The Sales Hacker Podcast
The Sales Hacker Podcast

Episode · 3 years ago

14. Quick Guide to Seed Fundraising for Startups w/ Brad Svrluga

ABOUT THIS EPISODE

On episode 14 of the Sales Hacker podcast, we speak w/ Brad Svrluga Founding Partner at Primary Venture Partners about the top seed funding tips for startups.

One two one te: Three: O everybody welcome to the sales tackerpodcast. It's your host, Sam Jacobs, we've got an incredible episode. Comingup today, we've got brads for Luga WHO's, a general partner, confoundingpartner of primary ventures, one of the Best Oly Stage Investors in New York.So we're really excited about this episode. We recorded this episode on avote during the retreat with sales hacter and had some of the best folksfin the New York revenund, collective and other FE pecof sales. So hope youenjoy this interview. It was live in the middle of the Udston River. We alsowant to think our sponsor this one sponsor is air. Call Air calls thisphone system designed for the modern sales teeth. They seemlessly integrateinto your crm, eliminating data entry for your reps and providing you withgreater visibility into your teams performance through advance reporting.When it's time to scale you can add new lines and minutes and use incallcoaching to Adu Stram time for you new rap. So if you're interested in theirCalland, I've mentioned them before, but they're really grown very veryquickly, and one of the benefits is just sort of seemless implementation.It can actually happen within seconds. I know a lot of us have trouble withsort of landlines and phone systems and how long it takes to get everything upand running with air call. You can do it in seconds if you want to learn moreabout or call or you' interested, because I think the technology isreally really quite powerful dies. It air called that io forward ash saleshacker so again, that website is air called at io forward sale, sacker tosee why webere done in Bradstret, pipe crive and thousands of others trust aircall for the most critical sales conversations and then. Lastly, I wantto thank a few folks that have written in Simon Howard. S was asking about anepisode focused on the optimal cadence for SDRs. He really loved the DerekGrand Episode, so Simon were going to work on that James Dominac used to workwith me, a Cersan Leren group and he's just a nice guy that likes all of mysocial media stuff. So thank you James and then Sam Colin Rode in once anepisode on. When should you hire your first tbs, your first Ppsal, so we'regoing to be working on that as well, so Simon James and Sam thanks, so much forfor listening and for for writing in and without further ado, let's listento my interview with Brads for Luga on a boat. Thank you. Folks! Welcome backto sale, tacker Bot Day little mini saleshacker podcast we've got going onon your host Sam Jacobs, but we've got somebody really special brats for Lugo,who is the founding and general partner, a primary aventure partners, and one ofthe best and leading early stage investors in New York City Brad.Welcome! Thank you! So for those that don't know you and make that maybe afew people in this room and out there in the universe, tell us about yourselfand also tell us about the origins of the firm that you have vent started andwhat primary ventures is great, so primary bench parters is a firm that Istarted with my partner Ben Son about four years ago. Now we just closed oursecond fund and out sat last week. First was a sixty milliondollar fundthat we started investing a q one of two thousand and fifteen, and then wejust posed a hundred million dollar fund that we've made our first threeinvestments seut of so far we are a hundred percent seed investors as ourpoint ofventry, and nearly one hundred percent focused on New York City andthe EUCO system. Here we are when we set out to start the firm. It was witha recognition that there was an enormous explosion of techinovation andcompany formation going on here, and there was not yet a robust enoughfentur ecosystem here, and we thought that we could really carve out a placefor ourselves and take a leadership in the position in this market and so farthat's gone reasonably. Well. I've been a institutional seat. Investor for overfifteen years now started out with a tiny little fun that absolutelypositively never should have existed and lost a bunch of money early on with. Thank you but learned some hard lessons. You knowshutting things down, trying to selvish things and then gofounded a firm thatwas kind of the predecessor to primary...

