The Real Reason Startups Fail (It’s Not Ideas)

If you want to build a great company, you've got companies that fail, companies that do okay, and great companies. You want to build a great company, you have to have operational excellence. You don't actually have to have innovation to build a great company. If you have operational excellence, you can build a great company. Innovation is a great seedling to building the best companies. But innovation will fail or succeed purely on the forwards of the execution. Gpm, the greatest idea in the world, greatest business concept, the greatest thing all if they cannot execute. Nothing ever happened.

Look, I'm excited to talk to you. You know, there's. You've got a vast wealth of knowledge and a variety of different things, obviously exiting companies, buying, selling companies, all this kind of stuff. You know, as we head into 2025 and we're heading in now to the election cycle that we've got coming up in 2024, I'm curious to know what your perspective is on kind of how you see the economic environment shaping up, especially as it relates to deals, M and A and that kind of thing essentially.

I mean, there's a lot in there. You're gonna get very different. I don't want to kind of throw out a political perspective of who people should vote for, but obviously it's very, very different outcomes potentially from the two different candidates. I think I would focus more on kind of a little bit more of a detail in the weeds around, you know, what's happening with M and a and the FTC's position with Nina Khan running the FTC at this point. And, and I do have a. Maybe some of the strategies that taking, as it relates to M and A and as they think about the M and A market, I think there's some good things, but there's also a lot of things that are, that it definitely, you know, will hold back, innovation, will hold back, you know, business development.

I like getting perspectives of people in the industry that have, have done great things. And this is, I mean this is your, this is your thing, your. It's your job to know those things. Right. And a lot.

Yeah, so.

So who are kind of going through this are, you know, novice at best in many cases. But yet we're trying to figure out, okay, how are we going to acquire a company? Are we going to sell a company? What does that look like? I chose to exit last year due to the environment itself, specifically just. Just because of that.

Yeah.

I am curious to know what some of the hill tailwinds and headwinds you see.

Yeah. So I've been obviously in the heart of innovation for 25 years of my career and, and innovation has just, I, you know, I grew up as an engineer, I came into the market as an engineer and I kind of ended up building technical businesses specifically an idea of like how can I contribute to society with the advancement of technology. That's how I see it. You know, some people might see it differently, but I definitely see it as a contribution to society, contribution to quality of life. Like how do we advance technology and as the US how do we stay ahead of the curve? Because I think the key thing that's driven the US economy for the last 50 years has been technological advancement and innovation. And this being a hotbed and an environment where innovation is encouraged, new businesses are encouraged. And so now I sit in the venture space and I'm investing in a lot of these innovative companies. And what I really have come to learn and understand in my career is the cycle of money and the cycle of innovation. How does it all work? So there's the general concept is people.

That have made capital in their life want to invest that capital back into the next generation, they want to make money. Everyone has an economic outcome they're looking for. But ultimately I do think that innovation into venture businesses is kind of the most forward looking innovation, forward looking investment strategies that people might have. But again it's still an economic decision that people make. So as investors invest in funds like our fund, what they're really looking for is hey, what is the opportunity that we're going to generate here? We'll invest in some great businesses, some will grow, some will be successful, some will fail. But at the end of the day, how do I get my returns from this investment? And those returns stem from two main categories. One is companies that are able to go public, which is a real thing. And secondly is companies that get acquired, which is the far more common exit strategy. Ironically, the biggest acquirers in the category are the big players, the Googles, the Microsofts, the world. They're going to be the biggest acquirers. Having said that, the general idea is, you know, for, for me as an investor to continue cycling my money back into these venture funds, I need to be able to see the end of that cycle. I need to see that come out and then I'll reinvest it into the next set of gener of innovation. And so if you know, two years ago I think there was north of 100 IPOs, 140 or something. And then in the last two years there's been probably sub 10 each obviously because the market has come down. So everybody's leaned much more into, well, if we don't have an opportunity to go public right now, then what's the opportunity to be acquired? And the opportunity historically to be acquired has been significantly higher. The likelihood of being acquired is significantly higher than likely that of going public. But again, what it does is it drives that loop of capital which drives the loop of innovation. And by the way, it's not just the capital, it's the innovators themselves. When they sell their businesses, they want to go back out and innovate again. And there's very few innovators, true innovators in this world. So you want to release them back into the wild and give them the opportunity to innovate. And so, you know, the markets are going to naturally strangle or drive public offerings. Like that's going to happen kind of organically. But M and A, which should possibly happen organically if you suddenly put a real restraint on it. If the FTC decides.

