Victor Gutwein M25

Victor Gutwein of M25 // A conversation 200 episodes in the making [CC080]

In All Episodes, VC by jayclouseLeave a Comment

view episode transcript

Jay Clouse 0:02
You know, Eric, on this show time and time again, founders talk about the importance of hiring great employees.

Eric Hornung 0:08
And they always say it’s so hard and so important early on to hire the right person.

Jay Clouse 0:14
It makes a lot of sense that it’s difficult because most founders don’t have experience doing high level searches or hiring top level talent.

Eric Hornung 0:21
And they’re also limited to their local talent pool a lot of the times.

Jay Clouse 0:24
That’s why a lot of founders choose to work with SPMB one of the fastest growing executive search firms in the country. For over 40 years, SPMB has specialized in recruiting upper management and board members to early stage VC funded startups and larger growth stage companies do.

Eric Hornung 0:39
They bring the knowledge of a large global firm and combine it with the personalized service and attention of a boutique,

Jay Clouse 0:46
they have a dedicated team focusing on the Mountain West and Midwest emerging tech markets. So no matter where you are in the country, if you’re trying to hire top level talent SPMB can help you out.

Eric Hornung 0:57
If that sounds like you, you can go to to learn how they are closing hundreds of C level searches annually.

Victor Gutwein 1:12
We’re at the earliest innings of these companies, there’s not a lot to evaluate, relative to later stage companies. So I’ve always had this philosophy that we need to ensure we capture outliers. And this power law dynamic that is early stage venture capital by investing in a lot a relatively a lot of company.

Jay Clouse 1:32
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 Silicon Valley. I’m Jay Clouse, and I’m accompanied by my longtime co host, Mr. unicorn plushy himself, Eric Hornung.

Eric Hornung 2:14
Three years Jay, three years, three hellos. And we’re doing it. I have unicorn plushie maybe we’ll have to get three of them for one for each year.

Jay Clouse 2:23
Three years. 159 weeks notice 52 weeks in here. 156 weeks.

Eric Hornung 2:30
Big math guy.

Jay Clouse 2:31
In 200 episodes of Upside

Eric Hornung 2:33
Isn’t that crazy 200.

Jay Clouse 2:36
That’s a lot.

Eric Hornung 2:37
Think about how much time you and I have spent talking to each other on the mics.

Jay Clouse 2:41
Yeah. It’s, it’s more than I ever thought I would talk to you or want to talk to you.

Eric Hornung 2:49
Here’s the crazy thing. None of it. Zero of it was possible without the people that took a risk on us early on in this process, when we just were an idea. And probably not even the best idea.

Jay Clouse 3:01
And how hard it wasn’t beginning to even just get guests to come on the show. It felt like such a reach to reach out to anybody and ask them if they would come on this thing that doesn’t really exist that doesn’t really have listeners at the time. And talk with us

Eric Hornung 3:14
For an hour and a half.

Jay Clouse 3:16
At the time. Yes, it was. No, no, the whole episode was an hour and a half.We we’ve never talked for more than an hour in an interview. That’s true. Still a lot.

Eric Hornung 3:26
Actually, that’s not true. Vlipsy we talked for like an hour and 25 minutes with him.

Jay Clouse 3:29
Well, that was just a great conversation.

Eric Hornung 3:30
True. So one thing that changed for us one thing that was a big catalyst for us early on and making it easier to get guests on the show was we we found an advocate Jay early on,

Jay Clouse 3:40
We had a secret secret weapon.

Eric Hornung 3:44
He was out there he was given out unicorn plushies to me, not to you, of course, and he was advocating for us to his portfolio of founders. We’ve had 10 of them on to date Jay.

Jay Clouse 3:57
10.10 founders from this portfolio. And while we are celebrating our 200th episode here, we also want to Hail to the victor Victor Gutwein, the Founder and Managing Partner of M25 which was really picking up steam around the time that we were picking up the mics and has since really built quite a name for themselves but all along the way. Victor has been an incredible advocate for us, introducing us to companies let me name off our 10 podcos that are within the M25 portfolio. We have Pear, Loop, Local Crate, Summersalt, Upsie, Super Dispatch, Rapchat, Opendorse, ScriptDrop and Chris Bergman’s new company that’s a cool 10 portfolio companies and Eric those 10 alone. Pretty great portfolio if I say so myself.

Eric Hornung 4:51
Yeah, it’s almost probably says something about Victor’s portfolio.

Jay Clouse 4:55
That’s what I’m saying. That’s what I’m saying.

Eric Hornung 4:57
Yeah, our portfolio Victor’s portfolio personally Some overlap there and we are stoked to although we did not invest any of those companies the media co investors with him.

Jay Clouse 5:07
Victor started M25. In 2015 in Chicago, Illinois, he is a Kauffman fellow class 22, former leader of Hyde Park angels. And Eric little known fact, has an Uber rating of 4.89 out of five.

Eric Hornung 5:24
That’s pretty good. I think I’m stuck in the four point sevens because I had some friends who were terrible in college, and I don’t I think I kind of baked in that score. I’m not getting over it.

Jay Clouse 5:33
Uber ratings are often a reflection of your friends behavior more than your own behavior, unfortunately.

Eric Hornung 5:38
Yeah, I think that’s true. So it seems like Victor has great friends,

Jay Clouse 5:41
And you want to have great friends. If you’re trying to live this one life, you have to live the best way that you can.

Eric Hornung 5:45
That’s true. Friends are a reflection of happiness in the long run. And if you dear listener, have some great friends or you want great friends reach out to our friends at Ethos Wealth Management, you can learn

Jay Clouse 5:59
M25 is an early stage venture firm based in Chicago, as I said, investing solely in tech startups headquartered in the Midwest. They do have a very strong stance and what the Midwest is Eric’s one of the few firms that will take a hard stance on what is and is not the Midwest since launching.

Eric Hornung 6:14
What’s the most controversial opinion in there?

Jay Clouse 6:18
Wisconsin, Nebraska.

Eric Hornung 6:21
I think those are all very Midwest. How about Louisville? I feel like Louisville is

Jay Clouse 6:25
Louisville. Louisville is. Yeah, Louisville is not on their Midwest route map.

Eric Hornung 6:30
But a lot of people feel like it’s Midwest.

Jay Clouse 6:32
It does feel Midwest. And Midwest isn’t answering title. Why is Ohio Midwest? We’re more like Mid East. But there’s no such thing as a Mid East.

Eric Hornung 6:41

Jay Clouse 6:42
Since launching in 2015, M25 has become the most active investor in the region while being led by two of the youngest fund managers in the industry and Victor and his partner Mike,

Eric Hornung 6:55
I still can’t believe three years dude,

Jay Clouse 6:57
Three years, 200 episodes one hell of a podfolio that we should really do some analysis on

Eric Hornung 7:03
Now that we seem to be very geared at you.

