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We are a leading venture capital firm in the Upper Midwest. We are  in immediate need of an Executive Assistant to join our close-knit team in the Twin Cities. In this essential role, you will assist with administrative support tasks and ensure that all projects run seamlessly. Your ability to adapt to changing priorities coupled with a positive engaged attitude will see you thrive in this exciting role.

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Orazio Buzza, Founder and CEO of Fooda – on Episode 13, “Execution is King”

In this episode, we talk about management styles and goal setting, and uncover some gems about granting equity and hiring from our guest, Orazio Buzza, Founder and CEO of Fooda.

Orazio has taken the startup ride from early on through exit twice already, before founding Fooda. Fooda is a food technology platform that connects restaurants to people while at work, has received $45M in funding, and currently has 250 employees in 20 cities. 

He has a great take on goal setting that keeps people accountable, brings transparency to the entire organization, and keeps the team moving in the same direction. 

Orazio’s milestone approach to managing growth (vs. a calendar-based approach), makes sure that expenses don’t outpace revenue as Fooda scales to new locations. 

Who does Orazio see executing? John Bauschard, at Darwin AI.

Transcript:

00:09

Welcome to the execution is King podcast where we talk to successful startup founders, investors and ecosystem builders to uncover insights and best practices for the next generation of great global startups. I’m your host, Joseph Siebert. My co host today is Rob Weber, managing partner at Great North ventures. Hey, Rob, how you doing today?

00:29

I’m doing great. How are you?

00:31

I’m good. I’m good. I just I just read this, like tiny little distillation. It was on this app. I don’t want to name drop the app, but it has like, it’s like the Cliff Notes of Cliff Notes. It’s it’s like one or two sentences distillations and it was talking about OKRs, you know, and it got me thinking about goal setting and everything. And I was wondering if you had any, any goals for the summer, my goal is more about culture setting, right? Like, I just want to have a relaxing summer, you know, hanging out, I’ve got a repaint my deck, I was gonna finish it. But now we’re gonna paint it because that’s a whole bag worms anyway. Yeah, that’s, that’s my big goal, I think my stretch goal would be to actually make all the plants that I planted in my garden grow. Yeah, that’s

01:19

really that’s awesome goals. Maybe I could talk about my personal goals. And we’ll talk about my professional goals this summer, on a personal standpoint. So I have kids ages 1012, and 16. And I’m just such a big believer of entrepreneurship, that I know I only have a few more years with my kids. So I’m trying to help them experience entrepreneurship. So one of my goals, that’s one of my goals this summer, is to really take the real serious plunge of helping my 10 and 12 year old boys are joining us at the nationals the treaty, the biggest trading card conference in the world, which will be in Atlantic City in late June. So I’m bringing my 10 and 12 year old boys, so that they can exhibit with this trading card startup we have and try to sign up users for the app. And you know, it’s supporting this, you know, venture studio company, but the personal goal is really just trying to impress upon my two boys, you know, the value of sort of their efforts and being a part of scaling a startup at a young age. And they can relate to it because they’re kind of into trading cards. So but then, you know, outside of that, that was a little bit work related, but it’s more family related. I’m also I’m doing father daughter dance with my daughter. So I’m hoping to be front and center because we’re the best at dancing of any of the father daughter combos. And then the third one is I this is every summer for me, I want to catch just a little bit bigger or better fish than I’ve ever caught in a previous summer. So, you know, early season is like crappies, but then it’ll turn into like northerns, bass, walleye, maybe some lake trout in there. So those are, those are my three kind of areas of goals.

02:55

So I noticed you didn’t use the you know, like the phrase ology for like stretch goals or anything like that. Do you use OKRs? Do you buy into that framework? I know it’s been really popular. People have written about it way more intelligently than I am talking about it right now. But I mean, what has it come in handy for you? Or do you use some kind of other framework for setting goals when you’re when you’re managing employees?

03:19

I guess what I’ve always found is you don’t have to be so enamored by the process or individual frameworks. There are a lot of leadership frameworks and a lot of management frameworks. It’s just sort of the Do you have one? And then are you able to sort of iterate on it, make sure it works well, for you. I don’t think there’s anything particularly magical about OKRs versus a any other management system. Or same thing with like, you see this sometimes in the startup world with like, the focus on MVPs. And like lean startups. And, you know, I was listening to a podcast the other day with a former executives of Amazon wrote a book about managing and they said, Be careful about the MVP trap. And like the lean startup process, like an Amazon, it took them two years to iterate on AWS before they launched it. And the team wanted to put it out. And basil and other large tech players started launching, you know, cloud services. But Jeff, you know, felt like they he slowed the team down and said, We really need API’s, you know, we need to get these things done. And sometimes, I guess what he said about that, that MVP was, it’s the V part of it that the startups get wrong, the viable, right, like, you know, you can launch something in two weeks, but are really viable and viable for what how big of a market, you know what I mean? So I think that’s really a key is, I love these kinds of frameworks, but just don’t get trapped in the process for the sake of process. Like, you still got to use your brain at the end of the day, right.

04:45

Well, I’m really excited for this episode today because we have a fantastic manager. He was recommended for actually from a previous episode, when we interviewed Jonathan treble of print with me, which is now known as with me, which you know, full disclosure and transparency. That is one of the Great North ventures portfolio companies from fund one. Anyway, he recommended this guest and we’re really excited to have him on rasio BUSA is the founder and CEO of Fouda. Welcome to the podcast or Azio.

05:16

Thanks, guys. Great to be here.

05:18

So for our first question today, Orazio, can you walk us through kind of your journey up into the point of starting food? How did you how did you become an entrepreneur?

05:29

Well, you know, I was one of those guys that even as a kid, I was always had a side hustle going on, I had paper routes for those of you that remember what it paper route was, I sold baseball cards, kind of like a physical version of a precursor to NF T’s, right. But I always was doing something on the side. And, and, you know, I started my career at some large companies. You know, one of them was Amoco, you know, before was bought by BP was the largest company in Chicago. But then, you know, over time, I realized that I wanted to be closer to the product. And eventually I became the product that was in the consulting, I was in the consulting space, primarily doing technology implementations of ERP systems in the late 90s. And then all of a sudden, the.com thing hit and a friend of mine that was a former colleague had gotten funding for a company and, and said, Hey, do you want to join the startup and I found my home, I found my people. So starting with around 2000. And you know, for the next 22 years here, I’ve been in various startups over the years, and I’ve been lucky enough to be part of a bunch of exits. And so I keep kind of going back for more punishment. Yeah, that’s

06:39

similar to my own journey. You know, you even if you have a few exits under the belt, it’s, you know, you’re a serial entrepreneur, and you just keep going back to the well, right, so. So tell us more about food. Can you describe kind of the genesis of how you came up with the idea and kind of tell us more about the business today?

07:00

Yeah. So you know, to describe food at first of all, I was at a previous company, I was before food, I was a company called Echo global logistics here in Chicago. And I was part of the founding team, I was a president, that company at the time, and we were looking to provide additional food options for our employees, we were in a little bit of a food desert here in Chicago, where the company was located. And one of our employees had this great idea to start inviting local restaurants and to sell food to our team. And every day, a different restaurant would come. And it was a couple day a week program to start in over the next several years. It was one of the most used perks I would say at that company, the company continued to grow initially, we had, you know, maybe a couple 100 people when the program started. And fast forward about three years, that company had about 800 employees. We had gone public the year before. And I was getting ready to transition out of the company. I loved it at Echo. But I was 38 years old. And I thought if I don’t leave here soon, I’m going to die here. And I thought, you know, maybe I’ve got another startup left than me. And so I started the process of transitioning out of the company. But I had agreed to a long transition. And as part of that transition, I was still going to management meetings and one of those meetings, our head of HR came in and said, Hey, I want to talk about our food program. Because the lines are getting too long other people that work in our building, are walking to our lobby and buying food from from the vendors. And I didn’t think much of it at the time, our high tech solution was to hang a sign that said, if you don’t work for Echo, you’re not allowed to be here. But then, you know, maybe a week or two later, I was laying in bed thinking what I want to do next. And I thought, You know what, this is a b2b marketplace company, where I can, you know, use some kind of technology and build a marketplace where on one end, we have employers that want to provide access to food. And on the other end, we’d have restaurants that want access to that different audience. And so I put two and two together and decided to that was gonna be my next venture. I, you know, started the process of working it out. And then a couple months later, Echo came back and said, hey, you know, the transition is good, you’re free to do whatever you want. And so I decided to launch Fudo right away, and echo became our first client, and then it’s still a client today. So that’s how the idea came about. I had nothing to do with it other than I was a customer and I was at the right place at the right time. But at the end of the day, it’s a b2b, b2c marketplace that specializes in food at work primarily for larger employers. Remember, we don’t cook food instead, we partner with restaurants we cook, transport and sell the food to our clients at their clients sites. Our target market is larger employers and all kinds of industries. We have a vertical software platform that includes a point of sale system that our restaurant network uses To execute the events, and Fouda acts as a financial clearing house and provides a consumer rich experience and includes mobile ordering loyalty and real time feedback to the consumers. We have various product offerings based on the size of location. But a key to our offering is that there’s high quality foods, a wide range of restaurants that provide food at reasonable prices, you know, it’s designed to be used every day, you know, one of the key features is variety, users get a different restaurant each day, a typical site gets 15 to 20 unique restaurants per month. And, you know, regardless of the company, you work at all employers, you know, they care about recruitment and retention engagement of their teams. And, you know, since COVID, now, they’re also thinking about motivating employees that come into the office, you know, more and more, whether it’s, you know, the great resignation that we’re all hearing about, or the, you know, the idea of wanting their teams back and sharing a meal. from a physical standpoint, either way companies care about the food component of their office or workplace. And then food as model allows for companies to subsidize all or part of the food. And but it’s not a requirement to subsidize any at all. In fact, most of our business historically, was 100%, employee paid. So it can be very economical. You know, depending on, you know, the needs of a client,

11:21

for clarification sake, with your business model of Fouda. Are the employers do they pay any kind of a fee or a subscription for this service? Or, and or do they end customers? Were the employees do they pay for their meals? Or what’s the typical business model?

11:38

Yeah, so it’s a mix. So when foodist started, it was 100%, employee paid. Frankly, companies paying for food wasn’t really a thing in Chicago, way back in 2011, as employers have been competing more and more for talent, we saw an opportunity. So we started providing programs that had fully subsidized meals. And so you know, some companies will pay for 100% of the food. And then over time, we build technology that allowed for partial pain. And so now we have a mix, it’s all over the board, you know, we have companies at both ends of the spectrum. Overall, our programs are very economical with the food being representative of what would appeal to a certain site. And so we have an algorithm, we have an AI algorithm that does all the scheduling and the restaurant selection. And so as a site is live, we start to understand more and more the preferences of the people that work there. And so the matching of restaurants and menus to sites is all done by using artificial intelligence and machine learning.

