CC034: Greg Robinson of 4490 Ventures // leading Series A/B rounds in underserved markets

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Greg Robinson 0:00
The number of people that have been part of a high-growth software company that has gotten to critical mass, and has some real size, and have it and, and hopefully some, you know, exit, is fewer and farther between than, than I would have hoped.

Jay Clouse 0:21
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. Podcast-guest-list himself, Eric Hornung.

Eric Hornung 1:03
I think that there are a few companies trying to solve this IMDb for podcasting space, where it makes it much more searchable for podcasts and podcasters and podcast guests and topics. And you see Google getting into it. And there’s just a lot of discover-ability around podcasts that seems to be a focus right now in the space. Nothing has worked, as well as just manually creating guest lists on our favorite podcast app, Breaker, and then sending it around. So I made a Jay Clouse Podcast Guest Playlists. I just made one for our friend Alex Rubalcava, and going forward, I think I’m going to do it for guests of the show who’ve been on other podcasts.

Jay Clouse 1:48
It’s a delightful little asset, and maybe you should just make it a little side hustle for yourself, Eric, to say, hey, you pay me 20 bucks, I categorize all the shows you’ve been on.

Eric Hornung 1:57
It takes about seven minutes.

Jay Clouse 2:00
So that’s like, that’s almost $120 an hour.

Eric Hornung 2:04
I’m worth it, Jay.

Jay Clouse 2:06
Billable hours. I’m sure your billable is much higher than that.

Eric Hornung 2:10
I think the benefit is really just the share ability of it. So if I wanted to, if I hear someone on a podcast who I think is interesting, if I listened to Alex Rubalcava on Meb Faber’s show, then I can jump into his, kind of, podcast playlist of all the podcasts he’s been on and learn about him over time. I think that that is almost like reading a book about somebody or that somebody wrote.

Jay Clouse 2:34
How can guests of the show check out the playlists that you’ve made for our guests so far?

Eric Hornung 2:39
Well, we share them on Twitter. I don’t know that we store them anywhere else, except for if you go to Breaker and you find me, I am EK Hornung, and they go to my public playlists, they will see any guest list we’ve made to date.

Jay Clouse 2:56
Well, today we’re adding a new guest to our fold, as we do every week, with Greg Robinson, the Managing Director of 4490 Ventures. 4490 Ventures is a technology focused, early stage venture fund based in Madison, Wisconsin. The fund seeks to invest in companies in the Midwest. It puts between $5 million and $8 million per investment and was founded in 2014.

Eric Hornung 3:19
I guess I’m going to have to make Greg a podcast playlist.

Jay Clouse 3:23
2014 seems to be a good mint year for venture capitalists jumping into the Midwest.

Eric Hornung 3:30
I wonder why that is? Do you have any, you have any hypotheses?

Jay Clouse 3:33
I’m not sure. But what we do hear from folks who are focused on the Midwest and aren’t in Chicago — and maybe even in Chicago, we just haven’t had enough context there — is that most of them started looking eastward or westward, depending on where they started, but towards the middle of the country, sometime around the 2013-2014 timeframe, probably looked really crazy then and now as we’re talking to them, and they seem smart, they’re all telling us about the same date. Greg has a blend of venture capital investing and startup operational experience. He was a Managing Director at the Palo Alto based Peninsula Ventures, and a co-founder and CEO of Cogent Technologies, which was an enterprise software company that successfully exited via acquisition to a publicly traded company. He’s invested in approximately 20 early stage startups over his career and has an MBA from the Tuck School of Business at Dartmouth.

Eric Hornung 4:24
I’ve talked to a few venture capitalists who are in the Midwest or the middle of the country, and came from Silicon Valley. I mean, this is Palo Alto, this is like the heart of Silicon Valley. And it always seems like they have really good processes or, like, very specific things that they do that you don’t read about in the general ‘how to be a venture capitalist’ books. So I’m interested to see what Greg’s, kind of, differentiator is here.

Jay Clouse 4:56
Well, we’re about to find out. And as we go through this interview, dear listener, you can tweet at us your thoughts @upsidefm, or email us Would love to hear what you’re thinking. And we’ll get into that interview with Greg right after this. Eric, what is your favorite kind of pie?

Eric Hornung 5:13
Dude. Apple Pie all day. Also, I’m kind of on the fence between apple pie and apple crumble, and are they the same thing? Or are they different? Either way, they’re both delicious. Little scoop of vanilla ice cream, carmel. I bet you didn’t think you were going to get that much of an answer for me on that one.

Jay Clouse 5:29
A lot of detail. So I want you to imagine a pie chart, and we only even make it an apple pie chart. Let’s cut that apple pie in half, 50% of it is technical recruiting, 25% of it is executive search, and 25% of it is sales, marketing and product. That is the breakdown of the different types of searches done by our friends over at Integrity Power Search, the number one, full stack, high growth startup recruiting firm between the coasts. They partner with venture capitalists, private equity groups, and CEOs to build amazing teams for the world’s most disrupting companies. Fifty percent of their searches are technical recruiting; 25% executive Search; and 25%, sales, marketing and product. So if you are hiring, dear listener, I would get a hold of Integrity Power Search.

