CC015: geography and investing, should location matter? (live from SXSW 2019) // a panel with Andy Sparks (Holloway), Rachel Carpenter (Intrinio), and Brandon Bryant (Harlem Capital)

In All Episodes, Coffee Chatsby jayclouseLeave a Comment

view episode transcript

Andy Sparks 0:00
Venture Capital kills more companies that it actually builds. Because oftentimes venture capitalists invest in a company and you know, it’s doing 10 million in revenue and they’re growing 50% year over year. But for VCs, that’s not enough. You need to be growing 100% year over year, 200% year over year, you need to be getting towards a billion dollar company. And you have an entrepreneur sitting there like, do my company’s doing 10 million in revenue. This isn’t terrific. We’re profitable and the VCs is now we got to pour more money on the fire. They feed the founders ego and then everything goes up in flames.

Jay Clouse 0:29
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 asked first podcast finding upside outside of Silicon Valley. I’m Jay Clouse, and I’m accompanied by my co host, Mr. Twitter master himself, Eric Hornung,

Eric Hornung 1:09
I don’t know that a Twitter master would have 419 total followers. I think you are very good at twitter. You’re not great at personal brand and personal messaging and positioning. Man, that compliment really turned into a critique of me very quickly.

Jay Clouse 1:26
Well, I was actually trying to compliment you on how well you’ve been manning the Twitter since issue one of the update and during our panel at South By Southwest.

Eric Hornung 1:37
Do you think I get workers comp? If I get arthritis in my thumbs from this podcast? workers comp from you the podcast? I’ll just take it from you.

Yeah.

Jay Clouse 1:46
No, not at all. This is your own fault for not using your laptop in that room and just typing.

Eric Hornung 1:53
Yeah, that was a mistake. But I’m allowed to paper. And that’s one reason. The other reason is I didn’t think about it. So too, very valid reasons for why I didn’t type the live tweet why I did it on my phone, which I hate it. You’ve also taught me quite a bit about how threads work. You’re very good at threads and how to structure things. All you have to do Jay is spend way too much time on Twitter and you learn these things.

Jay Clouse 2:17
I’m trying to spend more time in Twitter. It’s it’s a, it is a point of emphasis for me right now spending more time on Twitter with upside also with my own stuff, because I am a tad bit selfish yet. But I am trying to do more because Twitter is so much more impactful than I realized. And that’s all due to the podcast is how I’m realizing this.

Eric Hornung 2:38
You know what the move is? You do it in between sets while you’re working out. And instead of running on like the road or something, you do it on a high knee elliptical. Then you get like an hour of Twitter again, and you feel super productive because you also worked out.

Jay Clouse 2:54
You also taught me how effective lists can be.

Eric Hornung 2:57
Oh, those are my favorite. That’s that’s a common for another day though.

Jay Clouse 3:01
Lists are great. Yeah, we should talk lists. Also, dear listeners, if you follow us on Twitter at upside FM, which you should, you can see that we have published a few public lists that are I would say very high value. So check those out. We have accelerators, VCs, community builders, founders and companies are pod guests very, very good list for you to be tied into. We follow them. We interact with people there. And so can you. Speaking of our live tweeting at our South by Southwest panel, Eric, today we are airing a special episode, which is a recording of that panel at South by Southwest.

Eric Hornung 3:36
That’s right. So you can check out the transcript, you can check out the audio right here. Or you can check out some of the quota bowls. That’s what I’ll call them. I call them the quota bulls on our live tweet, which we will link to, on the tweet announcing this episode.

Jay Clouse 3:53
Bear with us on the audio we were working with what we could there was some feedback at times. We think the file came out pretty well. Listen all the way through even included the guest question answer at the end of the panel. Our guests, which we do introduce on the recording are Andy sparks, founder and CEO of Holloway in San Francisco, Rachel Carpenter of in 20. Oh, who is Episode 24, founder from St. Petersburg, and Brandon Bryant, the partner and co founder of Harlem capital in New York City, moderated by yours truly. And once again, thank you guys, for all of your support and voting for that panel this year, we would not have had the panel most likely, if not for that support. So we very much appreciate it. We hope that you enjoy the product of that panel, which you can listen to right here.

Eric Hornung 4:44
You had to throw the most likely in there, huh? Most likely,

Jay Clouse 4:48
yes.

Eric Hornung 4:48
You couldn’t just give the listeners full credit you had to say most likely look, even Hank disagrees with them in the background.

Jay Clouse 4:56
Sorry, if you guys want to yell at me for that you can tweet at us at UPS FM or at j Klaus. If you have thoughts on the episode, please tweet at upside FM and use the hashtag finding upside which is what we’re using at the event. You can follow the event as it happened using that hashtag finding upside.

Eric Hornung 5:14
And now for some validation.

Jay Clouse 5:18
Eric, what do you think is the number one piece of positive feedback we get from listeners about the show?

Eric Hornung 5:25
Eric looks so good,

Jay Clouse 5:27
Strange piece of feedback to get on something that’s based on audio.

Eric Hornung 5:30
Well, you know they can they can intuit.

Jay Clouse 5:33
Yeah, they can into it. They can intuit the look, I do get some compliments on your voice. Your podcast voice.

Eric Hornung 5:37
Well, it just took five filters of pop filter, a audio engineer that we pay every episode and a new mic and boom, nailed it.

Jay Clouse 5:45
Yeah, it’s like the airbrushing of podcast. But no, I think the number one piece of feedback that we get is that we come across as authentic.

Eric Hornung 5:54
We don’t come across as authentic. We are authentic j that’s what being authentic is.

Jay Clouse 5:59
And that’s the the title of this review on iTunes from Ben Snelling. He says Jerry and Eric are crushing it. It’s an inspiration to hear insights into some of the fastest growing companies in the Midwest. And I love generics take on business valuations and angel investor techniques. They are real and authentic. Keep up the great work guys and fight the good fight.

Eric Hornung 6:17
That’s true. We are real. And we’re authentic. I think

Jay Clouse 6:20
we are authentically real. And we’re doing our best. So if you guys are enjoying the show, as well, please leave a review on iTunes for a chance of us reading it here on the pod.

Eric Hornung 6:30
And we’ll do it real. And we’ll do it authentically.

Jay Clouse 6:39
Thank you so much for joining us here. I know you guys have a lot of choices, probably an overwhelming number of choices to go to with this hour of your day. So thank you so much for being here. We’re here to talk about geography and how it relates to investing. We hope you guys get a lot out of it just to get a feel for the room. How many people here are founders or entrepreneurs? Awesome. Any investors in the room? Awesome. Cool. Cool. We’ll touch on both sides of that, obviously. So our goal today is to talk about the role geography plays in receiving investment, talk about the role that it should play in receiving an investment, and talk about how investors can find companies with upside regardless of geography. This is a topic that I’ve become interested in recently, I’m going to be our moderator today. I become interested in this topic recently, because of a podcast I’ve been running for the last eight months or so called upside, where we talked to startup companies in communities outside of Silicon Valley. And we talked to them about their everything about their company, how their fundraising, how they’re building the company, what the role of their geography plays for them. And so it’s gotten myself and my co host Eric, who’s taking a photo the screen right now. Thank you, Eric. We’ve we’ve learned a lot about different geographies, and so it’s a topic that’s just interesting to us to explore. I’m joined by Rachel carpenter, the CEO and founder of in 20. Oh, tryna was a disruptive financial data platform launched in 2015. Based in the company’s Florida office, Rachel has overall responsibility for Antonio, including driving a strategy and position for long term growth. She’s an advanced front end web developer and a graduate of the starter league advanced web design course. Rachel graduated from the University of Wisconsin Madison with a BBA and both finance and management, and minors in Spanish and European studies. She’s a member of the Forbes finance Council, a member of the data coalition advocating for open structured data, and a board member at Casa, the largest domestic violence shelter in Florida. We want to make this panel social guys, so feel free to tweet with the hashtag finding upside. I have the panelists handles up here on each of these slides. Then it’ll be in the slide where we have our discussion as well. Next to Rachel is Brandon Bryant, Brandon Bryant received his degree in economics from Ohio State University and worked at Bank of America Merrill Lynch as an investment banker for three years. Afterwards, he transitioned to the marketing world as a social media content creator is handles Wall Street paper, working with companies like Uber, Microsoft, Walmart, Wall Street Journal, and GQ if you’ve heard of any of those, he also co founded Harlem capital in early stage venture capital fund that is focused on investing companies investing in companies founded by people of color and women. And then to his left is Andy sparks. Any sparks is the co founder and CEO of Holloway, a new digital publishing company focused on publishing the best knowledge on navigating the challenges of modern work for all to find, Holloway is backed by FDA and the New York Times previously, he cofounded matter mark, a provider of data on private companies that raised more than $17 million and sold for far less than that. Andy graduated pause.

