Trust is the Real Capital - Ian Sigalow - Greycroft- Episode #89

They will run through walls to make this company successful. Isn't that a nice person to have around the table?

Welcome to Not Another CEO podcast. I'm your host David Politis. Every week we talk to inspiring leaders and get the true stories, the ups and downs, the lessons learned and come away with actionable advice for our own journey. Today's guest is one of the most influential and respected early stage venture capitalists in the country. He's the co founder of Greycroft, a firm that started in 2006 as a small firm investing in New York City and la. As a side note, they're one of our earliest investors at BetterCloud and support us through all the ups and downs of our journey. Now fast forward 20 years. They're a multi billion dollar platform where Ian leads investing in AI companies at pre seed and seed stage all over the world. Over his career he's led investments in category defining companies across all different markets. Companies like Venmo, Braintree, Buddy Media, flutterwave, hidden road, public.com and dozens more. He's known for his product and technical depth, his approach to helping founders operationally and his ability to see around corners in markets long before other people do. Please welcome co founder and managing partner at Greycroft, Ian Sigolow.

Thank you. Happy to be here.

Very excited to do this on this rainy day in New York. So if we look rainy, that's all wet, that's why. First question right into it, what is the one thing that you look for in founders and companies that you invest in?

As usual, I'm going to respond with three things to a one thing question. So I guess first off is we look for something we call a master of two domains and it's a type of CEO who is both technically astute or understands the product really well and can sell. And my observation is that in the world there are a lot of people who fall into either of those buckets. But if you look for true expertise in the middle of that Venn diagram, there are very few founders who can do both and the ones that can have historically gone on to build the biggest venture backed outcome. So that's the first thing. The second thing is we look for markets that that are big enough. We have these 10 year funds in venture and I guess they're really like a 12 year fund and if I'm being totally honest, they're a 15 year fund. But within the scope of a 10 year fund we want companies that can go from zero to a billion in revenue and a billion is a number that means I can take that company public at the end of the journey. And these are software companies, right. So my view is that to access the public market you need a business that can operate at that sort of scale with growth and therefore you need some big markets. And the third thing we look for is something we call an earned secret. And of these three things, the earned secret is my favorite. And what's great about these earned secrets is that once you hear them, you just can't stop thinking about them. Like I wake up in the morning like oh, that was such a good meeting I had yesterday. They are few and far between. And you could think about an earned secret as something about a product, a market, a structure, an idea that is going to lead in success to a winner take all outcome and their secrets. Because if somebody else had built it already, there would already be a winner take all business in the category. Right. So until somebody can really articulate and explain how their go to market or whatever special about their thing can, can create one of these types of outcomes, they're usually stay secrets.

What do you think of the three as the hardest to find?

Oh well the other bit is that they tend to be highly correlated with each other. So if you find a really exceptional master of two domains founder, they have probably also discovered an earned secret. And if they're really, really good, they probably only want to operate in a market that's big enough to build a public company. So I mean independently they're all hard, but they tend to all kind of collapse together at the end.

I actually feel of all of them, it's weird, but I feel like the first one is one of the hardest things for when I talk to founders, I, I don't find many that are masters of two domains. Like I've seen these amazing technical founders and they, they under all circumstances they do not want to sell, they do not want to do that. And I see that, but they have to.

But they have to because if, if you can't sell your own product, you can't expect anybody to sell it for you.

I, I agree with that. But finding that person who's that master of two, I actually when you tell me those three, like that's the one that I mean obviously the billion dollar revenue business is probably the actual hardest one to go and achieve. But you can believe that you're in a market like that or you can talk about that when you're at pre seed. But the master of two domains is.

Yeah, I mean you think about it, it's also, it's not Just sales in the sense of like, I'm going to go book revenue and sell an enterprise deal. It is every round of funding, it is every employee that you convince to leave Meta or Google or whatever, walking away from an enormous package and taking a 90% pay cut because you believe in the equity of a startup company. Like, those are all very important sales jobs, and the best CEOs are expert at all of them.

