S5E6: Mac Conwell of RareBreed Ventures is Serving His Community by Turning LP Relationships Upside Down

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On today's episode of The Room Podcast, we sit down with Mac Connell, the founder of Rare Breed Ventures, popularly known as Mac the VC. Mac is proud to say he raised his unique venture fund on Twitter. You might be asking, how did he do that? Well, Mac's early career tackled solving problems through the lens of a builder and operator. As a software engineer, then as a founder, Mac learned the ins and outs of the Silicon Valley ecosystem. After his second startup and a quick career detour, he started investing back into his home state of Maryland. This platform opened up the door to new opportunities to invest directly into underrepresented founders within the confines of the state. However, this is where he got the idea to start Rare Breed Ventures. Today, Rare Breed invests in companies pre-seed rounds with a focus on founders based outside of major tech hubs. Including Maryland. Fun fact, he's gone from 2,500 Twitter followers to almost 70,000 in under 2 years. He attributes Twitter as the platform that most helped him raise his $10 million fund. On today's episode of The Room Podcast, we discuss the importance of team and trust, tactical advice for starting your own venture fund, and the future of the emerging venture manager ecosystem. Let's open the door.

Mac, it's so amazing to have you on the podcast today. Excited to share more about your story and learn a little bit more from you.

I'm so excited to be here. I'm looking forward to this one. Should be a fun conversation.

We think so. Before we kind of hop into everything Rare Breed, we'd love to really start at the beginning. Tell us, where did you grow up and how did that shape your view of the world?

I grew up in Baltimore, Maryland. Started in early parts of my childhood, I was in Baltimore City, then my family moved out to Baltimore County. I come from blue-collar family. My father was in the Air Force and then was a postal worker. My mom was a bank teller, very humble means. Didn't know what any of this stuff was, didn't know anything about this world of venture or asset classes or investing in general. I barely knew anything about stocks. Ended up going through the path of getting interested in engineering, went to college and thought I was going to be a robotic scientist and one day work for NASA. And when I told them that, They told me, oh great, computer science should be your major. Because of course I knew nothing of majors. I didn't know what any of them meant or what they were. And somebody told me computer science did robots. I was like, sure. Come to find out that's not how that works. But I looked up how much computer scientists made at the time. I saw like $80 grand on some number on some like list online. I was like, this is my major. This is what we're going to do. That led me down a path to being a software engineer and then being a founder and eventually owning dark side of things.

After graduating from college, you started your career as a developer at Northrop Grumman. Then you went into a bit of consulting. How did this early career stage put you on a path into entrepreneurship?

When I was in college, my sophomore year, I got internship with Department of Defense and I got a top secret clearance. That is what allowed me to drop out of college my junior year and get that job at Northrop Grumman as a government contractor. And I worked as a government contractor for years. But the path to startup was different, was sparked off by that initial internship because it was a student program, 300 students, and of the 300, 30 of us were Black. And so those became my core group of friends in my early 20s. But then again, to be in this program for the government, you had to be an electrical engineering major or computer science major. That was it. These really highly technical, highly educated young Black folks that became my core group of friends. And one of them, It's a gentleman by the name of Patrick Jackson, who is currently the CTO of a startup called Disconnect in the Valley. And he was obsessed with being the Black Mark Zuckerberg. He's the reason I learned PHP and MySQL because Facebook was built in PHP and MySQL. And that's what you gotta learn. He was the first person I knew to build an iPhone app. So the iPhone comes out in '07. He builds his first app in '08, super early days of all this stuff. In '09, he was the first one in the group who quit his job. Got married, told us he was moving to San Francisco and that some people who used to work at Google gave him money to build a company. Had no idea what was going on, didn't realize he was starting a startup, didn't realize he was getting money from VCs or investors. It was just, oh, that's really cool. This is what you've been talking about for the last 2 years. We're all engineers. We can all do this. We're all builders. So yeah, we should do this. And so the group of us, 6 or 7 of us, started our own businesses.

It's so cool to hear those stories from back when Facebook just got launched or when iPhone apps, there was only a few hundred of them in the App Store. At what point did you say, okay, I'm going to follow this path and become an entrepreneur and quit my job?