Acquisition in general is a bad thing and we're going to put a whole bunch of barriers and blockers, suddenly the amount of considerations an acquirer has to go through before they actually make an offer to buy a company is way, way more stringent, way, way more restrictive. And as a result, I'll end up in a situation where the volume of acquisitions goes down significantly and the likelihood of a company being acquired goes down. What that does is that stops the returns coming back to the investors, it stops the release of the innovators that want to go back, market and re innovate again. And ultimately in the grand scheme of things, it slows down the whole process of building a big great business, especially from a technology standpoint. I feel as though, although there are, you know, legitimate reasons for some intervention, like true competitive or kind of anti competitive issues that you have to consider, I actually agree that those exist for the most part that is not the case. For the most part companies are not able to be acquired for reasons that don't relate to an anti competitive environment or things like that. And I think that that's actually does a misjustice to the ability for this market, for the US market to continue to be the leader in innovation, continue to cycle money back into that innovation cycle. So that's kind of on the surface what worries me. There are whole bunch of nuances in there that we can dive into deeper. But that's kind of the general theme of my concerns around kind of M and A thinking right now. Walker.

Yeah, well, another kind of a loose pivot off of that is I know a lot of times compliance issues specifically are generated by, you know, regulations. In some cases, administrations, you know, administrations believe different things and how the economy should work, not work, et cetera. And I see a lot of deals specifically fall apart at the end because of compliance issues. You know, compliance, you know, five years ago was xyz. You're getting towards the end of the deal, you're not paying attention to compliance. And because you're not doing that, you get to the end of the deal and like, hey, you're out of compliance on these three major factors. And then a deal gets, you know, haircut or doesn't close at all. So what types of things maybe do you see in relationship to compliance related items that businesses need to be kind of forward thinking of going into the next several years?

Yeah, I think the interesting thing is the best situation is always going to be a compromise. It's always going to be a balance. I think overregulation is bad, but under regulation is also bad.

The problem is bad actors are always going to try and find the new pulse and try and figure out ways to do bad things, taking advantage of whatever avenues or open doors. There are so many that's inevitably going to happen. And the problem is sometimes I feel maybe we over regulate in order to protect ourselves from that, but in doing so.

We'Re kind of throwing it in the kitchen sink. Right. Where everything suddenly gets kind of tied up with that. So I'm definitely not a complete anti regulation person. I think regulation is really important. I think one actually great example of that is regulation in crypto. The lack of regulation in crypto actually is a problem. And the fear, the SEC's position around crypto where they basically will sue anyone for anything and never make them all. So you don't actually understand what rules you have to abide by. It's just forcing everybody offshore. And now suddenly more crypto innovation is really happening offshore US is losing out in a big way by not being part of the crypto revolution. And so if you could actually put good quality regulation behind crypto that people can follow because they actually understand the rules they have to work by and now can make a plan accordingly, then you're going to bring crypto back into the US market and there's massive innovation in crypto that you can play with. So that's a great example of under regulation that is problematic. But then there's so many examples of overregulation that's also problematic. So I think it's just, it's a very interesting balance, you know, and it's a very interesting navigation. I do think whenever you're looking at M and A, if you are in a regulatory environment, if you're, if you're being acquired in a regulatory environment, you're always going to have kind of loopholes. You have to navigate those, you have to do a good job of that. If you don't, then you can only really blame yourself because regulation in most cases is clear. My concern is in situations where there is no rule, it's just the FTC or whoever it is steps in and says, oh, this doesn't sound right. I'm going to break out Google.

One of the things to think about is the world going forward is going to be so heavily driven by AI and AI innovation and our biggest ability to compete on the global scale because AI costs so much money, is only to do it through the major kind of tech companies. Facebook, Google, Amazon. These are the only guys that really, really compete at that level in terms of their investment into AI globally. And so again if your fight is to break up the big companies, you're breaking up some of the powerhorses. We have to actually compete on the global scale. And sometimes I feel as though some of the thinking is a little short sighted because you're not thinking about what's the longer term ramification of, of you know, kind of driving these kinds of regulatory actions that don't have, you know, that are more feeling than an actual documented rule.