...called Hig Peac Ventra parkers with twoother guys a little over a decade ago, and then they were in three of us werein very different lightst life stages. So I got together with band who 's asuccessful consumer. Internet entrepreneur had started a company inthe late Ns main through the bubble, survived and sold it in two thousandand eight, and then he had become a very active angel investor in New Yorkand he and I hooked up around our shared interest and kind of obes in thekinds of investors we want to be, and I coached him all the way to the darkside that about five years ago. Our approach is it compared to a lot of ourseat? Investor peers, considerably more concentrated. So we'll do seven. Eight nine deals a year. A lotof our firms in our Peer Group are doing twenty or thirty. Both areperfectly valid ways to run afirm and to make money in this business. But Ithink, but what feels been and I and what gets US ot amit every day, is likereal relationship driven partnerships with founders, incredible founders, inthe teams that they build, and you just can't do that. If you're doing thirtydeals a year and then we have been very focused as we built the firm and scalethe firm on building genuinely impactful operational resources thataddress the biggest challenges that we see with companies sas they scale fromsee to Seriesa. So the first thing we built in that world was in the talentand recruiting space. We Av two full time. People who drive team building anorganizational development with our companies and CATERDAMAS. My partner,who runs that for us, takes the model where she will at any giveen point intime, she's working with three or four of our companies on a totally embeddedbasis and spending a day a week in their offices and just Troug, taking onthe team building kind of foundational work so that the founders can it's upto the VATTERS T ts Yu as to make the choices on who comes on to their team.But we take a lot of the kind of the intelligent work of sourcing anddesigning interview processes and creating a recretting culture in anorganization and bring that Expertis inothe companies. We have a CFO whodoes similar work for kind of foundational, strategic finance, workand helps people think about models and KPIS and instituting kind of managementbi metric cultures from the early days, and then we just latch something thatwere still in the process of kind of starting the king, sout and aroad. Whatwe call market development, which would be of interest to folcus in this room-and that was a rather realization that, like most venture investors when you'relooking at a certainly abtb company, one of the things we do and a diligenceprocess, every time is try to talk to you know hypothetical would becustomers for your product and oftentimes will actually makeintroductions and want to learn by sitting as apply on the wall in thosesales efforts. As we're trying to learn about your company and frequently we'reable to make valuable introductions to companies and a diligence process. Andthere is something about o w being a VC and cold calling a CMO at a largercompany or the CIO at a big bank or something- and you know rightlyorwrongly, the fact of the matter is we have an easier time getting thosepeople on the phone than a salesperson selling. One of you know six thousandothers things that they're getting hit up with that week, bu we and everybodyelse in the industry kind of systematically den wires money to thecompanies we invest in and the investment team moves on, and we stoppedoing that Fori and we just you know this likht Boll went off for us aboutnine months ago and say well. Why can't we build a capability to continue tomake that available to our portfolio company? So we brought on a guy who hadbeen a customer sucass hand, sales guy both have nexs and dated our raycaletty to start building that capability and hopefully to startonlocking, more sales opportunities and kind of big account opportunities andgenerating market insights for the revenue leaders of our PTB companie. Sothat's in the works, but I think showing some really rreally promised.That is a an amazing overview. You've made a couple very specific decisionsthat I think would be interesting for the room to hear about. There's,probably three two of which you...

...mentioned. One is the stage which issee. The second is the city which is New York, and then the third is whatyou Havenin touched on is: Is there indto what Extentis, ther, ethematicfocus or in Industry Focus Ond? How do you think about, or are youindustriagnostic so walk through some of those decisions t at particularlythe first two, because I think they'rethey're interesting. So seeseedis that's just a personal taste thing I think. For us I mean Ben was anentrepreneur and a company builder and a company starter. I have been andoperating CEO, although not a founder, and I think for both of us there's justsomething in our guts in and our DNA, that it finds the process of going fromfive people to fifty people radically more interesting and exciting than theprocess of going from fifty to five hundred. I totally understand whydifferent people have different views on that, but the later you get in theventure business later stagewise, the more readsheats become a critical pieceof your decision making and your analysis- and I just don't find that asinteresting or as exciting were we're kind of human driven investors. As forNew York, we actually didn't start out intending to be as New York oriented aswe are. We knew we would be heavily New York bias, but then, as we started,building out more and more of the operational capabilities and and whatwe call our portfolio a pack team, we started realizing that if we builtthose things to be very gocentric, there were things that we could do withthem, that we would not be able to do if we were trying to serve as aportpolio, company in Chicago or Atlanta, or God forbid, the valley, D andFranklhat. You can't you know from here. What am I going to be this best seatinvestor for in the valley? You know you've got an adverse selection whris,certainly when you're crossing coasts like that. So so we realize that thePortulaiof TAC stup, which has become I think our most critical differentiator,was just way better executed and the way we built it init, Tay, giocetricand then there's just an enormous amount of efficiency and effectiveness.That comes out of the fact that literally we can walk from our officetwenty first street to all but two of our portfolio companies in less thanfifteen meuts, and, like that's crazy, when you know when you talk to peoplein the valley about like driving up and done unre and one and in twon eighty,you know they want to put a gun to their head. I think that's one of themost special things about this beor KICO system is, you know that doesn'tjust benefit us. It benefits all of you guys as you're, hiring and recruitingand like literally stumbling andnew, each other and copy shops give uscenmatic, focus or sector focus. I spent all my time on be to beapplication businesses, but I'm relative generalist within that world.I don't dive down into infrastructure very much, but I do I've done forhealth care. It things in the last few years, not when it gets into the kindof regulatory spaces, but certainly where healthcare is just anotherBernicole for vertical ass businesses. I've probably done more vertical Sassin the last half dozen years than anything else ban does leads all ourconsumer businesses. So anything that's a kind of confumer transaction drivenrevenue model is the stuff that he leads whatd stage. Three doesn't haveto be three actually state a few controversial points of view on themarket or you know your point of vwn SAS ty evolution assess. Are therethemes that you're investing against or ideas that you have about where theworld is moving over the next five to ten years? There's a lot. I think thatthat blockchain is long term, esential and short term like ridonculously overused and it's you know it's kind of what I was five years ago, where peopleare just like feeling compelled to put that label on things. So I don't wantto talk about es e Blockchain in o business unless it actually is likefundamental to changing the way and that how a business is operating andcreates real economic leverage O real product differentiation. I do thinkthat, while this Surdayi and machine learning stuff was ridiculously overhyped five or six years ago, machine...

