Lowercase Capital's Competitive Advantage with Managing Director Matt Mazzeo

Welcome back to Beyond the Headline, everyone. It's a really exciting day to be on the show because I'm here with Matt Mazzeo, the Managing Director at Lowercase Capital. Matt, thank you for being here.

Thanks for having me, Jenna. Appreciate it.

I'd love to kick off with your favorite part of every day meeting with entrepreneurs at Lowercase. Why do you love your job so much?

Why do I love my job? It's hard to call this a job, right? So my My, my role lowercase is for the most part, it's kind of broken down into 3 parts. One part, just getting to be out there in the environment, meeting other people at other companies and sort of being active in everything from media to tech and just learning broadly. One-third helping portfolio companies. And so helping my team sort of achieve whether it's a hire or some new strategy around BD or working on product or getting ready for a fundraise. It's another third of it. But I can't— candidly, like, my favorite part of this job is actually just meeting the different entrepreneurs out there. And so for a third of my life, I go out there and have conversations with really, really smart people who are taking on these often sort of ludicrous risks when they could be going out there and getting paid a wage. They sort of shun that, take a risk. Do something that's by definition a little out there that other people might not see as obvious. And so they take these crazy risks because they feel this need to create or solve a— create a vision or solve a problem that they are uniquely positioned to do. And so you kind of get to constantly meet people who are looking 5, 10 years down the line and have a conversation about like the world that they want to bring and create themselves. And then if you love them and you love the problem and you think you're good to help work on that problem with them, you get to give them money and you're aligning your incentives in the long term. And so it's pretty incredible. All of those things are really fun. It's like getting to work on all of those challenges, dive in, help, and then sort of move to another one that you're capable of advising and helping on. All of those things are sort of pretty incredible aspects of this gig.

Can you tell us about one of your favorite or the most out of the ordinary stories of meeting a founder and you ended up investing?

Yeah, I got a few of those. Let's see. So Chris talks about like the Uber pitch a lot, my partner, Saka, which is like, we care a lot about narrative. So you have to be really, really good at nailing your story and telling your story to the right audience in the right timeframe. Knowing whether you have 10 seconds, 30 seconds, 30 minutes to tell your narrative, how to hit all the right beats of that story. And so whether it's raising for a Series A or for a customer that you're trying to sell or a new hire, each narrative needs to be sort of pitched across the medium and across this sort of like towards the end goal that you're pursuing. But for fundraising, you need to have a pretty pithy few minutes and whether that's in a deck format or just in a conversation, Chris calls it the Uber pitch because he wants you to be able to tell your story in the time it takes for the Uber to get there and pick you up if you bumped into a founder or if you bumped into somebody on a street corner. And so, funny enough, one of the teams that we backed in Little Labs, which is a product focused on the smartwatch ecosystem, incredible gaming background out of the team and building sort of top-tier sort of applications and experiences for the smallest screen, the smartwatch. I met the team through a friend at SFO. So Cody Sims introduced me. I've known Cody for a long time. We sat on the airplane together and we get off and I meet this group. And I'm like, "Well, let's hear the pitch." He's like, "Hey, you should meet this team." So they go and in the 2 minutes that it takes me to hear the pitch, I'm like, "That's incredible." And their backgrounds were amazing and they hit the beats. So damn well in 2 minutes that we were both about to get into separate Ubers. And I said, you know, actually, that, that was a killer pitch. Like, let's do the rest of the pitch right now. And so I had them cancel their Uber, jump into mine, and the 3 of us packed into the back of the— of an Uber. And that was actually the first pitch meeting that I had with the team at Little Labs, was literally in the back of an Uber heading to to South Park in San Francisco. We ended up doing the deal and really liked the team and sort of were excited about what they're building, but that was an interesting way. They're all sort of unique and nuanced because again, not all of them are just done through demo days and emails. You're sort of bumping into people constantly.

Give me another bumping in story. I've never heard of a pitch being done in an Uber.