Eric Hornung 6:11
How would you do that Jay?

Jay Clouse 6:12
Just go to to learn more about what they do and how you can get involved. That’s

Eric Hornung 6:21
It seems to me like you lead with pie, and I don’t get any pie. Am I am, I losing on this one?

Jay Clouse 6:27
You are getting no real pie. It was simply a visualization.

Greg, welcome to the show.

Greg Robinson 6:40
Thanks for having me.

Eric Hornung 6:41
On Upside, we like to start with a background of the guest. Can you tell us about the history of Greg?

Greg Robinson 6:47
Sure. My background is, primarily, I’ve always been involved with software, first on the creation side of it and quickly realized that I wasn’t nearly as talented as other people, and I needed to find a different way to utilize that. And so I went more on the entrepreneurial side. Was fortunate enough to start an enterprise software and services company that we built up and, after doing that for a number of years, sold it to a company that had just gone public. And at a fairly young age, felt I was probably overly smarter than I really was and all the things that young overconfident young men do. So,

Jay Clouse 7:22
That’s right where Eric and I are right now.

Eric Hornung 7:25
Except we haven’t exited to a public company.

Greg Robinson 7:29
It’s a beautiful time of life. It’s, it’s just you’re just overconfident and happy about everything. But after that, I decided that maybe it was time for me to go on the investing side. And so made my way out to the Bay Area and started my career on the investing side. Joined up with some guys and Peninsula Ventures, and we basically did early stage, kind of classic venture, early stage, capital efficient, software investing, and was out there for the better part of th decade, decade and a half. I had a great time, loved the Bay Area, but like most people after a decade of doing something, kind of get an itch to do something different. And so that led to the end of the point in my career where I started contemplating, could I do what I do but do it somewhat differently? That sounded like a an interesting challenge. Through that process, ended up in Madison, Wisconsin, where I started 4490 Ventures about five years ago, trying to take a lot of the learnings that I had in from my work in the Bay Area and apply that to, to really a different geography, which changes the game dramatically. And so provided in some ways of , you know, familiar opportunity set but in a very different way. And so, it was kind of brand, felt brand new and exciting. And so, been doing that for about five years now.

Eric Hornung 8:52
How did you come up with the idea as a young guy for enterprise software play?

Greg Robinson 8:58
My first job was with Anderson Consulting out of school where we did big enterprise systems, so data, a flavor for what that look liked. And while appreciated working with these Fortune 500 companies and kind of large production systems, didn’t love the mass of things and the pace of things And so, so I kind of took the, what I saw the needs and the capabilities out there and tried to apply that to a, you know, what I would consider kind of a, more of a mid market opportunity set, which would, which would basically translate into smaller customers, more nimble customers, more dynamic solutions and products and things of that nature, which was more in line with what I wanted to do. And it was really part of the evolution of kind of going from kind of the big enterprise to, you know, mid market to eventually going on the investing side, which was really, you know, more about, you know, getting to the startup side of things where things were even smaller, more nimble, more dynamic, and — from my perspective –more interesting,

Jay Clouse 10:06
What were some of the high level learnings or takeaways you had from running and selling a company that keeps creeping up now working with entrepreneurs on the other side of the table?

Greg Robinson 10:15
One of the most important lessons I think I learned early on was kind of the difficulty and also the benefit of being capital constrained. You know, you always wish you had more money to do more things and build more stuff and hire more people, and you think that would make your life better and your product better and, and ultimately, much more successful. And what I found is that, when lots of money gets thrown around early on, you can do all those things, and it makes for lots of expensive mistakes versus just a few smaller, cheaper mistakes. And I think it also provides, provides cover or at least facilitates kind of a culture where you don’t have to make some of those hard decisions and you don’t have to be as focused and, and I think those things, once they’re set, are hard to really change. And so that’s one of the reasons why I like the model that we employ, which is, you know, a little bit more on the capital efficiency side of things, at least on the early stage. And there are certain stages, once you get product-market fit, and you really know what your go to market strategy can be. Sometimes it does make a lot of sense to raise a lot of money and to really go in mass after the opportunity. But I feel like in the early days, there’s just a huge benefit to being capital efficient and building that culture and building that mindset that can yield, yield some huge results and huge benefits later on.

Eric Hornung 11:44
So you were a successful entrepreneur who exited his business. If you would have went back to investors, instead of going to the VC route, you likely could have raised a lot of money. I know this is maybe a little bit of the narrative fallacy, but do you think you would have retained that capital constraint philosophy?

Greg Robinson 12:00
You know, I don’t know. You know, I think I was in some ways, because of, you know, we were young, first time entrepreneurs, access to capital was harder, as we all know, if you’re not in a…surrounded by lots of firms with lots of money, it’s just, it’s really, really hard. So, you know, I didn’t have that luxury. I’d like to think that I would have been somewhat predisposed to be capital efficient, but I, I know, other people that around that same time were part of groups that raised a ton of money, and I kind of saw firsthand how that played out in a very destructive way. And I would have, I would have thought that they would have been fairly rational about things as well. I think it’s just, you know, we’re products of our environment in many ways. And sometimes we, we think we’re good and sometimes we’re just, you know, it’s, it’s locked in, it’s, you know, it’s just, you know, circumstances that you’re placed in. And so I think that, you know, I’m a product of that experience, and I, you know, in retrospect, you know, developed a strong belief around it. I don’t know, if I, if I could have raised money I probably would have, and it probably would have changed my outcome. I don’t know if it would have been better or worse if it would have changed it, and I probably would have a different perspective on capital efficiency today.

