Transcript
WEBVTT
1
00:00:06.240 --> 00:00:10.070
With the partners in the principles around
the table and and our venture partners.
2
00:00:10.509 --> 00:00:13.789
If we don't feel like we can
help them, if we don't have people
3
00:00:13.789 --> 00:00:19.230
within our network to help them generate
sales, we typically pass. And that's
4
00:00:19.789 --> 00:00:23.820
not a negative on the opportunity or
the company itself, but we really want
5
00:00:23.820 --> 00:00:29.660
to add value. Welcome to the
revenue series on BB growth. I'm your
6
00:00:29.699 --> 00:00:34.859
host, John Grispin, founder and
sales coach at early revenue. Let's get
7
00:00:34.859 --> 00:00:41.250
started. So today I'm here with
Brian Matthews, cofounder and general partner at
8
00:00:41.409 --> 00:00:46.409
cultivation capital. Welcome, Brian,
but Hello John. Thanks for having me
9
00:00:46.570 --> 00:00:51.640
on. I'm excited to tell our
story. Absolutely certainly appreciate your time.
10
00:00:51.840 --> 00:00:57.600
So just a kind of level set. Our podcast guests are typically revenue leaders
11
00:00:57.840 --> 00:01:03.240
and venture firms like yourself. We
want to provide early stage tech founders and
12
00:01:03.520 --> 00:01:08.310
their sales leaders insights and best practices
in really two areas that are top of
13
00:01:08.390 --> 00:01:15.230
mine for everyone, the how tos
of going early stage sales and fundraising,
14
00:01:15.590 --> 00:01:19.659
which is why you're here so well. Really, today we'll break this chat
15
00:01:19.780 --> 00:01:23.579
in half. First we'll talk about
cultivation and your growth kind of pre covid
16
00:01:25.180 --> 00:01:30.980
and then we'll get into some post
covid quarantine related questions. So first of
17
00:01:30.980 --> 00:01:34.810
all, I'm so glad you hear
Brian. Want you tell us a little
18
00:01:34.810 --> 00:01:38.489
bit about your background? Sure.
Yeah, so start out as a mechanical
19
00:01:38.569 --> 00:01:46.209
engineer working for McDonald Douglas in the
S. Left McDonald Douglas in the early
20
00:01:46.730 --> 00:01:53.519
s and with my wife started a
fantasy sports company pre Internet, and that
21
00:01:53.760 --> 00:01:57.120
went very well. We came one
of the largest fantasy sports companies in the
22
00:01:57.239 --> 00:02:02.349
country. Also started an Internet Company
and is sp here in the Midwest.
23
00:02:02.430 --> 00:02:08.150
Raised over fifty million dollars and started
a software consulting firm and a back office
24
00:02:08.189 --> 00:02:15.860
software company. Sold all four of
those companies in the two thousands bar to
25
00:02:15.979 --> 00:02:20.539
publicly traded companies, and so quite
proud of that. To that for exits
26
00:02:20.580 --> 00:02:25.819
the publicly traded companies during the time
did a lot of the angel investing in
27
00:02:27.099 --> 00:02:32.289
probably over a fifteen year period invested
in forty two angel companies as well.
28
00:02:34.009 --> 00:02:38.490
Of course there were some failures along
the way. Probably Co founded another six
29
00:02:38.569 --> 00:02:45.719
or seven companies at didn't exit,
but you learn a lot even in your
30
00:02:45.759 --> 00:02:52.039
failures, and so did that until
about two thousand and ten and then started
31
00:02:52.080 --> 00:02:57.360
getting involved in the accelerator scene that
was starting up here in St it's the
32
00:02:57.439 --> 00:03:00.949
company called capital innovators, and then, multimately in two thousand and twelve,
33
00:03:00.110 --> 00:03:06.349
decided with a couple of CO founders
to launch cultivation capital, which is an
34
00:03:06.430 --> 00:03:10.550
early stage venture fund. Well's so
it's a perfect segue. You you've spent
35
00:03:10.629 --> 00:03:15.780
a lot of time as not only
an operator, you spend some time doing
36
00:03:15.780 --> 00:03:19.819
anma. You've been an investor at
multiple levels. Tell us about the mission
37
00:03:19.819 --> 00:03:23.500
and purpose while you formed cultivation and
what it's purposes yeah, well, it's
38
00:03:23.580 --> 00:03:30.370
kind of a wealthhold story now,
but I think early on we recognize how
39
00:03:30.449 --> 00:03:36.210
difficult it is to get capital in
the undercapitalized markets, are underserved markets between
40
00:03:36.250 --> 00:03:39.930
the coasts, and so I know
I struggled to raise capital during the years,
41
00:03:40.169 --> 00:03:46.159
and so the thought was that there
were good investment opportunities and we could
42
00:03:46.199 --> 00:03:51.199
get in earlier than the more establish
venture funds, and so that was the
43
00:03:51.319 --> 00:03:57.310
premise. We started with a software
technology fund, but we also then launched
44
00:03:57.430 --> 00:04:01.509
a life science fund as well as
an Hag tech fun so you've got an
45
00:04:01.590 --> 00:04:08.229
array of different funds going on each
of these funds. So you started in
46
00:04:08.349 --> 00:04:11.699
two thousand and twelve these funds that
emerging of all the over time. You're
47
00:04:11.780 --> 00:04:17.019
on multiple series of the funds.
What's the typical funds size for the funds?
