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, three, three quo. Hey everybody, welcome to the sales packer podcast. It'syour host, Sam Jacobs. We've got an incredible episode coming up today.We've got RADSFOR Luga, who's a general partner and founding partner of primary ventures, one of the best early stage investors in New York. So we're reallyexcited about this episode. We recorded this episode on a boat during a retreatwith sales hacker and had some of the best folks from the New York revenuecollective, another three piece of sales. So hope you enjoy this interview.It was live in the middle of the Hudson River. We also want tothank our sponsor. This oneth sponsor is air call. Air Calls this phonesystem designed for the modern sales team. They seamlessly integrate into your crm,eliminating data entry for your reps and providing you with greater visibility into your team'sperformance through advanced reporting. When it's time to scale, you can add newlines in minutes and use incall coaching to reduce ramp time for your new Rep. so if you're interested in air call, and I've mentioned them before, butthey're really growing very, very quickly and one of the benefits is justsort of seamless implementation. It can actually happen within seconds. I know alot of us have trouble with sort of land lines and phone systems and howlong it takes to get everything up and running. With Air Call you cando it in seconds. If you want to learn more about air call oryou're interested, because I think the technology is really, really quite powerful.visit. are called that io forward sales hacker. So again, that websiteis are called that io forward, so as hacker to see why we weredone in Brad Street, pipe drive and thousands of others. Trust are callfor the most critical sales conversations. And then, lastly, I want tothank a few folks that have written in. Simon Howard as was asking about anepisode focused on the optimal cadence for STRs. He really love the DerekRand episode. So, Simon, we're going to work on that. JamesDominic used to work with me a person Larmur group and he's just a niceguy that likes all of my social media stuff. So thank you, James. And then Sam Collin wrote in. Who wants an episode on when shouldyou hire your first Tbus, your first FBU sale. So we're going tobe working on that as well. So, Simon, James and Sam, thanksso much for listening and for for writing in and without further ado,let's listen to my interview with Brad's for Luga on a boat. Thank you, folks. Welcome back to sales hacker boat day, Little Mini Sales Hackerpodcast we've got going on on your host, Sam Jacobs, but we've got somebodyreally special, Brad's for Luga, who is the founding in general partnerof primary venture partners and one of the best and leading early stage investors inNew York City. Brad, welcome. Thank you. So for those thatdon't know you, and make that maybe a few people in this room andout there in the universe, tell us about yourself and also tell us aboutthe origins of the firm that you have been started and what primary ventures isgreat. So primary venture partners is a firm that I started with my partner, been son, about four years ago now. We just closed our secondfund. Announced that last week. The first was a sixty million dollar funthat we started investing in que one of two thousand and fifteen and then wejust closed a hundred million dollar fund that we've made our first three investments outof. So far we are a hundred percent seed investors as our point ofentry and nearly one hundred percent focused on New York City and the ecosystem.Here we are. When we set out to start the firm, it waswith the recognition that there was an enormous explosion of Tech Innovation and company formationgoing on here and there was not yet a robust enough entry ecosystem here andwe thought that we could really carve out a place for ourselves and take aleadership of the position in this market, and so far that's gone reasonably well. I've been a institutional seat investor for over fifteen years now. started outwith a tiny little fund that absolutely positively never should have existed and lost abunch of money early on with l thank you, but learned some hard lessons, you know, shutting things down, trying to Salvash things, and thenco founded a firm that was kind of...

