From Farm to Fortune: Toph Day on Building Businesses, Leading with Humility, and Fueling Innovation in the Midwest (Part One)

Forbes Books presents The Startup Science Podcast with Gregory Shepard, brought to you by startupscience.io. Greg is an entrepreneur who's built and sold 12 businesses, a recipient of 4 private equity awards, featured TEDx speaker, and Ben Bella Publishing and Penguin Random House author. Here's Gregory Shepard.

Tofte is a visionary CEO of Elevate Ventures. The most active seed early-stage investor in the Great Lakes region and a top 20 venture capital firm globally. With over 30 years of experience, Tof is dedicated to fueling innovation-driven founders and transforming Indiana into the innovation capital of the world. Tof, I am so excited and honored to have you on the podcast.

Oh, thank you, Greg. I, the, the honor's all mine. I'm humbled and honored to be here. I'm, I'm so excited for For this podcast. By the way, I'm, uh, right in the middle as we speak right now, 50%, just over 50% of the way through a 72-hour fast I'm doing right now as we speak.

Whoa, whoa, whoa. That's crazy. Yeah. That's, that's a, that's a, are you hanging in there? Are you okay?

You know, I do. I feel, I feel good. I think it's all like mind over matter. Right. And I, I, uh, set my brain to it on kind of Sunday afternoon. I've been wanting to do it and I'm like, you know what? I'm just going to go for it. I'm going to start tonight. And so I start about 6:30 on Sunday night and I just put my mind to it and I feel pretty good.

Oh, well, good. Well, good. Well, listen, you have co-founded 8 businesses across 7 different sectors with multiple exits to Fortune 500 companies. And I'm dying to know what drove this entrepreneurial spirit and how did you navigate such diverse industries?

So that's a great question. And it wasn't by design. I never planned for it growing up. I did plan to be an entrepreneur growing up. But I would say, how did that happen? I never liked authority too much, probably because of how I grew up in a strict German Baptist household. So like, you know, you got Amish and Mennonite and German Baptist. So we were German Baptist, you know, hats and bonnets. And, you know, we did take a horse and buggy to church on Sundays. But I was never much for authority. I like kind of, you know, I'm my own person. And if like, the less you put your thumb on me, the better I'll behave, you know. Concept. And then I think growing up on that farm and, you know, we didn't have a TV. I think I was just, I became very curious about the outside world, get on school buses and, you know, we, so I grew up about an hour north of Indianapolis on a small little farm and we'd get on a school bus and come to the big city, going to this place called Conner Prairie. And we'd pass these buildings that looked like pyramids. And I remember just peering out that bus window, like, who, who are those people that work in there? Like, what if I could work in there someday and wear a tie to work? You know? And so I think that's kind of the roots of it.

It's interesting. We share that. My family homesteaded, so we lived on a piece of property where we lived in tents while we built our own house and stuff. It was, it's very interesting. I mean, as somebody who has been, I mean, your background is just astounding, right? As somebody that's been an IBJ 40 Under 40, a top 200 most influential leaders, What key lessons have you learned in leadership that impacted you throughout your career and still today?

I think it, these are going to sound like lame words probably, right? But I think one that really, uh, that hits home with me is listen. And so just really trying to listen to other people. I've never, um, never felt like I'm the smartest person in the world, nor do I want to be, and nor do I want to be the smartest person in the room. And I get real I really get, I get really juiced up when I'm hanging out with other people who are smarter than me on 100 different things, 'cause I learn so much. So I think listening is one. And then I think being willing to be vulnerable, like to go for it and be comfortable that you're gonna probably screw some stuff up. Probably, it's probably what comes to mind.

I mean, you know, you're just, you've led companies in AI, SaaS, hard tech, broadband, Internet and on and on and on. And so I'm dying to know how you adapt your leadership style to such a variety of different sectors because they're different cultures, right? These different verticals are different cultures.

I think, you know, giving respect, right? There's the book Good to Great too. I always think about is, you know, he went that, I can't remember the author who, the author of Good to Great, but he went through and looked at all those public companies for decades, right? And who was the most successful? And then there were about half a dozen of them, I think he looked at and went and interviewed and talked to the teams, et cetera. And Tractor Supply is one that pops out. I think Walgreens was on that list too, but Tractor Supply is one that really popped out. And I think that was the number one in the period of time he looked at the highest performing stock and he couldn't find anything tangible. And he's sitting there thinking about it for days and weeks and months. I'm like, what is the difference between a high-performing company and not. And what he came down to was arrogance. That, um, that the, the companies where the CEOs were not arrogant and willing to give the credit to everybody else, those were the ones that were the most successful.