When you meet with founders for the first time, how do you, like, how quickly do you know if they have those things?

Well, I know if they don't right away. So I think about the filtering mechanism within five minutes. I know if somebody is not a fit once I classify that group down, like, I don't know, we're wrong a bunch too. In this business, I'd say it can take a long time to know for sure because some people can navigate this kind of, this fundraising environment. You don't really know if the market's big enough or not. You're gonna take some risk. There's, you know, the earned secret may end up not being real because no one's tried it before. So we'll call a bunch of people and try to validate if something is true. I'll give you kind of a funny side story. So we, we invested. I invested in this company, Venmo, before. It was a big deal, right? Like, it was two guys out of pen, came into my office. Crazy idea. Pre iPhone, okay, Pre feed. And we invested in Venmo. Within a couple weeks, they launched the feed on the front of Venmo. And the feed worked. It got more kind of consumer engagement with the application, which then drove virality. But even then, we wrote the investment off and we sold it to Braintree because the company was burning a ton of cash. And Braintree then kind of grew that business. And then Braintree sold to PayPal. The. It was the eBay business unit of PayPal. And. And then it really flourished under. Under PayPal's leadership. It was massively unclear at the time that Venmo would work, that, that even you. Even if it was going to be important, because we called people and I thought, well, you know, PayPal has a right to win here. And PayPal, for a variety of reasons, could never launch a mobile application that was any good anyway. So the earned secret there would have been like, you can combine a feed, you can make a social experience, A, and B, that the incumbents were never going to get mobile. Right. And that would give you enough time to get to critical mass and scale. But like you're taking a lot of risk. And other people invested in similar companies, like a go wall or whatever it was at the time, that that couldn't execute against that same earned secret.

Do you think that because of the reps that you have as an investor with so much, I mean, how many companies do you think you've invested in?

I know like 85 or so companies.

So 85 companies, like, yeah. Do you think that those reps have made you more better at investing, being able to see kind of where the markets go, or do you think it makes you more, you know, too many of the things that could go wrong?

I think when you're really young, you generally have overconfidence. Maybe this is my projecting about the way things will work. And then as you gain experience, with experience comes some amount of humility of like, I don't really know anything. And so I've learned to think in more of a probability state and less of a certainty state. And I think that's just generally helpful thinking in the venture business in general. So if my view is that Something has a 1 basis point chance of success and success in my opinion is framed in some modest size outcome, it's an immediate pass if Something has a 1 basis point chance of success. But it could be so big, you know, maybe we take that swing. You know, like there, there's a world where you, you want to have one of those in the portfolio. Particularly if it's like priced right though

it feels like that is what first time founders that I talk to that are fundraising. That last point. A lot of first time founders have a hard time telling that, that big story.

Yes.

When they're raising precede or seed, they almost feel like they don't have the right to, to tell that story. That's what I feel when I, people will pitch me and I'm like, yeah, what you're pitching is really like, I think it's really cool.

You say just dream bigger.

Exactly.

I tell people to dream bigger all the time. I don't tell people in San Francisco as frequently to dream bigger. They like, I don't know, like people come out of the womb there and they dream too big sometimes. Like, yeah, you just pitch me four companies. But yeah, I think this is one of the, it may be an unfair criticism of entrepreneurs outside of the Valley is that many of them aren't dreaming big enough. It's not the case for all of them, but it's certainly the case. And it's because they're just not exposed to people Frequently who are pitching such big grandiose ideas.

I think I had one CEO who was talking to me and he was saying that in the board meetings. The way the board members said it to him is, stop running all these running plays over and over and over. He's. Try some flea flickers. Try some.

Try for Hail Marys.

Yeah. Like, try some different things. Because you're just doing the same. Like, it's good, the outcome is going to be good, but, you know, it's

not going to be great.

Exactly. But I think that's hard for operators actually, for. As an operator, I think that's a hard thing sometimes to process and understand that that's that from a venture perspective. If it's not that, it's not interesting. Right.