...the predecessor to primary called high peaksventure partners with two other guys a little over a decade ago, and thenthey were in. Three of us were in very different lights to life stages. So I got together with Ben who's a successful consumer Internet entrepreneur. Itstarted a company in the late night these written it through the bubble, survivedand sold it in two thousand and eight and then he had become a veryactive angel investor in New York and he and I hooked up around our sharedinterests and kind of will in the kinds of investors we want to be,and I coaxed him all the way to the dark side then, about fiveyears ago. Our approach is it compared to a lot of our seat investorpeers, considerably more concentrated. So we'll do seven, eight nine deals ayear. A lot of our firms in our Peer Group are doing twenty orthirty. Both are perfectly valid ways to run a firm and to make moneyin this business. But I think, but what fuels been and I andwhat gets us out of bed every day is like real relationship, driven partnershipswith founders and credible founders in the teams that they build. And you justcan't do that if you're doing thirty deals a year. And then we havebeen very focused as we built the firm and scale the firm, on buildinggenuinely impactful operational resources that address the biggest challenges that we see with companies asthey scale from seed to series a. So the first thing we built inthat world was in the talent and recruiting space. We have two full timepeople who drive team building, an organizational development with our companies, and cathe dam as, my partner who runs that for us, takes the modelwhere she will at any given point in time she's working with three or fourof our companies on a totally embedded basis and spending a day a week intheir offices and just through taking on the team building kind of foundational work sothat the founders can it's up to the founders to and the CEOS to makechoices on who comes on to their team, but we take a lot of thatkind of the intelligent work of sourcing and designing interview processes and creating arecruiting culture or in an organization and bring that expertise into the companies. Wehave a CFO who does similar work for kind of Foundational Strategic Finance Work andhelps people think about models and KPIS and instituting kind of management by metrics cultures. From the early days. And then we just launched something that we're stillin the process of kind of storting the kinks out on around what we callmarket development, which would be of interest to to focus in this room,and that was around the realization that, like most venture investors, when you'relooking at a certainly a bdb company, one of the things we do ata diligence process every time is try to talk to, you know, hypotheticalwould be customers for your product and oftentimes we'll actually make introductions and want tolearn by sitting as apply on the wall and those sales efforts as we're tryingto learn about your company. And frequently we're able to make valuable introductions tocompanies at a diligence process. And there is something about being a VC andcold calling a CMO at a larger company or the CIOH at a big bankor something, and you know, rightly or wrongly, the fact of thematter is we have an easier time getting those people on the phone than asalesperson selling one of, you know, six thousand others things that they're gettinghit up with that week. But we and everybody else in the industry kindof systematically then wires money to the companies we invest in and the investment teammoves on and we stopped doing that work and we just you know, thislight bulb went off for us about nine months ago, and so will whycan't we build a capability to continue to make that available to our portfolio company? So we brought on a guy who had been a customer Success Hand SalesGuy At both Hal Nexus and data dog, Ray Colletti, to start building thatcapability and hopefully to start unlocking more sales opportunities and kind of big accountopportunities and generating marketing sites for the revenue leaders of our BB companies. Sothat's in the works, but I think showing it's really, really promised.That is an amazing overview. You've made a couple very specific decisions that Ithink would be interesting for the room to hear about. There's probably three,two of which you mentioned. One is...

...the stage, which is see,the second is the city, which is New York, and then the thirdis what you have in touched on, which is there and to what extent? Is there a thematic focus or an industry focus, and how do youthink about or are you industry agnostics? So walk through some of those decisions, particularly the first two, because I think they're they're interesting. So seeseed is that's just a personal taste thing, I think for us, I meanbeen was an entrepreneur and a company builder and a company starter. Ihave been in operating CEO, although not a founder, and I think forboth of us there's just something in our guts and in our DNA that itfinds the process of going from five people to fifteen people radically more interesting andexciting than the process of going from fifty to five hundred. I totally understandwhy different people have different views on that, but the later you get in theventure business, later stagewise, the more spreadsheets become a critical piece ofyour decisionmaking and your analysis, and I just don't find that as interesting oris it as exciting work. We're kind of human driven investors. As forNew York, we actually didn't start out intending to be as New York orientedas we are. We knew we would be heavily New York bias, butthen as we started building out more and more of the operational capabilities and whatwe call our portfolioid pact team, we started realizing that if we built thosethings to be very geocentric, there were things that we could do with themthat we would not be able to do if we were trying to serve asa portfolio company and Chicago or Atlant our or, God forbid, the valley, and frank that you can't. You know from here what am I goingto be this best seat investor for in the valley. You know that you'vegot it adverse selection risk, certainly when you're crossing coasts like that. Soso we realize that the portfolio impact stuff, which is become, I think,our most critical differentiator, was just way better executed and the way webuilt it if it's a geocentric and then there's just an enormous amount of efficiencyand effectiveness that comes out of the fact that literally we can walk from ouroffice twenty one street to all but two of our portfolio companies in less thanfifteen minutes. And like that's crazy when you know, when you talk topeople in the valley about like driving up and done one on one and intwo hundred and eighty you know and they want to put a gun to theirhead. I think that's one of the most special things about this New Yorkecosystem is. You know, that doesn't just benefit us a benefits all ofyou guys as you're hiring and recruiting and like literally stumbling into each other andcoffee shops give us in that atics focus or sector focus. I spent allmy time on'd be to be application businesses, but a relative generalist within that world. I don't dive down into infrastructure very much, but I do I'vedone for healthcare. I T things in the last few years, and notwhen it gets into the kind of regulatory spaces, but certainly where healthcare isjust another vertical for vertical SASS businesses. I've probably done more vertical Sass inthe last half dozen years than anything else. Then does leads all our consumer businesses. So anything that's a kind of consumer transaction driven revenue model is thestuff that he leads. Would state three doesn't have to be three. Actuallystayed a few controversial points of view on the market or you know your pointof view on Sass, the evolution assess. Are there themes that you're investing againstor ideas that you have about where the world is moving over the nextfive to ten years? There's a lot I think that that blockchain is longterm essential and short term like we're donkey lessly over used and it's, youknow, it's kind of what ai was five years ago, where people arejust like feeling compelled to put that label on things. So I don't wantto talk about use of blockchain and a business unless it actually is like fundamentalto changing the way and how a business is operating and creates real economic leveragea real product differentiation. I do think that, while the sort of aiand the machine learning stuff was ridiculously overhyped five or six years ago, machinelearning at least you know, if every...

