Ginger Rothrock HG Ventures

Ginger Rothrock of HG Ventures // corporate venture capital investing in heavy construction and materials, environmental services, and specialty chemicals [CC076]

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Ginger Rothrock 0:00
It never occurred to me that I could be on the other side and being an enabler. It’s when I step back. It’s it’s a different scale of impact, right? I been worked with mentored scientific entrepreneurs my whole career, you know, maybe my whole life if you throw my family in the mix, I feel like I can connect to them in ways that maybe a traditional business focused VC cannot.

Jay Clouse 0:22
The startup 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.

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. Green Bay Packer descendent himself, Eric Hornung?

Eric Hornung 1:02
Ooh, with the question mark there. That was pretty nice.

Jay Clouse 1:04
Are you related to Paul Hornung?

Eric Hornung 1:05
You know, I get asked this question a lot being down here in Cincinnati, talking to a lot of older guys who remember the golden boy. And with him passing away this year, I think it popped up even more. If I’m going to tell you the truth. It’s I don’t think so. But and here’s where here’s where the but comes in Jay. My grandpa did make a on paper in the garage family tree once and somehow on there. There was a Paul Hornung, who would have been about Paul Hornung’s age. Now. That’s pre That’s like there’s a lot of room for error on that chart. But I’ll take you know, a maybe that’s all for there.

Jay Clouse 1:43
He was born in Louisville, Kentucky.

Eric Hornung 1:45
He was born Louisville.

Jay Clouse 1:46
It’s not super far. I’m really impressed. You know his nickname was the golden boy. I didn’t know that until looking at his Wikipedia page right now.

Eric Hornung 1:52
Yeah, that’s the off the top of the dome knowledge right there. When you have the same last name of someone, you tend to learn a little bit about them just over time, because you have to. It’s really a forced habit.

Jay Clouse 2:02
I’m just trying to learn a little bit about your heritage. Eric, I want to know a little bit more about who you are related to, descended from. I think our heritage is something we should honor.

Eric Hornung 2:12
I think so too. Mine is you come through New York City. You know, I think it’s where everyone showed up. And somehow every single Hornung in the country ended up in Buffalo, I think at some point and then dispersed from there. So if you ever go to Buffalo and meet a Hornung, chances are I’m related to them. That’s my heritage Jay.

Jay Clouse 2:29
The downside is if you’re going to be descended from Paul Hornung, now you now have to live up to the life that Paul Hornung led.

Eric Hornung 2:37
And he led a great life. Some would say he led the one life that he had the best way he could. So he would have got along great with our friends at Ethos Wealth Management, and you can go to to learn more.

Jay Clouse 2:53
Well speaking of heritage Eric. Today we are speaking with Ginger Rothrock, a Senior Director for HG Ventures. HG Ventures supports innovation and growth across the Heritage Group by investing in partnering with private companies developing new technologies and approaches in both their core and adjacent markets. Eric the Heritage Group was founded in 1930.

Eric Hornung 3:15
Good year.

Jay Clouse 3:16
Good year, a very good year. It’s a fourth generation family owned business managing a diverse portfolio of more than 30 companies specializing in heavy construction and materials, environmental sciences and specialty chemicals back on the large, privately owned company trained.

Eric Hornung 3:33
This is just like some good old fashioned Midwest business right here.

Jay Clouse 3:37
Good old fashioned Midwest business. This is gonna be really fascinating. I think HG Ventures akin to kind of a corporate venture capital arm for The Heritage Group. And we have lots of questions for groups like this, Eric, but this goes one step further because HG Ventures is now supporting a TechStars accelerator in Indianapolis, Indiana, bringing in companies in this world of heavy construction materials, environmental sciences, especially chemicals. Sounds like a really interesting and unique opportunity for companies in those industries.

Eric Hornung 4:10
Want to give a quick shout out to Haley Keith from MITO Materials, who’s been on the show. She introduced us to Ginger. Like two years ago, Jay, and we are finally getting this up running and I am stoked about talking hard tech here on the Upside podcast.

Jay Clouse 4:28
Stoked. Before joining HG Ventures, Ginger served as vice president of technology and commercialization at RTI International, one of the largest contract research organizations in the world. In that role, she oversaw the commercialization of more than $1 billion of portfolio r&d, and save as a man served as a mentor and coach to numerous scientific innovators. I’m gonna be way out of my scientific periodic table of the element here, Eric, but you’re Mr. Creative elements.

You’re right, you’re right. You got to rise to the occasion. Gotta rise to my heritage, we’d love to hear what you think about this episode with Ginger. You can tweet at us @upsideFM or email us Hello@upside.FM. And we’ll get that interview right after this. Eric, we got to make some big changes to how we do operations here at Upside.

Eric Hornung 5:16
This feels like an intervention. Jay.

Jay Clouse 5:18
It’s a bit of an intervention. I have to give you some tough love. We’ve had some calendar problems over the last couple of weeks.

Eric Hornung 5:23
I’ve had some calendar problems, you don’t have to throw the third person on this.

Jay Clouse 5:26
I do like to take the blame for you. But this one is on you. And Eric, I think we have found a solution to our calendar and scheduling problems.

Eric Hornung 5:34
But there are 101 scheduling tools out there Jay that can help you avoid the awkward dance of finding a time to meet.

Jay Clouse 5:40
But this tool is by far and away the best one I’ve seen and I have looked at a lot of scheduling tools. And I’m talking about SavvyCal.