Yeah, I tend to agree with you. I also think to the short sightedness piece the short sidedness tends to follow, at least from my perspective, election cycles, you know, it's following.

An avenue of what do the people want to hear, need to hear kind of concept rather than what's really right for the, the economies globally, US wise, what's really like, what's really kind of at play. And with the AI thing specifically it's growing so fast that all, it seems like all the new ideas that are being now integrated into more, the more of the larger tech companies seems to come through acquisition. So you know, I think, I think one of the original AI platforms was purchased by Google and then they went on to develop it further if I'm not mistaken. Or maybe it was one of the other platforms.

Yeah, that's a great example about M and A really feeds innovation. Right. Like you want Google to buy that platform because outside of Google the ability for that platform to compete is, is very limited. And that's similar. Most, most really, you know, disruptive technologies Find a home in these big platforms because that's where they get the money and that's where they get the distribution to really be impactful.

Yeah, yeah, no, I totally agree with that. Yeah, I totally agree with that. As I'm thinking through things, you know, I'm now I'm kind of like positioning my brain a little bit more towards the. I actually got a message on one of our social platforms yesterday and it was a pretty easy question. It was what do I do if I'm looking for venture capital? That was a pretty interesting question. That was the, that was the extent. No, no business concept, no deck, no nothing.

Was a very complicated answer.

Exactly right. So it's like, you know, well there's lots of different ways you can look at this. But to pivot off of that, given the fact that you're in the venture world now, what are you looking for when you're considering putting venture capital into an entrepreneur business endeavor, et cetera.

In a moment I'm going to go, I'd love to go into like what I'm most proud of from an investment standpoint. That's piece of kind of like what drives me personally. But from a business perspective, you know, we, we invest in a very south stage. We invest in.

This late series a stage. Anybody in the industry will kind of understand what that is. It's the stage at which a company has kind of demonstrated they've got a real product and a real business but they haven't really, really figured out the true growth and scale mechanics yet. They know the market's there, they haven't quite figured it out. And so we're looking for something that fits in that realm. We want to invest.

Five to fifteen million dollars like a decent check but not these hundred or five hundred or trillion dollar hours at much later stage. And so we're really trying to find those early innovations that are really going to cut and that are moving with the Tyler market, are going to drive the market. One of the biggest things honestly is going to be the people like beyond anything it's, we really want to believe, you know, we're really dedicated to our whole ethos as an affirm is dedicated to founders and founder success. And so we want to find the right founders. We're basically getting into a 10 year marriage where.

Innovator a, you know, an entrepreneur. So when you're getting into that marriage you want to make sure you're getting married to someone you actually enjoy working with. Right. You don't want to every phone call to be painful.

Do Your due diligence, for sure.

Yeah. Make sure that they're good people. Make sure that they're, they excite you, they innovate, they think beyond your realms of being able to think. And then everything that you match around that is kind of the, the, the understanding of how that all fits together. So, you know, is the category they're investing in moving with the, with the tides of technology, moving the tides of the market? Are they well suited to be the driver of, be a leader in that category? Is their poor business model economically viable at scale? Does it make sense? Will it grow? And then what is. How does the market react? So, you know, one of the key triggers for us, the thing that kind of gets companies over the hump for us is have they gone to market, do they have customers? When their customers think of them, what's the product market fit? You know, do we believe that this is an early signal that there is a mass need and demand for this, this offering, and those are kind of the characteristics we look forward when we try to identify someone we want to invest in?

No, I love that. I do want to, I do want to hear the segment on the passion as well. I do. Before we hit that, I want to come at it from a different angle. One of the things that I've seen just in entre on entrepreneurship. So I don't know what you know about me, Carl, but one of the things that I did with my first company is I started it literally from a trash pile of a construction site and built it to close to nine figures before we exited. So I learned a lot about a lot of different things, mainly by failures, my heartache, hitting my head against the wall many times. I had a really hard time moving from founder entrepreneur into CEO. It probably took me three years to become a qualified CEO. So when you're looking at. And I think this would fit into the round that you just made, that you just mentioned, where it's kind of a little bit late stage, the A's and the C's, that when it, when it comes to that, it seems like that's also the biggest jump when the founder has to either become a CEO or step aside for a CEO. Do you guys have any kind of like goals or benchmarks that you guys use to kind of validate? Is that founder really ready to be the CEO of a larger organization?