...business isn't thinking about how they areaggregating data and how they are used applying intelligence to that data to drive economicleverage in their business model or drive insights for their customers, then you're probablymissing the voter and you're going to get sideswiped by somebody. I think thatif you think, when I think about the kind of Verticalsass Universe, whenyou really and we've done some of this, when you kind of evaluate the industrialeconomy, I doubt we're even out of the third inning in terms ofapplying real automation process, automation efficiency, driving efficiency with the use of softwarethrough all of the industries across the country, and I think some of that iswe're just starting to see because, you know, cause of sensors areis getting cheaper and cheaper and cheaper and cheaper, and so there's a wholeworld of things that are now. You know, when you could put afifty cent sense or onto every peach piece of equipment in a factory and youcan get all that data into the cloud and apply intelligence against did. We'rejust starting to unwrap a whole world of things that you know, literally twoor three years ago weren't possible. But I think one a big piece that'sdriving a lot of the part of why I'm so excited about some of theseserve older line industries too, is that some of what drove industries to belaggards in their adoption of new technologies over the last couple of decades is justthe kind of the age of the decisionmakers and those universes. And so therewere there were places like, you know, Tech Company selling to tech companies.Okay, you'r your forward thinking, and certain other industries that have alwaysbeen kind of tech leaders. But today I'm forty five, I sent myfirst email in college. I never had a job that didn't have an emailassociated with that. I've never had a job that didn't involve using the webto do research and using, you know, software as part of my everyday life. And you know, forty five year olds are increasingly making all thebig you know, plus minus a few years, like all of the bigdecisions in most companies are being made by people roughly are contemporaries. And soyou've got industries that I have. A dozen years ago, you know,the folks who were running them just weren't progressive minded and now and now we'rethere and that's so there's kind of no excuses left anymore. Yeah, Ithink it's really interesting New York City. So I'm sure you a lot ofdifferent points of view. There's benefits to this ecosystem and then there are disadvantages. Walk US through sort of your perspective on the State of starting a businessin this broadly defined metropolitan area. And and then what are the things orwhat are the gaps that we still need to think about overcoming? I thinkfor bb software businesses, the thing that I like to call New York isthe two things I call it. One is the customer capital the universe,the others the domain expertise capital the universe. So what do you think about verticalSASS companies? That I think are best started by people who come outof those industries, who've been operating in, or selling in or ortsts sort ofsteeped in those industries. Those businesses should not be started by two kidsat a stay up for a business school classroom or a Harvard business school classroomor, like I want to do a start up and let's get to thewhite board with a case of beer and see where we can come up with. Those businesses should be started by people who are kind of coming out ofindustry solving their problems. And we have way, way, way, way, way more industry concentration in this market than anywhere else on the plant andso that is a huge, huge advantage. And then there's an enormous you know, the same point about may be able to walk to almost all ofmy portfolio in fifteen minutes. I mean a bunch of you guys in thisroom, how many of your customers can you get to within fifteen, twentyminutes walking or subway or a city bike or whatever? I mean it's justthere's nothing else like it. So that is a monstrous advantage we are Imean it's certainly a war for talent. It's certainly a war for engineering talent. I think we don't you know, if I could snap my fingers andChange One thing, I would put something...

