eric Hornung 21:37
Also want to give one closing shout out to our friends at Holloway, who are trying to solve the information inaccessibility gap by putting out a robust, thoughtful piece on how to raise venture capital financing. So go check that out at

On today’s episode, we analyze four predominant themes we’ve encountered lately in the startup and investing arena. Our four on the fore includes:

1.) hiring talent
2.) the growing trend of remote work
3.) frustrations with information inaccessibility
4.) and our takes on specialized funding

We discuss:

  • Transitioning the podcast planning to Airtable (00:25)
  • Talent: the importance of hiring talent from the get-go and the challenge of hiring talent as companies grow (02:57)
  • Remote work: the mullet strategy and full distribution model of teams (05:54)
  • Information accessibility: the plethora yet inconstancy of available information and some of the available search engines (11:07)
  • Foreshadowing of our new project that compiles lists of venture capital firms (13:37)
  • Specialized funding: different types of specialized funding and potential interests and harms (16:48)

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