48
00:04:17.060 --> 00:04:21.139
Yeah, so, you know,
we want to say under a hundred
49
00:04:21.180 --> 00:04:26.329
million dollars. The first fun was
was about twenty million dollars. Tech Fund
50
00:04:26.410 --> 00:04:30.930
three, or third iteration of the
Software Tech Fund, is now seventy five
51
00:04:30.009 --> 00:04:34.329
million dollars. But we want to
keep them under a hundred million dollars because
52
00:04:34.529 --> 00:04:41.720
we're really investing in pre a late
seed are an a ram, which is
53
00:04:41.800 --> 00:04:45.680
usually at a lower multiple than what
you'd see on the coast. So before
54
00:04:45.680 --> 00:04:48.439
we get into the investment sizes,
tell us a little bit about the lps
55
00:04:48.560 --> 00:04:54.750
that are part of the different funds. Yeah, so on most of the
56
00:04:55.069 --> 00:05:00.069
LP's are family office high net worth
individuals. We do have some institutional investors,
57
00:05:00.670 --> 00:05:05.829
but in your early funds it's very
difficult to get institutional investors. They
58
00:05:05.910 --> 00:05:11.060
they don't really like to invest in
a first fund or maybe, in some
59
00:05:11.220 --> 00:05:15.420
cases a second fun but as we've
matured now and we're on fund three and
60
00:05:15.860 --> 00:05:20.300
getting ready to start raising for fun
for we are getting interests from institutions,
61
00:05:20.810 --> 00:05:25.449
but for the most part kind net
worth individuals, mostly in the same louist
62
00:05:25.490 --> 00:05:30.689
region. And what's on a typical
investment size that you're looking at? Yeah,
63
00:05:30.769 --> 00:05:34.170
so that is grown with the size
of the fund. But but today
64
00:05:34.449 --> 00:05:41.360
we're typically writing a two million to
three million dollar check with companies that had
65
00:05:41.439 --> 00:05:46.040
between a half a million and two
million dollars of rr. Our software tech
66
00:05:46.120 --> 00:05:51.230
funds are predominantly focused on Bob Sass. Our first fun had a little bit
67
00:05:51.269 --> 00:05:56.550
more BTC in it but we decided
it, starting in our second fund,
68
00:05:56.629 --> 00:06:00.350
to go with Bob only. On
the Life Science Fund and the Egg Tech
69
00:06:00.470 --> 00:06:04.819
Fund, there you have a little
different investment thesus and they do invest in
70
00:06:04.899 --> 00:06:09.620
pre revenue. I can't speak too
much to those. I'm going to keep
71
00:06:09.660 --> 00:06:13.220
most of my conversation around the software
attack. I do want to mention we
72
00:06:13.300 --> 00:06:15.699
do have one other fun the sphere
of St Louis Fun which is an SBI.
73
00:06:15.899 --> 00:06:21.410
See it's in investment criteria is a
little earlier than to fund three.
74
00:06:21.810 --> 00:06:27.689
kind of filled the void that tech
fun one had and it is got a
75
00:06:27.889 --> 00:06:32.720
larger investment thes to sit will do
be to see it will do agriculture as
76
00:06:32.800 --> 00:06:39.439
well as software technology and it's a
two hundred and fiftyzero dollar first check.
77
00:06:40.279 --> 00:06:45.079
We like a rr in the hundred
to two hundred thousand dollar range to make
78
00:06:45.199 --> 00:06:48.350
those investments. That's you. So
you've you've written this. You're walking into
79
00:06:48.389 --> 00:06:53.870
some of my questions here. So
any particular metrics other than revenue that you're
80
00:06:53.910 --> 00:06:59.589
looking at or any particular criteria?
I know you you've I've heard you talk
81
00:06:59.589 --> 00:07:01.980
before where you got a product,
got a revenue, got of traction.
82
00:07:02.019 --> 00:07:06.939
Any particular metrics that you look at
as you analyze these potential investments? Yeah,
83
00:07:06.939 --> 00:07:12.620
Oh, yeah, definitely. So
we like to see growth rates of
84
00:07:12.660 --> 00:07:15.850
at least a hundred percent year over
year. The smaller the fun the higher
85
00:07:15.889 --> 00:07:18.649
the growth rate we want to see. But when you when you start getting
86
00:07:18.649 --> 00:07:23.170
to a million, five, two
million dollars of rr, least a hundred
87
00:07:23.250 --> 00:07:28.810
percent a year over year growth is
is kind of a minimum criteria that we
88
00:07:28.970 --> 00:07:33.519
want. We do look at customer
acquisition cost and LTV and, you know,
89
00:07:33.680 --> 00:07:39.079
looking for all of the traditional SASS
ratios as part of the the due
90
00:07:39.120 --> 00:07:45.430
diligence process. But first cut,
when you company first interviews, it's totally
91
00:07:45.589 --> 00:07:49.470
our our growth rate got. And
so for founders out there, what are
92
00:07:49.509 --> 00:07:54.550
the characteristics that you're looking for?
I'm sure one of the things that you're
93
00:07:54.550 --> 00:07:59.060
investing in, obviously, are the
founders and the team. So what are
94
00:07:59.060 --> 00:08:03.180
the characteristics you seek in the founders
that you'll invest in? Boy, that's
95
00:08:03.220 --> 00:08:09.980
a that's a million dollar question for
sure. Obviously, once we're comfortable with
96
00:08:09.220 --> 00:08:13.209
all of the financial data, in
the metrics in the market, it really
97
00:08:13.370 --> 00:08:18.769
boils down to do we like the
founder and do we think the founder has
98
00:08:18.850 --> 00:08:22.569
what it takes? Obviously experience helps
a lot. You know if they've done
99
00:08:22.569 --> 00:08:30.240
it before, it's a much simpler
decision. We look for what the background
100
00:08:30.439 --> 00:08:35.639
is. You know where they are
software developer, where they salesperson. And
101
00:08:35.120 --> 00:08:39.559
one of the things we've noticed,
which is different than probably the cost,
102
00:08:39.679 --> 00:08:48.190
most of our founders have been good
Biz Dad, good sales people, partly
103
00:08:48.350 --> 00:08:50.389
since it's so hard to raise capital
in the Midwest. You you got to
104
00:08:50.429 --> 00:08:54.590
be able to get the revenue quick
and you got to be able to sell
105
00:08:54.710 --> 00:09:00.580
and raise money. So the tendencies
tend to be more sales driven, our
106
00:09:00.700 --> 00:09:05.299
business development driven for our founders,
although we really look for Co founders.