...the equivalent of, you know,mit or Cargie, Mellon or or Stanford in this town. We don't havea world, truly world class engineering school that's cranking out software developers. We'vegot good but we don't have incredible. I think Cornell Tech has some hopeof the coming more of that over time, but that's not an overnight story.That's another decade in the works. Yeah, I agree. I thinkthere's a dearth of engineering talent and furler's but there's a dearth of engineering talentin the valley to and there's a dearth of engineering talent in Boston. Imean the places that have Stamford and Harvard and might are still it's a warfor talent everywhere right now relative to to Boston, San Francisco and Tele Avis. So I think this has the highest disparity between people that think they're verygood and are actually very good when it comes to engineering. This is mypersonal point of views. I will withhold my comment on vern these sales laterequivalent of that stale. I'll take. I'll take that as a tacit endorsementof my comments. So how do you make money and seed? You BuyA, you know, a dollar, fifty a share and sell at fiftya share. How do you make money? and See, the hardest thing isis making the sort of shots on gold decision for a fund. Soyou can the first venture fund that I was ever a partner of. Itwas effectively a seed stage fund. It wasn't called that at the time,but it made fifteen investments and there were there ended up being one really greatcompany in that and three pretty darn good ones and that wasn't enough shots ongoal. That as a as a sort of typical batting average for investing atthat stage was pretty good, but it wasn't enough shots on goal to generateenough out wire out comes to drive the funds. So when we choose todo twenty, six to thirty deals in a fund, that's where we feelyou're at the enough chances, enough trips to the plate, but without goingso far that you who's sort of lose touch with the portfolio. You haveto own a material amount of the companies that you invest in. I meanit's just you know, you do the math. If you end up owningthree percent of a company and it sells for a billion dollars, that's athirty million dollar distribution, which is great. But if I can't you know,if I have a hundred million dollar fund and thirty million dollars is thebest single outcome in that fund, I will not be able to raise thenext fun you have to be set up so that your biggest winners can returnthe fund and one shot and then a bunch of other good winners can referthe return the fund. You know, one more, one and a half, two more times. Does that find its way into the term sheets whereyou have sort of antidilution or pro rata maintenance privilege? Rata rites is isimportant. Andy Delution is like we all put it in the term sheets.But like, if you're at a point where you're exercising that anti delution crosscause your kind of already host like companies not doing what it's supposed to bedoing. But pro rata rides and our ability to write that second check andif I bought ten percent in the first round, I want to keep owningten percent. That's super, super pattern recognition. So you're meeting so manypeople that are such early stages and embryonic stages of their companies development. I'msure you have points of view on, first what makes a great CEO,which she looks like, what he looks like, not physically of course,but sort of what their experience looks like and what their points of view andwhat their personality are like. And then, at this point you've also seen greatteams. So talk us through sort of how you evaluate both a founderand then when you know the team is the right team. So I'll answerthe second one first, because I think this single it's a real luxury whenyou have these opportunities, but the single greatest indicator success when it steps offthe elevator is this a group of people who have operated and executed together before, and that doesn't need to be even necessarily wildly successfully, but as longas there's been some level of success and...

...you know that they're familiar with eachother, you know that they've made a deffirmative decision to kind of get theband back together. The reality is, as a seat investor, like thelist of things that could go wrong is like unfathomably long. I mean literallyeverything probably will go wrong at every turn. And so if you can just checksome cultural like jelling of the team, integration of that team early on,effective operations amongst the core group at the very beginning of you can checkthat off as a risk, you've just taken something off the list. That'seasily one of the two or three at the top. So we have oneteam in our portfolio now that we'd back for the third time, a coupleof others that we back for the second of those are just super, supereasy decisions. It almost doesn't matter what the heck they're going after. Ithink that two other things. If you said, okay, what's the signsof great founder and or great opportunity? One size of market is, Ithink, something that I spent a long time under estimating the importance of.But the reality is that, you know, what she set out to do isgoing to change and tweak in a lot of ways, as all ofyou guys have seen through various businesses, and the more room you have tooperate in a market, the easier it's going to be to build a hundredmillion dollar business period like. It's just it's really, really hard to getto ten percent market share in anything, right. So the difference between startingwith L and a lot of entrepreneurs are like, look a pencil us outand the TAM is like eight hundred million dollars. And if I build a, you know, three hundred million dollar business and an eight hundred million dollarmarket like that's clearly going to be worth a shitload of money. Right.Yes, but how many people in this room can give me an example ofa three hundred million dollar revenue business in an eight hundred million dollar market?I probably nobody. There are some, but they're like those are the trueUnicorns, frankly so, market size is like wildly, wildly, wildly importantto just introduces degrees of freedom. And then on the founder. The thingthat we have increasingly gotten focused on that this room will probably be happy tohear, is that just the raw salesmanship of the founder, and that's notnecessarily like it. That's not purely about is it a trade salesperson who likeknows how to close the big elephant. But it's when you think about whata what that CEO needs to do through the first few years of the business, where you're making it up on the fly, like literally nobody should joinyou 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, me wiring money from my fun to you when it's like four of youand a business plan and a view of the market, or your first customers, like you have to get those three constituencies, investors, customers, employees, to do genuinely on natural acts for years before you get to the pointwhere you're you know, you're probably just getting to the point where, likeyou're at a scale, at about ten million dollars of revenue, and there'slike a lot of logos on the website and you're like, okay, wecan relax a little bit, but you are faking it, basically and askingpeople to do desperately unnatural things for a while. And people who can justconfidently command a room and inspire confidence and get people to do unnatural things arewildly more successful than not, particularly as it relates to financing. To Imean when I look at the CEO's in our portfolio. I mean I'll pickon on Liz, her husband. I'm lucky enough to be a seed investorand was his husband's company and he just raised a series a a couple ofmonths ago in I think it was seventeen days, and that happened right afteranother of our companies raised a series a and nine months and when he companiescalled electric case, you want to know, outsourced at support via slack. Right. Thank you for the advertise. You Welcome. I should do betterat that myself, but you know you think about you you guys have allbeen in work for see knows you had to go through the process of raisingmoney. And think about the distraction value...

