WEBVTT - TERM SHEETS, a talk with New York VC, Richard Kerby 0:00:00.880 --> 0:00:02.880 So we're deep in the throes of planning for afro 0:00:02.960 --> 0:00:07.720 Teche and COVID still sucks. While we still have some 0:00:07.800 --> 0:00:10.240 in person events, the bulk of the conference this year 0:00:10.280 --> 0:00:13.920 will be a digital experience. But never fear you've never 0:00:13.960 --> 0:00:17.480 seen a digital experience like an afro Tech digital experience. 0:00:18.440 --> 0:00:20.640 Last year in the virtual world, I met people from 0:00:20.720 --> 0:00:24.160 all over the real world, from Cape Town to St. Louis, 0:00:24.960 --> 0:00:26.560 and I didn't have to wear a mask get on 0:00:26.600 --> 0:00:30.040 the airplane. While I do missing you all in person 0:00:30.080 --> 0:00:33.200 that time we'll come again. But for now, and before 0:00:33.200 --> 0:00:35.680 we get into today's episode from one of our highest 0:00:35.720 --> 0:00:39.320 view YouTube series ever, Term Sheets, I wanted to share 0:00:39.360 --> 0:00:44.880 some of my most memorable experiences from afro Techen. Backstage 0:00:44.880 --> 0:00:46.839 at the conference, I got a chance to sit down 0:00:46.880 --> 0:00:50.080 with some of the biggest names in tech, media and business. 0:00:50.960 --> 0:00:52.519 I asked the things all of us want to know. 0:00:53.320 --> 0:00:57.000 How do we successfully raise venture capital? Are all our 0:00:57.000 --> 0:01:01.280 efforts in diversity, equity and inclusion helping turning us? And 0:01:01.320 --> 0:01:04.960 how do we find customers or strategic partners for our businesses. 0:01:06.080 --> 0:01:09.240 Marlon Nichols is managing partner in mac Venture Capital, a 0:01:09.360 --> 0:01:12.640 Los Angeles based VC firm. Which focuses on c stage 0:01:12.720 --> 0:01:17.120 companies and invest in visionary founders. Marlin is one of 0:01:17.160 --> 0:01:20.000 the most genuine people I've met in this industry, always 0:01:20.080 --> 0:01:22.520 quick to respond to an email and always full of 0:01:22.600 --> 0:01:25.360 great council it has a quiver full of strategic advice. 0:01:26.360 --> 0:01:38.000 We're talking backstage at afro Tech. Here's the conversation, well 0:01:38.080 --> 0:01:41.000 looks for afro tech here with my guy, Marlon Nichols 0:01:41.000 --> 0:01:44.560 of mac Venture Capital formerly Cross Culture Ventures. This is 0:01:44.600 --> 0:01:47.400 not your first afro tech. Tell me about your experience 0:01:47.400 --> 0:01:50.720 with afro tech and what Mexic Society. We first invested 0:01:50.800 --> 0:01:54.320 in Blinty maybe three years ago now, so it's been 0:01:54.400 --> 0:01:57.320 since then, and every year is doubled in size. I 0:01:57.360 --> 0:01:59.680 think this year might have tripled in size. So it's 0:01:59.720 --> 0:02:02.200 it's a amazing to see all these young black people, 0:02:02.560 --> 0:02:06.320 ambitious young black people running around. You gave a really 0:02:06.320 --> 0:02:09.600 great talk last year about cap tables and helping people understand, 0:02:09.760 --> 0:02:12.880 you know, their diverse, their equity distribution, and that whole thing. 0:02:13.160 --> 0:02:15.960 So a lot of tips advice come out of the 0:02:16.000 --> 0:02:18.520 Bay Area and raising money. But if I'm raising money 0:02:18.520 --> 0:02:21.959 in let's say, in Illinois or Tennessee, how do I 0:02:22.000 --> 0:02:24.639 apply that when my ecosystem may not be the same 0:02:24.680 --> 0:02:27.360 as raising money in the Silicon Valley, it's all the same, 0:02:27.360 --> 0:02:29.920 it's all the same games. So they're going to be 0:02:30.200 --> 0:02:33.200 investors and wherever you are, right, and it's about you 0:02:33.280 --> 0:02:35.799 finding them, particularly at the early stages. It's just simpically 0:02:35.800 --> 0:02:39.120 gonna be angel investors. So people that know something about 0:02:39.120 --> 0:02:42.080 the industry that you're going into that I want to 0:02:42.080 --> 0:02:46.800 support you, right, So target them first, get going build something, 0:02:47.040 --> 0:02:49.639 and then