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's your 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 really excited about this episode. We recorded this episode on a boat during a retreat with sales hacker and had some of the best folks from the New York revenue collective, another three piece of sales. So hope you enjoy this interview. It was live in the middle of the Hudson River. We also want to thank our sponsor. This oneth sponsor is air call. Air Calls this phone system 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's performance through advanced reporting. When it's time to scale, you can add new lines 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, but they're really growing very, very quickly and one of the benefits is just sort of seamless implementation. It can actually happen within seconds. I know a lot of us have trouble with sort of land lines and phone systems and how long it takes to get everything up and running. With Air Call you can do it in seconds. If you want to learn more about air call or you're interested, because I think the technology is really, really quite powerful. visit. are called that io forward sales hacker. So again, that website is are called that io forward, so as hacker to see why we were done in Brad Street, pipe drive and thousands of others. Trust are call for the most critical sales conversations. And then, lastly, I want to thank a few folks that have written in. Simon Howard as was asking about an episode focused on the optimal cadence for STRs. He really love the Derek Rand episode. So, Simon, we're going to work on that. James Dominic used to work with me a person Larmur group and he's just a nice guy that likes all of my social media stuff. So thank you, James. And then Sam Collin wrote in. Who wants an episode on when should you hire your first Tbus, your first FBU sale. So we're going to be working on that as well. So, Simon, James and Sam, thanks so 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 Hacker podcast we've got going on on your host, Sam Jacobs, but we've got somebody really special, Brad's for Luga, who is the founding in general partner of primary venture partners and one of the 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 a few people in this room and out there in the universe, tell us about yourself and also tell us about the origins of the firm that you have been started and what primary ventures is great. So primary venture partners is a firm that I started with my partner, been son, about four years ago now. We just closed our second fund. Announced that last week. The first was a sixty million dollar fun that we started investing in que one of two thousand and fifteen and then we just closed a hundred million dollar fund that we've made our first three investments out of. So far we are a hundred percent seed investors as our point of entry 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 was with the recognition that there was an enormous explosion of Tech Innovation and company formation going on here and there was not yet a robust enough entry ecosystem here and we thought that we could really carve out a place for ourselves and take a leadership 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 out with a tiny little fund that absolutely positively never should have existed and lost a bunch of money early on with l thank you, but learned some hard lessons, you know, shutting things down, trying to Salvash things, and then co founded a firm that was kind of...

...the predecessor to primary called high peaks venture partners with two other guys a little over a decade ago, and then they 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. It started a company in the late night these written it through the bubble, survived and sold it in two thousand and eight and then he had become a very active angel investor in New York and he and I hooked up around our shared interests 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 five years ago. Our approach is it compared to a lot of our seat investor peers, considerably more concentrated. So we'll do seven, eight nine deals a year. A lot of our firms in our Peer Group are doing twenty or thirty. Both are perfectly valid ways to run a firm and to make money in this business. But I think, but what fuels been and I and what gets us out of bed every day is like real relationship, driven partnerships with founders and credible founders in the teams that they build. And you just can't do that if you're doing thirty deals a year. And then we have been very focused as we built the firm and scale the firm, on building genuinely impactful operational resources that address the biggest challenges that we see with companies as they scale from seed to series a. So the first thing we built in that world was in the talent and recruiting space. We have two full time people who drive team building, an organizational development with our companies, and cat he dam as, my partner who runs that for us, takes the model where she will at any given point in time she's working with three or four of our companies on a totally embedded basis and spending a day a week in their offices and just through taking on the team building kind of foundational work so that the founders can it's up to the founders to and the CEOS to make choices on who comes on to their team, but we take a lot of that kind of the intelligent work of sourcing and designing interview processes and creating a recruiting culture or in an organization and bring that expertise