Yeah, that was a pretty unique one. I don't think I've told that story actually. Yeah, you know, let's see. There's a friend who introduced me just over, you know, we were walking down the street and bumped into a guy that he knew, Royce Desinny. Royce is sort of an LA entrepreneur. I had never sort of crossed paths with him before. We had a little extra time. We ended up going and grabbing just a quick breakfast in LA.. And the three of us were just hanging out, and friend leaves, it's just Royce and I, and he starts telling me a little bit about the business that he's building. And I'm like, that's fascinating. It's called MobCrush, and it's all in the esports ecosystem. So it's like one of the best platforms out there to stream your gaming experience from mobile onto the web and onto social. Really incredible team, and they were really early. It was still like really rough tech prototype. And right then and there, he pulls two phones out of his pocket, and we're at breakfast, and he puts both on the table. And it was— for anybody that's in tech, you know, the tech demos are like, literally never go right, right? Takes 10 minutes to set up a Skype conversation still today. And, you know, we're talking about—

I know, right?

For every— there's always a problem in a tech demo. And literally there, at breakfast, over the shittiest 3G line I've seen, puts both phones on the table and is able to stream live a jailbroken app experience, so a jailbroken mobile game, onto— with almost zero lag time, so better than most Twitch experiences that you've seen out there, and streams live this using the front-facing camera. And it was just the most mind-blowing tech demo that I've ever seen. And he laid out a vision for the world where much like Twitch where you have the front-facing camera on a computer and these mobile, these League of Legends tournaments that you'd be streaming, that everyone would be live streaming mobile games directly using the front-facing camera of their phone. And we backed the team. I met with the whole squad that night. And honestly, sometimes you have those moments where you're like, this is just such incredible tech and he is such a great storyteller. And he told a future of where esports was heading. I think looking now at the ecosystem, First Round ended up coming to that deal, Crosscut came into that deal, the Reign Group, and then Kleiner Perkins led their A round. That team is now in Santa Monica pushing the boundaries. They were actually featured at WWDC for their work around the ReplayKit and live streaming mobile apps. They were just years ahead of it. They had the vision on where this world was heading. Now I think people are just catching on to how big esports will be. And I still feel like that team is a few years ahead of it.

I love both of those stories, especially the esports reference, too, because it goes into a question I was really excited to ask you. Everyone always says, expect the unexpected. How do you apply that to your life as an investor and seeing ahead?

Yeah, I think we're unique in that we don't have a really thesis-driven fund. I think there are a lot of funds out there who are like, Bitcoin's gonna be big and that's where we're focused, or this geography is gonna be big and that's where we're focused. Notionally, we have theses that we, that Chris and I sort of bat around, and predictions on where we think the world is heading from like what social platforms will be impactful, what new user behaviors are like, can we project out a little bit? But for the most part, a heart, like a big part of this job is just being really open-minded to the entrepreneurs and the ideas that you see out there. 'Cause the best ideas are non-obvious. And so I am not out there coming up with an idea saying, "Hey, you guys, somebody go out and solve this problem." But we're constantly meeting people taking leaps. And that's why a lot of the investments that we make in the early days seem a little bit nutty because, you know, we're kind of trying to keep out our own pattern matching. Pattern matching in certain respects around like the right motivations, the right approaches, the right way to think about fundraising, but pattern matching and staying away from like solutions that we would apply to a problem. And so, because you can't really pattern match the best ideas, you can't pattern match for Uber in the early days because it doesn't really look or smell or feel like anything that came before it. Same goes for Airbnb, which we missed. Or, you know, I can go on and on for ones that we've missed. Where we applied a little bit too much pattern matching. And so we constantly fight just to keep out of that and just keep open mind to entrepreneurs, why they're building it, what their essential insight, why now, what does success look like for them? Those are the questions. What scares them about the business? Those questions matter more to me than like me thinking about like, somebody solve this problem, please, kind of thing.

When you say the why now, I was thinking about this, this morning, actually really excited to chat with you. A lot of times when both for founders and investors, you come together and partner on a business, there's a lot of conviction around it.

Yeah.

What happens when you have a lot of conviction, but you're not 100% sure about the timing? Do you take the risk?