Jay Clouse 13:11
Doing a software company, something eight or ten years ago, software has changed a lot to today with the companies that you’re investing in. Are there any disconnects to that? Or does it map pretty well to your experience?

Greg Robinson 13:23
Yeah, so I think the good news about software today is that, unlike before where you had to raise a fair amount of money to actually get your product up and going to where you can start to do customer, you know, investigation, now you can actually, for hundreds of dollars, and you know, days if not weeks of time, you can stand up your product and spend the bulk of your time and money really exploring the voice of the customer, you know, the market need and really tailoring your solution to what the customer needs and versus building off this big expensive infrastructure that, you know, was table stakes, you had to do it, but really didn’t provide a lot of value. So I think that as a result of that, you’re seeing a lot of people that otherwise didn’t have access to capital 10 or 15 years ago start companies, you’re seeing them spend a lot more time focused on product-market fit, which I think is great. The downside is you’re getting a lot, just a lot more companies being started and a lot more competition. So if it’s kind of an obvious opportunity set, there’s going to be, you know, 10x the number of entrepreneurs that are going to go after that. And that just waters down the opportunity, largely speaking. And so I think, from an entrepreneurs perspective, you have to be thoughtful now of you know, if you go after something and you get feedback from the market, that, you know, this is going to be tougher, you can’t execute against the opportunity, that you need to be, you know, I think just self aware and, and willing to shut things down if they’re not working right. Also, if you get into something and you realize there’s 100 other companies that are going after it because it’s kind of an obvious opportunity or just it’s very popular or it’s over funded, also have to be, I think, realistic about that, because in the end, you know, the most valuable commodity we all have is our time and as an entrepreneur, it’s easy to get sucked into a passion project that you spend a year on, and you just don’t want to let go and you feel like, you know, you have a lot of fight in the dog and you want to keep going. And sometimes it’s, you know, you need to have that as an entrepreneur, and there’s other times where you’re just, you’re barking up the wrong tree, and no matter how much fight you have, it doesn’t yield a successful outcome for you or your investors or that people within the company.

Eric Hornung 15:39
Do good and great VCs have to have operating or founding experience?

Greg Robinson 15:45
Now, this is a great debate because my personal bias would say, as an entrepreneur, I would want to have somebody with great operating experience on my board and as my investor. That would be my personal bias. And yet if you look at some some of the great investors of this vintage, prior vintages, a lot of them were not operators, and they still managed to develop the, whether it’s pattern recognition, or it’s the board level skill set, or whatever the case may be, they were able to really be very additive and very successful in that role. And they didn’t have operating experience. So I think that I want to say, yes, I want to believe yes, I’m going to err on the side of bringing on people within 4490 that have that kind of background, because I think it’s, it is really, really important. But I think the data probably is not conclusive that you have to be an operator and that you have to be a successful operator, because what the data probably doesn’t bear out is, you know, all of the hugely successful operators that go into venture that aren’t terribly, you know, successful, those either get glossed over, we don’t focus on them. So I think you kind of miss some of that data. But I would say for me, we’re, we’re going to err on the side of trying to bring more operating expertise, more insights in and around our portfolio companies. And one of the best ways to do that is with the with the general partners.

Eric Hornung 17:13
So I want to go back to this decision of going from an operator — and real quick point of clarity, where is your business located?

Greg Robinson 17:20
We were based in Phoenix, Arizona.

Eric Hornung 17:22
Okay. So you went up to the coast. I want to know why VC, why the Bay Area, and why Peninsula? Like, walk me through that elongated decision?

Greg Robinson 17:33
So I think some of it, you know, the why venture, I think, was probably an easy one to explain. It may not make the most sense, but I think it’s easy to explain. You know, I think part of it was, there’s this belief that when you become a successful operator, there’s at least some of us that think, well, the next evolution would be to be an investor. That’s what I thought at the time. I don’t necessarily share that view today, because I will tell you that the probably the most satisfying times that I’ve had and the most gratifying experiences professionally probably came when I was building, you know, my company and, and certainly, you know, have fond memories of that. And so, I don’t necessarily think there’s this graduation that happens. And I think that was probably just a view that I had that, you know, again, today, I don’t probably share quite as much. So that was probably what led me to venture, is like thinking, well, I’ve done this, now I need to move on and do this other thing. So when I looked around, you know, it was clear, especially at that point in time, that there were a couple of, you know, hot spots for for venture and, you know, oddly enough, it’s different than today. And you know, back then it was so still Silicon Valley by and large, but it was more, it was the Bay Area, but it was less, you know, San Francisco and then it was Boston. It wasn’t New York, but it was Boston. But I knew if I was going to try to do this, I wanted to try to do it the best I could and with the best opportunities and the best people and all that. And, and so the idea of going to the Bay Area and trying my hand there made all the sense in the world and was fortunate enough to get connected with the guys at Peninsula and we had a very similar mindset in terms of kind of funding of companies around this idea of, you know, capital efficiency and all that similar focus on sectors and things of that nature. And so that made a lot of sense. And to be honest with you, I, I still was an entrepreneur at heart. And so the idea of going to a big, bigger fund really just didn’t feel like that was the natural evolution for me. And I had seen bigger, bigger organizations and bigger things and I kind of just naturally gravitated towards earlier stage, smaller groups. And so Peninsula was a was a smaller group, and it fit my personality and I think my… I felt like I’d come in and help build something, and that would scratch a little bit of that entrepreneurial itch that, you know, you lose a little bit of when you go on the investing side. And so it’s kind of this nice mix for me of working with really good, good people, good partners, being in a small enough firm where you can help build and make it grow and then be in a geography, in an industry that I thought was going to be really exciting and interesting.

