Michael Cohn and Sean O’Brien of Overline // leading seed stage deals in Atlanta and the southeast [CC072]

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Michael Cohn 0:00
The options that those founders had, were really in two camps. It was either piece together a million-dollar angel round, you know, with 25k and 50k checks, meeting with folks in between, you know, them seeing their customers or their patients as it were, or hop on a plane and look for funding elsewhere. And both of those scenarios we found to be completely sub-optimal for this region.

Jay Clouse 0:27
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. first words this morning himself, Eric Hornung.

Eric Hornung 1:06
Oh, those were pretty ugly words, weren’t they?

Jay Clouse 1:08
We are getting the hang of it. We’re getting back on the horse.

Eric Hornung 1:11
I woke up this morning. I realized I didn’t say a single word. I hopped on the mics. Jay said Hey, how are you? And I said

Jay Clouse 1:22
That’s what it sounds like. It sounded less like a Tasmanian devil and sounded more like it just failed. It sounded like the process failed to boot in words did not get produced you’re like.

Eric Hornung 1:35
Well, you know what, I got my coffee. I had a couple sips and we swing right into the sentence number two, and here we are Jay. We are on the mics. Were saying hello.

Jay Clouse 1:43
We’re on the mics are saying hello. Man, I feel like a dummy. I don’t have my coffee and we’ve got a coffee chats here today. a fun one going into Atlanta, Eric. We haven’t spent a whole lot of time in Atlanta. What’s going on in Atlanta before we get in this interview. What do you expect is happening in Atlanta.

Eric Hornung 1:58
Boom times. I’ve heard nothing but great stuff happening in Atlanta. It feels like there is a lot of momentum there. It also feels like kind of like Chicago it’s that go to destination in the region. So in the Midwest is Chicago is like the go to destination in the southeast Atlanta is the go to destination. So I think that those kind of regional go to destinations are having a quite the quite the time right now as cities.

Jay Clouse 2:24
Speaking of Atlanta, and go to destinations our friend from Atlanta. Charlton is in Columbus right now. And I have failed to set up a meeting around David. I will have to do that this afternoon. Shout out to Charlton sorry that I’ve dropped the ball here.

Eric Hornung 2:37
Charlton is of the Keystone podcast and you can check it out by searching Keystone in your podcast player.

Jay Clouse 2:45
And he’s doing a little bit of a tour of the country living his life the best way that he can, Eric.

Eric Hornung 2:51
That’s right, Jay. Charlton only has one life and he wants to live it the best way he can so he could talk to our friends at Ethos Wealth Management. If you dear listener want to learn more about Ethos, you can go to upside.fm/ethos, Ethos.

Jay Clouse 3:07
Well our guests today are Michael Cohn and Sean O’Brien. Michael and Sean are successful founders, operators and community builders building a firm called Overline. Overline is an Atlanta based founder operator led venture capital firm focused on investing in seed stage businesses primarily in Atlanta in the southeast region. they partner with founders throughout their seed stage and lead investments ranging from 250,000 to 1.5 million a lead Eric, a seed stage lead.

Eric Hornung 3:36
The thing that we’ve been asking for to talk to you the most I love that this came across, there’s just something different about when a venture fund is a lead, especially at the seed stage, as opposed to a lot of the companies we talked to our follow on capital, a lot of venture firms, we talked to a lot of the angel investors our follow on capital, or their series a, you know, leads or whatever, but you don’t see a lot of seed stage institutional leads out there Jay outside of the valley.

Jay Clouse 4:04
They must be popular guys, they must have a lot of founders coming to them. I’m excited to learn more about the Atlanta region in the south east at large, as well as the background of both Michael and Sean. You know, Eric, we had for a while kind of a policy to not have two guests on the show at a time because we thought that it would be challenging to navigate the conversation. But every time we do have two guests, I tend to really enjoy it.

Eric Hornung 4:25
Maybe that’s a cause and effect thing though, because we push back on the two ghosts and if people push back, we’re like, no, our story’s better with two people, then maybe it’s an opt in thing. Maybe our screener is working just not the way we intended.

Jay Clouse 4:37
Love that. Love giving ourselves credit for something that we did not intend. Well, we would love to hear what you guys think about this episode with Sean and Michael. You can tweet at us @upsideFM or email us hello@upside.fm and we’ll get to that interview with Sean and Michael right after this. Eric we got to make some big changes to how we do operations here at Upside.