Depends on how— it's a good question. Market timing risk. I've done it a few times. Sometimes I'm right, sometimes I'm dead wrong. Timing, you know, being early is the same thing as being wrong. And so it depends on the category. It depends on the team that's able to like wiggle their way to enough revenue and enough like sort of cockroach mentality to stick around for when the market matures, that you'll have— you'll be there around the hoop when that market matures and finding mechanics for revenue. It's okay to be early Your timing can be a little bit off if you have the right team that will know how to survive for when the timing is correct. If you have conviction around a team and a problem, often we'll make that investment, even if we think it's a little bit early. Now, there's certain categories where that's just not the case. We've been very hesitant to place too many bets into VR. We've done one and are looking at another, but certain categories within VR, we're going to wait for that marketplace to mature. Content studios, platforms where you really need to have density of user base in order to make it make sense. Timing is important.

I love that, and I'd love to chat about how you guys operate as a firm. Why is it so important to you to remain a small and lean team?

Why is it so important? I think being active investors at the seed stage doesn't scale particularly well. And so, when we make an investment, it's not like a huge workforce. There's not like a lot of infrastructure. Behind me is my house. We don't even have office space. We had an office for 3 months once, and literally neither Chris nor I went to the office. We're not a traditional fund in that way. It's not— we don't have an address on Sand Hill, but at the same time, like, I just think it's really hard to scale up the kind of activity and the impact that you can have at the early stages. Now, I think there are funds that have done an amazing job of it. I think First Round is like— and what Josh and the team partners over there, and Rob and Chris and Hayley and all of them, and Finn, they are just an amazing platform today. That has scaled it up. But for us, we like to just, we like to go in and work and spend time and jam. And it's not like productized. Your thoughts are not productized and like your insights are not productizable. And so like when I sit down with a founder and I'm like, let's just leave it as an open, we call it a jam session. Let's block off a few hours and just have an open discussion about the business, about the product, about our thoughts, what we're seeing in the market, any insights. And some of the best turns in a team come from like pulling those, like some insights that you have out of those. The bigger you get, the more infrastructure you place, the further you get from that insight. And also, you know, when you think about funds that have like a lot of analysts and associates and principals and people between the partners ultimately making those investment decisions and the companies entering the process, it's really easy to dismiss really cool companies out of the gate. Because the ideas might sound silly, or small, or niche, or— and as you sort of— they're not always like, "Oh, that's an obvious, like, you know, transportation hack," right? It just seems like, really, a limo business? And so you have to really have a texture in those early meetings to get a sense for the team, and the entrepreneur, and all of those things. And so the further you get away from the entrepreneur and the idea and the, the moment of analysis of like that first pass, um, I think you lose a little bit in terms of your, uh, ability to spot the ones that aren't as obvious. And frankly, those are the best.

When you think about those investments and your experiences, how do you feel you've evolved as an investor from the first investment you made to now?