Shortly after he was going down the path he was going, a group of us started meeting weekly. We would go to Chipotle over lunch or after work and we would talk about tech and we would talk about ideas. Eventually, two of my best friends from college started working on something, I was like, "Hey, the only reason y'all two know each other is because of me, so y'all not gonna work on a project without me, so we're gonna do this." We didn't know anything. So as we're building this product, we're trying to figure out where to go to learn and how to gather information. We spent our first year just building, having all this tech built and no customers because we didn't know what we were doing. And then we figured out, we don't have customers, but we need to put money towards marketing. We don't have money for marketing, so what should we do? And one of my co-founders is like, Well, maybe we should get an angel investor because those are people who invest in companies. We can use that money for marketing. How do you find an investor? I don't know. You go down this rabbit hole trying to figure that stuff out. As you go down that rabbit hole, you start to figure out when you go to events, you meet people. So the more events you go to, the more people you meet. The more people you meet, the better chance you have of meeting an investor. Didn't even know that was called networking at the time. I tell the joke, this really happened. When I was first starting to do this, and this is 2012, I had a guy come up to me one day and he's, "Hey, Mac, you've been doing a lot of networking recently." What are you talking about? I don't run wires. I thought he was talking about setting up actual computer networks. I didn't realize that's what we were doing. So that's the beginning of learning how this all works. If you start reading blogs and you're early in the game, every blog says if you wanna be an entrepreneur that VC's investing, you gotta be full-time, you gotta do this. And so I look at my team, I guess we gotta quit our jobs and do this full-time. That was the wrong decision at the wrong time. We didn't know any better, and that's just how it starts.

It's almost as if you figured out the networking, pitching, finding investors, figuring out how to start a company really from first principles, whereas now it's such a track process.

There was less resources back in 2010 when we first started, but even today there's a track process, but you got to know that process exists. If you don't know this world exists, if you're starting out trying to build a company today, you go through the same thing. Even with the mountains of resources and books and podcasts and YouTube videos, I was 2 and a half 2 and a half years into my journey as an entrepreneur before I found This Week in Startups, because I just didn't know. And there was nobody in my circles who knew. There's a track path today. But if you don't have any entry point, you still struggle.

You have a community around you, Mac. You had these friends that you wanted to start this company with, which is I think something that Claudia and I have really felt ourselves on The Room is getting to start something with your closest friends who you do have that high confidence interval of trust with. Who were the people that you did end up starting your first company with?

Michael Washington, one of my best friends from college, and Sam Henry, my oldest friend who I've known since middle school. Those were my two co-founders. And oddly enough, all three of us were engineers. We had the perfect construction for a startup team, just three engineers, because that's how you build a company. The first company was originally called sometimesyouforget.com, later turned nobadgift.com, and then eventually givento. It was originally a platform to allow people to crowdfund money for gifts. We figured that if gifting is hard, you never know what to give people. So if people gave you a list of everything that they actually wanted, you could put the amount of money that you felt comfortable giving onto an item on their list, and then on the day of whatever it was, they would either get the gift shipped to them or they would get all the money put in their PayPal account. You give what you feel comfortable giving, they always get what they want. Really, the idea is every year on Facebook, everybody would say happy birthday to you. What if all those people put a dollar towards something you wanted? You might actually get a gift you really wanted. So we started down that path in 2010. 2012 is really when we started figuring out how this world worked and getting out there. We get into our first accelerator here in Baltimore, then one in San Francisco. But that's the time where we're feeling out that this industry of social gifting is a thing. It's oversaturated. Facebook had just bought our biggest competitor. Everybody knew Facebook Gifts was coming. There's a bunch of other companies in the space. And so our timing was completely off. No VCs were really interested. We're in the third class, which is the first accelerator for underrepresented founders. I'll never forget, we're having a meeting with an investor. He say, "That idea is uncommonly popular these days." You expect an investor to tell you they've heard your idea before, but when they say uncommonly popular, a death sentence, right? As we are processing that, I'm thinking to myself, we need to figure out a way to differentiate. What we figured out was a way for people to gift each other paid iPhone apps. You could basically prepay for a paid app and be able to ship it to somebody. And the way we had it set up was that person would get a text message that had a link, and when they clicked the link, the app would just download to their device. But when we started demoing this new feature, people's eyes were popping out of their heads 'cause they had never seen it before. This might be something. Then we realized we couldn't just do iPhone apps, we could do anything out of the iTunes Store. We figured out we could build a platform where you could programmatically purchase any amount of things from the iTunes Stores and distribute them in the form of a link. It could be an email, a text message, a tweet, what have you. I made the executive decision that we're pivoting to that. We go from a B2C company to a B2B company, which is a whole nother set of learnings and things we need to figure out. The needle started moving, customers started coming around. Then one of the customers we were using reached out and asked about working exclusively with us. At that time, me and my team were pretty burnt out. It was 4 and a half years in. When we started, we didn't know anything. Now we unlearned everything and recognized we weren't building something we were passionate about. We were just building something we thought was cool. So we said, "Hey, you could buy it." So we sold the IP off to one of our customers, and that was the journey of the first company.