12:45

So it was kind of you kind of answered the type of type of restaurants that engage you know, that you that you that you work with? It almost seems like you don’t need to have a physical restaurants, right? Have you had any ghost kitchens using Fouda?

13:03

Yes, so we partner with all kinds of restaurants, about 50 to 75% of our restaurant partners are local, independent, or local chains, but about 25% are regional or national and size. And a portion of both of those are some ghost kitchen operators. And so whether you’re purely a ghost kitchen, in the new model sense of the word where you’ve got a commissary, and you don’t have any brick and mortars, or you are a brick and mortar operator that operates a commissary, essentially, it goes kitchen and you want to service food as business through that location as opposed to a physical store. We’ve worked with all kinds so so ghost kitchen, operators make great partners for us.

13:46

So Fouda has about 250 employees or so is that right?

13:51

Yeah. So we we’ve raised about $45 million to date, we were founded in 2011. And we have about 250 employees, and we operate in about 20 cities across the US.

14:03

Great. So I’d love to kind of shift gears here a little bit in I had this experience as an entrepreneur turn professional manager, so to say it was like accidental, and I learned a lot, you know, in part by, you know, just reading a lot or you know, trial and error, but then part of it was bringing on other leaders and managers around me, so I could learn from them. But can you talk you know, start maybe we can dive down this rabbit hole a little bit on different leadership and management topics. Given your experience? Can you talk a little bit about goal setting and how how that works at Fouda?

14:38

Yeah, absolutely. So um, you know, as an individual I’m very much someone who sets goals and measures against it in all facets of my life. You know, my friends and family and co workers make fun of me for the way I run my my life. It’s kind of funny, but but food you know, one of our values is we set goals and measure everything. If there’s no data then it didn’t happen. We literally Have that you know, written on our walls and various documents around the office. So we do measure just about everything. But when it comes to goals, I like to keep them very short. And a list of just a handful of, you know, very key items, you know, generally three or four items per year max. And then you know, maybe as you accomplish certain goals, you know, you might replace them. And you don’t, one of the things that probably makes us a little different as a company is we’re very transparent, we literally share our board decks with our entire company every quarter. And as part of that we share our goals, the same goals that we present to the board, we present to our company. And when you think about transparency, you know, there’s a couple things to it. One is, you know, that goal sharing not only holds people accountable, but also it’s an effective way of getting teams to all move in the same direction. And so it just makes our life as a manager much easier, because you know, that information is getting out there. So that’s kind of how I like to think of it one of the things that we added just this year, is that we’ve now started sharing our department goals to the company as well. So not just our, you know, Fouda level, Hey, everyone, this is what we’re aiming towards. But each department shares their key goals in front of the entire company in the beginning of the year. So we really believe in it.

16:21

That’s awesome. I was one of them when I was in my mid 20s. And when we made the company a my brother and I had started off at dorm rooms, we were at around 50 employees. And in my early 20s, some of that we started to get some negative feedback about how we were managing the business. And it was because we kind of kept key information really guarded. And I didn’t really know any better. And then, at this point, we brought on an outside CEO to help us just grow the business. And he had a lot of management experience, one of the first things he did was just like you described, he basically coached us to kind of share all the key information about the business really openly in the organization. And it was absolutely, you know, a complete one at like changing the culture. And we really became more centered around accountability, which was sort of always one of our, I would say our most important value. But it was just like, we didn’t know how to create a structure or a system that would orient around that, you know, that accountability? I think that’s what transparency provides. It’s awesome to hear that I actually haven’t I don’t think we ever distributed our whole board deck. So that’s like, oh, no,

17:25

we don’t distribute it. But I do present it, I go through slide by slide on Zoom and person, you know, depending on, you know, our people in Chicago here, I will tell you the first time we did it, it was pretty scary, you know, from a sharing of the actual deck, but we’ve been doing it now for probably about four years. And so it’s second nature, and if you think about it, public companies do it all the time. Right, yeah, they share, you know, a ton of data and, and still, you know, their businesses are defensible. Their employees are motivated, you know, good news. And bad news is they feel, you know, a deeper connection because there’s a level of trust that’s, that’s gained.

18:03

Oh, it’s awesome idea. I mean, now everyone’s in the room where it happens. So they can’t make excuses, right. It’s all about accountability. And then, I think related to that people, like managers and companies put so much effort into producing good board materials, like this isn’t that much extra work to just present it to your team? Right? Because you already have to produce this quarterly anyway, for your investors, and, and so forth. Right?

18:27

Absolutely. It’s, you know, I think the the whole idea of presenting to a board to begin with, since we’re on that topic, whenever it comes up, right, whatever that quarter is, and the team is preparing, it’s always an effort, right? You have to pause other things that you’re doing to do this step of taking a step back, thinking about the big picture, and then putting board materials together. And as time consuming as it is, as a CEO that, you know, my tendency is to be very involved in the business day to day, it forces me to take up to pause, take a step back and evaluate what’s going on and say, hey, you know, what is the big picture? What’s going on with the business? What’s the tone, what’s the messaging, and I find it really healthy. And you know, as a manager that be forced to do that once a quarter. And then you know, you already have the materials, you might as well double dip, right, you get additional use out of it and take the time to present to your team so so you’re right, it’s it’s getting that second use, and it’s it’s really beneficial for everybody.

19:30

Do you use like the OKR framework? You know, like we’re talking about, like KPIs and stuff, do you use that framework? Or do you just kind of do use your own? Is it similar?

19:39

Yeah, we use our own. I think there’s a couple of things you know, when you think about goals, as well as, you know, whether they’re stretch goals or budgets, etc. And what KPIs do you measure, we do measure a lot. As I mentioned before, we like to have very few goals but they’re, but they’re written out. So we write them out and you know, it’s the The same concept of SMART goals, right? You know, the there’s been books written on making sure they’re measurable and achievable, etc. But I think more importantly, when I think about goals, and and how they differ from budgets, right. And so and I see this a lot, I mean, I’ve made this mistake before. And at some point in my career I was coached. But I think startups, especially earlier stage, you need to separate your budget, from your stretch goals, you know, there’s no reason why you should, you know, miss a budget by a material amount, let’s just say more than 10 or 15%, if that happens, then you might not have a great handle on your business, right? Especially, you know, we’re a later stage company at this point, right. And so we do have, you know, all the mechanisms in place that allow us to do really good forecasting. And so we shouldn’t be missing our budgets by that much on the high end or low on right, either, you know, beating by a lot or missing by a material amount. If that happens, I think, you know, other than maybe COVID, right, and some existential event that happens, you should be able to nail your budget, you know, relatively closely. On the other hand, people shouldn’t use budgets for bonuses and goals, right, for, you know, personal bonuses and goals. That’s where the stretch part, you know, comes in. And so there’s the, you know, the table stakes of achieving the budget. And then there’s, you know, what are the extra goals that we have documented for each department, or each person or the company that allows us to go above and beyond? And so I like to make sure that those are addressed in variable competence?

21:45

That’s really interesting, because I mean, I don’t know a lot about OKRs. But it seems like, what you do is you you set all of these goals, and you’re supposed to set ambitious ones, right? Where you set I think, what is it three or four goals a quarter, and then they’re supposed to be pretty ambitious, so that you’re not hitting 100%, that you’re hitting like 60%. Otherwise, if you’re consistently hitting your goals, quarter after quarter, then you’re not like reaching, right? You’re not stretching your capabilities and stuff. But what you’ve outlined, is is fantastic, because you’re hitting what you need to hit. But then at the same time rewarding, you know, everything beyond, which is the whole idea of you know, OKRs, the whole idea of setting these kind of longer goals is to have people reach to, to exceed just hitting the budget, right to actually reach and get these greater achievements. This is a really interesting framework. I think you actually I heard you on a podcast, where you talked about your milestone approach to growth and scaling. Can you tell us a little bit about that?

22:55

Yeah, so we’ve adopted a concept that we call the milestone driven plan versus a calendar driven plan. And so for example, and how this became a more mature process here is, food is a market based business, right. So we have certain operations that exist in each city that we operate in. And so there’s a process of launching a city or launching a market. And so before we started that process of adding markets at a regular clip, we talked to some third parties, other market based companies like Uber at the time, that you know, was launching cities, you know, once a week or so. And we had some feedback from them and some other companies in regards to how they did it. And what we heard time and time again, was, you know, in the first two weeks, you do this, and the second two weeks you do this, and the second month, etc, right? You know, it was it was calendar based and time based. So that’s what we did, we built a plan based on some of the learnings that was driven by that. And so what you find is, what we found, is that, that works really well, if you have a highly predictable process, but ours was not. Once you introduced, you know, a b2b sales component of building of a restaurant network, launch calendars at you know, large enterprise sites, things were a little squishy. And so the other thing that you find is when you have a calendar based plan, is that the team tends to always hit the timeline of the things that are fully within their control, like hiring, but they tend to, you know, be behind if anything, and things they don’t control, like sales and client launches. And so all of a sudden, you get, you know, expenses are going up faster than the revenues catching up. And so over time, which we try to, you know, think about how we can do a better job of matching those two. Now, the key is that these the steps are not linear, but there are dependencies and so For example, we put together a revised plan, maybe a, you know, a year after we were doing this, which was more milestone based. In other words, you first had to sign 10 contracts with clients. And then after that, you started to onboard restaurants, and then after a certain number of restaurants are on boarded, then we’re actually launching the sites. And so, you know, you can, you know, obviously, those steps are not happening independent of one another. But there’s these milestones, and you don’t hire the replacement team, until you get 10 sites launched. Right. And so all of a sudden, then, you know, the market becomes more profitable earlier, there’s more attention given to those, those dependencies. And so, you know, overall, we found that the process is working much better. And so we continue to use that, you know, what it really says is the milestone plan is more, you know, is a plan that has guardrails. And so as we were coming out of COVID, and there were a lot of unknowns on like, you know, maybe our business was know, leading up to COVID, which was, you know, very predictable, we started to adopt the same model from a budgeting standpoint. And so now, we not only use it from a market launch perspective, but we also use it in budgeting. And so, you know, a simple example would be that, you know, you know, a certain role doesn’t get unlocked, to be hired, until that department reaches a milestone. So, you know, it could be revenue driven, it could be based on some other metric that, you know, once something happens, then it unlocks dollars, to hire a role. And so if something’s ahead of plan, then the roles open up faster. And if something’s behind plan, then you know, just takes longer for that role to be to open up and so it kind of, you know, is the checks and balances or guardrails?

26:48

That’s so great, it sounds almost gamified, like, as you’re describing it, in my head, I’m imagining, like, video game, progressing as you like, build your Sim City, or build up your character or something like that, I can imagine it’s pretty attractive for the employees, you know, once they get a little bit competitive, to start reaching these milestones start pounding them out.

