In this episode, Rob and Josef talk about the newly launched venture studio project that’s a social app for trading card collectors. 

They are joined by Atif Siddiqi, Founder and CEO of Branch. Atif is a former EIR of Idealab, a venture studio that has generated multiple unicorns. Branch came out of Atif’s time at Idealab, and has grown substantially after relocating to Minneapolis. Branch helps businesses modernize their payment methods to empower working Americans. Atif shares the insight that led to Branch’s successful pivot, and gives operating and fundraising advice.

Who does Atif see executing? Marc Lore.

Full Transcript:

00:00

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. Today, my co host is managing partner of Great North ventures, Rob Webber. Hey, Rob, how you doing today?

00:19

I’m doing fantastic. I’m writing on a high Oh, why is that? We just recently announced coming out of stealth mode, our funds first venture Studio project, which is next gem, it’s a social app for the trading card collectors out there. And I’m a huge Trading Card Collectors. So it’s, I’m especially passionate about this one, my brother Ryan and I have been big on and off sorta collectors, we picked it up again, maybe 10 or 15 years ago, but as kids, we were big time Trading Card Collectors.

00:50

It’s really exciting with the venture Studio, you know, like you and your brother Ryan have this great focus and knowledge about when it comes to product management. That’s something that I that I’ve dabbled in a little bit, but I really don’t know what to look for in a great product manager, or what to like how to create that product myself. Really.

01:10

Yeah, I think the timing is really interesting as our guest today, Atif is actually came out of a one of the leading global venture studios Idealab out of Los Angeles, which is where he’s from, you know, Idealab is, is had some of the biggest successes, they invented, paid search with their overture business, which everybody knows how much of Google’s revenue comes from search traffic, they kind of ripped off the idea from from idea labs Overture and there, but that was a multi billion dollar unicorn outcome. And and there’s many others, of course, but and I think that’s one of the things I’m really excited about the conversation with him today is he’s you know, just an incredibly strong product driven leader. I think there are a variety of founders come from all kinds of functional backgrounds. But I have to say one thing that really I get jazzed about is when I get to work as an investor, when I get to participate along the journey of a really strong product driven founder. It’s just It gets me really excited. So I think this is gonna be a great episode.

02:11

All right, well, let’s get to it. Atif Siddiqi is the CEO and founder of branch. Welcome to the podcast, Atif. Thanks for having me.

02:22

I think for our first question today for Atif, I’d like to just start back, let’s go a little bit before even your the founding of branch, your current company and talk about your path into entrepreneurship. What were you doing as a teenager or as you know, college and beyond and, and maybe spend a couple of minutes talking about how you became a founder and what led to sort of branch maybe the origin story?

02:49

Sure, I’ll go even be before my teenage years when I was younger, my first entrepreneurial pursuit was renting out my Nintendo video games to the neighborhood kids. And I had a quite a good business going until, you know, one day we had a couple bad apples that didn’t return games. And you know, had to send in the muscle, which was my mom to go recover them. And so that was that. But for me, I started getting involved in various product roles at startups in Los Angeles, and went to business school with a goal in mind that I wanted to start something and just get better business background. And while I was at business school, I linked up with an entrepreneur, a serial entrepreneur in Pasadena, California, and Bill Gross, who was the founder and CEO by deal lab. And it was really there where after I graduated, he they started a new entrepreneur residence program. And for those of you not familiar with Idealab, it’s a big technology studio and incubator where they take early stage ideas and really guide them along their journey. And that’s where branch was really born. It was a you know, as the e ir ideal lab, I was able to create this as a with a with a mission in mind of helping working Americans grow financially, and I could dig into that journey as well.

04:11

I think it’s just incredible idea lab. It’s one of the most successful venture studios of all time, having hatched, you know, some of the biggest companies that have ever come out of a studio. And with our great North venture studio, it was really a source of inspiration. When you see how some of the advantages that can come out of a studio model. It was really kind of influential, and thinking about how we would launch our own. So do you want to maybe fast forward to today and just tell us more about I know there was a kind of a pivot to the overall the brand story, maybe you can walk us through the initial value proposition and what you set out to build and then walk us through kind of that pivot and where you’re at today?

04:54

Definitely. So a branch really, we sought out our mission of branch was to To help working Americans grow financially, and this was really born through my own, you know, firsthand experience as an hourly worker, on the front lines, where, you know, a lot of these workers were looking for ways to, you know, improve their cash flow. And so when we first started product looks fundamentally different than when we are today, like most startups, twists and turns along the way. And it was really about helping these workers pick up shifts at the companies they already worked at, to earn more income. And ultimately, you know, I think what we found was the reason they needed more income was because their income was very volatile, right, it was hard for them to manage cash flow. And so when we looked at, you know, this problem, and came across the cash flow concerns for these workers, I think one of our strengths was, we were plugged in to all the HR systems at the workplace. So we knew when the worker, how many hours they may work, how much they made. And ultimately, we had this crazy idea, probably a year and a half, two years into our journey with brands where we said, like, hey, if cash was such an issue, how about we just provide these workers small amounts of capital on our balance sheet? It was pretty risky before. And you know, but they’ve already heard it with the hopes that we get it back. And we did that little test. And, and quickly, we found about three months, we surpassed all growth than we saw in the previous two years. Right. And so we knew we were definitely on to something here, we tapped into a really strong sentiment problem that we’re solving for workers. And that’s when we started really digging into okay, what are the financial services and what is their financial lives of these workers and, you know, have really created now a suite of services to improve financial services for hourly and gig workers.

06:50

I think it’s such an inspiring business, I must be really easy to get out of bed, like when you think about the past decades, and how larger financial institutions just screwed over low income workers, you know, with high interest, payday loans, or, you know, high APR, credit cards, and just like the realtor just clean up this sort of predatory behavior, like there’s nothing worse than, you know, an industry that preys on the low income, right.

07:17

I remember, in college, I had a good friend who worked for a payday loan place. And I had an interesting discussion about the ethics of it, because, you know, they had a good point, their boss was like, we’re providing a service that these people need. These people need access to cash. But on the flip side, yeah, incredibly predatory.

07:37

Yeah, incredibly predatory. And I think one of the big insights were also branch was, again, like, how do we provide these services to this demographic in an equitable way. And really, we had to take a hard, long look at, you know, a business model that hopefully aligned with the interests of the user. And so as part of the pivot, we also pivoted from a b2b SaaS platform to a financial service platform that’s consumption based off of interchange revenue. So the products free to both sides, both the companies they work for as well as the worker. And we found a way to, you know, off the interchange and for your listeners aren’t familiar with interchange is it’s, anytime you go take your debit card and goes swipe at a merchant, that merchant pays a fee to MasterCard, and MasterCard splits that fee with us, right. And so looking at our mission, and our goal, it was a nice way to not only create a product and service that aligns with the user, but also a business model. So as they grow and hopefully have more money in their accounts, where along that ride to and are growing with them.

08:40

Yeah, that’s awesome. I wanted to kind of just change gears a little bit. So when we first met, I don’t know how long ago this was probably now like, over five years, I imagined my bear. Yeah, yeah. So the, I mean, it was one of these things. When I first met you, I thought, like, immediately, it was like a two minute thing as like, when we started talking about like, product, it was just like, immediately, I just felt like, oh my gosh, you’re someone I want to be around. And I guess for me, I like working with all kinds of different founders. But like the, the founders who are can are really strong at product management, product design, and just, you know, kind of have that kind of compelling vision, but can back it up with execution on the product side, those are the ones those are the founders that like really stand out to me. Of course, like when you’re dealing in the enterprise world, you have a lot of founders that have more of a sales driven mentality, especially historically, and I think, you know, the changing landscape of not only, you know, enterprise software, but also FinTech, you’re seeing the consumerization which is really resonates with me with sort of coming from social gaming and the kind of background my brother and I had, so I was curious what kind of what was sort of the inspiration for you, you know, are there either books or people you’ve met or how did you develop this? Like insane you know, product management kind of competency, your product leadership competency?

10:01

Yeah, I think it’s one being around good leaders in different product roles. But more importantly, it’s failing a lot. Let’s be honest, like, the only way you learn really in this game is you go out, you execute, you learn, and those things stick with you. And probably like our my product philosophy has always been just like, you have to keep shipping. Right? I think one thing that’s very underrated, just in general, and for startup founders is momentum. And when you ship product, you’re learning you’re testing, you’re iterating, and you’re building momentum. And that momentum just starts compounding, right, and you start yourself getting traction and growth. And that’s really, really powerful. Because nothing is more exciting than, you know, that feeling of just pulling you the markets pulling you and your product is getting better. And, you know, it’s really funny, I just had a team meeting, where I reiterated, like, you know, the sense of the RE Halfmann quote, right, if you are not embarrassed by your first product, you ship too late. And I put on a big slide, like the first branch logo, which was really embarrassing. And I just made it in Photoshop, but that was on the App Store. And luckily, today we have a great design team that is fix that. But like, yeah, that was embarrassing, but it was out there in the world. And so I would give that advice, like, just keep shipping.