How do I think I've evolved as an investor? I spent a lot of time thinking about how to like, let's, let's, I'm not sure on the decision-making. Let's focus on the servicing side. So I care. I think in the early days, you're frankly, when you first become an investor, some of the best advice I ever got from Chris and from others was like, you will feel this emotion of when you look at a deal and you're like, oh, that's pretty interesting. And they're coming to you and they're like, and we want you. There's a really— there's this like dopamine hit that you get as an investor, like, oh my God, they want me. Me? Wait, me? You want me to be in this business? That sounds amazing. Like, thank you. Really, thank you. And it takes a little bit to get over that. I think you could go through most investors. There's a game you could play where you go through and like try to randomize their investments and try to pick the ones that they did first. Because I think a lot of that, like, you know, a lot of it comes from like getting over that and like really having an analytical mind in those moments. But ego plays in everything. And so losing that is some of one of the ways you evolve. Getting reps, I think at this point, in the last 4 years since I joined the Fund on Fund II, we've done around 65 investments, new investments. And so you just get a lot of reps. You get, you build a, you know, you understand the mechanics better. You understand how to coordinate the right kind of fundraising strategy and the right kind of like pacing to how a deal gets closed. You understand a little bit more about when you have leverage around like pricing your terms and when you have less and how to act quickly and do the diligence faster. And just, you've built it up enough rep, like repetition and muscle memory that you can go through the exercise of coming to a decision faster and building conviction faster and identifying sort of like, oh, that's, that's the kind of team and round that I want to be a part of. Now let's go through the exercise of like, what do I need to find out to get the, to build conviction? And how do I have to talk about it? And what, like, you start to pay attention to things in yourself where you're like, oh, that's a real thing that I really want. I'm excited to work on. I think I've gotten better at listening to those things. You also get over a little bit of— to go back to the ego conversation, like, you stop trying to imagine what a company will look like with your impact, if that makes sense. I think that's one of the things that plagues a lot of investors, and particularly me when I started. I'd look at that company and be like, "Wow, that's an amazing company. I could imagine if I was in that running that company, here are the 10 things that I would want to do to that company." And like, you start to play, you start to even in the pitch meeting, like describe a variant of the company. And it's very easy for an entrepreneur in that moment to say like, well, shit, I need the cash. And I want this investment. And so I'm gonna say yes, that's exactly what I'm thinking. And so not filling a company as like, as though it's a glass with your own vision for it is an important thing to evolve as an investor, that I think I see a lot of people who are new to it do, and frankly, I did when I was really new to it. The other way that I've evolved, I think, is like learning how to service. Like, what are the things that are really important to a company? And like, now that you've built reps, so we've invested in 65 companies, it means I've been through more than that in terms of next fundraising and advising on that. It's how do you structure onboarding as an investor, which I wasn't necessarily thinking about when I first started, but like, what does an onboarding look like most effectively? What does communication between an investor and a founder look like? How do you give templates for how to communicate? How do you give templates for how to fundraise the next time? What other services matter? So we scaled up a product called Lowercase Alpha, which is a beta product. Like, that was a real problem that I was identifying from like founder after founder after founder, which was like, we have this beta product, we don't know whether to launch in like New Zealand to get a handful of users on it to test it and see if it makes sense. Apple doesn't let us do big beta tests, so like, we have 100 of our friends and family on TestFlight, we're not getting useful data, and so we built a beta community ourselves, just 'cause that was a good service to provide founders, and so we now have almost 6,000 people who are on a text message group. You can go to lowercasealpha.com and sign up, put in your phone number, and every couple weeks I'll send you a beta product, either from a team that we've backed, or from a team that we like, or from another, founder that we just wanna be helpful to. So it's not just investments of ours, it's just cool, interesting products that are looking for cool feedback and interesting feedback from actual users, not just their friends and family. And so turns out that like having a few thousand users try your product before you had to go live in the App Store was a useful product, was a useful thing for founders to get. And so building those, thinking about like what other value propositions that an early stage fund can provide, I think that's been an evolution too, is knowing what the needs are repeatedly for early stage companies., and servicing either through relationships and contacts that I need to build or through like hard products like Lowercase Alpha.

When you're thinking about those needs that you want to fulfill for the founders and other teams that you're really excited about, where do you go personally to stimulate your creativity and to sit down with all those ideas?

Uh, where do I go? Give me an example.

Or what do you do?

What do I do to like brainstorm around those ideas?

Brainstorm around those ideas, like your quiet time.

Oh, where do I go? I'm a morning person and I wake up just earlier than almost everybody. Like, I just, I, it's a force of habit. Like by the time most people are waking up, I've probably read everything more than I should. And like I spend too much time on news. And so it's like from 5 till 7:30 before my house is waking up. Like, um, that's my favorite part of the day.

Yeah.

It's just like a different part. Like I, again, like I've always been a bit of a morning person anyway, and so I just know that that's my time to do my most creative thinking. There's not a structured way that I do it. I'm up, I'm reading, some idea will come to me, I'll be like, "Oh, that's what I should be working on. That's really fun. That's a good project to build." That's kind of when I do it. I'm not disturbed, not by intent, just because I can't sleep in the mornings. I wish I could sleep in a little bit later. It would probably be healthier for my lifestyle, but that's when I'm getting a lot of good creative thought time done. Frankly, you're not getting a ton of emails then. Everybody's inbox is a massacre these days. If you can have a few hours where not everybody is up and pinging you before the East Coast gets up, that's a great time for me.

I love that. It's the best time. I just started leaving my phone on airplane mode for like an hour. In the morning. And it's so nice because literally there's nothing and it's dark.

Yeah, it's nothing. Nobody's up in the mornings. I don't know.

Let's not get them on the train.

Just don't tell anybody. So it's like before I've done anything, like just 2, 2, 2 and a half hours of like grind in the morning. And I like, that's when I read everything I can. That's when I like write. That's when I you know, just jot down ideas on things that I want to build next.

What's something that you've read lately that really stood out to you?