I mean, yeah, so this gets into some of the way I think about the world, but I'm such a numbers person. I. Every, every, everything to me comes down, unfortunately, to know why I went to MIT in the first place, because literally every building's a number, every course is a number. Every, like this is my home, is just thinking numbers all the time. But in this world of numbers, and we've been doing Greatcroft for 20 years, if I look at just the way the numbers work in venture, to your point, like, if it isn't big, it isn't interesting. When we started the firm in 2006, our goal was get a company to 100 million of revenue. At 100 million, you could take it public. It would trade at roughly 500 million market cap. You'd do an offering, you'd sell, you know, 100 million of equity. It's about 20% of the company. You get out a little bit like six or 12 months later, you start to distribute. And, you know, if you had a 50 or $100 million venture fund and you had one, maybe two of those in your fund, you did okay. Like, that was. That was the business. And maybe something got a little bit bigger than that. Fast forward, and they're like 20 companies a year that had that journey. But there weren't that many startups relative to the number there are today. You know, like, if we were really busy, we'd meet with 10 or 20 startups a week. And, you know, that was kind of the pace of stuff. Fast forward 20 years. At the bottom of that funnel, there's still 20 companies that go public every year. That number has not changed. It has been one of the constants. There's a bunch of reasons why that structural number, like in 2021, there were a hundred but 80 of them have now gone out of business. So like there's like 20 companies that actually make this journey with some amount of durability at the bottom and get into the public market. The scale of those businesses is much larger, like a billion of revenue and not 100 million of revenue. The market cap of those companies at the time of IPO is much larger, far exceeding kind of the rate of inflation or the rate of economic growth. It's just like this is where the market has gone. A number of factors there too, including the way that all the retail investors in the world invest. Like we just buy index funds, so we want things that can eventually make their way into an index, et cetera. So you need bigger companies. And the other part of the funnel that's changed is just the number of companies vying for that 20 slots at the bottom. I think there's 100 or 200,000 companies a year that seed investors are looking at with a view of like, I have to sort this, I have to sort this into a manageable universe, which is like I've sort it by got to get rid of 99% of those things off the bat. That gets me down to 1 or 2000 that I can actually like spend some time on. And then I've got to sort that again by another factor of 100 to get the ones I want to invest in. And if I'm good at that, and if I'm really good at that, my group of 20, there'll be one of them every year that makes this journey and you become one of the best investors ever if you're like able to actually do this thing. The part of the reason I like seed investing in particular is because this is the hardest problem in venture capital.

Definitely there's no signal. There's almost right. I mean the signal, there's a lot

of signal because what you'll, what you'll look at, if you look at those 20 companies and you go back in time and you work backwards, I think in general to kind of form one of these theses, what you'll find is that the vast majority of those 20 companies have a founder, CEO at the time of going PO. So my first observation is if you can underwrite talent well enough, that's the same talent at the time of the seed round as it is the time of the ipo. You can form really good signal. This is super hard to do because people change and it's a 10 year journey and we're all going to go through our own version of that over the next 10 years. But if you can underwrite talent well enough, you can predictably identify great people with enormously high ceilings that can do this. That's number one. And number two, if you look at the business plans, because we've looked at the business plans of many of these companies that have gone public, almost all of them are doing the exact same thing at the time they go public that they were doing when they pitched us for the seed round. They have expanded it. But that core thing that they did, whether it was a Facebook or Google or whatever, it's so often the exact same thing.

Wow.

So there's a lot of signal, but you have to be focused on the right problems to solve. In big enough markets, you'd be focused on the right. The right caliber of founders.

How many people do you meet with now? Like you said, that was 10, 20 a week. Whatever. Like, what is it now?

I don't know. It's. It's like an unquantifiably big number.

Hundreds.

Well, we're pitched by hundred.

Well, I guess now also Greycroft's much

larger as a firm. We're much larger. I'd say, like, we're probably still only meeting with 10 or 20 because there's only like so many hours in the day and you want to have quality meetings with people. But I think the number of op. Like the number of people trying to get into one of those slots is at least 10 times larger. Well, it is.