You've hit on so many different parts of the founding journey from getting negative feedback around, hey, this is probably not going to lead to product market fit, to operating in a very competitive environment where competitors are being bought out, to pivoting to a sale. Tell us about how that experience after the 4 and a half years led you into venture.

After that company, I started another company. My second company, I knew how all this worked. I had the network, I knew how venture works, I knew how accelerators work, I knew how to put the team together. So I put a new team together, started a new company, which was an e-commerce product, got into an accelerator and raised a pre-seed round in all of 6 weeks. Super fast. I knew what I was doing. I got the game down. Then 2 months into our accelerator, our CTO disappeared, and I didn't see that gentleman again for 2 years. That completely tanked the product. It was never able to get off the ground, and then that company ultimately didn't work out. I then take a 6-month sabbatical, which is really, I just took 6 months to hide away from the world because I didn't want to go to an event where somebody asked me, "So how's your company doing?" And I have to do the song and dance of, "Oh, we're doing great," or, "We shut down recently." I don't want to be around those people. I don't want to think about this anymore. Then after 6 months of hiding from the world, these things that you get in the mail once a month called bills, they don't stop even when you want to stop. So I had to get a job. Got a job at this marketing firm. It was good money, but it's not what I want to do. It's a terrible terrible use of my skill set. Then after being there for a year, they got a client I didn't agree with ethically, so I quit. Quit on principle on a Friday, had no plans, didn't know what I was going to do, didn't know anything, just knew I couldn't work there. That Friday I gave them my 2-week notice, and the very next Monday I got an email from the investment arm of the state of Maryland saying they were hiring. The odd thing about that is I almost never checked my personal email at work, and I had never gotten an email from this organization before that I could ever remember. This is the first email I've ever seen from them on a day I just happened to check my personal email at work because what do I care? I quit already. I'm on my way out. It says they're hiring a new fund manager. And I called one of my earliest mentors who I knew that worked there, asked him if he thought I had a shot. He said, "Why not throw your hat in the ring?" And so my Eric himself wrote a cover letter for the first time in my life and applied to another job. That was the only job I applied to. 4 and a half months later, They invite me to lunch. Oh, this must be good stuff. I show up and the first thing they tell me is, "Hey, Mac, we really like you, but you're not qualified for this position." Why the hell did you bring me to lunch then? You could have sent me an email to tell me no. They told me that they really felt I should be on their staff. They were essentially creating a junior position to bring me on staff if I would take it. And I said yes immediately to taking a job making less money than I'd ever made in my professional career. That's how I broke into venture, from an email.

Wow. I'm chuckling because I also went to lunch when I got my job in venture, and I think VCs love to take people to lunch. That's, I think, a part of the job.

It's credit expense. It's free food.

You are from Maryland, so this is very full circle for you to go from Maryland to Silicon Valley, back to Maryland to actually be investing out of the state that you grew up in. Talk us through a bit more about that experience of getting to be so integrated in into your home state and home community?