27:09

Absolutely. And, you know, with any growth organization, you know, things are always kind of up into the right, you know, when whether it’s revenue, or other kinds of sales metrics or operating metrics. But you know, when you have a manager come in and say, hey, you know, I want to hire this role, and it’s the middle of June, right? Well, you say, Well, let’s take a look at the plan, you know, because, you know, we, that role gets unlocked when you hit this metric, and you haven’t hit it yet. And so it allows the decision makers to be disciplined, as opposed to living in the moment and feeling pressure to do something, obviously, you know, we break our own rules periodically, and you have to have a feel for the business, right? Like any good manager would, but we try to stick to the plan. And so it’s an easy way to think about those decisions in the middle of the year, which is, you know, could be 567 months removed from when you put your plan together.

28:05

As both entrepreneur and investor in a lot of companies kind of in the middle of the US, one of the cultural things that is really kind of bothered me after spending time in other markets, like San Francisco, is just the value that equity based compensation can have in supporting growth companies. Have you had much experience, both in the early stages? And then in more of the growth stages? How do you feel equity compensation is? Is it properly utilized? Are there any tips on how to manage equity? Referring to

28:37

stock options? Yeah, stock or whatever else? Yeah, yeah, of course. So it’s actually a really good question, because I dealt with it personally. So when I was, you know, at a previous company, and the way a lot of companies do it is for executives is you join a company, you get a big option grant that vests over three to five years, depending on the company. And as you get towards the tail end of that, you might get some refreshing of shares here and there. But relatively speaking, it’s a it’s a small component in comparison to that original grant. And so as you get on the tail end of that, it’s all about cash comp. And because you’re fully vested, right. And so, I believe that if you’re going to use equity effectively, you have to have two components to it. One is it needs to be widespread. And so we give options to everyone from an hourly person that works at one of our locations all the way obviously to the executive team. The other thing that we do is we do annual granting. And so we have a process where every summer in July, we do we you know we do a big grant where everyone in the company gets a new stock, right and they’re pretty material and so it doesn’t mean that we don’t that we have really small grants when someone starts But relative to that traditional ratio, our initial grant is probably a little smaller, but we communicate to the team that we hire that, hey, you can expect roughly this based on, you know, each year, you’re here, you’re gonna get more of a grant. And so what that creates is a ladder in effect, where every year, you have a bunch of shares, vesting, and so, you know, one of the keys as an executive, and I’m a large shareholder, I was, you know, not only the founder, but I put a lot of my own money in to start as a shareholder, I want to retain our team. And so there is a big incentive to stay at FIU to because at any given time, you are giving up lots of equity, right, and you’re giving up more equity in the future. And so it’s a tough decision, right? You don’t have that scenario that I might have had earlier in my career, where, hey, I’m pretty much fully vested, this next new shiny object, that is another startup is going to recruit me away. So that’s pretty important here at Fouda.

31:02

And one of our prior episodes, we spoke with Joe Stryver, who was the first UX hire at Google. And Joe told us after moving from Minnesota to San Francisco to be the first UX designer at Google, that he observed how talent would move in packs around San Francisco and Silicon Valley. And, you know, I think part of this might have been due to stock options, right? Like, if you have a group of people who all work together and they invest their shares, there’s, you know, that incentive to stay retained at a company kind of starts to go away, and why not go build yourself a nice venture portfolio and go from company to company. So this is really interesting approach. I, I can’t think of too many companies, if ever that I’ve seen this approach, but it really solves a big problem of retention, that the standard kind of, you know, four or five year vesting plan with, you know, all parent, you know, that, that, that kind of that really just encourages people to leave after that period. Right?

31:56

Absolutely. And, you know, I will say that we didn’t make that decision lightly, a lot of work went into designing the plan, and what the amounts would be, and we, you know, the way we looked at it is, if someone’s here, you know, seven to 10 years, you know, let’s say on the longer end, what does that exit look like, and bait, you know, based on each role, or each level, we have a target of what we want to see each person get over time. And so we have a system where they build up to that over time. The other thing is, is took a lot of work with our board, to you know, to agree to put this in place, because we’re we’re giving out a lot of options. And so I think if you were to compare the size of our option pool, in comparison to maybe some other comparable companies, you probably find that it’s bigger.

32:41

So you’ve been a part of two companies before Fouda, where you were one of the first 15 employees and the startup scaled through IPO. How does this inform the way you hire and develop leaders.

32:54

So, specifically, you know, regarding hiring, there are a ton of great books out there on hiring, but I like to address you know, one tangible a call it a tactic that I believe moves the needle for us. So it involves addressing the fit for the first role in the company, relative to other characteristics like long term potential culture, fit, intelligence, you know, work ethic, etc, that concept evolves, addressing if, you know, your company can easily promote or move people around the organization, the more flexible you are as a company, then the lower priority you can place on that first role. But if you have flexibility that is limited, then high likelihood of success for the first role is a much bigger priority. So as an example, you know, we we don’t do well, we don’t do it food is hire someone based on what we think we might need later on. So it’s, what do we need now. And so not only does the current role matter, but those other characteristics I mentioned earlier, and so we don’t create jobs for great people. So you know, so I meet great people a time I love networking. But just because I meet a great person, we’re not going to go back and create a job, you know, based on we think we might need later we focused on the now. And the reason is, is that at both those two companies that you mentioned that IPO they were centralized were fruit as a market based business model. And so at companies that are centralized, you can have a general hiring strategy, that you just hire, you know, the best and brightest. And they tend to get promoted or rotate through other functional areas over time, you know, based on their skill, set their goals and the company’s needs, the fit for their first job within a company where it wasn’t as important at those, you know, the places not saying that you don’t evaluate that and you just bring in miscellaneous people, but there’s more flexibility to bring in people that you believe have a high ceiling and you’re like, Hey, I’m going to start them here. And I’ll eventually move them on. What we found here is that it did not work very well. because we didn’t have that flexibility or as much flexibility, it turns out that, that people really don’t want to move, like maybe they used to years ago. And so if you hire someone into a certain market, whether it’s a city we operate in or centralized here in Chicago, moving isn’t really a thing. Now, obviously, this doesn’t pertain to remote work and jobs that are remote, that’s more of a recent phenomenon. And that’s, that can be helpful, that’s more like a centralized where you could work anywhere, but in a lot of jobs, that food there depend on the market you’re in. So a lot of our sales and operations jobs, and even some of our managerial jobs, you know, if you’re managing a market or region, you need to be in that city or region. And so we find that that first job, and the role is really important. And so we make it a requirement that you have to be a great fit for that first job.

35:55

I love this approach, I think this is one of the areas, if you’re going to create a growth company, you want to create a culture centered around your people growing, right. And I remember in my prior business, I used to draw a few goalposts. I’m a big football fan, so and I would kind of rank entry level talent, you know, everyone had a develop into the first two or three rolls of skills, they’re sort of slotted, but then you sort of have this field goalposts. And you could grow into two different tracks, there’s the management track, and then there’s technical proficiency. And you’ll notice, it wasn’t just one track of management, we did not want a company that the only way to grow your career was to become a manager, and then an executive. You know, for example, when you’re in a technology startup, you want you also want to value the chief data scientist and the, you know, chief architect of your platform, that’s a technical track, they don’t necessarily need to have a lot of managerial responsibility. And so I think it’s super important to clarify, you know, the growth opportunities, and then you can kind of, in your one on ones with employees, I found, it was just really honest, I’d say, you know, what do you want to do, and a lot of people, they, you know, if you don’t communicate that, and I found in this field goalpost that everyone thinks, the way they grow their career is to become a manager. And there’s there is like, a significant amount of talented people who are just never meant are not going to be great managers. But you know, what, they might be freaking awesome engineers, so why not provide growth opportunity for them to right, and I don’t know, I just found like, once we it was almost like a relief. Sometimes we’re like, great example would even be sales. It’s not just technical skills, like, you can have a really, I’ve seen a lot of people try to promote really awesome salespeople into sales managers. And a lot of times the best sales managers are not the best individual sales contributors. Right. So I found this like analogy, I don’t know, to steal from football, you know, to just kind of like this to try to be really direct with people about what what their future can look like.

37:55

Absolutely. So it’s funny, I haven’t heard that analogy used before, but I am going to borrow it in the future. I totally agree with it. And I think there’s a sentiment that management is sexy, and it’s easy to get sucked into that. But a lot of organizations and including a lot of roles here now and historically, the highest paid people within a certain function, we’re generally not the managers, right, from a cash comp standpoint, I you know, we’ve had engineers that were not in management make more than, you know, the leaders of the department, we’ve had sales people that, you know, make more than the people running that region or that product. And historically, I’ve seen the same thing. And so, you know, getting back to that topic earlier of equity, I think equity is a bigger driver for management tracks, but cash should be a bigger driver for, you know, individual contributor tracks, whether they’re technical skills or sales or operations, etc. hitting certain stretch goals, you know, could could provide more cash comp than maybe equity.

39:05

So, when your book on management comes out, I’ve got a couple of titles for you, either Busan business, or make management unsexy.

39:17

I like to make management unsexy now

39:23

wow, that was awesome. You can tell that Joseph went to journalism school although you wouldn’t maybe pick it up off of this episode so far, but before he went to journalism school he was actually in the food industry so he’s probably he if you ever need help with naming or branding and, and different products for food, or you could give Joseph a call.

39:44

Nice, nice. I didn’t have any food experience before food, but I always tell my friends I could run the best hotdog stand ever. And now I believe I’ve done it.

39:55

One of my board members from my my last startup, we kind of had the odd shouldn’t pick a board member is working with a we had a private equity fund by a third of our business early on. And and the first guy they brought in, was I forget, I don’t remember the name, but he had this background of from some mega conglomerate holding company from, you know, the internet 1.0. And he had raised billions of dollars and flowing through it all in the.com bus. And I was like, he was talking about all these high profile stories of like, whatever he was doing blowing all this money. And I was like, Nope, he’s not our board member. The second guy, they introduced us to this private equity firm was actually he he was an immigrant political refugee from like, I think it was I rack. And he ended up in New York. And he was basically like, pulled himself up by the bootstraps, as literally his first business was a bagel, like a bagel street vendor. And I have so much respect for him. It was like, right away is like, You are our board member. I mean, I just love stories like that, like, and he was the only board member who would curse in a board meeting. And but it was awesome. It was just like something about that, you know, that kind of progression. Like, you can have humble beginnings, right? Like as an entrepreneur, I think most entrepreneurs have humble beginnings. It’s not, you know, I don’t know, I’ve always could relate to add a little bit more. So.

41:14

Yeah, I agree. I agree. And I think the whether that’s the workout that goes along with the that profile that you mentioned, you know, the grid resiliency, that’s that’s where the value is, and whether it’s co founders or board members, investors that just really understand that.

41:33

Yeah, I’m really excited to ask you this question, or ossia. We ask everybody who comes on the podcast? This question, actually, we asked Jonathan treble. And unsurprisingly, after listening to how you develop frameworks and how you manage your team, Jonathan said that, what’s the quote from Jonathan, you, you are the best operator he has ever seen. So I’m excited to turn around and ask you, Who do you see executing right now? A startup or an individual? Maybe it’s someone flying under the radar? Or maybe it’s someone we’ve all heard of? Maybe it’s, you know, Elon Musk? But who do you really see performing?