Jay Clouse 20:26
So then tell me, you, you moved to Wisconsin, you said, I’m going to take what I learned and apply it to a different geography. Why Wisconsin?

Greg Robinson 20:34
Well, during my process of exploring other geographies, you know, the natural places for me, you know, coming from where I was at was, you know, look at places like Portland or Salt Lake or a Boulder, Denver, Boulder, something like that, and started to kind of explore and see which one of those would make the most sense, both personally and professionally. And during that process, I got connected with a couple of very large institutions, they’re actually based in Madison here. The initial conversations from my perspective were, you know, get to know them, and then have them be part of the next evolution of the fund here. I think, from their perspective, they were always thinking, well, we have a lot of money, and we we think that the real opportunity is, you know, something other than the Bay Area, because both of these investors had a lot of exposure already to California, venture capital firms and whatnot. They didn’t need more of that exposure. But I think what they saw being here on the ground was that, you know, there’s a, there’s a lot of what I would consider now kind of the inputs of innovation, that reside in, you know, kind of between the coasts, and you know, whether that’s, you know, engineering grads, whether that’s Fortune 500 companies, whether that’s domain experts, and inside of those companies. There’s just a lot of those inputs. And then when you look at the percentage of inputs relative to the amount of capital that’s either managed by firms in this part of the country or deployed in this part of the country, regardless of where the firms are based, it was miniscule. And so, as I started to compare kind of this thesis of the middle part of America relative to Portland or even Salt Lake and whatnot, the dynamics were just so different in terms of the inputs to capital. It became kind of a no brainer from my perspective. And then the, you know, the investors that I was talking to were great people, they had a lot of money, they had a clear vision of what they wanted to be a part of and fund. And so, at that point, then it became kind of a no brainer to partner up with them, have them be really kind of foundational LPs for 4499, not only for the, you know, the start, but for the long term. That’s a big, meaningful part of the story. And then we got in business, and then we really mapped out our thesis on where we should be spending our time and where we should play. And that was about five years ago.

Eric Hornung 23:03
So in engineering, if you go to Silicon Valley for a few years and come back, you demand a premium in finance. If you go to New York for a few years and come back, you demand a premium. Is it like that in venture capital? Is it easier to raise a fund having had Silicon Valley-based experience?

Greg Robinson 23:21
Yeah, without question. I mean, the benefit of being in the Bay Area is the velocity of learning. There’s just, there’s 10x or 100x, depending on where you’re coming from, the number of opportunities, the people, the people that have been successful. And so I think the learning is dramatic in the Bay Area, just like it is when you go to New York for finance, or whatever the case may be. You just learn so much more at more aggressive pace that you end up I think, you know, progressing faster and further and seeing things that you might not be able to see quite as readily in this part of the country. So I think from that perspective, I think people realize that there’s, there’s value to having had that experience. I think there’s value to being able to identify what part of that experience is relevant going forward in our 4490 effort. And then there’s value in being able to translate kind of the, the approach and the attitude and all the things that go along with it and putting that into kind of a non-coastal environment, which is very different. And so, it definitely, there’s not a lot of people that have been on the coast and then have come to the middle part of the country. And so, you know, for better or worse, I don’t sound like or look like or appear to be, you know, like a lot of the folks that you know, the LP’s probably talk to.

Jay Clouse 24:45
How big was that first fund that you started in 2014?

Greg Robinson 24:48
Yeah, so our first fund was just me, and it was a $30 million, kind of, sole GP fund. And then we raised fund two, I brought on a partner and we doubled the fund size a little bit more than that, so About $65 million for fund two with the second GP, with the idea that we kind of systematically grow over time with adding kind of one general partner, and trying to get to kind of a steady state of call it $40 million per partner per fund, which we kind of think is kind of the right number for the type of investing that we do in this particular geography,

Jay Clouse 25:23
What types of assumptions did you have in that first fund about opportunities or companies that you could find that proved to be true?

Greg Robinson 25:30
I think, you know, we certainly had an assumption on kind of the profile of, of an investment and from a pricing perspective, and then also from an efficiency perspective. You know, we we expected companies to, you know, I’d say my assumption was probably, we’d be about half the price for valuations. And we also felt like, if you looked at the cost of engineers and personel and everything else, office space and all the kind of the more major inputs into building a company, at least the first three or four years, we’d be kind of, you know, not quite half cut-off, half the price, but maybe 60 cents on the dollar. And I think that’s largely proved out. And so that was the biggest, one of the big assumptions that clearly proved out. We had other assumptions that I think we maybe didn’t quite prove out exactly the way that we thought. And there’s probably something in there, a handful of things that we had hunches on that we had to kind of work out over, you know, the first year or two.