into the companies. We have a CFO who does similar work for kind of Foundational Strategic Finance Work and helps 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 still in the process of kind of storting the kinks out on around what we call market 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're looking at a certainly a bdb company, one of the things we do at a diligence process every time is try to talk to, you know, hypothetical would be customers for your product and oftentimes we'll actually make introductions and want to learn by sitting as apply on the wall and those sales efforts as we're trying to learn about your company. And frequently we're able to make valuable introductions to companies at a diligence process. And there is something about being a VC and cold calling a CMO at a larger company or the CIOH at a big bank or something, and you know, rightly or wrongly, the fact of the matter is we have an easier time getting those people on the phone than a salesperson selling one of, you know, six thousand others things that they're getting hit up with that week. But we and everybody else in the industry kind of systematically then wires money to the companies we invest in and the investment team moves on and we stopped doing that work and we just you know, this light bulb went off for us about nine months ago, and so will why can'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 Sales Guy At both Hal Nexus and data dog, Ray Colletti, to start building that capability and hopefully to start unlocking more sales opportunities and kind of big account opportunities and generating marketing sites for the revenue leaders of our BB companies. So that'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 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 is see, the second is the city, which is New York, and then the third is 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 you think 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 see seed is that's just a personal taste thing, I think for us, I mean been was an entrepreneur and a company builder and a company starter. I have been in operating CEO, although not a founder, and I think for both of us there's just something in our guts and in our DNA that it finds the process of going from five people to fifteen people radically more interesting and exciting than the process of going from fifty to five hundred. I totally understand why different people have different views on that, but the later you get in the venture business, later stagewise, the more spreadsheets become a critical piece of your decisionmaking and your analysis, and I just don't find that as interesting or is it as exciting work. We're kind of human driven investors. As for New York, we actually didn't start out intending to be as New York oriented as we 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 what we call our portfolioid pact team, we started realizing that if we built those things to be very geocentric, there were things that we could do with them that we would not be able to do if we were trying to serve as a 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 going to be this best seat investor for in the valley. You know that you've got it adverse selection risk, certainly when you're crossing coasts like that. So so we realize that the portfolio impact stuff, which is become, I think, our most critical differentiator, was just way better executed and the way we built it if it's a geocentric and then there's just an enormous amount of efficiency and effectiveness that comes out of the fact that literally we can walk from our office twenty one street to all but two of our portfolio companies in less than fifteen minutes. And like that's crazy when you know, when you talk to people in the valley about like driving up and done one on one and in two hundred and eighty you know and they want to put a gun to their head. I think that's one of the most special things about this New York ecosystem is. You know, that doesn't just benefit us a benefits all of you guys as you're hiring and recruiting and like literally stumbling into each other and coffee shops give us in that atics focus or sector focus. I spent all my 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've done for healthcare. I T things in the last few years, and not when it gets into the kind of regulatory spaces, but certainly where healthcare is just another vertical for vertical SASS businesses. I've probably done more vertical Sass in the 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 the stuff that he leads. Would state three doesn't have to be three. Actually stayed a few controversial points of view on the market or you know your point of view on Sass, the evolution assess. Are there themes that you're investing against or ideas that you have about where the world is moving over the next five to ten years? There's a lot I think that that blockchain is long term essential and short term like we're donkey lessly over used and it's, you know, it's kind of what ai was five years ago, where people are just like feeling compelled to put that label on things. So I don't want to talk about use of blockchain and a business unless it actually is like fundamental to changing the way and how a business is operating and creates real economic leverage a real product differentiation. I do think that, while the sort of ai and the machine learning stuff was ridiculously overhyped five or six years ago, machine learning at least you know, if every...