Jay Clouse 7:07
Is appointed it’s a point of being more of a royal way than a true we I’m talking about Mr. Math guy, Mr. plush unicorn himself, which we didn’t even talk about. For salty about this plush unicorn that you have that I don’t have.

Eric Hornung 7:22
Victor we got to get Jay plus unicorn. Or don’t actually don’t that’d be better.

Jay Clouse 7:28
The the gift of the M25. portfolio companies Eric as an honorary member. And here I am. unicorn lists

Eric Hornung 7:35
Unicorn lists.

Jay Clouse 7:36
Unless you look at our podfolio in which case soon I’m sure we will have a unicorn in that podfolio. But without further ado, let’s talk with our good friend and advocate and Victor Gutwein. We’ll get to that interview right after this.

Eric Hornung 7:49
I hate that we’ve demonized scheduling links Jay.

Jay Clouse 7:52
Scheduling links are actually one of my favorite things. I love the ease of someone saying here’s where you can book a time with me. And then I can choose when it’s best for me too.

Eric Hornung 8:00
Whenever I get an outreach and someone says what time looks good for you. I asked them, hey, do you have a scheduling tool? And you know what scheduling tool I wish they had?

Jay Clouse 8:09
Which one is that?

Eric Hornung 8:09
It’s a new scheduling tool called SavvyCal. SavvyCal makes it easy for both parties to find the best time to meet

Jay Clouse 8:16
SavvyCal makes the scheduling process even more savvy than any other scheduling tool that I’ve seen. And I mean that it makes it so easy to personalize your link. You can say hey, this is a meeting time for Jay and Eric. And it just looks so professional, so sophisticated.

Eric Hornung 8:33
So much so that we’re going to be using it for Upside going forward, and maybe even rolling it out to the Upside network.

Jay Clouse 8:39
You can use SavvyCal as well. You can sign up for a free account at that’s And when you’re ready to upgrade to a paid plan, you can use the promo code Upside for a free month.

Victor Gutwein 9:01
Thanks for having me guys. I am from Indiana, originally born in a small town called Rensselaer and then we moved to West Lafayette from generational farmers to entrepreneurial businessmen. I actually my first startup was a vending machine business where I had those small 25 cent bubblegum machines. And I put them around town when I was in middle school to generate money while I was at swim practice or school. I just wanted to earn earn a living really save money for college at a young age and when and do some other businesses like landscaping company in college or in high school and in college. I started a scooter company, which was to get around campus faster I bought a scooter and I started selling them around to people these were kick scooters like adult sized kick scooters. It was ahead of the time for when people were actually thinking that scooters are cool. I remember The Boosted Board, comm Boosted Board came out, I thought I said, Hey, we can put that on a scooter. But I was not nearly as capable or skilled. And me, my co founder, really just had it as almost like a hobby in college while we were getting other schools on. And, you know, I really enjoyed that experience, though. They got me kind of rubbing shoulders with people that were doing more tech related startups like apps. And I wanted to, you know, like, learn more about that. One of the things we did was we were on the founding board of a student run venture fund at the University of Chicago, where they gave us like 100, or $200,000 To start off with, and we were making very small like $1,000, dorm room investments, basically, but modeled after venture capital funds. And I thought this was very interesting. I did not know the venture capital was even a career option. But this was my first exposure to it. And I’m, I thought, Hey, I gotta try this. And so after that, I started to think about venture capital, how to get into it, didn’t know any path into it coming out of undergrad. And so I went, and I was going a couple years in the corporate world, try to get some just just from experience. I was in corporate strategy first at Claire’s the girls jewelry store, which is a really fun fact. I had a blast there. That was a tough time because they were all mall based. And their model was basically give your daughter $25. While you go to JC Penney, you hang on to Claire’s. And that didn’t work in the Age of e commerce and with mall traffic claim. So we were iterating trade iterate fast. After Claire that went to Walgreens on the e commerce side off on the Strategy Team really enjoyed that. I felt like I got my like some some basic building blocks of business experience. But I knew it wasn’t going to be in the corporate world for very long I had this, like I said, history of kind of generational entrepreneurship, as well as that passion to get into venture capital. So in 2015, I convinced my friends and family to give me $1 million to launch fund one. In hindsight, I should have called it been zero was like a beta fund, but fund one and I quit Walgreens in May of 2015. And started investing full time into you know, companies in the Midwest. I’m sure we’ll get into that strategy.

Eric Hornung 12:27
Talk to me a little bit about this generational entrepreneurship. How, how far back does that go? Like? How rooted and seated was that in you as a kid growing up?

Victor Gutwein 12:37
Yeah. So I say they were farmers, but you look at my family, and they’re obviously all over Indiana, they have started so many businesses, and they came over in the early 1900s. All these sons that had other signs in there, lots and lots of good ones in Indiana, and many of them like so, you know, they had a they had a mill, they had a seed company, they had farms, my dad started a grain elevator business. And then you know, now there’s you go across, there’s a popcorn company, a lot of people know that field, they have some advertisements. So that’s just something I was completely surrounded by. And my dad was always pushing me to, like, test out, you know, business like and to kind of learn about learn about how businesses operate. When I was starting my vending machine business in middle school, he was the one that said, well, you need to track what you’re putting in these machines, what’s popular, you need to track your margins and your cost of goods sold, and making sure that you’re not giving away too much or too little for every 25 cents that you like, so he was like, and I’m like, Okay, great. He also told me don’t eat all of your profits, which was, you know, it’s been patient, I have a pretty strong sweet too. But, you know, that was just some some really basic concepts He told me to, you know, I go in to all these different stores around town, hair cutters and banks. And if I get 10 nose in a row, then I would just not want to go I’m like, I don’t want to go ask for a machine and he be encouraging me like, gotta go ask again, like, you know, we got that that machine is not going to generate money in our garage. You got to go go out there again. So it was really like some of the maybe some of the practices that were instilled in me.

Jay Clouse 14:23
How did you find this opportunity at the University of Chicago to be on the venture fund? If you weren’t familiar with VC before? I’ve heard about this model in a couple of places. I think we talked about it in Austin, Texas, as well with a guest on the show. They had something similar, and it sounds like an incredible experience. But how did you even find that that was something available to you?

Victor Gutwein 14:42
That’s kind of funny, it almost came to me I thought like you Chicago, everybody. I was an econ major, and everybody’s either doing consulting or banking, and there’s all these clubs you can do that you can join. And I wasn’t really that interested in any of them. And I was known as The person that had launched we called it the scooter versity, the scooter startup. And I was known as that person that launched that. And it was showing a lot of interest in entrepreneurship. And that kind of allowed me like I was literally asked, hey, we’re going to get started, do you want to be part of the founding board? Or that’s going to be involved? Like, yes, that sounds really cool. You know, working with other founders, backing other founders member backing is like a couple $1,000. But as these were idea stage companies, but it was really emulated, you know, was the tension, we had the advice of some VCs, that emulated of venture funds, you know, how that they would operate and make decisions to have those partner meetings and do due diligence. So that was my, how I kind of got into that.