Start a company. I mean, as much. I mean, to start a company, when you start Greycroft, you have to go rack servers.

Yeah, sure. Now you can just go, well, anybody can start a company.

My kids, I think, are starting some

app, you know, I mean, and that's not a bad thesis. You know, look at the Thiel scholars. They're going after like 14 year olds. Some of them go on to like build Ethereum. So, like there's. It works.

How do you. How do you. How do you sort. Like, are you using technology? I know a while ago when we talked about this. I remember, right. Like at the beginning of the AI wave, me and you saw each other on a plane and you know, you were talking to me about. You were talking to me about kind of some of the things you're thinking about. Even tooling internally at Greycroft.

Yeah.

Have you started to do that?

Yes. Okay, so venture in general. And we're not the only people doing this. But first off, the whole industry has shifted earlier. Right. So it used to be a really interesting founder would start a company they'd have some friends and family money, they'd figure some stuff out. Then they would come and meet with VCs and they'd raise a million dollars and we'd call that a Series A. Or maybe it was a $2 million Series A. And at that time, most of those companies had prototypes. Some of them had revenues and customers already. But there was something built and had been in business usually for a year, maybe longer. Today the industry is now about formation money. So our job is now finding people who are thinking about. It's almost like Minority Report. Like I think David Politis will someday start another software company. And I want to make sure that when you do, I'm your first phone call. So I spend time with you in advance. And when the time is right, I hope you remember me because there's in my universe of people who are high potential software CEOs, there's like 10,000 people that were, we're in touch with. And you kind of monitor those people over a period of time. And out of that pool, in my opinion is likely to come many of those 20 companies, not all of them, but many. And sometimes it takes a while because they'll have the energy but not the idea.

And so how do you do, like, how do you actually do that?

It requires technology. There's people data involved. And the people data services have gotten to be quite good. And you can identify people through LinkedIn and other social graph methods really early. And you could figure out using some of this exhaust data that exists on the Internet, like the papers people have published to arXiv, which is a website for computer science, whether or not they've contributed interesting research. You can, you can figure out the rate of career advancement of people who've been at a hyperscaler. You can, you can start to understand network centricity. So like every single one of these points, I'll give you a for instance. If you ran all of engineering at Palantir, you are really visible, right? And you've probably been pitched by 900 VCs about leaving Palantir to start or pick, you know, you launched the V0 product at Vercel or you did something interesting, you invented the transformer. We funded Noam, who invented the transformer, he started character AI. Like there aren't very many people on the planet who have both pioneered research and built teams and executed products at scale. So those people stand out. There aren't a lot of people who from their dorm room have kind of created interesting products that have started to grow virally so you have to track kind of that universe. There are people who have risen to prominence in Israel's 8200, you know, the right division with the right leadership, with the right cyber. You track those people. But these are kind of known pots and VCs. Their job is to make sure they know the people in these kind of tight networks. Because oftentimes the only financing for a great company where there's meaningful ownership that's being transacted is right at the beginning.

And so one of the things you have gone all in on AI. Yes, all in and all in on early stage. Very early because you were doing later stage. But you.

I've done every stage. But yeah, I like, I like now

you're really focused on the early stage. First check AI. What is your view of this market? I mean it's gotten a little crazy. Feels to me, feels to me like. It feels to me like 21 for SaaS companies, you know, peak of COVID And do you think that it is over hyped or do you think that this is just the reality when something game changing like this happens?