It was a good feeling to be a part of an organization that supported Maryland. In 2012, I break into the scene of the Baltimore tech community. So I'd been a fixture in the tech community at that point almost 5 years. I had really strong relationships, really strong connections, which is one of the reasons why they hired me. Half of their board knew who I was. And then to be able to start there was really helpful because I knew the pockets where entrepreneurs were and I knew where investors didn't go. So I knew where I could get differentiated deal flow. The other thing was, as a former underrepresented founder myself, I know the struggles. And one of the things when they hired me at TEDCO was they had been struggling to invest in Black-led startups. They had done these listening sessions around the state that I got to be a part of, but I already knew what the feedback was going to be. They were asking entrepreneurs, why aren't more Black entrepreneurs applying for our funding? And it came back to many of us don't have access to friends and family capital to compete for seed funding. I'm lucky enough to be on staff while this is happening, so I come up with a proposal for a pre-seed fund. Why don't we create a fund that institutionalizes friends and family round, invest in these entrepreneurs earlier than anybody else in the country is willing to do? Lucky enough, a good friend of mine, Calvin Young, now in private equity himself, oddly enough. At the time, he was working at a local Black-owned bank in Baltimore called the Harbor Bank of Maryland. Me and him are getting breakfast one day, and I have this idea. I want to give 10 Black entrepreneurs in Maryland $40,000 to try and get them going. Would your bank be interested in being part of it? And he's like, "That's an interesting idea. Let me take it to my boss and get back to you." A week later, I meet with his boss, a gentleman by the name of John Lewis, the CIO of Harbor Bank now. I believe that's his title. If it's not, John, I'm sorry. Um, John was like, "Yeah, this is interesting. We can do that. We could put in half." And I was like, "Great." That night, I wrote up a proposal and gave it to my bosses for this pre-seed fund. I got into a bunch of trouble because I already talked to the bank before I gave my boss the proposal. They were like, you know, you're not allowed to do deals on behalf of the state of Maryland. We still got to talk to them. But I found you half the money already. They told me, if you want to do this, we see in this proposal you put your name down to run it. And so I got hired October 31st, 2016, and March 1st, 2017, I launched a totally new fund specifically for Black founders. Less than 6 months on the job. The first year we did 9 investments. The second year We increased the designation of women and all minority groups. And in 2019, the team and I went before the governor and state legislators and got them to put $1 million in the annual budget to make a long-term fund here in Maryland. At the time, it was the first and only state-backed pre-seed fund for women and minorities in the country.

I love how when you accepted this job, they said you weren't qualified for the title of fund manager. And then within 6 months on the job, you turn that around and say, by the way, I am starting my own fund.

That's pretty much how that worked. It was a pilot. Nobody knew where it was gonna go. I should go back to the original question about being a part of Maryland. Because I was working at a fund specifically investing out of the state of Maryland, I had these connections to make these kind of things happen. I was able to get these leaders and people involved. That's really what kind of pushed it forward. Nobody thought that Pre-Seed Fund was gonna go anywhere. I think everybody thought it was gonna be like a one-year one-off. It'd be a cute story. We got more applications from Black founders than for any other government program they had put up, period, full stop. And everybody was just like, how did you find all these founders? I went out to talk to them. I went out the doors. I didn't leave the doors open, say anybody come in. I actually walked out the doors. That's how that worked. And I worked so hard to make it so that they couldn't deny the program. And I'm happy to say they can't.

I think there's a challenging question taking it up a level from your experience to more just what's happening in the ecosystem. Which we see, which is, okay, is it a top-of-funnel problem with changing the numbers down to who gets actually funded? Or is it who's saying yes? I think it's often up for debate, but in your example, it definitely wasn't a top-of-funnel problem. When you opened the door and walked through it, there were founders to be found to invest in with differentiated backgrounds.