Absolutely. Absolutely. I mean, a lot of it is a feeling and kind of getting to know. A lot of it is their ability to deliver vision. A lot of it is their ability to execute Against a vision, but absolutely we think of that. We want to invest in founders that really can build and drive and run their own businesses. Our goal is not to invest in a founder, just for the need to replace them. But having said that, I've been there myself too. So I definitely founded companies where I've had to kind of fake it as CEO because I really don't know what I'm doing very early days and then over the years have developed the skill sets and the understanding of kind of the different stages of business. But I think one of the key traits we really look for is humility. You know, a lot of young founders have a lot of hubris and that gets in the way. And I think what you said is really poignant. Like, you know, you have to learn sometimes you realize it you're not ready yet, but you could be ready. You just have to be open to the guidance, the mentorship, the education that it takes to get ready. And I think there's a lot of amazing founders that learnt it on the job, you know, absolutely some amazing ones in our portfolio and that's fine, but you're only going to learn it on the job if you're open to learning it. Some founders, luckily a little bit more of a rat breed. I don't see as many of them these days. Most founders tend to be more open these days, but some founders just come with a lot of hubris and then it kind of you question if it's, well, trying to work with them because you know that then that's not necessarily going to take the feedback or take the guidance or grow as needed with the company.

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I think a parallel strategy to that is more than the way that we would take the reason. I worry about that strategy a little bit because when you bring someone in that you already have kind of that CEO mindset too, first of all, you got to recruit someone that expects to be a CEO. There's no otherwise. You're not really filling. When you do the job description for that, you kind of have to define it in a way that you actually look at someone else here. So it means you have someone in the job who's thinking I'm going to be CEO, I'm going to replace this person and they can create some straight edge dynamics. What we really like to do is we want to work with a founder to build the best executive team possible. Ideally, if you have the absolute best executive team possible, first of all they'll prop up their founder, they'll fill in the gaps. But more importantly, if the founder does at some point decide hey, I'm not right for this or I built it as far as I can and I want to take a chairman role, I want to take a bit more of a vaccine. You have a handful of executives already in their seats that could potentially each step up, but they're not coming in with this clear vision that they should be CEO.

Yeah.

So I think the dynamic of that founding team and the quality not found that that executive team that surrounds the founder and the quality of that executive team that founds a surrounder is key to everything, to success, everything and also key to succession planning. But I think you have to go into an investment with a mindset that I'm investing in. A founder has potential to run a multi billion dollar company. If I don't believe that founder has that capability out the gate, then I'm not sure that this, it's too much heartache and hard work to transition and then it's such a gamble because you get the best CEO in the world. But if ultimately they're not the right fit for the company that's founder built, then it's just not going to work. And so you're taking a whole additional level of risk by investing in something where you don't think the incumbent leader is there already in the sea. We're not always right. So you might be wrong. So the idea of putting a great team around them gives you the avenues to for succession planning. But I wouldn't be very hesitant if my first thought is oh, this is a great company, but we might have to replace this, the CEO. And so therefore let's put someone in a seat that is ready to do that. I think that's a risky approach when you're putting money to work.

Yeah. And there's a side reason why I wanted to ask the question because there's a lot of founders and entrepreneurs that are that watch the show.

And one of the things we talk about on the show all the time is this, this essence of humble confidence. Right. Knowing that you. Knowing you have to be maintain a spirit of being teachable and humble, period, Constantly. And to your, to your point, I'd say about 25% of the entrepreneurs that we bump into through our programs and everything that we do haven't learned the humility trait yet. And I learned the humility trait in different ways by getting my head cracked open with different problems, you know, and, you know, part of the goal is like, to prevent them from having to do that and go ahead and set the stage is like, okay, if you're in a kind of industry that maybe venture capital makes good sense for, you're an innovator, you're in the AI space, a tech software space or anything like that. This is coming from someone. This is what they're looking for. This is what they need from you as a founder, CEO. The ability to, you know, grow yourself, the hunger to do so. Because growing yourself is a daily. Is a daily decision. It's not. It's not something you do. It's once and done. You know, I am curious. Yeah, I want to go back to your earlier comment. What is driving your passion. What is driving Your passion for M13? What is driving your passion for the venture capital side within that? Like, what is.