...business isn't thinking about how they are aggregating data and how they are used applying intelligence to that data to drive economic leverage in their business model or drive insights for their customers, then you're probably missing the voter and you're going to get sideswiped by somebody. I think that if you think, when I think about the kind of Verticalsass Universe, when you really and we've done some of this, when you kind of evaluate the industrial economy, I doubt we're even out of the third inning in terms of applying real automation process, automation efficiency, driving efficiency with the use of software through all of the industries across the country, and I think some of that is we're just starting to see because, you know, cause of sensors are is getting cheaper and cheaper and cheaper and cheaper, and so there's a whole world of things that are now. You know, when you could put a fifty cent sense or onto every peach piece of equipment in a factory and you can get all that data into the cloud and apply intelligence against did. We're just starting to unwrap a whole world of things that you know, literally two or three years ago weren't possible. But I think one a big piece that's driving a lot of the part of why I'm so excited about some of these serve older line industries too, is that some of what drove industries to be laggards in their adoption of new technologies over the last couple of decades is just the kind of the age of the decisionmakers and those universes. And so there were there were places like, you know, Tech Company selling to tech companies. Okay, you'r your forward thinking, and certain other industries that have always been kind of tech leaders. But today I'm forty five, I sent my first email in college. I never had a job that didn't have an email associated with that. I've never had a job that didn't involve using the web to do research and using, you know, software as part of my everyday life. And you know, forty five year olds are increasingly making all the big you know, plus minus a few years, like all of the big decisions in most companies are being made by people roughly are contemporaries. And so you'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're there and that's so there's kind of no excuses left anymore. Yeah, I think it's really interesting New York City. So I'm sure you a lot of different 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 business in this broadly defined metropolitan area. And and then what are the things or what are the gaps that we still need to think about overcoming? I think for bb software businesses, the thing that I like to call New York is the 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 vertical SASS companies? That I think are best started by people who come out of those industries, who've been operating in, or selling in or ortsts sort of steeped in those industries. Those businesses should not be started by two kids at a stay up for a business school classroom or a Harvard business school classroom or, like I want to do a start up and let's get to the white 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 of industry solving their problems. And we have way, way, way, way, way more industry concentration in this market than anywhere else on the plant and so 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 of my portfolio in fifteen minutes. I mean a bunch of you guys in this room, how many of your customers can you get to within fifteen, twenty minutes walking or subway or a city bike or whatever? I mean it's just there's nothing else like it. So that is 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, if I could snap my fingers and Change One thing, I would put something...

...the equivalent of, you know, mit or Cargie, Mellon or or Stanford in this town. We don't have a world, truly world class engineering school that's cranking out software developers. We've got good but we don't have incredible. I think Cornell Tech has some hope of 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 think there's a dearth of engineering talent and furler's but there's a dearth of engineering talent in the valley to and there's a dearth of engineering talent in Boston. I mean the places that have Stamford and Harvard and might are still it's a war for 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 very good and are actually very good when it comes to engineering. This is my personal point of views. I will withhold my comment on vern these sales later equivalent of that stale. I'll take. I'll take that as a tacit endorsement of my comments. So how do you make money and seed? You Buy A, you know, a dollar, fifty a share and sell at fifty a share. How do you make money? and See, the hardest thing is is making the sort of shots on gold decision for a fund. So you can the first venture fund that I was ever a partner of. It was 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 great company in that and three pretty darn good ones and that wasn't enough shots on goal. That as a as a sort of typical batting average for investing at that stage was pretty good, but it wasn't enough shots on goal to generate enough out wire out comes to drive the funds. So when we choose to do twenty, six to thirty deals in a fund, that's where we feel you're at the enough chances, enough trips to the plate, but without going so far that you who's sort of lose touch with the portfolio. You have to own a material amount of the companies that you invest in. I mean it's just you know, you do the math. If you end up owning three percent of a company and it sells for a billion dollars, that's a thirty 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 the best single outcome in that fund, I will not be able to raise the next fun you have to be set up so that your biggest winners can return the fund and one shot and then a bunch of other good winners can refer the return the fund. You know, one more, one and a half, two more times. Does that find its way into the term sheets where you have sort of antidilution or pro rata maintenance privilege? Rata rites is is important. 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 cross cause your kind of already host like companies not doing what it's supposed to be doing. But pro rata rides and our ability to write that second check and if I bought ten percent in the first round, I want to keep owning ten percent. That's super, super pattern recognition. So you're meeting so many people that are such early stages and embryonic stages of their companies development. I'm sure 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 and what their personality are like. And then, at this point you've also seen great teams. So talk us through sort of how you evaluate both a founder and then when you know the team is the right team. So I'll answer the second one first, because I think this single it's a real luxury when you have these opportunities, but the single greatest indicator success when it steps off the 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 long as there's been some level of success and...