People talk about this issue of investing in underrepresented founders. It's not a pipeline issue, it's a funnel issue. There's tons of entrepreneurs at the top of the funnel. They just don't have resources, capital, and access to move through the funnel, to go from pre-seed or just getting started or just launching to how do you get to A series, B, and beyond. The path is so limited due to the lack of knowledge, access, and resources. It becomes a thing where it's like VCs will be like, you know, I've never seen a successful Black founder. You haven't seen enough Black founders get started with $80K day one to move at the same pace so that they can get the resources, so that they can be competitive with the deals you see now. And now the ones that do get to you have gone through so much, they gotta be the best of the best, because you got to go through so much just to get off the ground. And then the problem is you spend so much time learning and getting off the ground, you now have this time horizon that's working against you. There's a lot of reasons why these founders have a hard time getting there. But the more we have, the more people are saying yes earlier, the more people who are evaluating companies from a cultural competency or cultural lens to better understand their industries and their products and their consumers, the more we'll see that start to shift and change. But how long that takes, I don't know.

We're able to build into the ecosystem that you lived in, in Maryland, and open these doors for your neighbors, your community. Down the street. I don't hear often about the relationship between the ecosystem of tech and venture and state funding. Could you explain a little bit more about the dynamic at play where the state of Maryland is investing in for-profit businesses that don't have to do with the government?

TEDCO, or the Maryland Technology Development Corporation, is economic development firm first and foremost. It just so happens to make investments using state money. TechCo was founded about 25 years ago, and it was originally created to help commercialize technologies coming out of our research institutions. So really doing tech transfer. Over time, it kind of morphed into more of a funding organization, 'cause they realized that they weren't just missing out on commercializing technologies out of our universities, but also these amazing entrepreneurs who were struggling to get it off the ground. So wanting to be an organization that helped with early funding there. There's several other organizations around the country that are similar. In Virginia, there's one called CIT. Because TEDCO is a government entity, at the end of the day, they do have a double bottom line. Whenever you're looking at state funding or getting funding from a state, it's usually tied back to not just returns, but job creation. So our money came directly from the legislators. Those are our bosses. And what the legislators care about is job creation, 'cause that's what they can sell back to their constituency, which creates a very interesting push and pull When doing venture, our job is just to go for returns. But if you got a company in a rural part of the state that may never generate returns but can generate 20 high-paying jobs, that's a win. Having to take that unique lens to companies creates some interesting tension when doing venture. But I will say that TEDCO does a very high velocity of companies. They do anywhere from 60 to 80+ companies every year, from pre-seed venture.

Thank you for unpacking that unique dynamic. It is an interesting one, and I don't think something we talk about a lot on this podcast, so appreciate it. You actually left TEDCO to start Rare Breed Ventures, where you are a founding managing director today. Congratulations on that exciting milestone. Tell us a little bit more about Rare Breed's investment thesis and what prompted you to start it.

The thesis at Rare Breed is we invest primarily outside the major tech hubs. That means outside of Silicon Valley, New York, and Massachusetts. We'll still invest in those areas opportunistically, but the bulk of our deals will be elsewhere. We do pre-seed to seed, and so the way we define that is anything sub-$15 billion post-money valuation. We'll go as high as $20 and $25, but sub-$15 is really our sweet spot. We're industry agnostic. We don't do life sciences because I don't have a PhD. I'm not smart enough for that stuff, but happy to do everything else. Within that, we care about two things. If it's a software or tech-enabled company, We like to see a clearly repeatable and unique customer acquisition strategy. Don't have to have a lot of customers, but need to know how you go about getting them. And then with physical products, typically in consumer markets that have lacked innovation for 10 or more years, kind of legacy markets, because those two founders tend to be out-of-the-box thinkers and out-of-the-box problem solvers. That thesis comes from my time at TEDCO and seeing all the stuff that I liked and all the stuff I didn't like. That's one of the advantages when you're growing in your venture career is the ability to start to frame your own internal thesis by being able to see all the stuff your firm currently does that you like and all the stuff that your firm doesn't do that you hate. That's basically how I got to my thesis.

I was checking out your website and it's very sleek, very cool. And you had this button that says become an LP. We don't have that on our website. Most venture firms don't have that on their website. Talk to us about what that button means for you and your firm.