Jay Clouse 26:33
What were some of those things that didn’t prove out, or at least not to the degree that you expected?

Greg Robinson 26:37
The first one is probably the number of people that have been part of a high growth software company that has gotten to critical mass and had some real size and have to it and hopefully some, you know, exit, is fewer and farther between then I would have hoped. We knew we’d have to be kind of early days helping entrepreneurs in all the normal ways and whatnot. But when you get to $5 million, or $10 million of revenue, then you can start to bring in some other people that have different skill sets that can help take that company from, you know, 5 or 10 to 50 to 100. And those people are just incredibly hard to find around here because there just hasn’t been a lot of successes. There’s getting to be more and more, that’s the good news. And there are people out there. But it’s just those people are in high demand, obviously. And there’s such a shortage of them, it makes it hard. So that was probably the the big thing. The other assumption we had, whether we kind of thought about it explicitly or not, was kind of just the notion of expectations of the founder. And I think that, right and wrong or the other in the Bay Area, people are overconfident. Everybody thinks they’re going to build a billion dollar business, and they’re not going to settle for anything less than that. I think in the Midwest, you know, people haven’t seen billion dollar companies being built. They don’t feel like they need that to be able to buy a house and, you know, have a lifestyle in California. And so for them, if they can build a company and sell it for $50 million, that’s, they haven’t seen that before. That would be, that would be huge. And so there’s a little bit of a, trying to elevate the founder’s vision and expectations for what they can and should be doing. And, and also understanding that, you know, if you build something and you get some traction, and you know, somebody very early in the life, the life of the company comes in and says, I’m going to give you $50 million and take you off the table early, you know, that sounds I think great to a lot of young founders in this part of the country, whereas I think a lot of people realize that that’s, that’s flattering, that’s interesting, maybe it’s the right idea and you should take it, but maybe they’re offering that because they see that there’s a much bigger opportunity, that if you stick with this for another, you know, five to eight to ten years, because these things do take a long time to build, that there could be something much more material on the back end. And so that’s the other piece, that just working with the entrepreneurs, making sure that you back the ones that have the bigger visions and then continue to, to help them execute against those visions and even tried to expand those things to where they can see them a broader opportunity said, it’d be an expansion of their skill set and comfort zone so that they, they want to go after kind of that secondary opportunity or that bolt on opportunity or whatever the case may be. And so, it ends up being kind of a bigger part of the filter than I think in the Bay Area where it’s a foregone conclusion that everybody’s overly ambitious, overly confident and, in a lot of times, you have to try to moderate that a little bit to get people back to you know, something that might be more rational.

Eric Hornung 29:56
Where do you invest? Like how far away will you go from Madison? How is your geographic footprint?

Greg Robinson 30:01
Yeah, so I think like most investors, if we could have an entire portfolio where we could walk to our portfolio companies, we would love that. And so, we try to do every good deal we can in Wisconsin, we try to manufacturer move companies to, you know, just like everybody always has done. And so we’ll do that just like everybody else. And then as time goes on, and as our, I would say, as our reach expands with, you know, new people involved with 4490, and with the network expanding, we go farther and farther field. So, you know, I’d say most of our activity has been, you know, if you look in the rearview mirror, has been kind of upper Midwest, so those 8 or 10 states that you normally associate with the upper Midwest. I would say that if you look at what we’re doing, going forward includes all those states and, you know, probably the other 10 or 15 states that you can kind of start to see things happening, whether that Colorado and Texas, Georgia, places like that, that have, you know, nice tech hubs that would make a lot of sense. But you have to be, you have to be thoughtful about where you’re spending time and where you’re investing, because you do want to be able to have those frequent and meaningful exchanges with those entrepreneurs in the early days. And, you know, getting on a plane, if especially if it’s not a direct flight is, you know, ends up being a huge hindrance to having those types of relationships. And so you have to just be really thoughtful about all that stuff. But we’ll, we’ll kind of go, you know, our, our belief is we want to get the best investments we can kind of outside of the coasts, because we just believe that, you know, the capital dynamics outside of a few select places in that region are, you know, very similar to what we found, you know, kind of here in the upper Midwest.

Eric Hornung 31:50
When you’re investing, how are you investing? Are you leading rounds, are you joining?