11:18

I totally agree with you like and there was this, I just I’ve been rereading the book super founders when they did research on basically unicorn founders. And one of the common, one of the outliers versus all founders who received venture funding is just this like this, like serial entrepreneurship. And it’s not even just tech. And it’s not even just being successful. Like the most successful unicorn founders have this sort of pattern of like serial, like, they’re serial entrepreneurs and builders, it’s like part of who they are, you know, and I think it kind of reminded me when I was 15, talking about that really crappy MVP product, or really low fidelity, low quality, I grew up kind of lower income. And my first website I built in 1995. You know, this is like, I don’t know, I feel really old. Now. That’s a while ago, but it was, it was this really misaligned directory website. So like, I didn’t know how to format, you know, like web publishing that well. So if you looked at the directory, it kind of started to slant as you as you scroll down the page. And it’s because I didn’t know how to do like proper alignment on like, using like, whatever web publishing tools at the time. But hey, it served the bill, you know, we got the site published, we got the application done, you could do a little bit of scripting, I was never that good, you know. And then we got the we got got some customers, we got a lot of traffic and off to the races, you know, we’re able to take those early works, and iterate and iterate and, you know, about over like 10 or 15 years, we were able to bootstrap to like a 70 million annual run rate. And that was that business. And it was like, but it was just the team. It was really just a hobbyist approach tinkering, very simple. There was nothing perfect or magical about that, you know, the MVP of my web publishing days, but it was like, you know, I think that’s how great businesses start, though. You could go look at the first version of Uber and you go, that’s Uber, like, What the hell is it the wayback machine where you can look at like, often find like old photos of like the biggest homeruns and in tech, and it’s just incredible to see.

13:11

So a lot of people in startup land talk about you know, failing quickly and often, but out a lot of people talk about like recognizing when to stop failing. You mentioned coming across this period of growth that exceeded your past two years growth. How to exactly did you know when to pivot? Are there inflection points or what did you recognize where you were just like this is this is the point. We need to make this decision and pivot.

13:34

Yeah, for us. The big inflection point was really when we started saying active usage taking off and customers started, you know, and users started pinging us both good and bad about this new feature around earned wage access. You know, they they’re had requests and how do we can make it better and that’s when we felt really you know, we talked a lot about product market fit as founders and startups and we did feel the market really pushed the product forward and accelerate that product or to help to build momentum. And that’s when we knew we really tapped into a strong sentiment in the market and continue to iterate around building better financial services for this demographic.

14:21

So I know one of the common links between us as we both have companies kind of scaled starting in the Twin Cities. And I guess I understand you’ve got you’ve moved to more of a remote first approach with your team. Can you talk about, you know, what it’s been like, kind of scaling outside of, you know, like a primary tech or what would be historically thought of as like a primary Tech Center, like, you know, the Bay Area or maybe New York or Boston or something like that. What’s that been like? And then also making that transition from kind of the primarily like an in first team to more of a remote first team.

14:54

Yeah, so you know, coming to Minneapolis, maybe to give your listeners a story. Originally from Los Angeles. We He moved here as part of the TechStars target retail accelerator. We were part of that first class in 2016. Had no ties to Minneapolis prior. And so, you know, one of my challenges was like, how do I build a network? How do I, you know, start meeting people in the area. And what was great is one, there’s great investors like Rob and others that were able to do some of that. Yeah. And early on, it was a lot of recruiting through our network. And we found really great talent. You know, one of the things that we found about Minneapolis is great place for b2b software, you know, people that know how to sell into companies, how to implement it on the customer success side market. And so we started building out a core team there. And then, you know, obviously, fast were the pandemic, like many companies that reevaluate kind of, you know, what that hiring looks like, in that period. And, you know, we were really fortunate where we saw some tail winds from the pandemic, and our team was actually growing pretty rapidly. And so, you know, we had to adjust to this remote first culture and for us, you know, that meant a little bit different ways we operate, you know, asynchronous communication, documents, everything, and it’s worked out really well, for us, we’re, you know, now we’ve been able to recruit talent all over the country. I forgot the latest on how many people we have. But I think it’s, you know, upwards of more than 1520 states around the country, and we’ve been able to grow and move really fast. But ultimately, I think it comes down to like just the mindset and culture and making sure that, you know, you recognize kind of the adjustments you can make as a remote first team.

16:40

So you went through a period of growth, while you were adjusting to remote first culture? That’s right.

16:46

Yeah. You know, I think when you look at kind of our product, and helping workers on the frontlines, be it hourly workers, gig workers, you know, these were working Americans that even during the pandemic, they were keeping stores stocked to the, you know, they were delivering food. And so we definitely saw acceleration in certain key verticals. And we’ve developed new products along the way, like our digital tips product, which was used by a lot of quick service restaurants doing delivery. And so we were hiring out all around the country during that time.

17:21

I wanted to kind of switch gears and talk about how startups raise money from venture capitalists. I guess from the outside looking in, it seems like you’ve been able to raise capital fairly quickly and efficiently. But can you maybe describe more, not so much like, the names and who invested but more of the process? I know, I read this book the other day from Ryan Breslow, I think is how you pronounce his name. He’s got a payment startup. And I it’s called fundraising. And he kind of describes his fundraising process, actually a really short book, but I thought it was, I felt like a lot of founders. My experience is that it’s often a process breakdown. Like they’re not really, they’re not treating fundraising like a well, maybe there’s not really it’s more of like ad hoc. And I’m curious if you develop more of a process? Or how would any advice you would give to founders, as they’re thinking about raising from, from VC?

18:14

Yeah, it definitely is a process. And, you know, I think for me, one of the things that I always taken away with relationships with investors is just making sure that you’re intellectually honest about what you know, and what you don’t know. Right, and the things you don’t know, you can go figure out at, you know, with additional capital, and that’s why that’s why you’re raising money. So know why you’re raising in the first place. And it helps us build credibility, because the more you figure out what you don’t know, you go back, and you have new data, and that helps build credibility, you accomplish, the milestones you set out. And that kind of compounds that relationship as well, over time, and one of the things that’s helped, for me, especially early on, that really early stages is almost over communicating, I would do weekly updates to my network. And it was a great way to also build accountability to your team in this culture of like, hey, if I say I’m going to do something, I’m going to do it. And that was really great, too. And then, you know, over time, that goes to monthly updates, and quarterly whatnot with your investor group. But you also have to make it easy for investors to help you right and others to help you and people generally want to help and be helpful, but you know, these updates that you can provide, just lets them build, I think a series of dots that they can connect over time and show that momentum and growth.

19:37

I’ve been playing around with tick tock lately, and one of my first videos was about this whole notion of you know, don’t be transactional. I think I’m really bad at tick tock, by the way, but it was, I think the average marriage in America is 8.2 years and like for successful VC backed companies, especially the funds that come in early stage, like a seed round, that you know, They often are in your, you know, with you for seven, or maybe nine to 10 years or more. And so that means the average VC investment last longer than the average marriage. And this is why you got to think about, you know, building relationships, I don’t think, I think this industry, maybe with the, you know, you could get lost in the noise of reading all the big venture rounds that are happening on TechCrunch, or whatever. And, but you know, it’s so important, I think, to be authentic and build real relationships. And it goes both ways. Like the founders, I think you want to get to know the VCs and make sure they’re the right partner for you, and vice versa. But I think there’s, I feel like if I could change one thing about a founders fundraise, I’m very much relationship driven. I’m not transactional, I can’t stand it when a founder reaches out to me, right at the moment, they want to raise for the first time they say, Here’s my pitch deck, it’s like, whoa, whoa, whoa, like, you know, slow down, we’re gonna get married here. Like, maybe we’ll get married here, but we got to date first, you know, like, so anyway?

21:00

Definitely. No, it is. Yeah, very tight relationship. And I will say that, you know, for founder’s at least, it is a great time to get found, right. There are many opportunities, especially the early stage for capital, there’s Angel syndicates and networks you could tap into, there’s accelerator programs, a slew of accelerator programs like TechStars, the Y Combinator is 500, Angel 500. Startups. So those are also great places to be don’t have a network starting out, they, you know, you kind of have built in networks to some of those accelerator programs as well.

21:31

Yeah. You know, it’s for me, it’s, you know, I don’t know, I’m a big Twitter user, like, I can engage with a lot more people over Twitter than I can say, I have, you know, in person meetings. So I find like, you know, that’s a great way I think to, you know, for founders, especially as Pete, I think VCs are more open about it used to be, you got to move the barrier to raise money, you got to be based there. And that like, that was already trending towards being thrown out the window. But then especially in the wake of COVID is like, it truly doesn’t matter. I don’t think where you’re at in the world. It’s just, you know, built, find ways to build relationships. And but anyway, you came out of, you know, as an EIR out of IDEA Lab, what did you see the pros and cons of sort of working within a venture studio? Because that’s a whole different framework in terms of resources that you might have. And I know there’s not like, just like, there’s no, no two VCs are exactly the same. I’m sure there’s even a greater difference between the various incubators and venture studios around the world. But maybe if you could talk about them more generally, like what were some of the advantages or disadvantages.

22:33

So ideal, I’ve just backing up a bit traditionally, you know, a lot of the ideas and companies that came out of IDEA Lab were were created by Bill Gross, right. And then Bill had four management teams and operational teams around these ideas to go out and execute. Over time, I think one of the things they saw was like, there was value in bringing entrepreneurs in house and letting them go out and form these teams themselves. And they would be the first check in because they had an early view into the company. And so I came in on the ladder, kind of part of the IDEA Lab strategy with company formation. I think for me, as a solo founder, it was really great. Because, one, they had resources that can help get products off the ground. So think design resources, supplemental engineering resources. And then also, you know, as the company did start growing some of the help around some of the, you know, general administrative aspects of running a company, like I didn’t have to worry about legal, HR accounting, and I can focus solely on product building, talking to customers and solving problems for customers. And so I thought for me, you know, that was really instrumental. And then, yeah, you know, thinking about networks, right? Oftentimes, these venture studios will be the first institutional capital into the business. And that, again, builds a network and some validation that you can go out and execute and grow pretty quickly at the early stages.