What is driving you in terms of what drives? So I've, I've, Obviously it was 20 years actually operating. I had three companies in that, in that bridge of which I was CEO and I exited through acquisition. And then the last one that went public And I was CLO of that company, DigitalOcean. You know, I put in the hours, put in the hard work. And honestly, you know, through my time, I'd made certain negative investments, sat on other boards, advised other founders and going. Looking back on my history, I had so much excitement and pleasure, the stress and pressure around the companies that I built. But all my interactions and relationships when I was dealing with other founders and other companies was always very, very joking. Even if companies didn't survive, I just really enjoyed the process of helping them, working with them. And so when I was getting to the tail end of my time at DigitalOcean, I was obviously being heavily recruited to go into another operating role, into an investor role. And my first fork in the role was to say, do I want to do this again? I don't want to go through another five, six, seven years of just like hard work myself.

The same question with these new businesses I'm starting.

I'm now a dad. I have Young babies, like, is this really the right thing to do or do? I want to go, you know, really explore this passion of working with a portfolio founders fighting really young and limited and exciting. Well, and I, I paid my dues, so I think I earned. Right?

That's right.

And so, you know, my first decision was, you know, I think I could get really passionate about helping other people realize some of the success and opportunities that I got in my life. And it's really played out that way. I have like incredibly passionate and exciting founders that I really love working with. And I get this ability to really see the broad horizon of the market and understand where people are playing and help kind of from a different position, help founders navigate direction, what they're thinking and where they're going with their strategy. It's important because when I was in the seat, you get so blinked. You've been there, right? You get so blanket, like, this is my world. And then not only until you get out of the seat do you look up and you go, wow, the rest of the world has evolved so much, I didn't even necessarily notice that. And so I really enjoy being in that kind of like wide eyed view and working really. I'm inspired every day by the conversations I have with the founders in the portfolio with the things that they're building. I love it. It's not the role and should be to just kind of continue to see the success of all these other founders out there. And that really, really drives me. And I think we've done something very unique at M13. I'm always an entrepreneur, so I've always been thinking, like, if I'm going to do something, I want to do it disruptively.

Yeah.

And I think what we did here at M13 was we really drove this concept of partnership. We found this really proactive approach which not all venture capitalists take, where we can really get involved, really work on strategy, really help drive, you know, fill in the gaps in the organization, help drive these businesses forward. And so seeing that come to life and seeing the relationship and the partnership we have with our portfolio companies is just really exciting to me. But happy, like in terms of specific investments, I'm happy there's a certain area which I'm happy to share that kind of really makes me proud of kind of what we do, which I'm happy to elaborate on it. So I think, you know, as I said at the beginning, I think I've always felt that technology really contributes to the quality of life of man, but there's also always going to be the position, the mindset that people have.

Venture capitalists.

Yeah, it's going to take my job next week and this $90. There's a couple of companies I think that really, really I think are for the betterment of humanity. Like real impact investing. It's hard to find impact investments that really make sense economically.

Sure.

But I think we've identified a couple that really speak to the betterment of humanity. So one is in common called Prepared that's in the 911 space. And it's totally disrupting the way that 911 happens. And it comes off of the back of like an immense amount of just bad first responder situations that be driven by lack of knowledge and lack of understanding. And so Scumbag is bringing AI and multimedia into the 911 category to allow for much better responses and much better outcomes as it relates to first responders. And not just police, fire department, ambulance, everything. It has saved countless lives, it has improved countless situations. And the case studies that come out of this company every day are just unbelievable. The founder himself is very, very young. Comes, you know, experienced the school shooting and that was the inspiration for communication incidents. And so when you see the origins and the passion behind it and you understand how it's actually designed to improve society, yet it's an incredibly economically viable investment, that type of thing is incredibly exciting to me. There's another one we just, another one we invested in which is kind of about proactive health care and longevity. It's a longevity platform with life force and, and it's all about how do we actually make people healthier. Which in turn is the only way to really solve the, the healthcare like cost debt crisis.

Yeah.