Eric Hornung 5:48
SavvyCal makes it a collaborative effort allowing you to personalize links and allow recipients to overlay their own calendar on top of yours.

Jay Clouse 5:57
It’s going to make booking guests for Upside and even just one on one conversations a complete breeze. You gotta see what this looks like. You got to see how it works because you’re going to ask why wasn’t it always this easy?

Eric Hornung 6:07
You can sign up for a free account at That’s And when you are ready to test out a paid plan, use the code Upside to get your first month free.

Jay Clouse 6:27
This episode is sponsored by Fundboard. Fundboard is a free tool to help you find startup investors and manage your fundraising process. Fundboard helps you to find not just the right firm, but the right person at the right firm. Fundboard makes it easy to search, save and share. You can search 1000s of investors ranked by how well they match your startup, you can save them to your Fundboard to create your list of targeted investors. And you can share your Fundboard with your network to game plan how you’ll approach investors directly. You can build a tailor fit list of startup investors in minutes with Fundboard. And you can learn more at upside.FM/fundboard. That’s upside.FM/fundboard and the link is in the show notes.

Eric Hornung 7:16
Ginger on Upside we like to start with a background of the guests. So if you type take us on a quick rocket ship through your history.

Ginger Rothrock 7:23
Sure. So I grew up in an entrepreneurial family not the type that you guys interview or I fund but the type that takes a second mortgage on a house to launch and grow. Right my my dad, my uncles, grandparents, engineers, contractors, small business owners, I grew up in the brick business, Rural Tennessee hanging out the brick plant running copies of blueprints, but really, you know, seeing the hustle and hard work and the correlation between your own efforts and in the rewards right embracing risk. So I grew up with risky household right. And the downside, right, I had years where I ate a fair amount of spam. But I went to undergrad in Furman in South Carolina to pursue chemistry. I’ve always loved science and engineering. I did some research for three years at Los Alamos National Labs at New Mexico, working on cleanup of nuclear waste. So started my fascination with sustainability, recycling and the like back then. But last summer after I graduated was 2000s was the height of the .com. And one of the guys I played Ultimate Frisbee with said, Hey, you would thrive in the Bay Area. Here’s a Berkeley law student. So I said, You know what, let’s go. I’m young. So they’re in 22 year old girl changed the world, right? software is not something I knew anything about and probably still don’t know enough about. But definitely, you know, fixated on the environment, clean water waste, I decided to go work at the EPA labs, because I thought that was the place to make real change. It was a frustrating and enlightening experience, because it was so bureaucratic and hierarchial, you know, the opposite of that agile innovation role that I imagined I really wanted. So thought, I’m in the Bay Area it’s 2000 Why can’t I start a company, right? Let’s go meet people in the ecosystem. You know, get to know people in the community figure out how this all works. But I was pretty naive. You know, if you think about the last few years, we’ve we’ve recognized what are the biases against female entrepreneurs and young folks like imagine 2000 where VCs were 100% white guys with logoed MBAs, and here I am this like young Southern science girl excited approaching them with ideas, you know, draw your own conclusions. And that didn’t work out. So it’s like, how do I get these folks to take me seriously. So in science, the way you get taken seriously as you go get a PhD. So I went looking for advisor that was more interested in more than science for the sake of science. It was actually pretty hard to find at the time, but I went to the University of North Carolina, which was a top chemistry program and work for a guy named Jo Desimone. So if you recognize that name, he’s now very well recognized for being the founder of Carbon, which is a multi billion dollar additive manufacturing company, which is, I believe, his fifth startup now, but I worked for him when he was relatively unknown. He’d had one startup, but he’s incredible visionary, best storyteller I’ve ever met. Made me realize research is really only impactful if you can market your discoveries and help connect the dots for investors. So I got to see him pitch companies from very beginning I got involved it was just a learning experience of a lifetime. So long story short, we and another graduate student founded a company called liquidy technologies, which at the time of launch focused on plastic chips, kind of like rapid diagnostic technology. But the company fairly rapidly pivoted to drug delivery. So nanoparticles for drug delivery. We had great investors in the Bay Area from Boston. I love that science business interface. We’re gonna customers prototyping, started a separate group focused on material science, which is really aligned with my passion areas, batteries, solar cells, smart windows, all those clean tech goodies from the late 2000s almost became its own company. It didn’t work out. timing was bad. The life science side of our business was going really well. We’d raised I think, $16 million. We were still funding the cleantech side and the crash happened, right? So execs team said, You know what, we really need to focus on life science, which is totally the right move for the company. It was a crossroads for me. And sort of serendipitously, that’s a word I was getting, I was having conversations with a group at RTI called Research Triangle Institute, was a not for profit translational Institute. So it’s not a university, they only do applied work. In that, quote, a company has a large global organization that a billion dollars in revenue, almost exclusively federal funding. So it’s really interesting, because the people in the work were extraordinary, but there was no commercialization function. So here I am, you know, this, this background startups and what an untapped opportunity to take this work or to reserve the federal government understand the value for corporates, and maybe partner license create spin off companies. So I had some success learning partnerships, growing our team build the credibility to bring more entrepreneurial thinking to the organization, our executive team basically granted me an internal seed fund to sort through all our assets, pick out the ones that value fund them. It was amazing connecting with the scientific innovators across the Institute, coaching them on translating skills to business validating their work, I loved it, I got promoted to see the engineering functions. And then one day, I got a text from a guy named Kip Frey, he was a very well known local North Carolina entrepreneur and investor. I met him twice at Duke. He said, Hey, I’m now doing something really interesting in Indiana, I think you’d make a great VC, you should come see me.