42:17

So I’m gonna give you one Elon Musk story first, since you brought that up. So valor Equity Partners is our largest investor and, and I remember early on, I would be sitting in board meetings, and they were the, I believe the first institutional money into Tesla and later SpaceX. And and I would get, you know, comments such as, you know, Elon wouldn’t do it that way arise. Or not, I’ve had to live up to you know, Elon, as a competent in a weird way, right? I am not Elon. And actually, my example of someone who I believe is executing is not arouse do so just, you know, different styles, different ways of doing things. And so the person I, you know, that came to mind was, I’d like to give a shout out to John Bouchard at Darwin AI. And so they’re an ad tech company based here in Chicago. They’re about 70 people, you know, John and his team, they’ve been heads down executing for about four years and bootstrapped a company from the beginning. So John is an accomplished founder with several exits under his belt, and gets calls from VCs all the time. He easily could have taken an early investor, but he stayed true to his plan is and they’ve self funded the business. And, you know, they kind of keep putting one foot in front of the other each quarter and have built a great business and have a lot of runway. So that’s why I’d like to give a shout out to

43:38

can you give us his phone number? I’m just kidding. Thanks so much for joining us a rasio. I’ll make sure to link to John Rashard and Darwin AI in the episode description for everybody. Thanks so much. It’s been great having you on.

43:55

Sounds good. Thanks, guys.

43:57

Thanks a lot Roz.

Welcome back to the Great North Ventures newsletter! The big news this month is the closing of Fund II! 

We have closed our $40M Fund IIGreat North is excited to build on its Fund I success investing in startups from Seed to Series A, with a new, larger fund.

Fund II Snapshot:

Thanks to our investors, founders, team, and to our community! Read more coverage here and here.

“Great North Ventures has a strong track record,” said Rob Weber, Founder & Managing Partner. “Our investors have given us a vote of confidence by coming out strong for Fund II, with a 70% increase in fund size, and we are grateful for their continued support as well as the support of new investors. Our strategy as a thematic, network-driven investor focusing on opportunities in underserved markets is resonating, and we see this successful Fund II raise as proof of this theme and our ability to execute.”

Interested Founders can apply for funding consideration immediately. Are you looking for early-stage funding?
Do you fit one of these themes:


Visit our site to view our criteria and to apply.

Need to learn more about early-stage scaling and venture funding? Are you working on scaling and thinking about VC funding? Listen to the latest episode of Execution is King.

It features Eric Martell, Founder of Pear Commerce, former founder of EatStreet, and former Venture Partner at gener8tor. As a successful founder, investor, and now repeat founder, Eric has valuable insight on what it takes to scale and successfully utilize funding. And guess what? He shared it with us.

Like this tidbit on what remaining focused on the problem looks like: “it took some patience and dozens, if not hundreds of customer conversations, and not being super in love with any individual solution to the big problem that we were trying to solve until we found that correct solution. And it’s almost like, you know when you know, because then the business really took off.” 

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In this episode, we talk about early-stage scaling. What it looks like, how to think about it, and what it takes to generate growth.

We are joined by Eric Martell, Founder of Pear Commerce. Eric is a former founder of EatStreet, and a former Managing Director and Venture Partner at gener8tor. 

With a background as a founder and as an investor and startup mentor, Eric has a lot of perspective on early-stage growth. He talks about what it takes to succeed: being obsessed with solving a problem (not with the solution), getting traction by creative means, and good old-fashioned hustle.

He also shares how to land VC money: by demonstrating the aforementioned traction, hustle, and creativity; being willing to swing for the fences by taking risks; and understanding that the math that drives VCs means your business needs to be capable of reaching a tremendous valuation.

Who does Eric see executing? Adam Choe, a former Managing Director at Gener8tor, current VC, and professor at University of St. Thomas.

Transcript:

Execution is King Podcast (with Eric Martell) Edit Round 1

Tue, 5/17 3:42PM • 35:06

SUMMARY KEYWORDS

founders, company, investors, building, startup, people, customers, big, problem, rob, crazy, work, vc, retailers, generator, turkey burger, eric, diners, restaurants, scale

00:09

Welcome to the execution is King podcast where we talk to successful startup founders, investors and ecosystem builders to uncover insights and best practices for the next generation of great global startups. My name is Joseph Siebert. Today, my co host is Rob Weber, managing partner at Great North ventures. Hey, Rob, how you doing today?

00:30

I’m doing well excited about our guest today. Yeah, me too. You

00:34

know, this is a topic near and dear to our heart. I can’t imagine a topic near or Dear actually, we’re going to be talking about early stage scaling, right about how to generate growth, what to look for in like founders, what it really takes to be able to scale at an early stage, you’ve got a lot of experience with this, Rob, you must be excited, hey,

01:00

I think that people who haven’t founded a company or a startup, the thing that that often goes unrecognized is just how dedicated you have to be. And this is why I feel like you probably shouldn’t start accompany if you’re not visibly enthusiastic about that idea. And that problem set that you’re solving, because the amount of energy, you know, hours and time it needs, it really is all consuming for most of the founders. And when it’s all consuming like that, and working crazy hours. And sometimes that’s when you’re working when you’re not even working. You’re just you’re constantly thinking about scaling the business and growth. And you know, those first couple years are often so physically draining. I think this is why you often see founders, you know, they don’t just like they don’t go from startup to startup to startup, they take a break, because of just how draining, you know, you get some gray hair my case I started probably lost my hair a little faster than I otherwise would have. You know, it almost just because of how consuming being a founder can be in those early years. It’s I think it’s like a positive stress most of the time, like, but it’s still stress. And, you know, I think it’s why people get off the hamster wheel after they have an exit for a while, they usually come back to it because they’ll miss it. But you know, it’s often nice to get a breather after you’ve been on it for a while.

02:19

Well, our guest today is someone who can definitely obsess over a problem in a by obsess, I mean in a very good way and who has all the hustle and the ability to do this as a serial founder. This week. Our guest is Eric Martel, founder of pair commerce. How’re you doing today,

02:35

Eric? Oh, I can’t complain. Thanks for having me on, guys.

02:39

So Eric, we’ve known each other for a few years now. I met you when you first moved to Minnesota from Wisconsin. And you’ve had a pretty diverse background as a founder and then organizing the accelerator now founder again, can you kind of provide a little bit of background on kind of your journey to what you’re doing now?

02:57

Absolutely. So yeah, Rob, I think we met each other back in 2016. When I moved here from Madison, I don’t consider myself a Vikings fan. I’m a Packers fan. But in every other way I consider myself to be a true Minnesotan at this point.

03:13

Oh, that sorry. Sorry to interrupt, but the podcast is now over. Thanks for coming.

03:21

I think the first Packer fan we’ve had on the podcast, but you know, you did move years. So you know, we let that we let it slide.

03:27

Yeah, absolutely. Forgive me my faults, and I’ll forgive yours. But yeah, so I’ve been in the entrepreneurial Universe since 2009. Myself and two of my college friends started a company called Eat Street. The summer between our sophomore and junior year at the University of Wisconsin Madison eat street powers the online ordering of 15,000 restaurants nationwide, primarily in college towns of 100,000 to a million residents. I like telling folks even here in the Twin Cities, we don’t have much of our presence, the city is too big for us. But if you ordered some celebratory pizza in Lawrence, Kansas after the NCAA championship, there’s like a 95% chance that that food was delivered from my old company. So I was there from 2009 until 2016. That was the point when I decided that Madison wasn’t cold enough for me. So I moved up here to the Twin Cities and joined generator the startup accelerator As Rob mentioned, I had been a participant to the generator accelerator with my first company eat street, love the team love the vision, and was really honored to help open up the first office here in the Twin Cities along with a guy named Mark McGwire. I was there for two years, but I knew that at the end of the day, I was going to have the entrepreneurial bug again, I was really inspired by working with all these founders, so I decided I had to do it again. And I’ve been with pear commerce ever since. So that’s like the I don’t know maybe 62nd overview of you know, the last 13 years of my life I’ve and I’ve worn a lot of hats. I’ve been both an investor and investee, and I love every second of, you know, building companies. And

05:09

so tell us more about pair commerce. What was your inspiration? And, you know, how has that evolved since focusing on launching peer commerce?

05:19

Yeah, at my first company eat street, it was a two sided marketplace, we had to have restaurants. And then of course, we had to have hungry people ordering food from us. And the hungry people side of it, the diners, we really built that customer base with digital advertising, Facebook, Google, tick tock, I mean, you name it, we’ve probably spent tons of money on that ad network. And the great thing about building that giant list of consumers was that everything was really transparent to the digital space. Like somebody would click on an ad, we would capture their information as they actually went and checked out and bought some pizza on our website or app. And that allowed us to do things like remarket back to these people say, Hey, are you hungry? Again? Do you want to buy more pizza, and really helped us learn who our customers were so that we could run more effective digital advertisements to acquire new diners? Pair commerce came about because my fiancee, who has worked in CPG, for the last half a decade, was actually at the time Head of Marketing for a turkey burger company called Mighty spark here in town, that company was running digital ads, but they didn’t actually sell turkey burgers on their website. So she was like coming back to me every day and saying, Oh, my God, you are so spoiled, because you’re able to actually like see what your digital ads do for you. Whereas for us, if somebody clicked on our ad for a turkey burger, where they’re going to take you to a blog post, that’s just information about a turkey burger, I mean, who the heck cares about that. Or we can send the traffic to a retailer that sells our product, but we get no confirmation of sales out on the other side, we have no idea how many people buy the products, we have no idea anything about the products. And she’s like, you know, it’s totally worthless restaurant digital ads. And I was like, totally worthless. I mean, that’s, that’s an upside down understanding of like, the value that I see in digital ads. So I set out to build a company that basically provides the same kind of transparency and benefits to digital ads that are for companies that sell through retail, as I myself had been, like, super spoiled with at eat street running ads that were more or less direct to consumer, where we were the ones both advertising and selling the product. So basically, pair Commerce has tried to be a company that provides the benefits of direct to consumer performance marketing advertising, to companies that sell their products, primarily through retail,

07:38

well, you’re making us look like bad husbands, Eric, I gotta say.

07:43

She’s like Beyonce at this point. So I don’t, I’m neither a good nor a bad husband. I’m just

07:51

as Eric knows, I spent 16 years in both consumer app world and then also building mobile ad tech where, you know, dealing with AD attribution, and building and developing digital performance advertising systems and technology. And so I know the there’s a lot underneath all of it to make it work. And to try to do that in a market that doesn’t have, you know, have that infrastructure yet. It’s, you know, it sounds like a mountain of a task, I imagine you have to probably work with online retailers as well as the brands Right? Or how does it all work?