...learning- at least you know if everybusiness isn't thinking about how they are aggregating data and how they areus, applying intelligence to that data to drive economic leverage in theirbusiness model or drive insights for their customers, then you're, probablymissing the boter and he're going to get siencefied by somebody. I thinkthat if you think, when I think about the kind of vertical assess universe,when you really and weve done some of this, when you kind of evaluate theindustrial economy, I doubt were even out of the third inning in terms ofapplying real automation, process. Automation, efficient drivingefficiency with the use of software through all of the industries acrossthe country- and I think some of that is we're just starting to see becauseyou know causeofe censors- is getting cheaper, cheaper and cheaper andcheaper, and so there's a whole world of things that are now. You know whenyou could put a fifty cent censor onto every peace spece of equipment in afactory, and you can get all that date into the cloud and apply intelligenceagainst it. We're just starting to unwrap a whole world of things that youknow literally two or three years ago, weren't possible. But I think one, abig piece. That's driving a lot of the part of WHYI'm so excited about some ofthese GERB olderline industries. To is that some of what drove industries tobe laggards in their adoption of new technologies? Over the last couple ofdecades is just the kind of the age of the decision makers and those universes,and so there were, you know there were places like you know: Te Comtay,selling to tech companies, okay, Yryou're, folward thinking and certainto other industries that have always been kind of tech leaders. But todayI'm forty five. I sent my first email in college. I never had a job thatdidn't have an email associated with at. I never had a job that didn't involveusing the web to do research and using you know, software as part of myeveryday life, and you know forty five year olds are increasingly making allthe big you know, plus minus or two years like all of the big decisions inmost companies are being made by people roughly ar contemporaries, and soyou've got industries that I have a dozen years ago. You know the folks whowere running them, just weren't progressive minded and now and nowwe're there and that's so there's kind of no excuses left anymore yeah. Ithink thit's really interesting New York City. So I'm sure you H A lot ofdifferent points of view. There's benefits to the Secosystem, and thenthere are disadvantages, walk us through sort of your perspective on thestate of starting a business in this brobly definementropolitan area and andthen what are the things are, what ar the gaps that we still need to thinkabout, overcoming I think for bbaby software businesses. The thing that I like to call New Yorkis the or two things I call it. One is the customer capital, the universe, theother is the domain, expertise, capital, the universe. So when you think aboutpertical SASS companies that I think are best started by people who come outof those industries, who've been operating in or selling in or or stistsor steeped in those industres. Those businesses should not be started by twokids at a stamfor business, school classroom or a Harvard business schoolclassroom. WOR Like I want to do a startup and let's get to the whiteboard with a case ofper and see what we can come up with. Those businessesshould be started by people who are kind of coming out of of industrysolving their problems and we have way wayway wayway, more industryconcentration in this market than anywhere else on the plant, and so thatis a huge, huge advantage and then there's an enormous. You know the samepoint about me being able to walk to almost all of my portfolio in fifteenminutes. I mean a bunch of you guys in this room how many of your customerscan you get to within fifteen twenty minutes walking or a subway or a citybike, or whatever I mean it's just there's nothing else like it. So thatis a monstrous advantage. We are, I mean it's certainly a war for talent,it's certainly a war for engineering talent. I think we don't. You know. IfI could snap my fingers and Change One thing I would put something in theequivalent of you know: MIT or Carrenie,...