Jay Clouse 12:04
Wow, that was one heck of a Roth rocket ship. So tell me, there are so many different paths to go down here. How quickly did you take to the business side of all of this, because to me, these sound like almost different worlds when we talk to a lot of hard sciences. And it sounds like you really took to it quickly, and built that side of your brain and enjoy the intersection of these two.

Ginger Rothrock 12:31
I did. And I think I grew up with it in many ways. So my dad had me going to meetings with him, even as a kid, I would be in his booth. I’d be talking to customers, I love talking to people, connecting with folks. I’m an experimentalist at heart, right? All scientists are, but I see the business side as a different type of experimentation. People talk about this and things like lean startup and whatnot. But it is a testing your product in a market is very similar to testing your product in the lab. And I and I really enjoy that the new product development commercialization piece. It’s it’s just part of that ideas, only a tiny percentage of of what makes it right. The rest of it is, is the execution side is the team building. It’s the Do you have the right business model? Do you have the right way to sell your product, get it out in the market, etc. And it just, you can’t have a complete product without all of those things.

Jay Clouse 13:27
So kit pride comes to you says I think you’d be a great VC. I’m doing an interesting thing in Indiana living in the Bay Area in early 2000s. What types of feeling did you have about Indiana?

Ginger Rothrock 13:39
I didn’t know anything about Indiana. Yeah, I had been there once in college for an NCAA event. And had had rarely visited. I didn’t know much about the Midwest in general, I lived in North Carolina with my husband and two kids for 20 years. I didn’t know a single person, you know, it can be kind of intimidating. When you think about moving to a city where it feels like most people have lived a long time. They have extended family and a support system. But we came to visit and the community was just incredibly welcoming. It actually felt a lot like North Carolina. I left the Bay Area after about a year to do my PhD. But it also didn’t feel like home to me. It was exciting and invigorating. And there are lots of things happening. But you know, I speak to my my desire to have relationships. And at the time, it felt like it was very transactional.

Eric Hornung 14:30
Besides the the city itself, what about Kip’s proposal was so interesting to you to be able to change everything up and say yeah, I want to move to Indiana and I’m interested in pursuing whatever this something interesting was.

Ginger Rothrock 14:44
Sure. And I’d love to talk more about HG Ventures because a lot of it was because the way they set up HG Ventures but so I wasn’t looking for a job, right. I had just gotten promoted to Vice President I thought I was making significant change in a big organization. And I looked at what I loved. I loved the entrepreneurial, the new product development, the commercialization activities, I always saw myself staying there and being like a builder and a doer of companies and products, VC was never on my radar. It never occurred to me that I could be on the other side and being an enabler, it’s when I step back, it’s it’s a different scale of impact, right? I been worked with mentored scientific entrepreneurs, my whole career, you know, maybe my whole life, if you throw my family in the mix, I feel like I can connect to them in ways that maybe a traditional business focused VC cannot. And so looking at the work the heritage group does, and could do just aligned exceedingly well with my professional interests and experience in their focus on on values, honestly, like, big opportunities bet on people, safety customers, first, it just really aligned with my own.

Jay Clouse 15:47
Have you heard of The Heritage Group before? And how is it described to you that it became interesting to you because businesses like The Heritage Group, these these family started, giant, but kind of private businesses are often pretty low profile, despite their size. And so I’m interested to hear how, how that was taught to you and how you received it.

Ginger Rothrock 16:08
Sure. HG Ventures itself launched in 2018, as the corporate venture arm of The Heritage group, and I joined a couple months after we launched. So The Heritage Group is not well known. It’s a 90 year old Indianapolis based multibillion dollar private company, as operating companies in three main segments, heavy construction and materials, environmental services, and specially chemicals. It’s a private family owned business that has seen impressive, like consistent growth in this like humble, Midwestern manner, right? When I got the text from Kip that said, Hey, come see what I’m doing. And I learned a little bit more about The Heritage Group, they had no website, there was no website for The Heritage Group. They said, just come up here and see. And I came to Indianapolis, which was just a really lovely community and pulled up to this building that look like it was lifted out of Silicon Valley. It was clear from when I stepped in that the the owners in the end, the feel, and the vibe and the values were about innovation, and you know, putting your money where your mouth is, is not like we’re not gonna talk about innovation, do nothing. We are going to actually invest and, and be committed. Right? And so you, you then step back and say, Okay, what are we doing HG Ventures, there’s a lot of things that we can do that are different than a traditional venture firm, or even a traditional corporate venture firm, because we are private, we have huge support from the executive leadership team. Maybe I’ll go a little bit into that in a second.

Jay Clouse 17:39
Yeah, please go into that I would love to hear more how HG Ventures is structured. And when they started that arm of the business, if you if you understand the history of it as to why they started a corporate venture capital arm in the first place.