Jay Clouse 15:46
What sticks out to you during that time as something you learned about investing, that still holds true?

Victor Gutwein 15:53
Well, I think one of the craziest things, and maybe given that context that I was surrounded by a bunch of people that said, this is how econ works. This is how banking and finance works. And then you go into venture capital, and it’s literally so subjective. You know, that’s, you look at the means that we have and be like, I think this is a great idea to see the market opportunity here. You can you can extrapolate this out, and that would be good. And you have my you know, another student, that I probably had a lot of respect for completely arguing the other other points and also having lots of data to back that up. So is it looking like a debate or like some some subjective sides of the issue it you know, there is fact, there is stuff you can point to but the earlier stage you go is always more subjective that is, and I think that was what was really interesting to me is, you know, there’s a lot you can point to, and there’s probably some that are aren’t on balance, worst ideas and work opportunities and others. But you can almost always make a case to back a company always make a case to not make a company,

Eric Hornung 16:58
It feels like today, there’s this idea out there that to get into VC, one of the ways to get there is to go get some experience like you that you said you joined a corporate at Claire’s and at Walgreens to get some experience. But it feels like the common advice today is more go join a high growth startup. And that will get you into VC. As you’re thinking about your decision to go into a startup versus go into corporate to get experience. How do you reflect back on that? Would you have done it differently? Or do you like the way that you took it? And would you advise others do the same?

Victor Gutwein 17:34
Yeah, that’s the one of the problems with venture capital is it’s not like there’s that clear path to get into it? Because if you I was gonna do consulting, it was exactly you do these case studies you practice and there’s a season where you’re going to interview with a whole bunch of consulting firms that come to your campus, like that’s exactly how it’s done. How can you invest in making a similar process? If you’re going to do venture capital, there’s literally no way to go? I didn’t, I wasn’t as familiar back then, with the concept of joining a startup, as I’ve been an option to get into venture capital. I didn’t know there were there was any route, I didn’t know what my path would look like to get into that I just knew, it basically wasn’t an option is what it felt like. And I pursued it Mike was, you know, being on the strategy teams of these companies working in the kind of consumer space. I mean, that was pretty interesting to me, represents me, it was interesting, that was going to give me some broad skills that and you know, I didn’t think it was too option narrowing. Like I didn’t think it was gonna remove a lot of options on the table. But you know, I also thought about going into consulting instead. I mean, I didn’t actually consider working at a startup other than I did consider pushing full time on scooter versity. And was kind of just, I don’t think we I just don’t think we were that innovate. I don’t think we had the skill set and the kind of the right model, as what you saw about five years later with like bird and lime taking off. So I did not back my own.

Jay Clouse 19:04
I want to talk about fund one slash fund to zero, somebody listening to this, who says, I want to get into VC and I would love to start with my own small fund like this. Looking back, what advice would you give them if they wanted to start with their own funds zero about the size?

Victor Gutwein 19:18
I actually have a decent number of people actually asking me this on a semi regular basis. Because, you know, they see that I started with a little bit and now we have been open three. And I think one of the things is I actually lucked into a really good market timing with when I started M25. I had this hunch I had been doing this research, I’ve been seeing what was out there that the Midwest was going to be this big opportunity that it was currently almost like an arbitrage situation like almost like a Why aren’t there more people doing risky early stage investments. And I think there were some good, you know, reasons why there wasn’t but That gave me a huge step up as somebody that basically had no venture experience, and had a tiny fund without being able to say, Oh, I was at Groupon, or Well, I was a VC at this firm before or, like any sort of, like, I have done this, before I had none of that I had, I’ve done nothing before, but I’m going to work hard, and like, invest in your company try to help you out. And just hustle and network and whatever, like, everybody can say that, right. So that was what I was doing. That was my promise. And that actually, I was still able to, to find, you know, to kind of move the ball forward within M25. I don’t know, if I if Victor, St. Victor, starting right now was trying to do that, that would not be enough of an edge, you’d have to have something else at this point in time.

Jay Clouse 20:46
What changed?

Victor Gutwein 20:47
The markets when we’re saturated in the Midwest and competitive, both from funds based here, but also funds from the valley investing here. And in 2015, when we started, I think you could get into almost all opportunities just by being non value negative capital. Now, so I was at first all I was was value neutral capital, right, with the promise of trying to be a little helpful here, now, I would argue, are very value add, and even, we still can’t get into all of the best deals, you know, it’s it’s very, it can be very competitive. And if you’re just capital right now in the Midwest, which will be like me starting off right now, that’s like, not going to be enough to get into most of the highest quality deals,

Jay Clouse 21:36
Zoom into that and tell me what the value negative capital was like in the 2010s.

Victor Gutwein 21:45
Oh, my gosh, I have seen so many examples of bad behavior. But let’s just say the average at the table was comfortable capital of firms that maybe stemmed from more of a private equity mindset. And that we’re looking for the complaint was, they’re looking for series A metrics at seed prices, you know, you hear that a lot, or they’re looking for safe outcomes. So companies that maybe they’ve only been growing 50% year over year, but now they’re at two, 3 million ARR, they can buy in at 10 million pre something like, that looks like a very small stage growth, equity, private equity. And also, those firms tend to be run by people that had this had been successful in something in almost had been there done that mindset, where like, their involvement was why you’re going to be successful. That was kind of the I don’t know, if that was necessarily value negative, that might have been more value neutral capital value negative was like sharky family offices with like, crazy non market terms, value negative capital would be investing as a small Angel check, and being very hard to work with, invest in a convertible note, and then expecting to be able to call your note and at the maturity date, you know, trying to say, oh, I’ll invest 20, I’ve seen this on this $25,000. And then I need you to sign me for $5,000 a month is your part time CFO, or, which is like okay, or I’ll invest. But I also need some advisory shares for all the value I’m going to add. And they end up getting like 5% advisory shares or something ridiculous. That’s value negative, you know, that’s actively harming the business for lots of different reasons. And that still exists today. We push them out of the best view, we make sure they’re not like that with that. But, you know, it still does exist. But it’s, I think it’s going away. Hopefully.

Jay Clouse 23:51
It sounds like a lot of this change has come from institutional firms that have come into the region or sprouted up from the region that are a little bit different, more sophisticated. Now. How have you seen Angel and Angel group activity change over that same period of time? Is that getting better or different? Are they coming from outside?