...you know that they're familiar with each other, you know that they've made a deffirmative decision to kind of get the band back together. The reality is, as a seat investor, like the list of things that could go wrong is like unfathomably long. I mean literally everything probably will go wrong at every turn. And so if you can just check some 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 check that off as a risk, you've just taken something off the list. That's easily one of the two or three at the top. So we have one team in our portfolio now that we'd back for the third time, a couple of others that we back for the second of those are just super, super easy decisions. It almost doesn't matter what the heck they're going after. I think that two other things. If you said, okay, what's the signs of great founder and or great opportunity? One size of market is, I think, 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 is going to change and tweak in a lot of ways, as all of you guys have seen through various businesses, and the more room you have to operate in a market, the easier it's going to be to build a hundred million dollar business period like. It's just it's really, really hard to get to ten percent market share in anything, right. So the difference between starting with L and a lot of entrepreneurs are like, look a pencil us out and 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 dollar market 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 of a 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 true Unicorns, frankly so, market size is like wildly, wildly, wildly important to just introduces degrees of freedom. And then on the founder. The thing that we have increasingly gotten focused on that this room will probably be happy to hear, is that just the raw salesmanship of the founder, and that's not necessarily like it. That's not purely about is it a trade salesperson who like knows how to close the big elephant. But it's when you think about what a 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 join you on any of the journeys of like quitting their good job to come and work 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 you and 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 point where you're you know, you're probably just getting to the point where, like you're at a scale, at about ten million dollars of revenue, and there's like a lot of logos on the website and you're like, okay, we can relax a little bit, but you are faking it, basically and asking people to do desperately unnatural things for a while. And people who can just confidently command a room and inspire confidence and get people to do unnatural things are wildly more successful than not, particularly as it relates to financing. To I mean when I look at the CEO's in our portfolio. I mean I'll pick on on Liz, her husband. I'm lucky enough to be a seed investor and was his husband's company and he just raised a series a a couple of months ago in I think it was seventeen days, and that happened right after another of our companies raised a series a and nine months and when he companies called electric case, you want to know, outsourced at support via slack. Right. Thank you for the advertise. You Welcome. I should do better at that myself, but you know you think about you you guys have all been in work for see knows you had to go through the process of raising money. And think about the distraction value...

...of a seventeen day process versus a ninemonth process. Think about the lost time on recruiting and your CEO Providing Air Cover, on big sales wins and and keeping the organization driving ahead. There's just forget about the did you get a better investor and did you get a better price? and was it more or less dilutive? Like just the time and energy and organizational disruption is a measure. Last question, because I'm sure people in the audience are going to want to ask some questions. So my question is, given that we are all, and I think I've asked you this before another settings, but we're all V piece of sales and we want to make sure that we do well and that you evaluate us well, both in the immediate moment but also because we'll all be seeing each other around in the ecosystem. How do you think about great fee piece of sales or great crows versus the ones that haven't worked out? What are the qualities or characteristics that emerge for you as you're thinking about the executive team, but specifically about the development of the go to market executive component? I tend to be most involved earlier. So by a time company gets to ten million dollars of revenue or something, I'm more focused on earlier stage companies. So probably predates almost the Baulk of the people of this room. But I'll say a couple of things at the early stage. One, and this one will apply at any stage, like please just under promise and overdeliver, please, like almost nobody does in my experience now sometimes it's you know, you're just getting surprised and you don't know. But if you don't know, I would rather as a board member. I would much rather hear halfway through the quarter we're probably not going to make the number, because if her halfway through the quarter and you say we're probably not going to make the number, it's not like I'm going to be sitting there at the board member saying like well, Shit, we