Andy graduated from the Ohio State University lives in San Francisco and will be publishing a book on how to raise venture capital later this summer. So can you please join me in giving a hand to our panelists here today?

Rachel, I’m gonna start with you. You’re based in St. Petersburg, Florida. Yes. So what advantages do you see as a financial data company to being in St. Petersburg, Florida,

Rachel Carpenter 10:12
side of the fact that we have 360 days of sunshine during the year, which is certainly a plus. So we actually ended up down in St. Petersburg randomly. And we’re getting our company started, because we had a lot of technology to build. And we were originally in Chicago, which is a very high cost of living when you’re making no money and don’t want to raise a ton of money from investors early on. So we ended up down there, we were honestly just looking for a cheap place to program for two years to get all of our tech built. So we ended up down in Florida. And two things, I guess kind of happened once we got there. The first is that we absolutely loved it. It was kind of like a well kept secret that we had great, you know, lifestyle down there, bars, restaurants, things to do easy flight straight up to New York when you need it. And we just absolutely love the area, we found it easy to recruit talent down there. People wanted to come, you know, program with us on the beach as well. But also, we started to think of it as less of a disadvantage and more of a competitive advantage, considering the cost basis down there. So you know, just generally speaking, or operating costs are ridiculously low relative to any of our competitors are trying to get started on the on the coast. So that’s kind of the thesis behind that,

Jay Clouse 11:19
And your industry is predominantly in New York, right?

Rachel Carpenter 11:24
We sell data on like over a million securities globally. And so we have customers all over the world, but a lot of the major hedge funds and asset managers and banks that we sell to are on the east coast.

Jay Clouse 11:33
Yeah. And so being in Florida, most of your investors to this point are outside of Florida. Correct. And so where are they based?

Rachel Carpenter 11:42
Yeah, I beat my head against the wall for about a year trying to raise money in Florida. And I would say that the first half of my fundraising efforts, as I was getting the company off the ground, people thought of it as a disadvantage. And it was a big struggle. It was a struggle with Florida investors, because all Florida investors understand is real estate and restaurants. And they’re very, very covers. And there’s a lot of education that needs to happen in that area. So that was one problem. And early on, when I went outside of Florida and try to talk to investors in San Francisco and New York. This was you know, almost five years ago, it was a bad thing. Now considering obviously, the rise of the rest movement, it’s not really a bad thing anymore. And there was a notable shift, kind of almost like a year or two ago, when I stopped getting asked the question, why aren’t you in New York, and people started to recognize that, you know, if you’re in an industry that’s working on being disruptive, you’re up against a lot of big companies that have high costs, and a huge competitive advantage can be having lower costs, and being a unique place that has a great lifestyle to attract talent. So yeah, I have investors out of Singapore and New York and San and the California area now,

Jay Clouse 12:40
Andy, you’re in San Francisco, and you started Holloway in San Francisco. Can you talk about the advantages that you see yourself having for being in that hotbed?

Andy Sparks 12:50
Yeah, definitely. The first one that I’d say is just the access to talent, in addition to the capital raising money is obviously it’s, I think, it makes it a little bit easier, just because the density of how many people are in San Francisco, I also read some of the money from this round in New York, spend a week out of every quarter in New York. But when I say density of talent, what I really mean is like when you don’t know how to do something in your company, which is basically every six months, you have to reinvent yourself and figured out how to do something new. There’s this network of people who have done it before, and they’ve been successful in their three blocks away for a cup of coffee. And it’s really hard to beat that. So whether it’s you’re trying to figure out marketing, or you’re trying to figure out a new channel for sales, or you’re trying to figure out how to hire people out of big tech companies, there’s people that have just done that in there in there, and you’re surrounded by them. And it’s hard to it’s hard to be just how many the sheer number of people are are a couple blocks away from you. I think that one thing that I tell people a lot that are in San Francisco is come spend a couple weeks here every year or come spend spend a week here every quarter, and you can get a lot of that benefit. The network is pretty open, people are really willing to introduce you to other people, you don’t necessarily have to live there. But there is an investment in the work that I think is worth it for almost every entrepreneur to just come and spend some time there and get to know people.

Jay Clouse 14:05
What’s it been like for you? Rachel talked about costs and the cost of living and building a business being lower in Florida. access to capital is easier for you in San Francisco. But your costs are higher to I would assume. So talk to me about what that experience is like for you building a company with just a naturally higher burn rate.

Andy Sparks 14:23
Yeah, if your analysis of San Francisco is that it’s purely a cost trade off of this place cost this much. And this place costs this much. I think that you’re not valuing it, right? I think that San Francisco, especially if you don’t have an existing network as a place you need to think about as an investment for a few years of your life that you go there you get to know people and then you can always leave. I personally have a love hate relationship with San Francisco, it’s crazy expensive, it has one of the most asinine local governments in the entire United States, it’s not going to get cheaper, it’s probably only going to get more expensive. They need to build more housing. But the one thing that San Francisco refuses to do is build more housing. So so it’s not going to get any more affordable. And seven Francisco and almost everyone that I know that’s been there for 5678 years is on their way out there trying to figure out how to move to Denver, how to move to Seattle, how to move in New York, at some point, you just hit it, you get to the San Francisco and you kind of have gotten into the network, you know a lot of people you can get a meeting with people that you need to and you say I’m kind of sick of spending, I think the median rent for the average rent that they reported two weeks ago was like 30, $500 for a single bedroom. And so almost everyone that I know, as soon as they, you know, start to have a family started thinking about having kids, they’re either moving out of the city to Oakland or Berkeley or somewhere else, which are now getting just as expensive and also refusing to build new housing. So they’re deciding to leave and move to another city, which also just from a personal standpoint isn’t super fun when all your friends leave every four years.

Jay Clouse 15:43
And you’ve raised outside of San Francisco, too.

Andy Sparks 15:45
Yeah.

Jay Clouse 15:46
So how did you how did you find those investors? And why did you find those investors?

Andy Sparks 15:51
So actually, the New York Times found us so we the day that we announced that we existed, Jake, from the New York Times you send us an email and said, hey, we’ve been waiting for something like this for a long time. I said, Oh, well, I’m going to be in New York next week. And I don’t think I was going to be in New York next week. But I got on a plane and I was in New York the next week.

But uh, yeah, I think that we have a few investors in New York City. And I think that New York City, especially for a company that’s in publishing, and media, you need to go where the experts in your industry are. So for the early part of my career, I wanted to learn how to build a software company. And so I moved to San Francisco, and I learned how to do that. And right now I’m trying to learn how to build a publishing and media company, in some spending a lot of time in Boston, or New York City or places where those industries are, Brandon, you are the investor in New York.

Jay Clouse 16:31
So talk to us about what you look for in investments in what type of role where the company is based plays in that.