...melon or or Spanford in this town. Wedon't have a world truly world class engineering school, that's cranking outsuffer developers, we've got good, but we don't have incredible. I thinkcornel tech has some hope of becoming more of that over time, but that's notanothernight story. That's another decade in the works yeah. I agree. Ithink there is the durncs of Engineering Talen and far there's, butthere's a dirth of engeneering talent in the valley too, and there's a dirthof engeneering talent in Boston. I mean the places that have Stanford Harvardand Mit are still it's a war for talent everywhere, right now, relative to toBoston, San Francisco and telleve. So I think this has the highest disaparitybetween people that think they're very good and are actually very good when itcomes te engineering, Thet's UST. My personal point of view, I will withhold my comment on ter amysales later equivalent of that Ta Tink I'll. Take that as a tacit endorsementof my comments. So how do you make money? An seed you buy? You know adollar fty a share and sell it. Fifty a share. How do you make money? ITD Saythe hardest thing is: is making the this for shots on goal decision for afund? So you can the first Ventur Fund that I was ever a partner of it waseffectively a seed stage fund and wasn't called that at the time, but itmade fifteen investments and there were. There, ended up being one really greatcompany in that and three pretty darned good ones, and that wasn't enough shotson Goald that, as a as a sort of typical batting average for investingat that stage was pretty good. But it wasn't enough shot son goal to generateenough outwier outcomes to drive the fun. So when we choose to do twenty sixto thirty deals in a fund, that's where we feel you're at the enough chancesenough trips to the play. But without going so far that you lose sort ofthose touch with the portfolio you have to own a material amount of thecompanies that you invest. In I mean it's just you know you do the math ifyou end up oning three percent of the company and it sells for a billiondollars. That's a thirty million dollar distribution, which is great. But if Ican't you know, if I have a hundred million dollar fund and thirty milliondollars is the best single outcome in that fund, I will not be able to raisethe next fun you have to be set up so that your biggest winners can returnthe fund in one shot and then a bunch of other good winners can refer thereturn. The fund. You know one more one and a half two more times does thatfind its way to the term sheets where you have sort of antidelution or prorata maintenance, privilege, orate rights is, is important. Andy Delucionis like wel put it in the term sheets, but like if you're, at a point whereyou're exercising that Panty delution cross clasyoure kind of already host,like companies not doing what it's supposed to be doing, but porata ritsan our ability to write that second check, and if I bought ten percent inthe first bround, I want to keep owing ten percent. That's super super pattern,recognition so you're meeting so many people that are in such early stagesand and breonic stages of their company's development. I'm sure youhave points of view on first, what makes a great CEO, which she looks likewhat he looks like not physically, of course, but sort of what theirexperience looks like and whath their points of view and what theirpersonalities are like and then, at this point, you've also seen greatteams. So talk us through sort of how you evaluate of a founder and then,when you know the team is the right team. This all answer the second onefirst, because I think the single it's a real luxury when you have theseopportunities, but the single greatest indicator o success when it steps outthe elevator. Is this a group of people who have operated and executed togetherbefore and that doesn't need to be even necessarily wildly successfully? But aslong as there's been some level of...

...success, and you know that they'refamiliar with each other, you know that they've made ou anfirmative decision tokind of get the band back together. The realis as a seat investor, like thelist of things that could go wrong, is like unfathomably lock, I meanliterally, everything probably will go wrong at every turn, and so, if you canjust check some cultural, like jelling of the team integration of that team,early on effective operations amongst the core group at the very beginning,if you can check that off as a risk, you'v just taken something on the list-that's easily one of the two or three at the top. So we have one team in ourportfolio now that wee backed for the third time, a couple of others that webacg for the second at those are just super super easy decisions. It almostdoesn't matter what the ect they're going after. I think that two otherthings, if you said okay, what's he the signs of great founder and or greatopportunity? One size of market is, I think something that I spent a longtimeunderestimating the importance of. But the reality is that you know what sheseid out to do is going to change and tweak in in a lot of ways, as all ofyou guys have seen through various businesses and the more room you haveto operate in a market, the easier it's going to be to build a hundred billiondollar business period like it's. Just it's really really hard to get to tenpercent market share in anything right. So the difference between starting withEl and a lot of entrepreneurs are like look. I pencil us out and the TAM islike eight hundred million dollars and if I build a you know three hundredmillion dollar business and an eight hundred million dollar market, likethat's, clearly going to be worth a ship out of money right, yes, but howmany people in this room coand give me an example of a three hundred milliondollar revenue business in an eight hundred million dollar market? Iprobably Knobud. There are some but they're like those are the trueUnicorss franquit, so market sizes, like wildly wilely, widely Importandt,just introduces degrees, O freedom and then on the founder. The thing that wehave increasingly gotten focused on that this room will probably be happyto hear is the just the raw salesmanship of the founder and that'snot necessarily like it DOE's, not surely about. Is it a trade salespersonwho, like knows how to close the big elephant? But it's when you think aboutwhat a what that CEO needs to do through the first few years of thebusiness where you're making it up on the fly, like literally nobody shouldjoin you on any of the journeys of like quitting their good job to come andwork for you for less money in the promise of equity, or you know mewiring money from my fun to you when it's like four ofyou and a businessplan and a view of the market or your first customers like you, have to getthose three constituencies: investors, customers, employees to do genuinely onnatural acts. For years before, you get to the point where you're you know,you're, probably just getting to the point where, like you're at a scale atabout ten million dollars, O revenue and there's like a lot of logos on thewebsite, a you're like okay, we can relax a little bit but, like you, arefaking it basically and asking people to do desperately unnatural things fora while and people who can just confidently command a room and inspireconfidence and get people to do on natural things are wildly moresuccessful Tan, not particularly as it relates to financing. To I mean when Ilook at the CEOS and our mortfolio an I'll pick um on Liz, her husband, I'mlucky enough to be a CD investor and Liz his husband's company, and he justraised a series a a couple of months ago in I think it was seventeen daysand that happened right after another of our companies raised a series a innine months and when he alt he's called electric case, you want to knowoutsource it support by a slack right. Thank you for the avertalyo welcome. I should do better at that myself, butyou know you think about you: guys call been and work for CEOS who had to gothrough the process of raising money. I...

