Shabaka Gibson - Common Thread Ventures

Welcome to another VC Wisdom Pod. We have Chewbacca Gibson with us today. Chewbacca's an early VC stage investor in healthcare mostly. He's a veteran, uh, he's a managing partner at Common Thread Ventures, also principal at HealthX Ventures, um, and yeah, previously director at Creative Destruction Labs. So Chewbacca, welcome to the pod. Tell us a bit more about yourself and what you've been up to.

Thanks, Charles. So I've started a venture fund, Common Thread Ventures, and looking at digital health stuff. So that's kind of the stuff that I really like, but I come from healthcare through HealthTech Ventures and through the Creative Destruction Lab at the University of Wisconsin. We were looking at some really interesting stuff over there, getting global companies, connecting them with You know, really, really strong and influential people in the industry nationally, and putting them together let the magic happen.

There you go. Tell us a bit more about how you started out in life. You were a veteran, right? How was your time in the Army?

Yeah, I did 10 years in the Army as a military intelligence officer. So kind of wonder how I ended up here. But the— so I started out enlisted, and then I decided that I liked it. So I went ROTC and became an officer, did 16 months in Iraq. And then once, you know, I was done with that tour, I left and went to University of Chicago for grad school. And that kind of started my career in the corporate world.

Interesting. And how was Iraq for you? What did you learn as a future VC in there?

I learned that I didn't like Iraq. That's for certain.

Like a hellhole.

Yeah, yeah. You know, it was interesting over there. We had a project. I worked in civil affairs. I was a civil affairs company commander while I was there. And what I— one of the projects that I worked on was this sulfur plant that was just south of Mosul. It's one of the largest sulfur plants in the world, but it was not up and running, and we had a lot of folks who were shooting at us because they didn't really have anything else to do. So the idea was get the plant back up and running and hire a bunch of people, and then maybe that would reduce the folks who were, you know, doing nefarious things. And it worked. We We, you know, you only needed about 300 people to run that thing. And we hired about 2,000. But it gave people things to do.

I love it. Yeah. And being shot at?

It was a joint operations company, civil affairs companies. Typically, when they deploy, they can have people from different units get together. My unit that I was commander of had Air Force and Navy as well as Army. Personnel. So I joined operations company commander as a first company command.

And was that stressful to manage all these people? How did you manage all these egos together? How did you make the team productive?

Yeah, really, you know, it was about communications, setting standards, understanding, you know, what success really looks like. And then using that to— if you get everybody bought in on that, then everything else kind of plays itself out. I didn't get to pick my team. If you're running a startup, you get to hire the folks, right? And if it's a bad hire, you can fire fast and then go hire another person. You don't have that opportunity when you're leading troops in a war zone. You take what is assigned to you. And if they're underperforming, your job is to get them to perform. So again, setting the standards and giving them the resources they need to get done. That's, that's really the key.

The first objective that came to my mind with like, the objectives, right, is like bring everyone back in like one piece, I guess that would be it. But you would have missions, what, on a daily basis? Is that how it would work? It would come from higher command, okay, today we go there, we do this. What did the mission look like?

Yeah, typically we would have, um, there was a battle rhythm to the week and to the days. Um, there was a— we had a battle update brief, a BUB. So there was a BUB in the morning at around 6 AM, and then there was a BUB in the evening at 6 PM. In between them, that you were, uh, As the commander, I was doing a lot of planning and meetings and everything, but everybody else was preparing to go outside the wire or crossing the berm, as we call it. But we would get our missions and then we would go and do our missions, come back, and then, you know, I would spend a lot of time writing reports and everyone else would end up, you know, making sure all the equipment and vehicles were ready for the next set of missions that we would have. You know, we do this 6 days a week, and then on Fridays— Fridays is a holy day there. We weren't a combat unit, we were civil affairs. We operated with the, with the people a lot. So if it was a holy day for them, we weren't really going to be operating with them. So Friday morning, we would do a lot of training in the morning, and then I would give them the afternoon off. So they worked 6 and a half days a week. Wow.

Um, how did you manage the communication gaps with the local people and the challenges of, uh, managing these folks which had such a different culture from yours?

Um, well, you know, they have a different culture, but they're still human beings at the end of the day.

They need money, they need to feed their family, they want health, right? It's like—

Yeah, it's Maslow's hierarchy of needs. Am I safe? Can I feed my kids? Is there a roof over my head? All of that stuff. We had interpreters, but we also had these things called BBAs, bilingual bicultural advisors. They were interpreters, they could interpret, but they were also a bit more educated and could give us greater insights into an area or an economic system or something of that nature. that we could then use in order to, you know, do our job a little bit better. Uh, so that, that the goal was to have the BBA because they were a little bit stronger, but sometimes you just had the interpreter and the goal was to get the interpreter to tell you exactly what the person said, not their interpretation of it.