107
00:09:05.460 --> 00:09:09.659
We would prefer to see two to
three founders as part of the mix a
108
00:09:09.210 --> 00:09:15.769
business development person and technology person and
an operations person, and the CEO can
109
00:09:15.809 --> 00:09:20.289
be any of those three. It's
really tough to scale one of these businesses
110
00:09:20.409 --> 00:09:26.399
with a single founder, and so
that we view someone as a negative,
111
00:09:26.519 --> 00:09:31.600
and so cofounders is very important to
us. What percentage would you say on
112
00:09:31.720 --> 00:09:35.679
the on the Tech Fund side of
things, are they at a stage where
113
00:09:35.720 --> 00:09:39.230
it's founder led sales or do they
have a sales team? They took three.
114
00:09:39.269 --> 00:09:43.110
They usually have a sales team,
in the spirit of St Louis Fund.
115
00:09:43.230 --> 00:09:46.350
There it's usually the founder that is
is leading the sales. So at
116
00:09:46.470 --> 00:09:50.909
what stage are they typically when they've
brought on sales talent are they? Are
117
00:09:50.909 --> 00:09:54.299
there any particular metrics or have you
noticed any trends that way? No,
118
00:09:56.179 --> 00:09:58.059
they still haven't got it figured out. Obviously, one to two million you
119
00:09:58.179 --> 00:10:03.059
haven't got product markets that most of
them think they know, and you know
120
00:10:03.220 --> 00:10:07.059
this capital is going to go to
build out that team, to spend more
121
00:10:07.100 --> 00:10:13.889
money on marketing, obviously continue to
enhance the product. In most cases they
122
00:10:13.929 --> 00:10:18.730
are then starting to look for a
senior VP of sales or business development.
123
00:10:18.610 --> 00:10:24.799
With this round of capital we are
typically the first institutional round and you know
124
00:10:24.960 --> 00:10:28.039
what, it's usually a three to
five million dollar route. So the companies
125
00:10:28.039 --> 00:10:31.679
at a point where we think,
and they think, that they're going to
126
00:10:31.759 --> 00:10:33.679
be able to scale and they're really
going to start building up that sales team.
127
00:10:35.320 --> 00:10:41.789
Very good. So how are you
traditionally sourced deals for your pipeline?
128
00:10:41.789 --> 00:10:46.909
Yeah, so we're a little unique. We've got a pretty big team.
129
00:10:46.429 --> 00:10:52.980
We've got six partners and Tech Fun
three and we've got three analysts, are
130
00:10:54.179 --> 00:10:58.700
principles, as we call them,
one in St Louis, one in Chicago
131
00:10:58.860 --> 00:11:03.570
and one in La and all of
us are networking and building relationships with other
132
00:11:03.649 --> 00:11:11.809
venture funds, other accelerators and honestly, deal flow just pours in. cultivations
133
00:11:11.850 --> 00:11:18.490
been recognized as one of the most
active investors and so we're found pretty easily.
134
00:11:18.720 --> 00:11:22.720
And so there's lots of deal flow
pouring in pre coovid and and even
135
00:11:24.440 --> 00:11:28.000
post covid. As far as the
amount of deals, we haven't seen much
136
00:11:28.039 --> 00:11:35.909
of a slow down from the startups
looking for capital. Gotcha and and given
137
00:11:35.990 --> 00:11:41.230
the approach that you take, everyone
has their different approach. Is there anything
138
00:11:41.429 --> 00:11:45.549
that you're doing in particular when you're
after you make the investment? How you
139
00:11:45.669 --> 00:11:50.419
helping to contribute to a startup sales
growth? Yeah, so that's important in
140
00:11:50.500 --> 00:11:54.179
the selection criteria as well with the
partners in the principles around the table and
141
00:11:54.379 --> 00:11:58.179
and our venture partners. If we
don't feel like we can help them,
142
00:11:58.220 --> 00:12:03.649
if we don't have people within our
network to help them generate sales, we
143
00:12:03.929 --> 00:12:09.490
typically pass. And that's not a
negative on the opportunity or the company itself,
144
00:12:09.610 --> 00:12:11.250
but we really want to add value. We're going to ask for a
145
00:12:11.330 --> 00:12:16.679
board seat, we're going to be
making introduction, so someone, one of
146
00:12:16.720 --> 00:12:22.559
the partners on the team has to
feel very comfortable and being able to help
147
00:12:22.720 --> 00:12:28.679
generate leads and and use our network
to connect them to other opportunities. I
148
00:12:28.759 --> 00:12:33.549
think that's a smart approach. And
how are you approaching the whole notion of
149
00:12:33.470 --> 00:12:39.629
making sure that a founder gets proper
guidance and coaching to make them a better
150
00:12:39.669 --> 00:12:46.460
leader? Yeah, so it's the
board members responsibility, whoever takes the board
151
00:12:46.539 --> 00:12:50.539
seat for cultivation capital, to really
start working with that founder and in many
152
00:12:50.659 --> 00:12:56.899
cases I start out doing a phone
call every single week and really getting to
153
00:12:56.059 --> 00:13:01.769
know the founder deeper and what the
challenges are and and we do that so
154
00:13:01.889 --> 00:13:05.889
that we can then talk about that
at the partner meaning every week. But
155
00:13:07.049 --> 00:13:13.399
these companies are still relatively young and
there's a lot of challenges. There's a
156
00:13:13.200 --> 00:13:18.240
lot of management decisions to be made. Our getting decisions we made, and
157
00:13:18.519 --> 00:13:24.440
so I would say for the first
couple years like to spend weekly time and
158
00:13:24.519 --> 00:13:28.509
as the company matures those phone calls
become less and less. Not all of
159
00:13:28.590 --> 00:13:31.269
the partners do it that way,
but most, most of us to talk
160
00:13:31.389 --> 00:13:35.950
on a weekly basis to our to
our powers. That sounds like it's that's
161
00:13:35.990 --> 00:13:39.509
great support, especially in the early
days. I know that's critical to form
162
00:13:39.590 --> 00:13:46.620
of solid working relationship with team.