Victor Gutwein 24:10
Well, I think those are, in some ways I’ve seen, you know, two different things with angels and Angel groups angels have, because there’s been access and people that have made money in tech. Whereas before, like even in 2015, we had some great exits, you know, like ExactTarget, and Groupon and Grubhub and some things in the Midwest, but like, there was very little people that were recycling Angel capital, to most people that were rich angels had made their money on traditional businesses, agriculture, real estate, something like that. They’re not going to learn how to roll the dice on a tech startup or if they do, they’re going to want it to be pretty far along kind of have a growth equity mindset. Now we have some super angels across the region that have made money on a tech company exit whether they invested or part of it. And we are seeing more super Angel activity. It’s really helpful writing 50 100k checks or more. I love that. And there’s not enough. There’s nowhere near what, what happens on the coast still. But that can be really helpful for founders and that kind of thing outcompete us. Sometimes we like to move very quickly. It’s, you know, that’s something that keeps us on our toes, which I think is a, I’m a big proponent of more competition is healthy and makes us even better. The angel groups have almost been notorious for being really bad forever. There’s some great examples of angel groups that aren’t, they actually work really well, they’ve almost federalized in a way, in a sense of like having a lot more central control, and like, can commit and like move, can whip their members into shape to actually invest quickly, and significant amounts of money and do it all in one LLC, and all these types of best practices. But a lot of angel groups were like the Country Club, and really investing in a kind of having very high expectations, very onerous processes for founders, when I was charging the money to present or something really bad. And I don’t know how much that’s improved. Other than that, I do know a few Angel groups that have really pushed things for the better. But those are almost you almost there started looking online venture funds. You know, at that point.

Eric Hornung 26:17
You mentioned this concept of the best deals, I think, use that phrase a few times, who determines what the best deals in the region are?

Victor Gutwein 26:26
Well, Victor Gutwein, and Micah Asem are if they put their stamp of approval, so that’s my partner. For those listening. Mike is my partner. No, we the best deals. Obviously, as I talked about before, it’s very subjective, we would argue a best deal is something just on a surface level, you can tell about thats it because there’s a lot of money that wants in on it. It’s oversubscribed, has great. It has brand name, capital, trying to invest. These are what the market would say are the best deals, I’m not necessarily saying those are always what I think is the best deals. But those are what the market would say, would be the best deals. Those 10 is basically founders that have a lot of choice in the capital they can bring on. And it’s usually coming from a founder that has like a really well known and well regarded track record reputation within the community. A lot of times they have sold a business successfully or been part of a of a really rapid rise of the company. Sometimes it’s for other reasons, like maybe the company is just they’re in the right market the right time, and they’re growing really fast could be regardless of the founders experience. Those companies, you know, they get they get bid out fast for you know, they they are oversubscribed, people want to invest in people want to back then, and they have their choice of the best capital. So, at that point, that becomes like a, you know, the best capital is trying to find the best founders and vice versa. So we’re trying to be the best capital, no situation.

Eric Hornung 28:02
Some of your original thesis was around this idea of an arbitrage opportunity. I’m gonna make an assumption here that the best deals have less of an arbitrage opportunity, because there’s more capital chasing it. How much of your current view of the landscape is rooted in that? Let’s find the best deals versus let’s find the arbitrage opportunities?

Victor Gutwein 28:23
Well, I think what has become is part of the original arbitrage was just like, there’s, like, these are undersubscribed rounds that are high quality, or they are just, they just they just don’t have access, they don’t have access to capital. Most of the capital that’s out there in the world isn’t willing to invest in Ohio or Iowa or St. Louis or wherever. And so that was the reason why somebody that they know name could invest in great companies still in M25 funds one, you know, now, I think overseen is we try to find our edge our arbitrage as is an information and reputation edge and sourcing opportunities, often before most other funds, especially coastal funds, can even have access to it and then being able to win with a huge footprint of founders, VCs, accelerators, you know, service providers podcasters that rave about us, hopefully. I mean, Jay always is talking trash. I know.

Jay Clouse 29:35
Well I don’t have a unicorn. I don’t have a plush unicorn on my shoulder like Eric does.

Victor Gutwein 29:39
That was my biggest mistake. You got to watch so many deals because I did not give Jay a plus unicorn.

Jay Clouse 29:46
We’ll talk to me about fund one and this million dollars that you have and how you decided how you’re going to spend that initially like How did you decide? Okay, this is going to be x number of checks versus y number of checks.

Victor Gutwein 29:59
Yeah. So this goes back. Another thing that you can still see in our current model that we thought from the very beginning, harkens back a little bit to my you Chicago economics route, which is, we can’t necessarily guarantee that we’re going to be able to pick the best company. We’re at the earliest any of these companies, there’s not a lot to evaluate, relative to later stage companies. So I’ve always had this philosophy that we need to ensure we capture outliers in this power law dynamic that is early stage venture capital, by investing in a lot a relatively a lot of companies. Now, we have not taken to the extreme, there are some firms that have hundreds and hundreds of companies per portfolio. But we wanted to prove out that we could do more than is typical in a seed fund. So we need to kind of basically prove we can invest in 20 companies a year, it was kind of the initial model so that you take that fun one, that’s the fund one we did. And we wanted to show a little bit of a follow on strategy to so we actually carved out like 700k, a little over 100k to do 21 deals, they said roughly 20, so we end up doing 21. And that was like a $35,000 check, I think on average, we reserve the remains or follow on investments, that is tweaked a little bit funded for fun. But the core concept of doing a lot of the earliest stage is still very strong, because we are just we don’t want to, even though we think we can pick the companies, you know, we’ll evaluate 150 companies and do one deal. We think we can pick good companies, we just don’t want to rely on that alone. So we want to have a broad enough portfolio. And I’ve got, you know, my risk, I did a whole bunch of Monte Carlo simulations, modeling out in, you know, an Excel of all of the kind of likely outcomes, and seen how likely we are to return the fund how likely we are to hit a 3x return, you know, kind of all the different the different goals that a fund would have. And, you know, ironically, you can be a mean return, but be top court file or even top def file. And that’s because the mean is actually way higher than the median fund. So most funds are way below the mean. And I’m like, Oh, I can get the mean, we would be doing pretty good. So that was kind of my mindset. So

Jay Clouse 32:26
if you’re investing in more companies than the typical fund of your size, are you seeing that same multiple in like the number of companies you’d look at? Like, basically, are you multiplying the number of companies you see to make that number investments? Are you just investing in a higher proportion of the companies you see?

Victor Gutwein 32:43
Yeah, I think at the beginning, we’ve definitely was a higher proportion, because we didn’t have good deal flow built out. Now. You know, I think doing a lot of deals as we get more access to deals and more deal flow. People come to me and say, Oh, you’ve already I’m sure you’ve already seen this deal. You know, I you know, you see everything first. And we have a we have a reputation for clo deals, I actually try to downplay that, because I don’t want people to assume that I’ve seen everything because then I won’t have somebody may won’t share it, right. So it’s this kind of a little bit of a catch 22. But we see between 150 to 200 deals a month, we do usually one to two deals a month. So it’s about 1%. I think that’s typical for venture capital. But we also don’t have as narrow of a thesis. So it does allow us to do we can do a consumer DTC deal over here we go baby safety over here, we can do a FinTech or insure tech investment. And that’s all in the same portfolio. You know, we’re more generalist than some firms that are more and more focused. So that allows us to maybe pick up on more deals as well.