...think about the distraction, value of aseventeen day process versus a nine month process think about the lost timeon recruiting and your CEO, providing our cover on big sales, wins andkeeping the organization driving ahead. There's just forget about the: Did youget a better investor and did you get a better price and was it more or lessdelutive like just the time and energy and organizational disruption isimmeasure. Last question, because I'm sure people in the audits are going towant to ask some questions. So my question is given that we were all- andI think I've asked do this before an other settings, but we're all thepiecof sales and we want to make sure that we do well and that you evaluateus well both in the immediate moment, but also because we'll all be seeingeach other around in the ecosystem. How do you think about great te pieces,sales or great cros versus the ones that haven't worked out? What are thequalities or characteristics that are merged for you, as you're thinkingabout the executive team, but specifically about the development ofto go to market executive component? I tend to be most involved earlier, so bya time comany agats to ten million dollars a revenue or something I'm morefocused on earlier stage. Companies so probably predates almost the bulk ofthe people at the Throuoh, but I'll say a couple of things at the early stage.One in this one will apply at any stage like please just under PROMIS and overdeliver. Please, like almost nobody, does it in my experience now. Sometimesit's you know, you're just getting surprised, and you don't know, but ifyou don't know, I would rather, as a board member, I would much rather hearhalfway through the quarter. We're probably not going to make the number,because if we're halfway through the corter- and you say we're probably notgoing to make the number it's not like I' going to be sitting there ath, hepoard member, saying like well Shit. We got a fire room and like reloadimmediately tomorrow like manage the expectations down and then overage,it's the simplest rule, but the risk is, of course, if we manage it too far down,then we look like sandbaggers ind that we don't actually know what we're doing.I'm dying for a sandbagger sand show me a sandbanker just like a coupleof times in our portfolio. Please yeah, I mean, if you do it once you're, not asandbanker. If you do it twice in a row, we may be like Oh wow gee. We keepfeeding our expectations like. Maybe we should start dining upbeur expectations.That's a great conversation to have Yo Gon to get fired for sandbagging fortwo quarters or three quarters for sure right then. The other thing is that Ithink this is true of sales leaders had CEOS and founders of really early stage.Companies both is the failure to start thinking early enough about really kindof actionably, segmenting markets and starting to understand how differentcustomer segments are different in. Why and where you really are best suitedwhere whatever it is, you'r selling is best suit and I think people out offear of we need to make a lot of stuff happens. We need to like just get anypoints on the board early on a really really really reluctant to to makechoices about just focusing resources, but I think it's almost always the casethat whatever product, whatever your product, you've launched in the marketat the beginning, or even when you're, two three four million dollars of sales-it's woefully lacking in a bunch of stuff that even your best customersreally really want right. You're still at that point selling vision and dreams.So you may as well do yourself the favor of being really honest aboutwhere your product falls, the least short and is most likely to lead toshorter sales cycle. Like really study and think about the data, even when thenumbers are small and just being elitially honest about that stuff andbe unafraid of taking a risk around focus very helpful questions from theAys Yeah Megan Cou keep going on this segmentation point because I totallyagree and I'm wrestling with the decision right now. Oh sorry, my name is Megan Boen. I run sales andaccount management at managed by CE. So we did a Secumentatian analysis and youknow we have a couple. Smaller segments...