Brandon Bryant 16:39
So I’ll even step back and talk a little bit just about Harlem capital as well, like so our own capital started in one of my business partners living room, and we just wanted to work for x bankers, we just wanted to invest in real estate or invest in small business. And we started investing in startups. And we saw a problem, when in a startup round where it’s like, we don’t see anyone who looks like us. We want to dig deeper on this problem. And so people have kind of women, we started looking and say, okay, hundred and 30 plus billion went to venture last year, but roughly 2% of that, or 3% of that went to people of color, and women, maybe we can dig in deeper on this. And then that’s how it all started. And those are the type of founders, we look for folks who are digging on problem solving something for themselves, if you if you will, talking in terms of just like our overall and like investing criteria, or what have you, folks who have some type of traction already product market fit roughly 100,000 to maybe 500. And revenue, we have a full time team have a you know a clear pathway of how they’re going to grow their business. Also, we look for like founder self awareness, we look for passion, we look for vision, we look for it just like a lot of things that you want to invest into the actual team to actually Jackie, not necessarily the horse, we also look at the investment landscape, can you attract other investors to want to invest with you, because we’re not writing the check for the entire round, we want to work with other folks who want to diversify risk, and want to we want to share notes with other individuals as well. And then going into geography and stuff like that people of color, and women tend to be outside of Silicon Valley. So we’re industry agnostic. A lot of our investments have already been outside of Silicon Valley, we’ve invested in like Baltimore, we’ve invested in Chicago, we invest in LA, we’ve invested in Atlanta, we’ve invested in Columbus, we know Columbus very well. And we see that those folks at one have companies that have been around longer, they have more revenue, they’re going through a lot of challenges that a lot of founders in Silicon Valley may not have have went through. And it’s it’s kind of refreshing to see folks like yourself, you know, pulling themselves up by their bootstraps, in executing at a high level. And finally getting that chance to have the opportunity to have expertise from investors, but also have that capital to scale their business.

Jay Clouse 18:47
So structurally, you guys are already building Harlem to be able to invest outside of New York. How does that process logistically work? And how can a founder get into your pipeline if they’re not in New York?

Brandon Bryant 19:00
Yeah, man, I mean, so we actually look back at how we get all of our deal flow we see about like, probably five to 700 deals a year, about 40% of those are inbound 25% of those are from LinkedIn. So sitting in a deal in that I can someone up in LinkedIn is actually extremely professional and the right thing to do. Also being at places like this, like a south by Art Basel, Coachella, all star weekend for NBA Super Bowl, other big conferences, like all the top players, in my opinion, investors are at all those places, because either their LPs to their fun, or a company they invested in is sponsoring something there. And it’s just like a good opportunity to get in front of them without it being so I corporate or it being so professionals like hey, like, oh, you’re from x y&z i actually have a startup company, Here’s my card, will love this into your investment deck, we’re actually looking to raise like, it’s very, I think it’s very simple to do it that way. And then understand, like warm intros are really good. Obviously, they’re not the only thing that that needs to be done. But warm intro always gets you a little bit farther than a cold email. And then also potentially talking to another founder that maybe we’ve invested in and having them intro us or talking to a potentially like another investor who’s just in a space that may, they may know. So we get a lot of deal flow from other investors. And then here’s a marquee thing that we think we’re our DNA is and content in media. So we believe that people of color women are like, experts in that space. And that’s where they spend a lot of time at. So that’s what we’re spending a lot of time at, as well. And if you look at folks like first round capital, like they’re probably one of the best VCs in content, and they get into a lot of the top companies, and they start building out these processes for their companies in their founders end up being like, individuals who was just like scream at the top of the mountains about how they’re so great. So that’s how we’re, we’re trying to like build our firm as well. And we understand, you know, we’re fundraising and $25 million fines, not the biggest fun, but if we can continually build that strong brand. Our goal is to basically if any person of color woman starts a company, we can be one of the first two calls. And then that shows us that we’re doing our job, right.

Jay Clouse 21:05
A lot of founders are just naturally outsiders in some way or another. So if they can’t get that warm intro, what do you see as the best way to get in front of you?

Brandon Bryant 21:14
Man, that’s a good question. If they can’t get a warm intro, go through the content. So go through the medium posts and make the comment, go through the one of our YouTube channels, go through Instagram dm, and also do the email still. And just follow up through all of those, we’re going to see it mean if you come correctly. So there here’s the other thing a lot of investors have their criteria on our website, we do, hey, send this deck soon as these four or five things like when you how much you fundraising, when you’re closing, who’s in around, what’s your revenue, ARR x y&z and that helps us like sift through everything really quickly. So I would go through social media channels, because unfortunately, a lot of us are actually on social media more than growing our email.

And you know, you just have to going to play that same game. But the follow up like consistency, that’s been like a something that we’ve been talking about consistency is the best, I follow up to mentors and people who I want to invest in their company, I’ll follow up seven times, it’s, it’s really I just copy and paste the same thing. So it’s really not that hard. And understand if you don’t get in touch with that person, there’s more than one investor. Another thing I want to say investors investment about one, maybe 2% of the companies that they see. So understanding that as a founder is like, hey, like maybe this investor doesn’t invest this round, maybe they can invest next round. So if you raise 1.5 million in your seed, going into your a potentially write out your seat, you can just say, Hey, we raise our seed already, but still want to keep you on a radar for our A. So that follow up game that consistency continuing to pound the pavement is is probably the best thing they can do.

Jay Clouse 22:49
I want to ask us to Rachel and Andy, what have you guys found as your best way to start building relationships with investors that you didn’t previously have?

Rachel Carpenter 22:58
I think starting the conversation with investors that are not in your wheelhouse early is really important. That’s actually how I got investors in my series a round, we look a lot bigger than we are online. So I was like, I was like getting calls for general Atlantic when I should not have been getting calls for general Atlantic. But I took the calls, because there are a lot of friends of general Atlantic that our earlier stage companies and if they like you, and you’re obviously passionate, and they think that your idea is good, it’s just as fit their mandate, or you’re too small or too early stage for them. And they will make intros. It’s a it’s a tight knit community is a small community. And that is probably one of the best ways that I’ve found a lot of my existing investors, you know, just getting on the phone with those guys, you know, following up with them every couple of months, they get you on the gamut. And they call you every six months to keep up with you. And then they’re willing to make introductions as well. But also with respect to geography. Like I think it’s only a barrier if you make it one. That’s just not the way the world operates anymore. Like I’ve Angel Angel investors out of Singapore, who are like pretty serious financial services executives, who found me and I didn’t have to go to Singapore, to get them to invest in my company. It’s just those I think those are just barriers if you if you create them, you think of them that way. So yeah, I just don’t i don’t think isn’t much of an issue as people make it. But definitely putting in the work early on. Like you can feel like you’re wasting time when you’re taking those phone calls with with a later stage guys. But that in particular is one strategy that ended up in inking us some pretty great VCs.

Andy Sparks 24:21
So many thoughts, the first one might one of my favorite phrases for this, which both of you have touched on, Mark sister from upfront, he has this phrase called investors invest in lines, not dots. So the first time that an investor meet someone, you’re a.on, a chart. And he’s looking for mines that go up into the right even if you go up into the right and you fall off a cliff for a while, but then you’re going back up to the right, because you’re learning or you’re starting a new company. That’s what they look for. So investors are fundamentally collectors of people, and people who have talent, who they think they could build a really great business one day. And it’s pretty common for me to meet an investor, he says, You know what, I’m not sure about the thing they’re working on right now. But I’m pretty sure that going to build a really great company at some point. And so they’re building that relationship, and they’re trying to stay close to that person. So when they do come to them with something that they think is interesting, they might invest. One other thing I’d say is like I went to school in Ohio, my parents went to the University of Iowa, I had no network. Like,