Eric Hornung 33:50
You mentioned before reputation as a competitive advantage when you’re saying no to 99% of people. Obviously, the people that I’ve talked to that are in the 1%, the 10 or so companies we’ve had on the podcast that I’ve been in, funded by M25. Have nothing but great things to say about you. How do you think about maintaining reputation on the nose?

Victor Gutwein 34:10
We have everybody sign a non disparagement that would be hilariously poor way to try to you know, we we think about this a lot. Because Yeah, the vast majority of interactions with people in the marketplace are saying no. And you can just like you can just be like, well, we got to be nice. It’s like that’s, you know, that’s not enough. We actually, internally, every year, we will go through our path process of how we pass on deal and passing you’re never going to come across great on a path. But you know, that like saying of like, well, I don’t need to outrun the bear I can get out when the person next to the bear. We’re just trying to be better than everybody else in the industry when it comes to transparency and communication. And treating a founder, like a human, like, the founder knows the pitch, and they’re gonna get pulled out, I know, let’s just be one of the best interactions of the past, right? Let’s just be, you know, hey, here’s what we said, we’re not going to first of all, we have we tried to outline on our website, even before you reach out on our website is pretty transparent website, we get a feedback a lot, then we say, you know, hey, it’s not going to be a fit for XYZ, or we have that first call. And we only escalate things like we’re very intentionally or escalate things in our process. And not like, we don’t want to spend time on deals we’re not going to do so when we don’t when the founder doesn’t want to spend time pitching VCs and aren’t going to invest in the company. So we’re trying to move forward the highest probability deals, and then turn away as quickly and as politely as possible, the vast majority of deals. So we practice sending past emails to check this practice reasons, and why we’re passing on companies. You know, obviously, if it gets really far along, and we end up saying, No, that’s a more intricate process of like, hey, with the conversation, or spend a little bit more time with talking through why we’re not going to move forward with investment, because at that point, we’ve taken a decent amount of time from the founder. So you know, that we just, we just were trying to be really intentional, I think and that intentionality is seen. Of course, some people don’t like us, you know, and I can only do so much. But we care, I think it’s I think it comes across that we really care. And we can empathize with you. We’re not, you know, on a different level.

Eric Hornung 36:38
What do you mean, you practice sending pass emails?

Victor Gutwein 36:41
Yeah, we run a what I think we like chiefly named it internally, like passing one on one or something like that, you know, where we will have like, Hey, here’s what we’re gonna do. here’s, here’s some, here’s some guidelines around passim. And here’s what we need to say, here’s what we don’t say, here’s what when to share what went to offer, what when to do what else, let’s have some scenarios that you pass to me, like everybody goes and passes, you know, one on one, or he goes want one on passes to Mike just we’re trying to keep that consistent of how we all want to attend from the top Mike and I would want to treat boundaries, we want to make sure that all of our whole team is treating founders how we would want them to treat. And I think like, that’s just especially we do that as long as if we onboard in an intern or, you know, a temporary part time associate, then that’s what you know what we’ll do that as well to make sure that message is consistent. Because like I said, it’s actually like, most of the interaction with most of our time is probably spent on founders they’ve invested in co investors working with frequently that type of stuff. But most of our quantity of interactions is this external, large amount of people that are pitching and that we’re interacting with. So we really care about, you know, how that’s perceived and how we’re interacting with those founders.

Jay Clouse 37:58
Now, you’ve been doing this for six ish years, and more people are starting to take notice of the Midwest and starting to plant their flag and say we invest in the Midwest, because it’s a great place to invest. What What have you seen change over that time? Like, what are the trends that you’re seeing now for opportunities in the Midwest, or types of companies that are coming here, and especially if you can draw some contrast between what the tropes are, what some assumptions are now versus what you’re seeing?

Victor Gutwein 38:25
So when we started, there was this dearth of capital, we’ll talk about that quite a bit. This was changing already pre COVID. And then COVID, really kicked into high gear. But the access to capital bienick, founder in the Midwest, I think is going, you know, it’s not maybe 100% to zero, but it’s going it’s like that trend line like that. And so it is kind of like we’re going to where that’s not going to be an issue. Part of it is, is because of people like us that are highly connected early stage investors that then can sync up can sync those investments into series, a capital on the coast or something or bring together a syndicate of nationwide investors, because it is still very much warm intros, but your access your hesitancy to invest in a company in Indianapolis, or Chicago or Minneapolis, is way less than it used to be as an investor base in the US. that’s changing rapidly. I think it’s kind of obvious. The other thing is, the access to talent has drastically shifted. Part of it is there’s companies that are headquartered here, they probably have an office here, and Okay, half of their customer success team is overseas. They have engineers wherever they could find them throughout the US North America International. And the remote willingness to have a remote team has shifted but also just the ability and the and employee looking for work aren’t looking for work in their town, sometimes looking for work. with people who have a cultural end goal and vision minded fit, and so that’s great. But even if you wanted to look for talent in the Midwest, that’s now here, like, we have so many people that are spinning out of companies, and getting hired from others, you know, tech company out there to say, like, you look at somebody has spent their whole life in an arbor now, and they may have gone from duo to census to blue mirror. Like, that’s their whole, you know, they have 10 years, 15 years, and that’s a very experienced person, they didn’t have to go all the way over to Facebook, or Cisco, and you know, or somewhere in SF and then come back. So you can actually find homegrown talent, that’s 10 years, 15 years, 20 years developed with basically homegrown tech software, digital companies. That’s pretty interesting, too, it’s less common, but you can actually you can build your especially your first part of your company with that talent. So I think access cap capital and access to talent have shifted drastically. That’s something that used to be the biggest reasons not to invest here. And why companies couldn’t be billion dollar companies here. And that’s just, you know, that’s basically completely going to almost going to zero.

Jay Clouse 41:11
So if those problems are gone away, what are now the new problems that you’re seeing trend lines in for companies in this region.

Victor Gutwein 41:20
I still think there’s a cultural gap of where people are settling for smaller exits, then then what would be acceptable on the coast. And as part of it, as my partner, Mike actually talks about this a lot. But the culture of allowing somebody to fail or not, is still pretty, like people that are at the point where they could sell for 20, 30, 40, 50 million, they’re going to feel like they should take that versus risk, rolling the dice, taking on that big series A or B round, and going for something that has to be 500 billion $2 billion exit. And a part of it, nobody has a lot of people what we have on a first time founders, they have a lot of people that haven’t gotten rich yet on tech, so they’re not as willing to go big or go home. But also, I think it’s this, this more conservative culture. And you can be super local famous for selling a company for 20 million bucks now, in Detroit, or in St. Louis, you are going to make the headlines of your local business journal. Everybody’s going to ask you to speak for the rest of the hairline. You can be an EIR at your local university. You can like Angel invest, it’s a good life. But you didn’t change the world. You changed your your city, you know, a little bit but not not permanently changing your city now you need to have route insurance IPO and in Columbus, you need to have governed my med you need to have you need to have Duo Security like those are those are permanently changing the tech landscape, and really the local economies of those cities. So that’s what we’re trying to push for. We want more of those to happen. Do

Eric Hornung 43:01
you think there’s room for a different source of capital to fund those more conservative minded exits?