24:03

Yeah, I think that’s so that’s so interesting, because I think it’s something like the media doesn’t really talk a lot about. And I think, when they celebrate successful founders, or whatever business or startups, which is just like being a founder really means you have to have general knowledge across all functional areas, you know, within your founding team, or you got to be able to quickly acquire that because you’re, you’re going to be the CFO, the head of the General Counsel, the CTO, the VP of sales, you’re going to be the head of ops, you’re gonna be everything. And so I think that’s where a venture Studio, you know, having launched our latest startup, our first venture studio startup next jam, you know, like I had never done any of that and probably, you know, 20 years because the bootstrap startup we had, you know, we got all that done and so we were able to take that on for the next jam team as a fund and, man, it wasn’t fun though. I like have to say like, that’s it’s just it feels like such remedial work. And of course, the tools that are better tools that startups have now to make it make it a little bit easier. And that you see, a lot of first time founders especially really struggle with some of the things like, what legal structure like, you know, how many startups do I see that start as an LLC, and I think, man, you need to find a new attorney like, but you know, but I think that’s where i The other thing is, though, that knowledge is more freely available than 10 or 20 years ago, if all the just explosion of resources, both through social and just like, you know, all the online content for supporting founders, but I think that they had that opportunity with the studio, I think that that can be a real advantage.

25:35

That’s one thing, it’s one thing to have the knowledge but then it’s another thing when you know, you find yourself in the middle of a pandemic, and you have to shift your entire huge 15 State team to remote first while adding five other states worth of employees. Like it’s one thing to have a little bit of HR, but you guys must have a rockstar HR.

25:57

We do. Yeah, no, we have a great People Operations integrate people later.

26:00

Yeah, I was gonna say like, just setting up payroll like think how much time an average founder spends setting up payroll? Like it’s, it’s kind of a i You gotta it’s just, it’s, it’s not going to add value. It’s not going to make your product and you better, right, but you have the right way.

26:15

So we’d like to end the podcast, you know, our whole title is execution is king. And we love to get lines on people who may maybe they’ve been recognized before, maybe they haven’t. But is there anybody that you see executing, whether it’s an individual at a startup, or maybe it’s just a start up itself? But somebody maybe they’re flying under the radar? Maybe it’s you know, maybe it’s Disney or something like I mentioned our last guest, two guests ago, when a fox, maybe it’s someone huge like that, but just somebody that you’d really see performing?

26:50

Yeah, I’ve been a big fan, especially after he bought the Timberwolves Mark Lore. He’s, you know, across many different industries, continue to execute. And in fact, just, you know, more ambitious, I think it is new endeavors, whether that’s the new city he’s building or, you know, the new, I believe food delivery, kind of startup. Yeah. So, yeah, I think when it comes to execution, and a great CEO, its Mark comes to mind. Yeah, I

27:19

think we’re, we’ll see maybe we’ll get Mark Lore on his podcast cast. I think yeah, pretty. Yeah, definitely. I would agree with you. He’s, you know, we had a prior guest on who bootstrap at the age of 27. Bootstrap to start up to 50 million in annual revenue from down in Miami. When I thought man, it’d be interesting to talk to someone like Mark who did it the exact opposite way. His startups have raised just a tremendous amount of capital right out of the gate. And especially in this world, where you talk about like, the MVP, and you know, starting very, you know, very iteratively but I think there are there are certain times where a bit or businesses that are better off just having more resources to start with and building to scale from day one. It’s not I not everyone has to have a group thing. There’s multiple ways to build a company, right?

28:06

There should be a term for that like coin person or something. Thanks so much for joining us on the podcast today. Atif. We really enjoyed having you. Likewise. Oh,

28:17

this is great. Appreciate it.

Welcome back to the Great North Ventures newsletter! (Sign up here!) This month we have some advice for founders as well as an open call for funding applications. 

In the latest episode of “Execution is King” we talk with Jonathan Treble of PrintWithMe. Jonathan talks about his path from Wharton to Grubhub to CEO/founder, and shares advice for those starting out:

“Optimize for control over valuation” – when negotiating at early stages.

“Validate with the smallest team that you can” – because, really, more money means more problems. 

For the full episode, including recommendations and resources on recruiting, find us wherever you get podcasts or on YouTube.  

For the full episode, including recommendations and resources on recruiting, find us wherever you get podcasts or on YouTube.  

As we move ahead with Fund II investing, our themes have coalesced. Here are descriptions along with examples from our portfolio

Digital Transformation through AI – We are looking for technology-driven startups that are innovating analog industries using artificial intelligence. Examples include Dispatch and Flywheel.

Community-Driven Applications – We are looking for consumer or enterprise startups which are connecting people through software, especially in the areas of media consumption or commerce. Examples include NextGem and PartySlate (and our new investment, Mustard!).

Solving Labor Problems – We are looking for startups with market-driven solutions for workplaces and labor. Examples include FactoryFix and Skillit.

If you are a founder who fits a theme and our investment criteria, apply for funding on our website!

Portfolio Updates

Mustard is new to the portfolio! Mustard is a video-based food discovery and ordering app. Users view and share videos of restaurant dishes, discovering food from restaurants nearby, and can even order or reserve a table right from the app. The app is live in LA and free on the App Store.

Patrick O’Rahilly, CEO of FactoryFix Talks Jobs in Manufacturing with Tim Heston of The Fabricator

Allergy Amulet Research Secures Second Peer-Reviewed Publication

NoiseAware Introduces AutoResolve To Solve Vacation-Rental Noise Problems Automatically Any Time Of Day Or Night

Breezeway and NoiseAware announce integration

Open Positions

See open positions on the Great North Ventures careers page

Dispatch is hiring for 58 positions

FactoryFix is hiring for 8 positions

2ndKitchen is hiring for 5 positions

PrintWithMe is hiring for 22 positions

Parallax is hiring for 2 positions

Branch is hiring for 14 positions

Inhabitr is hiring for 6 positions

NoiseAware is hiring for 1 position

PartySlate is hiring for 1 position

Flywheel is hiring for 3 positions

In this episode, Rob and Josef talk about some Twitter controversy over founder extravagances, and the difference between, say, personal chefs at work used for recruiting, vs. buying a used fishing boat with your profits. This is something we looked into in a piece Rob wrote on BuiltIn, “The Weird and Wonderful Things Midwest Founders Do After They’ve Had a Big Exit

Jonathan Treble joins and talks about his path from Wharton grad to startup employee to Founder/CEO of PrintWithMe

He also talks about building his company, and practical milestones he set. He also has valuable advice for founders: 

“Optimize for control over valuation” – when negotiating at early stages.

“Validate with the smallest team that you can” – because, really, more money means more problems. 

He also talks about team building, which is something Jonathan excels at. They use the “Culture Index” to guarantee culture fit, which is incredibly important. He talks mistakes, onboarding, and recommends two books that created his own foundation for recruiting: 

“Who” by Geoff Smart and “Recruit Rockstars” by Jeff Hyman

Who does Jonathan see executing? Orazio Buzza of Fooda, Inc. 

Transcript:

00:00

Welcome to the execution is king podcast. Today we have Jonathan treble founder and CEO of print with me, along with my co host, Rob Weber, managing partner at Great North ventures. Welcome to the podcast, Jonathan.

00:16

Thank you. Happy to be here. Thanks for having me.

00:19

So Jonathan, I know we first met a little over a couple years ago, I believe, and you were kind of busy starting to really scale your business print with me. Maybe for starters, could you maybe introduce us to how you got to that position, you know, whether it be where you went to school, maybe some of the influences you had from a career standpoint, which sort of led you to print with me?