And it's fascinating, right? Like the sulfur plant, because it just goes to show again, if you take care of the economy humans can take care of themselves better, right? There's less aggression, there's less desperation, there's less incentive to, to kill Americans, right? So it's—

Yeah.

It's always the same in politics as well. And that, I guess that's why sometimes, um, green movements take less traction. It's like we still need to take care of humans economically before we can talk about the, the environment. Um, but yeah, such a fascinating challenge and puzzle you were Handed quite early on in your career. Why did you decide to move on from military around 2007?

Well, I was an Army reservist at the time, and I had— so I had a civilian career and a military career. And when I deployed to Iraq, my civilian job was a city manager in Stevensville, Michigan. So, and this is Michigan, I was right there. But, you know, you get to a point where your military career and your civilian career bump heads. And that's, that's kind of what happens. If you can imagine, I don't know what city you live in, but if you imagine that the person that's running your city, that runs everything, says, oh, by the way, I got to go disappear for a year, maybe a year and a half. I may come back. I may not come back. You know, that, that's, that's tough. I remember right before I deployed, the CFO for Ford Motor Company was also an Army reservist, and he deployed. He was on Time magazine's cover at one time. And, uh, you know, it's, it's disruptive, uh, and, you know, you, you as a soldier, you don't want to go— you don't want to not go downrange if all of your, you know, your battle buddies are going downrange. You want to go down there with them. But once I'd accomplished that, then yeah, I could make a break and be, be be okay with it.

Yeah, yeah, which makes sense. Then you went to work at Exxon for what, like almost a decade?

Yeah, well, there was a 2-year period I was at the University of Chicago, uh, studying business policy, uh, at Chicago for a couple years. And the goal was to go right back into economic development and small business development. Uh, but it was 2009 when I graduated. And, uh, that Nobody was hiring, right? I actually got an internship with Lehman Brothers, and I still have the email where they accepted me into their mutual fund— I'm sorry, their municipal bond department as an intern. And then like 2 weeks later, they no longer existed. So I was that close to becoming a banker.

Yeah, a fired banker, like from day one. That would have been so weird. They accept you and then You're like dropped in that totally chaotic phase of their, their company. Um, and yeah, what did you learn at Exxon? That's a gigantic company, right? Like very successful company. What, uh, what did you learn from your time there?

Yeah, so I, I went to Exxon. Uh, I interned there after I lost the internship at Lehman Brothers. Um, I interned there in a new, uh, company within the corporation called ExxonMobil Environmental Services. The whole point of that company was to take all of their dilapidated sites from around the world. They had about 9,000 at the time that had some type of environmental impact or needed some other disposition. And the idea was to remediate the sites and then figure out the best public use for those sites and then get them there. Because of the work that I'd done early in my career in economic development and city management, they hired me as an intern first and then brought me on full-time because I understood that world. Southwest Michigan, when I graduated high school, saw a lot of their tool and die companies pick up and go to Mexico, and they left behind all these brownfield sites, and that's really where I cut my teeth. was on these brownfield sites. So Exxon having 9,000 of them around the world and me having experience, that, that really helped out.

Yeah, you asked what city I'm in, right? I'm in Oaxaca, Mexico. I'm from Montreal, Canada, right? But, um, so yeah, I know about Mexico's, uh, petroleum state and the struggles of Pemex, right? Like, uh, their efforts to, uh, renationalize, denationalize the, the gas there and all the the chaos, right? Like people poking holes in pipelines and just explosions ensuing, right? How was your time there? You were deployed again in a foreign land in the chaos, right?

Well, what's interesting is one of my last assignments with Exxon, I went to Papua New Guinea, which is just north of Australia. And exactly what you said, they were having those same issues. They're trying to build a pipeline and they'll lay a pipeline, lay pipeline, bury it, and then a week later somebody comes in and they tap into it thinking that there's, you know, refined gasoline in there. Really, there's, you know, natural gas in there and not oil. So it was, it was an issue. But, you know, the idea was that if you could educate the citizens, if you can educate the citizens in that area, And then again, help with jobs, public health, education in those areas. Then they stopped doing that and they go and they do other things that are more creative. So the first thing that Exxon did in Papua New Guinea when they were building that whole LNG facility, the first thing they built was a junior college. And most people would never have guessed that, but the idea was Hey, educate these folks on how to actually be able to work on these sites. And then once you've built everything and you know nothing's going to explode, uh, you can, you know, take your expats, send them back home, and then the local population can actually do it.

Yeah, I read about this incident in Mexico, and I mean, that's exactly what you get. It's like low education, right? It's people fucking congregating around a pipeline that's literally blowing fucking gas in the air like a waterfall.

Yeah.

And chilling like it's a family dinner.

Yeah.