got to fire them and like reload immediately tomorrow. Like manage the expectations down and 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 like sandbaggers and that we don't actually know what we're doing. I'm dying for a sandbag. Or Sam, show me a sand bag or just like a couple of times in our portfolio, please. Yeah, I mean, if you do it once, you're not a sandbagger. If you do it twice in a row, we may be like, Oh wow, g we keep beating our expectations, like maybe we should start dialing up our expectations. That's a great conversation to have. You're not going to get fired for sandbagging for two quarters or three quarters, for sure right then. The other thing is that I think this is true of sales leaders at CEO's and founders of really early stage companies. Both is the failure to start thinking early enough about really kind of actionably segmenting markets and starting to understand how different customer segments are different and why, and where you really are best suited, where whatever it is you're selling is best suited. I think people, out of fear of we need to make a lot of stuff happens, we need to like just get any points on the board early on, are really, really, really reluctant to make choices about just focusing resources. But I think it's almost always the case that whatever product, whatever your product, you've launched in the market at the beginning or even when you're two, three, four million dollars of sales, it's willfully lacking in a bunch of stuff that even your best customers really 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 about where your product falls the least short and is most likely to lead to shorter sales cycles and like 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 taking a 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 wrestling with the decision right now. Oh sorry, my name is Megan Bowen. I run sales and count management at managed by Q. So we did a segmentation analysis and you know, we have a couple smaller segments that are just, we're not the best fit,...

...not as profitable, and what I've been doing is just reduced it heavily, reducing resource allocation against that segment and like barely serving them, not proactively getting new clients there, but not turning away 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 afraid to 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 to serve those different segments, and that's the other piece of this. It's one thing to figure out where can I get to yes most effectively, and then that's another thing to understand the true cost of acquisition and ongoing service of those customers. 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 run rate and they start realizing that, Holy Shit, like two thirds of my early customers actually suck, like when I really start to apply some sophisticated economic analysis to him. And I'm not just focused on I'm trying to drive the top I'm and trying to drive the top line. So if you've done that analysis and these ones that are just landing in your lab great, sign them up. 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 to talk to them. In my mind it is not just about focusing like where your 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 web and your white papers? Like who are you best served for? People just get freaked out about saying if I am really for, you know, midmarket hospitals and urgent care centers, that I'll never going to be able to sell you know. You know mass general in the Cleveland Clinic. No, prove yourself, 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 people and you have a more sophisticated product like quick and clinics not going to ignore you if you have something worth selling. Christinato, dxc technologies, I work is lead sales for a very large company, but I do advise a bunch of smaller companies. I give them a piece of advice. I be curious what 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 against that. 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 either way. When I see is I'd bised smaller companies to do take a specific path. But how we tell you what 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 hunts where we come home and made peanut butter sandwhich is so by bias. If you said we are like Ross Startup, we have zero customers, where do we start? I would say points on the board. Get points on the board. Get, because you don't, you can have failed elephant hunts that you learn nothing from. Sure you don't really start learning until there are customers actually interacting with your product and using it. And now, usually, despite my earlier rant about focus, a thing you can often do is have a sales team that's focused only on the maybe the small things, and you may have a CEO who's able to go and sort of opportunistically, at episodically, have a different set of conversations with a small set. But even then I would say, like, let's be super, super, super realistic about those things. Qualify the hell out of them in terms 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 think it'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 lose folks and go after too many things and I think when you get a big customer 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, way harder. It takes longer, but that's telling. What I said. Those great and an unexpected answer. Thank you.