You know, I 100% agree with that. I think I tell people that there's no room for arrogance in entrepreneurship.

No.

Right. It's all about being humble and kind. Right. And, and learning from other people. And yeah, 100%, right? And I think it's interesting that you said you don't want to be the smartest person in the room. My mom used to say, if you're the smartest person in the room, you're in the wrong room.

Wrong room. That's what I'm saying, right? You know, Greg, you also made me think of another story, just so like leadership styles and what shapes you and the different cultures of all those different types of, in those different types of sectors. So my very first, uh, actual company was a painting company. So I, I picked up a paintbrush and started painting homes. And so I had that in college. I had 14 employees in college at the peak. And, and, and at the peak we're painting 2 houses a day, making $400 net per house.

Wow.

And we had this thing down to a science, right? Every painter had their specialty and, you know, you had the window guys and the cut-in guys and all that kind of stuff. You very quickly get to know who's good at what. And so one day I went to check on another house and I drove up on the site and I didn't see the painters on the ladders. And, uh, I'm like, what the heck's going on? So it's like 3 o'clock or something like that. And, um, I walk around the side of the house and they're kind of sitting in the bushes drinking beer. And my initial reaction was, oh my gosh, I've got to, I've got to fire this whole crew. And I'm like, guys, what? What's up? And long story short, um, I expected everyone to put in the same number of hours and work as hard as I was. And I was just blind to like, just like, just work, work, work at all costs, productivity, right? Just banging out the house. You know, it doesn't matter. We gotta stay as late as we have to, period, to get this house done so we can go to the next one tomorrow instead of, you know, doing a half a day at that same house the next day. That's not sustainable. And these were like some of my best painters too, right? I love these guys. They were great. Loved 'em personally and professionally. And I caught myself before I'm like, hit the road. I'm like, maybe there's a leadership issue here. So that was one of my first big moments of self-reflection that maybe you're not doing a good job as a leader.

Well, how did you, how do you think about that though? Like, so you're sitting there and you're saying, okay, there's a leadership issue. What do you think was the leadership issue and do you still carry that with you today?

So the issue was, so I grew up on that little farm and we worked sunup till sundown. That's what we did. And we, you know, it was a small farm, but we basically, you know, the kids all took care of the farm, right? So at the peak we had 200 hogs and a few cows and a horse and then the rest was tillable. So we had corn and soybeans, you know, we rotate those. Every couple of years. And then we got rid of the hogs. And then my dad planted that all to garden, 5 acres of garden. And so I've snapped more peas and frozen and canned and Lord knows what else, all kinds of stuff sold at the farmer's market on the roadside, selling melons for 75 cents, all that stuff. Work ethic is like one thing my dad was really good at is he taught work ethic and how to think ahead 3 steps. Or maybe he wasn't good at teaching work ethic because I'm still, I still suffer from this today. I struggle with it all the time. I still work. It's not shocking for me to work 16-hour days, 3, 4 days a week, and getting up on Saturday morning with coffee at 6 o'clock and banging out some thing that I've been wanting to do until 11. That's really not healthy, probably. There's a little thing called balance, and I've always struggled with that. I think I'm going to go back and ask the team in the next leadership team meeting if I'm getting better at expectations, but I don't think I think I've improved a lot to know that like the life I live isn't the life that everybody wants to live. And then maybe the life I live, I shouldn't live, you know, maybe I should get a little more balance in my life.

Yeah, I'm with you on that. I get up at like 4:30 in the morning, you know, I'm working, I do my yoga and my meditation, visualize the day, and then boom, I'm at work at 5:30 in the morning. And then I work until 7 o'clock at night. And I do that, I do it 7 days a week. I get off work at 12 on the weekends. Because my wife will, you know, not have it.

Well, and it's because you found what you love, right? And like what I do now, it's like entrepreneurship, all those businesses, what I do now with Elliott Ventures, I love it. Like I, it fires in every fiber of my body, like 24/7. And I just can't wait to get rolling to the next thing.