once you have something and attraction is rolling, 0:02:49.960 --> 0:02:53.480 like institutional investors are gonna follow that traction. Right. So 0:02:53.520 --> 0:02:55.720 as long as you build it right and it's doing 0:02:55.720 --> 0:02:58.120 what it's supposed to do, then you can start reaching 0:02:58.120 --> 0:03:01.120 out outside of your your a full ecosystem to bring 0:03:01.120 --> 0:03:04.680 an additional capital. Let's start start local and find the 0:03:04.680 --> 0:03:07.280 people that make sense for your business. You just talked 0:03:07.280 --> 0:03:10.960 about a little bit difference between angel investors and institutional investors. 0:03:11.120 --> 0:03:12.880 Can you dig into that a little bit, because if 0:03:12.880 --> 0:03:15.760 I'm looking at an angel maybe I don't have all 0:03:15.760 --> 0:03:18.640 the attraction and data points there yet to justify going 0:03:18.760 --> 0:03:22.760 to a institutional like a BC. So angel investors they're 0:03:22.800 --> 0:03:27.400 investing their own personal capital, right, whereas a Uh, institutional 0:03:27.840 --> 0:03:31.320 investor or a BC, someone like me. I'm investing out 0:03:31.320 --> 0:03:34.600 of a fund, so capital that I've raised from different 0:03:34.600 --> 0:03:39.000 groups of UM of investors, individuals, family offices, foundations, and downmands, 0:03:39.000 --> 0:03:41.640 et cetera. And I'm deploying that capital over a period 0:03:41.680 --> 0:03:45.120 of time, typically about five years. Right, UM, Angel investors, 0:03:45.120 --> 0:03:48.240 I said, their own pocketbook, Right, what they need to 0:03:48.280 --> 0:03:50.480 see from you versus what I need to see from 0:03:50.520 --> 0:03:52.400 you is gonna be different. Also, our check sides are 0:03:52.440 --> 0:03:55.880 gonna be different, right, Um, they require less, They're also 0:03:55.920 --> 0:03:59.040 gonna write smaller checks. Right, I'm gonna require a bit 0:03:59.080 --> 0:04:01.400 more and I'm gonna right a much larger sex somewhere 0:04:01.400 --> 0:04:03.920 a half a million to one point five right. So 0:04:04.000 --> 0:04:07.600 that's that's a that's I would say that's the key difference. UM. 0:04:07.680 --> 0:04:11.000 And they're they're usually willing to get involved at the 0:04:11.040 --> 0:04:14.760 ideation stage. Right, So you've got an idea in the space. 0:04:14.840 --> 0:04:17.120 I know the space really well. I think I can 0:04:17.160 --> 0:04:19.760 help you. I'm a fan of what you're doing, of 0:04:19.839 --> 0:04:21.680 you and your team. All right, let me put some 0:04:21.680 --> 0:04:24.560 money in here and also some sweat equity. I love that. 0:04:24.839 --> 0:04:28.880 So if I'm thinking about UM raising money and how 0:04:28.880 --> 0:04:31.480 do I know how to price it? So if am 0:04:31.480 --> 0:04:33.719 I just trying to get enough money to get myself 0:04:33.720 --> 0:04:35.640 off the ground, or am I trying to raise enough 0:04:35.680 --> 0:04:37.960 to build a war chest to not only get off 0:04:38.000 --> 0:04:39.880 the ground, but get far enough out to where I 0:04:39.880 --> 0:04:41.800 can keep competitors off? How do you think about that? 0:04:42.160 --> 0:04:44.839 Companies can get in a lot of trouble have gotten 0:04:44.839 --> 0:04:47.839 in a lot of trouble historically when they raise more 0:04:47.920 --> 0:04:50.200 money than they need. If you take on five ten 0:04:50.279 --> 0:04:52.680 percent more than what you actually need to hit your milestones, 0:04:52.720 --> 0:04:55.280 you're probably okay, right, But if you just pile on 0:04:55.360 --> 0:04:57.600 this capital and you don't have a you don't have 0:04:57.680 --> 0:05:00.920 a use for it, it usually gets wasted and um 0:05:00.960 --> 0:05:03.800 it gets wasted in the um in the form of resources. 