Don't hey, red till in binding, Co founder of mighty hear before my question. One lets you know we meant like four years ago and you pass on our series a and so we're a leeching company and you're a totally right way to pivots. Hears later you 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 come back. Do we not come back? We should have come back. We're a vertical company serving legal, medical and finance companies in personal injury law and one question we grapple with, and it is a little broad question, is when it comes to talent in your vertical portfolio companies, how do you weigh sort of industry expertise at like the executive or director level versus best player on the board, sales talent in particular. I used to be quite focused on the care a lot about industry experience and stuff, and I care almost not at 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 ask him I was Gal every time. What about another departments? It depends a little 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 Nane little subtleties to how the industry works where it really really helps to have a product person, although, frankly, you're hopefully your founders are those people who have that. Other than that, I'm an athlete driven guy. Every time I think thank you, they want the bar. Last question, Nader's way hand drinking or CEO prinkie technologies. The definition of rounds is changing a little of the place and I know it's greatly asked question for just look to get your view on what you define as seed these days versus series, and maybe also just give a point of view on the overall state of the capital markets for all of us in the room. yesly their flesh, but it would be interesting to get your take. So actually I have a look for a stabb all. I answer that. The seed for us means generally it's the first 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 round or it's definitely like smaller than fifteen million dollar or five million dollars. Fifteen million dollars right. But we will do things where six years ago our average deal size was probably one and a half to two and we've done we're about to close our fourth deal out of the Second Primary Fund and those have been two 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 a is, you know, two thousand and eight nine for sure. Okay, here's the just as a measure of the growth in round sizes, the percentage of grounds that are fifty million dollars or bigger. Ten years ago, four percent 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 now almost twenty like one in five series C's or fifty million or bigger. That triggers all the way back down. And so now we have like an opportunity that's been created for us is with good companies where they might have done a two and a half three million dollar seed and they're executing well, but you don't feel like they're quite ready to kind of qualify for at least an eight million dollar a from a top firm like this. Six million dollar a is almost like a badge of failure now, and so we're having conversations saying like hey, we'd psyched about what you're doing. Let's circle of wagons around the table and put another two or three million and we get to buy up and then wait to do that ten, twelve million dollar round later. So the one 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's so much capital at every stage and valuations are too high and this will all sometime somewhere not terribly far off, is going to end rather painfully for probably all of us. Other than that, will be fine. Bars open soon, but the venture industry, if you...

...look at dollars raised by venture funds by year in two thousand and fifteen, sixteen and seventeen were three of the biggest, I think three of the five biggest years ever. The only other two 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 the five biggest years in history in aggregate are slightly smaller than the Softbank Vision Part that's fucking bananas right. And so that leads to, you know, soft bank is out there now literally like playing kingmaker and the kind of the story that has that has started to come out. That's, I think, most indicative of 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 million dollar value companies. But they went to wag which was in second place in that market, and said we'll do a three hundred fifty million dollar investment at like four hundred million prex we basically are in a buy half the company and we know you don't really want to get diluted by almost fifty percent, but you can take this deal. Or we're going to go invest three hundred fifty million dollar in rover. What would you like to do? Like, nobody's ever seen people don't know what to do with that. Well, they know what to do, like take the fucking money, because you're going to get, okay, crushed otherwise. Yeah, it is gangster invest exactly. And so that's why, you know, Sequoya is now raising like ten or twelve billion 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 know like that a six million a is a badge of failure, right, or almost a badge of failure, right. But I guess you know my issue with that, having done, you know, my first start of New York in one thousand nine hundred and ninety nine and and seeing what. Raising money is not the goal, right, the goals to build, not it's like it'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, like how 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 the year, just realize that too late. I agree. I think that and I have had a bunch of conversations in the last year so with companies that have been able to raise a bunch of money like, arguably prematurely. Is What we should if we can raise that much at that price, I'm okay with it only if we have a real clear conversation with that new investor about how we're going to deploy and if it's like I'm taking your forty million dollars at a kind of wacky price, but you need to put forty million dollars to work, okay, I'll accommodate that need because your fund is so stupidly large 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 process of what I'm going to start doing is burning two and a half million dollars a month. Let's have if we can have rational conversations about burn and spend and growth expectations, then having a huge balance shade is fantastic. And is it generally doesn't matter at all to customers, I don't think, but we're it does have an impact is on recruiting and when it is a hardcore war for talent. If you raise, you know, thirty million dollars from sequoia and he raised, you know, six million dollars from primary like, where would you want to work? Bullshit, Brad. Last question for you is you've got so many amazing portfolio companies. So it's some of them we're doing such cool stuff. Can you give us some of the highlights? Maybe you're obviously they're all your favorites. They are all beautiful children. But what's are your favorite? Some more but ugly couple companies that are doing things that are that are just very, very cool. One that I love to death for sure is latch. I don't know if...