I'm a first-time Black fund manager without a network of LPs. So anybody who wants to give me money, come on down. If you're accredited, I will take you. During the time I was really thinking about building this fund, I started thinking about putting this fund together 2019, maybe even sooner than that. But I'm a student of venture structured 506(b), all these things are regimented. This is how venture's done. I'm following the playbook. As I get to the point where, okay, I want to raise a fund, there's some dynamics that are working against me. One, GP commit. I'm a broke VC. I don't have money for a GP commit. So how do you do that? Two, I don't have a network of LPs, but I'm arrogant enough to believe that if you gave me 18 to 24 months, I could meet enough people to raise money. I don't know if I can actually raise a full 10, but if you gave me 18, 24 months, I probably could. But again, I'm a broke VC, so that means I don't have the money to handle the travel that's required to fundraise. How do you get over these humps? You could raise money for your GP, raise money for your management company. So actually having people invest in your venture firm to own parts of the venture firm to give you the early money to go do the things you need to do. That's the pathway I have for me. It's the only way I'm ever going to be able to do it. I finally make up my mind early 2020, it's the year I'm going to do it. The pandemic hits, everything shuts down. I guess I'm gonna work at Takeco another year or two, we'll revisit this later down the road. Then George Floyd happens, I start tweeting. I have 56,000 followers on Twitter today. June 2020, I had about 2,500 followers. But after the George Floyd thing, I started tweeting more, I started getting more active. And for whatever reason, I just became consistent at it. I don't think there was any thought process to it. It was just something that I was doing. I meet this founder in Dallas, Texas doing something really cool. I want to back him, but I can't. I work for the state. So I'mma put an SPV together. It'll be my first ever SPV. And one of my advisors said, "Hey, I don't want to invest in this company. I want to invest in every company you find. So here's $250, go raise a fund." I kicked and screamed and fought him for like a good 10 minutes. And then he finally told me, "Look, if you want this money, this is what you're going to do." My personal network got me to about $400K, which is a far cry from $10 million. I'm trying to figure things out. I start seeing that I got more and more VCs following me on Twitter. So I see somebody who's a VC who follows me on Twitter, I'm going to send them a DM and try to meet with them. Over the middle of June to the middle of September 2020, I had over 1,100 VCs. 2 of those meetings were super instructive. One, I got to meet Kate Broaddock from the W Fund. Kate's amazing. I love Kate. The thing about my relationship with Kate is at the W Fund, they were one of the first 10 funds to get accepted to be a rolling fund on AngelList. Kate's telling me about this rolling fund and she's telling me how they can publicly talk about fundraising. I'm like, how can they do that? Because according to 506(b), you're not allowed to publicly talk. As I dig in, I meet the folks over AngelList. I find out they're using this 506(c) designation. I had never heard of it. The 506(c) designation comes from the JOBS Act, the same act that allows for equity crowdfunding. This is a designation that's been around since 2013 that basically says if you set up your fundraiser, whether for a fund or a company, under this designation, you are allowed to publicly solicit. The only caveat is all of your investors must be accredited. I'm raising a fund and I was only going to take money from accredited folks anyway. This is perfect. I didn't recognize that I didn't like the way Rolling Funds did LP returns. Rolling Funds is not going to work for me. But as I thought about it, all the things I liked about Rolling Funds were really technical stuff. You got some technology here, click a button, get access to docs and everything you could talk about publicly. Okay, what if I made a traditional fund but I use all the technical stuff on the front end that I like from Rolling Funds? Can I do that? Why couldn't I do that? So I did. Because we used the 506(c) designation, we are able to put a button on our website that says click here to become an LP, where if you click on it, it's a Typeform that asks you if you're accredited or not. If you say you're accredited, it then gives you a link that gives you access to our subscription docs. So you can literally click a button and have access to our legal docs ready to go. 20% of my LPs are folks who committed money to the fund without ever meeting me and never wanted to meet me. That's a very odd thing. It's not something that has been a thing in the industry before, and Rolling Funds really popularized it. I just showed another way that you could use it.

Mac, that is the most creative fund construction I've ever heard. We've talked to a few venture firm founders on this, and the ingenuity behind what you're building feels directly tied to the hustle you've had to have. And I love that you're turning what has been traditionally known as venture fundraising LP relationships upside down, putting it back in the hands of your community. It's really cool to see.