08:28

That is the biggest crucial piece of what we’re trying to build is, we want a retailer to provide transparency into the purchase, if a CPG company sent the traffic to the retailer in the first place. It’s like a clean trade, like, we’re going to help you as a retailer, grow your business online. But what we need as a brand, you know, Hershey, us who’s spending millions of dollars on advertising, it’s sending this traffic to retailers, is a little bit of transparency into what’s actually happening with the retail. So of course, there’s a whole lot of complicated technology that goes into like, you know, capturing and exchanging this kind of information. But really, at its core, it’s more a human problem than a tech problem. It’s approaching retailers and aligning incentives so that they understand the value of receiving traffic from brands in exchange for more transparency. And I’ll tell you, I mean, we’ve been at this for like two and a half, three years now. And it’s not been until the last like six months, that we’ve really gotten massive buy in from retailers. But at this point, we work with three of the top six grocers. We work with the largest club store, we work with the largest electronics retailer, the largest alcohol delivery company, we’ve really been able to get them to see the value of exchanging a little bit of transparency to the products that they sell, and the companies that you know, make those products in exchange for receiving, you know, massive, massive amounts of traffic that helped them grow their own business. So it’s a tough problem, but it’s a human problem. And yeah, it’s probably taken a few years off my life and I’m finding my first gray hairs. Now, Rob,

10:03

welcome to The Club.

10:06

How would you go about validating the idea for pair? After you? So after you talked about the inspiration and recognizing that there’s an opportunity here, but I imagine you had to like, you know, there’s a little bit of iteration and formulation, when you’re trying to figure out exactly how to figure it out, especially with a two sided marketplace like that. How did you know that you had like, kind of hit on the winning formula?

10:29

Yeah, admittedly, we fell in love with the problem, because it sounded really complicated. And nobody else was like, really delivering value on that problem of like providing CPG companies that sell through retail, the transparency and performance marketing playbook of direct to consumer brands. And we loved how that sounded on paper. But we had no idea originally exactly how we were going to go about what we really did as immersed ourselves in a network of mentors and potential customers. And what I found is, you know, maybe even the easiest way to get sales is to come to somebody for advice in their perspective. And, you know, have them say this is a good idea, or this is never going to work. And if they think it’s a good idea, they might sign on as a pilot customer. So for us, I mean, I think that we could count no less than four iterations of the product. And I mean this in like, significant ways where, like, we totally reinvented our way of following through on this goal, and this problem statement that we had fallen in love with. But it took, like, you know, building an MVP, bringing it to customers and saying customers, you know, there’s somebody that I’ve been talking to in the CPG universe, who got all four of the pitches, and on the third one, he was like, Uh, you’re almost there, but like, it’s not quite going to be able to deliver the value that I’m looking for, I don’t think it’s gonna work retailers aren’t gonna say yes to it. But, you know, the proof is really kind of in the numbers. And what we did is eventually found a strategy, where we’ve aligned incentives correctly between the consumer packaged goods companies and the retailers, we built the necessary technology to, you know, facilitate that, you know, alignment of goals. And it’s been off to the races for us since that. And so we’ve been growing 30% month over month for the last nine months. But God, it took some patience and dozens, if not hundreds of customer conversations, and not being super in love with any individual solution to the big problem that we were trying to solve until we found that correct solution. And it’s almost like, you know, when you know, because then the business really took off.

12:31

Oh, that’s one of the things I’ve always enjoyed speaking with you, Eric, is you have the two characteristics that I think are most important, you know, if to be successful as a founder, and it’s, it’s really centered around creativity and being analytical. And it’s sort of like, I mean, if you can tackle, you know, the CPG industry, you know, the brands and these mega, you know, monolithic retailers, like it takes a certain amount level of just insanity to want to, you know, to go into that space, you know, but, but I mean, that is an all, you know, in the best ways, like, it’s not an easy, it’s not easy to get big companies to move. But I’ve just really enjoyed seeing this, you know, analyzing the problem falling in love with the problem, but then also kind of, you know, the creativity that goes into finding the right solution, right, like, like you said, you’re on your third iteration or whatever on, you know, on Pierre now, right?

13:21

Yeah, number four, actually, and thank you, blushing, and you’re probably giving me too much credit. But I mean, I also, you know, it would be worth calling out that, like, we’ve been very grateful to create north from, you know, day one for the support that you guys gave us, after we had a little bit of traction, we’re still kind of searching for our true north, and you guys believed in us as leaders, you know, we could not be in the position that we’re in right now. If it wasn’t for the support of, you know, our investors on our precede and our seed round. So, thank you guys for helping me pay my bills, as I’ve gone, you know, looking for the solution to this massive problem. And, you know, we’re pretty confident to this point that we’ve cracked it.

14:03

Yeah, let’s jump into that a little bit more in Thanks for the kind words, we appreciate it. But if you if you think about, you know, what are some of the lessons learned? So you raise quite a bit of capital while at each street, then you have been on the other side with generator and as an investor, and then back to being a founder again, what are some of the things that you’ve learned along the way for, you know, how to raise venture capital, and just, you know, things that maybe gaps that you see that maybe some founders struggle with? Is there anything that stands out to you?

14:33

Yeah, well, the first one, and this is just something that we said repeatedly generator is that traction speaks the loudest, and at eat street, we were relatively significantly entrenched by the time that we went out to raise money. You know, we had paying diners. We had restaurants. You know, the concept was working on a pretty small scale at the time, but you You know, the concept was working? I mean, then the question just became like, how large can this go? and pair it was a little bit different because enterprise sales do take a long time, you know, what I think that we had going for us, in addition, of course, to a track record of being repeat founders, and was the fact that we were learning so much by the day, from these customer conversations that we’re having before they were even customers. So when I would talk to you guys, or when I would talk to other investors, you know, when we do our check ins, it’s like, you know, listen to like, you know, this new revelation, like how much closer we’re getting to solving the problem, you know, having people initially committing for pilots, you know, that was a pretty good proxy for, like pure revenue traction for us the first time around. But I think a lot of people think that like, you know, the extra 10%, that goes between, you know, being unsuccessful and successful and raising around is like, you know, the quality of the Photoshop of the deck, and like, what really speaks, you know, the loudest is probably like, you know, the progress that the company is making. And you don’t get that without rolling up your sleeves, and just putting in a tremendous amount of hard work. So I think that that’s the first thing that comes to mind. The other thing that I would say, that comes to mind, when it comes to fundraising is like, your investors are counting on you to be a big success, or at least they’re counting on some of the companies in their portfolio to be a big success, you know, they’re placing, you know, that’s with every single company that they invested to, but you need to justify that you can be a big enough success, that, you know, the fund math actually works out. I mean, if you imagine that an investor is investing out of a $50 million fund their investors because it’s not coming out of their own pockets, like they have people who invest into them, those investors are expecting, you know, at minimum, probably $150 million, coming back in 150 million is a staggering amount of money, when you consider that VCs are only taking tiny slivers of companies in terms of ownership of themselves. I mean, you know, great North labs does not own pair commerce, great North labs as a sliver of pair commerce, and realizing from the onset, that your company needs to exit for hundreds of millions, if not billions of dollars, is the only way that, you know, you can probably like position your story in such a way as to attract venture capital. And you have to be honest with yourself from day one as well. Because if you’re like I can’t make a justifiable statement that this company is probably going to be, you know, a $500 million company, why put yourself in a position where you accidentally successfully fundraise. And now you and your investors incentives are misaligned. So I would say, you know, dreaming big, having the justification to dream big, like going after an opportunity that’s big enough to necessitate, you know, venture capital dollars, it can make money for the VCs, coupled with some traction. I mean, those are like the dyed in the wool ways to go ahead and like raise some venture capital.

17:51

I couldn’t agree more, Eric, you know, you show this, this sort of lack of understanding from a founder as a VC, if I put on my VC hat when, you know, you kind of see in their pitch book, this sort of 10 year plan to get to like 3 million in ARR. And unless there’s some really special technology that, you know, that is going to cause the company to be valued more than beyond its revenue, like, that’s just not going to get to the returns, that a VC is going to need to have almost any size, it shows a lack of understanding, right? Like, that doesn’t mean you can fake it and say, Hey, we’re gonna get to 100 million in ARR. But there’s no underlying plan, you know, what you want to be able to understand, I think is, you know, it’s that sort of upside scenario, like, how does this look like a 50? Or 100 million run rate company, right? And what’s the path to get there? And what are your assumptions and be able to walk through, you know, rather than even go through a deck, if you can have that kind of a conversation? And there’s substance behind it? You know, like, kind of the way you’re describing it, I think you’re gonna have a much easier time raising money. Right?

18:54

And totally, and for founders, Eric, I mean, what kind of advice would you give to them? Or if there’s numbers aren’t saying that, you know, they’re venture backed ball? I mean, would you say, hey, figure something else out? bootstrap it? Or would you do more of the, you know, swinging for the fences? approach?

19:14

I think that totally depends on you know, what the founder kind of wants to get out of life, I made that sort of as a try to answer but look like, I think that the majority of us would probably be pretty happy 10 years down the road and Rob scenario, to be the sole owner of a company that’s making $3 million a year and maybe a million of that is profit, I mean, shoot, like, you know, I’d be paying myself a whole lot more. If I had a company that I owned 100% of I could put a million bucks in my pocket every single year. And I know a lot of investors you know, who, you know, built their businesses now. are leading the good life right now. I think, you know, in the case of me and Alex and the reason why we keep on doing this crazy venture capital like world, really is just because Like, we like solving massive problems with like, you know, tons of moving parts, because like, that’s just what gets us fired up. You know, I mean, some people get fired up, you know about their job because they enjoy like managing people, some people get fired up about their job, because they’re artists and you know, they’re creating art. For me and Alex, like, I just, I mean, I shouldn’t speak for him. But for me personally, like, I wouldn’t be happy if I wasn’t solving a problem at massive scale, because like, I like puzzles, and I like challenges and that kind of stuff. And you could still face big challenges and come up with creative solutions when you’re building a like smaller, you know, business that you own 100% of, but I think Alex and I like this idea of like changing industries and turning them upside down. And that’s why we’ve gone after like, such crazy problems are day wide. What do you look around

20:48

at, like Midwest startups? Do you see other founders doing that? Or do you see more of them slipping into that, like value protection? Versus like growing value growth, or creating value growth mode?