Eric Hornung 5:00
This feels like an intervention. Jay.

Jay Clouse 5:02
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 5:07
I’ve had some calendar problems, you don’t have to throw the third person on this.

Jay Clouse 5:10
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 5:18
But there are 101 scheduling tools out there j that can help you avoid the awkward dance to find a time to meet.

Jay Clouse 5:24
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 5:32
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 5:41
It’s going to make booking guests for Upside and even just one on one conversations a complete breeze. You got to 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 5:51
You can sign up for a free account at SavvyCal.com/upside. That’s SavvyCal.com/upside. And when you are ready to test out a paid plan, use the code Upside to get your first month free.

Jay Clouse 6:16
Michael, Sean, grateful to have you here to talk about Overline. But before we get into Overline I’d love to hear a little bit about your backgrounds, your your backstories and what brought you together to start over line. So Michael, I’ll start with you. How did you guys get here?

Michael Cohn 6:31
Thanks Jay & Eric, for having us here today. We’re excited to be here. I’m Michael, I’m the founder. I started my first company right out of college that was a failure started another one a few years later in 2008 here in Atlanta called Cloud Sherpas. And thankfully, that was a success. We grew the business out of my basement to nearly 1200 employees. We were the top partner in the Google, Salesforce and ServiceNow ecosystems, almost 200 million in revenue and Accenture bought the business in 2015. At that point, I was looking for my next career. And along my Sherpa journey had an opportunity to write a few Angel checks, one of which was into a company that we fund out of our existing business. And that’s really where I got the bug for what happens on the other side of the table. And so when the opportunity to leave TechStars Atlanta came about when the program was getting established in our city, I jumped at that opportunity. I know you all are familiar with TechStars, or recently heard the interview with John Fein, and some others. You know, it’s a phenomenal organization that really gives you you know, an opportunity to develop as an emerging manager. And so over the three years, I had two primary roles. One was to find great companies. And the second was to build a world class mentor community to support the companies that were coming through the program. And that’s how I met my friend and my partner, Sean.

Sean O’Brien 7:53
Hey, thanks, Michael. Jay & Eric, thanks for having us today. We’re really excited to be here. As Michael mentioned, we met initially during the TechStars program, we have very different backgrounds. I started my career back in the early 90s, with an investment bank out of Nashville, Tennessee called Equitable Securities, sort of by happenstance ended up in that career, and candidly would have never left, spent nine years with that firm, ultimately flipped onto the buy side, went to join a friend of mine, Howard Linson, who at the time was managing a hedge fund out of Scottsdale, moved out there and co managed his fund with him for a year, then ended up launching my own Fund, which I ran for two to three years. And then we had a series of life changes that brought us to Atlanta, I took a corporate job thinking it was going to be a one year reset. Took a job with the company that I was a large shareholder of in my fund. And what was going to be a one year reset turned into a 15 year career, went to work with a small public technology company had a lot of different roles over that 15 year period. And my most prominent role there was running the strategy and M&A where we did a number of acquisitions that help take us from a very small North America only company into a very large global leader in 25 countries, then, ultimately helped lead the sale of that business to a private equity firm in 2015 and $1.1 million exit. And then during my transition there with the fund, I had a three year transition period where I really leaned into the Atlanta tech ecosystem started vising individual companies and supporting programs like TechStars, which is where I met my friend and partner, Michael.

Eric Hornung 9:34
You guys have such large experiences, you know, international selling to Accenture, the world’s largest consultancy, why the focus of Overline. So locally in seed stage. Feel like you could have gone upstream you could have gone wherever you wanted to.

Michael Cohn 9:51
So ever since the beginning of time, it feels like there’s been this trope in this part of the country that there’s a lack of institutional seed capital, or actually, it’s been a lot of funding has really been the story. And as we peel the onion back, we found it to be specifically focused around institutional seed stage funding. And that was never more apparent than when we put 10 companies on a demo day stage every year, not all 10 were truly fundable for being honest with each other. But every year, two to five of them were, and the options that those founders had, were really in two camps, it was either piece together a million dollar Angel round, you know, with 25K and 50k, checks, you know, meeting with folks in between, you know, them seeing their customers or their patients as at work, or hop on a plane and look for funding elsewhere. And both of those scenarios, we found to be completely sub optimal for this region. And so we set out to establish Overline, you know, to to fill that gap number one, but also to provide great outsized returns to our partners. And we believe that the earliest stages of company development are where we can generate those returns.