...you're familiar with them, but it's a smart block. As it dissert does, it is service. It's aid access control business for kind of mid dire and multi tenant residential building. So the best example of why Latch is interesting is my apartment building, which has like four hundred fifty units in it. When I talked to the building manager when we were doing diligence on last three years ago, he told me that that four hundred fifty unit building spends about thirty thousand dollars a year on keys and security around keys and recutting keys and replacing locks when keys get lost and people move on. And Latch turns all of that into a purely digital process where I can literally go into the APP on my phone right now and put in Sam Jacobs phone number and say Sam is allowed into my apartment, you know, from three thirty to four thirty today, and when Sam goes there and uses the code or the code that it gives him, or or uses the APP if he's downloaded, you can go in. I get a picture of him when the door handle gets touched, and so that's kind of convenient for letting my friends in or like my dad who's visiting out of from out of town and he's going to get to the place before I get home for work. But where it's really, really powerful is when you think about these buildings and the dog walking services, the cleaning services, that all of the people 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 into your refrigerator. So Amazon, Walmart, Fedex ups, they all have enormous costs 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 just about done building out a test where they were they were paying to put latch access control devices on the front door of a thousand non doorman buildings in New York City because they know if they can just eliminate the failed deliveries and always be able to get their guy in the door to drop your box, if they'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. And there were a bunch of people in the kind of smart block world trying to go direct to consumer, trying to be like nest for locks and getting consumers to do their do it yourself, the most of whom sort of flamed out, ever raising a ton of capital, and these guys are building an incredible business. That's amazing. Thank you. So we might blast us out to folks. 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 to U DC any time and and the thing that we try to convey increasingly to 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 love to meet people as they're just starting to think about ideas, as they're stressed pulling teams together. We're happy to kick stuff around, we're happy to white board. We you know, one of the last deals we did was a company that I had known for a full twelve months and like really participated in the process of figuring out what the business was going 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 get a b you as a clause. Hey, everybody, as SAM's corner. But of fun and really outstanding interview with Brad. I've known Brad for a couple of years now 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 single day. Now one of the things I hope you picked out. I asked him what's one thing that the we need to be thinking about as we are sales 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 I know that there's a lot of a lot of expectations placed upon our shoulders when we join into company. Often Times the sales people are the highest paid people in 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 and they come from product market fit and it's just much, much better to be clear and transparent with the board and with your boss as things are progressing rather than slip some bad and he's right at the very end of the quarter or the year or an aboard meeting. So the message from Brad and from investors is very, very simple. Transparency and honesty over over promising and then last minute 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, see upcoming guests and play more episodes from the incredible line of the sales leaders that we have, visit sales pickercom podcast. You can find us on itunes or grouple play. And then, if you enjoyed this episode, please share with your peers on Linkedin, twitter or elsewhere. You can email me if you have questions or if you have comments or feedback about the show. So you can get in touch with me on twitter at Sam FFJ ACOBS or on Linkedin at linkedincom and Sam f Jacobs. And then, finally, special thanks to this months sponsors at air call. You can find more about air call at Air Call Dot ioh forward sales hacker, and I really strongly encourage you to check them out. So thanks for listening, everybody, and I'll see you in the next episode.

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