Making VC Investments Beyond Silicon Valley w/ Jonathan Tower

ABOUT THIS EPISODE

For a lot of investors, Silicon Valley is still the center of the world. But more and more, venture capital is drifting outside of the 100-mile radius of Palo Alto into emerging tech markets.

Jonathan Tower, Managing Partner at Catapult, joins the show to explain how his venture firm approaches investments beyond Silicon Valley.

He shares:

  • The epiphany behind Catapult
  • How Catapult sets up scouts in emerging markets
  • Current trends in seed-stage venture capital and tech
  • Advice for founders

Visit Jonathan’s blog and follow him on Twitter for more insights.

This discussion with Jonathan Tower was taken from our show Startup Success. If you want to hear more episodes like this one, check us out on Apple Podcasts.

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Welcome to start up success, thepodcast for startup founders and investors here you'll find stories ofsuccess from others in the trenches as they work to scale some of the fastestgrowing startups in the world stories that will help you in your own journeystart up. Success starts now welcome to start up success. I'm reallylooking forward to our conversation. Today we have jonathan tower managingpartner with catapult with us today. Catapult is a venture capital firm thatfocuses on early stage startups outside of silicon valley. Jonathan is also aregular contributor to publications like the wall street journal new yorktimes fortune, and i had the pleasure of discovering his blog last night andit was a great reed. So i'm excited to have him here to day so welcome andthank you for joining us jonathan and you know to get started. I'd love for the listeners to learn a little bitabout your background and how you got into you know investing on the start upside yeah. So i mean i was something of anaxcidental antree neur early in my life. Actually, i you know, i grew up in newyork city. I was a fairly you know, entrepreneurial kid always kind of hadside hustles here and there, as many kids do and then i came out west to goto berkeley, uc berkeley and basically had to put myself through school forthe most part, and so i had to get pretty resourceful about how to do that.If i didn't want to take ten years to graduate and waiting tables wasn'tgoing to do it, so i kind of was coming up with all sorts of ideas to dobusinesses sort of out of my dorm room or studio apartment. Wherever i wasliving and you know like a lot of students, i had a number of jobssimultaneously. While i was carrying a full load at berkeley and what, at onetime, i was working for a gentleman that put out stock, newsletters,newsletters on stock, picking and so forth, and so on, brilliant man, verydisorganized, and so i ran his front office and sort of learned about thenewsletter business summit by default. Simultaneously, you know being aeighteen nineteen year old kid. I also worked for as a runner, basically for acouple of classic car dealerships, and you know i was also an icon student,and so i was sort of running back and forth, dropping off cars all overnorthern california and my spare time and at the time the collected car market was explodingand it was sort of defying logic to me as an e. You know as a student ofeconomics and at the same time i was also seeing that my boss, that put outstock letters was, you know, having a very nice living it. Basically writingthese letters on economic activity and what he was doing and so kind of light.Bold moment was realizing that you know these. These collector cars were movinglike any other sort of classic or final art type of the commodity, but nobodywas tracking it from an investment perspective, and so i kind of noodledaround one day and came up with an economic model as part of a term paper.I was working on and sort of picked it to my advisor at cal berkeley, and youknow he looked at me and say: oh, this is really interesting. What you've done.I think there's a business here and i said you know i thought so too, and sobefore you know what i know opened a little po box off of campus. I went tomy boss at the newsletter and said hey. I have an idea for a newsletter butfully focusing on collector cars and approaching it from an investmentperspective, and he said i love it. I'm not going to give you any money, but iwill put you in touch of my printer and if you can convince him to do aninitial run of your newsletter, you know maybe i'll get you in business. Solong story short, i you know took whatever was- would have been my rentmoney one month and i basically ran the smallest at that i could afford in theback of the magazine, basically talking about this investment newsletterfocused on these very rare collectible cars and it just exploded and beforeyou know what i had you know, checks coming in my mailbox and put out myfirst issue pulled it on nutter to do...