Ginger Rothrock 17:52
Sure. So we invest in entrepreneurs that work in our core industrial business areas, right, those adjacent and disruptive through this corporate venture arm, HG Ventures and Heritage sponsors TechStars accelerator to support even earlier stage businesses. We are highly sector specific, but generally stage and geographically agnostic. We have a thesis, it essentially says he partners with entrepreneurs building the future of sustainable materials, infrastructure and industrial processes, but put very simply, we invest where the heritage group can help. So as the corporate venture arm, we leveraged the people that assets which is really important in hard tech and the relationship in our operating companies to support entrepreneurs scaling their businesses. So like other cvcs, which is corporate venture capital, we invest off the balance sheet, we allocate $50 million per year to our investments, which would equate to a 350 to $500 million fund and kind of standard fund language, our process and our metrics for success, a more like a traditional VC, we’ve established a hybrid model. So we’re really trying to take the best attributes of traditional and corporate VC and eliminate a lot of the challenges that are there. tactically, our initial investments range from one to 10 million. We can lead deals, we can syndicate with partners. We have resources set aside for follow on funding, and we can invest in anywhere but well over half our deals and capital have gone to the Midwest are outside of Silicon Valley. We’ve been extremely active in the last two and a half years, 20 companies funded and about 125 million deployed. We’ve had 19, pre seed and seed stage companies go through our TechStars accelerator.

Jay Clouse 19:32
When did HG Ventures begin and when did the TechStars accelerator begin?

Ginger Rothrock 19:37
So HG Ventures began the summer of 2018. And our first TechStars program was run in the fall of 2019. So we built our relationship from TechStars basically from the start. So our ventures group is actually fee if you if you step up to our corporate function, it’s called New Ventures. And it’s really about innovation, entrepreneurship. As a whole, and a piece of that is HG Ventures which is our fully external facing fund. A piece of that is TechStars. And the third piece of this, which speaks to why the heritage group is a piece of why the heritage group is interested in in ventures is bringing innovation and entrepreneurial spirit to our companies inside. And so if you look at how we are measured as a group, and we should go into this, because corporates are all measured in very, very different ways, but they are things like yes, return on investment, it’s really important. But it’s also a set of qualitative criteria that align with the values of this private family own business, right, exposure to market trends, new business models, emerging products and services that could drive future creative thinking and growth, like, we have now entered the fourth generation of the Heritage Group leadership. So 90 years, the fourth generation has just started, it’s a woman named Amy Schumacher, she is a total badass, and just sees the writing on the wall, there’s the world is changing, software’s becoming a huge part of industrial. There’s, there’s all these interesting, very large scale market drivers in climate change, green moving away from petrochemicals, construction, efficiency, super interesting things that will impact our businesses. And they have the long term vision in sight to say we can’t do this ourselves, we’d love to, but at the end of the day, look at how corporations are set up. And now we are a 5000 person organization that can only run so fast and look at what startups are doing right now. And we believe that startups will be the future of our businesses.

Eric Hornung 21:38
A lot of times when you hear from these kind of private, family owned businesses, they pitch patient capital or permanent capital, specifically on the acquisition side. I’m curious, on the venture side, you talked about all these kind of fun, comparable metrics before, do you have the same kind of 10 year fund horizon? Or is it can you go forever?

Ginger Rothrock 22:01
We can go forever. I mean, we started in 1930. And we, while we are in first and foremost judged on return on investment, it’s not quite the same as yet we measure IRR, we want to be a top decile fund, we are aiming to be at least a top quarter of and we are measuring ourselves like a traditional VC.

Jay Clouse 22:21
Because you can go forever and you don’t have the same fund horizons as a typical fund. I was curious how you measure ROI for yourself and your team, even if that’s not required by the larger business entity, because you strike me as somebody who very much likes to measure things and be scientific about all of this. So how do you think about ROI on these investments that have whatever time horizon that they need to,

Ginger Rothrock 22:45
We actually measure ourselves exactly how any other VC would measure ourselves. As far as ROI goes, we measure IRR, we look at capital, and we look at our overhead structure. So from that aspect, we are measuring and judging ourselves like a traditional VC, our belief is actually that accesses to resources that we can give entrepreneurs will generate better outcomes and better returns so they can move faster scale these unique hurdles that hard pick companies more that have more often than a, you know, with a partner like us that has been there before. But I also speak to the qualitative criteria, because this is sort of in the veins of LP management. Right? So a traditional venture fund needs to think about managing their LPs and making sure they’re happy. And the set of qualitative criteria by which were measured. Again, I met I said it aligns with the values of this this family on business, right? Like how can we develop and grow employees of the heritage group that engaged with us by giving them knowledge in leadership opportunities outside what they may find in their core businesses. We have employees that have gone on loans or portfolio companies and participated as mentors in our TechStars programs, you know, that benefits us as an organization, developing our people, you know, giving them new opportunities. And so that makes us a little bit different. But again, like I said, we’re a private company with we’re only on our for CEO we make commitments at last and deeply understand and value the time and effort it takes to build enterprises in our business segments. You know, entrepreneurs and syndicate partners are always afraid that see VCs have and will definitely have disappeared when times get rough. But but we’re committed.

Eric Hornung 24:21
Speaking of different we got introduced to you because we have been looking for someone who funds hard science type innovation versus just software. What’s different about using the VC model to fund hard sciences versus software companies.