...of a seventeen day process versus aninemonth process. Think about the lost time on recruiting and your CEO Providing AirCover, on big sales wins and and keeping the organization driving ahead. There'sjust forget about the did you get a better investor and did you get abetter price? and was it more or less dilutive? Like just the timeand energy and organizational disruption is a measure. Last question, because I'm sure peoplein the audience are going to want to ask some questions. So myquestion is, given that we are all, and I think I've asked you thisbefore another settings, but we're all V piece of sales and we wantto make sure that we do well and that you evaluate us well, bothin the immediate moment but also because we'll all be seeing each other around inthe ecosystem. How do you think about great fee piece of sales or greatcrows versus the ones that haven't worked out? What are the qualities or characteristics thatemerge for you as you're thinking about the executive team, but specifically aboutthe development of the go to market executive component? I tend to be mostinvolved earlier. So by a time company gets to ten million dollars of revenueor something, I'm more focused on earlier stage companies. So probably predates almostthe Baulk of the people of this room. But I'll say a couple of thingsat the early stage. One, and this one will apply at anystage, like please just under promise and overdeliver, please, like almost nobodydoes in my experience now sometimes it's you know, you're just getting surprised andyou don't know. But if you don't know, I would rather as aboard member. I would much rather hear halfway through the quarter we're probably notgoing to make the number, because if her halfway through the quarter and yousay we're probably not going to make the number, it's not like I'm goingto be sitting there at the board member saying like well, Shit, wegot to fire them and like reload immediately tomorrow. Like manage the expectations downand then over a cheap it's the simplest rule. But the risk is,of course, if we manage it too far down, then we look likesandbaggers and that we don't actually know what we're doing. I'm dying for asandbag. Or Sam, show me a sand bag or just like a coupleof times in our portfolio, please. Yeah, I mean, if youdo it once, you're not a sandbagger. If you do it twice in arow, we may be like, Oh wow, g we keep beatingour expectations, like maybe we should start dialing up our expectations. That's agreat conversation to have. You're not going to get fired for sandbagging for twoquarters or three quarters, for sure right then. The other thing is thatI think this is true of sales leaders at CEO's and founders of really earlystage companies. Both is the failure to start thinking early enough about really kindof actionably segmenting markets and starting to understand how different customer segments are different andwhy, and where you really are best suited, where whatever it is you'reselling is best suited. I think people, out of fear of we need tomake a lot of stuff happens, we need to like just get anypoints on the board early on, are really, really, really reluctant tomake choices about just focusing resources. But I think it's almost always the casethat whatever product, whatever your product, you've launched in the market at thebeginning or even when you're two, three, four million dollars of sales, it'swillfully lacking in a bunch of stuff that even your best customers really reallywant. Right you're still at that point selling vision and dreams. So youmay as well do yourself the favor of being really honest about where your productfalls the least short and is most likely to lead to shorter sales cycles andlike really study and think about the data, even when the numbers are small,and just being allecially honest about that stuff. To be unafraid of takinga risk around focus. Very helpful questions from the ice. Yeah, Megan, to keep going on this segmentation point, because I totally agree and I'm wrestlingwith the decision right now. Oh sorry, my name is Megan Bowen. I run sales and count management at managed by Q. So we dida segmentation analysis and you know, we have a couple smaller segments that arejust, we're not the best fit,...