...that and it just took off because therewas nobody doing what i was doing and i had the benefit of being able to dothis sort of on the sly. So nobody knew that i was an eighteen year old collegekid doing this. You know i wrote fairly well. My analysis was fairly. You knowwell constructed, and so i think people had the idea that i was some. You knowfifty five year old phd in in economics in our history, which i had nothing ofthe sort. So this thing just took off and i went back to my advisor and isaid: look i can't manage this anymore, i'm carrying a full load. What do i do,and he gave me great advice- he said you know jonathan berkeley's, not goinganywhere you're, getting an amazing businesseducation. What you're doing you need to see where this can lead you, and sohe basically talked me into withdrawing for a semester and really kind oftaking this business to the next level, and so i did that and it turned out tobe a couple of years where i ran a business full time sort of took it tozero to sixty. You know several million in in revenue for a twenty one year.Old kid is not bad, but it really sort of set the path for me and start upsand investing for the rest of my career, because i think when you're anentrepreneur very early in your life, you know you get a very good senseabout where your natural gifts are and where you need to sort of short up yourweaknesses and by sort of throwing myself into the start of world at ayoung age and having no business background. You know i had a much morea deeper respect for finance and accounting and operations andmanagement and recruiting all the things that you talk about and work onwhen you're, an investor, and so when i went back to school after i sold mybusiness, i had a real definite is a purpose of what i want to accomplish atberkeley, and so i went back, i got my degree and and kind of went off to youknow, led a career working in some former fashion with startups, either asan adviser, an investor investment banker or management consultant, butalways working with these emerging growth companies, and it was a veryformative experience in kind of getting me into the investment game. What agreat story! I have yet to hear one like that on this podcast, i did notsee it going that you dropped out for a while and pursued it. You know fullylike that great advice from your professor yeah unusual. My parents were terriblythrilled, but i think it all worked down right. It did work out. I mean nowhindsight, but it's true. I do think, there's peoplethat have that entrepreneurial gift, they can see things and the fact thatyou saw it in something that you had no experience with and then ran with it.It's a true talent and gift okay. So that being said now, on the investorside, a recent or one that sticks to mind, it comes to mind of an investmentthat you did. That's a interesting story, and i asked because founderslove these stories and we have so many founders that listen to the show and they always wantto know what caused an investor to take notice and make that commitment. Youknow it's always difficult to pick one, because it's sort of like picking yourfavorite child, but you know a right one. That kind of comes always pops up,and i get asked about a lot because it's one of my sort of better knowninvestments was i would, i would have to pick doll a shape club and thereason i pick it isn't because of the size of the outcome or the how famousthe company was or hiva how viral their video was. It was something that i justit checked, so many boxes for me and bear mine. You know what i invested in,i want to say to thousand and twelve two thousand and thirteen. You know theidea of subscription e commerce didn't really exist right and there wereprobably people nibbling up the margins of doing something in that, but theyreally didn't exist in in the full. Some way that we see it now, and so youknow when i looked at dollar shave and i met michael and i met kevin and metthe team o these guys were working out of an an incubator in santa monicacalifornia right small team. Handful of team didn't really have an office yet had this idea and what i really lovedabout it was. You know, first of all,...