Ginger Rothrock 24:38
Sure and there are a number of differences. And just so your your listeners know, people use the term deep tech, which refers to companies and innovators building science or r&d based products. We use the word hard tech, which is a subset that eliminates the life science side. So that’s where we live, and they are quite different from software. So a couple of different things worth noting. First, the curve for capital needed is complete. pletely different, right? Most venture investors, angels, they have a playbook, right? They talk about pattern matching and hard tech patterns don’t necessarily fit. LPs have a playbook, right? You can go online and type in a software company, what do I do to raise a series A. What are these metrics, and there’s an industry norms, right? There’s the million dollars in ARR, the CAC, the LTV, the whole software metrics, alphabet soup. But if you look at the curve for capital in the hard tech sector, and the risk profile accompanying that curve, it’s completely different. So if you’re going to make a piece of hardware, right, the cycle, you’re doing an innovation cycle quite similar to software, you prototype, customers like it, you iterate. But then you have to make a huge investment, right, you have to build a factory, a process to scale the technology, and it can be very capital intensive from the start, you’re filing intellectual property along the way to make sure that that capital is is protected. So make sure you also make sure your product is safe and effective. But for you launch it out into the public. Now once all that is done. So you’ve put a bunch of money and you’re making a great product and you’re loving it and the tweaks that are made to that product tend to be smaller, right? In, in comparison, look at software, you can release a half done thing, and then improve it over time. And to keep selling it you need to put money in for continuous improvement, right? Compare that to say our use a specific example or a portfolio company P2, it makes sustainably produced plant based flavors and fragrances. I can’t release a specialty chemical that partially works, right? It’s part of it like a green fragrance model molecule. If I only give you part of that molecule, I could kill you, right people could get really hurt. And so the company trajectory cycles, timing capital requirements differ. A second thing is that there are less VC funds here, right? So there’s a combination of structural issues and optics, I think fuel some LP resistance investing in hard tech, they perceive this to be an it isn’t different, a high risk field and what’s already a high risk investment category, right. And they often will question their capacity to source and diligence investments here. So there are a lot fewer hard tech venture firms that are well capitalized. There are a number that are emerging managers, which is very exciting, but a lot of them are under 100 million in assets and their startups themselves. So I think it’s really important for groups like ours with larger reserves. And again, you said more patient capital market understanding. And the last thing I might mention is that these hard tech startups face some first pilot or sales cycle risks, right, a lot of hard tech companies ultimately sell their products to industrial corporations. You’ve had Mido on before, right. These companies don’t always move at startup speed. You know, in some industries, a single sales cycle can take years, especially one like Mitel, where you’re going into automotive and aviation that may set specifications three to five years before a new car comes on the market. Because the amount of testing and validation needed. I think wastewater treatment selling to municipality, cities with really low risk tolerance as an investor we need to dig into, we see sales cycles and revenue projections. You know, we got to be realistic about time and adoption. But there’s so much opportunity here. You know, I actually think the opportunity is the biggest here in the Midwest, I am consistently surprised to see the total mismatch between the number of industrial hard tech customers in the Midwest and the number of startup companies. That’s why we started TechStars that’s why excited about other funds and ecosystem builders like mo the customers are here, there’s really big ones. I think m 25. said there we have a quarter of the Fortune 500 headquarters such a strong diverse economy. And hard Tech has moved from being you know, it’s hard and expensive, but it’s moving from nice to have to need to have.

Jay Clouse 28:34
You know, this HG Ventures is relatively new being from 2018 till now, how long was the company planning HG Ventures or researching even how to start a CBC because you mentioned you know, we do things differently than a lot of cvcs which means that there must have been some research done on how this is typically done and, and ultimately modeled for how you guys did it HG Venture. So I’d love to hear a little bit more about that process.

Ginger Rothrock 28:58
So my boss likes to say that HG Ventures was started because of Duke basketball, which drives me nuts because I’m a Carolina girl. And if you’re from North Carolina, you got to pick your team, right? So the the third generation CEO Fred Faison Feld is huge Duke guy. And he and my current boss Kip Frey, are the type that invest heavily in Duke basketball, they go to every game, so they have been part of this Duke basketball community for years. And I would say it happen pretty quick, early 2018. Fred comes to Kip and says, Hey, I have this little company in the Midwest. And I’m thinking about starting a venture fund. And I know you have a long history in venture like how might I set that up? So they sat in a hotel and just sketched out what was going to be HG Ventures in a matter of an hour or two. You’re in Kip gave some thought to it went away give some thought to and said hey, you know, there are these things that you can do as a private company. That normal cvcs can’t do. Oh my gosh, this is really interesting as a traditional VC because it’s like a single LP, right. And so the investors in the CVC arm, don’t have to spend all this time fundraising. And so think about all the impact that a CVC can bring to the ecosystem that you already work in. And so they said, Okay, here’s all the great things about CVC. Here’s all the great things about VC. How do we merge those together? and Francis, how much money would you need? That’s math? Like, how about 50 million a year? It’s like, all right. Do you want to run this? Yes. And I’m gonna bring my colleague John Glushik, who I’ve worked for for 25 years. And a couple weeks later, they texted me and HG Ventures got started.

Eric Hornung 30:39
You mentioned the cost to start a startup in this space is a lot higher, because there’s just a sub manufacturing, you have to do all of this stuff that you don’t have to do in software, because you can kind of iterate more in software, I think about kind of software in the 90s, and how it costs, you know, $5 million to really get kind of software up and running, because there wasn’t all this infrastructure around. And now today, you can launch an app on your phone using no code. Do you see any similar trends in the hard tech space? Are there people who are building infrastructural components to make it easier for other hard tech companies to launch and scale quickly are those already exist,