...not as profitable, and what I'vebeen doing is just reduced it heavily, reducing resource allocation against that segment andlike barely serving them, not proactively getting new clients there, but not turningaway in bounds. How do you feel about doing that as opposed to actually, you know, turning away in bounds, letting them turn? I'm like afraidto go that far, but curious what you think about that choice.I think it depends on the degree of which you really understand the cost toserve those different segments, and that's the other piece of this. It's onething to figure out where can I get to yes most effectively, and thenthat's another thing to understand the true cost of acquisition and ongoing service of thosecustomers. So if you have figured out, and a lot of companies you know, they get to somewhere in the mid to high single digit billion runrate and they start realizing that, Holy Shit, like two thirds of myearly customers actually suck, like when I really start to apply some sophisticated economicanalysis to him. And I'm not just focused on I'm trying to drive thetop I'm and trying to drive the top line. So if you've done thatanalysis and these ones that are just landing in your lab great, sign themup. But the thing I didn't say that before about segmentation and focus.That's important is make sure you don't compromise your messaging to try to continue totalk to them. In my mind it is not just about focusing like whereyour SDRs are calling and where you're a's or spending all of their time.Are you compromising the language you use in your in your collateral on the weband your white papers? Like who are you best served for? People justget freaked out about saying if I am really for, you know, midmarkethospitals and urgent care centers, that I'll never going to be able to sellyou know. You know mass general in the Cleveland Clinic. No, proveyourself, like if that's where your best focus like, talk only about that. And then when you built a twenty five million dollar business serving those peopleand you have a more sophisticated product like quick and clinics not going to ignoreyou if you have something worth selling. Christinato, dxc technologies, I workis lead sales for a very large company, but I do advise a bunch ofsmaller companies. I give them a piece of advice. I be curiouswhat you think about this. It's early. It is around your first customers.On one hand, you know you get after the one large marquee customer, a name brand that everybody knows. You put all of your energy againstthat. That's one strategy. Second Strategy would be get after ten smaller,maybe no name customers. It takes the same business development effort to go eitherway. When I see is I'd bised smaller companies to do take a specificpath. But how we tell you what that is? How would you advisea but I didn't want to lead the witness. So I've been with companieson a lot of elephant hunts where we come home and made peanut butter sandwhichis so by bias. If you said we are like Ross Startup, wehave zero customers, where do we start? I would say points on the board. Get points on the board. Get, because you don't, youcan have failed elephant hunts that you learn nothing from. Sure you don't reallystart learning until there are customers actually interacting with your product and using it.And now, usually, despite my earlier rant about focus, a thing youcan often do is have a sales team that's focused only on the maybe thesmall things, and you may have a CEO who's able to go and sortof opportunistically, at episodically, have a different set of conversations with a smallset. But even then I would say, like, let's be super, super, super realistic about those things. Qualify the hell out of them interms of what they're buying. Process really looks like a speaker. Yeah,okay, what was your answer? Actually the opposite, and I'll here's why. Well, I just'll wrestle on the top deck. Yet I don't thinkit's a right answer. But I do see companies that do they do?What? That what happens when they go downstream. As they get they losefolks and go after too many things and I think when you get a bigcustomer it gives you on our incredibility. I'm working for name the brand,and then smaller companies flock to it. I see that it's harder, wayharder. It takes longer, but that's telling. What I said. Thosegreat and an unexpected answer. Thank you.

Don't hey, red till in binding, Co founder of mighty hear before my question. One lets you knowwe meant like four years ago and you pass on our series a and sowe're a leeching company and you're a totally right way to pivots. Hears lateryou scared me. For us, we're we're like one year in we're like, Holy Hell, he was right early Jack Company. So you didn't comeback. Do we not come back? We should have come back. We'rea vertical company serving legal, medical and finance companies in personal injury law andone question we grapple with, and it is a little broad question, iswhen it comes to talent in your vertical portfolio companies, how do you weighsort of industry expertise at like the executive or director level versus best player onthe board, sales talent in particular. I used to be quite focused onthe care a lot about industry experience and stuff, and I care almost notat all about that anymore, and curious the room would generally agree with that. But I like I like the she can sell. I was to askhim I was Gal every time. What about another departments? It depends alittle on how like for product people, if there are situations where, like, the customer need is so like nuanced and unique and there's like in Nanelittle subtleties to how the industry works where it really really helps to have aproduct person, although, frankly, you're hopefully your founders are those people whohave that. Other than that, I'm an athlete driven guy. Every timeI think thank you, they want the bar. Last question, Nader's wayhand drinking or CEO prinkie technologies. The definition of rounds is changing a littleof the place and I know it's greatly asked question for just look to getyour view on what you define as seed these days versus series, and maybealso just give a point of view on the overall state of the capital marketsfor all of us in the room. yesly their flesh, but it wouldbe interesting to get your take. So actually I have a look for astabb all. I answer that. The seed for us means generally it's thefirst institutional financing. There's a precede. There's a seed, there's a mango. See, there's an Avocados, like whatever. It's either the first roundor it's definitely like smaller than fifteen million dollar or five million dollars. Fifteenmillion dollars right. But we will do things where six years ago our averagedeal size was probably one and a half to two and we've done we're aboutto close our fourth deal out of the Second Primary Fund and those have beentwo and a half, three, three and a half, four rounds.There's a real sis and grounds and that kind of feels like a series ais, you know, two thousand and eight nine for sure. Okay,here's the just as a measure of the growth in round sizes, the percentageof grounds that are fifty million dollars or bigger. Ten years ago, fourpercent of series D's were fifty million or bigger. It's now thirty four percent. A four percent of series C's were fifty million or bigger. It's nowalmost twenty like one in five series C's or fifty million or bigger. Thattriggers all the way back down. And so now we have like an opportunitythat's been created for us is with good companies where they might have done atwo and a half three million dollar seed and they're executing well, but youdon't feel like they're quite ready to kind of qualify for at least an eightmillion dollar a from a top firm like this. Six million dollar a isalmost like a badge of failure now, and so we're having conversations saying likehey, we'd psyched about what you're doing. Let's circle of wagons around the tableand put another two or three million and we get to buy up andthen wait to do that ten, twelve million dollar round later. So theone comment on the state of the capital markets in general, which is well, the overarching comment is it's a little out of control right now. There'sso much capital at every stage and valuations are too high and this will allsometime somewhere not terribly far off, is going to end rather painfully for probablyall of us. Other than that, will be fine. Bars open soon, but the venture industry, if you...