That yeah, I, you know part of the reason I like doing this very, very first phase of investing is because the market is fairly bounded and consistent. Interesting. If you look at. Well there's many reasons. I want to actually talk to you about all the reasons but the first one is if you look at all of the Data north of 90% of companies will raise some sort of pre seed seed, call it like first round, formation round. People are struggling to name these things because VCs are really an uncreative bunch. But one of the areas we're very creative is renaming round names and different. So whatever that first round is called, it is almost always a 20% dilution event and it is almost always up to 10 million bucks. There are certainly some single digit percentage outliers that don't look like that. Those people are super interesting by the way. And it's important for me and Greycroft writ large to know the people who are capable of raising the like out of the gate a public round. But that's not the part of the market that I personally focus on. My colleagues focus on some of those. But one is I like kind of that box because it enables me to play the game that I like to play. And second, I think that what's also nice about doing seed round is I can only be wrong once. This is important observation because if you pass on an amazing company at the seed round and all you want to do is first round investing. You don't kill yourself for also passing on the A and the B and the C and the D when those are kind of obviously great investments too. So I feel like my job is to only be wrong once and as infrequently as possible. And then when I'm wrong, tell my colleagues, like, I was totally wrong, but now, now it's your job to like go in the A or the B because we were totally wrong anyway. It feels better, at least cognitively, to only be able to be wrong once. And then I'd say the other bit is just like that. The energy. I liken this like showing up at Thanksgiving. I want to be there for the full meal. I want to be there for the apps and the cheese plate and not show up when everybody's having pie at the end. And when you're doing seed investing and you show up and you get to work with a company at inception, you get to be there for the whole journey. And if you're good at that and you reserve, you actually get to have a seat at the table for that entire 10 to 15 year journey with a founder. And it's like a really privileged place to spend time and work, particularly if, like, I don't know, my passion is working with these founders and helping them achieve their vision. And the creativity you get from working with them is so exceptional. And you only really get that experience if you're the first investor in a company.

How has your. The value that you add for companies? Given what you just said, it feels like that value add changes as you come earlier. State. Right? If you're investing in series B, series C, you're not. It's a very different value add that Greycroft adds, you know, to the mix. What, what does it look like today, like when you talk about being there at inception? What is that value that you deliver? And is it you, Ian? Is it Graycroft, the firm? Is it? You know, how do you see that?

So it's a. On the second question, first on the who it is both Ian and Graycroft, although I believe that most founders pick a partner as a person, I think so too, rather than a partner as a firm.

Yes, I agree.

And I have other partners who do seed investing. So the founders who pick us will pick them as frequently as they will pick me. But they're picking us because of who we are and the energy we bring and kind of kindred spirits like minds about solving a problem in terms of the how so the way, the way we do this at Greycroft is we onboard every company, the onboarding process actually starts before the funding. So we have. We'll sign a term sheet and we'll start talking about, like, let's get. Let's get started on building. Because the money's going to take, like, four weeks to clear. It's got to go through legal. There's going to be some back and forth. If it's a safe note, it could be, like a week. But most of the time, these are kind of, you know, full financing documents. And then we'll fly out, we'll spend time. The company's in New York. I don't have to fly very far, but if it's in California, you fly out, you go meet with the team. And my view is, I learned this actually from the team at Albertsons many years ago. I went out and I met. We manage a venture vehicle for them from 2018. And I asked the CEO at the time, like, how do you. How do you communicate when you have a million employees? It's an unfathomable exercise. How does that work? And he said, look, I have to dumb everything down to just three things. And I just repeat the three things over and over and over and over and over again. But there's only three things the whole company cares about, and I have to make sure they're, like, the three big things. And, you know, every year I have an opportunity to maybe change one of the three things. And it makes sense. It makes sense because if you're trying to communicate something to a million people, you need to be very succinct and always on message, and it's a hard job. So if I think about, like, the way I structure information, I do think there's a certain magic in the rule of three. And other people will tell you, like, if you listen to a talk, there's only three things you will remember from that talk, and there's probably only three things people remember from this podcast. Maybe they're the first three things I started with, which is what I look for in founders, which is also why I've reduced it to three things, right? You know, earn secrets, big markets, master of two domains. But when I sit down with the founders, I reduce it to three things. Those three things are one, a discussion about kind of talent density in the company, which inevitably we land on some metric on a hiring plan. Like, I want to hire nine people, and I want them to be of certain caliber in a certain role. Like, great, we land on that. By the way, each of these three things, I can deploy myself or other Greatcraft resources against. So like you need to go hire a cto, you need to go hire head product, you need, whatever you need, we'll help you go find those people, make sure they're world class. Some of them we will have in our network that are proven operators. The second is a product thing and as software companies you're constantly pushing new product into the market. The CEOs will have a view on their roadmap and accomplishing the roadmap. We'll talk through the product roadmap for the next 12 months and we'll kind of reach an agreement on where we want to see that product land. Of the three things, that's the one that I've got the least direct impact in. I mean I'm happy to check in and see how things are going. Sometimes the product roadmap, like there's one of my companies that's trying to pivot their pricing model. Sometimes the product roadmap is a pricing pivot. It's like I have to sell into customers which means I have to build enough heft to the product to do abc. And I will know at the end if I can get one customer to agree to like this new pricing thing. And the third is, the third is a commercial metric. The commercial metric could be number of users, it could be number of customer logos, it could be something else entirely. But we will agree on one commercial metric and then we write on a piece of paper. Super. You put on a post it note and I check in with the founders. I don't believe in board meetings in general. Like at any stage I really dislike board meetings, but for seed companies in particular, I think they're a waste of time. So my goal is to have a catch up once a month for 30