I got my boss from Ohio sent me to South by Southwest one year is like a consolation prize for winning a deal. And I ended up meeting one person here, we had beer until like 2am, at the Hilton Hotel talking about science fiction books. And that person ended up being my only contact in San Francisco and I moved out there and we ended up starting my last company together. I mean, so I think that one thing is like building a network and breaking into the network doesn’t just happen immediately. Oftentimes, there’s a really cheap criticism of millennials that we want stuff to happen really fast. And we’re not patient. And I think it’s definitely true. I think it’s just a human thing. It’s not just a millennial thing. But it can take 10 years to build a career and build a network and a space, and you’ve got to really be willing to put in the work. And, you know, you’re not going to get a meeting with Marc Andreessen, maybe it your first meeting, when you’re trying to, you know, get into Silicon Valley, you might come talk to one of us. And we know some people and maybe, you know, if we think you’re a nice person, and you’re not a jerk, and maybe you’re hard working and you’re a lifelong learner, maybe we’ll introduce you to some people

Rachel Carpenter 26:15
I would add to that too, just build a good product and focus on that helps quite a bit. One of our early angels when we were struggling and pretending like we weren’t struggling, came to us because he was CEO of a large FinTech platform that needed data. And we sell data. And so he was looking for a data partner to integrate. And once he did a trial of our API and pull the data into its platform, he recognized Oh, this is awesome. I’m going to be a client. And also I’d like to personally invest. And once he got through that barrier, he said, let me introduce you to all the investors in my FinTech platform as well. And it just instantly opened up this whole network. But it was because we built a great platform that was useful and valuable to him. And then we got in the door that way. And it just opened up the doors. But it was all because we were just narrowly focused on building a great platform and a product which helps

Andy Sparks 26:59
I asked the same question on a panel in San Francisco that I was moderating and it was Santa Patel from homebrew ventures. And his answer was just build a great company.

Jay Clouse 27:09
How many times that the two of you been told no?

Andy Sparks 27:11
Way more times…

Rachel Carpenter 27:12
I don’t know how to count? Yeah, I’m just finishing up series a fundraising right now. And I probably talked to over 100 investors and 95 plus percent of them said no.

Jay Clouse 27:22
So how do you manage just like hearing that and staying the course and saying, like, Okay, I’m going to keep building these relationships anyway, like, what was the moment where you learn that you had to do that? And then practically, like, what’s your mindset? How do you get through that?

Rachel Carpenter 27:35
Florida helped a lot, because that was pretty much 100% knows. Nobody in Florida understands back end financial services, infrastructure. But I think part of the lesson for me in this too, is also recognizing that like I can say no to and so recognizing that this is a like a marriage with an investor. I think once I realized that, I was able to take the knows a lot easier, and also give my own nose to VCs and investors that weren’t the right fit for me.

Andy Sparks 27:59
I’d say every night always a learning experience for us. And the hard thing about the learning experiences, you have to figure out is this a no, because there’s something that sucks about my business and the way that I pitched it? Or is this a no, because this investor just doesn’t get it. Reid Hoffman, who started LinkedIn and Greylock has a really great theory all around secrets. So basically, like what is your secret? And you want to spend time with people who understand your secrets? Like I know that it was Tristan Walker from devil was like going out there telling everyone that, you know, he’s building this new shaving company, and there’s all these white guys who are just like I don’t get it is how Why is this a problem? I don’t believe this is a problem. And he’s like, I’m just wasting my time because these people don’t get the fact that this is my secret. And Reid Hoffman uses that as a story and masters of scale, which is just like, over and over again, you go in, and you have to figure out is this person telling me No, because they just don’t get it. Or they telling me know, because I need to figure out something in my pitch. And oftentimes, it’s a little bit of both. And I think that you just have to be enormously self reflective, you also have to take feedback, you can’t be defensive when someone tells you know, you have to figure out, you know how you can use that to build a relationship. Oftentimes, I’ve been told no from one investor, and then it’s been four years later, and I’m sitting with the same investor. And they’re investing in another company in mind. So again, like invest in like in lines, not dots.

Brandon Bryant 29:16
Yeah. And I just wanted to jump in here. From the investor perspective, like, venture capital funds are also startups. So just like when you guys understand that part two, like we have LPs, we have to return capital to other folks who give us money. So we’re going through to the same thing, not not every single VC person who’s at a VC is into fundraising chair, but at least at our own capital, all four of us are in the fundraising to so we see, venture is just like a contact sport, right? It’s contact in awareness, can you stay in contact with people can they be aware of what you got going on. So quarterly updates are great, there’s so many companies that we didn’t have the chance to invest in, who still have us on their quarterly updates. And sometimes that makes us really want to jump at the opportunity to invest in our next round. Also, like social validation. So other investors, when we look at your brand, online, social media, what have you, it looks clean, it looks like, I want to be a consumer that that brand. I’m also going to all these conferences, like there’s so many people we’ve had opportunity to almost invest in, or some LPs, when invest in us from speaking on panels all over the country. So being like your own best champion out here, when your feet on the ground is pretty good. And then lastly, on the geographical side, if you feel that that is like a disadvantage for you go to an accelerator or potentially an incubator in a big city, the company we invested in artists out of Columbus, she was at TechStars. In New York, she happened to be the best person at TechStars in that cohort, and we didn’t care where she lived. So if you are in a small market, and you go to one of these bigger markets, and you just show up and show out in your desktop, then you will get that opportunity to get investment.

Andy Sparks 30:54
Building a company is this journey of over and over again, having to solve new problems. So getting told no by an investor is just one of the problems that you have to figure out. It’s this enormously mental game that you’re going to be playing for decades, where time and time again, something’s not working, either the pitch that you’re giving to an investor or a sales meeting, or something that you build, or no one’s using your product. And you’re going to continuously basically be told that you’re doing something wrong. It’s a continuous feedback loop where you kind of suck, and you have to get over that and get over that and get over that. And guess what, around the corner, there’s something else that you’re doing wrong, and you’re gonna have to fix that. And so getting attuned to what are these things that are in you’re facing? And how can you solve those problems systematically? That’s just kind of like, welcome to the beginning of the game. This is level one.

Jay Clouse 31:45
Brandon, and you talked about an early stage or a new VC firm also kind of being a startup? Yeah, through our podcasts, we’ve learned just through, you know, a few dozen wraps. Well, we had no idea what we were thinking when we’re starting to. Exactly. So tell me now, now, a couple years into this, how has your evaluation and what you look for in companies changed?

Brandon Bryant 32:06
Man, I mean, it’s I think it changes per industry, almost like for human capital, like we didn’t know we were we are industry agnostic, but we’re not investing in like capital intensive companies or something that you need a PhD to get up to speed. So like blockchain or VR, what have you. So we’re thinking about 60%, 60, 70% is going to be enterprise and then the rest of the final priority consumer. And so we’re just trying to put our heads down there, build the right consultants to help us get up to speed. So we’ve invested in a metro product company, we just invested in logistics company, we’re looking at a tele health. And then now we’re also looking at something like a Procter and Gamble. So we’ve been really relying on our industry experts to get up to speed. And that’s something for founders, like build an awesome team, you are like the Tony Stark, or to Captain Marvel your team, you need to build other ventures to join it, so that they can know what you don’t know or like, help you x execute at a high level. And then just talking more about like how that how our investment, theology has evolved over time, I think it’s just reps. Like you can’t really know what you don’t know, you can’t see what you haven’t seen before. And he was just talking about it like you every know, or every opportunity to even look at a company like gets you up to speed for the next time you see it. And sometimes you may just be like, Hey, that was a mistake that we didn’t invest. But we want to stay in touch with them. Because if they exit the company, or maybe we can fall on, but if they exit company, we want to be the first investor for their next one. And I was just reading are just listened to 20 Vc and believe his job Josh Kaufman from first round, was talking about, he missed Twitter, because it was it was the first deal that was too expensive for him. And Twitter, jack came back, hey, you know, we got all these other investors. And I just really wanted to know if you want to be in again, still said no. So then jack came back for a square, even higher price. Josh learned, he invested on the spot into that next one. So I think it’s just like scar tissue. One of my good mentors in the hall from Indiana, he talked about having so much scar tissue from like going through building companies are going through LP meetings and stuff like that. So I think for us, we just want to build up as much scar tissue as possible, fail, fail, fail, fail forward, so that we can continue to be flexible and adjust our theology. And at the end of the day, if you are a kick ass founder in are very smart and understand your product, we just believe that you will figure it out. So we’re rather invest in that then actually always it built out, where’s the revenue? Where’s this? Where’s this? If you can really close show that you have a strong grip on everything, then that’s an opportunity for someone to just bet on you, which is kind of what you want, because you’ll pivot the business and you’ll change different things along the course anyways.