Let's talk about cycle duration. So once
163
00:13:46.259 --> 00:13:50.539
you you have an initial conversation and
there's interest and you end up investing,
164
00:13:50.620 --> 00:13:56.210
what's a typical cycle duration from initial
conversation to term sheets? Typical? I
165
00:13:56.330 --> 00:14:00.090
know there's all. That's all of
the matter, I'm sure. Yeah,
166
00:14:00.250 --> 00:14:05.330
so I would say all of us
are kind of nurturing opportunities. So we
167
00:14:07.169 --> 00:14:11.039
most of the time we find the
company, it's free investment pieces. So
168
00:14:11.679 --> 00:14:16.679
we like to spend time on a
monthly basis with these opportunities that we like
169
00:14:18.440 --> 00:14:22.399
and and so for that might take
as much as six to nine months before
170
00:14:22.399 --> 00:14:26.750
they get into our investment zone,
and so there's someone on the team that's
171
00:14:26.830 --> 00:14:31.830
working with them. I like to
ask for a monthly sales update or investor
172
00:14:31.870 --> 00:14:37.070
update. I think it's good for
all pounders to be sending that out every
173
00:14:37.110 --> 00:14:41.779
single month to their investors and get
in that habit of sharing this data,
174
00:14:41.860 --> 00:14:46.620
and so I ask to receive that. So outside of that period, once
175
00:14:46.779 --> 00:14:52.379
they get into the zone and get
into the number that we're comfortable with,
176
00:14:52.049 --> 00:14:58.850
its probably another thirty days of due
diligence. They're going to present to the
177
00:14:58.009 --> 00:15:03.570
team, they are probably going to
present to our investment committee and then,
178
00:15:03.649 --> 00:15:09.159
once we issue a term sheet and
said, another six to eight weeks to
179
00:15:09.279 --> 00:15:15.799
get financing. So we're probably with
these companies as long as a year and
180
00:15:16.000 --> 00:15:20.559
and maybe as short as ninety days. Just kind of depends with the state,
181
00:15:20.720 --> 00:15:24.830
the stage they're at and if they
are meeting the criteria that you're seeking,
182
00:15:24.870 --> 00:15:28.110
kind of based on the metrics that
we we talked about earlier. Yeah,
183
00:15:28.190 --> 00:15:33.110
and in some cases they're actively raising
three to five million and they're in
184
00:15:33.230 --> 00:15:39.379
the zone and and things move a
lot faster than when they're kind of police.
185
00:15:39.740 --> 00:15:43.379
But they haven't really figured out product
markets fit in that, and so
186
00:15:43.500 --> 00:15:46.659
that one's just going to take a
little longer while they figure that out before
187
00:15:46.700 --> 00:15:50.889
we're ready to start talking about investing. And that's a that's a key point
188
00:15:52.009 --> 00:15:54.409
to keep. Takeaway here is to
make sure that you're communicating early, even
189
00:15:54.450 --> 00:15:58.610
if you're not the right fit.
Keep that line of Communication Open. That
190
00:15:58.730 --> 00:16:03.440
way it builds similiarity. That's exactly
where I you know, I think that's
191
00:16:03.440 --> 00:16:07.759
one of the biggest mistakes of an
investor in and I think it one of
192
00:16:07.039 --> 00:16:12.720
my bigger takeaways when I was running
a company is not continuing the communic cave
193
00:16:12.879 --> 00:16:17.840
with my potential investors out there.
You know, if I got to know
194
00:16:18.080 --> 00:16:21.830
or and not yet, I kind
of just went away. And the other
195
00:16:21.909 --> 00:16:26.509
thing is a lot of investors don't
exactly say what their criteria is, and
196
00:16:26.830 --> 00:16:32.070
so it's best to just keep telling
the story because once you find product market
197
00:16:32.190 --> 00:16:36.019
fit and that revenue starts accelerating,
it's going to go pretty quick, and
198
00:16:36.460 --> 00:16:40.379
so we don't know how you're doing
in the less you tell us on a
199
00:16:40.419 --> 00:16:45.539
regular basis. It's also good to
share forecasts with us on a monthly basis
200
00:16:45.580 --> 00:16:51.049
so that when we get this investment. Are This revenue data? We can
201
00:16:51.169 --> 00:16:55.490
see how well you're hitting your targets, because the one of the things we
202
00:16:55.730 --> 00:17:00.009
really like to see is that you're
hitting the forecast that could put out there.
203
00:17:00.129 --> 00:17:03.920
Are Exceeding all be so lucky.
That's those are all great sales techniques.
204
00:17:03.960 --> 00:17:07.640
Stay in contact with your customer,
keep them updated, be transparent and
205
00:17:08.400 --> 00:17:14.880
meter exceed your numbers. But those
are just all good selling techniques for founders.
206
00:17:15.559 --> 00:17:19.829
That is the right it's no different
than selling a product right and founders
207
00:17:19.910 --> 00:17:26.589
and sales mode all the time.
So you've had some success over time.