You know what, what— and then next thing you know, they, they become 80, then 200, and then all you need is a spark or dumbass to light a cigarette and everyone blows up. And that's exactly what happened. About, uh, what, 30, 50 people died in that incident? I think it was close to Mexico City, um, or on the, the eastern coast. I think it was in Veracruz. And man, it's like, I mean, it's easy for me to say as someone that's educated, right? But it's, it's all about education, man. It's like, guys, come on, man. Uh, not a single one of you is like flashing alarm lights. I think the police tried to disperse them, but they would get pissed off at the police, right? So, and then the police couldn't fire warning shots because they would light sparks, right?

Right, right.

Terrible incident. Um, What, what happens from there? You became a VC? What's the transition between Exxon? Yeah, it's this world between VC.

Yeah, so, so if you remember, I told you my, my original goal was to go back into economic development, small business development, and I guess Exxon was a bit of a, a sidetrack. But, um, I decided that I was going to make the push and jump back into it, and I found myself in Battle Creek, Michigan. So there. Battle Creek, Michigan, home to Kellogg. Well, was Kellogg's. And just like any other major company headquarters, they brought in just really, really amazing talent. And they would— that talent would go there and they'd work for Kellogg for a few years, and then they would spill out into the community and they would start their own companies. And this happens all over the country. The issue is in Battle Creek, you also have the largest industrial park the state. So the focus was really there. Meanwhile, all of these small entrepreneurs, they were picking up and they were going to Grand Rapids and Kalamazoo and Detroit and Ann Arbor because they weren't getting support that they wanted in Battle Creek. So I said, well, all right, I'm going to focus on those guys. So I really started focusing on food companies and made really good friends in the— strengthened my network and made good friends in that food space. Uh, but I helped some, some really great companies. One of the companies that I really, really love is a company called, uh, oh, I just forgot the name of it. Oh, Junkless. It's, uh, it was founded by 2 gentlemen from, uh, from Kellogg's. One, uh, finance guy and another was a food scientist. And they, they basically went to Kellogg's and said, can we take one of your breakfast bars and pull sugar out of it. And Kellogg said, no, you cannot do that. So they started their own company where they wanted to make breakfast bars that had no junk in it, thus the name Junkless. And when I first met them, they were looking for like $500K just to get things going, to help with the startup. And I believe they sold to private equity a few years ago, and the number was well into the, to the 8 figures. So Really, really great success story. But companies like that, right, and stuff like that, I really, really like. But I wanted some more dynamic companies and not as much D2C companies. So while I was working on my doctorate, because I guess I was a glutton for punishment, I came across this thing called the Creative Destruction Lab. And the Creative Destruction Lab is this seed-stage, non-dilutive accelerator that was started at the University of Toronto. And the idea is, it's pretty simple. If you're in New York or San Francisco or Boston, you can get people to help you, and you can take a really great idea or a really great insight, and you can really, really explode it out into the, to the market. But if you believe that, you know, smart people are everywhere, finance is everywhere these days, hard workers are everywhere. Why is it that the great ideas land on the coast, not anywhere else in the country? So the thought was, okay, look, if you, if you look at these areas, what they've got that the other places don't have is this marketplace for judgment. And so if you're in Boston and someone wants to give you something and you've got a great idea, you can shop it around. And get really good feedback. You can also take, you know, take the chance and look for folks who can help you build it out and get financing. There's just a really high concentration of that judgment that can help you out. So what the Creative Destruction Lab does is it artificially recreates that marketplace of judgment in these tier 1 research universities around the world where there is a certain expertise within a given industry sector. So at the University of Wisconsin, they have insurance, risk and insurance, and then they also have health. If you think about UW-Madison, you've got Epic, you've got Promega, you've got all of these massive companies here. Healthcare and insurance are like the 2 big things. So those are the things we focused on at UW. They needed somebody to help build out the system and get it going, and that's where I came in.

Interesting. And that's led to you running your own VC firm. What's helped X, Y focus in health, right? And what's Common Thread Ventures?

Yeah, so, um, as part of the Creative Destruction Lab, I went out and I recruited a bunch of mentors to help these companies. And I was looking for really, really high-quality mentors. And one of the ones that I recruited was a guy named Mark Bakken. Mark had created Nordic Nordic Consulting. It's the largest Epic consulting company in the world. Mark had started— had left Epic and started— left Nordic and started HealthX Ventures, and he had 3 funds, and he was— he had given— been given SSBCI dollars to start a Wisconsin-focused fund. So another fund. He reached out to me and said, hey, look, you know, I like what you did at CDL. Would you be interested in jumping over to the venture side and helping out with this, this new Wisconsin-focused fund that I'm creating? So I said, yeah, and I came over to HealthX and started working on that fund and, you know, got really set a lot of things up, made some really good investments. And, you know, because it was SSBCI, it's the dollars come from the Treasury. there was a bit of a misread or a change of the guard with, you know, Biden going out and Trump coming in. That caused a little bit of an issue and things reset. So we kind of had to start over again on the fund, keep the companies, but start everything else over again. And I said, all right, well, look, let's— how about I, you know, leave, start my own fund because I'm kind of tied to Wisconsin. Why don't I start my own fund, which is Common Thread Ventures, and I can go broader? I stayed focused on health— healthcare because of the connections that I'd made while running the Creative Destruction Lab. I built this massive network. I'd learned the ability to pick out the best companies, the ones that would really work. I began to understand the industry a lot better than I did anything else. So I understand that, I understand insurance, and I understand fintech, and that's really the core of the, of Common Thread, of the thesis for Common Thread Ventures.