Sean O’Brien 11:06
It’s also an area, Michael to just build on your point where we think our skills and experience can have the most impact on on a business and on a founders trajectory. You know, we are very much hands on investors leaning into our founder operator histories, we like to actively engage with our founding teams to support them in all their strategic and operational priorities. We want to be in the business with them. The role of the founder is a long lonely journey, as my partner can clearly empathize with deeply based on his experience with Cloud Sherpas, and having a strong funding partner who’s there, who’s the first call to celebrate the good news with you, but also to be there to, you know, hear the bad news and help you work through it or to be a couch session, during those challenging times when you need somebody to give you some emotional support and encouragement. We think that that’s where we’re perfectly positioned, and that each of our careers while we’ve had different paths that have brought us here, we feel like everything that we’ve done up to this point perfectly prepares us for this moment in time to support founders in their earliest stages.

Jay Clouse 12:12
Michael, on the TechStars front is the Atlanta TechStars accelerator verticalized in any way. I know some TechStars accelerators are very theme specific.

Michael Cohn 12:23
So there are now two TechStars accelerators in Atlanta. There’s the TechStars, Atlanta, I guess, city program, as it were. And then there’s the TechStars Atlanta impact program. So speaking to the first one, that was the program that I ran from 2016 to 2018, that was very much horizontal by design. It was funded by Cox enterprises, who of course, is a very large family owned multi multi billion dollar business in automotive and media and communications. You know, oftentimes, we would hear the CEO of that company, who’s also the great grandson of the original founder, repeat if it’s good for Atlanta, it’s good for Cox. And so they their approach to funding the program and really funding programs throughout our city has not been with their business in mind, but more with ecosystem development at the forefront, which really resonated with me, Atlanta is my adopted hometown. I’m a New Yorker, originally, I came here in 02 supposed to be six months, fell in love with the city and and have had success in the city. And I’m eager to give back much in the same way that we’ve heard, you know, the CEO of Cox, talk about giving back to the community.

Jay Clouse 13:37
Well, while you guys, you know, started your journeys in Atlanta for different reasons. Can you talk about the growth you saw in Atlanta as it relates to the startup and tech ecosystem?

Sean O’Brien 13:48
Yeah, for sure, I’d love to. Well, it’s you know, Atlanta has been sort of this 10 year overnight success. Many of us have been working behind the scenes at various capacities to help develop the ecosystem to support what has always been a strong sense of entrepreneurial entrepreneurism and innovation here in the city. We’ve got, you know, friends and partners at startup hubs like Atlanta tech village, which is about to celebrate their 10 year anniversary, and a lot of us have been leaning into sport founders for a very long time. But up to this point, it feels like Atlanta now is having a moment, we used to be referred to as a secondary city or a tertiary city than we were referred to as an emerging market. And we really believe that may be accelerated by some of the trends that have resulted from COVID. That time for Atlanta and throughout the southeast is right now. We’ve got a great business infrastructure, fabulous schools and universities. In fact, you know, within a 45 minute car ride from the center of Atlanta, we have almost 300,000 undergraduate and graduate students who want to stay in the community are highly educated, many of them deeply technical coming out of one of the best technical colleges of the country, Georgia Tech, and up until recently, there just haven’t been the jobs to keep them here in the community. And so the ecosystem is there. We, as Michael mentioned earlier, one of the things that was missing up to this point was just a really strong, early stage institutional funding partner, which is one of the primary reasons we launched Overline.

Eric Hornung 15:22
When you talk about an institutional funding partner, I noticed on your guy’s website, it says, You lead rounds from 250k to 1.5 million. One of the things we’ve noticed talking to venture capitalists, investors founders, outside of the coasts, is that there are a lot of funds that will follow on what was your guys decision around leading, and what makes a good seed lead?

Sean O’Brien 15:46
Well, first, say we want to lead, we’re super collaborative. And so we played nice with everyone. In fact, we have right now about 50, deal flow sharing partners funds across the country, we’d like to lead in said terms, we’re deep conviction investors, maybe we spend an awful lot of time working with the founders in advance of putting a term sheet in front of them. That’s a very good setup for us to be hands on investors, we want to deeply understand the founding teams understand the markets that they’re building toward understand their unique insight and the business that they’re building. And we are founder forward, we care deeply about the founders that we’re supporting. And we want to present symmetrical terms. And we think that we’re best positioned to do that as a lead. But I would say that, you know, we’ve recently co led an investment and but we’re not the type of fund who will likely come in as a follow on investor with a small check into a big round that just has, you know, a small stub piece, it’s just not the type of relationship that we want to have with our founders. And so we want to be there, we want to be there to support them throughout the seed round. Unlike many funds, we’re only focused on deploying capital in the seed stage. And so when it comes to the later rounds of financing with the series A, we’re on the same side of the table is the founder, helping them market the series and beyond and helping them hopefully drive the best outcome possible.