Ginger Rothrock 31:19
I believe the market is moving more in the sense that the hard tech market, that you don’t necessarily have to build a giant factory to make your thing. There’s a lot more folks relying on totals called toll manufacturing, where you can sort of rent a facility for a small period of time. There’s also a really interesting movement in the change of business models happening in hard tech where two pieces to that one is on the on the capital side, where historically people have thought about economies of scale, right, where you have to build this huge factory, bring in all the all of the you know, the infrastructure in place so that you can make an economical product. And now people are tapping into what I would call the economies of mass manufacture. Can you take things like a car engine that’s made at large scale fairly cheaply, and use that to run a much, much smaller factory? decentralize it all, and put it on site at a location? Like for example, if you have a wastewater treatment, you know, you’re making microelectronic chips, there’s nasty stuff that comes out of the back door, a lot of times it’s put into a truck driven down to one of our facilities in the middle of Indianapolis and treated there, right? Why not have in there, people are starting to do this small scale treatment plants that are located right on site. Right? So how do you take these giant economies of scale and shrink them down so that the economics work and the footprint works at smaller, more interesting also works on the other side of supply chain? Right? I need hydrogen to make my specialty chemical, right? Rather than using miggins giant plant or taking methane, you pull hydrogen off, and you track it across the target across the world? Can you make it just right there on site by maybe tapping into a natural gas pipeline or something and again, using a small piece of equipment, that’s super exciting to me. The other side is business model innovation, right? So if you think about this, if I am selling to a large industrial customer, a piece of equipment that may have to go in their plant, right, it might be a million bucks, it’s not $50 million plant, that’s huge and centralize maybe it’s a million dollars. And that’s still a bit of a hurdle for folks. And so I see heartache innovators, starting to iterate around business model, and really pulling from the software business model side where they’re like, you can rent this piece of equipment over periods a month leasing hardware as a service, per se, where you’re getting the cost of capital and spreading it out over a number of years, but having people sign up for much longer term agreements, if that makes sense.

Jay Clouse 33:53
How do you think about founder versus product market fit? You know, in the startup world, a typical startup world, a lot of early stage investors will say we bet on the founder 100%. With the backing that you guys have, does that change the calculus at all with all the capabilities that you can bring to bear? How much you worry about the founder versus the fundamental business innovation?

Ginger Rothrock 34:18
It actually doesn’t. When we diligence startups, we look at things almost the same way. Another investor in another segment might be right team and founders are still our number one, then market, you know, then technology. Now the founders are different, right? We’re looking for things where, you know, we still want that relentless pursuit of success balance with like not being married to their specific technology solution. You see a lot of relentless founders, but they’re totally enamored with their solution as being the best and not listening to customer feedback. I think we run across that a little more often. I think we need to look for heavy self awareness in these groups. understand where their limitations are, because sometimes you can get a little bit of Hey, I know where Thing type of thing. We also need to look for their, their vision, articulation and ability to tell a story. And so while it’s a team, I think there are different things that we tend to look for because it’s it’s more common that you know, a scientist CEO is there and do they know their strengths and weaknesses? Can they hire and surround themselves with people who know things different than what they. Were they may have gaps, right? Can they tell a great story, the big picture, you know, attract talent, bring on customers, attracting investors, and then another piece, are they part of a community right outside the scientific world? So networking is incredibly critical. You guys know that as well. If I do peer mentorship is so valuable, you know, you can you can build that. And so we look for probably different attributes in our founders, because we see where people tend to get tripped up. But absolutely, you know, the early stage technical founder is a major part of our our diligence and selection process.

Eric Hornung 35:55
How do people think about pricing in this industry? I feel like in the software world, it’s, hey, you’re growing 100%? Have you hit the rule of 40? Here’s a 10x, revenue multiple and be gone. Not always. But there’s a more simple way to value things, because there’s so many startups in so many funds. How does pricing and thinking about valuation work in the heart sciences?

Ginger Rothrock 36:19
I would say that the way we look at value valuation is, like you said, you can’t do a multiple on on something because 100% of our businesses or even a negative right, yet the revenue is is very, very small, if nothing. So we are looking at the slope of the line in terms of traction, in many ways, like who’s in their pipeline, how long does it take to get there, and we’re doing a lot more modeling, seeing if we believe when revenue will happen? And at what scale? Because we know these markets really, really well. We do a lot of comparisons. I’d say that’s probably our number one factor in valuation is what are the comparable companies in the sector? And there’s not a lot I mean, it’s not like in software where I could have 1000s of companies and like you said, there’s there’s norms, but there are similarities, even if they’re in in different segments. And so, valuation is always a hard answer, but particularly hard in our businesses. And I would say comparison, and slope of the line and where they are in the maturity of their technology versus where they will get to sort of a tipping point in revenue and customer adoption are all go into the equation.

Jay Clouse 37:28
With a little bit of time we have left here, I would love to hear a little bit more about what it takes to partner with TechStars or bring a TechStars accelerator to an area because that’s probably a big game changer for that area in Indianapolis to have that type of accelerator there. In my understanding, you know, these types of partnerships are basically backed by the the the company so can you talk a little bit about that decision and what that mechanically looks like to make happen?