...as again as a student of economics anda student of business, you know they were going after an industry that wasjust had all those classic oligopolistic aspects to it. Right youhad three or four big market entrance marketing comments. I should say youknow, consolidate the industry. Had ninety plus percent market share anindustry that really hadn't seen innovation in decades? Right, where imean you can sort of say, you've got the sort of fat and happy incumbentsthat were very happy extracting the rents from what they were doing with noreal competitive pressure in any particular way. Ericas michael dubin,saying you know, look i understand, you know what is the male buying patternsright? Well, how do men buy high replenishment items like razor likenobody looks forward to buying razors right, it's sort of a nuisance? It's atask! You want to check off your list plus the way that men consume razors.You know you could you could forecast pretty easily what is the cadence ofreplacing your razors and once a week once a month, you know see you? Couldyou could figure all this out and find a way to deliver those razors in a lotless expensive way than what was currently being delivered and offeredto you? So that's number one. The other thing to about the razor blade industry,there's actually a term called razor blade marketing that we're all probablyfamiliar with right. What does that come from is come from this idea ofsort of giving away the razors for free or rather give way the handles for freeand then charging up for the razors and kind of getting him in that sort ofhamster wheel, paying these exorbitant amounts of money for essentially littlepieces of plastic with ribbons of metal. In that that cut your cut, your bladecut your your whiskers, so i mean the whole idea was that there was so veryyou know, an industry that was really right for disruption. So i really like that and the fact thathe thought this through in a very analytical way, but what he also did.Is he wrapped it around this idea of creating a brand that was veryirreverent? That was creating a strong sort of stronger relationship with theconsumer and then d? You, you wrap around that the idea that this was abox that was being delivered to your house every two weeks or every month orwhatever the cadence was, so you had an additional sort of branding experiencewith your consumers. Every time that box arrived was almost like christmasmorning, because once you have a box arriving in somebody's house, what isthe marginal cost of throwing in a sample of spas or hair jail or or facemoisture, as it virtually nothing? So it was a way for you to kind of buildthis sort of platform of other products that you can sell to your customer.That's now getting that box every two weeks or four weeks or whatever thecadence is so that was very powerful and michael's vision was never aboutrazors right. When he pitched me he said. Look i want to own the men'sbathroom right. Yes, razors are our. You know that's how we're going toplant the flag and sort of hit the beach, but ultimately we really want toown the bathroom and get into every type of product that the men are usingon a high replenishment basis. So all those elements really sort of appealedto me and then the other thing that i liked about it was once he launched.You know beyond just the viral video that got a lot of attention which wasgreat, but once he launched, you saw the incumbents. Do all the classic kindof knuckle head moves that every incumbent does when a new entrancecomes in right. The first thing they do is they kind of ignore you they kind oflaugh at you. Then they try to sue you into oblivion. Then they try to knockyou off and copy you. Then they try to launch a fighting brand to kind ofcompete with you and then ultimately they have to buy you right, i mean, andhe and they did everything right. They did all of that in a very sequentialway, and that was because another s aspect of this industry was that theseincumbents were systemically encumbered from really having a competitiveresponse against dollar shape club. They couldn't risk upsetting thechannel relationships they had with wall greens with dwayne read with writaid where they had. Ninety percent of their products were selling throughthat channel, so they really couldn't go direct and so in a weird way.Michael can build this rag tag, team to...

...kind of go up the middle with afootball and score the point, and so that was something that was reallyappealing to me. The sort of you know david and goliath aspect, but also avery new way to engage with your customer that michael really fullyunderstood, and so i just all those elements really appeal to me, and irealized that this guy's had a real chance of building something quitecompelling. I really appreciated how you took us through that, because icould sit here and talk to you all day about each investment. It's just i meanthere's so many lessons in there for what people are doing now and consumer.It's fascinating, but i want to get to a catapult and what inspired you tostart this fund and you know the priority there, because i find thatreally interesting and it very unique at the time so yeah thanks. So i meanyou know the epiphany behind the fun you know came about five or so yearsago, and i was still at ing my last platform. You know doing a lot of theseat investing there, and you know we were very polifilo, so we weredeploying in lots and lots of checks and lots of seed stage companies andthey had a very you know. They had a very sort of silicon valley, centricview of the world which a lot of investors had at the time and stillhave to a certain extent now their view was they wanted to work with. You knowthe top twenty vc funds that mattered make sure they were getting into dealsthat i could find and then work with those companies for twelve or eighteenmonths and then bring them to our best friends at excel graylock, sequiorwhatever, and hopefully one of those firms would lead the round and we wouldput more money behind it. You know the epiphany for me was a couple ofdimensions in like every venture fund. We did a sort of deep dive into theportfolio every year, sometimes twice a year kind of saying. You know where wewinning our deals where we losing deals. What are we doing right? What are wedoing wrong? All of that, and one of the epiphones i had was i looked at theinvestments that i had made in my team had made. I noticed a couple of veryinteresting insights, one of which was that i was doing more and moreinvesting in these tear two markets that were outside of the classichundred mile radius of palota ecosystem, so dolla shave, club great exampleright. These guys were in los angeles i invested in jack in when they were inhoboken new jersey. You know i was in you know: cabbage was in atlanta. Therewas a bunch of these opportunities where, as i was getting further andfurther away from silicon valley, i was finding that the valuations were a lotmore rational team. Matritis was a lot lower. Cost of operating were a lot.Lower teams tended to be scrappier little bit, so there were certainaspects that i found were really interesting and a lot less competitionfor me, because i wasn't you know i wasn't pitching against ten other termsheets. Maybe it was one or two other term shes, so we realizing that therewas a lot happening in these smaller markets, but what i also realized wasthat i had a unique currency to win deals in those markets that other firmsdidn't have what i mean da that is having invested at that point for o thebetter part of ten years. You know i built relationships with all the vcfunds that matter right and i had you know good deals. Bad deals, deals thatwent sideways and at the end of the day, kate, as you know, vcs a relationship,business right, vcs want to work with other vcs, they know and they like andthey've, been on boards with and they've sort of been through thetrenches with, and that is how you build social proof. It's how you buildcredibility, and so what i found at my last platform as having been a seatinvestor there for the most part, a lot of the deals that i had found. You knowpeople would trust my judgment, and so they would say: okay i'll, take themeeting with that company jonathan, if you've backed that company you've gotmoney in the deal and you've worked with them for the last year. We'll takethe meeting, doesn't guarantee they're going to back it, but it certainlyhelps those deals rise higher in the priority stack and one of those tear onfunds. So i don't built that track record credibility, social proof,whatever you want to call it, and i realized it as i went into the smallermarkets for the most part, i don't want to be too generalizing here. For themost part, there was a lot of vec there...