Jay Clouse 34:46
what if someone has a strong grip on something, but they’re out there in one of those outlier industries that you didn’t want to touch initially?

Brandon Bryant 34:52
Man that I think so for the telehealth company that we had, they have two extremely large players in like digital health, who are leading their round, and we’re just into syndication. So that makes us feel comfortable. We use our industry experts to make us feel comfortable. But it’s if it’s too complex, then it’s just, it’s unfortunately, just not for us. And if you are in a complex area, you want strategic investors anyways. So some we invested in a company in our Angel portfolio, which was all our own money that was in the retail space. And we understood that this company is technically not a venture capital company, they need someone who is at like, Tommy Hilfiger, or they need someone, we got them an investor that was in the retail space, and they don’t have to grow as fast anymore, but they can get help with unit economics, they get hit with operations and stuff like that. So understand, if you you don’t have to do the typical VC, you can do just like a strategic person who has good bank grow. And they have good relationships in that industry. And that could still help you get to I mean, you want to get to an exit, right? Like you want to get an exit somehow, some way. We want to impact people along the way and run a good company. But it if the end goal is exit doesn’t have to be a typical VC could be someone who strategic.

Andy Sparks 36:04
And most companies should not raise venture capital. I think this is something that’s just massively misunderstood. So venture capital is it has a very specific business model, right, they have a very specific set of skills.

And venture capital in order to substantiate their business model, they need to have companies that are worth several billion dollars, not just a billion, like a $1 billion company is actually you need many of those in a venture capital portfolio and actually to make the returns that they tell their LPs that are that they’re going to actually get for them that their LPs expect. And so when a venture capitalist is looking at your company, they’re saying, could this be one of the biggest companies in the world, and there are a lot of really good companies that do tend to 100 million and EBITDA, a little bit bigger, a little bit smaller. There’s great companies that do that. And you do not need venture capital to do that. And when you take money from venture capital, you make commitments, that you’re going to be a huge company. There are some sort of like educate strategies that you can take where if you take a, you know, a smallish check from a front fund with a ton of assets under management, you know, if you take 2 million from a fund with a billion under management, then you’re one of the small fish in their portfolio. So you’re probably not going to get a ton of pressure. But ultimately, you need to really taken into account what the business model of venture capital it is. And I don’t know what someone I don’t know if his code Kara Swisher something said that? No, it was it was the guys from base camp, that venture capital kills more companies that it actually builds, because oftentimes, venture capitalists invest in a company and you know, it’s doing 10 million in revenue, and they’re growing 50% year over year. But for VCs, that’s not enough, you need to be growing 100% year over year, 200% year over year, you need to be getting towards a billion dollar company. And you have an entrepreneur sitting there like do my company’s doing 10 million in revenue, this is terrific, are profitable. And the VC says now we gotta pour more money on the fire. They feed the founders ego, and then everything goes up in flames. So really take that into consideration when you’re building your business, whether you should be you should be raising venture capital at all,

Jay Clouse 38:03
Andy or Rachel, have you guys ever taken dumb money? Like on strategic capital?

Andy Sparks 38:08
Or dumb strategic money? Totally kidding.

Rachel Carpenter 38:11
Yeah, I mean, I think the farther along that we’ve gone, the more strategic our investors have become. And I think early on, angel investing can be angel investing really should be strategic. And I don’t think it is, that’s part of the problem we actually haven’t done in Florida, with Angel groups that are unionizing early stage capital. But, you know, early on, we took some money from angels just to keep keep the fire burning, and keep building. Most of our angels were very strategic, though weirdly unique thing about Florida is that a lot of Wall Street executives retire down there, which was amazing for us, and very surprising, and you probably wouldn’t think that. But there’s a huge financial services landscape down there. So there were some investors that didn’t know anything about finance, and like definitely not financial data. But for the most part, our angels were coming from the wall street space. And then as we got further into more institutional capital, it became very strategic. And I wouldn’t call any of that really dumb money.

Jay Clouse 39:01
Any of the unstrategic money, was it not worth it? Or was it all worth it?

Rachel Carpenter 39:05
I mean, I guess I would say keeping a small cap table is very important. So there, there are times when that can be a very negative thing for you. I don’t think we got to that point. But that is something to be aware of that if you take a lot of money from a lot of small investors, it makes it really hard to raise capital later on.

Brandon Bryant 39:18
The thing I was going to say about dumb money. I think there’s another way to talk about Have you taken money from somebody who pitched you something. And they didn’t follow through on those I mean, as a venture capitalist, like context, context, context, context, introductions, introductions, introductions, and all across is like we should be bringing to the table. If not, you know, if we’re strategic, we should we can bring some expertise, we can help you hire talent, we can help you can jump in on a sprint on a new product or getting something to market like, that’s what we should be bringing to the table. But even from like the VC side, some, some LPs, just write a check and run. And you just need to say, put my face in a deck and cool. So sometimes that hurts, but it’s like, I think it’s up to you, as the founder of the team to market that for whatever you need to market that for it to get in certain doors, or to potentially get that real strategic money that you actually need.

Rachel Carpenter 40:07
There’s the under reaching, which is, is. But there’s also the overreaching side of that, which is also dumb money to which is like you need to be building your business. And sometimes there can be early stage investors that just want to be like part of it with you, and are constantly calling and so I’d say the under reach and the overreaching investor both can be can be bad, bad money.

Andy Sparks 40:25
I think part of the dialogue around investor selection is oftentimes a very like privilege conversation, because a lot of entrepreneurs, you’re starting a business and you’ve got like one person who’s can give you a check. And you’re like, well, who knows if they’re good or not, but I need the 50 K, because I’m going to be able to pay somebody tomorrow to build this thing, and you take the money and you figure it out. And then you have all this bias later on after you build a company and you talk about all the smart money that you raised from, but there’s that one person that gave you 20 k up front, and you know, maybe they were a thorn in your side, but you needed the money, and that’ll help you get your business started. And so to some degree, you’re like, that’s, it’s all the only option you have. So I think that in that case, like take the money, you go build a business and you move on and do learn from it. And you know that it’s a risk that person that you tell them I think if you do take money from a unsophisticated or somebody who’s not a traditional startup in her business investor, is to look them in the eye and say, Hey, are you okay? With me Never giving you this money back. Because if you give me this check, the most likely scenario is you never see this money again, let alone a return. And if you’re okay with that, cool, I’ll take your money. But like, you should just expect that we’re going to try this and we’re going to do our best, but you’re probably not going to get the money back. And if they’re okay with that, then I think that you’ve at least safeguard of the relationship. And in the most likely scenario, which the most likely scenario that you failed.

Brandon Bryant 41:42
Think about the thing about the legal side of your cap table. And like we were right, you’re giving up when you are lend folks invest in your business. A few of the companies we’ve invested in had pretty messy cap tables, some of them didn’t even have boards and could potentially if they fundraise that keep fundraising the same way they were going to raise they could get pushed out of the company, have nothing to say for. And so that’s like a really big thing I found is really needed to protect themselves and their teams on the legal side. And if find out some way to have someone look at your docs, because that stuff really gets tricky once you start getting big players in because they may not invest you just because of the legal ramifications of like, we don’t have enough opportunity to invest in actually good rights to the returns as early as we usually want to. And that’s like a turnoff for us. And we can invest.