21:01

Yeah, that’s such a good question, Joseph. So I’ll speak from, you know, some degree of experience here. And I think we did a ton right at eat street and I eat street continues to thrive. But if you do the side by side comparison to a company that was founded two years after us DoorDash, which is now worth $40 billion, more than Target Corporation, I think the difference probably in certain chapters of our life is that we looked at things that DoorDash was doing, and we were like, that is crazy. Like, why would they ever do this? Like for instance, they were listing restaurants that they didn’t have a relationship with, and just collecting the orders, and then they would call in the order over the telephone. And they wouldn’t make any money on that. In fact, they lose tons of money. And eventually, they got sued by the In and Out Burger for like doing that. Well, you know what they did, they provided like a ridiculous amount of value back to their diners, because now all of a sudden diners could order In and Out Burger online for the first time ever. They worked it out with it at Burger eventually, where I think that they’re like back to being best friends forever. But the point was, would we would look at that, we would say, oh my gosh, this could put the entire business in jeopardy. What ended up actually happening is that, you know, DoorDash is like Elon Musk style, like a bet the house over and over again, it’s like, you know, we’re not big enough. So like, Let’s go big on something that sounds crazy, you know, eventually propelled them to be probably one of the top five startup successes like the last decade, this time around, you know, Alex and I are trying to take that mindset where it’s like, you know, $1 million in revenue, $10 million in revenue, $100 million of revenue, like, you always have to just be like striving so hard for like the next milestone, and doing things that might at first seemed like, they’re super crazy. Now, again, that’s not a knock on Easter, because he’s really created like a ridiculous amount of value for its investors for its shareholders. For the founders. I mean, it I owe everything that I have in life, probably to that like, you know, startup career launch opportunity. But in some degree of hindsight, you know, the venture capital universe is built on people taking big crazy, that’s just betting the house over and over again. And I have newfound admiration for my former competition. And I’m trying to learn like from what’s worked at eat street, and also from that mindset that some of those crazy aggressive Silicon Valley companies take to become like multibillion dollar businesses.

23:21

So Eric, that’s really interesting. You think about this sort of growth at all cost mentality, you don’t, I’ve gone through a couple of cycles, market cycles, you get the.com bust in my early 20s, that I lived through as a bootstrap founder. And then the financial crisis of 2008 is timeframe. Now we’re heading into this recessionary period. You know, I guess, in my past experience, it seemed like that grow at all costs, mindset was perhaps disadvantage more so in like recessionary times. And perhaps then the advantage can start to swing back to the more a little bit more of a lean approach versus the where they call it the Blitzscaling. But I think I think there is a role for Blitzscaling I think, I think sometimes it’s just situational, right? You got to know like, when’s the right time to blitzscale? And when is it not? And you also see these massive flame out companies that they blitzscale with a bad business model, that just never works. And they all they do is burn up a bunch of cash. And it’s very nuanced, right? It’s not like, it’s not like the default is always just blitzscale. It’s sort of like the economic period has affected a role. The business model and strategy has a role, even how competitive is the space you’re in, you know, has a role. So it’s kind of I find that always really tough to kind of try to gauge

24:38

I totally agree. And maybe I should even rephrase like my thinking on the previous point. My co founder, Alex, also used to work at Facebook, and their original slogan for their engineers was move fast and break things. And then they changed it eventually to move fast with stable infrastructure, which I think you know, is a good analogy for like the blitzscale laying, slash, like taking bold bets. What I was trying to kind of say is, you know, don’t ever write off an idea is a bad idea because it sounds crazy, like you owe yourself crazy ideas that can 10x your business. But it’s got to be done on top of like a solid business model. And like, you know, doing crazy things, does it always be like spending more cash like DoorDash, listing In and Out Burger as, you know, place that you can order from and then they just call in the order? I mean, they probably spent some money on that. But that wasn’t like a, you know, we need a billion dollars to listed up burger it was more like they took a first principles approach to like, is this going to add value to our diners? And the answer was yes. And on face value that might have seemed like kind of a crazy idea, but it actually wasn’t. And so my argument would be, never write off ideas as crazy. Give them the time of day because they can really help grow your business. And don’t at all try to blitzscale until you have product market fit because otherwise you will like giant piles of money on fire. Our approach is just like, you know, once we’re rolling, like we’re not planning on spending more money than we have. But what we are planning on doing is like really doubling down on crazy opportunities to grow the business even more quickly.

26:10

What are some of the things that you did to hack growth when you were at eat street? So you just talked about like, strategically, you know, this idea of swinging for the fences, right? Create that infrastructure? And then give yourself the opportunity to 10 acts by pursuing these these crazy things? What are the some of the things that you did just like a level down from that strategy, some of that tactical stuff when it comes to like creating growth? Yeah, straight?

26:37

Well, you know, I mean, I think statute of limitations from 2009 is all up. So the complete transparent thing is that we like, we hustled our ass off, I mean, we, you know, I think put out over a quarter million flyers over the course of like, six months by actually, like, you know, working our way into student housing, like waiting for somebody to have the door open, like sliding a coupon code under everybody’s doors. I mean, we, you know, got a call from the massive police department at one point saying, Hey, you guys got a cool and otherwise, like, you know, the next time we see you, we’re gonna like pick you up off the streets. And we were always on the right side of ethical, but we were doing absolutely everything in our power to scale, in some ways very inefficiently at first, but like, You got to kickstart the flywheel your first customers are not going to be the same as the customers that you acquire after you’ve hit like some massive scale, you got to work your ass off for them. Thinking back to Madison, like we ran some very deeply discounted food deals to like get people to order from our website, where it was like, Hey, you can get $1 subs from like, you know, a Jimmy John’s style restaurant, but only if you order through us. And Matt, Alex and I were like working part time jobs at the time, like other part time jobs. And we were like funding that out of our own pocket. I mean, I remember my bank account went negative, because I bought so many sub sandwiches for other people. Well, that was what she had to do to, you know, again, get that initial spark that could turn into a giant fire, I would encourage founders, you know, especially in the early days of their company, like just like, work really, really hard. I mean, you don’t have to be so strategic about it. And then once you have some scale, then you have to start thinking, okay, how can I get 10 times 100 times bigger than this without just passing out 10 times, or 100 times more flyers that we’ve already passed out. But we just we were, we were wild. Back in the Madison days. I mean, we were skipping Saturday nights going out to the bars. And instead, we were, you know, passing out flyers, and that’s what it took to get our business off the ground.

28:33

So Eric, I think your description of of growing in the early days is really consistent with my own experiences, and that of what I’ve just observed, I mean, you have to do the things that don’t scale to get that spark going. And every behind every great startup is some kind of something that doesn’t scale or, or maybe it’s a creative, you know, method that doesn’t scale, or isn’t going to work forever, but it can at least work for a while. So you have like, you know, whether it’s Tinder and how they got started at, you know, certain like parties or you had like, it’s famous kind of how Airbnb got started by you know, like auto posting on Craigslist, or Pay Pal. You know, infiltrating eBay sellers. And just like the, the back and forth and, you know, there always seems to be these, like clever ways of, of sort of faking it till you make it right. I don’t know. So I, I it almost seems like more more of the exception. You know, I can’t even think of very many businesses that maybe maybe there’s some just vanilla like enterprise SAS kind of businesses where you could just, you know, but even then you still need to, you still need to get your first customer and you got to do whatever it takes, right.

29:46

Yeah, Rob, I couldn’t agree more. I think that the ultimate founder combination is a growth hacker and you know, somebody who thinks strategically and you know, sometimes they’re the same person and sometimes, you know, it’s a team of people. I’m really grateful to Matt, my co founder back at eat street and Alex, my co founder through both of my companies for help rounding out my strengths and weaknesses. And I think that together, you know, we’re able to check all those boxes. But honestly, the strategic thinking, like really plays its part once you hit a certain size, and then you’re like, oh, I need to think about how I can scale efficiently to be 10 times or 100 times bigger. But let’s be real, like 99% of startups don’t ever get quote unquote, big in the first place. You don’t have to overthink growth hacking, you just have to put in the time and the elbow grease, I mean, you know, you got to come up with some clever ways of connecting with your first customers, but a lot of the times, that’s just gonna be like, a whole ton of like, manual work and effort. So I would say to founders, you know, kind of getting their businesses off the ground. Like, don’t overthink this, you know, strategic, like, how do I scale to a billion dollars, like workouts scaling to your first $100,000? And do that in ways that don’t necessarily scale permanently? But like, usually, it’s just like, how many hours have you put on the clock, like trying to get those first customers and work relentlessly and you’ll get there. And then once you’re there, then you can start thinking, you know, a little bit more strategically about how to scale a general but like, I mean, you know, I guess if I had to summarize it, it’s just work your ass off of the early days, and you’ll be very, very happy with the result.

31:17

So from your time as an investor and working with early stage startups at generator, is that advice you would give? Or is that like a tool for screening that you would lean to? What do you ask them like about their first customers? And how many hours they’re putting into it? How did you filter like, I’m enamored by this idea that this is entirely required, that you have to be able to do this stuff? And I’m sure there are a few outlier examples where, you know, like, like Rob said, some of these b2b companies may be where they didn’t have to have this kind of hustle. But is that something that you saw across the board when you were working with early stage and something you would like filter for and encourage and startup founders?

32:03

Yeah, totally, you know, I’d say that hustle and early traction were like the number one things that we were screening for a generator, VC has a low hit rate, I mean, a generator probably has a lower hit rate than anybody, because we’re investing at the earliest stages, but like, a lot of the companies are not going to work out. And you just kind of have to build that into like, your understanding that not every company is going to necessarily be a home run right off the bat. But, you know, probably the strongest indicator that we would have in the future was just like sitting down with the person maybe even after the original interview, like getting drinks and asking them about how they got their first customers that if they told that awesome story right there, I mean, that’s gonna go extremely far, I would say in terms of like, probably getting you into generator, you know, something that I would recommend to anybody who’s like looking at those programs, or, more importantly, anybody who’s getting a business off the ground, you know, get creative and work super, super hard.

32:55

So for founders, hustle, swinging for the fences, right? And when you’re pitching your story to Vc, pitch them that dream, right? pitch them those big numbers, that a good synthesis.

33:08

I’d say you captured it all in probably 10,000 less words than I’ve gotten.

33:15

So when it comes to people who are successfully swinging for the fences, and who are able to hustle, who do you see executing right now? Maybe it’s a startup, maybe it’s an individual, maybe it’s someone everyone’s heard of, maybe it’s someone nobody’s heard of, who do you see executing right now?

33:33

Yeah, I’m gonna give the hat tip to my very good friend and former coworker, Adam Cho, who came up through generator with me, he was a managing director, as well as myself, we both worked at the Minnesota office, what impresses me so much about Adam is that he’s gotten like multiple lines in the water. I mean, I’ve never been able to have more than one line in the water personally. So I don’t know if he doesn’t sleep or what. But, you know, he’s actively working as a venture investment right now for tundra ventures, which is an upcoming VC in the Twin Cities. And he’s, you know, running basically like a community and working for an NFT community, you know, in the crypto space. And then, also, he’s teaching at St. Thomas. And what I what I love about Adam is that, in addition to building a lot of value himself, I believe is that if T project is going to be successful, I think that tundra is going to be successful. Adams, the kind of person who’s like lifting up the creating entrepreneurs of the ecosystem. You know, I think he’s inspiring students that say, Thomas to begin entrepreneurial careers. He’s very generous with his time for any founders looking to get something off the ground. And I just think that, you know, he’s kind of superhuman in his efforts and couldn’t say enough good things about it.

34:51

Well, thank you so much for joining us on the podcast, Eric.

34:55

Awesome. Well, thank you for having me, Joseph.