Victor Gutwein 43:08
Well, definitely, I mean, there’s already been an explosion of staff base lending, the rates you can get on that have gone down in the past five years, so tremendously. Like it used to be 35%. Now it’s like 15, to 20%. It’s a lot easier, a lot more commoditized. And those people aren’t even pretending like they’re like, yeah, we’re we’re capital, maybe we’ll have some value. But really, like, we’re our value added, like easy, flexible capital, very founder friendly, and you can keep control your company like it’s exactly, and they can pair up with venture to I don’t think those are are mutually exclusive, it is hard to find capital that would back before you can get to that strong enough of a recurring revenue base. For companies that aren’t looking for huge outcomes. That’s always been the case. And I don’t think that’s ever necessarily going to be I think there’s a reason for that is like, if you’re if there’s not a chance to use reward, it’s really hard to risk something that’s pre revenue or very early revenue. On an early data that’s specifically looking for a lifestyle business, basically, we’re a smaller exit. But I know there are firms that, you know, like NDDC was, you know, doing that and stuff. It just hasn’t been where the vast majority of capitals interested in being deployed. There’s probably, you know, efficient market theory here would probably say there’s a reason for that but.

Eric Hornung 44:31
Look at you being you Chicago guy pulling out efficient market hypothesis.

Victor Gutwein 44:36
Which is funny cuz my whole premise of M25 and actually was, it’s actually a little inefficient. But I said that because there’s there’s some significant transaction costs for doing deals here at the earliest stages. So I mean, you know, it’s inefficient, but I can have an edge that would make sense for me because I’m here.

Eric Hornung 44:52
You talked a little bit about how capital is traveling better from the coasts, it’s coming in, it’s going into the best deals. When you think about M25 thesis going forward into the fund 4, 5, 6, 7? Can you stay geographically focused? Or do you need to expand beyond the Midwest?

Victor Gutwein 45:09
Talk about this a lot. Like internally, we’re always wondering, what is it even during COVID? We had questions like, What does geography mean? And we have founders that are like, well, I’m currently at my parents in Columbus, but I live in New York, kind of, not now, not the last six months, but then we just have these issues are like, well, where are the company days? Like, where? What does it mean? And we’ve been among the most strict when it comes to our definition of geography, because we think it’s a huge advantage. We think that, you know, yes, I could invest in a great company in Denver, I think a great investment, a great company, in Nashville, or Toronto, but where am I always going to have the best visibility to, I’m always going to in the market, that I’ve already done four or five deals and that I’m, I know, all the founders, I know, all of the opportunities I’m visiting regularly, physically, that has been a core part of our thesis. And also just, you know, we win deals because of, yeah, we’re not just some fly in fly out, we’re, we’re literally, you know, we’ve, we’ve committed to invest for the past six years, and Cincinnati, and Cleveland and Pittsburgh. So expanding, that would be very intentional. If we did right now, we haven’t felt a need. Because we’ve, we are sourcing so many great opportunities here. If we felt like we couldn’t deploy the capital, into amazing world class opportunities, or that we were somehow losing, like earnest, like our edge wasn’t as valuable. And we had a different edge that was more transportable. But I can see I can see us making definitely considering the future, especially with markets that have some similarities. They’re not very, very over competitive. And our story can resonate, we can, you know, we can have maybe have some pre existing relationships, I can see that for sure. I just right now, it’s been so helpful to be so focused, it’s been a huge, it’s been a huge competitive advantage.

Eric Hornung 47:12
So if we assume that you stay focused and keep that advantage, do you see yourself ever moving upstream to leverage that same advantage in those same geographies with a higher chance of winning bigger, more growth? focused rounds?

Victor Gutwein 47:27
Yeah, I mean, right now, we are known we are we say, we really won’t even do a deal over 10 million posts, which is actually kind of hard sometimes in how crazy recently the environment has been. It’s just pushed us sometimes to go even earlier, you know. But that’s been a guideline, because we also basically the same, the same thing with geography, we get invited the plenty of series a round Series B round, those are not the best series A and B round. I know that because then six months later, those, you know, sometimes I see six months, four months later that company’s under, you know, we want to be always investing in the best in class of a certain wherever our slice is, I think there’s definitely an opportunity. Maybe, firstly, you know, first you lean into the companies, you already know, you deploy more money. Right now, our check our fund size hasn’t demanded that it hasn’t required us that, hey, we in order to deploy our whole fund, we need to do later stages. I do think that the highest IRR highest opportunity is in the earliest stages. And that we found a successful way to mitigate the risk of early stages with a highly diversified portfolio. So that’s that has been our focus. But I’m sure you know that we’ll have deploy further down the line. If we stay in this geography net bigger funds, then that’s gonna that’s basically going to have to happen.

Jay Clouse 48:48
Sitting here in Columbus, we talked about this a little bit before we got on the mics from where I’m sitting, I feel like I don’t see as many early stage startups starting here in Columbus as I used to, or it seemed like there was like a wave of them. And I haven’t seen a new wave of them. And I may be out of touch. And you can tell me no, that’s actually happening in Columbus, we see it all the time. But if I’m not out of touch, are you seeing something similar around the region? Or is there a pretty good wellspring of new fundable companies?

Victor Gutwein 49:17
I don’t know how much we can say that. It’s like a trend or just like a Do we have enough of a an in, in this data set to really say that’s causal or something or just you know, the random is because I haven’t done a deal in Columbus in over two years. But we did. We did three deals in Ann Arbor last year. So I think part of it is like sometimes there’s ways I just, I think I’m like, within like 15 months, I did five my first five deals in Cincinnati. Something like 2017 and then I didn’t do a deal another DLT study until 2019. And you know, it just kind of so on on a city by city basis. It’s hard I hate to look too closely at that, across the region, though we’re not seeing, we’re not seeing like that, that entrepreneurship or founding of companies has gone down. I think it like slowed down in 2020, from the rating standpoint, but I think a lot of people, you know, all these companies I’m talking to now, then in March, I decided to start my company, right in the pandemic, well, I can, like I was working on it, I was working on it. And then I went full time, you know, wasn’t maybe I got, maybe I got let go. But maybe I just decided that this is the opportunity to work on something. And now they’re raising, you know, so we’re actually we’re seeing plenty of deals raised right now. And it’s I haven’t seen many in Columbus, specifically, Jay. But I mean, it does kind of just go through different cycles. One point, Columbus was the hottest market for us. And, you know, like 2018, or something, and we’re seeing so many opportunities there.