Greg Robinson 31:54
Yeah, so that’s, that’s part of the strategy that, you know, back in 2014, when we start 4490, you know, we knew we wanted to be early stage, but what does that mean? Does that mean seed? Does that mean series A? Does that mean earlier or later than that? Does that mean, you know, whole bunch of investments and seeing what works and then piling on? And really, this was born out of talking to the customers, the entrepreneurs looking at, you know, what’s available and what other people are doing and trying to find a place where we can play the most meaningful role in the ecosystem that we can. And what we believe the biggest need is is a active lead significant series A investor that can write a meaningful check, because if you do look around this part of the world, there’s a fair amount of money. It’s not always sophisticated Angel money may not be organized in the best ways. But there’s a fair amount of money, and a lot of that money is more and more interested in technology-based efforts than ever before. And so, if you’re really good entrepreneur, the ability to raise a million to $3 million of seed money is is pretty — I don’t want to say easy, because it’s always hard — but it’s doable. And it’s, you know, that’s not the hardest part of this. And then the other piece of it is we felt like, once a company gets to $5 million, maybe $10 million of revenue, you know, the number of funds that want to come from the coast to write those bigger $15 to $30 million checks, those dollars will travel quite, quite easily, because those companies are much more stable and predictable, and, and just give, give those types of investors a lot more comfort that they don’t have to be as close to those. And so what we found is, you know, if you’re an aggressive entrepreneur, solving a complex problem and a big market, and you need to raise a fairly large series A — large by non coastal standards, you know, if you’re trying to raise six to $12 million in a series A to give yourself the capability to really build out something significant and hit some real meaningful milestones, there’s just not a lot of people that want to write that big of a check, that want to lead and price that round and do those types of things. And so that’s where we thought the biggest hole was, the biggest opportunity. And so rather than doing a bunch of seed deals, we focused exclusively on lead series A companies where, you know, we can have, you know, material ownership, material impact to the company, both in terms of writing them a big check, but also bringing together the syndicate, helping them with all the normal issues and challenges that they’re going to face and giving them enough runway to, to get to that next big milestone where you can attract the outside, you know, coastal investor.

Jay Clouse 34:38
That is the plight of so many of the companies that we hear on this podcast. So what are the first couple of filters that your team goes through when evaluating one of those leads series A deals?

Greg Robinson 34:49
Unlike a lot of people, we’re not terribly motivated by revenue. You know, I think there’s some people that, that feel like revenue is really, kind of the only thing they need to focus on, and if you have X, then we’re in, type of thing. For us, we really focus on, what is the problem that you’re trying to solve? Is it a complex problem? Is it protectable overtime once you expose your business to the broader ecosystem? And are you going after a big enough market with people that have the money to buy that, so they have the right type of dynamics? So if you’re a pre-revenue company, but you have those, those things going for you and you’re a, you’re an inredible team, again, they have this kind of the appropriately sized vision and outlook on things that has the capability to be kind of uniquely qualified to do this or solve this particular problem. That that gets really interesting to us. We tend to, while we want companies to be really capital efficient in the early days, sometimes that can can be really capital efficient, but that’s because you’re in such a small niche that it’s easy to build a simple product and get out there and and get to a couple million dollars in revenue, but your upside is really capped. So it’s really trying to balance the need to be efficient with your dollars and get way down the field with those dollars, but really being focused on a big, complex solution and having some product insight that, that others just won’t have.

Eric Hornung 36:21
How many deals are you guys evaluating, like, on a given week?

Greg Robinson 36:24
So we do…kind of back in this, so we’ll do one to two new investments per person per year. So, just a, we run a very highly, high conviction, high concentration portfolio by design. You know, that kind of allows us to have more time and more effort, more money for a fewer number of companies that we hopefully can have a more material impact to. So that, that kind of allows us to have a slightly different filter or, you know, view of things because of, you know, looking for one or two per year gives us the luxury of being, you know, I think more selective than we otherwise would be. But I would say, you know, we try to do a good job of clearly articulating what looks like a 4490 investment, what we’re looking for, and that obviously changes over time as trends and markets change. But, you know, having a clear understanding of that, so that we can, we can quickly look at lots of opportunities and not waste a lot of the entrepreneurs time or our time, unless they have kind of these clear things. So I would say that, you know, we we look at probably — back of the envelope goes from year to year — but I’d say we probably see, call it 1000 opportunities a year, which, you know, there’s probably even a filter of things that we have before we get there, but I got a thousand that you spend a little bit of time with, and then we quickly get to ones that are, you know, maybe 100 of those are kind of pretty interesting that you have more in depth meetings with and, you know, it’s probably only 25 of those that you get kind of really serious with, and you want to close on, you know, a handful of those by the end, you know, by the end of the process.

Eric Hornung 38:07
On the other side of the table, you mentioned that going forward, you’ll probably add more partners, and it’ll be this $40 million per partner thing as you grow. How do you think about and how, what’s your process for adding a new partner? Because that’s a pretty big investment as well.

Greg Robinson 38:23
Yeah, it’s a huge investment. And it’s really, it’s really hard, because it is such a small partnership. And so each person has a material impact and kind of the direction that you go and, and, there’s just, it’s a whole bunch of other things that make the kind of the sequencing of finding the partner hard. So I would say by and large, I’d say that’s probably true of a lot of firms. Typically, future partners end up being in and around your ecosystem in one way or the other, whether that’s a somebody you backed before or an operator from a company that you backed, whether it’s a co-investor, that you got to know, whether they were at a different fund or maybe investing on their own account, but somehow you got to know them over an extended period of time and kind of…because the most important thing is you want to make sure that they share a lot of the same philosophies and can be additive to the strategy that you’re going after and try to execute. Nut then there’s the, the dynamic of, you know, it’s much like, you know, the entrepreneur trying to evaluate an investor, we have to kind of do the same things. It’s a long term marriage, and so there’s an inter-personal fit that becomes very, very important as well. And so having that time that, you know, usually multiple years to kind of develop those types of relationships and that type of you know, insight into the type of person it that you’re looking at is, it’s a very time consuming process, but it’s something that, you know, I think you’re always on the lookout for, you know, who could fit that role. And 9 times out of 10, the timing doesn’t work out. You know, they’re under starting a new company or onto the next opportunity before you can, you can make something happen. And so you have to kind of be thoughtful of always been looking and just kind of waiting for the right time and right place for all this happened.