00:42

Definitely. So I started my business journey in undergrad, my undergraduate program was at the Wharton School, I majored in finance. But generally, it was a very well rounded business program. And I went into business school because I knew that I wanted to get involved in business in some way. Even back in high school, I had started a couple companies in high school. And I had the entrepreneurial edge, I think that comes from my parents, and particularly my father got me started with an eBay trading assistant store in high school. And it was so much fun to build the business and see that have some modest success in high school. I went to Wharton, I studied four years of business Warden is very much a finance school and breeding grounds for wall street and specialty services, firms, consulting firms, etc. And so that flavor of education was a little too formal for me. I realized at the time, I was not really going to use a lot of the finance in my career, although it was great background knowledge. And at even at the same time, in college, I had a couple of side businesses going right after college, I joined a startup in New York City that was founded by somebody I had helped in an internship. And that was my first foray into startup land. I immediately loved it and understood why I am meant for startups, right. And that is just the pace, building something out of nothing. The ambiguity that I like working inside of, and I took that job in New York City, and they haven’t quickly moved to Chicago. And the the story there just kind of all worked out well, for me, I guess is that this New York company took a round of investment from light bank, which was the newly named venture organization founded by Eric lefkofsky. And Brad keywell, who are known to be among the best serial entrepreneurs in the whole country, certainly, probably the top and Chicago, because they’ve, they’ve taken public, at least four companies I can think of, and now we’re working on one or two unicorns that are still private. They’re just incredible entrepreneurs. And when I heard that they invested in in my friend startup and that I could join, and then they needed somebody to go to Chicago and liaise with them. I was like, Yeah, that’ll be me, for sure. So I read jumped at that opportunity, moved to Chicago for that, and ended up with that startup for about a year wasn’t really gaining traction, I switched over to another light bank, back startup, and then even another did some consulting. And after about three years, I wanted to try something a bit different. I wanted to get the big startup experience. And what I mean by that is like a larger at scale startup. So I applied for a job at grub hub, I was given the position, I joined as a project manager on the tech team, slash business analysts. So I was essentially in charge of the development work for five engineers. And these engineers were pretty senior, like much, much more accomplished and experienced and knowledgeable than the more junior engineers I was working with at startup land. And I got to really learn how software is delivered at scale grub up at the time was, I mean, calling a startup is definitely an accurate in 2013. It was way along in his journey and actually getting ready for an IPO already. But it still had the startup feel. And so I joined this, this tech organization, the tech org at the time was probably 50 to 100 people. And I was one project manager among many over a certain team. And that was great. His big company experience I guess, to learn how to work on a team within a big company and I was my job as the business analyst there was to liaise with other departments in the company and help build software to meet business needs. And so that actually gave me a lot of insight into other facets of grub up. So other departments, ranging from marketing, to finance to customer support operations, I got to be the person to kind of liaise with a lot of those departments and help them solve problems with software. So I think that that year that I spent doing that full time was among the more important learning opportunities in my then career, because I got to see what a startup would look like, at larger scale. And kind of what, as a founder, a future founder, I should be keeping in mind kind of like setting as a North Star for my own venture down the road. So at this time, I was about 2526, I was dabbling with a couple other business ideas, startup ideas, I even funded myself, I bootstrapped, that a couple people would help write code for me for a couple of these ideas, and we put them out there and we tried to get some traction, and neither of them really took off. It was there were interesting ideas, for sure. But they lacked some, some point of traction. And

06:20

I suppose during all that time at grubhub, you know, building products to meet business needs, you kind of built may have built up a backlog of these ideas to try out. It sounds like you tried out more than a couple of them.

06:33

Yeah, Funny enough, the ideas I was trying out, didn’t really come from grubhub, I did get a lot of exposure to different parts of grubhub. But the types of problems we’re solving at that scale, weren’t all that. Well, I’ll say some of them were innovative. But a lot of them were just scaling systems. Like, for example, I had, I had the good fortune of being the business analyst who is revamping our accounting system and, like re building out the business logic for like, what activities wound up in which ledger accounts which is mind numbing, but good experience for I think, just just to have that a little bit of that background. And don’t get me wrong, we worked on some innovative things as well. And I was actually I think I, I was involved in some patent application with one of the founders because we came up with a way to track delivery times better through through an interesting system. But you know, by and large, most of my job was was just the nuts and bolts of, of scaling systems, which in itself is interesting stuff. I liked it. It’s intellectually challenging, but it was not exposing me to like a very wide range of ideas. So these other ideas, were just things that I was inspired by in day to day life. And one was like a meetup app, like a spontaneous meetup app, because at the time there was not in this is 2013 meetup.com was very, like planned. And so the a few companies have tried this I I would later discover and that the issue with traction is, I mean, it’s, you know, how do you build a network effect, it’s so hard to acquire those initial users you need. You need like person liquidity, you need a lot of people to be wanting to meet up at once. So it’s, it’s really tough, and then monetizing it as a whole nother very challenging endeavor for that type of app. So this is all setting the stage for how I ended up at print with me, right? So around 2014 I think it was early in the year, I needed to print concert tickets for a concert, right downtown in Chicago. And it was kind of a last minute decision to go to this concert. So it was the weekend. I couldn’t print the tickets at work. I realized I needed to print them somewhere else. And I didn’t own a printer. And I remember having to get into at the time, I think was a cab because early days, I mean Uber Lyft. We’re not quite there yet. And I, I drove about a mile away to a FedEx Office, I printed those tickets, I drove back in the cab. And the whole thing probably cost like 25 bucks between the cab fare and then FedEx Office rates for printing. Just thought, Wow, what an expensive thing to do. Certainly I could have bought a printer at that point and realize I save money in the long run. But I was also moving apartments somewhat frequently. I was in my mid 20s I was embracing the sharing economy. I was thinking, you know, why do I want to own more stuff? And I bet I figured a lot of my peers and people in my cohort felt the same way. And so the idea kind of struck for printing kiosks and it was an interesting idea. It was a kind of like a wacky idea. like okay, who would actually put printers in public places right like It sounds like that’s maybe problematic, like, I could foresee many ways that that would break and how it’d be tough to manage. But the idea really kind of sat with me. And for a few months, I kind of pushed it off. And I was like, I don’t know if this is a great business, and I was working on the other ideas at the time. And then one day, in the middle of the summer, I kind of just had this this moment where I was like, You know what, that idea is still bugging me. And it actually I, I could use that myself. And I bet a lot of people could, and why not just try to build it. So I just decided to go for it, stop the other projects work on this as my key focus. And that’s how I ended up starting it.

10:48

Yeah, there’s a lot of good useful lessons and kind of your your origin, how you got print with me off the ground, I think a couple of the things that really resonate with me is just overall, I think, when people see successful founders, they often think that, you know, that they’re, they don’t think of all the background work that went into sort of honing your skills, and they’re just hearing your stories a lot like my own where it was like, I wouldn’t necessarily call them failures. But like, there were a lot of projects that I was gonna tinkering with, you know, before we had kind of our breakout success, which, you know, went on. And I think that’s a really common theme with a lot of entrepreneurs. And I’d say, the other ingredient there was to just working at seeing another company at scale that was, you know, previously a startup, be able to learn from the kind of execution, especially in like a product or product engineering type of team, we’re actually working on the product. And, you know, ideally, probably some exposure proximity to one of the founders, like I think, you know, that is that can be so powerful for people who want to know, they want to be a founder, but they don’t know how to get there. I have a lot of young people who reach out and say, hey, how do I do what you did? How do I become a founder, I think there’s, there’s these like two logical, and you should have both of them. I never had the sort of bigger company experience. But I think that’s like to be able to see the, you know, the startup at scale, alongside your own tinkering projects, that’s got to be super powerful, right?

12:13

Yeah, it was definitely powerful is the best education I could have ever wanted or gotten better than a definitely better than like an MBA or an advanced degree. And I actually think you’re right grub hub. That year was very important. It gave me the Northstar for how a scaled business or scaling business needs to look like and how the different departments interact, and how technology can support all that. Very important lessons that I still have with me this day. And a network of people that I still keep in touch with this day, and that have helped out and consulted with me, you know, subject matter experts. But I’d even say going back before grubhub. So there’s three years that I was in startup land, at early stage startups that were still trying to figure out product market fit, and building product. So I was, I started as like a sales rep in the first job for a year. And I switched to Product Manager at the next startup. And I did that for two years, about two years. And those experiences were almost just as valuable. In fact, arguably, maybe more. So I got to see these founders, these early founders, in their process of tinkering and trying to make a product that was in demand and viable. And that was just such an incredible learning experience. And I got to do it on somebody else’s watch or like, on their dime, in a way, right, they were paying my salary, I didn’t have that much risk in it. Certainly I was like earning under market because it was a startup, but I was learning a ton. And so that the combination of all those experiences was super helpful. So that when I went to start print with me, I already had a lay of the land of like, financing fundraising, what, you know, common pitfalls that some of those founders have fallen into with, whether that’s building their product, or dealing with fundraising, and investors, right? So it was four years of incredible learning, you know, from the startup land all the way through grub hub. And I would encourage anybody who wants to eventually become a founder, if you haven’t already to get some sort of experience as an employee at a smaller firm. Right? As as early as you can. I would encourage that. And, yeah, I’ve taken a lot of that with me even to this day.

14:36

Yeah, so it’s interesting, Jonathan, I remember if I think back to when we first met, one of the things that really stood out to me was just kind of your, your sort of more pragmatic view on raising capital. If we go a little bit deeper down that path. It certainly like immediately just like kind of clicked for me as a founder who bootstrapped a company you know, some some level of success and I think there’s just like Eat this echo chamber and venture capital and startup laying that it’s sort of like, you get on the train, and you just raise round after round. And it’s sort of like the tech media just celebrates, you know, these markups and these more dilution and more dilution. And I think it’s almost unhealthy in a way of, of, you know, the way the VC industry kind of like, almost like, perpetuates this sort of like myth about building a company. And I think I’ve really respected Can you talk a little bit more about your sort of mindset with how you funded the business, getting it going, and now scaling it?