I'm with you on that, brother. Like as soon as I get up in the morning, I'm like, I have to, I have to pace myself. Otherwise I will literally get up and just go right into the office and start working.

100%. Exactly. Like open a laptop, let's bang some stuff. Let's get some stuff accomplished.

Yeah, exactly. Exactly. So when you think about your whole entrepreneurial experience, right? You look at your past and all the things you've done, which is just astounding. I was reading about you and I was just like, holy smokes, this guy is like, Epic. Just absolutely epic. When you think about not just being an entrepreneur, but investing and mentoring and founders today, is there something that stands out as something that listeners could look at and say, this is the key to success?

I believe that transparency, integrity, you know, honesty, Just being real. There's an element of entrepreneurship where you gotta, you gotta kind of sell the dream a little bit, you know, when you're doing things. But when you make a mistake, own up to it. I still make mistakes today, but I made some pretty big ones in the first few companies. The first, the second company I started with a broadband company and I made about a $150,000 mistake on like week 4. And that was pretty catastrophic when you'd only raised $1 million. And I just immediately went to the investors. I'm like, I screwed up. This is what happened and this is what I'm going to do about it. Anything else you want to know? They're like, nope, thanks for letting us know. And so I just felt when you own up to your mistakes, like the people will have much more grace.

So when you think about sort of like the keys? Like what I'm trying to understand, what makes you so special? Like, you know, I think about a handful of things, focus, drive, enthusiasm, discipline, and optimism, right? And you definitely have all of those things, but what is it that makes you stand out so much more than everybody else? You've had multiple exits to Fortune 500 companies. What is your advice to founders building businesses today?

Well, thank you for saying that, Greg. I don't, I don't feel very special. I feel like just a, uh, you know, German Baptist kid that grew up on a farm that is, that as far as we know, we live once and just, I want to just suck every moment out of life. I love people. And so that's just my personality, I guess. So I think of a concept called MELFO. It's kind of what we had adopted here at Elevate, but it's, it's market entrepreneur, legal, financial, operational. And just breaking stuff down into the most simplistic, like entrepreneurship's so hard, right? As you know, like when you start doing something, you know, if I'm gonna make this set of reading glasses, you know, well outta the gate, all of a sudden I wanna make bifocals and trifocals and I wanna do, you know, bedazzled, you know, arm bars and whatever. No, no, just start off with this good old set of 1.5 reading glasses. And I think we, we, entrepreneurship is hard enough and then when the squirrel, right? And, and you want to do everything in the first, you know, 12 months, it's just not believable. It's not doable. Um, and so it's like, keep the old KISS, keep it simple, stupid. Like just narrow deep. What are the basics? One foot in front of the other. What's a natural milestone to get to next and focus on that thing, get there and then, you know, and then get to the next one.

So it's interesting. It reminds me of something that Buddha said. He said, instead of drilling holes, shallow holes all over the place, drill one hole real deep.

Real deep. That's right.

Yeah. And when you think about Elevate Ventures, and then we got to talk about your conference rally because that thing blew my mind. So let's talk about how you transitioned into Elevate Ventures.

So It was formed, it was spun out of by Governor Daniels. So what's that, 2 or 3 governors ago? It was spun out of the Indiana Economic Development Corporation into a separate private entity. And so it was spun out to be an evergreen fund. And so I'm the third, we call Elevate 3.0. I'm the third CEO at Elevate. And so Elevate been around for 15 years, set up as an evergreen fund, and now we manage $255 million. Uh, so we're both venture development and venture capital, and then we invest cross-sector. So that's software, hard tech, life sciences, ag tech, food tech, sports tech, name a tech. We love tech. We're in the tech. Um, we don't invest in like pure-play services or, uh, you know, bricks and mortar or, uh, oil, gas, insurance, that kind of stuff. Um, and then we invest at the pre-seed, seed, Series A level. And so, um, so, uh, I was, I was blessed. They did a big national search and I was lucky enough to get a phone call and, you know, was put into the process and here I am, but was brought on to modernize the entire organization to get it ready for the next kind of 15, 20 years, or I think about the next 50 years. And so brought in to modernize the entire organization top to bottom and then go launch the first ever growth fund that will be headquartered in Indiana. So we're launching a $200 million Growth fund. We're getting ready to go to market here literally in the next few days to start raising that fund. And our BHAG is to have $1 billion under management here in the next 10 years.