208
00:17:26.910 --> 00:17:33.420
Maybe you could share with us some
successful investments or acquisition or potential individual companies
209
00:17:33.539 --> 00:17:37.059
that have grown or the the fund
itself, the funds themselves. Yeah,
210
00:17:37.180 --> 00:17:44.099
so some of our main companies that
are near arandeered our heart. Our gain
211
00:17:44.259 --> 00:17:48.410
site, who was one of those
actually our first investment back in two thousand
212
00:17:48.450 --> 00:17:52.210
and twelve, has done very well, raised over a hundred million dollars.
213
00:17:52.250 --> 00:17:59.720
Nick metis a phenomenal CEO. We
have label in stit which is done very
214
00:17:59.759 --> 00:18:04.039
well, which was founded in St
Louis and has offices also in Chicago.
215
00:18:04.519 --> 00:18:08.720
There at tech on, one company
that's doing very well in the e commerce,
216
00:18:10.200 --> 00:18:14.430
the food ingredients space. Another company
that we really liked, a tech
217
00:18:14.509 --> 00:18:19.269
fun to was deal cloud. Deal
cloud sold a year or two ago,
218
00:18:19.710 --> 00:18:25.630
probably about two years ago now,
and had a very nice return. You
219
00:18:25.829 --> 00:18:29.980
light isn't to we love moonlight.
It's one that I sit on the board
220
00:18:30.099 --> 00:18:33.019
of. It's what unique in that
it does have a developer founder, Zach
221
00:18:33.099 --> 00:18:40.619
Linkler, and started here in St
Louis now has offices also out in Los
222
00:18:40.700 --> 00:18:44.690
Angeles. So they've been good.
Some new ones in tech. onunt three
223
00:18:44.970 --> 00:18:48.930
we've got reconstruct that's been getting a
lot of press. It came out technology,
224
00:18:48.970 --> 00:18:55.650
came out of university Illinoisiana Banda.
It is a construction technology company that's
225
00:18:55.650 --> 00:19:00.559
integrated with autodesk and Oracle. It's
getting a lot of a lot of good
226
00:19:00.680 --> 00:19:04.119
traction. So those are some of
the ones that, you know, we've
227
00:19:04.160 --> 00:19:10.950
really enjoyed working with. What's a
great lesson and I know that there are
228
00:19:11.069 --> 00:19:18.910
plenty of recent news noonlight inking a
deal with with wise. I know that's
229
00:19:18.910 --> 00:19:22.029
big deal for them. I saw
the news just recently. You were going
230
00:19:22.069 --> 00:19:25.660
to mention something else. Well,
I was going to pivot a little too
231
00:19:26.539 --> 00:19:30.819
to the spirit of say Louis funders. A couple of ones in there that
232
00:19:30.940 --> 00:19:37.420
we like. somer salt has been
amazing, Laurie and Rushima to Women Co
233
00:19:37.619 --> 00:19:42.769
founders, director consumer. It's one
to Keech fun three putting invest in because
234
00:19:42.809 --> 00:19:48.289
of its directed consumer, but the
spirit is in it. It's actually one
235
00:19:48.329 --> 00:19:51.970
of our larger investments in the spirit
of Saint Louis Fun. They're doing amazing
236
00:19:52.569 --> 00:19:57.559
work and honestly, we were very
worried with covid situation how they would do
237
00:19:57.759 --> 00:20:00.359
and and their numbers have dropped.
But they're going to come out of this
238
00:20:00.640 --> 00:20:07.670
very strong and you know, good
managers take advantage of these kind of situations
239
00:20:07.829 --> 00:20:15.029
and hopefully do better than their competition, because everyone in their segment is probably
240
00:20:15.069 --> 00:20:19.150
struggling, and so the good managers
find a way to to adapt and come
241
00:20:19.230 --> 00:20:22.180
out of the other end of these
prices stronger than they went in. So
242
00:20:22.339 --> 00:20:26.420
that's one. Another one that has
had those challenges is clever. Clever real
243
00:20:26.460 --> 00:20:33.700
estate, another great founding team today
in the real estate business. took a
244
00:20:33.740 --> 00:20:38.490
hit in March but to have quickly
readjusted and change some of their strategies and
245
00:20:40.569 --> 00:20:42.970
they're going to come out of this
just fine as well. So it's really
246
00:20:44.089 --> 00:20:48.130
important to be nimble on your feet
and be able to jest when he's come
247
00:20:48.130 --> 00:20:52.440
up. These crisis seem to come
up quicker than than I thought they would.
248
00:20:52.599 --> 00:20:56.640
That this isn't that the truth?
I don't think anybody was expecting this,
249
00:20:56.960 --> 00:21:02.759
for sure. And your topic is
is we're not going to shift and
250
00:21:02.880 --> 00:21:07.349
talk about covid given the situation and
given the climate. How has this impacted
251
00:21:07.470 --> 00:21:14.390
your investment strategy? But it has. Tech on three has made the decision.
252
00:21:14.470 --> 00:21:17.589
Made the decision in March to keep
looking at deals, but we were
253
00:21:17.670 --> 00:21:23.740
going to take a pause and come
back and look at those opportunities to get
254
00:21:23.740 --> 00:21:26.220
in July. So we stayed in
contact with the ones that we like,
255
00:21:26.539 --> 00:21:33.450
but we made a conscious decision to
the weight ninety days and and see how
256
00:21:33.650 --> 00:21:37.450
this plays out, and I think
it was a wise move. It was
257
00:21:37.490 --> 00:21:42.009
a difficult move, for it was
difficult conversations with a number of companies that
258
00:21:42.210 --> 00:21:48.319
we were deep in discussions with.
We continue to invest in existing portfolio companies.