15:34

Yeah, happy to I, I’m very passionate about this topic. As an early employee, pre IPO employee at grubhub, I was given some stock options. So I’ll start there. And that was, I think that was great that the founders still allowed early employees, I was like, employee 500, something. I was definitely not early, but they pre IPO, every employee still had a grant of options. And a year later, I was there on IPO day, I was still full time there. We all were in the money essentially. Right. And, and in a big way, I think the IPO popped. And incredibly the first day, certainly a lot of my peers who had been there many years were way, way better off than I was. But this was a modest, you know, a modest gain for me early in my career. And it is true what they say that when a when a tech darling in a community IPOs or exits and, and it’s a good exit, a meaningful one a big one, a lot, it creates a whole class of new founders, right. And they’re, I know, several who’ve gone on and founded new things after that, and, and so the liquidity was great. Again, I don’t want to overstate this, it was very modest. But for me, it was the working capital for bootstrapping print with me for the first six months, before I started raising some funds from friends, I’ll start with that, I think that’s important to reiterate, like being an early employee, getting those options can actually be life, life altering, I won’t say changing. And then I’d say my philosophy in the early days of Chrome with me, so like your, the first two years was to just raise enough funding to reach certain milestones, right, just enough to kind of keep validating that this is indeed a good business. Because when I first started with me, I went in with eyes very wide open, that this may not work out, this has a high likelihood of failing, actually, and I have no idea if consumers will actually pick up on this. So I said, I told myself, I was like, I’m gonna give this three months, if I don’t see any traction, after putting alpha test printers in a few public places, I’m just cutting the cord and moving on to my next idea, right, I was 26, I had nothing to lose, which is another critical part of being a founder, you really need to be be okay to like not earn any money, or it’s better if you have less to lose or lower lifestyle at that point. And I certainly had a pretty humble lifestyle at that point. And so I just figured it I bootstrapped for four or five months, just paying the developers on my pocket, I’m still working part time at grub hub, right? I luckily, they, they were able to reduce my hours to like 20 hours, which gave me enough money to pay my bills, and invest some of that money into into print with me. And there came a time where we had bought a bunch of printers, we wanted to increase our, our velocity for developers. So I wanted to hire a third developer contractor at the time. And I was like, no, what I should raise some money, I could really use some more more funding here. So I started going to friends first, and a good friend of mine from study abroad, wrote the first check in like December that year, so about five months in. And then another acquaintance from the light bank portfolio wrote another check after that, and another college friend wrote one of my former boss So in the first six months of fundraising, I just raised 50 grand from, you know, on a convertible note, and it was like such a shoddy convertible note that probably had tons of mistakes in it. But we ended up you know, converting that into equity with the first price round about a year and a half later, but that was it 50 grand to just fund more development and more printers. And again, bring me to a milestone where I would decide whether it was gaining enough traction to continue even further, you know, that end up being not very diluted at all, but enough capital how we could prove that. And then, at the same time, I was getting great mentorship from one person in particular comes to mind rasio bouza, who’s the founder and CEO of fouda Buta Inc. in Chicago, they do pop up restaurants in, typically office buildings. And they’ve grown an incredible business. And he’s a light bank veteran as helped two or three of the light band companies go public. And he was telling me early on throughout my early days tinkering with print with me, he was saying, you know, I wouldn’t raise that much money. I try to bootstrap as much as you can retain ownership. Right. And, you know, he didn’t think the print with me was a business that was really set up for venture rounds of funding, like ABCD, etc. And I think he was probably right. And I’m happy that I I raised in dribs and drabs slowly, because I still retain majority ownership today, and majority control. Importantly, and I could have easily gone away had I been enamored with the venture cycle of raising so many rounds, and you know, giving up more board seats losing control, right? That stuff is scary. I mean, you know, I’ll jump forward a little bit to when we did raise our first price round, it was August 2016, that we got the first term sheet. And, to his credit, Jeff meters, network ventures, was one of the only VCs in Chicago that would take a deep look at permits me bear with me scared off most other VC is what a printing company right? As it as I totally understand it would, right. And he got in the numbers, our traction saw, saw the growing revenue that each kiosk was making, like, wow, this is actually a good business, great margins. at scale, it can be a meaningful business, a decent size, exit, you know, medium to large. And he said, you know, I’ll do a term sheet. So we did that. And thankfully, right I, and I’m saying this to help maybe other founders that end up in this position. And, Robin, I know you’re a VC now, so I hope you hope you don’t, don’t mind me like giving some advice the other side of the table, but you’ve been on both sides. So I’m sure you don’t mind. Like I got great mentorship from two of these people that I looked up to when I was reviewing that term sheet. And both rasio and Mike Evans, a co founder of grub hub, when we were reviewing it together, they were like, you, you cannot give up a third board seat right now, right? Like the term sheet initially said, One investor board seat, my board seat, and then an independent third. And this was like a pre seed round. And they were like, No, no, no, you can’t do that. That’s crazy pants. So of course, I pushed back on that. And they, their advice was optimized for control over valuation. So I gave up the point on valuation, it was still a decent valuation for where we were at the time. And I but I was firm on retaining two out of three board seats. And to this day, I have so at I mean, I tell you, five years later, if I had if I hadn’t had that advice, or I’d gone the other way on that I would have many more sleepless nights because, you know, there’s there’s another group of people a board that could technically asked you, whenever, you know, they think that’s that’s the right call. And that can happen and does happen a lot of founders. So you know, I’m very happy for that for that advice. Now on raising capital in dribs and drabs, oh, I’ll continue, I raised that round, it was just 500k in new funding, all the previous notes converted in for equity, the post post money was like 3.1 on that. And then that was enough, again, to kind of validate that I could build an early sales team, we’d continue to get traction, some sales efficiency, get ready for maybe an A, well, we didn’t hit quite all those metrics. In the first year I struggled with hiring I made some poor hiring choices. And nevertheless, we were still growing, we actually tripled that year, but it wasn’t like what I wanted it to be, we’re able to go raise a seed two, which is definitely a thing now. And we’re it was an up around, I think,

24:20

an 8 million posts. And, and that, you know, was another I think, in fresh capital that was another like 900 at the time. And I was like, Alright, well, this might all be all we need to really get a sales team in place that can harm and, and prove the model and that ended up being true, I only needed that. It gave me another year and a half of burn, right? hiring and getting getting the team more efficient. And then we we reached profitability a couple years down the road and didn’t really need to raise again and You know, certainly it’s slower. It’s a slower path. It’s not for everybody. It’s not for every business, right? I, you know, the venture path makes sense for a lot of businesses, but not for my business, and certainly not at the time.

25:13

So when you’re talking about like raising, and like setting these milestones, you also talked about, like, kind of like a friends and family round going to people, you know, so were you matching up? Were you like setting the milestone first, figuring out what you needed, and then setting the amount? Or were you kind of gauging how much capital you can expect to raise, and then readjusting what milestones you can hit with that capital expectation?

25:41

Yeah, that’s a great question. I’m not even sure I can remember exactly what my thought process was. Go back now, five, four years, you know, I think, I think it was, well,

25:52

maybe just knowing what you know, now. Like, maybe if you can’t remember, like, instead of the chicken and egg quandary we could get into right now, if you had to devise somebody, what what would you tell them?

26:04

Yeah, I think I would advise to go the former route that you described, which is, pick your milestones like, what do you want to validate with, with your funding and figure out what you need? Yeah, figure out, like, what your use of funds will be? Like, do you really need 10 sales reps? Or can you validate with three? Right? All right, well, three is a lot cheaper than hiring 10 sales reps, right? Do you need five engineers or can you get by with to really try to i, in my opinion, validate with a small team as possible, because then you don’t have to raise as much at such a low valuation and dilute as much. But also, like, more money, more problems, right, you raise a $3 million pre seed, you’re going to have a ton of stress trying to hire up to to meet like, the expected burn on that in like six months, you’re, you’re gonna make hiring mistakes, these are gonna feel time pressure, you know, go slow in those early days. Unless, of course, you there are certainly exceptions where like, if you’re really on to something that can be a massive market opportunity, like 10s of billions and like, you know, someone who’s gonna copy right away, or somebody else is going to, or there already are competitors, you gotta go fast, right? And that’s, that’s where raising a lot of money and trying to blitzscale make sense where it’s a winner takes all are most market. And if you don’t act quickly, a competitor will, will take it right. I think that’s where, where you have to, but for a business like mine, where I didn’t see any competitors coming after us. And still, to this day, there really aren’t any, like, I didn’t have that time pressure.

27:53

It’s so interesting. And I just love I couldn’t agree more. It’s interesting. So on episode four, we had my new con from Twin Cities bass field nation, which is huge breakout success that the story isn’t very well known because we did this sort of friends and family round with my new Alcon he was sort of my brother’s computer science lab partner at St. Cloud state and central Minnesota. You know, he skipped all the subsequent funding rounds, no seed round, no way around, no, no, maybe not even a B round. And then he raised like 30 million after bootstrapping for seven years. And the weird thing about my news story, in his category, there were several direct competitors that raised far more money and ended up just flaming out. And actually one case, he acquired the company, it was just like, this is why we have the execution is king podcast, not be blitzscale and raise the most money you can podcast, because it very much it speaks exactly to the core of our beliefs, which is, you know, it really execution matters the most. And I think it even matters and even in cases where there are competitors, multiple competitors, even some with a lot more capital, you know, stronger execution with the right strategy will kind of Trump the capital all day long, right? I believe that it definitely is a little more nerve wracking as a founder, when you start, you know, having a more direct competitive pressure and in there, you know, maybe categories where there, there’s just a lot more capital flowing into it. But even then, like, I think my new is a great example. So I think that’s probably why like, this sort of mindset you had is very much aligned with my own, you know, in terms of just capital efficiency. And I think there’s also this being cognizant of the overall competitive landscape like you described, like that. It’s just so important. So I know, obviously, you know, if we fast forward to today, you know, growing the company is gone from like, will the idea work? You know, scaling and scaling, of course, means expanding the team. Can you talk a little bit about, you know, some of your lessons learned in terms of recruiting and building up your team and maybe we can dive into that for the last part of the podcast here?

29:56

Oh, absolutely. Yep. And I mentioned it earlier, but I made a bunch of hiring Mistakes after my first like large round of raising and which was 500k. And so it was it was actually the investor, the lead investor Jeff gave me a book on recruiting after that he was like, you should probably read this book. I was like, Okay, great. So I read it. And it was cool by Jeff smart. And that’s like one of the classic recruiting books out there. And about a year later, I picked up another book by Jeff Hyman called recruit Rockstar. So those two books have formed the backbone of our recruiting process, I’ve just taken their processes and kind of melded them together in a way that I think makes sense. And I hate

30:41

to interrupt yet, but I don’t want to get too far away from this. You dangle that out there. And I just got to ask without naming any names. What was your worst recruiting mistake?