Wow. That's, that's a, that's, that is definitely a big, hairy, audacious goal for sure. But, but, you know, you can't trust anybody else but you to make that happen. I mean, if it's going to happen, you're the guy that's going to make that happen. I mean, it's—

Right. We have a great team and couldn't do anything without, without the team.

I love how humble you are. I mean, you're just so humble, you know? I mean, you're this guy who has done all this stuff and you're just so humble. You're, you know, the roots that you came from definitely show through. It's like a huge quality. I mean, every time I give you a compliment, you defer to others and it is just, it's just a really neat thing to see with somebody at your level. I mean, you're—

Thank you.

You're the number one most active early seed, uh, pre-seed, seed, uh, investor in the whole Lakes region, right? I mean, it's just like, and you've done all these startups, sold Fortune 100 companies, sold Fortune 500 companies, and you have these 3 pillars, community, capital, acceleration. How do these pillars work together to create a thriving ecosystem in your region?

Yep. That's a great question. So, um, you know, when I came in, we, we, We kind of took a step back and said, you know, what's our vision going to be, our mission, like where are we going to focus? I always like to say I'm not smart enough to focus on more than 3 things at one time. So as we stepped back and looked at, so our mandate is venture development and venture capital, and then the sectors I mentioned in the stages. And so how will we be successful in that? So the venture development piece is very much about community. And so when we think about community, we think of it in terms of inside out, right? Or sort of local, regional, state, national, global. So we had historically, we elevate their main focus as you're headquartered or have a significant presence in Indiana. So some of those companies might be headquartered elsewhere, but they have a significant presence here in Indiana. On those rankings, by the way, Pittsburgh just came out with Q4 rankings and we were number 1 in the Great Lakes region and number 15, I think it is, in the US. Wow. Yeah.

Holy smokes.

Yeah. So pretty crazy. Yeah.

I mean, competing with the Valley, you're right up there with them, passing them up, most of them.

Yeah. In Q2, we outpaced Wycom.

Wow.

Last year. Now, I don't know if we did in Q3 or Q4 or not, but I mean, we're pacing right there at like the Wycom level. So it's pretty amazing. But we think about entrepreneurship, right? So you need community, you need people. We can't do any of this stuff alone, right? And then we need capital, right? To fuel it. And then acceleration is all about post-investment value add. So not just writing, you know, the dumb check, right? We all know the dumb check and the smart check. And so really making sure we write smart checks for the entrepreneur, meaning post-investment value add. So You know, it's so hard as an entrepreneur to go find the right talent, for example. And, and if you hire it yourself, you're so busy, you're so frantic, you just kind of hire the first body or 2 that comes in the door. Like one of the, one of my favorites is, is, you know, we've done founder-led sales, now we're ready for process-led sales. And so what does every founder want to do? Go hire a CRO from some big CRM. Well, they forgot how to make coffee. You actually haven't perfected your sales pitch. You actually don't have product-market fit. But you, we have false positives, right? So anyway, so we're, so from that post-investment value-add standpoint, the acceleration side, so helping people find talent really cost-effectively. We have a whole toolkit with over 50 partners with pre-negotiated discounts just to help 'em accelerate getting to the right partners to do the things they gotta do. We're looking to roll that out with a lot more AI tools here in the coming months. Network, Helping introductions to customers, to partners. We have over 45 operating partners that work with us. They're domain experts in all those different sectors. We're launching a research desk. The first version or the first artifact will come out here literally in a week or two. One day, I'm getting a signal over here, just one day. But the venture report that we put out We took a big step up. So it's really thinking about the 3 legs of the stool, like what matters, right? And it's those relationships, the people, that's the community side. Then you gotta have some capital, right? To be able to invest in the innovation. And then you gotta be able to grow efficiently. And so that's what we really focused on triangulating around that entrepreneur.