0:05:03.839 --> 0:05:05.880 So now you're hiring a bunch of people that you 0:05:05.920 --> 0:05:09.600 don't need. You're probably pursuing a lot of different avenues 0:05:09.800 --> 0:05:12.080 that you shouldn't be pursuing right now, right because the 0:05:12.160 --> 0:05:14.960 name of the game is his focus and just laser 0:05:15.080 --> 0:05:18.720 in on something, uh, find success with that, conquer it, 0:05:19.040 --> 0:05:21.920 and then start to add, you know, layers to it. 0:05:22.240 --> 0:05:24.480 If you have all that money, you probably you gonna 0:05:24.600 --> 0:05:26.960 skip the stage of making sure that the thing works 0:05:27.240 --> 0:05:29.719 and jump right into step two and step three, and 0:05:29.760 --> 0:05:32.039 a lot of times failures happen as a result of that. 0:05:32.160 --> 0:05:35.440 So I always tell um entrepreneurs, you want to raise 0:05:35.560 --> 0:05:39.400 for investment cycle, which is eighteen and twenty four months 0:05:39.560 --> 0:05:43.120 at tashed to that is a certain number of milestones 0:05:43.120 --> 0:05:45.560 that you want to achieve, right, So how much do 0:05:45.600 --> 0:05:47.920 I need to raise in order to achieve these milestones 0:05:48.160 --> 0:05:51.000 within that within that time frame? Right? And let's say 0:05:51.080 --> 0:05:55.479 I'm giving myself twenty four months, Well, realistically I want 0:05:55.480 --> 0:05:57.680 to be I should have hit those milestones by the 0:05:57.760 --> 0:06:01.440 eighteen months um point, giving me time to raise raise 0:06:01.520 --> 0:06:04.120 money when I'm not running out of capital. And so 0:06:04.240 --> 0:06:06.440 it maybe an interesting question to ask a VC, but 0:06:06.520 --> 0:06:08.760 being somebody who's seen a lot of cap tables, has 0:06:08.760 --> 0:06:11.160 seen a lot of heartbreak, you know at the end 0:06:11.160 --> 0:06:13.600 of at the end of companies, talk to me about 0:06:13.640 --> 0:06:16.680 how you think about what entrepreneurs should be thinking about 0:06:16.680 --> 0:06:19.880 in the early stages of giving out equity to not 0:06:19.920 --> 0:06:22.560 only co founders but also to them early investors. What 0:06:22.640 --> 0:06:24.480 kind of things that they be thinking about. Keep as 0:06:24.560 --> 0:06:27.160 much of your company early as you as you possibly can. 0:06:27.320 --> 0:06:31.000 So I always tell entrepreneurs. There are only two reasons 0:06:31.000 --> 0:06:33.480 that I think that you should be raising capital right. 0:06:33.880 --> 0:06:37.360 One is that you absolutely have to hire the resources 0:06:37.400 --> 0:06:39.440 to build a product. There's no other way for you 0:06:39.480 --> 0:06:41.760 to build this product and get it to market other 0:06:41.839 --> 0:06:44.640 than raising venture capital to do that. The other is, 0:06:44.839 --> 0:06:47.160 you're at a point where you've built something and the 0:06:47.200 --> 0:06:49.520 only way that you're gonna scale this thing, and and 0:06:49.600 --> 0:06:52.000 let's say it's uh, it's a competitive space. There will 0:06:52.000 --> 0:06:55.160 be a competitive space. You gotta scale and scale quick, right, 0:06:55.279 --> 0:06:57.400 So now now you need the capital in order to 0:06:57.440 --> 0:07:01.120 do that. Scaling organically just gonna eg too long. Those are, 0:07:01.120 --> 0:07:03.680 in my opinion, the only two reasons why brounds should 0:07:03.680 --> 0:07:07.040 be looking to take on venture funding. In terms of 0:07:07.080 --> 0:07:10.760 like employees, you want to be fair their their their reports, 0:07:10.760 --> 0:07:13.960 in terms of like compensation reports um that you can 0:07:14.000 --> 0:07:18.559 get from recruiting agencies and law firms and all that stuff. 0:07:18.600 --> 0:07:21.360 So I'd say, get ahold of that and see what, 0:07:21.560 --> 0:07:25.160 um what what the average payout in terms of equity 0:07:25.160 --> 0:07:28.320 and salary, etcetera for companies at your stage is and 0:07:28.360 --> 0:07:30.520 just kind of stay as closer that as possible. You 0:07:30.560 --> 0:07:32.800 want to be competitive, but you also don't want to 0:07:32.800 --> 0:07:35.440 give a giveaway to farm We'll look ut here for 0:07:35.480 --> 0:07:39.920 afro Tech. Marlin Eckles mac Venture Capital formerly Cross Culture Ventures. 