minutes or an hour against those three things.

I talk about those three things, but there's always like 50 other things that come up. But yeah, I always check in on the three.

Let's talk about the board meetings. Said you don't like board meetings?

No, I really don't like board meetings. So I, I first off, I've just been in a lot of them. You know, there's probably most of my companies have four board meetings a year, some have plus or minus two. And you figure over the course of a career if, if at any time I'm managing 15 companies, there's a lot of board meetings, right? It's a lot of prep to be a good board member and to really listen. And the second is that most board meetings are quite Performative and the management is trying to convey what they're trying to convey, which is sometimes the truth, maybe a version of the truth. They have to perform this act for many people. Right. Because the board meetings are. It's not just Ian Sigolow on the board, it's the employees they bring into the board meetings. It's the other investors around the table, the observers. It's the observers. I mean as, as boards get bigger, it gets worse. Governance by committee is generally speaking, not great because people don't express their full opinion and you end up going on these long, multi hour long sidetracks into the wilderness to satisfy somebody's curiosity which could have totally been handled offline. So anyway, I, I just find that all to be like, I don't know, I, I'd rather, I'd rather spend 30 minutes with a founder and really understand what's going on. So I can.

The founder would also prefer.

Also preferred.

Also preferred. How. What is the. Just what makes a good. If you think about the best board meetings you've been in or the best CEOs running board meetings, what would those. What. What is an element of that?

So first off, CEOs that absolutely control the board is a very different dynamic. When CEOs like, Look, you guys work for me, I control the board. I will operate, I will, I will treat you guys as peers. But I am running this meeting number number two, which means that sidebar conversations and such can be handled later. I will navigate the important issues. Number two is, you know, the CEO, so I'll name him by name. But Mike Lazaro at Buddy Media was like a master at this. He would send around the financials in advance. You say, I don't want to talk about the financials. If you have questions about the financials, we can have a sidebar conversation. I'm not even going to present them. I'm only going to, I'm going to keep the board meeting to two hours or less and I'm only going to talk about things that I think are important for you to know and I want your feedback on much better board meeting. I've been in board meetings that are owned by PE sponsor company. They're the worst because you spend the entire board meeting reading a financial package and the whole conversation is about like some change to working capital in line 42 that an analyst could have. It's not a good use of anybody's time and then it's not measuring what matters.

That's really good advice. The CEO controlling the board meeting and really owning that. I think that is really good advice. Which again, back to first time founders. I think most people think they, the investors are kind of their bosses in, in some ways I think, yeah, that

that's a big mistake.

But I think that's how a lot of people feel when they walk into that first board meeting. They've never done a board meeting before. And they walk into that first board meeting and they say, wow, these people gave me tens of millions of dollars and I reporting to them, you know, versus I'm, they're my partners in this journey.