...and the v c. That was there even thegood, even the better firms. They tended not to be that well networkedoutside of the fifty maradas of portland or nashville or wherever theywere, and so the real problem created was, if you were a promising start upand you were bubbling out of one of those smaller rico systems made. Let'sjust say it's nashville, you know you might be able to raise a little bit ofcapital locally from some angels, maybe a small regional fund. Maybe you'll geta product in market. Maybe you'll get six months attraction, but prettyquickly you will. You will find that you will have exhausted the localecosystem adventure, but you're, not at a level of scale that a tear one fundin the valley is going to pay much attention to you yet so now, you've gotthis sort of problem this this location, where you can't scale, and you reallycan't tap any more assets where you are, and so now you have a high risk thatyou're going to die on the line and that's a shame, and so what i realizedwith there are lots of companies that were just getting out of these justgetting going out of these local markets, but really needed adventureform that could help them build that bridge to the valley where you know tothis day, still at plus percent of all the venture tends to flow through, andso you need to have a way to to kind of tap into those networks in the valleyin boston in new york. An maybe a couple of others where you know at pluspercent of all the venture tends to flow, and we had built that right. Wehave been investing in the valley. We had that footprint, you know across myteam and i we've had you know eight eight. Ninety exits i mean across youknow, ma and ipo, and so we had relationships with all the corporatedevelopment teams at adobe and cisco and facebook and google and yahoo. Sowe knew all the right people that were critically important for thosecompanies, as they thought about partnerships and also all the big tearone funds, as they thought about who's, going to leave my series, a who's,going to kind of put me on the map in a global way, and so that was a realstrong. You know insight that we had about our particular way of winningdeals in these markets and just you know, from a mackerel perspective, whatwe saw happening was these tear to markets were catching up really quicklyfrom an innovation perspective from a talent perspective with the valley wehad this remote work force collaboration boom that was happeningin two thousand fifteen two thousand and sixteen which obviously postpandemic, is only increased by an order of magnitude. You were seeing many morecompanies yeah and we were seeing many more companies coming to us pitching usthat were global day, one right. They were pitching us, and maybe they had asmall office in poloese or or san francisco, but other development was inthe ukraine. They had a call center in kansas city. They had something elsewhere they were already distributed right. They were already realizing thevalue in the street teaching importance of having a broad footprint where theycan post the best talent wherever it exists in the world. Didn't have to bein san francisco, didn't have to be in palo alto, and so they were seeing thevalue of that and we realized that venture had to keep up with that. Sothose are sort of the things that kind of made us realize that we had. We wereon to something pretty compelling and it required a new firm to really doubledown on that strategy and focus on that and what so you were early. I mean ifeel like now the conversations i'm having everybody's doing what you didnow right so they're just starting to do it now, post coved- and you knowit's interesting- you brought up then that the tie back to silicon valley fornext stage funding. You don't see that as often right now with some of thesefunds that are popping up in these regional tech ecosystem. So that beingsaid, what are your plans for the next five to ten years for scaling becauseyou're, obviously on you, know the forefront of things so yeah? Thank youfor that yeah, and i say just in your last comment. I mean certainly folksare thinking about remote, investing in ways they didn't think about it, prepandemic. For sure i think, broadly speaking, and i talked about this a lotof my blad stuff, you know a lot of the trends that we're seen now we're notnecessarily new trans. It's just that...