And so it's, it's like delivering a, a kind of health management kind of toolkit that makes you healthier at older ages, makes you an age better, like helps you just never be, you know, healthier muscle and have a better life. And it's all grounded by real science and real kind of longevity medicine. It's like a virtual category again, something I'm really excited about because I'm like, hey, I use it and it makes me feel my old age. And I can see how if people just proactively thought about their health, how much of a difference that makes just to society in general. Another one where we just invested in the paladin called Replenish, which is a system to really manage and help kind of recycling of plastics and cardboard, metal products. And it takes a really fragmented, messy category and really organizes it and could become an incredible tool to actually create real value. See, you know, California suing, you know, the oil companies for, you know, what they consider the lies are recycling of plastics. But the reality is it's not that recycling as bad as the processes of how it's done unaffected. But if now sudden you put technology behind it and you say, hey, you can track every ounce of plastic that goes through the system, you suddenly create an environment where you can actually, really, truly measure the impact of recycling and really, really make it work for society. So those types of investments are super passionate for me because they actually.

Make better for humanity. A whole bunch of other investments that just businesses be better and this and that. But when it comes down to the actual improvement of humanity, those are the things that really, really kind of I can get passionate about.

Man, I'm there with you. You know, it's funny to me, but not funny. I think I find it interesting where innovation actually normally derives from. And I've always said there's three great purposes in life. The first purpose is serving the person. Used to be what you're doing with some of these entrepreneurs, serving or serving the person you once lost or loved, which would be the shooting scenario that you kind of mentioned. And then kind of that same kind of concept, the serving the person that you know, essentially needed the training that you needed, if that makes any sense in that same vein. And everything you just mentioned is like kind of smack dab in one of three of those on a consistent basis. And I always, I just, I find it so cool where innovation and ideas come from. You know, it doesn't take much to have a, a really great idea and then align yourselves with really great, you know, professionals to help you get the idea to the marketplace and actually do some real change in the world like you're just talking about. I want to pivot a little bit as it regards to innovation specifically. It seems like innovation is here and then operational excellence kind of trailers it or follows it. How do you kind of look at innovation and operational excellence and getting them kind of succinctly unified to get the maximum output of any business?

Yeah, it's actually really interesting, really kind of framing in my head that concept that it really makes sense. Like I think.

Operational excellence, if you want to build a great company. So you got companies that fail, companies that do okay in great companies, you want to build a great company, you have to have operational excellence. You don't actually have to have innovation to build a great company. And it's along the road, but if you have operational excellence. You can build a great company with innovation. Innovation is a great seedling to building the best companies. But innovation will fail or succeed purely on the forwards of the execution. The greatest idea in the world, the greatest business concept, the greatest thing all. If they cannot execute, nothing ever happened. If their execution is average, at best, they'll be an average company. Their execution is excellent, then they have the greatest chance of being excellent. If you have a great execution but no innovation, again, it could fail because it can be part of market. But a great executor is going to navigate that and figure out how do I iterate, how do I improve, how do I get enough product market fit to at least have a business. So your likelihood of failure is probably lower, your likelihood of greatness is probably lower as well. But you, you end up in this like interesting middle ground where, where you build a good company. Now obviously we're investing in great companies. We don't want to invest in good companies. Like yeah, they're good, but they don't really make a big difference in the world. So we want to find the great companies. So it really is that blend.

You have to find the innovation, but within the pool of great executors. So table stakes is you have to be an executor and then we'll make our decision based upon quality of the innovation. We think that you're, that you're bringing to the world. And so it's kind of that interesting balance between those two categories.

Yeah. Well, it also seems to me too that the glue between the difference, or glue if you will, between a great company and an average or a good company at best, tends to center around the company culture that ultimately drives the execution. What are your thoughts on kind of like what the ideal company culture looks like with a handful of pillars to give our, some of our entrepreneurs that are watching kind of some ideas on how to maybe look at their culture from a different perspective. Because, you know, their culture is typically a resemblance of them more than anything else.

Yeah, I, I think company culture is, I learned this so much at Digimotion. Company culture is so key to deliver.

And get the best out of this team for a couple of reasons. One, because a team that is motivated is going to work on their own. They don't need to be, you know, forced to work. They're going to go out of their way. And more importantly is the, you know, the best employees want to be motivated. You know, they want to be something that they're passionate about, they believe in. And if it's a bad company culture. They have every opportunity in the world to go find good culture elsewhere. So I think culture is a real driver of the best teams and also gets the most out of the best teams. So I do think, I think culture is definitely key to success for sure. I.