Well, so there's so many things wrong with that setup. For starters, a CEO should never, ever take money from anybody they don't trust. And I don't think that you can trust an investor unless you've spent some considerable time with that person. One on one, getting to know them, referencing them. It is like, it is terrible. And I see it happen all the time where founders are, they feel they're pressured, they have to make a fast decision. They don't even call references on the people. And keep in mind, this is another common expression like, oh, it's easier to get out of a marriage than a bad investor. It's totally true. You would never marry somebody you met in one. I mean, maybe people do. I would never marry somebody I met on Tuesday. On Tuesday. Right. Like you have to do some work. And I don't know why founders don't feel empowered to ask those questions, but they should feel totally empowered to ask those questions anyway. That's the source of a lot of problems. Because if, if the founders had a highly trust based relationship with their investors and they only took money from people that they trusted, and they were then able to have board meetings and conversations that were totally on level, then the quality of the conversation would be better because they'd be like, look, I don't know these seven things. I will admit I don't know them to you, my investors. I need to go figure them out. And if you could help me figure them out, will make a lot more money. Like how many, how often have I had that conversation, an open board meeting? Almost never. How often do I have that conversation? One on one? All the time.

But you still take board seats.

I do, I do.

Because that to me as an investor, all the board seats I've been offered in the last two years, I have turned everyone down purely because I don't think that sitting in the board, I tell people, me sitting in your board meeting for three hours, I'm not even sure did I Add even one iotum of value in that. In that meeting? No, like, I don't think, but. But if you run the board meeting, I like the Mike Lazaro, you know, two hours and let's talk about the stuff that really matters.

And you know, and if you need a dinner in advance or a dinner after time with team, like, you can schedule those things outside at some point, you need to have board meetings. They're like an unavoidable. It is, it is governance.

What is something that you think is misunderstood by founders, about investors, about your side of the table?

And there's a lot of information out there about our side of the table. I think, number one, like, where the money comes from. I don't think that founders care or have spent any real time thinking about, like, well, I'm going to talk to a vc. The money's of course going to be there. But you have to realize that venture capital firms are allocating other people's money and they're in the business of raising that money and deploying it into these businesses. And I do think that the quality of those partners, the depth of their respective balance sheet, some of that is, you know, will be and should be of interest to founders when they're talking to investors. Not necessarily for the reasons that you would expect, but like, for instance, like, hey, if I've got money from XYZ Corporate, it doesn't mean that you're going to get a deal done with XYZ Corporate. In fact, that company may have nothing to do with your business. But I do think it's an interesting thing for founders to understand about their partner. What else? I think understanding exactly what you're getting and where that person sits in the organization and are they in a seat where their role is going to continue for the next 10 or 20 years? And really understanding that. I'll give you another example. I'm on a board of a company that we just received a term sheet from another venture firm. And I really liked the person from this other venture firm who's leading the investment. And I told the founder, I told her, this person is betting his career on us. And I like that because this person on the other side is early enough in their career that they had to stick their neck out to get a deal done. They are a youngish partner and they will run through walls to make this company successful. Isn't that a nice person to have around the table? Like, you have to trust them. They've got to be a good quality person. They got to do all of those things, but understanding that somebody has check writing capacity but also is like where are they in their career and how much risk are they going to take? And what do you think about. And I don't think founders think about that either.

Definitely not. By the way, I actually thought you were going to say the opposite. I thought you were going to say those people can be don't have the same

gravitas.

Gravitas.

Yeah, well, I, I think.

But I get what you're saying. The hustle part is actually we had that experience with one of the investors at BetterCloud who this was the deal that for them they were betting, you know, they were trying to make partner. And that was like we're going to do anything. Anything I can do to make this successful, I'm going to do because it's really my career that's on the line.