Ginger Rothrock 37:54
Sure. So we made a three year commitment, which is the TechStars commitment where we through HG Ventures and The Heritage Group Funds, the TechStars program that runs for three months, we jointly hire and onsite leadership teams, we have two individuals that are full time here that are TechStars employees. TechStars brings the infrastructure the programming, the brand, which is important for us and the global network, right, we bring our deep market knowledge, our technical expertise, right. So as part of this, the partnership between The Heritage Group and TechStars get split the equity, each company gets $20,000 in the option take 100k convertible note also gets gets split. And if you look at why we want to have this accelerator on site, as a lot of the weight reasons, or it’s similar to the metrics by which we as a ventures group are measured, right? Let’s increase the absorptive capacity, let’s expose our organization to these market trends and business models and emerging products and services. It gives us a pipeline right as ventures for future investing for financial return. Can’t forget that right? Partnering for strategic benefits, like the opportunity to try before you buy in some ways. There’s that development and in growth of heritage employees. Again, they bring their knowledge and leadership opportunity and leadership to these startup companies. But they gain too right the startup companies gain and we and we gain through employee development. I think it helps us grow our brand and our reputation we started talking about hardly anybody knows who the heritage group is through partnership with TechStars. We are elevating our brand and our reputation in this fairly small ecosystem of industrial startups. And as a family business in the Indianapolis community. There’s a lot of thought and and like careful thought and consideration given to how do we benefit the communicating you know what I mean? It was companies like Mido, Agios locating here and from where they were companies from our previous group material evolution pre trade thinking about which are from Colorado and from England thinking about putting facilities here bringing global startups here to the Center for other groups who engagement and benefit from that’s, that’s our side. That’s why we’re excited about it. If you look at it from the company side, you know, there’s a lot of choices for startup coming is in terms of accelerators and funding partners. But there are very few accelerators that are supported by a company like THC with like this deep market and technical experience, and access to a professional Investment Group, even it’s, it’s a, it’s a really interesting and powerful combination. Right? I talked about how startups in our company started companies or sectors faced challenges around winning their first pilots and riskless sales cycles. You know, these companies are trying to sell their products to large industrial companies. But one of the goals of the partnership between the company and the heritage group is to provide these opportunities for pilots, this is a first use case to speed adoption from other like who did it first, right, we can do it for them. But then the work begins, right? The corporate mentors have to dig in with the founders. It’s It’s not easy, because these are very early, early, early companies. But it’s a two way street, right? Startups learn from us and other brands in our network, and the corporate veterans can see the value of doing more faster if I use a TechStars term.

Jay Clouse 40:51
Do companies ever have a fear? Or a worry that if by working with HG Ventures, I either get locked in and can only work with HG Ventures’ companies? Or what if what if my company doesn’t make it? And if I couldn’t make it in this system? How will I ever go out and get another pilot outside of this ecosystem? Has that ever come up?

Ginger Rothrock 41:10
I would say it comes up more on the investment side because you know, after my experience has not burned the CBC world. Cvcs are Yes, a powerhouse x asset class and can provide tremendous value. But there’s bad actors. And I think there’s still a historical bias, either within TechStars or within investing that we have to acknowledge and actively work to change. Right that. But we’re not tourist playing VC we are we are committed to it. Right? There’s complaints like corporates have vested interests, right? There’s different incentives and different expectations, it’s highly likely that the corporate could value their core business more than your growth. That’s something that we have to acknowledge and pay attention to m&a. We don’t. Our m&a function. We do have an m&a function. It’s very, very focused on our core business, right? But you need to pay attention to that as a startup, is m&a a desirable outcome for the CVC group, then they’re going to want to keep the valuation low. They’re going to only pilot things in certain ways, right? It’s a public company that they report back to the shareholders. That freakin slow, right? Often, corporate groups need to prove business unit alignments and nightmare. tell you stories about you know, one of my startups working with $100 billion chemical company turns out they needed CEO approval for a $2 million investment, good lord, but then you go back to HGTV and like, how are we? How are we trying to get around those fears? I tend to be a very authentic, like, ask me any question that you want. Like, there’s no question that’s out of bounds, zero questions out of bounds. And good thing. I’m saying that at the end of this interview, right. But we try to show them like on the investing side, we’re set up as an independent LLC, right, we have independent decision making authority. And for any startup that’s thinking about working with a corporate, you really at the end of the day, we need to find out how are they measured? And what does success look like for them? I say that’s the number one most important thing because sometimes it aligns. And and sometimes it doesn’t.

Eric Hornung 43:02
Well Ginger, this has been fascinating. I’ve I’ve take you up on that and have you come back and talk hard tech again, cuz I still have so many questions asked, but if people want to know more about you, where to find you where to go to find out about Heritage Group or Heritage Group Ventures? Where should they go?

Ginger Rothrock 43:18
Well, you can connect with me on LinkedIn. I’m very active on LinkedIn, I am on twitter @GingerRothrock. My email is Our website is and from there, you can link over to their HG group. So definitely check us out.

Eric Hornung 43:38
Alright, Jay, we just spoke with Ginger from HG Ventures. We got we learned a little bit about something out there.

Jay Clouse 43:46
That’s your that’s your takeaway, we learn a little bit about something there. I learned a little bit, we learned a little bit about a lot there. I actually really love having these conversations with corporate venture capital arms, especially when they have this level of backing. Like it’s insane to me that this guy went to a Duke basketball game, met with Kip Frey, and said, What do I need to do here and they did some napkin math, and they’re like $50 million a year. Done. What? That’s crazy to me and the life cycles of these companies, the amount of investment we’re talking about to put into these things, to get them up and running. It’s just operating at such a scale where you’re thinking about numbers that are just such a stepwise larger than anything I’ve ever thought about.

Eric Hornung 44:26
And it sounds like the way the company is structured, and I’m not super familiar with the heritage group. But if it’s fourth generation, they’re talking about it like a family business. It’s almost famous family officee in style as well. It’s like a mix of these two things. They have this operating business, they have 38 operating businesses underneath that. They have different ways that they invest. So it’s kind of like a family office. It’s kind of like a company corporate venture capital arm. It’s a little bit of both.