Eric Hornung 17:11
If I understand that correctly, that means you guys don’t have any reserves for follow ons, is that correct?

Michael Cohn 17:15
That’s right, we will invest all through the seed stage, but we won’t invest into the series A and beyond. Instead, we will offer our pro rata to our LPs through spvs. And when we begin to see enough traction in the portfolio, and we’re far enough, invested through seed fund one that’ll be a cue to us to re up a second seed fund and also potentially create a third fund to take advantage of those following opportunities.

Eric Hornung 17:46
How do you guys think about sell discipline? Are you planning on selling those original shares on secondary in later rounds? Or you hold for forever?

Sean O’Brien 17:55
No, Eric, it may be an unsatisfying answer. But I think the best answer is, it depends. You know, when we’re entering an investment we have we’re underwriting to a minimum of a 10x return profile. And that might look a lot different on a case by case basis, our intention is to hold every deal for a minimum of seven years, we know that not everyone is going to make it to that timeline, and some are going to extend on debt. But you know, more and more, we’re seeing opportunities to lighten positions in secondary offerings. And then clearly with the rate of acceleration and adoption of alternative means of going public through spax. You know, that’s something that we’re paying close attention to. But I think that our intention at this point is to not exit a position early. If we do turn back any of our holdings in advance of a series c financing will be just on the margin.

Jay Clouse 18:48
Before I let Eric nerd out and go down the rabbit hole of spvs and spacs, which are magic words that are emerging here on the show. You mentioned John Fein, Michael and you and him seem to have a similar journey. And one of the things I really loved about our conversation with him and Chris on the show, having them both here, we could talk a little bit about their partnership story even even more deeply. So you guys both you know, as we touched on probably had a ton of optionality. You guys met you got along to the TechStars accelerator. Talk to me about the actual conversations you had that led to this fund.

Michael Cohn 19:19
Yeah, I think that really starts to how Sean and I met in the first place. I remember getting introduced by a mutual connection at Cox enterprises. I used to like to take some time to get to know the mentors before inviting them in to meet with our founders. And so Sean and I had a very memorable coffee. I recall outdoors upon City Market, where Sean was telling me about his career and about the time that he was spending currently, you know, with the firm that had acquired his business and how he very much wanting to get back into supporting early stage founders, you know, while he was at PGI, he had spent time acquiring dozens of businesses and you know, really having empathy and affinity for, for for those founders. And so through our conversations, one thing that really struck me was the alignment on vision and values, we seem to really be aligned on on what it was that the community was lacking that we needed to bring to our startup community. And, you know, a friendship emerged. You know, we didn’t jump right into a partnership after after our first coffee, you know, it took us, you know, three years or so of knowing each other, and, you know, seeing how one another works with founders, you know, to really get to the point where we decided to build overlying together.

Jay Clouse 20:40
Sean, I wanted to give you an opportunity to add on to that, if you think that Michael’s missing a key point or wasn’t remembering right.

Sean O’Brien 20:48
Well, other than the fact that it wasn’t over coffee that we first met, it was a an Italian spot at pond City Market where we had a salad. I think the coffee meeting was touched later. But other than that, I remembered exactly like, Michael, the most important thing was, it was super fortunate that our timelines collided in a way that we were both coming out of our commitments at the same time, toward the end of 2018. Michael is wrapping up a three year stint with TechStars, I was wrapping up a three year transition with a private equity firm I was working for. And we started really conspiring back then about what Overline would look like. And you know how we would help be part of the solution instead of continuing to complain about this, you know, desert of institutional, early stage capital. And so one thing I just mentioned is we didn’t just jump into a partnership, as Michael said, we spent all of 2019 operating together as two angels looking at the overflow, we ultimately invested in three opportunities independently, but through the lens of ultimately creating a fund. And so we wanted, we knew each other, we were friends, we had a lot of trust built there. But we want to make sure that our operating styles meshed nicely. And so we spent all of 2019 working together and toward the end of 2019, is when we said the outlets do this and started fundraising around labor day or so that there

Eric Hornung 22:12
I think a lot of people start when they say, hey, I want to launch a fund, the first thing they do is got an angel invest. What has been different in your experience between the angel investing process when you were working together, but independently and now investing out of a fund? Like what what didn’t you expect? or What did you expect, but still was significantly different?