30:52

Worst recruiting mistake? I think so hiring a couple of people at the same time who had fantastic like results on paper in sales roles, but were toxic for culture. So really, like just looking out for themselves to money motivated? Yeah, like all about themselves and not not willing to care about the team or the company. So that was so so I shortcutted the the interview process with those, those two people and it was disastrous for the culture, right, a couple other good people left because they were there and, you know, so that set me back a few months in the middle in the middle of this whole journey. But that was a lesson I you know, definitely learned and avoided that mistake after that. But yeah, that’s a it’s a great question. I made plenty of mistakes, I think I’ve made every recruiting mistake you could possibly make. But that one stands out as the worst in terms of impact on the company. And so I started getting building a process with these books. And and also like, you just build muscle for this right over time, you you get more confident in recruiting and interviewing and, you know, the imposter syndrome goes away a year into it maybe of recruiting and, and so I’ve learned a lot and even even from Jeff hymens podcast recruit rockstars, where he takes he brings on entrepreneurs, and they talk about recruiting, and lessons learned. I mean, I’ve learned so much from there, too. So now I feel like we have a really good process. But it’s so important. Nope, it was a lesson for me. Pretty pretty early on in the entrepreneur journey that I can’t do everything right, I, I find myself to be pretty bright, and like, adept at many different things. I like back in a year into starting print with me. I was like, I had my hands on everything, right? I was leading the tech development, I was leading the operational side I was selling I was like, marketing, I was doing everything. And I loved it, because I like doing a lot of different things. But at a certain point can’t can’t just scale like that. Right? And, and that, and I thought it would be kind of easy to hire people and just have them do the roles. But no, you know, you got to find great people for each role. And that was like, a learning opportunity for me, right? I think it was 28 when we started trying to hire people and at scale, and you know, and so that like learning how to identify strong talent for a role. Also make sure that the talent matches your culture that you’re trying to build for the company. Understanding like the difference between an entrepreneurial employee and somebody who works at a large company that needs so much structure and process around them and just gonna just flounder in your crazy mess of a startup, like, these are hard lessons learned. And I hope founders can avoid those mistakes by being very thoughtful about it and deliberate and listening to other founders who have gone through those same exact problems.

34:02

How do you how do you really like, ensure that they have the right personality? How do you how do you go through and like, I mean, it’s not like you give them like the Myers Briggs personality test are, you know, is it just a matter of the interview process and getting a lot of the right people on your team involved with talking to them?

34:22

Well, we do actually give a culture survey I’d call it which is a 10 minute questionnaire, and it’s called the culture index. And that is similar to Myers Briggs. It tells us at a high level, where an applicant falls on five or six different spectra of personality. So how driven they are right the competitive atop like seeking risk and autonomy, how socially our extroverted, introverted and in a way, how urgent they are versus more like methodical and Slow, and then how like detail oriented and conscientious they are, it’s been around for a while, it’s a derivative of like the five factor test, and like many people have written about it. And I use it religiously to this day. And so it is one data point among many in the interview process, and helps us get more comfortable with the idea of a person in a role and you figure out what archetypes and patterns you want for each role, and you try to make sure that your applicants match at least match majority of those spectra. So love that test that was introduced to me in 2018 by an investor who literally wrote a check for us to go get trained on it, like a five figure, check. He just wrote it. For me, it was like a gift. I was like, wow. But you know, that has been so game changing for the company that I’m sure he’s he’s, you know, it’s kind of like, he’s was protecting his investment, because he he probably also saw the hiring mistakes I was making. I was like, you gotta you got to go through this training, and use this test.

36:05

What What was the name of the test? I wrote down? culture index test. Is that the name of it?

36:11

Yeah, the culture index? Yep. Yeah, they’re, they’ve been around for, like 20 years. And there’s a great team at UT Dallas, I’m happy to put any founders that are interested in touch with with their leadership in Dallas. I’ll give my contact info after the show. But you know, it was transformative. I’m a junkie on that now. And it is, it’s really, it gives you a reference point that you you can’t even imagine for assessing candidates versus like the, the traits that you really need in a role. Now, that’s just one thing. You also have to test? Do they vibe with your culture? Like, if you’re trying to build a very Hustle, Hustle, Hustle culture? That’s like 70 hours, 80 hours a week? Well, are they willing to do that? Are they excited by that? Is that is that are they at a point in their career where they can do that, I was never trying to do that with all my employees. Since day one, I’ve expected just 40 hours a week, because we can get a lot done in 40 hours. And we we do I mean, I work I work a little bit more than that. But we’re, we’re still growing exponentially. You know it with a reasonable culture, they’re not not a crazy 7080 hour week culture. But you know, I realize some startups it’s, that’s, that’s what they want. And there’s good reason for it. In some cases.

37:31

I think that’s really interesting and kind of macro perspective, you know, our company’s scaled to 170 employees. And my brother Ryan, kind of, we were twin brothers, he ran kind of product engineering team and I, everything else kind of, for periods of time kind of rolled up to me. And so I think back to the way you evolved, your, your entrepreneur, your leadership style, sort of going out, studying the the areas, the best information available on certain processes, you knew you needed to scale your organization, and then bringing that into your business, on your own doing it on your own as an entrepreneur. And it goes something I remember, like in our sales organization, we got to several dozen people in our sales organization in my last company. And I think I read every, there’s all these different methods of selling, there’s like SPIN Selling solution, selling challenger sales, all these different methodologies. And I would just read up on all of them, I go, I think this would work best in our business. So we’re going to implement this. And then the next step was running a sales training workshop. And we’re creating case studies based on the book, you know, for this methodology that is completely built for our business. And it was like, and I thought it worked really well. There’s this sort of attention to detail on scaling, the organization, the onboarding that went into it. And, you know, even down to like an onboarding checklist for like, the first 30 days in an employee. There’s just I know, I was listening to your podcast interview on recruit rockstars. And you talked about, you know, the importance of strong onboarding, I think that’s something many startups, you know, really fail at, quite frankly, though, especially in the positions where, you know, you’re going to add a lot of staff. You know, it’s so critical. The early experience and employee has made me talk a little bit about like, you know, beyond recruiting like the onboarding experience, and some of the things you’ve learned as you guys have been building up the business.

39:21

Yeah, sure. So you, you hit the nail on the head. onboarding is very important. We’ve, I learned the hard way I had a couple people that I just kind of threw to the wolves and just said, Hey, can you go figure this stuff out, and that they didn’t last long, and that was my fault, right? But I learned some wisdom from Jeff in his book to take onboarding very seriously. So I started there a couple years back, I built an onboarding checklist of things that I think every employee approved with me should know. And you know, it’s it’s the nuts and bolts of like, systems, getting getting all your tech stuff on boarded obviously that’s going to be There, but also like, how we communicate what are our communication guidelines and standards? And what are our okrs? What does our OKR system look like we do objectives, key results, like the measure what matters, but we have every employee read the measure what matters book. So that’s part of the onboarding checklist. So we we try to be just as good about onboarding people into our culture as we do the nuts and bolts of the systems in the company and also like the knowledge for their specific domain or the role. Both of those things are very important. I we now have the good fortune of having two people in HR lead recruiter and then kind of an HR recruiter hybrid. And now that HR hybrid is onboarding people, and has a checklist and you know, he’s there, buddy, for for onboarding. But early on, it was all me, right? When you’re a 10 person company, you’re the founder, you’re doing everything. But like you said, Rob, I, I would read tons of books, I still, there’s there’s a bookshelf at our office in Chicago, where I dumped all my books before I moved to Denver last year, and it’s like, filled, it was probably 100 books on startups selling marketing, tech development. I mean, you name it, I think that’s another key point for aspiring founders is you have to be a voracious learner. You have to be humble enough to realize you, you don’t know everything yet. Which I, I’m not sure I was quite there at 26, I kind of learned the hard way. I need to level up a lot of skills in my late 20s. But you know, you really can if you’re open to learning and curious and you’re seeking it, you can find so much wisdom in any topic by just reading a book, and then bringing it to your business and saying, alright, this sounds great for my business. The next day, you incorporate it into your process, and you’re able to do that as a founder, right? Like there isn’t red tape, which is great. Your your employees might have whiplash if you’re doing that too much. So you can’t be a book of the week person but you got to, I think there’s a balance you can you could do it reasonably in a way that is beneficial for the org.

42:14

One of the other managing partners are great and adventures is Rob’s twin brother Ryan, co hosts other episodes. He is fantastic at producing book recommendations for me, I don’t know how many of his I have behind me on the shelf, but several and the last time I we were in person, I saw Rob and Rob recommended a book to me that I’m actually already currently reading a Clayton Christensen book. It was just fantastic. We are running out of time here though. I want to make sure we get in our last question. I like to ask every one of the guests on our podcast, this question focused, we’re focused on execution. And we like recognizing people who can do that it might not always be the flashiest people who are getting that recognition. So is there somebody, maybe it’s a team or a startup or a single person that’s really executing that maybe they’re flying under the radar, maybe they’re not maybe they’re deservedly, very popular, but someone that you’ve seen or startup that we should be paying attention to.