Jay Clouse 42:29
I have one more question. And then I’d love to take some questions from the audience. So if you guys have questions, you can just line up there behind that mic. And we’ll kind of go one at a time here for the panel. But

Andy Sparks 42:38
Can I follow up real fast on that. Sure. So this will be slightly a shameless plug. But I promise it’ll be useful to everyone in the audience. So one of the things that you said was get good counsel get good legal representation, get good legal advice. Now, the only problem with good legal advice on startups is it usually cost $950 an hour. And so you’re trying to figure out, you know, I don’t have money. I haven’t raised anything yet. But I need good legal advice I have I can’t afford it. So what the hell do you do? So one of the things I’ve been spending the last year and a half doing is writing a book on raising venture capital. And we really clearly outline every one of the legal terms, happy to give everyone else here early access to it. But it’s something that if you can afford the legal opinion, you can at least read a little bit about the terms of what you’re getting yourself into. And at a bare minimum, everyone in the audience should read venture deals by Brad Feld and Jason Mendelsohn.

Jay Clouse 43:28
So thank you. So let’s take a question let’s take it right now.

Audience 43:32
Does anybody have experience with international expansion and location decisions regarding that?

Rachel Carpenter 43:40
Not yet.

Andy Sparks 43:42
I think this is I think I’m useless on this.

Brandon Bryant 43:46
Yeah, we don’t have it. Was there a specific question?

Audience 43:49
No, I was curious. I mean, that business. And so I was wondering whether or not you had any, you know, insights, from your side.

Andy Sparks 43:58
insights in terms of raising capital outside of the United States?

Audience 44:01
in terms of in terms of location criteria, location decisions, you know, would you go somewhere that’s less expensive? Would you go somewhere that’s more expensive for a certain benefit that comes with that region or more place? What would be your decision making criteria?

Rachel Carpenter 44:18
Specifically, internationally? Yeah, I mean, it would have to be lower cost than where we’re at, which is hard to do. So that would definitely be a big factor. For us. That’s part of our just, that’s part of our competitive advantage, and part of our business models to be very low cost operationally. So that would be a huge factor, at least for my business.

Brandon Bryant 44:32
definitely lower costs, or like, standard of living access to really good talent. So like by a university or something like that. And then like a short flight from potential, like LPs or clients.

Jay Clouse 44:43
Great question.

Brandon Bryant 44:44
I would say, hopefully, somebody in the room has that information and can talk to the gentleman later.

Audience 44:48
Hey, guys. I’m Tessa, also from Columbus, Ohio.

Brandon Bryant 44:54
Yay.

Audience 44:55
My question is for Brandon, specifically, but feel free anyone else to jump in? So I know you mentioned about fundraising. But as a venture capitalist, I’d love to know more on where you actually source your funds that you give.

Brandon Bryant 45:09
Gotcha, gotcha. And another thing, we’re talking about how to get in contact with a venture capitalist or an investor, go to a conference and ask a question, because someone will introduce you. So that’s really cool. How do we have access to our fun, so we all had backgrounds and finance. So we actually had all of our old bosses invest first. So we worked on wall street for a few years, we have Oh, bosses, and then you go back and think about who’s any influential high net worth individual you’ve ever met in your life that you go to them. And then after all of them, after all those folks say no to you, you ask them, who do they know. And then those folks say no, and then you had to third degree in folks potentially start to introduce you to that family and friends. And after you get some traction, then you start talking to bigger player. So he was talking about your first pitch in and be to Andreessen, who it should be to another entrepreneur should be to a small angel investor, then you finally get up to sit around with a venture capitalist. So we took that same thought process, and we just like market, map everything out. And then eventually after you get some traction, and we started building a lot of content, a lot of brand around it. So we had Forbes 30, under 30, we were Ebony power 100. We were all these cool things. And we use those as like hooks for people to reach out to us. And then we’re we’re traveling everywhere we’re at every single conference, we’re at every single big event. And I from my side, all the top entrepreneurs all the top investors also go to all of those events, and they host things. And so as we started shaking more hands into Harlan Harlan capitals a great name, I you know, thank God for lenders get it, people just recognize him capital instantaneously, I wear my Harlem capital shirt most days. And eventually you said to come in and show up in the last part is like your marketing materials. we design our marketing materials as if we were startup. So there’s a company actually out out of Australia called deck works.com CEO, and they will do your deck for you for probably 1000 bucks. And it looks amazing. And so people come and look at our deck to say, Hey, this is not a finance guys doing it. This is like a startup, this is actually a cup product, this is actually a vehicle. And then lastly, the mission, there’s a lot of folks who are focused on closing that gap. So, you know, there’s 75% of Americans diverse, but only 3% of the hundred and 30 plus billion goes to those folks. So there’s a lot of people who are working on closing those gaps. So if you can get in touch with those people, and go to those conferences and talk on those panels, we talked on my business partner top down to Bumble panel. And after that we had four people are we had for opportunities to talk to LPs. And like I’m talking big time institutions, household names, like tech conglomerates. And it’s just from just being out there context for you got to talk, talk, talk shake a hand kiss babies do some.

Audience 47:58
There’s a lot of buzz around kind of corporate venture capital at the moment. And I think some of those models are clearly not not very effective. But so I was just wondering from you guys, what if any role you could see the corporates or the enterprise have in the venture ecosystem.

Rachel Carpenter 48:13
I think that’s definitely a growing trend. But I think there’s too many horror stories floating around for it to pick up I think it’s going to, I think one of the biggest challenges is, is on one hand, the copying issue, the risk and all the horror stories, which scares a lot of the entrepreneurs away. And then on the other side of the table, there is there aren’t very many good frameworks for early stage venture investing inside of corporations. And there are actually some models that are popping up where it’s like, outsourced, you know, deal sourcing and diligence models that are starting to pop up, which is actually really interesting, that can solve one of the biggest problems. But there really is no framework for going through diligence in early stage deals out of a corporation. It’s more usually like a Corp dev process, which is traditionally focused towards m&a, which is not the right way to evaluate an early stage business. And then there’s also the argument that that’s just not the right move for a corporation because it doesn’t fit into their business model. But I think there’s a lot of pressure just to innovate in general, we went through a really interesting program out of Atlanta called engage VC, all the publicly traded companies that are headquartered there. So delta ups, Home Depot, Georgia, Pacific, Georgia Power, Invesco, intercontinental exchange, chick fil a, and then additionally, outside of the area, Goldman Sachs, and at amp T, all those companies came together and said, we’re really bad at innovating. And small companies are really bad at selling to us. So let’s come together and put our money into a fun. And so those kinds of those corporations are LPs, and engage is that outsource to deal flow for them. So there’s some really interesting models that are popping up like that. But I would say the two biggest barriers are just there is no framework and process for evaluating early stage deals. Far too many horror stories.

Brandon Bryant 49:41
I wanted to jump in on that too, like core VCs are only creating them because they’re trying to like not get disrupted. So that’s like the the pain point that they’re trying to focus on there. A lot of the other corporate another thing that corporate VCs do is they’ll just tell anyone who throws $10 million at something is like in that’s the size of everything diversifying or every like corporate VC fund, like that is not enough to like be viable in venture capital. And we learned that we were trying to raise a $2 million fund that we were trying to raise a $10 million fund that we realized, no one can even work full time or no one can be actually incentivize, or no one can actually take ownership and accompany enough with a check size if you only $10 million fund. So I would say a lot of folks are not necessarily putting the right money to work. And then also in terms of the frameworks point of view, they’ll do that $10 million run as a test, with no nothing in place to raise another one. That was nothing in place to work with other people in a network. And then lastly, there to strategic Intel does a fine or whatever, Comcast or someone else, they can only invest in this very strong silo, which they technically don’t have venture expertise in, they just happen to be in the market and be older player. And I think they just write checks in in, you know, piggyback other folks. And that’s not the way to to win a venture, you kind of got to make a very convicted approach early, and then you get two people in your network to jump on it. So I think they’ve just made become an added at lackadaisical currently, but I know that they’re improving. There’s a lot of folks that we work with in this space, that are improving, and I think is actually smarter for some of these corporate VC. So really start partnering with other VCs and like sharing information and potentially working together.