...look at dollars raised by venture fundsby year in two thousand and fifteen, sixteen and seventeen were three of thebiggest, I think three of the five biggest years ever. The only othertwo were in the height of the bubble. And yet if you take US dollars, you has venture dollars raised by venture funds over that three year period. Softbank just raised one fund that was bigger than that. Three of thefive biggest years in history in aggregate are slightly smaller than the Softbank Vision Partthat's fucking bananas right. And so that leads to, you know, softbank is out there now literally like playing kingmaker and the kind of the storythat has that has started to come out. That's, I think, most indicativeof this is the there's Wagon Rover, the two big dog walking services,which is kind of amazing that dog walking services are now multi hundred milliondollar value companies. But they went to wag which was in second place inthat market, and said we'll do a three hundred fifty million dollar investment atlike four hundred million prex we basically are in a buy half the company andwe know you don't really want to get diluted by almost fifty percent, butyou can take this deal. Or we're going to go invest three hundred fiftymillion dollar in rover. What would you like to do? Like, nobody'sever seen people don't know what to do with that. Well, they knowwhat to do, like take the fucking money, because you're going to get, okay, crushed otherwise. Yeah, it is gangster invest exactly. Andso that's why, you know, Sequoya is now raising like ten or twelvebillion dollars, but ten or twelve million dollars in the face of a hundred. I don't know where this goes, but it's going to be interesting.Racing Khana from assistency, not a start up, but twenty years in startups, you'd set something. I just want to follow up on. You knowlike that a six million a is a badge of failure, right, oralmost a badge of failure, right. But I guess you know my issuewith that, having done, you know, my first start of New York inone thousand nine hundred and ninety nine and and seeing what. Raising moneyis not the goal, right, the goals to build, not it's likeit's a ticket to the movies. The movie still has to be good,right. It's option into extent, but like you know coming on, likehow do you think about and when do you think? But it was driven, I know, by markets, eye and a lot of other dynamics,but building just, you know, the right unit economics mind to business right. And we talked a little bit about market secondation, understanding all that.Like I don't think a lot of people to me that I've seen over theyear, just realize that too late. I agree. I think that andI have had a bunch of conversations in the last year so with companies thathave been able to raise a bunch of money like, arguably prematurely. IsWhat we should if we can raise that much at that price, I'm okaywith it only if we have a real clear conversation with that new investor abouthow we're going to deploy and if it's like I'm taking your forty million dollarsat a kind of wacky price, but you need to put forty million dollarsto work, okay, I'll accommodate that need because your fund is so stupidlylarge that it doesn't make sense for you to write a twenty million dollar check. will do that, but we're not going to agree in this diligence processof what I'm going to start doing is burning two and a half million dollarsa month. Let's have if we can have rational conversations about burn and spendand growth expectations, then having a huge balance shade is fantastic. And isit generally doesn't matter at all to customers, I don't think, but we're itdoes have an impact is on recruiting and when it is a hardcore warfor talent. If you raise, you know, thirty million dollars from sequoiaand he raised, you know, six million dollars from primary like, wherewould you want to work? Bullshit, Brad. Last question for you isyou've got so many amazing portfolio companies. So it's some of them we're doingsuch cool stuff. Can you give us some of the highlights? Maybe you'reobviously they're all your favorites. They are all beautiful children. But what's areyour favorite? Some more but ugly couple companies that are doing things that arethat are just very, very cool. One that I love to death forsure is latch. I don't know if...