...pandemic poor gasoline on everythingthat we were saying right. So all this moved to remind all this sort of thing,all these virtualization of everything. All these themes that i talk about.Other people talk about you know pandemic, just blew it wide open. So inthat sense, it's been incredible. I will say that you know we are goingabout our investing a little different, we're not just popping up a fund inakron, ohio and being an akron ohio, fun. There's something wrong with that.If that's what you want to do, we specifically didn't go that route,because what we do is we say, look our strength. Our base is still the valley.We have the relationships. We have all that network that we built for fifteenyears, we're not abandoning that. We don't we're. Not our thesis, isn't thatsilicon valley s going away, but it's silicon valley is everywherenow right and what we want to do. Yeah. What we do is essentially say: look wewant to build a a think of it like we're playing a man playing a zone, notplaying a man to man. In other words, we like to say we have access to thesemarkets because we have boots on the ground in these markets through ournetwork, through our seed scout sore of venture partners who live, breathe andsleep in nashville in portland, in barcelona, so they're in a betterposition to identify the great opportunities and a bubbling out ofthat equisite. And then we is a platform can really help that thatcompany get to some level of scale if we just put all of our assets inportland or nashville or barcelona, you're kind of putting all your chipson the table in one market which may or may not be the right bet long termright. So we we, like our approach not to you know not to be smart anybodyelse's approach. But we like our approach, because you know it's a it-creates energies across the platform. We can also iterate on ecosystems that,frankly, kate we're not sure of yet right. And so, if we look at a market-and we say you know what we're seeing a lot of interesting things happening inportland right, but it's early okay, and so we put somebody in portland ifwe open up a physical office which is basically just deputizing, a scoutthere in portland right and we will be in a position where, let's say, there'sonly six really interesting deals coming out of portland in a year, we'llprobably see all six if we play our cards right and so, if that begins toreally come into its own and become a very compelling ecosystem over the nextfive years. Long before serko is there long before exhales there long beforeendresens? There will already have been the vc fund of record right if we'reright. If we're wrong- and we look at this in two years and gonot a whole lot coming out of portland. Maybe we were a bit early. What is thecost for us to quietly just transition out? Nothing we're not really firinganybody, we're not really taking any brand hit in that respect. So it reallygives us a chance to poke around and ecosystems that are they're not readilyobvious right, they're, not toronto, yet they're, not berlin, they're justkind of getting something going and we think if we can go to use the overusedwayne, resky quote where the puck is going, not where the puck has been tokind of get there in time. We hopefully will have built a reputation that whenthat ecosystem then becomes obvious to everybody else, we will have been therefor five years. I think that's an excellent clarification at really smartstrategy. That being said, can you share which ecosystems your bullish onright now yeah? So where you go back and i kind of lost the threat of yourquestion, i apologize for that. So you ask about where we're going to be infive years, so our plan around that is we're we're really building aconstellation of funds all under the catapult platform. So right now we'restill, you know we're still on fund one right, we're still a new fund. We we'restill very much an emerging manager. You know we're going to walk before werun edward focus primarily in north american europe. So that's what we haveassets, that's what we have people, but we're already having discussionsprivately with other ecosystems, doing possibly in emerging markets, funfocused on eastern europe sub, so africa we have other conversationsgoing with mussel, doing something in...