Yeah, it's a really big deal. I always tell entrepreneurs, I'm like, I call it soft capital, right? This, this, or shadow capital, right? Like that, that capital is more important than the money itself. You know, it magnifies your company dramatically. I mean, you know, you guys are definitely one of the best funds around. I mean, that says a lot about you in terms of your, you know, what you can accomplish. I'm interested though, when you look at your sectors, hard tech, life sciences, real estate, oil and gas, I mean, you guys are all over the place. Why do you decide on certain sectors and different verticals? What is the reason? What is your You know, what are you looking for?

Yep. So, um, so our mandate is to invest in, in high potential, high growth innovation, innovation-driven companies. So, uh, I always like to use the Kauffman Tale of Two Entrepreneurs because it's a third-party definition and it's just easier. Somebody can go read a 2-page paper. So Kauffman Foundation says there's, there's SMEs and IDEs. So SMEs, your small and medium-sized enterprises. Kind of your Main Street businesses, right? The restaurants, or I used to have trampoline parks is one of the businesses I had. Those little things were cash cows, by the way. But like Elevate would never invest in those trampoline parks because the customer base is, you know, pretty tight, 60-mile radius. The innovation-driven enterprises, you know, you have a national or global customer base, a $500 million TAM or greater. And so that's our mandate is to invest in innovation-driven enterprises of any shape, size, or form.

Oh, okay. Okay. So what is your process for identifying visionary leaderships and found— like, how do you identify a really good founder? Because everybody's like, hey, it's a great idea. If you don't have a founder that can execute it, then it's a bad idea, right? So how do you identify them? What's your vetting process? I mean, we have a lot of founders and investors listening to the show.

Yes.

So I think they would love to hear Yes.

So the first 2 words that come to mind are kind of soft words, but they mean a lot. And that's grit and creativity. And so it's, you know, not all the best widget doesn't always win. And so grit, creativity, perseverance, slugging it out, marketing, positioning, timing, Um, a lot of times can have a bigger impact on success or not than the best widget. We share a lot with founders, the things that VCs don't talk about. So for example, if you have a financial model and you're raising capital at a certain value, raising a certain amount of money at a certain valuation, and your model for your next raise only allows for a 1.5 or a 2x step up in valuation, You're going to get a lot of silent nos from VCs because they won't tell you that they expect that step-up to be at least 3x, if not 4x. And so it, or, or some models that have it be 10x, which is not believable either. Honestly, I think at some level VCs put unnecessary pressure on companies way too early. And you get into these arbitrary, you know, things like you gotta grow at 100% year over year. You gotta be 120% net revenue retention. Really? That might be putting undue pressure in spending undue dollars when things aren't really baked in yet, when they really don't have control of the unit economics, right? It's like, truly, how many phone calls do you make to get a return phone call or with emails? And like, literally, this is tracked. Right? At every single step. So founders don't have control of their data is a big one. Uh, and, and know these baseline motions. Not having control of their data is a big one. And not having a believable model is a big one. Um, and then we get founders sometimes that will say, oh, I, I'm, I'm gonna go to market. I've got this PLG strategy and I got these channel partners lined up and we're gonna, Or I come over top and sell some enterprise deals along the way. No, you're not. Um, I've tried 2 channels at once before too early and it never works. And so these are very different motions, very different success metrics, very different unit economics, very different skill sets. The people to execute those are very different. And so, um, you know, your go-to-market strategy being very focused, you know, like PLG, for example. Like, I wouldn't recommend going to market with enterprise SaaS today to anybody. I think those days are over.

So if, you know, the first thing that you said is the, and what you said about false positives stands true, right? So you're a founder and you're trying to keep track of your data, but you do it too early, you get false positives, and then you act on that. And maybe you shouldn't have tracked your data until a little bit longer until you know that the data is solid. And you're getting real numbers. You're acting on real numbers instead of like, well, you know, somebody sends out 100 emails and they get 50% conversion rate, you know, and they're like, oh yeah, we got 50% conversion rate. Let's act on this now. Let's send 10,000 emails, you know, and that sort of thing. And the other thing, and so I love your concept there about data. And the other thing is if you're a brand new founder and you're just getting started and you're trying to do 1,000 things, right? You know, you're, Your morning is filled up with this thing. Your afternoon is filled up with this thing. Your evening is filled up with that thing. How do you make time and should you make time for data that early? Or what is a good time to make time for, you know, aggregating data and looking at analytics?