Well, and I'll add another layer too. Some venture firms are built like partnerships and some venture firms are built like companies. And depending upon where you are and who you're talking to, you know, the thing about partnerships is that it's not like you're tenured, but if you're a partner at a firm, you're given a lot of leeway for a long period of time to go make things work. And if this company ends up working, it may be the difference between you getting to stay forever or not. If you're at a company, even if your portfolio is great, like we just have a strategic whatever thing the bobber we're doing, we're making some changes. And I feel like as venture becomes more of a, an institute. I hate the word institutional, but institutional asset class. There are certain big firms that are operating more like companies and I don't know what that means. If you're like the fintech partner at one of these company firms and they decide to like, I don't know, make dramatic changes.

And that really sucks for the founder. When you lose that board member, like that person who made the investment is no longer there and then you get a science person, you know, that's not great.

It's not great. And you have to understand where that person is. So I think all of that is not well understood. And I think the best founders are going to will ask those questions.

Why did you get into venture in the first place? And why are you still, I mean from knowing you, you, you work like a founder in terms of like work ethic. So like it. What? Why? Let's go to the beginning. Why did you originally get into it?

I Got in the business right out of college. And my story, I grew up in Ohio, like a million miles from, like, not literally, but figuratively a million miles from here. And getting into MIT for college was an unbelievable breakthrough for me because, you know, you're. You go from Akron, Ohio to Cambridge, Massachusetts, but like, you're in the ecosystem of startups and technology and everything else. And I, I say this too, like, nobody ever, like, I'd interview for these jobs in college and they'd ask every other college student, like, brain teasers. They didn't ask the MIT kids any brain teasers. Like, people just assume you're smart forever. You know how nice that is? Anyway, so. And I probably have gotten them all wrong. You never know. So anyway, the, the thing about that, there were two, two venture firms that recruited on campus. One was a firm called Battery Ventures, and the other was a firm called Boston Millennia Partners. And I interviewed through to both firms and I got a job at this firm, Boston Millennium. And I was choosing at the time between really like three career paths. This is a long time ago. It was 2001. One of them was working for the Federal Reserve bank. So I could have been some sort of research wonk, like, and doing Fed work. That was the least interesting of the things. The second was going to McKinsey, which would have been interesting, but also I don't think the work I wanted to do. And the third was this venture job, which, incidentally, I'm not even sure on a comp basis these things were even in the same ballpark. The venture job I took was an analyst role. It was the true entry level role. And anyway, as it turns out, I'm so fortunate to have gotten into an industry that, A, I'm good at, and B, I love doing when I was 22. So here I am, I'm 46. So I spent more than half of my life doing just one thing. And when you.

So you knew right away, like when you started working, you knew, like, I looked.

Well, I mean, the truth is I got mono in like the first week. So, like right away I immediately got sick. And then once I recovered from mono, yeah, it was like a joke. They put like tape around my cubicle. How funny. So, yeah, I knew pretty much right away. And what I figured out is, you know, my passion is working with. I would do this for free. Like, just work with founders and help them on strategy and like, how you grow your business. There's a lot of creative and exciting things about working with people who are inventing the future. Right. Like, have you tried this? Will this work? I know this other person. You should talk to them. You get to cross pollinate. You get the smartest people in the whole world come to you with their best ideas and share these secrets with you in a privileged way. How amazing is that? And that for me, I was the kid growing up who wanted to understand how everything worked. That's why I went to mit. So it's like the most gratifying thing to understand how everything works. So anyway, I would do that for free. I got lucky that I got a job that enables me to do that almost every single day. And it's where I get all my energy. So that's why I got into venture. A little bit lucky, but also making your own luck by being in the right place. And that's why I stuck with it for 20 plus years.

Awesome. Ian, thank you very much for doing this with me.

You're very welcome.

I learned a lot of new things, actually. I've known you for a while, learned a lot of new things. So I think for founders, there's a lot of nuggets in here that as they think about pitching, as they think about their boards, as they think about finding the right investors, all of that, there's a lot of gold in here. So thank you very much.

You're welcome. Thank you for having me.

That's a wrap for this week's episode of Not Another CEO Podcast. Thanks for joining. For show notes and more, please Visit not another CEOPodcast.com we'll see you next week. Sam.