...south america over the next couple ofyears. So i think the vision is that we'll probably hopefully be on everycontinent, the next five or seven years, which will really take our platform tothe next level, where we'll have some relevance in every ecosystem thatmatters to us that is so exciting. I like that kindof global view, because we're hearing that more and more you know withstartups that we talk to on this show is there finding that tapping into moreof a global framework is helping them scale quicker, and what not? What areyou seeing specifically around trends and more the seed stage right now, yeah?There seems to be a lot of funding at that level. So i'm curious on your yoursake. I mean like in terms of like technology themes or what we're seeingin the venture part of the world. The vent are part of it. Yeah yeah, i mean,i think you know. As i've talked about in my blog post, i mean you're, seeinga lot of innovation in the asset class like one of the one of the things thatcovin done also, is it's really kind of bi fricated? What venture is whatventure looked like ten years ago? What it looks like now is quite radicallydifferent right and i had a whole post on. I was called ventured three point.Oh and my thesis in my argument was that right, yeah, thank you. So my viseis that we're sort of in this venture three point o phase. Now, where youknow, if you could look at sort of venture one point, ou is sort of theclassic sand hill road. You know, firms of the s and s and to the lake s, youknow sort of structured like law firms, you know with the partners andassociates, and you kind of worked away through the ranks and there's nothingwrong with that, but that was sort of what the venture world look like quiteopaque. You know very short of not terribly found or friendly in many ways,and then the s came and then you had. You know, after sort of the com, bus, alot of new firms came out of that and formed in the true, the true ventures,the shastas, a number of different platforms. You know going earlier beinga little bit more found or centric founder friendly. A lot of them werefounders that actually formed those firms and that sort of changed a littlebit of the aspect of venture was a little bit more accessible. A lot ofthese new vc funds were were writing. Blog posts were putting out a lot ofthe sort of secrets. Adventure to help founders in a puncheon urs do better innavigating the world of vc, and i think now we're kind of getting into thisthree point, o stage where you have nano funds and rolling funds andangeles syndicates and i think, net net. These are all positive forentrepreneurs, because it gives them a lot more access to capital, many morecapital sources out there, and so i think i think that friend is here tostay now, it's early to say which, what those you know, what platforms aregoing to be successful and what approaches are going to be successful?I think there are pros and cons of a lot of it. You know i think ultimately,re vc is a team sport. I think it's tough to kind of be a sola practitionerand provide a lot of the services that entrepreneurs are demanding, and so weobviously are taking a different approach were actually a platform. Wewant to be able to provide those services to help company scale, butlook is super exciting and i think there are lots of great investors goingto come out of this moment. Who may go off and run their own funds or may joinbig, establish funds and become super successful and in a weird way andsomething we're doing in our own platform? It's creating a bit of a farmsystem for vc. Much like baseball has a farm system. You sort of you find youngtalent, you kind of move them through the organization. We do that in our sescout program. We find what we think are going to be great investors. Somefolks are not quite sure they want to be venture investors. So it's a greatway to work with us. Show us that you have a great nose for deals. Show ushow you interact with founders, and you know it's a way for people to kind oftry on the vc had and see. If it's a career for them, sometimes they'll gooff and do something else or start another company or sometimes you'll,say i love it. I want to be part of the catica platform going forward, so it'sa great way for us to get to know them they get to benoa. So look. I thinkit's a super exciting time to be a venture and i think a lot of theinnovations that we see a are long...

...overdue and ultimately- and this iswhat's most importantly- it's going to enable great companies to get thefunding they need to really achieve their fullest expression. I like thatidea too, have you had a lot of success with this kind of farm approach? You know it's early days, but we loveit. I mean again what we like about it is, you know people come to us and theythey have something of value. Maybe they really know a certain space orcertain ecosystem and they've proven they've got a great nose for deals mostof the people that we work with. We have had some relationship with. Maybewe backed them in a company in the past or their former founders of ours. Maybewe have some other interaction, but what they bring the commonality theybring. Is they have a great opportunity to identify opportunities where theyare right, so they are in. You know, they're in la there, in chicago they're,dialed into that network. Right they've got that sort of granular understandingof what's happening there, so that it can dentify the great companies that weshould be spending some time with and getting to know better. And so, as weinvest, let's say it's a deal in chicago, then that scout is in a betterposition to be the day to day mentorship for that company. So ifthere's a board seat, they're likely to take it early on, if there is otherways that they're providing the day to day mentorship they're in a much betterposition to do it there than we're going to do from silicon vat, so itgives them an ability to kind of throw them in the pool, see how they do, howthey work with founders in that ecosystem and really develops theirsense of you know what it takes to be. A great venture investor, not justfinding deals. Finding deals is fine and my biggest criticism of some of theother scout programs out there is there more focused on deal sourcing, not dealmanagement right, and so what we do think i emphasize that yeah yeah i likehow you mentioned. You know they're close to them. They have a board seatearly on you're because that's the difficult part right that seeing itthrough yeah the other thing too, and you absolutely right you, the otherthing too, is bear in mind. You know if you're looking at an ecosystem that youwant to invest in. You know part of your, whether you're going to besuccessful. There is how you are working with the other constituents inthat ecosystem. So what is the relationship you're having with theother venture investors and angels in that market place? The problem is, ifyou have a scout program and you announce it to the world and you getyour tech crunch piece and that's all great, and you say we're going to havea scout in atlanta, but the scout is, you know a year out of college doesn'tknow what they're going to do and they're going to be gone in six months,because they're going to l figure something else out. Why is you as aventure investor in atlanta, want to spend time getting to know them andinvesting in them and really kind of work in that relationship? Right,there's a sense like they're, not really here long term. You know theydon't really speak for the firm and any real fulsome way. Maybe that's reallynot an investment that i want to make with that particular scout. So we likethe program of saying, look. We want folks to be with us for a while andwe're investing in them in their relationships, because their value isgoing to be. How are they going to network with other inventer investorsin the market place right and if they're going to sort of cycle outwithin six months, as some scouts tend to do it's probably not going to behelpful for us in really providing the support to that to that company and areally seeing him to get to a positive outcome right right, so that was fascinating onthe venture side. What about on like the sector? You know technology side ofwhat you're interested right. Now i mean we're finding we're just gainingso many clients and fintech market places. I mean is that kind of whereyou guys are somewhere different yeah we spend. I know we probably have threecourse sectors which encompasses ninety percent of our deal flow in ourinvestments, and you know it's not. Obviously it sticks to our knittingright. We are going to continue to leverage where we've been successful,so we do have a strong consumer practice, ance consumer presence. We doa lot of enterprise, so we have a whole digital transformation of theenterprise thesis that we invest in.