Michael Cohn 22:34
I think two things come to my mind right away of what’s different between being an angel and being a professional fund investor. One is obviously the the cheque sizes, you know, we’re not writing $25,000 checks, but as you know, we’re writing checks between 250,000 and 1,500,000. And with that comes a tremendous amount of responsibility. It’s funny, when we were fundraising, we had a couple of LPs ask us about our own personal commitments to the fund. And you know, how much of our own capital we’re putting at risk. And, you know, we pulled a number of folks to to understand what market was, and we felt like we were right in line with market, we were each contributing 1% of the fund each. And you know, for some investors that that didn’t, that didn’t seem like it was enough, you know, they wanted to know that we had more of our own wealth, if you will, you know, in the fund, I’ll tell you that, for me, you know, having the responsibility of managing other people’s money was far greater on me than putting my own capital at risk. And, and that’s something I suppose I did expect coming in, but it continues to ring true with every investment that we make.

Sean O’Brien 23:47
I just jump in there and say, you know, one of the things I love about my partnership with Michael is, you know, we have very, very different backgrounds. And, you know, our Venn diagrams have, you know, just a little bit of overlap. And it’s really about the things that matter. It’s about, you know, who we are as people, what we stand for, and how we want to support the founders that we ultimately fund. You know, my journey was very different, you know, I was trained up very much a classical, you know, investor, I started investing in 25 plus years ago, and kind of start every conversation and kind of look at a business through the lens of the business model and the financial projections and kind of all that. Michael has such a refreshing perspective, having been a founder. And I think that that’s one of the refreshing trends that we’re seeing in VC in general, which is a lot of the funds that are popping up, especially in the seed stage are coming from founders themselves who have a high degree of empathy for the founder journey. They look at the world through a different lens, which I think is really refreshing. And I think in our particular case, having that balance has been really strong. So Michaels journey of going through TechStars and making 30 investments there and what he’s done in angel side, taught him all the skills necessary to be a professional investor. But he’s still has that core basis of coming up, whereas I, you know, kind of learn from him. And so I think we have a really nice healthy balance and, you know, indexing towards sort of the emotional and the EQ component that’s so critically important in the early stages, and then everything else that a more classical investor might look for.

Jay Clouse 25:20
So this, this idea of more funds, being managed by former operators is a trend that we’re seeing on the podcast. And for the actual founder who’s receiving investment, the value proposition seems pretty clear to me, because the fund manager can more empathize with me as a founder having been in my position, but we don’t hear is whether or not that value proposition has a positive or negative effect on the LPS when you’re fundraising the fund. So when you guys are going about this, we’re LPs, warm or cold on the idea that this was going to have a former operator as one of the general partners.

Sean O’Brien 25:56
So you know, I think it was mixed. Jay, I think everybody initially resonated with the idea of founder operator is both unique in the region. Not surprisingly, a lot of the funds here in Atlanta and throughout the southeast are managed by, you know, finance professionals. So our messaging was unique, it was different. When we started marketing the fund about a year and a half ago, we did get a lot of questions about, hey, as you build a portfolio, it’s pretty easy to see how you can be hands on with the first one or two or three investments. But how does that scale? And where do you get in your own way? And ultimately, you know, if you’re going to build a portfolio of 20 investments, how is it possible that you’re going to be able to fulfill those board obligations, and really spend the time and those are legitimate questions. And there’s ones that Michael and I continue to talk through. But I think in general, I think people really understand deeply that by sharing our experiences and insight early, we can help founders identify problems, work their way through problems, hopefully avoid some of the problems that are typical in early stage scaling, and hopefully be a bit of a growth hack for them to find the best practices help through our pattern recognition, having done literally hundreds of investments between the two of us help to get examples that directly applied to their set of circumstances to help shortcut their growth. And helpfully, you know, help them increase their odds and make it through the gauntlet. But I think in general, it clearly is resonated, as evidenced by If nothing else, the fact that we oversubscribed, our first fund, we came in at around $27.4 million against our target of $25 million for the fund, which we think is strong validation of our approach and our messaging on this point.