Interesting. And who do you raise your capital from? Who are the LPs nowadays?

Well, being a Fund 1, a Midwest-based Fund 1, it's family offices, high net worth individuals. You know, there are obviously other places where I could raise, uh, you know, utilities. I could raise, you know, fund the funds, those type of things. But being a Fund 1, um, you know, it's— it— the pool shrinks until you show that you can actually do it and deliver, you know, DPI. So, uh, high net worth individuals and family offices tend to be the number one spot right now.

And what's your preferred way to reach out to, to these folks? Is it like private connections, friends of friends? Like, how do you get to these guys?

Any way I can. So, you know, friend of friends first, but, you know, you exhaust it very quickly. A lot of networking through events and, you know, a lot of just communicating and going second, third order effect to get to a person at a family office. Typically, you know, cold calls and cold emails don't work as well. It's got to be warm. And it's, it's really getting to them, trying to establish a relationship, and then moving forward from there.

Interesting. And the startups, how do you filter them? How do you get your deal flow?

Uh, well, given what I've done at UW and at HealthX, I've got a pretty good network now. So I get a lot of, uh, I get a lot of unsolicited inbound, probably Probably 20 a week. And then there's a lot of other investors that I've done work with or sent deals in their direction. They send stuff in my direction, so I don't count them as the unsolicited. That's more a network effect. And then, you know, other founders that, you know, I've talked to or I've helped out. You know, when I talk to a founder, even if I'm not going to invest in them, which You don't invest in 99% of the founders that you talk to. You know, I try to help them out some kind of way, give them some type of feedback, leave them with a good feeling. And because of that, they send, you know, they'll come back to me or they'll send someone else they know that's working on something in my direction. So I do work with certain accelerators like Generator, Matter. Northwestern Mutual has a Black founder accelerator there, which is really good. Uh, particularly in the insurance and fintech space. So I do work with, uh, a lot of accelerators, mostly Midwest-based accelerators. Think Denver to Philadelphia, somewhere in there. Um, but, you know, a lot of it comes in organically.

Interesting. And, uh, is it Wisconsin mostly? Is that where you feel you have a moat, or is, uh, nationwide?

It's, it's the focus is nationwide. And that was one of the reasons why I wanted to start this fund was to be broader than Wisconsin, make it nationwide. I think the best value is in between the coast, you know, in between the Rockies and the Appalachians, down south and up north. But I also have, you know, connections on the East Coast and the West Coast as well.

Interesting. How much investments do you pull out a week, uh, a year?

How much— how many do I see per year?

How much investment do you pull out a year?

Oh, the, the plan is, uh, 2 to 3 investments per year.

Interesting. Um, and check size, you told me anywhere from $500K to $2 million or something like that?

Yeah, $500K to $2 million, and then holding something in reserve as well.

So, and why not 10? Isn't like— wouldn't that be more aligned with like power law of like, uh, checking if like 1 out of 10 actually wins?

No, the, the idea, uh, is that you want, uh, late seed, early Series A. Um, yeah, late seed or early Series A because they have the most growth potential. Like, it's, it's managing risk, right? So there's an upside and then there's a downside. Uh, when you get to late seed, a lot of things on the downside that would keep them from being well, it's, it's pretty much gone, right? It's not— I shouldn't say that. It's been managed very well. And then the idea is that you want to look for the ability to explode the upside. So I'm looking for them in that spot where their valuation is still low. I prefer a valuation under $20 million post-money. And I want to put enough in there to where I'm going to be able to get a really good piece of equity. And, you know, you get a huge chunk of equity and you hold on for dear life, basically, right? So I don't want just a ton of bets at really, really small check sizes where the value— the equity piece is really low. And I don't want to get, you know, too big into just a few.

Are you raising right now? Is that your main goal this year?

Yeah, just that's the focus this year is is raising, and then if there are some that are really really good, I got my eye on a couple companies that I think are really really good that I may make an investment in before the end of the year.

Interesting. Yeah, wishing you luck for that. Where can people find out more about you, Shabaka?

Well, you can go to my website commonthreadventures.com.

There you go.

Yep.

That was Shab and Charles for another VC.