Jay Clouse 44:51
Amy Schumacher the fourth generation CEO is Fred’s daughter so it has been in the family the entire four generations.

Eric Hornung 44:58
Amy Schumacher and Ginger rothrock two just phenomenal names, just a plus names.

Ginger Rothrock 45:05
Phenomenal Midwest names. Ginger mentioned that every company they’ve invested in has been outside of Silicon Valley. Now, they are geographically agnostic, I didn’t get a chance to ask this. But it sounds like you know, they didn’t give me the sense that they will only invest outside of Silicon Valley. But it’s interesting to note that all their investments have, in fact, been outside of Silicon Valley, which probably speaks to the nature of this type of business.

Eric Hornung 45:29
You and I talk a lot about founders starting on second base Jay. And this feels like one of those spaces, where it would be very hard to just have an idea and get it launched, it feels like you have to kind of know how the this old legacy infrastructure construction, heavy building equipment, you have to know how the world operates out there, you can’t just say, Oh, I have an idea for incremental process improvement in building materials procurement, and then launch that there’s definitely a start on second base. So because all these companies, not all of them, but a large percentage of them are headquartered in and around the middle of the country, in and around the major transit areas like the Mississippi River, I would assume that you have a lot of companies that spin out a lot of ideas of spin out of those companies versus here’s a pie in the sky idea that I just came up with. And we’re going to run with.

Jay Clouse 46:20
I have two more thoughts that I want to present here in in order because they’re connected, the first being working with a venture group, like HG Ventures, if I’m building a hard sciences company that could serve their portfolio companies, just seems like such a slam dunk, quick opportunity to really grow my company. And I’m trying to think through what are some of the the challenges? And in doing that are the trade offs in doing that? You know, and she kind of mentioned some of them at the end there about, sometimes incentives aren’t aligned with corporate venture capital. And I worry like, does this lock you into only their companies, but, man, it sounds like such a almost cheat code to build a company that you’re trying to do to work with a group like this. The model to me makes a lot of sense. But I wanted to hear your thoughts.

Eric Hornung 47:06
Yeah, I think the holding company model makes sense that we talked to Jason from Koch Disruptive Technologies, which is the venture arm of Koch Industries, similar style company a lot bigger than The Heritage Group, though, they’re both gigantic by any measure that you and I are familiar with Jay. And I think that our takeaway was similar in that, because there’s so many stakeholders on the company side, there’s so many different companies, it’s probably a little bit more decentralized than if you just went to a company that had one brand, one thing like a Boeing, Boeing’s job is to make airplanes. And if you get investment from Boeing, you’re probably going to be in the Boeing ecosystem. The space isn’t wide enough, there’s not enough competitors, for you not to get sucked in. So here, I think there’s a little bit more, there’s a little bit different system dynamics.

Jay Clouse 47:52
And they do call out on the HG Ventures website, we apply strict confidentiality policies and procedures to protect private company information. All proprietary information is secured within a small defined group of HG Ventures professionals and is not shared with others in The Heritage Group unless authorized by our entrepreneur partners. So they understand that risk, right. But the second way that I want to make that into the follow up on that, when we talk to people like Ginger, or like Jason, I reminded how just everything is run by people. And it doesn’t strike me that Ginger, Jason, anyone who’s on the show is completely inaccessible. And so it gives me excitement that moving forward in my life, whatever I’m doing, if there’s somebody within a company that can like really fundamentally change the trajectory of what I’m doing, they’re probably not that hard to reach. And it’s worth trying.

Eric Hornung 48:43
The classic Jay Clouse ism that I think about whenever I send a cold email is, access is easier than it seems. And I think that’s that’s definitely true in venture. It’s true in life in general. So yeah, taking this kind of high level there, Jay, but I agree. It’s, it’s inspiring.

Jay Clouse 49:00
Amazing. Well, we’d love to hear what you think about this episode. Dear listener, you can tweet us @upsideFM or email us And we’ll talk to you next week. That’s all for this week. Thanks for listening. We’d love to hear what you think about this episode. So tweet at us @upsideFM or email us Hello@upside.FM and let us know. You can learn more about us and browse our entire back catalogue of And if you love our show, please leave a review on Apple podcast that goes a long way in helping us bring high quality guests to the show.

Interview begins: 7:16
Debrief: 43:38

Ginger Rothrock is a Senior Director at HG Ventures.

HG Ventures supports innovation and growth across The Heritage Group by investing and partnering with private companies developing new technologies and approaches in both our core and adjacent markets. We leverage the world-class expertise of The Heritage Group operating companies and research center to offer a unique value proposition to our portfolio company partners.

Founded in 1930, The Heritage Group is a fourth-generation family-owned business managing a diverse portfolio of more than 30 companies specializing in heavy construction and materials, environmental services, and specialty chemicals.

We discuss:

  • Doing Science and Business together 12:04
  • The Heritage Group and HG Ventures 15:48
  • HG Ventures and TechStars Timeline 19:32
  • Measuring ROI 22:21
  • HG Ventures Funding Model 24:22
  • Hard Tech startup cost 30:39
  • Founder Vs Product Market Fit 33:53
  • What it takes to partner with TechStars 37:2

HG Ventures was founded in 2018 and based in Indianapolis, Indiana.

Learn more about HG Ventures

Learn more about the Heritage Group

Learn more about the HG Accelerator powered by Techstars


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