Michael Cohn 27:41
You know, I’m gonna just add a quick point to that, as we look at the makeup of the LPS in our portfolio, it’s pretty unique. I think for a fund one, we were anchored by two corporations, bolstered by a large institution. And then the balance of our LPs are largely made up of entrepreneurs, and you know, folks that have have have have built businesses. And so I think for a lot of our LPs, there was a great comfort in knowing that this fund was going to be led by a fellow founder operator, you know, at the helm.

Eric Hornung 28:20
If we take that to the after you make a acquisition side of things you guys mentioned earlier that you’re hands on and you lean in, I’d like to get a little more tactical about what exactly hands on and lean in mean, how often are you speaking with founders? How, what are you talking to them about? What is what is an operator, what does lean in strategy look like?

Sean O’Brien 28:42
You know, Eric, it looks a little different with each company. With most of our investments, we’re meeting with the founders on a weekly basis. And then we are there to be their first call throughout the week if something comes up, but they need some help with. And so I want to be clear that for us hands on doesn’t mean that we’re being prescriptive, we’re not trying to come in and say, Hey, create all these reports, track all these KPIs do all this stuff for us. What we’re really trying to do is help lead in and professionalize the business early, help them create, you know, a mindset and a framework to optimize their success. And so we’re big proponents of a build, measure learn approach, we’re big proponents of creating KPIs that are highly relevant for the founders and their ability to know word their businesses and to be at the helm with right insight and information. And so we spent a lot of time working with him. And I don’t want it to sound like it’s a nuance that we’re in but we’re not, but we really are. We want to support the founders not dictate. So when we share insight and perspective, it’s just that it’s not direction.

Eric Hornung 29:46
So you said $27 million. We’re looking at 250 to 1.5 in terms of checks, so that’s 25 ish. We use round numbers here. Investments on average, across this portfolio. How do you think about scaling yourself, because weekly meetings across 27 companies with just the two of you plus being available for on hand emergency calls. That sounds like you’re signing up for quite the the meeting agenda.

Michael Cohn 30:12
Yeah, I think maybe some of that has been enabled by being behind the camera, you know, 24/7 during COVID. I wonder how that’s how we’re going to begin to feel that as things open up, and we’re coming back into, into the community, and you know, getting on the road, and even on two planes. Our plan is to grow the team, we are right now trying to figure out if we’re going to add maybe a couple interns or possibly in associate this summer, you know, but we have plans beyond the two of us, of course, we hope that Overline will emerge as firm and not just the fund. And so clearly, that involves growing the team.

Sean O’Brien 30:50
I would say that one thing I’d add that that we haven’t spoken about yet is we have an amazing operating partner network that we’ve built at the same time we’ve built and launched a fund. And so today, we have two or three dozen individuals with different experiences and backgrounds, either founders themselves, or executives with larger growth stage companies that have a history of supporting early stage founders, most of whom are investors in our fund, and many who are not. And they are a huge part of our ability to not only scale our work, but also to maintain our generalist lens that we think is so critical to the overland story. And so these operating partners will help us from identifying opportunities, they’ll help us on the front end diligence, especially if it’s a deep tech opportunity, they’ll come in there, we’ll bring in a few operating partners to help assess the uniqueness of the business. And then they’re very much there to support us. So many of them will come in and be mentors or advisors to the founders in our portfolio. Some of them ultimately will serve in an equity advisory role on an advisory board that will help the founders created. So it’s not just Michael and I, but we do want to increase our team of employees at Overline. But also, it’s all within the context of this broader operating partner network.

Jay Clouse 32:10
You guys are located in Atlanta. So I assume you’re bullish on Atlanta companies. I’d be curious to know more about what other regions or types of companies Are you guys excited about right now as a firm?

Michael Cohn 32:24
Yeah, we’re enthusiastic about the entire southeast. You know, just before COVID, Shawn and I were down in Tampa, we were in Charleston just last week, as things are starting to open up, we took a road trip up to Nashville to meet with a team, we just recently completed our first investment in Birmingham, you know that these cities that have often been called the stress, Sean said earlier, secondary or tertiary. These are the markets in the southeast. And so every one of the cities that others may refer to as emerging are really important to us. And so we spend time with other investing partners in those areas, we spend time collaborating with the various tech hubs and co working facilities at those in those different cities to understand what’s happening on the ground. And of course, we also have relationships with founders in those cities. And as I’m sure you all know, from talking to other founder investors on on the podcast, it’s the founders, you know, in those startup ecosystems that are often the ones who are who are closest to the flow.