Obviously, it's a big bucket, but youcan sort of pars that in any way you want. Obviously fintech is part of that.An shirte is part of that, and then we have a sort of a third sector which isa little bit of a catchall category, around deeper attack, and so thatencompasses ai and machine learning and robotics and things that touch on thatand just like any ven digan there's overlapping pieces. Where you know youcan't really talk about ai. If you can't talk about that, there arecertainly areas that sort of will blend and crash into one another, which wethink is super interesting in areas of tremendous innovation. But i'd saythat's probably ninety percent of our of our deal flow and where we focus butyou're absolutely right. There is a ton of new innovation happening, newindustries that were very sleepy just a few years ago, they're now getting aton of attention as people think about it right. You can think of you know iffertility and sex tech and things like nail care, we just had re e portfoliocompany called prim madonna that just got a ton of press in the last twoweeks and now everybody's talking about the nail care category. I saw thatthat's twenty years as what are, but you know the funny thing about itis you know: we've been an investor since two thousand and seventeen, andyou know it was a chore getting other investors to think about it. You know alot of them would kind of sit there with their arms fold in the pitchmeeting saying well, it's interesting. It feels like a toy, it's kind of nishi,i'm i'm not sure about nan care as a category. You know we'll track you thatkind of stuff- and i can tell you and again i don't want to get ahead of myskis here, but just giving the amount of attention that the category hasgotten just in the last month. I know i'm going to get a lot of emails aswell. The ceo from other investors saying hey: are you guys still raisingand we'd love to talk, and you know we think nail care is a huge category. Isright for disruption all the things that you know we were pitching twoyears ago and they see you know was pitching two years ago. Suddenly theinvestors are going to get religion really fast on that, so we're seeing alot of examples of these categories that seem kind of sleepy and maybeearly that folks weren't ready to kind of lean in on that. I think it suddenlybecoming super exciting. So that's one, then a sex tack, then is fertility.Obviously, tele medicine is one that's been around, but is getting a new look.You know i talk a lot about a r and vr as a category that was hot ten yearsago, went fallow and is now coming back with a vengeance because of pandemic,as we think about experiences and how we can have those experiences in avirtual setting in a virtual world- and this is a broader theme that i talkedabout also so- the decoupling of capital and geography, the decouplingof transactions and physical spaces, the need to transact- and you know whydo you have to buy a car in a car shom? You don't have to do that anymore. Thatwas unthinkable fifteen years ago right, my one of my partners, other thing thatovid accelerated, i think that you were on and then you know that wasaccelerated exactly and again. These are. These are super interestingbecause you know wasn't that long ago that it just seemed illogical thatanybody would ever want to buy a mattress without going to a mattress,show room and laying on and rolling on it right. That seemed crazy. My partnerwas a seat investor in casper right, so casper in much like dallas shave. Clipdid for razors created this idea of. Why can't you buy a mattress online?Have it delivered to your home in a box and experience it without the shore ofgoing to a show room and all that so now, you're de coupling, the physicalneed to have these long mattress, show rooms right staffed with people thisoverhead associated with that when you can buy it online. So all these thingsare happening in a very, very quick way, and it's just it's definitelyscrambling the playing field and ways that are are super chin. Yes, well said it is exciting. So, aswe wrap up our listeners, we have so many startup founders in the communityadvice from you to them for right now, the next year you know they love advice,whether it's about team formation or...