Jay Clouse 50:51
And maybe it’s a function of you said, like, there is now homegrown or local talent in these areas. But that doesn’t necessarily mean that that talent is comfortable taking the risk of starting a company, like maybe that talent is accumulating in some of these companies that did spring up two years ago, that’s now trying to hire all the best people, and they’re tied up. And that’s why it feels cyclical. We talked about the metaphorical flywheel on this show a lot. And I haven’t we haven’t, like really seen a definitive example of it playing out but like, Is it too early to see an ecosystem flywheel

Victor Gutwein 51:24
And in other ecosystems, I see it much more explicitly. And Barbara just mentioned, the duo ex has lots of talent starting lots of different companies, not just in cybersecurity, but many of them in cybersecurity, from the duo exit exact target was several years before, but that was one that spun up, you know, yeah, well, technically has a lot of children, because of the high alpha studio, which specifically just created lots of startups, but also other people that weren’t high operating, like pacsafe had a lot of the talent coming from coming from exacttarget. And so that’s, you know, I, it’s very explicit in other ecosystems. I haven’t, I’ve seen a few companies obviously comes to cover my meds, you know, a few years before, like root IP owed. And that talent has gone on to create companies like script drop, and he’s already health. And so, you know, there’s there’s a few, you know, coming out, but I haven’t seen it quite as, as frequent or dramatic, maybe in other ecosystems.

Eric Hornung 52:28
How many early stage venture capital firms do you think the Midwest could support today?

Victor Gutwein 52:34
Yeah, I mean, it depends where you draw the line, early stage, like, would you call it drive capital early stage, because to me, they’re later, often, but in the scheme of things, they are probably considered, you know, they do a lot of series A, it’s kind of maybe their bread and butter. But that’s the only billion dollar a u m, funds in the Midwest, and by a wide margin. So if you look at a lot of the funds around the Midwest, they’re going to have an issue in the same set, as it gets more competitive with postal dollars, none of them can compete on dollars on like leading around, or valuations or capital deployed, because they’re all 100 million dollar funds or smaller, basically. And so I think a lot more money could go into these funds, or, part of it is I have, I’ve always had a thesis that, especially as we go back into more physical age, it does really pay to be locally located. And when when sourcing the earliest stage of investment. And it’s hard to be local, when your ecosystem is just Columbus or even, or even just Ohio, if not producing quite enough fields. Although there are funds that are specifically focused on I have a lot of time to go, then you will more later stage or maybe leaving broader to the life sciences and you know, digital, but I think that, you know, it’s it, there’s there’s plenty of opportunities, I think it’s about 10% of us venture deals are here, you could easily have more fun, or more dollars in the existing funds here and it would still be there’d be plenty of investment to go around. I think right now, because it’s not the case. We’re seeing lots of our deals, even from as a pre seed and seed round, getting money from coastal firms, even like not even top maybe not top top names, ghosal firms, but just coastal firms that seize the opportunity and realize, Hey, I can write a million whereas the fund in Chicago can only write 500k. So I can get my ownership and offer twice the price basically, I’m gonna win. Like that’s that’s the mindset. Once again, I do you think the market will will correct that or, you know, will that no or there’ll be other opportunities and we’re going to have more posts on money sweeping and maybe we’ll set up off of this here like like mucker did kind of as you He just did the interview. So we’re seeing that to coastal VC spending more time, some of which are relocating permanently here.

Eric Hornung 55:07
So one of the unique things about M25 is this summit that you put on, I think it gets back to those two competitive advantages you talked about as well with information and reputation. Can you kind of talk about what that is how that came about? And maybe the idea behind it and what it’s become?

Victor Gutwein 55:23
Yeah. So this started by just seeing that we have a lot of founders, but they’re all spread out. And we have the disadvantage in the Midwest is that the ecosystem is across a wide geographic area. They’re not as connected to each other. So we thought, how do we, how do we start to bridge some of that gap, we invited all of our founders up to Chicago, for the first summit in 2017. And it was literally we had, like, you know, some beers, maybe a panel, and just from social time, like, and it was probably like, 30 founders at the time. And we saw a lot of really magical things happen out of that, you know, relationships, people helping each other out, and learning from each other. So then we started to build that out. And one thing that happened was, we started to invite VCs, to specific parts of the summit. And that has grown to over now, the last time what we did in person was right before the pandemic hit. And our next one will be in September. So we’re excited to bring it back to the last one we did in person was over 200 VCs. And from all over the US and Canada, who is all of North America, some of the top firms, you know, Excel, NEA Bessemer, a lot of those firms have come as well as a lot of the regional firms that are trying to Swarthmore the OCR to, and then I think we had 60 or 70 founders of ours, across the portfolio come, we have over 501 on one matches that were double opt in. So VC, the founder, that meant we had series B’s raised for meetings here, we’ve had even seed round. So maybe we did the pre seed seed, we’ve had a lot of capital driven into our company. And it’s not, it’s very intentional matchmaking, people will have to select to do it. And then we’ve had some great outcomes from just the founder relationships that we’ll do a whole day. Basically, it’s just socialization, founder roundtables, some founders speaking about certain things, how to hire this, you know, and after, after raising your series A, how to hire a bunch of people, after it maybe like the best way to increase your, you know, your, your SEO, and a selling a consumer product, right? Like, just to the consumer founders or something like that. Like, that’s what we put together. And this is, this has caused a lot to happen. Now it’s become so it’s become the biggest event in the in the Midwest for VCs. And it’s something that we’ve actually even had founders take our capital, just because they want to be able to attend this event, because it’s only for our founders. And that’s something that we get excited about ways to continue to expand that and make them more powerful.

Jay Clouse 58:05
Well, Victor, this is great to finally have you on the show, you’ve been one of our biggest advocates, so I can only imagine how much you advocate for people that have your money on their balance sheet. So thank you. If people want to learn more about you and M25 after the show, where should they go?

Victor Gutwein 58:20
Definitely check out on Twitter, on LinkedIn. You can also email, and we usually are pretty good at getting responses back so try to try to value your time as much as you value ours.

Jay Clouse 58:37
Eric, do you know what I love to have for breakfast?

Eric Hornung 58:40
I big-ol bowl of Jay O’s. I just imagine you have a box of cereal with your face on it.

Jay Clouse 58:45
I was going to say reviews on Apple podcast. 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 59:00
Sometimes I read my reviews right before I go to bed just so I can dream good dreams at night.

Jay Clouse 59:05
If you want to help me start the day right and help myself 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 59:30
All right, Jay, we just spoke with Victor Gutwein of M25. Little little easter egg here for the listeners a little behind the scenes. I don’t think I use easter egg appropriately for him about to say we have been contemplating when to have Victor on the podcast for probably about three years now.