0:07:41.760 --> 0:07:45.160 You know afro Tech eighteen. I also spoke with Angela Right, 0:07:45.600 --> 0:07:48.559 a political and social commentator in fire Brand who takes 0:07:48.560 --> 0:07:51.840 no prisoners. She took to the main stage at the 0:07:51.880 --> 0:07:54.600 afro Tech that year to discuss the black opportunity in 0:07:54.680 --> 0:07:58.520 cannabis with some prolific black innovators in the marijuana space. 0:07:59.640 --> 0:08:03.360 We say talking about social justice, how legislation impacts the 0:08:03.360 --> 0:08:06.560 black opportunity in tech, and demanding seas at the table 0:08:07.040 --> 0:08:17.560 versus building well Lucas afro Tech twenty nineteen, I am 0:08:17.600 --> 0:08:19.640 here with the world famous angel La Right. How are you? 0:08:20.040 --> 0:08:23.320 I'm great, famous, but happy to be here. When we 0:08:23.360 --> 0:08:26.440 talk about tech, there is this I call Jesse Jackson 0:08:26.480 --> 0:08:28.280 approach that says, you know, we need to see that 0:08:28.400 --> 0:08:31.000 the table Facebook, Google and etcetera. And there's also this 0:08:31.040 --> 0:08:34.360 approach of we're gonna build our own table. Right, Can 0:08:34.400 --> 0:08:36.720 you talk to me about how you see that argument 0:08:36.720 --> 0:08:39.160 playing out with ten thousand black people here who are 0:08:39.160 --> 0:08:41.160 trying to build their dreams and what position we should 0:08:41.160 --> 0:08:44.960 be thinking about walking into the building into this just 0:08:45.080 --> 0:08:49.600 the greater surrounding area. It felt so good and felt 0:08:49.640 --> 0:08:52.120 so free. And I think that one of the most 0:08:52.200 --> 0:08:56.040 incredible things about Reverend Jackson's approach so far with the 0:08:56.080 --> 0:08:59.319 tech community, what he did with Wall Street has been 0:09:00.160 --> 0:09:03.320 UM that it's not just one way, you know, to 0:09:03.440 --> 0:09:05.840 go about this. There are several We need people who own, 0:09:05.880 --> 0:09:08.240 but we also need people with seats at the table. 0:09:08.600 --> 0:09:11.400 We need the people who haven't had seats yet, but 0:09:11.440 --> 0:09:13.600 we need someone to plus that door open, and Reverend 0:09:13.679 --> 0:09:16.080 Jackson has done a tremendous job of doing that through 0:09:16.520 --> 0:09:19.640 RABO Push Check twenties. So has the Congressional Black Caucus 0:09:19.720 --> 0:09:24.120 through UM their Tech Initiative, to ensure that we're not 0:09:24.240 --> 0:09:28.439 only UM hiring companies to be diversity and inclusion officers, 0:09:28.440 --> 0:09:31.240 but to ensure there's real equity at the at these companies. 0:09:31.480 --> 0:09:33.560 And while we have miles to go, I think that's 0:09:33.600 --> 0:09:38.080 where ownership UM, an opportunity to have access to capital 0:09:38.120 --> 0:09:42.160 to create our own comes comes into play. UM. There 0:09:42.240 --> 0:09:45.440 is no innovator like a black mind, and I think 0:09:45.480 --> 0:09:48.840 that is the unique space that Afrotech creates and reminds 0:09:48.920 --> 0:09:52.120 us of. Right, I think that we can't hear that enough, UM, 0:09:52.160 --> 0:09:54.040 and so I think it's wonderful that what you all 0:09:54.080 --> 0:09:56.000 are doing. So thank you for letting me be apart. 0:09:56.880 --> 0:09:59.000 And so you just came off and talked about cannabis. 0:09:59.040 --> 0:10:01.720 And when you look at the landscape of cannabis in 0:10:01.760 --> 0:10:04.160 the industry, I guess I should say, is what has 0:10:04.200 --> 0:10:07.200 been characteristic of the black companies who have found success 0:10:07.240 --> 0:10:09.880 in your view in this field where all the hurdles are, 0:10:10.280 --> 0:10:12.920 you know, placed for us to not be successful. Yeah, well, 0:10:12.960 --> 0:10:14.400 I have to be honest with you, I don't know. 0:10:14.440 --> 0:10:17.319 Of many, UM, the one that I am the most 0:10:17.520 --> 0:10:19.840 impressed with and do a lot of work with is 0:10:19.880 --> 0:10:23.000 forth Movement UM Kaream Webb, who was just on the 0:10:23.000 --> 0:10:26.560 panel UM talks about it and it's just this revolutionary concept. 