    Doubling Down on Success Investing in Trailblazers

Minneapolis – May 23, 2022 – Early-stage VC firm Great North Ventures announced today it has closed $40 million for its second venture fund (“Fund II”). The fund aims to continue the firm’s success investing in startups from Seed to Series A stages. New investments will address three key themes: digital transformation through AI, community-driven applications, and solving labor problems.

Founded and operated by successful founders, Great North Ventures focuses on providing capital, connections, and operational guidance to startups. Its new Fund II has added a Venture Studio, whereby new startups are co-created and supported from ideation through launch and beyond. The fund’s investing and support are network-driven, with connection density in Minnesota, through the Upper Midwest, and extending beyond. 

Founders seeking funding can apply for immediate consideration.

“We have refined our approach as a network-driven investor with Fund II. Our Innovator Network has depth and breadth across startups and Fortune 500 companies. Our team’s network is diverse and rooted in our own experience as founders. It is densest in Minnesota and the Upper Midwest, and extends beyond. Our deal flow and support and consequently, our capital deployment, align with this density,  By playing to our network’s strengths in this way, we maximize investment potential, while also creating a blueprint for further Fund growth in locations that are undercapitalized.”- Ryan Weber, Founder & Managing Partner

“Great North Ventures has a strong track record. Our investors have given us a vote of confidence by coming out strong for Fund II, with a 70% increase in fund size, and we are grateful for their continued support as well as the support of new investors. Our strategy as a thematic, network-driven investor focusing on opportunities in underserved markets is resonating and we see this successful Fund II raise as proof of this theme and our ability to execute.”- Rob Weber, Founder & Managing Partner 

Fund II Strategy and Themes

Great North invests in domains with substantial unsolved problems that can be solved by entrepreneurs leveraging technology. The firm’s Innovator Network is a network of former founders, skilled operators, and successful investors that have a track record of execution. It is a key resource for helping with sourcing opportunities, diligence, strategy insights, referrals for team additions, and mentorship for the core team. 

One of the key strategies of Great North Fund II is its Venture Studio, in which it designs and builds companies with world-class founders in focused market segments with substantial opportunities. In the venture studio model, problems that startups could solve are identified, markets are evaluated, teams are built, MVPs (minimum viable products) are spun up, and experiments are run to iterate products until product/market fit is achieved. 

Startups co-created in the Great North’s Venture Studio continue to receive fundraising support and board oversight after they launch. NextGem is a tool and social network for trading card enthusiasts to better manage and discover great cards. It is the first company created in Great North’s Venture Studio. The second startup to come out of the studio is Backhouse Brands, a self-serve marketplace for creating and managing virtual restaurant brands.   

Three investment themes drive Great North Ventures Fund II:

Digital Transformation Through AI – Great North is looking for technology-driven startups that are innovating traditional industries using artificial intelligence. Its portfolio examples across Fund I and II include Allergy Amulet, Coverlease, DispatchFlywheel, Inhabitr, and Nested Knowledge.

Community-Driven Applications – Great North is looking for consumer or enterprise startups that are connecting people through software, especially in the areas of media consumption or commerce. Its portfolio examples include NextGem, Omnia Fishing, and PartySlate.

Solving Labor Problems – Great North is looking for startups with market-driven solutions for workplaces and labor. Its portfolio examples include FactoryFix, Skillit, and Yardstik

Founders who fit one or more of these themes and are raising a Series Seed through Series A round may apply for funding on this web page.

Fund I History

The firm was originally known as Great North Labs when it was founded in 2017. Its first fund of approximately $24 million was one of the largest debut venture funds raised in the Midwest and now includes a portfolio of 27 investments, six of which have exited. New investments from Fund I are now complete,  with the remaining capital reserved for follow-on investments. 

Strong growth has continued across Great North’s Fund I portfolio. Aggregate revenue run rate of these companies increased 294% from the time of initial investment through the end of 2021. Recently, several of Great North Fund I portfolio companies have announced new growth rounds including Dispatch, Branch, and FactoryFix.

Great North Ventures’ co-founders, Robert and Ryan Weber, are twin brothers with a successful track record since the early 2000s as founders and angel investors. They were joined in founding the firm by a former mentor, Pradip Madan, who is a successful technology executive and investor. Rounding out the team are Venture Partner Mike Schulte, and Director of Marketing Josef Siebert.

About Great North Ventures

Great North Ventures is an early-stage VC firm located in Minneapolis. The firm has raised two funds since its 2017 founding. As a network-driven, early-stage investor, the firm has deep roots and density in the “capital desert” outside Silicon Valley, New York, and Boston. 

Built by founders, for founders, the team is experienced in founding and scaling tech companies. Its team consists of ex-operators with significant experience across stages of growth from startup to public companies and M&A, and broad and deep technical, sales, marketing, and transactional expertise. Great North prioritizes execution over strategy and pedigree when choosing companies and founders to back. Fund II will invest in startups that fit three themes: Digital Transformation through AI, Community-Driven Applications, and Solving Labor Problems


For more information, please visit its website, or follow the firm on LinkedIn or Twitter. Listen to the Great North Ventures podcast, or sign up for its newsletter.

Intro to Great North Ventures

Great North Ventures is an early-stage VC located in Minneapolis and St. Cloud, MN. Our investment team consists of ex-operators with significant experience across stages of growth from startup to public companies and M&A, and broad and deep technical, sales, marketing, and transactional expertise. Starting in 2017, we have raised two funds. 

Fund I, from which we made new investments from 2017-21, focused on opportunities arising in the Upper Midwest given the strength of the entrepreneurs, and the relative lack of venture capital. Our focus on the Upper Midwest allowed us to leverage the substantial network our founders have in the region, as well as the operating experience of all the partners across sectors and geographies.

Fund II Thesis

Geography

For Fund II, we have narrowed our investing themes, as well as expanded our lens with respect to geographic focus. Roughly, we aim to invest 1/3rd of our Fund in Minnesota, 1/3rd in the Upper Midwest, and the remainder without a geographic constraint. This enables us to continue to address the undercapitalization as well as take advantage of our deal flow momentum in the Upper Midwest. For another 1/3rd of our capital, as we have built relationships beyond the Upper Midwest, we want to take advantage of the deal flow for the best opportunities. Our allocation of the remaining 1/3rd further enriches our deal flow, as all regions in the US and elsewhere have concentrations of expertise, and the greater geographic diversity enables us to find the best deals in our target domains.

Fund II Investment Themes

We invest along three themes, Digital Transformation Through AI, Solving Labor Problems, and Community-Driven Applications. 

Digital Transformation Through AI – The next dominant wave of technology-driven innovation will occur in legacy industries. We invest in the tools and technology that use AI to solve pervasive problems in legacy industries. 

Solving Labor Problems – The world’s talent markets are more competitive than ever, and the hardest challenges for virtually every business are related to attracting and retaining talent. Across all industries, we focus on investing in startups that tackle talent issues like recruitment, development, and retention.

Community-Driven Applications – Network-driven software is expanding into every industry, spreading beyond consumer to enterprise. These applications feature lower customer acquisition costs and higher retention rates, driven by strong viral effects that make use of growth loops. We invest in these startups that can kickstart networks. 

As an early-stage fund, we seek opportunities from inception through evidence of product market fit. 

Our investment criteria are foremost the size and potential of the opportunity. initial evidence of adoption or early product-market fit (e.g., registration growth, time spent using the service), low cost of customer acquisition, high lifetime value/customer, stickiness, sales motion simplicity, team strength, defensibility, and capital efficiency. We invest in domains where there are substantial unsolved problems that can be solved with entrepreneurship, and where we have strong expertise. Supplementing our own strengths, our network of advisors is a key resource for us in helping with diligence, key strategy insights, referrals for team additions, mentorship for the core team, etc.

Venture Studio

For opportunities at inception, we substantially rely on our venture studio. Our strategy for the venture studio is to create startups where we have unique expertise and where we do not see attractive opportunities based on external deal flow. We have incubated two opportunities to date in our venture studio.

Great North Ventures Investment Themes

Great North Ventures is a network-driven, generalist early-stage fund that prioritizes exceptional execution. Founded by founders, for founders – we back repeat founders, we back strong first-time founders, and we form founder teams in our venture studio. 

Our innovator network and team’s connections drive our value-add to startups, and our network density is greatest in Minnesota and the Upper Midwest. While we are a generalist fund, we invest in three themes: “Solving Labor Problems”, “Digital transformation Through AI”, and “Community-Driven Applications”. 

Community-Driven Applications

There is a global trend towards network-driven software expanding into every industry, for both consumers, and for businesses. And while much of the world is buzzing about Web3, we believe we are still in the early innings of Web 2.0, as these software platforms continue their expansion. 

There is a strong investment reason to invest in network-driven startups: they outperform! Why? Network-driven apps have lower customer acquisition costs than their single-user counterparts. This is because of strong viral effects that make use of growth loops, which compound user acquisition. When these network effects cause customers to engage with other customers retention rates also increase.

Founders building software today can leverage the behavioral design patterns that dominated horizontal online communications (Facebook, Instagram, Snap, YouTube) and gaming (Roblox, Fortnite, Zynga, etc). These same Web 2.0 patterns can be applied in any category where end users benefit through collaboration. 

Web3 startups will also take advantage of these network effects. The winners in the crypto and metaverse spaces will take on a mobile-first approach (“Start With a Mobile App, Not a Website”) and will adopt best-in-category community features. Regardless of which internet paradigm a startup is part of, the apps with the highest engagement of their end-users will win in most categories and capture most of that category’s profits. 

Starting and scaling a network can be challenging due to what is commonly referred to as the cold start problem. In addition to having a strong product, successful startups usually find the smallest network that can stand on their own (“atomic network”) and focus on building a leadership position there before expanding to other networks while eventually eroding the market share of the incumbent network. 

In practice, we have seen other strategies work as well. Andrew Chen details four of them in his book “The Cold Start Problem”:


1. Invite Only refers to allowing users to join only if they are invited to use the app by other users. This ensures a stronger network effect from those that get invited as they already know other users on the service.  

2. Come for the Tool, Stay for the Network refers to providing a single-player mode that allows a user to get value from the service even before it has a strong network. Instagram had photo filters, for example.

3. Paying for Launch refers to paying to grow the network, after the initial atomic network has been figured out, as a way to accelerate growth until the tipping point is reached where the network grows rapidly due to compounding atomic networks strengthening each other. This tends to be expensive and is not usually a tactic taken in the early stages of a startup that is resource-constrained.

4. Flintstoning refers to manually helping to keep the network strong while still early in developing automated capabilities that can exist at scale through the stronger network and product.

Tactically, we see many of the same tools and techniques work effectively across social apps. We’ve had startups scale based on strong network effects in both consumer and enterprise businesses. Usually, incumbents lack the creativity and know-how to thwart a well executed attack. Utilize a new technology, or market trend, to uncover a unique and valuable tool or focus on a specific network whose needs are only partially being satisfied and you may have the next big community app.