With the LP contributions and this fund that you raised and created, that really unlocks you to continue to fund founders that you believe in and you see their passion and hustle for the problems that they're solving in this world. Referencing back to Twitter, you just recently listed all of your portfolio companies. Would love to ask about a couple of portfolio companies that are near and dear to your heart and really embody the mission of Rare Breed and what you're excited for in 2022.

That's hard. It's like asking, "So which is your favorite child?" There are two founders that changed my life. They're two of the first checks we wrote for Rare Breed. One's in a company called Devineering Labs who has a product called the Spundle. The other one's MroboAmp. Shawna Step-Jones and Roberto are two amazing founders. The Spundle, or from Devineering Labs, is a device that can dry a wig or hair extension in 15 minutes with no heat. Basically a wig dryer. She's the reason why I started a fund. I watched her for 3 years struggle to get any interest. She became a surrogate mother to raise the money, start building her prototype. She literally gave birth to twins to fund her dreams. And so I quit my job and raised the fund so I could give her a $250,000 check. She is my hero. Roberto based out of Dallas, Texas, building a really cool SaaS company. When I met him, he was doing $10,000 monthly recurring revenue, had signed partnership agreements with Accenture, building this really cool company. As somebody who comes from the e-commerce world, the ability to make any website load in a second or less, I know how valuable that is. And yet nobody was looking at him for money. I was happy to back him. When I worked for the Pre-C Fund in the state of Maryland, There are 3 companies from that original cohort in 2017 that are currently in my portfolio: ScholarMe, Remodelmate, and Elite Gaming Live. I'm gonna talk about ScholarMe specifically, the founder Femi, because when I met him, he was 16 and he was in high school. When I was working for the state of Maryland, we gave him his first $40,000 check and basically gave him that money to quit college to go build this. He's now gone on to raise, I think, close to $8 million in total He's gone through YC. Paul Graham personally has a $100K check in his company. He was one of two companies Paul Graham invested in out of his class. His company's currently valued at $30 million, and they'll probably get a really large valuation early next year. Started off as a common application for scholarships, now is generated, turning into the largest neobank for Gen Z consumers. That is a heck of a pathway, and that is a young man I am so proud of. He's also one of the smartest people I've ever met, just flat out.

You mentioned some pretty incredible startups, but even more incredible founders. Thank you for highlighting those individuals. You mentioned a lot of the founders that you back are traditionally underfunded and Rare Breed exists to unlock that access. We talk a lot about access on this podcast, and so I'm curious, As we look towards the next 5 years in venture, how do you think access to capital will change for emerging managers and then also first-time founders?

You're gonna have a larger pool of emerging managers. When you think about venture, the vast majority of venture dollars comes from institutions, but the amount of money that's not being used from individuals and other private entities is astronomical. We're starting to see more and more people get into the asset class and more and more of that money and liquidity being unlocked. We're going to see a lot more emerging managers. We're going to see a lot more funds, and we're going to see a lot more structures that make it easier. Take me for example. I don't have a GP commit, and I raised my fund on Twitter. The ability to publicly solicit, the ability to build a brand. We're seeing a lot of emerging managers take this pathway of they're starting off doing SPVs. The ability to start a syndicate on AngelsList or Shore or through Carta and do these one-off SPVs. We're seeing the rise of these scout programs, giving people the ability to build up track record and then leads you to build out a fund. And then Web3 and crypto. Web3 is the future. Everything you use today is going to be replaced by something Web3. Everything, your TV, your devices, your credit cards, your cell phone, everything's going to have a Web3 version. That's going to be disrupted over the next decade plus. And that goes for funds as well. The idea of DeFi and DAOs, there are going to be crypto funds that are going to be raised through a DAO. Imagine having a venture fund that's a DeFi play where everyday people have ownership in the fund. And then the rise of the operator investor, right? The rise of entrepreneurs being angels. We flirted with the idea, Rare Breed, of putting together a small side fund to give a few of our entrepreneurs $100,000 to make 10 investments into 10 companies that they like. Y'all know all the entrepreneurs, you know all the hottest companies coming up. How many of your friends could you give a $10K check to over 2 years and then allow us to start building those relationships and cherry-pick? This is another way of doing a scout program. And as we see more and more investors building in public, people are getting the playbook It's not all hidden behind some curtain. It's not the Wizard of Oz. At the end of the day, we're all glorified financial advisors. Like, there's a playbook people can use and there's multiple playbooks and multiple ways to go about it. So as more of the information gets out there, I think we'll see the access grow. Giving people access to the room where it happens. That's how things change.