0:10:26.800 --> 0:10:29.400 I say all the time that it's like, UM, if 0:10:29.440 --> 0:10:32.880 we were to create our ideal program for what reparation 0:10:32.920 --> 0:10:35.640 should look like, that's it. And what they've done for 0:10:35.760 --> 0:10:39.439 us by us is say, UM, there are these brilliant 0:10:39.480 --> 0:10:42.280 people who have been hamstrung in life by the fact 0:10:42.280 --> 0:10:44.320 that they were born in the families where they weren't rich, 0:10:44.480 --> 0:10:48.000 or they made one bad move and ended up incarcerated, 0:10:48.320 --> 0:10:51.320 or they had a sibling or a cent or a 0:10:51.360 --> 0:10:54.040 daughter who was incarcerated due to the War on drugs. 0:10:54.120 --> 0:10:57.800 We want to find that person, that UM person who 0:10:57.880 --> 0:11:00.320 has this great potential and train them for a year 0:11:00.679 --> 0:11:04.199 to equip them to be their own retail operator. It 0:11:04.280 --> 0:11:06.880 is an incredible concept and to me, it is exactly 0:11:06.880 --> 0:11:09.439 what social equity should look like. When we talk about 0:11:09.520 --> 0:11:12.880 opportunities in cannabis. It shouldn't be about a level playing field. 0:11:12.920 --> 0:11:15.800 It should be giving us what we deserve and what 0:11:15.840 --> 0:11:18.480 we have earned in part because we were punished. Do 0:11:18.559 --> 0:11:20.560 no no fault of our own to ensure that we 0:11:20.600 --> 0:11:23.840 absolutely and actually have viable businesses in the long run. 0:11:24.480 --> 0:11:27.000 You mentioned this and that there's not just one way 0:11:27.040 --> 0:11:29.600 to be successful in any of these industries. How important 0:11:29.679 --> 0:11:32.880 is it for our black voices to be in the boardroom, 0:11:32.920 --> 0:11:37.280 and not just with regards to diversity and inclusion, immensely important. 0:11:37.760 --> 0:11:39.280 One thing that we know right now is there's not 0:11:39.320 --> 0:11:42.680 a single black woman of a fortune five company, UM, 0:11:43.040 --> 0:11:47.200 not a single black woman's CEO. And uh, it's twenty nineteen, right, 0:11:47.240 --> 0:11:48.840 this is our four hundred year of being here. I've 0:11:48.840 --> 0:11:51.200 been saying it all year long. I'm continue saying it 0:11:51.679 --> 0:11:55.400 um since the first documented enslave person arrived on these shores, 0:11:55.480 --> 0:11:57.760 and for four hundred years, we have been building up 0:11:57.960 --> 0:12:03.160 the companies of everyone else, consuming their products, consuming their services. 0:12:03.280 --> 0:12:07.360 And we know that our culture is so often appropriate. 0:12:07.480 --> 0:12:10.600 We know that our neighborhoods are so often gentrified. We 0:12:10.679 --> 0:12:13.839 know that we're so often um at the cutting edge 0:12:14.000 --> 0:12:17.520 of whatever is the coolest and next best, greatest thing. 0:12:17.559 --> 0:12:19.480 Of course we should have a board seat. That's the 0:12:19.520 --> 0:12:21.319 least we should have as a board seat. When you 0:12:21.400 --> 0:12:25.920 think about anything from funding to access to consumers, look 0:12:26.080 --> 0:12:30.880 like neutrality and etcetera. How important is legislation with regards 0:12:30.960 --> 0:12:33.800 to finding success and each of either of these avenues, 0:12:34.080 --> 0:12:37.040 You know, it's key. I think about often, UM for 0:12:37.280 --> 0:12:39.440 the people who are watching this who haven't seen the 0:12:39.520 --> 0:12:44.600 documentary about Maynard Jackson, thinking about what he did as 0:12:44.640 --> 0:12:48.439 and it wasn't legislation, but it was through his executive 0:12:48.440 --> 0:12:51.560 powers as the mayor of the City of Atlanta when 0:12:51.679 --> 0:12:53.520 the airport project came up and said, no, let me 0:12:53.559 --> 0:12:55.600 tell you, how many people who look like me are 0:12:55.600 --> 0:12:57.439 gonna be working on this airport? Is thirty three and 0:12:57.440 --> 0:12:59.680 a third percent. No, we don't always have to rely 0:12:59.800 --> 0:13:02.640 on and set asides or goals or quotas. But what 0:13:02.760 --> 0:13:05.520 we know happens as a result of that is that 0:13:05.559 --> 0:13:09.359 we finally get our say, we finally get our opportunities. 