Jay Clouse 59:48
And he just kept telling us No, you wouldn’t do it.

Eric Hornung 59:50
That’s what it was. Yes. He told us No. It was not us saying no to him. No. We want to have a very special episode where Victor came on where we were celebrating something three years. As a huge landmark in the podcasting space, most podcasts, actually like 96% of podcasts never make it to 200 episodes never make it to 150 episodes, which is usually the three year mark. And we wanted to have him on for something that was, you know, an arbitrary number of episodes, of course, in an arbitrary number of years, but something that were meaningful. So I’m happy, I’m happy we had him on, I’m happy to hear that this conversation.

Jay Clouse 1:00:24
I think M25 really came into my radar first in episode four or round episode four, when we released our script job episode, Nick Potts, and he talked about how despite being an earlier VC and a smaller fund, the team at M25 really went above and beyond and worked our butts off for him. And then we heard similar sentiment from Seth Miller of Rapjack.

Eric Hornung 1:00:43
I feel like I hear that sentiment all the time. Even with companies that we don’t talk to on the podcast, the M25’s ability to engender itself to founders is going to be a long term competitive advantage. They’re building a brand of advocates at scale,

Jay Clouse 1:01:03
it’s really easy to say you’re a value add investor, it’s really hard to build a genuine reputation as being a value investor with a portfolio of companies. And I don’t think there’s a firm doing a better job M25.

Eric Hornung 1:01:17
I was interested to hear that while they contemplate the future in terms of scaling beyond the Midwest geography and scaling upstream in the venture world, which would be going to kind of your series A B C’s. There’s no real firm plans to do that. It didn’t sound like there’s there’s ideas and constructs and concepts. But I would have thought, and this is me that there is more of a master plan.

Jay Clouse 1:01:44
I don’t know, I think that, you know, M25 innovated on how they were deploying capital in the beginning. And that has put them in a unique position to either continue to do that in the same way, or to continue to innovate and do things differently. And maybe they just haven’t made that decision in total, yet.

Eric Hornung 1:02:03
It feels like they’re currently investing in increasing their optionality and simultaneously increasing the strength of their reputation.

Jay Clouse 1:02:14
We did say in the intro that M25, historically has taken a very strong stance on what the Midwest is. But as we saw in 2020, what does it mean to be headquartered somewhere when you have a distributed and remote team? What does it mean to be in the Midwest versus not for those types of companies that are building teams differently and working differently?

Eric Hornung 1:02:34
All fun questions that maybe we should have a remote focused VC on here to counteract the idea of geography first.

Jay Clouse 1:02:44
I’m sitting here looking at M25’s portfolio? How many companies do you think M25 has invested in since 2015?

Eric Hornung 1:02:54
I’ll go with 90.

Jay Clouse 1:02:56
107 listed on the page. That’s pretty close. That is a lot of companies, if you’re investing in 107 companies, and that is a small percentage of the pitches that you see, we’re talking about a lot of pitch meetings.

Eric Hornung 1:03:13
He said, What 100 to 200, or something like that every month, and they only do about one investment a month. So that’s a lot of knows. But it’s also they see a lot. It’s very hard for me to make introductions to Victor, although I tried to. And we do, because I think I sent him a lot of stuff. And he’s like, Oh, yeah, that’s great. We saw it, we’re excited about it. Or yet we thought, or when I talked to founders, they’ve already said something to them. So the brand, the investment in reputation and brand, I think is paying off and it’s it’s going to be a compounder for M25. 10 years from now, that brand I think is going to be so much incredibly stronger than it already is.

Jay Clouse 1:03:54
That’s the model making an edge on sourcing information, having a huge footprint. We see some VCs that build scout networks. But when you invest in so many founders and have such a great reputation, those founders will probably essentially act as scouts on your behalf for free. So why not do that?

Eric Hornung 1:04:11
I love it. I love what M25 is building. If you have any thoughts on M25, their model, or anything you heard in this interview, reach out to us @upsideFM on Twitter, or If you have something a little longer via email, and we will talk to you next week.

Jay Clouse 1:04:29
That’s all for this week. Thanks for listening. We’d love to hear what you think about this episode. So tweeted at us @upsideFM or email us Hello@upside.FM and let us know. You can learn more about us and browse our entire back catalogue of and if you love our show, please leave a review on Apple podcast that goes a long way in helping us bring high quality guests to the show.

Interview Begins: 9:01
Debrief: 59:30
Victor Gutwein is the Founder and Managing Partner of M25

M25 is an early-stage venture firm based in Chicago, investing solely in tech startups headquartered in the Midwest. Since they launched in 2015, they’ve become the most active investor in the region.

They are led by two of the youngest fund managers in the industry, and they enjoy challenging traditions. They invest broadly, and our unique, analytical approach to venture investing aims to reduce the risk, while maintaining the high returns typically associated with this stage of investing. They emphasize our expansive networks, and thrive on collaboration – helping to syndicate deals, encouraging fair terms as a best practice, and prioritizing relationships.

A Kauffman Fellow (Class 22) and former leader in Hyde Park Angels, Victor founded M25 in 2015 and quickly grew it to become the most active venture firm in the Midwest.
We discuss:
  • Generational Entrepreneurship 12:27
  • Starting small with VC 19:04
  • Value Negative Capital Before 21:36
  • Angel Groups Before and Now 23:51
  • Knowing the Best Deals in the Region 26:18
  • M25’s Model 29:46
  • Maintaining Reputation 33:50
  • Trending Opportunities in the Midwest 37:58
  • Concerns in the Midwest 41:11
  • Expanding beyond the Midwest 44:52
  • Midwest on Early Stage VCs 52:28
  • M25 Summit 55:07
M25 was founded in 2015 in Chicago, Ilinois.
This episode of upside is sponsored by SPMB.
SPMB is one of the fastest-growing retained executive search firms in the country, closing hundreds of C-level searches every year.
For over 40 years, SPMB has specialized in recruiting upper management and board members to VC-funded startups everywhere from early-stage to growth stage.
They can do the same for you.
Visit to learn more.
This episode of upside is sponsored by Ethos Wealth Management.
Managing wealth with an eye toward the future demands vigilance and skill in today’s global economy. Over the years, Ethos Wealth Management has worked with clients and their other professional advisors – including attorneys and accountants – to create comprehensive wealth management plans designed to make the best use of their wealth today and help ensure its endurance for future generations.
They can do the same for you.
Visit to learn more.
This episode is sponsored by SavvyCal.
SavvyCal is the most intuitive and powerful scheduling tool on the market. In fact, we just started SavvyCal to book interviews with our guests!
You can create personalized links in seconds and even allow recipients to overlay their calendar on top of yours.
You really gotta see how this works, and you’ll wonder why it wasn’t always this easy.
Sign up to create a free account at and when you’re ready to test out a paid plan, use the code UPSIDE to get your first month free.