Jay Clouse 33:35
Michael when you talked about TechStars Demo Day and how it was obvious the lack of institutional capital when you put 10 companies on the stage, and they wouldn’t have a lot of options. And you said realistically speaking, not all 10 of those were investable businesses to that degree, something I think about here, with the ethos of Upside, obviously, we are enthusiastic about regions of the country all over the place to when a firm is focused on a geographical area. Sometimes I wonder if their investment in proving that that area has opportunity might cause them to take a reach on a company that might not be as investable as a firm would typically invest in. Do you guys think about that? Or do you have a way of thinking about that?

Sean O’Brien 34:16
You know, Thanks, Jay. It’s a great question. But I do want to be clear, you know, we are proud to be of this community and built for this community. But at the end of the day, we’re capitalists, and we are looking for the very best deals for our partners. That’s our job. That’s our obligation. The great news is that we think that there’s significant meaning and meaningful deal flow here in our community, both in Atlanta directly and throughout the southeast, including some of the cities that Michael mentioned. And so what we’re looking for, as a generalist fund, we look lots of different industries, lots of different business models, but we’re really betting on the founder, you know, these are seed stage investments, and so index very, very heavily toward founders, we look for founders, hopefully founding teams that have authentic connections to the problems that they’re working to build ones that you know, have a different degree of humility. We’re not necessarily looking for the ones with a Silicon Valley, or we’re looking for ones that are authentic, that have transparent relationships with us that are coachable. That will vibe well with our hands on approach to investments. And we have seen a very consistent number of them in the year and a half that we’ve been investing in the region. And we see no signs of that deal flow slowing down, especially as Atlanta seems to be having a moment now the SE seems to be having a moment now, we’re celebrating a number of new unicorns in our city. And the more that founders start seeing what great looks like, and the more that this flywheel starts turning, we see no signs that that’s going to slow down anytime soon.

Jay Clouse 35:52
Michael, Sean, this has been awesome. If people want to learn more about you, or Overline, or should they go after the show?

Sean O’Brien 35:59
We have our website, overland.vc we’re both just starting to be a little bit more active on LinkedIn. And so you can look for us both on LinkedIn as well.

Jay Clouse 36:10
Eric, do you know what I love to have for breakfast?

Eric Hornung 36:13
A big-ol bowl of Jay-O’s. I just imagine you have a box of cereal with your face on it.

Jay Clouse 36:19
I was going to say reviews on Apple podcasts. They give me more sustenance than anything else in my life. They bring me energy, they get me ready for the day ahead. And you know, Eric, it’s been been a minute since I had a good bowl of reviews on Apple podcasts.

Eric Hornung 36:33
Sometimes I read my reviews right before I go to bed just so I can dream good dreams at night.

Jay Clouse 36:39
If you want to help me start the day right can help my self esteem while also helping us in the eyes of Apple. Please leave a review for Upside on Apple podcast. If you have an iPhone, even if you don’t use Apple podcast, we would love for you to submit a review about why you love Upside. And if you don’t have an iPhone, if you’re an Android user, that’s okay, too.

Eric Hornung 37:03
All right, Jay, we just spoke with the Overline team. Where do you want to start?

Jay Clouse 37:08
Well, I will start with my research, Eric, because I did not dig that deeply into Michael and Sean’s backgrounds. And Holy cow. What humble guys for such incredible success, Michael grew his company, Cloud Sherpas to $200 million in revenue 1200 employees was purchased by Accenture in 2015. Wow, that is quite the ride. And if I’m a founder and I’m looking to take some investment from somebody, that alone sounds like I can learn a lot from this guy.

Eric Hornung 37:38
I was impressed with just how they thought about the space generally. And how this venture seemed to have something more than just financial gain buying it for them. I thought that that was a good indicator of they’re doing what they want to be doing not doing something because it was the next logical step in a career progression.

Jay Clouse 37:57
Yeah, totally. And we kind of alluded to this, but I imagine these guys have a ton of choices. And this did feel pretty mission aligned. I love the way they went about it. Also, we haven’t heard from a pair of founding partners that they spent a year angel investing together just to kind of get a feel for each other’s styles and the way they think what a brilliant approach.