0:13:09.720 --> 0:13:13.880 That does not happen if it's not forced, because unfortunately, historically, 0:13:13.960 --> 0:13:17.120 we haven't been in decision making seats. So that's why 0:13:17.320 --> 0:13:21.680 Maynard Jackson, whether he's a mayor or Keisha Lance Bottoms 0:13:21.720 --> 0:13:23.920 now as the mayor of the City of of Atlanta, 0:13:24.080 --> 0:13:27.480 or a state legislator, or a Maxie Waters who's the 0:13:27.559 --> 0:13:30.760 chairwoman of the Financial Services Committee, and said, let me 0:13:30.800 --> 0:13:32.720 tell you what we're gonna do. In order for this 0:13:32.840 --> 0:13:35.559 legislation of past, You're gonna have to have offices of 0:13:35.640 --> 0:13:39.240 minority and women inclusion in every financial service agency in 0:13:39.280 --> 0:13:41.880 the federal government. That's how this is gonna work. So 0:13:41.920 --> 0:13:44.000 if there's not someone there that's like, I'm gonna be 0:13:44.080 --> 0:13:46.400 the elbows and the mouth and I'm ensure that you 0:13:46.480 --> 0:13:49.080 do us right by my people, it doesn't change. So 0:13:49.120 --> 0:13:51.319 we need it. You're ten thousand people here for AFRO 0:13:51.440 --> 0:13:55.960 Tech this year. How important is this conference? Major? It's 0:13:56.040 --> 0:13:59.080 major for our mental health, it's major for us to 0:13:59.160 --> 0:14:01.559 see each other um in this space. I think it's 0:14:01.640 --> 0:14:04.400 major for partnership opportunities. You might come here and meet 0:14:04.440 --> 0:14:07.560 your next business partner, and if nothing else, you leave 0:14:07.679 --> 0:14:10.320 encouraged knowing that you're not in this space alone and 0:14:10.400 --> 0:14:13.000 you have the ability to keep going. So if I 0:14:13.040 --> 0:14:15.680 don't think we even have to say we shall overcome today, 0:14:16.040 --> 0:14:18.240 I feel like I'll overcame something. I feel like a 0:14:18.240 --> 0:14:21.360 conqueror in this speech. Shout out to Kirk Franklin for conquerors. 0:14:21.400 --> 0:14:25.800 By the way, I'm Will Lucas. This is black tech, 0:14:26.120 --> 0:14:29.240 green money. I'm gonna introduce you to some of the 0:14:29.280 --> 0:14:32.560 biggest names, some of the brightest minds and brilliant ideas. 0:14:32.880 --> 0:14:35.560 I feel black and building simply using tech to secure 0:14:35.560 --> 0:14:43.080 your bag. This podcast is for you. Richard Kirby is 0:14:43.080 --> 0:14:46.160 general partner on Equal Ventures. We're sitting on the set 0:14:46.160 --> 0:14:49.160 of term Sheets, afro Tech series about venture capital in 0:14:49.200 --> 0:14:51.880 New York City, discussing what it takes not only to 0:14:52.000 --> 0:14:54.880 be a VC, but what are the characteristics of a 0:14:54.920 --> 0:14:58.320 good VC. What is the makeup of a successful VC 0:14:58.360 --> 0:14:59.720 and how do I know if the gig is a 0:14:59.760 --> 0:15:03.000 fit of my personality and profile? Yeah, venture capital is 0:15:03.000 --> 0:15:07.400 about investing and supporting early stage entrepreneurs, and so that 0:15:07.440 --> 0:15:10.400 means you're you're finding companies that are hopefully diamonds in 0:15:10.440 --> 0:15:12.840 the rough. You're doing diligence and so you're trying to 0:15:12.840 --> 0:15:14.560 figure out if that investment is a good fit for 0:15:14.680 --> 0:15:18.480 your invested profile. And then you're making the investment. You 0:15:18.520 --> 0:15:20.320 may or may not be taking a board seat, but 0:15:20.360 --> 0:15:22.640 then you're also finding ways to be supporting on those 0:15:22.680 --> 0:15:25.080 companies and so what do they need to get done 0:15:25.120 --> 0:15:27.720 to make their chance of success much higher? You'll do 0:15:27.760 --> 0:15:31.800 So that means recruiting, happening with fundraising, strategy, business development, 0:15:31.840 --> 0:15:35.240 even maybe sales, and so those components make up a 0:15:35.280 --> 0:15:38.440 lot of different