...you're familiar with them, but it'sa smart block. As it dissert does, it is service. It's aid accesscontrol business for kind of mid dire and multi tenant residential building. Sothe best example of why Latch is interesting is my apartment building, which haslike four hundred fifty units in it. When I talked to the building managerwhen we were doing diligence on last three years ago, he told me thatthat four hundred fifty unit building spends about thirty thousand dollars a year on keysand security around keys and recutting keys and replacing locks when keys get lost andpeople move on. And Latch turns all of that into a purely digital processwhere I can literally go into the APP on my phone right now and putin Sam Jacobs phone number and say Sam is allowed into my apartment, youknow, from three thirty to four thirty today, and when Sam goes thereand uses the code or the code that it gives him, or or usesthe APP if he's downloaded, you can go in. I get a pictureof him when the door handle gets touched, and so that's kind of convenient forletting my friends in or like my dad who's visiting out of from outof town and he's going to get to the place before I get home forwork. But where it's really, really powerful is when you think about thesebuildings and the dog walking services, the cleaning services, that all of thepeople that they need to provision and control access to. And when Amazon,what they really want to do is get the groceries literally all the way intoyour refrigerator. So Amazon, Walmart, Fedex ups, they all have enormouscosts with failed deliveries at at places where they can't get in the front door, in nondoorman buildings in particular. So Walmart and jet actually have they're justabout done building out a test where they were they were paying to put latchaccess control devices on the front door of a thousand non doorman buildings in NewYork City because they know if they can just eliminate the failed deliveries and alwaysbe able to get their guy in the door to drop your box, ifthey've paid fifteen hundred dollars to get that on the outside of the door,they'll make that up in like three months. So they're doing phenomenally well. Andthere were a bunch of people in the kind of smart block world tryingto go direct to consumer, trying to be like nest for locks and gettingconsumers to do their do it yourself, the most of whom sort of flamedout, ever raising a ton of capital, and these guys are building an incrediblebusiness. That's amazing. Thank you. So we might blast us out tofolks. So we just got folks in the in the room right now. If you want to get in touch with you, what's the best way, besides being on the boat right now? Email? We're at a priory toU DC any time and and the thing that we try to convey increasinglyto people is there is no such thing as too early in our world.I mean there's a lot of deals that we won't do. We you know, we pass on ninety nine percent of what we see, but we loveto meet people as they're just starting to think about ideas, as they're stressedpulling teams together. We're happy to kick stuff around, we're happy to whiteboard. We you know, one of the last deals we did was acompany that I had known for a full twelve months and like really participated inthe process of figuring out what the business was going to be. And we'rehappy to do that and put all our resources against it if we think it'sa great pounder great. Thank you so much. Let's get a b youas a clause. Hey, everybody, as SAM's corner. But of funand really outstanding interview with Brad. I've known Brad for a couple of yearsnow and he's always insightful and it's always great just to hear the venture capital, the investor perspective on the job that we assales people are doing every singleday. Now one of the things I hope you picked out. I askedhim what's one thing that the we need to be thinking about as we aresales executives entering in your company? And he said it and it's very straightforward, but let's keep it in mind. Under promise and overdeliver. So Iknow that there's a lot of a lot of expectations placed upon our shoulders whenwe join into company. Often Times the sales people are the highest paid peoplein the company and so we feel a...

...sense of obligation to to promise really, really big things. But really really big things come from pipeline development andthey come from product market fit and it's just much, much better to beclear and transparent with the board and with your boss as things are progressing ratherthan slip some bad and he's right at the very end of the quarter orthe year or an aboard meeting. So the message from Brad and from investorsis very, very simple. Transparency and honesty over over promising and then lastminute alert saying hey, we're going to miss our number by fifty percent.So under promise and overdeliver. Now to check out the show notes, seeupcoming guests and play more episodes from the incredible line of the sales leaders thatwe have, visit sales pickercom podcast. You can find us on itunes orgrouple play. And then, if you enjoyed this episode, please share withyour peers on Linkedin, twitter or elsewhere. You can email me if you havequestions or if you have comments or feedback about the show. So youcan get in touch with me on twitter at Sam FFJ ACOBS or on Linkedinat linkedincom and Sam f Jacobs. And then, finally, special thanks tothis months sponsors at air call. You can find more about air call atAir Call Dot ioh forward sales hacker, and I really strongly encourage you tocheck them out. So thanks for listening, everybody, and I'll see you inthe next episode.

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