Eric Hornung 38:20
Indirectly, we saw that with Blue Note and FireBrand ventures which merged and you can check out on the Upside podcast us talking about and announcing their merger, but they did it as co investors as opposed to angels. And it wasn’t as intentional I think it was, hey, we ended up liking working together. Over time. We’ve invested a bunch of stuff together, we see the world similarly, let’s come together. This was, hey, we think we want to invest together. Let’s go start angel investing. And let’s be intentional about it and learn how each other works before we decide, okay, yes, let’s commit to 10 years of our lives together.

Jay Clouse 38:59
And that’s a big commitment. So yeah, I think it’s I think it’s a smart strategy. I also didn’t realize that Michael had spent time running the TechStars Atlanta program, so really great pedigrees between between him and Sean. Sean with his experience at investment bank, and then a hedge fund. I think it’s a good balance for the two of them as well. I’m still kind of tossing over this question I threw in late, which is, you know, we hear we hear founders say that they like operator, or, or like operator funds. But I’d love to hear more from LPs and the investors into funds themselves how they feel about that balance in this in this world. You know, with with Sean’s experience in finance, it probably doesn’t play into it too strongly. But if you had a fund that was entirely, you know, former startup operators, I wonder what the feedback is like in those investment pitches.

Eric Hornung 39:50
One of the other things to think about from like an LPs perspective is something that they kind of threw out offhand. It was Yeah, they they lead rounds and asked how’s your fund structured or something like that. And they said, Well, we don’t have anything reserved for follow ons. We just do an SPV with the LPs if they want their pro rata rights, that is something that is so counter to every fund that we’ve had on here that we’ve talked about, how did you decide how much you’re having on? How much are you reserving that it’s almost like dogma in the seed and series, a venture space that you make sure you’re following right? You make sure you have reserves so that you can double down on your winners. Very different structure here with Yeah, we’re just not going to do that.

Jay Clouse 40:30
How do you feel about that?

Eric Hornung 40:32
I like it. I mean, I don’t know the numbers behind it, I need to run all the numbers behind it. But to the point of like they’re doing what they want to be doing. I think if they can specialize and just being really great seed leads, their LPs. We don’t know who they are. But they could be upstream venture capital firms who essentially are using them as a lead gen source. And they just get to do what they want, when they want to do it. And if you have ever, maybe their LPs are also big family money or big, some sort of money, that’s not going to have a problem writing the follow on checks anyway. And maybe that’s a strategic decision by the Overline team. I’m not sure but I like it, because it helps you specialize helps you focus and doesn’t make you try to be everything to everyone.

Jay Clouse 41:10
And it gives you more firepower for those seed stage deals, right? Like you just if you’re not reserving that follow on that’s another, I don’t know some number of deals that you can write checks for in that fund. So kind of falls back on the mission aligned part we talked about earlier in the in the episode, which is these guys seem to be trying to fill this void. And you see that and the way that they’re operating,

Eric Hornung 41:32
they probably get a bunch of questions on if you’re not going to lead our next round. Who is that? We should ask them that question?

Jay Clouse 41:39
We should indeed, if, if there are other questions that we should have asked, you can tweet at us and let us know @upsideFM or send us an email hello@upside.fm we’re gonna dig a little bit deeper into the Atlanta tech ecosystem here following this conversation. If there’s a company or investment firm Atlanta that you think we should be speaking to, be sure to tweet at us @upsideFM or email us hello@upside.fm 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 episodes@upside.fm 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: 6:16
Debrief: 37:03

Michael Cohn and Sean O’Brien are the Managing Directors of Overline.

Overline is an Atlanta-based, founder-operator led venture capital firm focused on investing in seed-stage businesses, primarily in Atlanta and the Southeast region of the United States. We partner with founders throughout their seed stage and lead investments ranging from $250K to $1.5 million.

Prior to Overline, Michael served as both a managing director for Techstars Atlanta and the co-founder of Cloud Sherpas, which was acquired by Accenture. And Sean served as Chief Strategy Officer at PGi.

We discuss:

  • Focus on Overline 9:34
  • Growth in Atlanta 13:38
  • What makes a good seed lead? 15:22
  • Sell Discipline 17:46
  • Launching and angel investing 22:12
  • Founder Operator 25:56
  • Hands on, Lean in Strategy 28:20
  • Geographical Investment 33:35

Overline was founded in 2019 and based in Atlanta, Georgia.

Learn more about Overline

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