pieces of ventric capital. On top of that, obviously, 0:15:38.480 --> 0:15:40.480 if you're running a fund, you have to fundraise for 0:15:40.480 --> 0:15:43.040 your fund, and that's another kind of um back off 0:15:43.040 --> 0:15:44.600 of something that we try to focus on as well. 0:15:45.120 --> 0:15:47.720 So you you mentioned a couple of different disciplines, and 0:15:47.720 --> 0:15:50.360 I would think about if I was, you know, a 0:15:50.360 --> 0:15:52.840 person coming out of college and I wanted to do 0:15:52.960 --> 0:15:56.920 venture capital, you added other things other than just giving 0:15:56.960 --> 0:16:00.960 money to startups, and what are those the things that 0:16:01.360 --> 0:16:05.160 make a VC partner a good partner instead of just 0:16:05.320 --> 0:16:08.760 a checkbook. Yeah, yeah, I think it's um hard to 0:16:08.800 --> 0:16:10.880 add value because you never know what's happening in the 0:16:10.920 --> 0:16:12.720 day to day of a business and or startup, which 0:16:12.720 --> 0:16:13.960 is why you have to try your best to be 0:16:14.520 --> 0:16:16.480 as hands on as possible and be as intimate and 0:16:16.520 --> 0:16:18.640 closely as now as possible. And so the things that 0:16:18.680 --> 0:16:21.680 we work on is, you know, with our portfolio company CEOs, 0:16:22.000 --> 0:16:24.120 we talk to our CEOs every two weeks. We've got 0:16:24.160 --> 0:16:27.120 scheduled sessions so that we can ask them, you know, 0:16:27.120 --> 0:16:28.880 how things going on, how you how could be helpful 0:16:28.920 --> 0:16:31.280 Because when you're running a company, you're too busy. You 0:16:31.320 --> 0:16:33.160 can't think of like how can will help me? Or 0:16:33.120 --> 0:16:35.320 which help me? You need to have scheduled time for 0:16:35.360 --> 0:16:37.800 them to ask where your needs right now and how 0:16:37.800 --> 0:16:40.200 can I be helpful? Sometimes that maybe you know, I 0:16:40.240 --> 0:16:42.120 need to hire a VP of engineering, Can you help me? 0:16:42.480 --> 0:16:45.040 Sometimes that means I'm getting ready the fundraise, I need 0:16:45.040 --> 0:16:47.000 to practice, I need to get my story right, I 0:16:47.040 --> 0:16:48.960 need to figure out which investor I should be targeting. 0:16:49.240 --> 0:16:51.800 And sometimes that means, hey, we're thinking about changing our 0:16:51.840 --> 0:16:54.240 business like we were doing this today, we think it 0:16:54.240 --> 0:16:56.520 makes more sense to pivot in other direction. Can we 0:16:56.600 --> 0:16:58.360 run our strategy and our vision value to get a 0:16:58.400 --> 0:17:00.360 sense of like is this the right path us? And 0:17:00.360 --> 0:17:02.360 so it's a variety of things. But we try and 0:17:02.400 --> 0:17:05.200 do is be proactive and being helpful and make those 0:17:05.200 --> 0:17:07.639 conversations happen because it's really hard to elicit how a 0:17:07.640 --> 0:17:09.720 founder can need help without asking that question the first place. 0:17:10.160 --> 0:17:13.760 So at what stage should have started to be talking 0:17:13.760 --> 0:17:17.000 to a VC versus like an angel or just you know, 0:17:17.400 --> 0:17:20.440 family and friends. Talk to me about the different stages 0:17:20.520 --> 0:17:23.600 of the progression of the types of investors I should 0:17:23.600 --> 0:17:27.199 be talking to. Sure, sure, Um, you know, angel investors 0:17:27.240 --> 0:17:30.399 and family friends are just folks that kind of invest 0:17:30.440 --> 0:17:32.840 in a person, right, Um, you know, site unseen what 0:17:32.840 --> 0:17:34.840 your idea is. I'm a believer in Will. I want 0:17:34.840 --> 0:17:36.639 to support whatever Will is doing. And so those are 0:17:36.720 --> 0:17:39.359 they hopefully the first dollars you can get. Those dollars 0:17:39.400 --> 0:17:42.160 aren't easy. You know, as an undergrad to come out 0:17:42.160 --> 0:17:43.960 of college, I did not know folks that could give 0:17:44.000 --> 0:17:46.399 me a million bucks or half million dollars to get started. 