Jay Clouse 51:25
Andy your investment from the New York Times is probably corporate venture, right?

Andy Sparks 51:28
Yeah, I have, I have different opinions about this. So first of all, I there’s this quote by Joe Biden that I actually love that is that all foreign policy is personal relationships. And I like to apply this to all kinds of things. And so corporate venture capital is just again, very, very different based off of what company you’re dealing with some corporate VCs, and best off the balance sheet, basically, meaning that you know, they can, then they don’t have a fun, they’re just investing straight out of the company’s capital. And they’re really different strategies based off of whether they have a separate fund or not like Comcast ventures is completely separate from Comcast, and Comcast and desk, Comcast ventures invest in all kinds of different things. They’re also happened to be a very good media investor. And Comcast also has the ability to make some relationships happen in media. And Comcast tends to do pretty well getting into media deals, The New York Times has been one of my absolute favorite investors to work with. And the New York Times only makes a few investments every year, but they completely opened up the entire team at the times. So when we wanted to talk about pay what paywalls content and media, they said, Well, why don’t you talk to the guy that built the first paywall for the times, like eight years ago? And how about the guy who pretty much that the entire time strategy on a paid digital product, you want to talk to that guy, let’s get a meeting with him. You want to talk to this person, this person, this person, and that’s just been immensely valuable to someone who didn’t come from the media world. And so I think that going back to the Bible quotes, just like, build the relationships, get to know whether these are people that can actually help your business, as far as you know, is corporate venture capital going to be a great business model for the companies? I would probably say, you know, it’s going to be like most things for most large corporations where they’re going to probably screw up most of it. Like, I think the times happens to be an innovative investor, because the times is an innovative company. Like I’m skeptical about chick fil a venture capital arm.

Rachel Carpenter 53:19
It can be risky that depending on the industry that you’re in, like, you know, you you take money from Goldman Sachs, what is JP Morgan going to think about that? And will they work with you in the future? And you really have to take that and and maybe it’s not an issue for you, depending on the industry. But I know in financial services, huge potential risk to align yourself too closely with a friend like that from a sales and expansion perspective.

Jay Clouse 53:37
I want to follow up on that real quick. And then I’ll get to your question. It’s easy. If someone’s like saying, I found Harlem capital, I want to send them my deck to look at your website and see where it’s Harlem capital focus, as founders, how do you find the aligned investors for yourselves and your companies?

Andy Sparks 53:53
have a list.

The first thing, the one of the biggest mistakes I see founders make when Well, first of all, going back to my privilege question of the first time you’re looking for an investor, you just need sum of money. And to say anything else, I think would be disingenuous to get up here and talk about values, alignment, and whatever and this and this and this, and this, when you’re just trying to get your first check. So your company doesn’t die. Usually, you’re like, I just need the money. And you’re probably going to make some mistakes and wish you hadn’t done it. But you’re going to have, you know, success by us. And you’re just going to be happy that you had the money. So once you get beyond all of that, I think that it’s really important to treat an investor like one of the key hires on your team, especially if they’re going to be taking a board seat, especially if they’re just a large investor, they’re over your major investor threshold, do they share your values? Is this someone who’s going to really push you to grow really fast? Or is this a company? Is this an investor that’s going to be more patient? And does that line up with your strategy as a as an as a business owner? Is it the right stage? You know, General Atlantic, probably not the right stage for series a, you know, a lot of investors are a lot of entrepreneurs spend a lot of time like waste a lot of time speaking with investors who are really at the wrong stage. So if that’s a relationship building meeting, great, but if it’s not, move on.

Rachel Carpenter 54:59
Yes. I mean, I’d add to that, to ask a lot of questions. Like, we’ve had bad experiences, like you fundraise to like how’s your fundraising going? Where’s that? Is it done? Do you have the money in the bank, because if not, it’s the VCs job to talk to you anyway, even if they’re fun isn’t closed. And even if you don’t necessarily have to present fit their mandate. So ask just as many questions to them about all that stuff to to make sure that there’s alignment.

Andy Sparks 55:20
Definitely. I like to ask my investors questions that make them defensive, to see if they’re going to be a jerk, like put them on the spot. Because if they’re going to be defensive about something, you ask them in a pitch meeting, you better believe they’re going to be defensive when you come into them with some bad news. And you want someone who’s going to be on your team. And so you know, just get a little dig at them. And like, I test all the investors that I’ve worked with like that, and it’s been really helpful. And the last thing I’ll add, is helpfulness. If an investor isn’t going to help you before they write a check, they’re not gonna, they’re not going to help you actually write a check. The most helpful investor in Holloway is the guy who wrote $1,000, check. His name’s Kevin Lee, he’s in a pair of ventures invested personally. And every time that I asked investors for help, he’s the first guy to text back. And I really wish that I know, Kevin could have invested more.

Brandon Bryant 56:05
Yeah, I was gonna say if an investor point of view, like it is a two way street, so you should be interviewing the investor in terms of in whenever you’re in that pitch meeting. And what an investor is is supposed to do is anything that can get you across whatever finish line you’re focused on right now. And if they don’t give off that type of thought process or that type of helpfulness, then maybe that’s not the right investor for you. And like I said earlier, remember, only investors invest in one to 2% of the companies that they see. So it’s okay to move on to the next person.

Audience 56:34
Frank here of all, my local attorney, and I’m realizing that need to raise my right because it’s not 950 an hour. So. So I have clients in Florida, and Iowa, and the traditional places like New York, San Francisco here, I want to talk about terms and processes. Because her Florida and Iowa, the investors there are hammering the founders on terms want to see audited financials for seed stage companies. Do you guys see that changing as the coast come? Warren, Lynn, their investments? Just want to hear your thoughts on that?

Rachel Carpenter 57:06
I hope so. I don’t know how fast it’s going to change, I think it’s inevitable that it will change eventually. But it honestly at least from a Floridian perspective requires a serious re education on what early stage investing is like, you know, I’ve the deal terms of my friends have gone in Florida or just horrendous. So I think it’s just going to take time, but it will change. And as 100% about educating the investment community down there,

Andy Sparks 57:29
And the entrepreneurs to know what to ask for, yeah, say this is this is an untenable ask. I would also say that the way that it will change is that there will be a seed investor, at some point, who will raise a seed fund, like Dr. Capital raise to invest in the Midwest, for series A’s. And they will say, I’m going to go in there. And I’m going to basically tell every entrepreneur that I will invest in your company, and I will do seed and I will do no BS terms, and everyone else will suddenly have no deal flow. And once that happens, that’s when it will start to change.

Brandon Bryant 57:55
A lot of investors that are already outside are from Silicon Valley, or they’ve been in New York. So they’re bringing very aggressive term sometimes when they move out to an Ohio or Florida or what have you. So I think it’s definitely an education piece that people really need to focus on. Because it’s, it’s an epidemic, I think on like the founder side pre seed seed and series A on how they don’t understand the legal ramifications. And because folks on my team has been in private equity and they’ve owned businesses and Dave ran different pinos and things of that nature, they’ve been able to kind of find those missteps things early, when we look at a company, many that in terms of financials, I would say still, they don’t need to be audited financials, if you will, but like, we will love to see a bank statement and some type of financial just because unfortunately, some founders are just great salespeople. And they may not be building the, you know, most amazing company that they are selling. And we’ve been in that round before. And like if you don’t share contacts, and you share notes with other folks that you as an investor won’t see that and you’ll get burned. So it’s I think it’s a for both.