Um, what's something that I've read lately? Ready Player One was great. I thought Ready Player One was fantastic. Um, did you— have you read it yet?

I haven't read it yet.

Oh, you got to do it. Um, that one was really good. Uh, The Accidental Superpower was pretty great, uh, sort of an anthropological study of, uh, why the world became the way it is from a power structure, an international power structure. So like sort of a geopolitical breakdown of like historic history, present, and a prediction for future breakdowns of like who will be the superpowers in the next 20 to 30 years based on demographics and geopolitics. Super smart guy makes it relatable. That sounds a little bit heavy, but he's actually hilarious and fun and light and worth the read. What else?

I don't know.

I read a bunch. I read a bunch of like nonfiction and fiction stuff.

So you get those 2 hours in the morning where a lot of the reading is being done, the creativity is being done. Let's say this is probably the worst thing you could ever tell someone as busy as you. You only get 6 hours to work a day. What do you do?

I only get 6 hours. Um, I don't check email. Um, I, what's it called, let's see. Like, you want me to give you like right now, you give me 6 hours from now, or you like—

You have 6 hours, yeah, just today, 6 hours, a typical day of Matt, and you can only do certain things that fit into that time. What do you feel would be the most important?

I am, I'm making a list of the portfolio companies that I think I'm breaking down into two positions. One is like lowercase fun stuff, and the other is like portfolio company service stuff. And I am diving in on like the— I'll dedicate to six of the portfolio companies a half hour of thought time and like go through their top priorities of like, what are the things that are important to you? Like, let's go, let's go attack those and be basically a half hour employee at each of those companies and try to be as impactful to each of those teams as possible. Possible in a half hour. And then the other 3 hours I'm thinking about like scale, building out the next project that I'm working on for scaled service across all of those portfolio companies. And so I've been really focused on a jobs solution recently. Turns out like early-stage seed companies, maybe with the exception of First Round, are just total shit. Early-stage seed venture funds and frankly companies too don't have a lot of infrastructure for how to hire their first 5 to 10 employees. They probably have a network that gets them Some of it socially, but like how do I hire engineer 5 to 15 or whatever? So I've been banging around an idea that I've had for a while on how to solve that problem. And I'm getting close to launching something there too.

Oh, very exciting.

Yeah.

When you think about that problem in particular, what tip do you have for founders after seeing so many companies grow to navigate those shifts where you go from 5 to 10 employees and then 10 to 20 every time you double?

What advice do I have? You have to— don't rush any of it. Don't rush any of it. I know it seems desperate and you're like, I need that dev, I need that developer, I need that engineer. Don't rush. Like, find somebody you love and wait for it because it's just any time that you think you're wasting by not bringing on that person is going to— it's just going to cost you so much down the line. Pain when it— if and when it doesn't work out. And so that's what slows teams down, is the resets and like getting headcount out. And like, they underestimate the long-term cost of bringing on people that they didn't fully vet and didn't think about the culture fit. That's the stuff that's really cancerous. Really emphasize culture fit, not just skills fit. And don't hire— like, hire for strengths. There's a whole bunch of things in there, but like Those are important things. I also think that like, a thing that a lot of teams don't do is record their company culture from day one. And so when I've given a team advice on how to write the investor updates, like it's really easy if you were saying, hey, here's how you write an investor update. Here are my asks and my KPIs. And like, here's like the good news and the bad news and like my product work and hires and big business milestones. Nobody ever does like a culture piece at the end. And like a milestone in terms of like, here's our team and here's a cool story about our crew. That's actually really important in my mind.

Can you give an example of one of those companies giving you a culture update? What does that look like?

Yeah, the Bellhops team. The Bellhops team is—

I love the enthusiasm.

The Bellhops team is unbelievable. You got to go check this team out. So they're a moving company. They're one of the largest employers of college kids based in Chattanooga, Tennessee. Believe that. Um, and they're growing like crazy. They're doing great work. Uh, you've never heard of a moving company that basically has like an NPS as high as this team. And the reason is because they take their culture really seriously. They have this distributed workforce. The only way it would work is if you like really focused on making people love the company and love the culture. And so they hire just tons of college kids and help with everything from like local moves to like handiwork. And so they're basically building this like massive and distributed workforce. But the people that they bring in and highlight as part of it, they do videos and GIFs as part of most of the investor updates. And— Very cool. You love them. Like the video reviews, they send thank you notes from the movers, from the movers to the people that they just worked with. I've never, I've moved a bunch in my life, I've never seen a thank you video from anybody that's ever moved me. And like, they're just amazing, you know, storytellers, and they know how to build a culture in a way that is, that company is as much about their business as it is about their culture, and their success will be defined by both, frankly, equally.