What We are Looking For

Vertical Social and Passion Marketplaces 

The Web 1.0 marketplace winners like Craigslist and eBay were largely horizontal in nature. Since the early 2000s, nearly every category of e-commerce has had multiple successful marketplaces targeting it. But most categories have not fully embraced Web 2.0. 

We have multiple examples of these marketplaces in our portfolio, including NextGem, Mustard, Omnia Fishing, and TeamGenius. 

Consumerization of Enterprise SAAS 

Enterprises used to move slowly when it came to new tech adoption. Workers have accelerated and transformed that adoption as tools they elect to use garner enterprise sales. By getting enough workers to adopt the product first, businesses can’t say no to the enterprise products without risking productivity. As a result, now enterprise software is consumer grade: simple, easy to use, and mobile first. 

Examples from our portfolio include Branch, FactoryFix, Dispatch, Flywheel, Mustard, Omnia Fishing, PartySlate, Pitchly, SkillIt, CoverLease, ClinicianNexus, and Structural.

Work with us

If you have a startup that is a community-driven application, submit here for feedback. We will provide pitch deck feedback to all startups who submit. Before you submit, get an inside look at our process first: “This is how to evaluate early-stage consumer app startups

Great North Ventures Investment Themes

Great North Ventures is a network-driven, generalist early-stage fund that prioritizes exceptional execution. Founded by founders, for founders – we back repeat founders, we back strong first-time founders, and we form founder teams in our venture studio. 

Our innovator network and team’s connections drive our value-add to startups, and our network density is greatest in Minnesota and the Upper Midwest. While we are a generalist fund, we invest in three theses: “Solving Labor Problems”, “Digital transformation Through AI”, and “Community-Driven Applications”. 

Digital Transformation Through AI

In Steve Case’s book “The Third Wave”, Case describes how the greatest opportunity for innovation will come from startups who disrupt legacy industries, and that proximity to these companies in these industries will enable founders to better empathize with their prospective customers and grow faster.

We agree with Steve, but we would take it a step further. The tools and technology that use AI to solve pervasive problems in legacy industries are going to be the dominant wave of technology-driven innovation in the years to come. 

From the 1990s to the 2010s, early adopters of AI implementation were largely found in financial services and digital media. The talent required to build and deploy machine learning models was inaccessible by most companies- the world has an extreme shortage of scientists with advanced degrees in machine learning. Our firsthand experience backs this up, as founders from the digital media space where our company implemented predictive modeling at scale, our machine learning talent came at a premium. 

In the last few years, we have seen developer tools and cloud infrastructure improve so much that building applications using AI is now less of a scientific hurdle. These advancements enable startups to implement machine learning in their target market, and will accelerate the pace of digital transformation. 

Now the problem is more of a data acquisition hurdle. Can a startup identify a path to acquire the data they need to train the AI in the beginning? Can they build a proprietary data pipeline, that with scale, creates a strong competitive advantage? In our experience, typically, the best way to monetize data is to keep it to yourself. Startups succeed by requiring users to engage through their product to make use of their data.

What We are Looking For

Retail/E-commerce

E-commerce has gone from nice-to-have to a requirement for retailers, accelerated by the pandemic. Digital has become a cornerstone of retail strategy because of the ability to collect and act on customer data at the right time, in the right place. Top retailers are refining omnichannel strategies that embrace the right channels and offer seamless customer experiences. 

An example from our portfolio is NextGem. NextGem has developed core AI technology to create an image scanner which reads and maps data, and a search engine which uses that data for their trading card platform. 

Manufacturing

Digital transformation in manufacturing includes things like asset optimization, workforce productivity, and production speed. It also includes IIoT (Industrial Internet of Things), which encompasses the use of smart sensors and actuators to enhance manufacturing and industrial processes.

In our portfolio, FactoryFix is a marketplace for skilled manufacturing labor, which uses a matching algorithm to help predict the best-suited candidates for hiring managers. 

Transportation/Logistics

It doesn’t always take a container ship lodged in the Suez canal to cause worldwide supply chain issues- worldwide pandemics and war easily do the trick. Predicting behavior, weather, demand based on troves of data leads to optimization of routes and delivery, increasing efficiency, decreasing waste, and better service and profits – whether the cargo is goods or people. 

An example in our portfolio is Dispatch, which is a last-mile delivery company that provides on-demand delivery services to businesses of all sizes. 

Healthcare

Protein folding algorithms, case triage, and AI-enabled medical devices are three examples of how AI is changing how healthcare professionals research new drugs, diagnose issues, and treat patients. 

Flywheel is an example which offers solutions for the life sciences, clinical research, and academic research industries to accelerates collaboration, enables machine learning, and streamlines the massive task of data aggregation, curation and management. Nested Knowledge, which consolidates insight through metastudies, systematic reviews and living reviews in medical research, is an example in our portfolio.

Education

The most visible of digital transformations in education was accelerated during the pandemic: remote learning. Not only is it improving accessibility, but it has opened the door to personalized learning approaches, and wider inclusion of digital resources – both of which can be complemented or optimized through AI. 

Yardstik is an example from our portfolio focused on worker training, screening, and verification. Its platform offers solutions to help marketplaces and platforms more easily hire, onboard, and manage safer workforces.

Food and Ag

Agriculture is being optimized at all levels through AI. Tools for crop and soil monitoring, systems that can develop models and tools for assessments and management strategies, and self-operating machines  are some uses of AI. 

An example in our portfolio is Allergy Amulet, which uses AI to correlate allergen detection in food at the point of consumption. 

Travel/Hospitality

From restaurant reservations and food delivery, to airline pricing and route planning, to chatbots and data analysis, digital transformation through AI has affected every facet of the travel and hospitality industry. From what is available, to how it’s procured, and even to how we experience it – every aspect has been affected. 

Examples from our portfolio include Inhabitr and PrintWithMe. Inhabitr curates, sources, and delivers furniture for rental or purchase. PrintWithMe provides self-serve in-house printing amenities for coffee shops, apartment buildings, and other places people gather and work remotely.

Real Estate/Construction

Transformations in the industry are as mundane as chatbots serving real estate customers, to AI-controlled robots performing dangerous construction tasks. Scheduling, monitoring/sensing, and cloud-based collaboration are all widely used, and AI is increasingly used for planning, design, and risk mitigation. 

CoverLease is software that enables data collection for the commercial real estate industry, which enables insight discovery and decision-making. Another example is SiteKick, a construction site monitoring and reporting system that allows for remote, constant monitoring of job sites. 

Work with us

If you have a startup that is driving digital transformation through AI in these or other ways, submit here for feedback.If you have a startup that is driving digital transformation through AI in these or other ways, submit here for feedback. We will provide pitch deck feedback to all startups who submit.

Before you submit, get an inside look at our process first: “This is how to evaluate early-stage consumer app startups

Great North Ventures Investment Themes

Great North Ventures is a network-driven, generalist early-stage fund that prioritizes exceptional execution. Founded by founders, for founders – we back repeat founders, we back strong first-time founders, and we form founder teams in our venture studio. 

Our innovator network and team’s connections drive our value-add to startups, and our network density is greatest in Minnesota and the Upper Midwest. While we are a generalist fund, we invest in three theses: “Solving Labor Problems”, “Digital transformation Through AI”, and “Community-Driven Applications”. 

Solving Labor Problems

The world’s talent markets are more connected and competitive than ever. The hardest challenges for virtually every business are related to attracting and retaining talent, including skilled and unskilled. Given the pressure across all industries for recruiting, developing, and retaining top talent, we are focused on investing in startups that look to tackle talent issues with either horizontal approaches (across industries) or vertical approaches (going deep in a single industry). 

The future of work will see more workers who value their flexibility connecting across the world, working from anywhere. Traditional definitions of jobs (like the “9-5”) will also change as gig work and variations of employment affect how talent approaches the idea of work. 

As the industry changes, down to the very conception of “work”, new solutions will come to market to meet demand while accommodating new realities.

What We are Looking For

Labor Marketplaces

Despite the rise of horizontal recruitment platforms like LinkedIn and Indeed, most workers are unsatisfied with the way they find new work; similarly, employers want to source the right workers more easily . Workers end up with low success rates on time-consuming applications for many job types because the horizontal platforms can’t go deep enough to match-make at a high rate. This same filtering issue plagues employers because they end up with a lot of noise from poorly recommended matches.

Examples in our portfolio include FactoryFix and Skillit. FactoryFix is a labor marketplace that for manufacturing businesses to find skilled talent to run their business. Skillit matches skills-tested carpenters with great construction firms.

Financial Services for Workers

As companies compete to attract talent, services offered to employees factor into employment decisions. Financial services for employees improve the employee experience by reducing inefficiencies, saving money, and giving employees greater control over their earnings.

Examples in our current portfolio include Branch and Micruity. Branch allows users to budget, take paycheck advances, and earn more income by picking up available shifts. Micruity partners with life insurers and fund managers to  pensionize 401(k) plans, to provide access to a secure retirement for workers.

EdTech

Workers expect that they will advance in their careers. If they stay stagnant for too long, they will leave and go to another place. As such, employers and recruitment platforms need to get better at advancing the skills of workers so that they can level up. Edtech, especially “continuing education” offers this skill advancement.

An example from Fund I that has already been acquired is Clinician Nexus. Clinician Nexus provides clinical rotation management for health systems, medical and nursing schools, and medical and nursing students, with a transparent, people-centered platform.

Gig Work 

Employees want flexible solutions so they can choose when they want to work and have the flexibility to work around their personal schedules or part-time positions.

Examples in our portfolio include Dispatch and Yardstik. Dispatch employs a driver network that performs last-mile delivery on-demand. Yardstik makes it easy for gig marketplaces and SaaS platforms to screen, verify, and train their workers.

Workplace Collaboration 

A very effective way to increase productivity, while also increasing the engagement of workers, is to increase collaboration within and across functional areas of businesses. Collaboration limitations can be due to institutional silos, or physical barriers like those presented by remote work.

An example from our portfolio is Structural. Structural is an Employee Success Platform built to nurture employee connections within an organization.

Remote & Hybrid Work– The market was already trending towards supporting remote work, but the pandemic has accelerated the transformation by 10X. The cat is out of the bag and it isn’t ever going back. We still have a lot of opportunities to continue to innovate.

PrintWithMe is an example in our portfolio. PrintWithMe provides an accessible and smart printing solution for people who work from coffee shops, apartment buildings, or wherever a kiosk is located. 

Project/Task Management– Given talent constraints in the market, efficiently allocating resources is more important than ever. Businesses that can increase operational efficiency can stay ahead. 

An example from our portfolio is Parallax. Parallax is a platform built to help digital agencies and tech consultancies operate more efficiently, with better utilization of billable resources.

Work with us

If you have a startup that is solving labor market challenges in these or other ways, submit here for feedback. We will provide feedback to all startups who submit.

Before you submit, get an inside look at our process first: “This is how to evaluate early-stage consumer app startups

May newsletter
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Investment Theme: Community-Driven Applications

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