43:16

I’ll say I’m again, I always and I will always say this orazio bouza is probably the best operator I’ve ever met. And I’ve met a lot. And you know, just to give you a sense, so he he’s skilled three or four light band companies and food is is now an awesome success in Chicago. But I think he told me once and he wasn’t trying to brag, but he was just kind of explaining, like how he does budgeting. And he, he had set lot, you know, pretty ambitious projections for fouda in the early days when their fundraising and you know, some investors were passing on on a couple of his rounds, they just didn’t think it was for them. It wasn’t software enough. But then he would go back to them a year later. And he would show them the new projections. And they would see that he actually hit the ambitious projections. And they were like, no one ever does that. No one ever hits their startup rejections, but he actually does and I’ve learned a ton from him. He he, he’s probably the best. I mean, I can’t think of another so he is the best executer that I’ve ever met. So I’m happy to make an intro to try to help you guys get him on the podcast at some point.

44:30

Yeah, that’d be cool. Sounds great. Well, thanks a lot, Jonathan for joining us today. It’s been a pleasure.

44:35

pleasures all mine. I’ve really enjoyed the conversation. And yeah, good luck. Continuing with the podcast is a great idea.

44:41

Thanks.

Rob and Josef talk podcasts, and comes clean about his awkward intro to Nick Moran.

Nick talks about his path to becoming a General Partner of New Stack Ventures and the host of The Full Ratchet podcast. We talk decision-making as investors, and advice for founders, including the most common mistake: building a product then trying to find a market for it. Then dive in to address the problem of matching opportunities to investors, whether it’s founders pitching VCs, or VCs pitching institutional investors. 

Rob and Nick connect as founders-turned investors, while Josef jokes about the Insane Clown Posse in a truly additive and valuable fashion.

Not really.   

Who does Nick see executing? He calls out two companies that have pushed through the pandemic, Flamingo and Tripscout.

Full Transcript Below:

00:00

Welcome to execution is king, the Great North ventures podcast. Today we’re joined by general partner of new stack ventures, Nick Moran. He’s also the host of the full ratchet podcast. With me today also his general partner of Great North ventures Rob Weber. Thanks for having me, guys. This is such a pleasure to be here, Rob. Always good to see ya. Thanks

00:21

for joining us, Nick. First starters, talk a little bit about how you became a venture capitalist. And also tell us about a little bit about your work with the full ratchet.

00:31

Yeah, you got it. I mean, we’ve talked in the past, it was a bit accidental. This is my second career. So I started out in corporate America, doing m&a, you know, scouting out early stage tech companies to buy through a roundabout series of events, I ended up being an entrepreneur within this organization taking a product to market over three years, working with a large r&d team of 30. And we had sort of extraordinary success with that product. I was a beneficiary of that success and was able to sort of leave corporate america and, and figure out my next path in life as a young man when I was about 32. So I moved back to Chicago with my wife, I started angel investing and, you know, fell down this rabbit hole of venture and startups and, you know, how do you build the next transformational multibillion dollar tech company? And yeah, through that series of events launched the full ratchet, I think it was, maybe at best a clever hack to network with some folks on the coast. At worst, you know, it was just kind of a fun program for me to learn. And it really worked out. I mean, I think I was early to the podcast thing and got lucky. The audience sort of exploded, you know, before there were 1000s and 1000s of podcasts. And that resulted in a lot more deal flow than I knew what to do with and sort of snowballed into this investing for newstagged. ventures.

02:06

And you’re up to almost, is it almost 300 podcast episodes so far? Is that right?

02:11

Yeah, I think so. It’s probably more than that between we do these special segments in between episodes. So I can’t imagine how many we have total. But I would bet how it gets it’s more than 500 at this stage.

02:22

Yeah, it’s really impressive. I was just talking with Nick before the show about these great episodes he does with investor stories, that are just great little bites. So if you have a minute, check out the podcast, that episode I’m talking about the last one is about 11 minutes long. And it sees for investors giving post mortems on these companies that failed. And it’s just as super interesting, especially like the example around the one that failed due to COVID. Because it just this excessive headwinds and stuff. But there’s some great points from Great Investors on that podcast, urge you guys to check it out.

03:00

Yeah, I think part of the context that makes your experience, Nick, as he talked about it, you know, so interesting is having been on both sides of the table, you know, building a product, and then spending all this time interviewing all these investors, and then, you know, actually running a fund. But you know, especially as we think about, like, the product side, that’s kind of the background that my brother and I had before we started getting more adventures, you know, after, you know, spending so much time in this space. What are some of the takeaways you have, you know, for new founders, you know, in terms of product development? What are some of the common mistakes that you see, or what advice would you have, and I know, your fund is kind of in the pre seed seed stage was very early, in fact, earlier than probably a lot of other venture funds. What would be some of the advice that you would give to, you know, a first time founder who’s building their first product?

03:52

It’s a good question, I think, sort of classic mistake that still the majority of entrepreneurs make, even though we’ve we’ve said this advice over and over again, Rob, you and I have talked about it is, you know, they build a product and then look for a market later. Actually, just last week, we were talking about this episode I did with Dharmesh stacker from battery, right. And he was saying one of the weaknesses with doing investments in serial entrepreneurs. So folks that started and had success with a tech company from a previous generation is often those types of founders from you know, that learned in an old generation of tech, they often want to build super powerful tech, and then go out and you know, find a market for it. try and convince customers that this is the solution to all their problems. And in the modern world, in the modern tech world. That’s just not how things work. You need to prove value up front. You need to deliver ROI and value super fast. I think Dharmesh, his rule is in 90 seconds or less, you know, the end user needs to understand why this is transformational for them and makes their life better. And so we’ve seen this big shift to a focus on customers focus on needs, you know, what are the key problems that you’re facing in your work life or in your consumer life? And then how do we reverse engineer a solution that really delivers on on that problem? So if I were to give advice to the early stage founders, it would be you know, become obsessed with your customer, find your ICP, your ideal customer persona, spend time in a market, discover the key insights, you know, what are the key challenges facing that market, and then figure out how to build a solution that meets the need, you know, don’t just just because you’re a developer, and you’re a talented builder, that doesn’t mean you should go out and build some super powered tech, and then just assume that the market is going to love it.

06:02

Do you think that’s a consequence of tech really exploding out of, you know, the confines of being its own sector, and just kind of taking over every sector? that that that shift away from just being able to build something great, and then figure out a way to sell it, versus having to build to actually fulfill these needs?

06:22

Is that Yes, I think so. Joseph, I think it also goes a little deeper. I think it’s a mindset issue. And I think it’s, it’s the victim of arrogance, right. So we all have a bit of confidence, and maybe maybe a shred of arrogance, some more than others. But when you are arrogance, you believe the world operates like yourself, you believe that the mindset of the consumer base is much like yourself. And so you think that if you can build something, that’s your ideal product, right? That’s your ideal technology that ever the market will come? Right? If you build it, they will come? The reality is that, you know, if you’ve met one consumer, you’ve met one consumer, right? There’s a lot of shapes and sizes, there is no one size fits all anymore. That just doesn’t work. And so you need to figure out, you know, what are the segments within the market? What are the consumer groups, or the buyer groups within b2b that have a similar philosophy or ideology or buying behavior or need set, and you need to you build products that really serve a problem and serve a need. So I think it’s a problem of mindset. And it’s folks thinking that the rest of the world operates like themselves. And that’s just not the case.

07:42

It’s interesting, I do think there’s a sort of fine line between self confidence and being open to feedback, right. And I think in entrepreneurship, like you kind of have to have a balance, I think the best entrepreneurs app have developed that strong customer empathy. So they can kind of wreck, you know, they can take the feedback loops, and kind of, you know, bake that into their product development. It does take a degree of self confidence, though, because you can’t have every, every single feedback session or artifact, you know, can completely push you off your strategy. So it’s kind of a fine line of being a good listener, but also having, you know, some confidence in finding the right path forward. Right. And when you are building out your products in the past, like how much do you stock? Do you put in just like the systems for startups? Like, are your real vocal proponent of kind of lean startups and all the, you know, systems behind that? Or are you kind of take a more like open approach to, you know, in terms of the systems that these entrepreneurs are utilizing to kind of bake their strategy or their product development?

08:50

Yeah, that’s a tough one, I would say, Yes, I am a proponent of the lean startup, but more at the theoretical and philosophical level, I think some entrepreneurs can get maybe too caught up in the tactics, and you know, the details with that and chase their tails a bit. I mean, to your point before, you can’t be so wishy washy, that all feedback from customers finds its way into the product. Right? We like to say that when we’re selecting founders, or we’re investing in founders, we like to find people that are incredibly stubborn about their vision, but incredibly flexible about the path to get there. Right. So you need to have a really strong vision, here’s where we’re going. But you need to be incredibly receptive to the market in the customers and how the product actually manifest in the path. To tie this back to my experience with the product. I’ll give you a simple example. Right? I was building a handheld device, right? It was a handheld device for measuring compounds in drinking water. So things like monochloramine or chlorine or nitrate or iron, right. And a huge number of the customers That I did testing with said, I would like this to be touchscreen. Right? We launched this product in 2013 ish timeframe. And there was a big proponent of customers that said, I really need this to be touchscreen, right in the markets that we’re testing. Well guess what the reality is, there’s a lot of cold weather climates, where people are doing this testing on the back of a pickup truck in sub zero degree temperatures in places like Minneapolis, or Chicago. And they’re doing it with huge gloves, and big parkas and a hat and goggles. And you can’t have a touchscreen device in that environment. So this is just one simple example of the overwhelming feedback was we want touchscreen. But when you look at the markets we’re going to sell this product into it was not a viable decision for the product, right. And so that’s just one small thing. Like you need to collect all the different information from the customers, but it’s the job of the product manager to decide on the solution. Right? It’s the customers that surface the problems, the product manager needs to find a solution that most appropriately services the market.