259
00:21:48.400 --> 00:21:53.319
Of course, is as most of
the DC'sap but yeah, no new
260
00:21:53.559 --> 00:21:57.960
investments in the in the too,
too, but I expect that, I'm
261
00:21:59.000 --> 00:22:03.069
pretty sure we will start doing new
investments to getting q three spirit ofcing most
262
00:22:03.230 --> 00:22:07.109
on, on the other hand,
has continued to make new investments. So
263
00:22:07.269 --> 00:22:14.750
it's also a based on the there's
through company stage and whether they've received an
264
00:22:14.750 --> 00:22:18.059
investment from you. It sounds like
you're there with follow on capital. You've
265
00:22:18.500 --> 00:22:22.940
you've throttled or you're pacing you your
new deal flow, but with existing customer,
266
00:22:23.059 --> 00:22:27.500
with the existing investments port photo companies, you're still there behind them.
267
00:22:27.819 --> 00:22:32.569
Yeah, that's that's right, and
we were looking. Most of the companies
268
00:22:32.650 --> 00:22:37.410
were in pretty good shape as far
as not needing to do around. A
269
00:22:37.450 --> 00:22:41.849
couple of them were right in the
middle of a round and we did go
270
00:22:41.049 --> 00:22:47.000
through with those and finalize those rounds. But the Spirit Fund is written a
271
00:22:47.079 --> 00:22:52.759
couple of additional investments to new companies
here in Q two. One of the
272
00:22:52.839 --> 00:22:59.430
things that we have read and in
our investigations of the past two crisis in
273
00:22:59.589 --> 00:23:03.470
two thousand and one and two thousand
and nine ten, was that seed investments
274
00:23:03.549 --> 00:23:11.190
in early state investment multiples did not
compress as much as as later stage investment.
275
00:23:11.390 --> 00:23:18.380
So we're not expecting too much risk
in the spirit fun because we got
276
00:23:18.420 --> 00:23:22.420
good multiples, Midwest multiples, if
you will, and and we don't think
277
00:23:22.460 --> 00:23:26.210
there's going to be much compression in
the next round or two of those investments.
278
00:23:26.809 --> 00:23:30.970
Okay, well, that makes the
let's great news to hear. Based
279
00:23:32.049 --> 00:23:34.890
on the data you've been able to
kind of extract, let's talk about the
280
00:23:36.930 --> 00:23:41.480
one side is investments, with the
other side is gendering revenues. Now things
281
00:23:41.519 --> 00:23:45.680
have changed significantly and everybody is now
moving to remote selling and, as you
282
00:23:45.799 --> 00:23:51.799
mentioned earlier, the idea here is
to get back on pace so that you
283
00:23:52.000 --> 00:23:56.309
beat your competition to the punch.
So, based on the PORTROLO companies particular
284
00:23:56.349 --> 00:24:04.069
in Tech Fund how are these BB
sales teams managing without the traditional facetoface interactions
285
00:24:04.109 --> 00:24:10.099
that they're used to? Yeah,
and again it depends on the phase and
286
00:24:10.259 --> 00:24:15.859
the size of your Sass revenue model. Right, if you're selling a lower
287
00:24:17.099 --> 00:24:22.259
cross SASS product, you were mostly
in house sales anyway. It's the large
288
00:24:22.299 --> 00:24:29.609
enterprise sales companies that are impacted the
most. Probably the biggest thing is that
289
00:24:29.930 --> 00:24:33.970
the lack of conferences and being able
to attend conferences where they generated so many
290
00:24:34.009 --> 00:24:41.960
of their leads, and so you
know that switch from conference attendance to virtual
291
00:24:42.240 --> 00:24:47.480
conference. In trying to generate leads
is probably the been the most disruptive thing
292
00:24:48.400 --> 00:24:52.509
for our sales organizations that I can
think of. Some have not missed to
293
00:24:52.549 --> 00:24:57.910
be and the leads have continued to
flow pretty well. But I'm the big
294
00:24:57.950 --> 00:25:03.069
enterprise sales. For the most part, I would say the closed rates or
295
00:25:03.150 --> 00:25:08.940
lathing, and you know, we've
seen a slow down in the growth rates
296
00:25:10.779 --> 00:25:15.819
on the large enterprise sales, on
the smaller sales, depending on what industry
297
00:25:15.859 --> 00:25:22.569
you're in. In some cases it's
just been finding in some cases some benefit
298
00:25:22.609 --> 00:25:27.369
from these. If you if you
are selling products that help you sell from
299
00:25:27.410 --> 00:25:32.490
home, you know the sec rates
to been really good for that. So
300
00:25:33.049 --> 00:25:40.400
having a diverse portfolio, we've seen
growth rates increase and obviously some decrease.
301
00:25:41.000 --> 00:25:45.359
Really depends on the industry that you're
in how significant the impact is. Some
302
00:25:45.519 --> 00:25:49.789
can be significantly impacted in a positive
way, others could be the opposite.