So my personal opinion is that you should actually track data from day one, even if that starts on a spreadsheet, right? But now there's, there's, there's tools out there, probably. I'm sure that you can even get for free. Um, to, to start using some low, you know, lightweight, um, you know, CRM, for example, or something. But, um, but I think you should track it from day one. And I've never been good at this, but if you can track it like in real time, like after a phone call, like you're pop, pop, right? You're entering that, whatever happened there, you're entering those points of data right there on the spot because you can, you can never go back and recreate it, right? You, you, you forget. Um, and I, I think it's also, We jump from founder-led sales to process-led sales thinking that we have the playbook down, but we really don't. 'Cause people might be buying my passion or they believe in the dream. They drink the Kool-Aid, right? They get excited about it. Like, yeah, we'll, we'll buy this. Right. And I really haven't sat in front of those customers and watched them use my product. Or, you know, there's a lot of things I probably haven't done yet. And, uh, I wish I could remember who told me this. Um, unfortunately I only learned this about 9 months ago or 12 months ago. I wish I had known this 10 years ago, actually 27 years ago. But somebody said, before you hire your first salesperson, actually hire your sales ops person and tie them to your hip for at least 6 months and shadow every conversation, every move, every question the customer, the prospect asks, et cetera. Like literally track everything and develop what that real sales playbook is and what the real message is. That, that you use and what people really resonate with. Because obviously, oftentimes what we think it is as the entrepreneur, uh, isn't really what it is from an institutionalized sales process standpoint. And so by starting off with that sales ops person being glued to your hip every single day will make your first sales hires that much more successful.

And then how do you handle the investors, right? So the investor is sitting there going, We want sales, we want revenue, we want revenue, we want revenue. And you're like, hey, I'm gonna hire a sales op person. And they're like, no, no, hell, salespeople, marketing people, like pump, pump the engine, pump the engine. How would you, how would you help the founder to have that conversation with the investor and say, hold on, I gotta train my ops person first? Because I agree with you, there's a big difference between me pitching and a salesperson pitching, right? Somebody's going to buy from me because enthusiasm is contagious, right? And they're going to feel the passion and they're going to be like, yeah, these people are really on board. And a salesperson is going to be, it's not even close, right? So how would you track data between your results and somebody else? And then how would you deal with the investor's approach to get salespeople go, go, go? And you're like, hold on. You know, let me make sure I'm doing the right thing right instead of the wrong thing right.

This is going to sound crazy, but I think it's somewhat proliferant. But there's this, there's this thing called Google, and then there's also this thing called ChatGPT now. And what I'm honestly shocked by is the number of entrepreneurs that, that don't research. And so, Like, do thorough research in your space on trends, um, uh, you know, ratios of, of, you know, whether it's SDRs to AEs or, um, and even that probably gotta be careful about now. You should be thinking about how to stand up AI agents and how you send 1,000 people into the field, you know, every split second, uh, to bring leads back. So I think even that is changing radically. As we speak. But what I've found is that for some reason, shockingly, and I'll give you an example. Back when one of my SaaS companies, I would Google about every 6 months, you know, what are the best SaaS metrics? Or what SaaS metrics do investors care about? Or what are best-in-class KPIs for whatever metrics, right? And I methodically would re-Google these things. This is before we had, you know, ChatGPT and all that kind of fun stuff. But I wanted to see if there are any shifts in thinking and industry trends, et cetera. And there are a lot of changes year over year. And I think it's easy as an entrepreneur to think you have the answer, but the answer might be 5 years old or 3 years old, and nowadays 90 days old. And so I think it's really critical to be well-researched. And when you're trying to have that conversation with the investor, have some data slash market information that substantiates your viewpoint or that helps back it up.

I love that. All right, hang on, Toph. We have to take a break, but coming up next time with Toph Day, the CEO of Elevate Ventures, Toph and I will dig into the rapid pace of change we're all living If you think about the, the agricultural revolution took hundreds of years, that was centuries, lasted centuries, right?

The industrial revolution lasted decades. The digital revolution lasted years. The AI revolution is happening literally in hours, minutes.

The Startup Science Podcast with Gregory Shepard is brought to you by Startup Science. founders can log on to startupscience.io and use code Forbes to get free access. To connect and find out more about Greg, go to gregoryshepard.com. The Startup Science Podcast is a production of Forbes Books.