Jay Clouse 40:16
Well, we’ve kept you a little bit over time here, Greg. So one last quick question from me. Where’d the name 4490 come from?

Greg Robinson 40:23
Yeah, so it’s, this is an easy one. It’s, as you know, it’s really hard to name venture firms and have them not either sound kind of completely ridiculous or just sound like another rocker tree. So, so we went with the latitude-longitude of the center of the state of Wisconsin as a way to have something different that usually begs people to at least ask the question, and then hopefully they remember us. As a, as a young fund, you’re always looking for ways to have people kind of remember you and differentiate you from the rest of the folks out there.

Jay Clouse 40:56
Awesome. Well, if people want to learn more about you or 4490 after the show, where should they go?

Greg Robinson 41:01
Just go to 4490ventures. com is our website. And they can also get ahold of me at Love to talk to everybody. And you know, hopefully we can be efficient with our time and your time and have a good conversation.

Jay Clouse 41:20
Eric, one of our favorite questions is ‘what sucks?’ And do you know what sucks about podcasts?

Eric Hornung 41:27
The fact that we don’t know who’s listening to us?

Jay Clouse 41:30
Exactly. The analytics and podcasts are terrible. And so I think I came up with the solution of how we can get a better feeling for who our listeners are.

Eric Hornung 41:40
Well, do tell.

Jay Clouse 41:41
All we need you to do, dear listener, is go to and answer a short one to three minute survey so we can get a better understanding of who you are, which helps us serve you better. We love feedback on the podcast, don’t we, Eric?

Eric Hornung 41:55
Oh we love feedback. All about the feedback.

Jay Clouse 41:58
All about the feedback. And so, if you would humor us, please go to, let us know a little bit more about you so that we can better serve you and make this podcast even better. That’s

Eric Hornung 42:13
We promise the survey won’t suck.

And now for an Upside classified read. Each year M25 compares the 54 largest tech ecosystems across the Midwest with its best of the Midwest startup city’s rankings. For those who don’t know, M25 is a VC firm that has about as much authority as anyone to put this out. They’ve backed 90 plus different startups in the past four years across 24 Midwestern cities in 11 states. These rankings compare 24 unique variables, ranging from the number of startups in a given city, to the quantity and quality of its accelerators, to the strength of their university ecosystem. Unsurprisingly, in 2019, Chicago came out on top, and that was by a wide margin. But what about the rest of the top five? Minneapolis, Pittsburgh, Indianapolis and St. Louis. Is that surprising? Well, the big surprise for me was seeing the lack of Ohio representation in the top five. I was happy that all three of Ohio’s major cities came in the top 10, whereas every other state’s top ecosystem is concentrated only around one top 10 City. While all rankings should be taken with a grain of salt, this one should help drive some important conversations and give local tech organizations a yardstick to compare themselves against their peers. To learn more, go to If you want to have your ad read on the Upside podcast, go to

All right, Jay. We just spoke with Greg Robinson from 4490. And you know what trips me up?

Greg Robinson 43:54

Eric Hornung 43:55
Yeah. Frequently. Specifically names when their names of other people. So Greg Robinson is an offensive lineman for the Cleveland Browns. And I obviously had that picture coming into this interview. This Greg Robinson is a very different human being.

Jay Clouse 44:11
You expected our guest today to look like an NFL offensive lineman?

Eric Hornung 44:15
That’s exactly what I expected in my head, subconsciously.

Jay Clouse 44:17
All right.

Eric Hornung 44:18
But, like I told myself, that’s ridiculous. And I was still wrong. Anyway, we had a very Gregorian chat.

Jay Clouse 44:26
Oh, wow.

Eric Hornung 44:27
That’s not even not even the proper use of that term. But I need to segue somehow back out of the offensive line chat. So here we are. We’re just gonna jump right in. What were your takes on 4490?

Jay Clouse 44:41
It was a bigger firm than I realized. They raised a $30 million fund one, having started in 2014, which I imagine was very difficult. They’ve now more than doubled that in fund two. I really liked Greg’s, I’m going to say humility. Like, I just felt a lot of humility in the way that he presented himself. He brought it up in the beginning of the interview, which was basically, I had some success early. I was overconfident. And that theme came up several times. It’s like, yeah, I was young and overconfident. And you could feel the sense of how far he’s come since being overconfident. And maybe investing in the Midwest since 2014 does that to you? But I was surprised to hear how big the firm was, encouraged to hear the willingness and the interest in some of the institutions in Madison when he was starting to look around because he was looking at Portland and Seattle and Boulder. And Madison seemed to get it from an institutional perspective. They said we had exposure to California already, we wanted to get more things here, we see the inputs of innovation here. We want to invest here. And I’ll stop there and get your response to that.