...how to approach vcs funding. Justanything you know that sticks out they like to hear straight from the source.Sure i mean i could you know we could do a whole post just on an ice werestarted. I e comes to mind yes, if i don't askyeah, no absolutely i mean i think i think i think it's important for anystart of it. I don't care what space you're in what vertical you're in whatcategory you in you have to sort of embrace where you are right, we're in awe're in a moment we are in a frothy moment which is exciting, but is alsohas some peril to it, and so, if you're out there pitching your company, youknow you're one of thousands of startups out there, so you have toalways be thinking about. How am i going to stand out? How am i going toyou know, be memorable to a vc of to an angel in what i'm doing, and so it goesback to first principles in many ways you know really crisply articulate whatyou're doing how you're differentiated right. What is the special sauce thatyou have that everybody else doesn't have right to really get clear on thatright, focus focus focus i think you can. You know rarely fail by being toofocused, but you reason easily fail by general being all over the map and hardto sort of hard to see where you differential, and are you doingsomething that you can uniquely be successful at? So i tell any founderbefore even tell me what space you're in like. Have you thought that, throughwhat is your your core differentiation in the market place? Why you're theright team to do it and why this is the right time that you should bepresenting this opportunity to invest? Or so, if you don't get that clear.First of all, nothing else, i tell you matters really right, because thosethat's really important, and it's not just important when the times are good,so you can go and raise money, but also when the times are tough, because youwill have tough times, you will have moments that are existential where youare facing crises and if you're not super clear, and why you're doing whatyou're doing you're not going to be successful right. It's that caryaffects pine, it's the clarity of oedes. Yes, yes, that is such good advice,because you do run into difficulty and you start to pivot and loose track andyou're. Absolutely right, that's excellent! So, yes, i might all day, but anyone anymore, just one last bitof advice before i let you go yeah i mean just just to just to follow up onthat on that last point, you know again, it's it sounds corny, but one exercisethat we do with our with our startups you know is- is really easy forstarters to get caught up in the minutia in the housekeeping in thepitch craft right. Oh, i slide. Five should be slide to ors. My is myfinancial model and slide nine wrong. It's like put that aside, take a stepback. Ask the big harry existential questions. First right and sometimesit's worked for us- is when we have teams that are dysfunctional. You knowwe will have the sort of what we call them. Bean bag sessions we'll sit downand there's a beam bad chair and bring in an advisor, bringing a council,bring in a therapist and really dig in to what are you guys doing? Why are youdoing and what? How are you defining success? It sounds wouwou, but itreally helps founders realize you're going to be doing this. For you know,three to ten years, like you got to be a hundred percent on board, with thisand you're going to have so much pressure on you to bail. So many peopletelling you why you're crazy go back at your safe job. A google go, get yoursafe job at iv and that you left to do this. All that pressure is going to beon you, so you know before you get caught up in the in the weeds. Getthose big hairy, existential questions answered, because that's the thing isgoing to keep you. You know get you through those those nights when you'reup sweating bullets, because you can't make payroll and all the stuff thatyou're going to experience. So i just tell him first principles focus on whatyou're doing. Why you're doing it and then get those big questiions answered?First and then you can worry about what...

...the pitch deck should look like, andall that kind of stuff good point that to come after excellent,and i love the you know, support you, provide your companies around it,that's great with those being back sessions. That sounds really helpful.So what's the url for your blog, so we can share that with listener yeah. Soyou can find me on medium. You can certainly find the website. Our companyis canticle vc com e. You can find a lot of our post there, a twitter i'm atjonathan underscore tower. So just just lies. My name sounds so yeah happy toyou know, happy to engage with a community that way- and it's easy toeasy to reach me so i'm always open and try to keep his as my doors open aspossible for entrepreneurs to have questions. Oh that's great and ieveryone listening. I really encourage you to go check out. Jonathan's.Writing. I found it fascinating. So thank you for being here today. It wasa real treat, really enjoyed the conversation and hoped to have youagain in the future super i enjoyed it to gate, have a great rest o weekend.Thank you. You've been listening to start upsuccess to make sure you don't miss out on future episodes subscribe to theshow in your favorite podcast player. Like would you hear tap the number ofstars? You think the show deserves an apple podcast for more tools andresources for your own start up. Success check out berkly associates.Thank you so much for listening till next time, e.

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