Well, and it's. I'll give you some examples of company cultures, things that we did internally with the, with the company that just exited last year, that was mainstays. Uh, first of all, I chose to treat the company a bit like a personal development company. So when we have our, you know, our weekly or monthly meetings, a lot of times with either the C suite professionals or the entire team together, we would typically spend a little time on helping them become better humans. Content around mindset, content around heart set, content around building better strategies. There's a good friend of mine, Lee Benson, that wrote a book called the Most Important Number, which is all about taking a department and driving and getting the key metrics of each department to one specific number to focus on, which I thought was pretty powerful. Then we did this thing called Peaks and Valleys and we did this. Now our company was probably 400 strong across three states total. And so not everybody got to participate in this like your nucleus of a hundred, call it a hundred team members.

But we found that having, being, giving them the ability to have team members express both their peaks for the week and their valleys for the week in a way that was authentic and vulnerable and transparent to them. Like we, they didn't have to over share. It wasn't like, you know, make sure you do this right. Brought commonality. It also brought departments together because someone over here in this department may be, have experienced somebody else's problem that's happening over here. And that brought a lot of collaborative, collaborative efforts around lifestyle and life and just kind of being a better human on top of that. I think one of the other core values that we had was collaboration in general. Like we wanted people, teams to talk, we wanted the ideas, we wanted the comprehension. We wanted them to be able to feel safe enough to tell us where we weren't doing well, as well as tell us where we could do better. Like, you know, kind of like if you tell us a problem, give us some solutions, how would you do it different? And I found that many of the best ideas on creating a better company culture, as well as backfilling many of the roadblocks or the bottlenecks that happen in any process came out of that, that, that same concept, if you will. Have you seen models like that? That kind of work where you're kind of bringing the heart set of the team in with the mindset of the team.

Yeah, absolutely. And we've implemented that a lot. I think there's different components of culture, though. So I think that there is. There's a lot of the soft parts of culture, which I think is what you're referring to, which is the ability to drive communication across the organization and showing vulnerabilities and things, is all very helpful. We done things in the past where we have this kind of gratitude section of our kind of all hands, meaning where people can express gratitude to other parts of organizations. Certain people's contributions are highlighted. So a lot of that soft sound. But I think there's a couple other components. First of all, you got to think about the types of people that are out there for you to hire. One thing I would say I don't think it's that controversial, but it might be considered, that is, there's very few innovators, true innovators, out in the world. Very few. And even in a very large company, the reason why some of these companies, as they grow big, lose their ability to innovate is because they're hiring for core talent. But as the teams get bigger, the number of innovators that are, that are in those teams, if they're not called out, recognized, their innovations tend to be dampened. And so smaller companies have the better ability to innovate because they attract more innovators and the innovators have more impact on how the rest of the team works. And so I think one thing you have to recognize as you're building an organization is who are your innovators? Who are the people that are going to truly make the difference? You might have some incredible A level engineers, but a lot of them are just going to be there to execute. That's what they need to do, that's what they're good at, and we'll do it. And there's only going to be a handful of people at most that are going to sit there and go, no, we should do it differently. No, we should innovate here or we should do something. So recognizing the makeup of your organization is very, very important. And then that goes hand in hand with the other side of it, which is having the organizational structure to recognize where do people sit in the stack? What are the levels? People who are very, very experienced and capable kind of want to be recognized for them. So a lot of people, and I've been in an environment where we've tried to Build a flat engineering organization. All engineers are growing everybody together. But suddenly the more experienced engineers are like, this doesn't make sense. And the junior engineers get big hubris because they're like, I'm alongside this senior engineer and engineers really want to understand that, like, what's the pecking order? What's the structure here? Who can I learn from and who do I need to teach? And so creating structure within that structure, recognizing where the innovators are so they are highlighted as the innovators of the organization, allows you probably to get at most out of how that team operates and what. And then all the soft communication components kind of layer on top of that. And so I think you have to kind of combine these soft pieces that make people feel really good about communication, visibility, you know, connection with the structural components that actually give them mechanisms by which to operate and to work and deliver their best flow. Another key component is A plus players want to work with A plus plates. So you put A plus players in a team and you hire a bunch of visa Cs in there, the first people to leave will be the A plus players, and you're left with a whole bunch of these and Cs.

Yeah, and I'm kind of experiencing that myself.