...that are just were not the best fit notas profitable, and what I've been doing is just reduce heavily reducingresource allocation against that segment and like Bairly, serving them not proactively getting new clientsthere, but not turning away in bounds. How do you feel about doing that asopposed to? Actually, you know turning away in bounds, letting them turn, I'mlike afraid to go that far but curious? What you think about the Actuoio? Ithink it depends on the degree which you really understand the cost to servethose different segments, and that's the other piece of this. It's one thingto figure out where kind of get to yes most effectively and then it's anotherthing tat understand the true cost of acquisition and ongoing service ofthose customers. So if you have figured out and a lot of companies, you knowthey get somewhere in the mid to high single digit billion run right and theystart realizing that holy shit, like two thirds of my early customers,actually suck like when I really start to apply some soeducated economicanalysis to Hem, and I'm not just focused on INM, trying to drive the toplime and trying to drive the top line. So if you've done that analysis andthese ones that are just landing in your lap, great sign them up. But thething I didn't say that, before a bad segmentation of focus, that's importantis make sure you don't compromise your messaging to try to continue to talk tothem. In my mind, it's not just about focusing like where your SDRs arecalling and where you're as AR spending all of their time, are you compromisingthe language you use in your in your collateral on the web and your whitepapers like who are you best serched for people just get freaked out aboutsaying, if I am really for you know, midmarket hospitals and Ursen carcenters that I'll never going to be able to sell? You know you know massgeneral in the cleave on clinic no prove yourself like. If that's whereyour best fok is like talk only about that, and then we built a twenty fivemillion dollar business serving those people and you have a moresophisticated product like Quicton Penas, not going to immore you. If Yif,you have something worth Nou, Christanato, dxc technologies. I workiled sales for a very large company, but I do advise a bunch of smallercompanies. I give hem a piece of advice I' be curious. What do you think aboutthis? An Er it is around. You know your first cost wers on one hand, you knowyou get after the one large marqui customer, a name brand, that everybodyknows you qet all your energy. Against that that's one strategy. SecondStrategy would be gen after ten, smaller, maybe now name customers. Ittakes the same business development affirt to go either way. When I see isI buy smaller companies to do take a specific path. Without we telling youwhat that is, how would you advise a, but I didn't want to lead the witness,so I've been with companies on a lot of elephant huns where you come home andmade Peter putter sand, which is ye that so by bias? If you said we arelike braw start up, we have zero customers. Where do we start? I wouldsay points on the board. Get points on the board. Get because you don't. Youcan have failed elephant hunts that you learn nothing from so don't reallystart learning until their customers actually interacting with your productand using it now. Usually despite Myaer Rantobat focus. A thing you can oftendo is have a sales team. That's focused only on the maybe the small things andyou may have a CEO who's able to go and sort of opportunistically andepisodically have a different set of conversations with a small set. Buteven then I would say like let's be Super Super Super Realistic about thosethings. Qualify, the hell out of them in terms of what they're buying processreally looks like a es, bcer yeah. Okay. What was your answer? Actually, theopposite. I know here's why I di wrestle on the top dekator. I don'tthink it's a right answer, but I do see companies that do they oin that whathappens when they go downstream as they get they lose folcus and go after toomany things, and I think when you get a big customer, it gives you onearncredibility, I'm working for name the brand and then small companies flock toit. I see that it's harder way harder. It takes longer, but that's jeally whatI said that was great and an unexpected...

...answer. Thank you. Don't Hey Red Tillin,vinon cofounder mihty year before my question, O one listyou know we maylike four years ago and you passed on our theres sand, so we ere a legincompany and you're totally right. We to pivots years later, Tobedoyou scare mefrst er were like one year in like coly hell. He was R Ery ECK Ompanyso, youdidn't come back. Do we not come back? We should. I came back we're a verticalcompany serving legal medical and finance companies in personal injry lawand one question we grapple with and Ithis a little broad question is whenit comes to talent in your pertical portfolio companies. How do you weighsort of industry, expertise and like the executive or director level versusbest player on the board sales talent? In particular, I used to be qintfocused on the care, a lot about industry, experience and stuff, and Icare halemost not at all about that anymore and carrioes. The room wouldgenerally agree with that, but I, like I, like the she cancelli t, askamos Galevery time. What about another departments? It depends a little on howlike for product people, if there are situations where, like the customerneed, is so like nuanced and unique and there's like innane little subtletiesto how the industry works, where it really really helps to have a productperson, although frankly you're, hopefully your founders are thosepeople who have that other than that, I'm an athlete driven guy. Every time Ithink Gol. Thank you. They want the bar last question: Niters Waha, Drinkin orco ginky technologies. The definition of rounds is changing all lover theplace, and I know it's frickly as question. We supope to get your view onwhat you define is seed these days versus series and maybe also just givea point of view on the overall state of the capital markets for all of us inthe room, obviously their flush, but it will be interesting to get your Tak. Soactually, I have a look for a stab. While I answer that the seed for Osmeans generally is the first institutional financing. There's aprecede there's a seed. There's a man go see, there's an avocado s likewhatever it's either the first round or it's definitely like smaller thanfifteen million dola or five million dollars. FIFTO million dollars right,but we will do things where six years ago our average deal size was probablyone and a half to to, and we've done we're about to close our fourth del outof the Second Primary Fund and those have been two and a half three threeand a half four ro a Oro and that kind of feels like a series. A of you knowtwo thousand and eight nine for sure: okay, here's the just as a measure ofthe growth in round sizes, the percentage of grounds that are fiftymillion dollars or bigger. Ten years ago, four percent of series Ds werefifty million or bigger. It's now thirty, four percent. If four percentof series SS were fifty million or bigger it's now, almost twenty like oneand five series s or fifty million or bigger that triggles all the way backdown. And so now we have like an opportunity that has been created forus is with good companies where they might have done a two and a half threemillion dollar seed and they're executing well, but you don't feel likethey're, quite ready to kind of qualify for at least an eight million dollar afrom a top firm like thes six million dollar a is almost like a badge offailure now and so we're having conversation, saying like Hey, word,syt about what you're doing, let's circle the wagons around the table andput another two or three million, and we get to buy up and then wait to dothat ten twelve million dollar round later. So the one comment on the stateof the cavital markets in general, which is well Tha overarchin comment:Is it's a little out of control right now, there's so much capital at everystage and valuations are too high, and this will sometime, some wer not terribly far off is goingto end rather painfully, for probably all of us rother than that will be finecars opening soon, but the venture...