That's great. All right, Matt, two more questions for you before we go. The first one, whether personally or professionally, what's the best feedback you've ever received and how did it influence you?

What's the best feedback I ever received? I think it's the best feedback I ever received was from Chris when I first joined. I'm the kind of person that needs to have the shit beat out of my— every bonus meeting I ever went into in any company I was ever a part of, I asked for them to just beat me up. Even if it was like the best review I'd ever received, like, I literally ask everybody to just beat the crap out of me. And it was the only way I'd ever learn. Like, and so I'm sort of a glutton for that kind of like feedback. But there have been a couple of times where like I asked Chris for that. He was like, I was doing fine, nothing, nothing big. And he called me out for a lack of hustle, like a lack, like I hadn't, I hadn't done I hadn't done everything I could on a deal that we were working on. He was like, "You know what? You just didn't treat this moment like you were an owner of the fund." It stopped me in my tracks. He's the greatest mentor I ever could ask for as a partner and a friend. Have somebody who you respect tell you that and call you out just lit a freaking fire under my ass. Yeah, and I deserved the feedback. It was correct and it was— he could have been really easy just to be like, "Hey, things are great. Everything's fantastic." But it was like one deal and it was like one moment and he called me on it and I needed that kind of kick at that moment in time. And yeah, I think everybody does. Everybody needs somebody who's going to be like, "Hey, you know, you're doing great, but that's not enough. Like, check your shit. You need to step it up." And it comes like It comes when you feel it. It's especially hard. Like, the deal was great. Like, it was a great deal. It ended up working. It was fine. Uh, it's like, it's like, I don't know if you— my dad was like this as a kid, but I got a B+ on a test, and hard test. Think like, that's not a bad grade. But, uh, but he was like, yeah, that's a fine grade, uh, but you screwed up. You didn't study the right way. And so he called me on my mechanics.. I care about when people call me on my mechanics, not on the results. The results could be great, but the mechanics need to be there. Frankly, both, funny enough, now that I'm thinking about it, were based on my work effort, my work ethic.

They're definitely game-changing moments. I'm so grateful that we got to include that. I had a similar one. When you hear it, sometimes it's like, whoa.

Yeah.

All right then. It changes you.

It changes you from somebody you respect to the outside world it would look like, holy, Matt's working his brains out. He's everywhere, he's traveling, he's in email, he's doing all these things. The deals are great. It should be like a high-five moment, and when you don't get the high-five and you get the, "You need to step it up," is like, that's exactly what you need from a mentor. Nobody ever got ahead from being like, "Rest time, high-five." And so, like, I love that, I love that, and it's one of the things that I love about having a partner is they can call you on your shit. Like, just because you did a good job doesn't mean you get a high five. The results are not the work. The work is what matters.

I love that. It was very similar to my feedback, so I feel you on that. I don't know if we'll have time for the next question before we lose you at the computer, so I think that's an awesome way to wrap it up. I'm so grateful that we got to have you on the show today and dive into your experiences. What's the best way, Matt, for everyone to stay up to date with you and the work Lowercase is doing?

Uh, 3 ways. Check out Lowercase Alpha. Go to lowercasealpha.com, check it out, sign up for the beta. You can see the apps that we're playing with and give feedback directly to the founders. They'll appreciate it, I'll appreciate it. So that's one way to be active in our community. Number 2 is Snapchat, sort of where I'm doing a ton of like office hours now. So people like send me messages there and I respond pretty fast. So if you have a question, be pointed with it, but I'll get back to you more often than not. And then Twitter @Mazzeo. So @MMazzeo on Snapchat and Mazzeo, M-A-Z-Z-E-O, on Twitter. Those are the best ways to get in touch.

Fantastic. Thank you so much. This was so much fun.

Thanks, Jen. I appreciate the time.