I've experienced pretty brass in terms of how I'm describing it, but that's kind of, from. From a team building standpoint, that's what happens. And so really understanding the quality of a team and being very clinical about how you maintain an A plus level team, it's so important structurally to support everything that you would be doing on the soft side. So I do think it's kind of, when you talk about operational excellence, it's a combination of both those pieces.

Yeah, no, I. That's fantastic feedback because company culture, again, is, is the glue. Like, it's, it's, it's easy. I tell you. I take that back. It's either gunky oil or it's, you know, it's refined oil that allows the gears to kind of really spin kind of quicker.

Absolutely. See the greasing, the wheels, bugging the wheels. That's right. Exactly.

Just like that. In one or two minutes we got left. I'm curious, is there something else on your heart that you think all entrepreneurs should be aware of that most of them aren't aware of or don't focus on?

You know, I think it's all about the people at the end of the day. And there is something that maybe I have kind of front of mind about innovation and the innovation economy. As a whole, and I think something that the rest of the economy can learn from it. But we have a lot of issues and concerns nationally and even internationally, but very much within the US about the divide between the rich and the poor Left. How do you think about distribution of wealth in an organization like this? And I think that what innovative growth companies have done is they've affected this concept of the esop, which is the option pool. Clarity shares the wealth. Everybody comes into developing growth business, technology business usually, and everyone has a piece of the upside. Everyone has an opportunity to earn what they're working towards.

Sure.

And as a result, I would say, and again, this is not statistically founded in any, any reality, but I believe it works for me. But I believe that the most millionaires created in the last 30 years in this country are probably created out of option pools through 10 companies. And I've seen it myself where I've had, you know, middle management people calling me and saying, carl, you made me a billionaire. Like, and I've had a baby now with my life just so much, right. I'm like, that's amazing. This is someone that was getting paid 100, 120 grand a year and now they're legitimately a millionaire. And so understanding the people you're going back to, the entrepreneur question that the team are putting together, the family putting together, and the ability to share in the benefit and have them feel like they own a part of that journey and then ultimately you're distributing the wealth accordingly. Trust me, as the founder, you're going to be very, very well. But that willingness to distribute that wealth and distribute the value that everybody's built around you is incredible. And I think the biggest driver, and it's not really just comment. Entrepreneurs comment to all young Gen Z workers out there that are going to kind of want to be part of the economic system, like, find an environment where you can be part of the game and work your butt off. Right. Not all Gen Z's will have to work as hard as maybe some of the Gen Ys or Gen X's, but you know, work your butt off and being part of that journey and that'll pay incredible rewards. And just on the macro, if from an economic standpoint, we thought about government policies that promote the idea of wealth distribution within companies based upon company growth and creating tax benefits around that and created, you know, incentives that incentivized the 1% to really do that with their employee sets across wide range of industries. That is the greatest way to drive wealth distribution back into society. Which is the greatest way to spur the commerce of society as a whole. And so I feel like that's just a not well thought through aspect of fiscal policy within the United States right now.

I think you should head that up. I'd never heard that idea before. It makes complete sense to me. Complete sense.

Every time I tell someone, they tell me I should love politics.

All you have to do is be the think the think tank portion for the person.

Yeah, happy to join. I'm ready to be recruited.

Well, Carl, man, I've enjoyed your wisdom and your experience. I can't thank you enough for coming to show and hanging out with us. And I know the listeners and the viewers are going to get a ton from it. Where can they find out more about you? And maybe we work within 13.

Yeah, I mean probably the easiest way to find me is through LinkedIn. Just Karl Elmo through LinkedIn. My Twitter is Palomar NYC from my old days living in New York.

But M13 is the name of the company. M13CO is our website. Come take a look at our portfolio. Come take a look at what I'm doing. Let us know if you're building the next exciting businesses out there. We'd love to talk, we'd love to figure out if there's ways we could be involved and excited to meet, you know, more of the great entrepreneurs that are out there that are building the future.

Sounds amazing, Carl. Thank you again, my brother, my friend.

Nice to you. Appreciate it.

See you. I hope you liked that video and if you did, make sure you check out this next video right here. Does it make sense to build the organization to always be ready to be sold or does it make sense to actually build it, you know, as you're going to own it and operate forever?

I believe in, you know, building a business to be sold.

Like if you do that, it's easier.

To get financing, if you need financing, because then it's all explainable, right? Just like you're going to explain it to.