...industry. If you look at dollars raisedby venture funds a year in two thousand and fifteen, sixteen and seventeen werethree of the biggest. I think three of the five biggest years ever, the onlyother two were in the height of the pubble. And yet, if you take US dollars,you has venture dollars raised by venture funds over that three yearperiod, soft bank just raised one burn that was bigger than that three of thefive biggest years in history in agrigate are slightly smaller than thesonback vision, fuck, that's fucking, Banas right and so that leads to youknow. Soft Bank is out there now literally like playing kingmaker andthere kind of the story that is, that has started to come out. That's I thinkmost indicative of this is the there's Wagan rover, the two big dog walkingservices, which is kind of amazing that you know dogwalking services are nowthe multi hundred million dollar value companies, but they went to wag, whichwas in second place in that market and said we'll do a a three hundred andfifty million dollar investment at like four hundred million pre. We basicallyare oing, TA buy half the company and we know you don't really want to getdeluted by almost fifty percent, but you can take this deal or we're goingto go, invest three hundred a D, fifty million dollar in Rofer. What would youlike to do like nobody's ever se people to know what to do with that? Well,they know what to do like. Take their fucking money because they're going toget kill rush. Otherwise, yeah is gangster, invest exactly, and sothat's why you know Saquoi is now raising like ten or twelve billiondollars, but ten or twelve million dollars in the face of a hundred. Idon't know where this goes, but it's going to be interesting, Racing Conafrom Esitency, not a startup, but twenty years and startups. You saidsomething I just want to follow up on. You like that is six million. A is abadge of failure right or almost amagiccalli right, but I guess you knowmy issue withat. Having done you know, my first Starter Been New York inNinety ig N, ninety nine and seeing what raising money is not the goalright? The goals to Gils, not it's like it's a ticket to the movies. The moviestill has to be good right. It's optioninto extent but, like you know,coming inm like how do you think about, and when do you think about it? Itasdriven? I know my markets eyes and a lot of other dynamics, but buildingjust you know the right unit economics behind the business right. We talks alittle bit about market secontation, understanding. All that, like, I, don'tthink a lot of people to me that I've seen over the years just realize thattoo late. I agree. I think that- and I have had a bunch of conversations inthe last year so with companies that have been able to raise a bunch ofmoney like Ar Gugly pretty maturely is what we should if we can raise thatmuch at that price, I'm okay with it. Only if we have a real, clearconversation with that doing, admester about how we're going to deploy and ifit's like, I'm taking your forty million dollars at a kind of wackyprice. You need to put forty million dollars to work. Okay, I'll accommodatethat need, because your fund is so stupidly large that it doesn't makesense for you to write a twenty million dollar check. We'll do that, but we'renot going to agree in this diligence process of what I'm going to startdoing is burning two and a half million dollars months. Let's have we can haverational conversations about burn and spend and growth expectations thenhaving a huge batancry this fantast, and is it generally doesn't matter atall to customers? I don't think, but where it does happen, impact is onrecruiticg and when it is a hardcore war for talent. If he raised, you knowthirty million dollars, F SAQOA and he raised you know six million dollarsfrom primary like where would you want to work? Bulshin Rad last question, foryou is you've got so many amazing corfolio companies, so it's some onthemwe're doing such cool stuff and you give us some of the highlights. Maybeyou're, obviously they're, all your favorites theyre, all beautifulsholdren, but which are your fam onself and Yobut ocouple companies that aredoing things that are that are just...