303
00:25:49.910 --> 00:25:53.230
And so new sales are more difficult
and you just got a Batton down the
304
00:25:53.269 --> 00:25:59.670
hatches and have a plan for renewals
and expansions and sometimes even a shift going
305
00:25:59.950 --> 00:26:04.819
from focusing on resources from new Biz
de of to renewals and to expansions to
306
00:26:04.980 --> 00:26:08.700
maintain those customers so that there's no
plauses that go on. Yeah, I
307
00:26:08.740 --> 00:26:14.940
think that's right. I think our
advice was to focus on customer success immediately
308
00:26:15.339 --> 00:26:19.250
and and just touch every single customer. And you know, in some cases
309
00:26:19.490 --> 00:26:26.009
they were struggling and they needed relief
and, you know, doing some renegotiations
310
00:26:26.289 --> 00:26:32.849
of contracts to provide leaf but extend
terms, that sort of thing is something
311
00:26:33.000 --> 00:26:36.680
that I would say most of our
portfolio companies focused on over the last quarder
312
00:26:37.000 --> 00:26:41.079
and and and conversely, you know, we're trying to control their costs and
313
00:26:41.160 --> 00:26:45.839
negotiating some of their contracts to get
relief, and so I think the whole
314
00:26:47.000 --> 00:26:53.430
industry of software tech kind of went
through that process and so it's been a
315
00:26:53.509 --> 00:26:59.390
challenge. But you know, I
think for the most part, if you're
316
00:26:59.430 --> 00:27:06.740
in software attack, you were not
impacted as much as most retailers or restaurant
317
00:27:06.819 --> 00:27:11.339
ours were. So we kind of
came out of this batter than most of
318
00:27:11.579 --> 00:27:15.049
the other industries. You know,
that's that's true. And I think that
319
00:27:15.130 --> 00:27:21.490
enterprise sellers are probably the most significantly
impacted just because of the pauses that will
320
00:27:21.490 --> 00:27:26.089
be kind of required in some cases. But you're going to get better as
321
00:27:26.130 --> 00:27:27.930
a result of it, you're going
to learn how to sell remote and you're
322
00:27:27.930 --> 00:27:33.559
going to have to figure out ways
to get creative to shorten that sale cycle.
323
00:27:33.880 --> 00:27:37.000
Enterprise seal cycles are long and if
you could figure out a way to
324
00:27:37.079 --> 00:27:41.519
continue to sell without facetoface, you've
got a leg up on your competitors.
325
00:27:41.559 --> 00:27:47.589
Yeah, we have a company called
Sharp and out of Indianapolis that sells cloud
326
00:27:47.710 --> 00:27:52.309
based call center systems and you know, they haven't missed a beat. Right.
327
00:27:52.430 --> 00:27:56.430
There was lots of companies that were
sitting with on preme equipment and all
328
00:27:56.470 --> 00:28:02.019
of a sudden needed to go remotely. Right. So that that's one that
329
00:28:02.140 --> 00:28:06.740
had enterprised sales five hundred seats and
up, and yet has done quite well
330
00:28:07.220 --> 00:28:11.380
due to the circumstances or the change
that all of these companies have had to
331
00:28:11.460 --> 00:28:15.490
go through. Another one is ball
to, which is in our spirit,
332
00:28:15.049 --> 00:28:22.809
but ball to assists call center salespeople. They and they haven't missed much of
333
00:28:22.890 --> 00:28:26.920
a beach as well, just because
so many people having to work from home,
334
00:28:27.279 --> 00:28:32.599
any kind of assistants or tools that
you can use it perform better in
335
00:28:32.759 --> 00:28:37.319
that new environment is, as actually
seen, seen more success fully. Great
336
00:28:37.440 --> 00:28:42.549
so with his last couple of questions. Any advice that you would provide to
337
00:28:42.630 --> 00:28:48.670
a founder or early stage sales leader
that's in a early stage text startup land
338
00:28:48.750 --> 00:28:55.269
mines to avoid or that would limit
growth or threatened survival in general, or
339
00:28:55.349 --> 00:29:00.619
as it relates to covid nineteen?
Well, I would say in general sales
340
00:29:00.619 --> 00:29:06.539
are very important. A lot of
founders becomes so product focused and and want
341
00:29:06.660 --> 00:29:11.049
to fine tune the product and and
aren't ready to take it out. And
342
00:29:12.329 --> 00:29:15.650
you got to get the product in
the customers hands as quickly as possible.
343
00:29:17.089 --> 00:29:21.089
To make sure you're on the right
path. You need to figure out product
344
00:29:21.170 --> 00:29:25.039
market fit. WHO's your buyer?
What are they looking for? Who are
345
00:29:25.119 --> 00:29:30.160
your competitors? Those are the typical
things that the very early stage companies need
346
00:29:30.200 --> 00:29:33.160
to focus on. You know,
we are not investing in pre revenue company,
347
00:29:33.359 --> 00:29:37.319
so you know you need to get
the revenue as quick as possible.
348
00:29:37.869 --> 00:29:47.589
The best sort of capital is revenue
and and getting there makes founder's life easier
349
00:29:48.109 --> 00:29:49.869
and it is going to make it
easier for them to raise money from us.
350
00:29:51.509 --> 00:29:53.900
As far as COVID is concerned,
you're going to have to be patient.
351
00:29:55.180 --> 00:29:57.740
You need to get to the other
side. You know it's you need
352
00:29:57.740 --> 00:30:03.019
to try to show growth and revenue. That could be hard for a lot
353
00:30:03.019 --> 00:30:07.170
of these early stage companies, but
I would continue the fundraising process. These
354
00:30:07.210 --> 00:30:12.890
are long fundraising cycles anyway. And
and so once you've got revenue, you
355
00:30:12.930 --> 00:30:18.250
should be reaching out to companies such
as cultivation capital and start to have the
356
00:30:18.369 --> 00:30:23.400
conversations to let us tell you when
we think you would be ready for an
357
00:30:23.440 --> 00:30:29.640
investment with us. Don't don't be
shy. I was always pretty shy about
358
00:30:29.640 --> 00:30:33.519
when to reach out. I wanted
to be perfect, and that that's okay.