Audience 59:01
Hi, I would like to know a word about like, exit are willing to or like your firm VC perspective, like once European mom, dad, like when are you willing to sell their your your part of the investment or you’re waiting for an IPO…

Brandon Bryant 59:17
What’s Harlem Capital’s focused on the exit process? So for human capital, we look to get in either in your seed or your series A, we’re looking to write checks between 252 a million dollars, we hopefully will follow on and pro rata rights. In terms of the exit, we want to introduce you to a Great Investor for you to lead your a and potential leads your B and C. And we’re fine with acquisition or IPO. I mean, our job is to help you get across the finish line to an exit. There’s only two ways the IPO or the acquisition. So if we can connect you with folks who have like your strategic acquisition, or we can help you potentially acquire companies are grow fast enough to IPO like we’re going to do every single thing that we possibly can to get you there. I mean, that’s why we’re both here.

Jay Clouse 1:00:03
I had one question on Twitter here. How can other geo markets get in the consideration set of more coastal investors for travel?

Rachel Carpenter 1:00:11
Yeah, I mean, so we’d like finally got a flight out of Tampa direct to San Francisco, which everyone was like, Oh, this is a huge deal. And it kind of wasn’t like, if an investor wants to get to your area, they’ll come they’re like you can have this hoity toity like San Fran VCs aren’t aren’t going to take it. If it’s not a direct flight. I just think that’s Bs, like, everyone made a huge deal about it in Tampa Bay, when we finally got a direct flight. I don’t know if that’s what the question is about. But like, I don’t know, I don’t think that really matters. I think if you’re a good company, someone will come and see you. Or even more likely you go see them to and then it’s only once you get far enough in the villages, they want to come down and visit, I would

Brandon Bryant 1:00:43
I’d say, just get out of your respective market and like sleep on someone’s couch for two weeks in all the places where you want to get investment in, take as many coffees as you can find that one person who would take a coffee with you and just say hey, like, if you really enjoy my, my idea and what I’m working on, is there anyone else else that you think that I can meet with why I’m in town and send those emails as if I hey, I’m in town for three days do you have chance to meet like make them be on your schedule for that period of time, because if they’re really interested, they’ll they’ll jump at it. Most investors want to just like get up to speed and learn what’s going on. So they don’t, they don’t want to miss the chance to get or Metro or someone who’s in town working on something cool, or get access to knowledge of a market that they don’t usually invest in. Because if you’re outside of the coast, to an investor that for on my side, like you may have like a more favorable evaluation, I might be able to have a bigger equity check that goes further. And then I may be able to to introduce you to people on the coasts, and you can get that valuation pop and then we get to a potential exit down the line like that’s investors have to think like that.

Andy Sparks 1:01:45
Two tools are enormously valuable for getting to know strangers. The first one is Twitter. Like if you don’t use Twitter, you should get on Twitter, and you should learn how to use Twitter. And the best way to use Twitter is not to follow your friends. Follow people you want to know, especially people that are somewhere between like one and 10,000 followers are usually really accessible people and you can just tweet at them, follow them, engage with them be a normal human being and build a relationship Don’t be a creep. And then if they follow you just dm them and say, hey, look, I’m first time founder or I’m trying to build my business outside of Silicon Valley. I would love to just like do you have 15 minutes to hop on the phone and just love to pick your brain? If you do that with 50 people, I guarantee you’ll have 15 phone calls. And if you don’t have 15 phone calls, you should then you should evaluate what am I doing wrong? Am I being a creep in it, you should try again. Twitter’s an amazing tool. Also email, cold email people and in the subject line. First time founder looking for advice do that for 100 people, you’ll have 15 meetings, I guarantee it. But most people won’t go through and do the work to figure out someone’s email and all that, but you just have to hustle.

Brandon Bryant 1:02:51
Yeah, make it as frictionless as possible. Like meet them wherever they need to be at like be inner city be at the coffee shop that’s right around from the headquarters. Other companies like they, I’m in town for the next three days, if you have 15 minutes, and then next 72 hours like I would love to just be able to get your ear and then also on the Twitter spot. Folks are on social media more than they’re texting and emailing. And the amount of people who hit me up on Twitter that will never return anything in any other social platform or any other communication is just is weird. But that’s just how the world is right now. And so we have to be able to be agile and adapt.

Andy Sparks 1:03:28
So Kara Swisher tweeted at her like her screen time, and Kara Swisher was on Twitter for 15 hours and the last like seven days or something like that. So you just think about these people are staring at this tool, and you can actually build these relationships is pretty incredible.

Jay Clouse 1:03:42
Awesome. Well, if you guys enjoyed this, we have conversations like this on upside every week, would love for you guys to check it out founders all over the country doing all kinds of different industries. For now, we’re going to stick around after this for as long as they won’t kick us out. And if you can, please join me in giving a hand to our panel.

That’s all for this week.

Thanks for listening. We’d love to hear your thoughts on today’s guest. So shoot us an email at hello@upside.fm. or find us on Twitter at upside FM. We’ll be back here next week at the same time talking to another founder and our quest to find upside outside of Silicon Valley. If you or someone you know and make a good guest for our show, please email us or find us on Twitter and let us know. And if you love our show, please leave us a review on iTunes. That goes a long way in helping us spread the word and continue to help bring high quality guests to the show. Eric and I decided there were a couple things we wanted to share with you at the end of the podcast. And so here we go. Eric Hornung and Jay Clouse are the founding partners of the upside podcast. At the time of this recording. We do not own equity or other financial interest in the companies which appear on this show. All opinions expressed by podcast participants are solely their own opinion and do not reflect the opinions of death and Phelps LLC and its affiliates unreal collective LLC and its affiliates or any entity which employee. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. We have not considered your specific financial situation nor provided any investment advice on this show. Thanks for listening and we’ll talk to you next week.

Last month, we had the pleasure of hosting a panel at SXSW called Geography vs. Investing: Should Location Matter?

This would not have been possible without the support and voting of our listeners, and we really appreciate your help. Please enjoy the panel, recorded in full, including audience Q&A at the end.

Panel description:

It’s never been easier for entrepreneurs everywhere to start a company.

But even with world-changing companies being built all over, access to capital is still concentrated in Silicon Valley.

But we’ve found investors inside the coasts investing in Silicon Valley, as well as Silicon Valley investors funding companies inside the coasts.

This panel examines the role geography plays in investment, what role it SHOULD play, and how investors can find companies with upside regardless of geography.

//

Brandon Bryant received his degree in economics from Ohio State University and worked at Bank of America Merrill Lynch as an investment banker for 3 years. Afterwards he transitioned to the marketing world as a social media content creator (@wallstreetpaper) working with companies like Uber, Microsoft, Walmart, WSJ and GQ. He also co-founded Harlem Capital, an early stage venture capital fund that is focused on investing companies founded by people of color and women.

Twitter: https://twitter.com/wallstreetpaper

//

Rachel Carpenter is the Chief Executive Officer and a founding partner of Intrinio, a disruptive financial data platform launched in 2015. Based in the company’s Florida office, Rachel has overall responsibility for Intrinio including driving its strategy and position for long term growth. She is an advanced front-end web developer and a graduate of The Starter League Advanced web design course. Rachel graduated from the University of Wisconsin-Madison with a BBA in both Finance and Management and minors in Spanish and European Studies. Rachel is a member of the Forbes Finance Council, a member of the Data Coalition advocating for open, structured data, and a Board Member at CASA (Community Action Stops Abuse), the largest domestic violence shelter in Florida.

Twitter: https://twitter.com/Rachel_Ann_C

//

Andy Sparks is the Co-Founder & CEO of Holloway, a new digital publishing company focused on publishing the best knowledge on navigating the challenges of modern work for all to find. Holloway is backed by NEA and The New York Times. Previously, he co-founded Mattermark, a provider of data on private companies that raised more than $17M and sold for far less than that. Andy graduated from The Ohio State University, lives in San Francisco, and will be publishing a book on how to raise venture capital later this summer.

Twitter: https://twitter.com/SparksZilla

Follow upside on Twitter: https://twitter.com/upsidefm