0:17:46.480 --> 0:17:49.679 So it's very hard to find family and friends. Um, 0:17:49.720 --> 0:17:51.879 But they do exist, and I think that they exist 0:17:51.920 --> 0:17:54.720 for a reason. But that said, though, um, it actually 0:17:54.720 --> 0:17:58.679 can be easier to access. Sometimes actual METROC capitalists they 0:17:58.720 --> 0:18:01.520 have websites, their profile files, they build own personal brands. 0:18:01.920 --> 0:18:03.520 It's really hard to know who is an angel, who 0:18:03.560 --> 0:18:06.640 has capital as an individual or not. Now, the timing 0:18:06.680 --> 0:18:09.840 for targeting a venture investor versus an angel is tricky 0:18:09.880 --> 0:18:12.320 because some investors at a venture fund will invest in 0:18:12.320 --> 0:18:15.720 a company before it's even begun, before it started, before 0:18:15.720 --> 0:18:18.040 it's incorporated, before it's a product in place, and someone 0:18:18.080 --> 0:18:20.120 want to see traction and data, and so it's important 0:18:20.160 --> 0:18:23.199 to figure out what's the right fit investor profile for 0:18:23.240 --> 0:18:25.720 you as a company. Um So, if you're just starting out, 0:18:25.800 --> 0:18:27.960 maybe it's you and your co founder, you probably want 0:18:27.960 --> 0:18:30.920 to focus on what is now called precede funds. These 0:18:30.920 --> 0:18:34.120 are funds that will help you raise capital before they're 0:18:34.160 --> 0:18:36.560 actually built a product. The capital, you know, whether it's 0:18:36.560 --> 0:18:39.520 half a million dollars maybe less anymore, the soul folks, 0:18:39.560 --> 0:18:41.520 that capital is for you to get the product in market, 0:18:41.840 --> 0:18:43.000 so you can get to a spot where a c 0:18:43.119 --> 0:18:46.080 invest like myself will be more comfortable taking risk on 0:18:46.160 --> 0:18:50.640 you as a seed. Correct, there's there's been this new 0:18:50.680 --> 0:18:55.080 bifurcation amongst preceding seed where precede is no product. Let's 0:18:55.119 --> 0:18:58.520 give you capital build something, and seed is there may 0:18:58.600 --> 0:19:00.960 not be a product in place, but up what we 0:19:00.960 --> 0:19:03.080 think about it is you're about twelve months away from 0:19:03.080 --> 0:19:06.040 demonstrating product market fit. And when we try and work 0:19:06.080 --> 0:19:08.400 out founders, just to figure out what is proper market 0:19:08.440 --> 0:19:10.760 fit for your company and how can we help you 0:19:10.800 --> 0:19:12.680 get there beyond just the capital that we're hope we 0:19:12.760 --> 0:19:17.160 gonna provide to you. How do vcs make money? Yeah, so, 0:19:17.160 --> 0:19:21.600 so vcs make income in two ways UM one salary 0:19:21.720 --> 0:19:24.240 and the second piece carry and so um. You know, 0:19:24.320 --> 0:19:26.040 just to make the math easier, let's save a hundred 0:19:26.040 --> 0:19:29.640 million dollar venture fund UM. The GPS generally will take 0:19:29.680 --> 0:19:32.439 tent of the carry, which is twenty percent of the profits. 0:19:32.440 --> 0:19:35.680 So let's say hunter million dollar fund, we've returned two 0:19:35.760 --> 0:19:38.720 hundred million dollars of capital back to our LP I 0:19:38.840 --> 0:19:41.760 E have made a hundred million dollars of value for 0:19:41.920 --> 0:19:45.680 my investors UM eight sent that money will go back 0:19:45.720 --> 0:19:48.920 to your LPs as their profit will go to the 0:19:48.960 --> 0:19:51.159 partners of the fund, So twenty million dollars will go 0:19:51.359 --> 0:19:55.120 spread out. However, you guys agreed to amongst your partnership 0:19:55.440 --> 0:19:57.840 and that's kind of the the profit slash carry that 0:19:57.840 --> 0:20:00.639 you'll take UM at the early stage to the C stage. 0:20:00.640 --> 0:20:03.240 It takes a while to reach that because our companies 0:20:03.240 --> 0:20:06.919 are very very early. They may not exit for five, seven, 0:20:07.040 --> 0:20:09.040 ten years, and so it takes time to get to 0:20:09.080 --> 0:20:11.600 carry the early stage. It's it's a much short time 0:20:11.600 --> 0:20:14.760 frame at the leader stage and the last pieces. UH 0:20:14.840 --> 0:20:17.399