359
00:30:33.200 --> 00:30:37.990
You know, we were fine with
seeing your early and providing a little
360
00:30:38.029 --> 00:30:42.990
guidance and answering the questions you have. So a founder should ask questions of
361
00:30:44.029 --> 00:30:48.910
their vcs. Again, don't be
shy. View it as a sales process
362
00:30:48.029 --> 00:30:52.099
and get to know your customer and
what they're looking for. So you know,
363
00:30:52.299 --> 00:30:56.940
those are the things. I don't
think covid is changed that part of
364
00:30:56.019 --> 00:31:02.579
the process very much. So those
companies that are that are struggling to find
365
00:31:02.700 --> 00:31:07.369
product market fit may have to consider
going through a form of a pivot or
366
00:31:07.369 --> 00:31:14.289
a shift. Are there any portfolio
companies that that have seen great success after
367
00:31:14.450 --> 00:31:18.799
going through a minor or significant pivot? Oh yeah, sure, Locker Dome
368
00:31:19.079 --> 00:31:26.000
as has expanded into attack from where
they originally started. So Locker Dome was
369
00:31:26.119 --> 00:31:32.869
good. Great Management Team was able
to make that change while the airplane was
370
00:31:32.950 --> 00:31:37.829
still flying. I think that's very
important to not completely disrupt the pivot and
371
00:31:37.190 --> 00:31:45.069
kind of do a gentle roll into
this new product concept. Usually the tech
372
00:31:45.190 --> 00:31:51.500
funds are post pivot, but the
spirit fun certainly ends up seeing companies with
373
00:31:51.660 --> 00:31:56.019
pivot because they have a truly completely
nailed product market fit. Don't be shy
374
00:31:56.539 --> 00:32:00.339
and doing that pivot early on,
even once your revenue you know, like
375
00:32:00.450 --> 00:32:05.930
your customers tell you where you need
to go. They know what they're looking
376
00:32:06.009 --> 00:32:08.970
for. You can be wrong and
you need to massage what you're offering to
377
00:32:09.089 --> 00:32:14.329
get it to a point that achieves
that product market fit. pivoting is quite
378
00:32:14.609 --> 00:32:19.960
normal and these are early stages.
You're not a hundred percent correcting your pieces.
379
00:32:20.720 --> 00:32:24.799
Spoken from someone who has been a
long time multiple founder and operator.
380
00:32:24.920 --> 00:32:29.799
So a that's great stuff. So
last question for is kind of a personal
381
00:32:29.880 --> 00:32:35.109
one. What's your favoits favorite business
resource, either blog or content that you
382
00:32:35.309 --> 00:32:39.509
enjoy that others might find interesting?
Well, I'm on crunch base every single
383
00:32:39.589 --> 00:32:45.619
day. The data within crunch baits
to this amazing. I think it's very
384
00:32:45.660 --> 00:32:50.500
important for all companies to keep that
uptodate. Crunch base is getting more and
385
00:32:50.579 --> 00:32:52.779
more automated, but you know,
that's where we're going to see a lot
386
00:32:52.819 --> 00:32:58.460
of what's going on. You know, I read tech crunch. I read
387
00:32:58.500 --> 00:33:05.690
a number of other news letters,
but Wall Street Journal is something I read,
388
00:33:05.849 --> 00:33:09.569
but crunch base is the thing that
I probably live in more often and
389
00:33:09.849 --> 00:33:14.640
anything other than may be linked in. It's kind of the Bible these days.
390
00:33:15.279 --> 00:33:20.480
So if a company is a fit
for either the spirit fund or for
391
00:33:20.720 --> 00:33:23.119
Your Tech Fund, or really for
any of the other component funds, what
392
00:33:23.240 --> 00:33:29.950
should they do? Well, there's
contact information and cultivation CAPITALCOM, but if
393
00:33:29.990 --> 00:33:34.190
someone in the software text base whats
to reach out to me directly at B
394
00:33:34.470 --> 00:33:40.779
Matthews at cultivation capitalcom, B Maatph
e ws at cultivation Capitalcom, and I'll
395
00:33:40.900 --> 00:33:47.259
certainly reply to anyone that reaches out
to me either directly by email or through
396
00:33:47.380 --> 00:33:53.579
linked in. Let's fantastic, Brian, always good to see you and thanks
397
00:33:53.619 --> 00:33:58.730
for giving us of you into your
world. We really appreciate it. But
398
00:33:58.890 --> 00:34:01.049
thank you, John. I really
enjoy it. So that'll do it.
399
00:34:01.130 --> 00:34:07.049
Thanks for listening to this episode of
the Revenue Series on BB growth. I'm
400
00:34:07.089 --> 00:34:12.440
your host, John Grispin, founder
and sales coach at early revenue. Please
401
00:34:12.480 --> 00:34:15.840
connect with me on Linkedin. I
am happy to answer questions or provide recommendations.
402
00:34:16.159 --> 00:34:22.199
You can also email me on John
at early REVENUECOM. If you like
403
00:34:22.400 --> 00:34:28.230
this episode or I have a question, join the discussion on Instagram at B
404
00:34:28.510 --> 00:34:31.230
to be growth. Thank you for
tuning in and for subscribing to be tob
405
00:34:31.389 --> 00:34:37.780
growth until next time. I am
out. Are you in early stage tech
406
00:34:37.820 --> 00:34:42.500
founder that's frustrated by limited sales?
Do you like the time to dedicate to
407
00:34:42.539 --> 00:34:47.260
a traditional sales training program John Crispin's
earlier revenue sales program helps early stage founders
408
00:34:47.300 --> 00:34:52.619
accelerate sales in large accounts. He's
built a playbook that transfers what he's learned
409
00:34:52.659 --> 00:34:55.289
as a founder and sales leader into
a condensed, easy to implement program.
410
00:34:55.690 --> 00:35:00.849
If you're ready to increase your startup
sales capacity, is it early Revenuecom to
411
00:35:00.889 --> 00:35:05.889
get started today? Is Your buyer
a bebb marketer? If so, you
412
00:35:05.929 --> 00:35:09.239
should think about sponsoring this podcast.
BB growth gets downloaded over a hundred and
413
00:35:09.320 --> 00:35:14.519
thirty thousand times each month, and
our listeners are marketing decision makers. If
414
00:35:14.599 --> 00:35:17.719
it sounds interesting, Sin Logan and
email logan at sweet fish Mediacom