Eric Hornung 45:48
Do you have any understanding of, like, the distribution of fund sizes in the Bay Area? Because I don’t I don’t really know how big fund sizes are in the Bay Area. I know you have your top tier funds that are huge. And you have a lot of micro funds that are just throwing Angel checks around. But it feels like, in the middle of the country, this 50 to 100 million kind of space is the most saturated.

Jay Clouse 46:13
Interesting. No, I don’t have that sense. And I do think you’re right. Although, we frequently come across on the show guests or former guests of ours who are looking for someone to lead their series A and really struggling to find that in the middle of the country. And Greg said, yeah, we lead rounds, we invest 5 to 8 million per investment. So I guess I do hear anecdotally that…I don’t know, is that what’s available here? I feel like series A is where a lot of people fall flat here in the middle the country.

Eric Hornung 46:43
I would agree. But I think as a percentage of VCs, it feels like majority of them are in that 50 to 100 million space for some reason. And I don’t know how that translates to. Maybe it’s because there’s such a high number of 50 to $100 million funds that there are so few of them that the series a gap is still in existence. But there are a few people who are doing it. I don’t know, it’s, it’s maybe an anecdotal thought from my perspective. But that just seems like the fund size in the Midwest and the middle of the country in general tends to either be from 50 to 100 million, or it’s someone who tells us yeah, the next fund that we raise, we want to be 50 to 100 million. It just seems like the economics of the middle of the country tend to steer venture capitalists to this range, for some reason.

Jay Clouse 47:33
Something that Alex Rubalcava told us in our interview with him of Stage Venture Partners that connected some dots for me for the first time was he described venture capital as a capital constrained asset class. Like you can only invest so much before it becomes impossible to deploy that much capital and have the model still work. And so I’m wondering if some of these funds that are that size are just some of that leftover capital that can’t make it into some of these bigger West Coast funds that they want to put them into. And they’re saying, well, we got a, we want to get venture asset exposure somewhere. Let’s collect it in some of these new handful of funds that are reputable here in the middle of the country. I don’t know, this is all speculation at this point.

Eric Hornung 48:17
Right. But we’ve, we’ve talked to a good number of venture capitalists. So I think the speculation is at least guided if, maybe misguided, but it’s definitely guided in some capacity.

Jay Clouse 48:27
Well, by that logic, any speculation will be guided, if misguided also counts as guided. I like when investors on the show break down the way their funnel looks. He said they look at 1000 companies per year, 100 of them may be interesting, 25 then make it diligence, and they’ll close on a handful. I like that insight. That’s that’s new to me. And I also really liked his perspective on capital efficiency. And capital efficiency in the middle of the country probably is almost cliche at this point, and maybe even gets a bad name in a lot of ways. But his point was, when you have too much capital, you don’t have to make hard decisions as often and it leads to bad discipline down the road. So he thought that being capital efficient leads to smaller, cheaper mistakes, instead of lots of expensive mistakes, and it facilitates a culture where you need focus and put high value on decisions. I like that perspective a lot.

Eric Hornung 49:17
And I like the idea of connected software. So having a hardware component and software component. I don’t think we touched on it too much in the interview. But I think it’s a unique differentiator for firms that typically invest in pure software or firms that invest in hardware or firms that invest in products. I think it’s a unique thesis that 4490 is thinking about.

Jay Clouse 49:42
All right, dear listener, we’d love to hear what you think about this episode with Greg, who is not the offensive lineman for the Cleveland Browns. You can tweet at us @upsidefm or email us, and let us know what we missed, where we hit right, where we’re wrong. And we’d love to hear from you there. Talk to you next week.

Interview starts: 6:38
Debrief starts: 43:48

Greg Robinson is the Managing Director of 4490 Ventures.

4490 Ventures is an early stage venture fund based in Madison Wisconsin that invests in Midwest, tech based companies. Founded in 2014, 4490 Ventures aims $5-8 million per investment, and their portfolio includes companies such as EatStreet, Abodo, and SwervePay.

Before 4490 Ventures, Greg served as the Managing Director at Peninsula Ventures and also co-founded Cogent Technologies, an enterprise software company. In today’s episode, he shares with us his insights into working in different areas of the country and how these various landscapes change the investment game.

We discuss:

  • Ad: Improved methods to sourcing talent and finding new colleagues
  • Lessons learned from founding a successful company (10:05)
  • Differences in software investment today vs. then (13:10)
  • Operating experience in VCs (15:45)
  • VC experience from Bay Area to Wisconsin (17:25)
  • Expectations vs. reality when investing in software (25:23)
  • Investment strategy (31:50)
  • Adding a partner to the strategy (38:07)
  • 4490 name (40:20)
  • What sucks about podcasts (Upside Listener Survey) (41:20)
  • Classifieds: resources devoted to Midwestern startups (42:20)

Learn more about 4490 Ventures:
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Check out the Midwest Startup Rankings:

This episode is sponsored by Integrity Power Search, the #1 full stack high growth startup recruiting firm between the coasts. They partner with venture capitalists, private equity groups and CEOs to build amazing teams for the world’s most disrupting companies.

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