Thank you for joining us in the room to help open that door, Mac, and highlight some of these really unique and emerging opportunities to get in the game and create access. We'd love to ask, what's next for Mac?

Mac is going to spend the rest of his life as an investor. This is the last job I plan to have. When it's all said and done and I retire, I want to have a painting with me with my arms stretched out and pictures of the faces of all the entrepreneurs I've supported and backed who have raised over $1 million. And then I want to make sure that all of my children have a $50 million trust, and all of my grandchildren have a $25 million trust. If I can do that, then I would have made some change in the world and generated wealth for my family. I'd have had a good life.

I'm excited for that vision to come true for you. And if your story today is any indication, you're the king of manifestation. So I am excited about that manifested vision for you. We love to close with our question we ask all of our guests, It's our hero question, and it's near and dear to both Claudia and mine's heart. Who is a woman in your life that has had a profound impact on you?

A woman who's had a profound change in my life would be Angela Benton. Angela is the founder of the NewMe Accelerator, and it was that program that got me access to Silicon Valley and Silicon Valley world. Through her program, I meet folks like Eric Ries, Mitch Kapoor, Ben Horowitz, Ken Coleman. I get to be part of cohorts with folks like Brian Burkeen from Lightship, Chris Lyons from Andreessen Horowitz, Nate Jones from Andreessen Horowitz, James Norman from Transparent Collective, Justin Dawkins from Collab Capital, Carolina now at First Close Partners. We were all hungry entrepreneurs back in 2011, 2012. Now we're all peers as VCs and supporting entrepreneurs. But all of it started with Angela, her creating that program and giving us access and putting us in place to just be where everything was happening. It's because of that that I'm here today.

She sounds like an amazing person to have in your corner.

She's building an amazing startup, Streamalytics. Anybody out there, check her out.

We have to do that. Mac, thank you so much for answering our Twitter DM and hopping on to chat through your incredible story into founding Rare Breed VC.

Thank you so much for having me. This has been a pleasure. I look forward to being back in the future, and I'm looking forward to seeing what you two both do in this industry.

Thank you so much. We're excited to stay in touch, and we're excited to publish this podcast and continue to drive awareness for the mission that we share. This was incredible. Thank you.

Thanks for listening to this week's episode of The Room Podcast. To get The Room in your inbox every week, subscribe to our newsletter, which you can find on theroompodcast.com/subscribe. /newsletter. We'll be back next Tuesday, 10 AM Eastern, 7 AM Pacific, with our 7th episode of Season 5. Support for The Room comes from Silicon Valley Bank. Silicon Valley Bank understands these questions can keep founders up at night like Claudia. For over 35 years, Silicon Valley Bank has helped high-growth companies through scalable financial solutions, plus insights and expertise that many other banks just can't. Which could be why 50% of US-based venture-backed tech and life science companies bank with SVB. Learn more at svb.com/next. Silicon Valley Bank, built for what's next.

Cooley is a global law firm built around startups and venture capital. The firm has been devoted to entrepreneurs and investors, partnering with both to transform breakthrough ideas into successful companies. Cooley works with thousands of entrepreneurs and newly formed companies to ensure that they are structured for growth and long-term success. Since 2005, Cooley has been ranked the number one most active law firm representing VC-backed companies going public. Learn more at cooley.com and cooleygo.com, Cooley's award-winning free legal resource for startups.

All opinions expressed by Claudia Madison and podcast guests are solely their own opinions and do not reflect the opinion of The5VC. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. [MUSIC] [MUSIC]