...very, very cool. The one that I love todeath for sure is latch. I don't know if you're familiar with that, but it'sa smart lock as a dissert. Does it is service? It's an access, control,business for kind of Middiran multitenant residential building. Sothe best example of why Tatch is interesting is my apartment building,which has like four hundred a fifty units in it. When I talked to thebuilding manager, when we were doing diligence on lash three years ago, hetold me that that four hundred and fifty unit building spends about thirtythousand dollars a year on keys and security round keys and recutting keysand replacing locks when keys, get lost and people move on and latch turns allof that into a purely digital process, where I can literally go into the AB onmy phone right now and put in Sam Jacob's phone number and say Sam isallowed into my apartment. You know from three thirty to four thirty todayand when Sam goes there and uses the code or the code that it gives him oror you uses thap if he's downloaded, he can go in. I get a picture of him whenthe door handle gets touched, and so that's kind of connenient for lettingmy friends in or like my dad who's visiting out from out of town and he'sgoing to get to the place before I get home for work, but where it's reallyreally powerful is what do you think about these buildings and the dogwalking services, the cleaning servicis that all of the people that they beedto provision and control access to and when Amazon? What they really want todo is get the groceries literally, all the way into refrigerator. So AmazonWalmart, Fedex ups, they all have enormous cost, with failed deliveriesat t places where they can't get in the front door in noondoorban buildings inparticular. So Walmart and jet actually have theyre just about done buildingout of test where, where they were paying to put Lach ackess controldevices on the front door of a thousand non doorman buildings in New York City,because they know if they can just eliminate the faild deliveries andalways be able to get their guy in the door to drop your box. If they've paidfifteen hundreddolars to get that on the outside of the door, they'll makethat up in, like three months so they're doing phenomenally well, therewere a bunch of people into kind of smartlock world trying to go directoconsumewere trying to be like messed for locks andto getting consumers to dotheir. Do It yourself, thin, most of whom sort of flamed out EPER, raising aton of capital, and these guys are arebilling an incredible business.That's amazing, thank you, so we might blast this out to folks or we just gotfolks in he in the room right now. If peou want to get in touch with you,what's the best way, besides being on the boat right now, email, Brado,primary DOTDC, anytime and and the thing that we try to conveyincreasingly to people is, there is no such thing as too early in our world. Imean there's a lot of deals that we won't do we. You know we've HASD onninety nine percent of what we see, but we love to meet people as they're. Juststarting to think about ideas is theyre stress. Pulling teams together werehappy to kick stuff around we're happy to WITE board Wev. You know one of thelast deals we did was a company that I had known for a full twelve months andlike really participated in the process of figuring out what the business wasgoing to be and we're happy to do that and put all our resources against it.If we think it's a great pounder great, thank you so much. Let's give Baer as apos, hey everybody at Sam's corner but offun and really outstanding, an up Yoa, Frat, I've known Brad for a couple ofyears now and he's always insightful, and it's always great just to hear theventure capital. The investor perspective on the job that we as salespeople are doing every single day. Now one of the things I hope you you pickedout. I asked him: What's one thing that that we need to be thinking about, aswe are sales executives entering in your company and he set it and sverystraightforward, but let's keep it in mind under Promi snow for diiver. So Iknow that there's a lot of a lot of expectations placed upon our shoulderswhen we join in Te Company often tends...

...to sales. People are the highest paidpeople in the company, and so we feel a sense of obligation to to promisereally really big Sixs, but really really big. Things come from pipelinedeveloand and they cotfor product Marketit, and it's just much muchbetter to be clear and transparent, with the board and with your boss, asthings are progressing rather than slips and badnews right at the very endof the quarter for the year or an a for meeting. So the message from Brad andfrom investors is very, very simple: transparency and honesty overovercomising and then last minute were saying: Hey we're going to miss ournumber by fifty percent so underpromise, and over deliver now to check out theshow, notes, see upcoming guests and playing more episodes from theincredible end of the sales leaders that we have. Is it sales hypercompodcast? You can find us on itunes o group of play and then, if you enjoythis episode, please share with your peers on Linkedinh, witter or elsewhere.You can email me if you have questions or if you have comments or feed backabout the show. So you can get in touch with me on twitter, at SMF Jacobs or onLinkdon, at linkdoncom, Lash and l, samf Jacobs and then finally, specialthanks to this month, sponsors at air call. You can fignd more about air callat air, called that Io forwardh sales tactor and I really strongly encouragtyou to check them out. So thanks for listening, everybody and I'll see youin the next episode.

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