11:13

That’s really interesting. Well, yeah, bringing up, you know, kind of the Midwest in Chicago. I know, that’s where you’re based. Can you describe a little bit about your experience, since you moved back to Chicago? What is the startup ecosystem like there? For those who are unfamiliar?

11:29

It’s exploding. I mean, I’m not on the ground in Minneapolis, I’m sure you’ve seen things really develop and evolve in your ecosystem. But in Chicago, I got back in 2012 2013, in 1871, had just opened, which is sort of the incubator startup Mecca. Within Chicago, we were really just finding our footing on becoming, you know, a real sort of call it a second tier tech ecosystem, not not on the level of San Francisco, New York, but a major player, right, we had had some big exits, we had some big successes, and that had spurned some talent in the ecosystem that went and started more companies. So now, you know, during the past almost 10 years, geez, it’s developed quite a bit, you know, there’s more venture capital firms than ever before. There’s more startups being funded than ever before. we’ve really seen the ecosystem progress for the better, and sort of hit its stride. So I think Chicago is only going to go from here. But you know, if you go back to the time I started investing, there was very few pools of capital. And we kind of, we had our choice of the startups we wanted to invest in now. It’s, it’s, it’s more competitive, which is better for everyone involved.

12:55

I was really impressed. When I went back to Northwestern in February, pre COVID. For venture capital events. I had gone to school at macdill. So I haven’t spent a lot of time at Kellogg, but when I went there, they have this fabulous new building, which they were just building when I was at Northwestern. And it was just a beautiful setting right there on the lake, the field. And it was full of all kinds of people. Betsy Ziegler was there from you mentioned 1871, some other people, all kinds of great funds represented there, mingling with just these top level up and coming VCs, out of Kellogg, and just being in that spot. And that’s not even that’s up in Evanston. That’s not in the heart of anything, which, from my experience is more towards 1871 would be kind of the heart of a lot of this action, while at least downtown in general will be more towards the heart of it. But it was super impressive. It really gave me some hope for what what we can aim for here. You know, like getting that vision, getting that idea, that vision for Minneapolis and what the ecosystem can aspire to be.

14:04

Yeah, it’s really great. I mean, you’ve cited the university’s Stanford and MIT their efforts are well documented and the stratix accelerator at Stanford, you know, one of the most prominent in the country. But look, look at Northwestern, you mentioned them, they’ve got the Wildcat challenge and look at Chicago Booth. They’ve got the NVC the new venture challenge, which I believe kicks off tomorrow on the third of June. This has become the Chicago Booth one has become one of the preeminent accelerators in the country. That ranks right up there with the YCS and Angel pads, right? The successes from that program, you know, the winners of Chicago, Booth NVC, our grub hub, Braintree tovala, I mean, you know, hundreds of millions, if not billion dollar companies that have been enormously successful. So it’s it’s really nice to see that the academic academic institutions have structured themselves in a way to really promote true Entrepreneurship, that is the challenge when you get into academia, you know, is this going to be more of a research or learning exercise, there’s this really, you know, a capitalist endeavor. And I think what we found is the Chicago based institutions have figured it out, and, you know, created some really transformational, you know, large scale tech companies. So we’re looking forward to meet and some more tomorrow at the competition, and at a future Northwestern event as well.

15:29

I think it’s really interesting, Nick, I’ve been building software companies, either as an was started off as an entrepreneur, and then an investor, the last, you know, I don’t know, 15 years, but 25 years as entrepreneur, all in Minnesota, and really, you know, from when I got started, there was very little support, there weren’t organized, you know, communities for startup competitions, accelerators, you know, maybe there was one or two venture funds, you know, now there’s, you know, just in the Twin Cities market, there’s well over a dozen early stage funds. And then we have, you know, it’s a little different in Minnesota, the University of Minnesota, I think it’s a little over 10 years old, we have a Minnesota cup, which is actually kind of built for all startups in Minnesota, it sort of lives, you know, on the campus of the University of Minnesota, but it’s not just for the U of M students. So it’s kind of interesting, I think it’s, it’s evolved a bit differently. But in many respects, I think the last decade is really brought just incredible wealth of support for entrepreneurs starting to build things. Of course, I think one of the main areas that entrepreneurs that are looking to get discovered are looking for support is on fundraising. And you know, despite the emergence of what 1500 plus venture funds around the country, you know, getting that first round of capital for many is still really challenging. And I know you’re, you’re one of the few funds that you know, invests in kind of pre seed, and then also what I’ve called, like, really early seed stage companies in the Midwest, I know you invest all around the country, what are some of the signals you look for? Or what are some of the things that you would in terms of advice would pass along to founders, you know, in terms of raising that first round of venture capital?

17:08

Well, first of all, you need to know where to aim. Right? Like before you launch a process, and before you start pitching. And before, you know you do your dog and pony show with a bunch of investors, you have to understand your ICP. Just like if you’re launching a product into a market, right, who’s your ideal customer persona. And for a fundraise is the same Rob, you just mentioned, like in the Midwest, there are seed stage investors series A investors pre seed, some will do pre traction, some won’t. Some will invest in hardware, others won’t write some, like consumer, some have a preference for b2b. We’ve got a whole crop of Life Sciences folks, right? There’s a lot of shapes and sizes to these investors. And if you just roll out of bed with a really cool product, and you know, a little bit of sales, and do your rounds in sort of Minnesota ecosystem with whoever you can get an intro to, you’re probably going to find some mismatches, right? It’s like the dating app. And you know, you’re you’re dating somebody from a different culture that doesn’t speak your language. And it’s like, where do we even begin here? So you kind of have to know where to aim. Figure out what type of startup you’re building, right? What are the sectors you appeal to? What are the technologies that you’re building around, you know, Ai, blockchain, etc? Who are the markets that you’re serving? Right? Are you serving certain demographics with your startup, let’s say, the boomers or Gen Z, for instance, or you know, maybe your startup is focused on women. And then the stage, of course, the stage is important, the geo is important. So there’s all these filters and structures that investors use to kind of think about your startup. Here. Again, it’s like sector, market technology, geo stage. And if you are honest with yourself about which boxes you check, you can find the ideal set of investors that is just well designed for your startup. Right. There are generalists that just invest in Minneapolis startups, there are specialists that just invest in AI powered startups, right, you need to know who those investors are first. Rob, you and I have discussed this tool that we built VC dash rank.com. It’s a simple questionnaire that startup founders can fill out in five minutes or less about their startup. And they generate a customized list of all the ideal early stage investors for their startup. I think we have somewhere from 15 to 30. Startups filling that out every day. So it ends up being you know, you add those up over time, there’s a lot of startups out there looking for investors, but if you’re aimed in the wrong direction, you know, you’re gonna waste a lot of your own time. In founders time is the most important thing when you’re building an early stage startup.

19:57

I think that that’s a lot a source of a lot. VC hate that you see, I mean, there is plenty of legitimate criticism about VCs, there’s there’s bad behaving VCs, don’t get me wrong. But I think that that point you just made, that it just being a mismatch, that people going into every what should be a speed date with the intention that they want to get married, without actually realizing that they need to make sure that that’s going to be a good match. I think that that manifests itself and justly so in people getting incredibly, you know, frustrated by that process, and then taking it out against just the industry in general. It kind of obfuscates a lot of the legitimate criticism of the industry, though, and and makes people you know, it makes it harder to uncover. Because when the problem is that source, what’s the real problem? It’s hard to uncover when it’s just simply a mismatch from the beginning.

20:54

100% Joseph, and I’m getting a taste of my own medicine, right, because as we embark on on raising our next fund, we’re not raising currently, but as we do that, we need to meet with the right investors for us, right. In our industry, we call them LPs limited partners. But I need to know who are the institutions that like to invest in emerging funds, right? Who are the institutions that like funds in the $50 million size range? Who are the institutions that have an interest in the middle of the country investing versus coastal, right or international, right, if I don’t do my homework, on my own ICP, then I end up spinning my own wheels with a bunch of folks that you know, want to cut billion dollar checks in the multi billion dollar funds that are focused only on San Francisco, and I’ve just wasted their time in my own. So, you know, this, this has got many different levels of extra abstraction, whether you’re a startup selling a product, you know, founder trying to, you know, sell your business, sell equity in your business, or a venture capitalist that’s, you know, trying to raise a fund.

21:55

And just some advice to anybody out there who’s going to turn around and Google ICP to figure out how to proceed, ignore the first results, or any results with pictures of crazy clown makeup. That’s the wrong result for you. Wow, flashback there. Now we’re showing our age.

22:12

It’s really interesting, Nick, when I was a sort of founder turned investor, you know, I was like you as an angel investor for a while, while while I was sort of founder, took the success as an angel investor became a VC. And the number one request we have, from founders we back is, can you help me complete my round? Or can you help me connect other capital sources, and to me is like a founder turned investor, it’s like, the least interesting thing I could help a founder with, is just finding more capital, I’d rather go deep on like product goes to market, you know, human resource and operations, like how do you scale the growth of the company? Not so much like, Hey, can I i’ve this spreadsheet, I started with 200. Plus, it’s just people in the last four years that I’ve talked to you that are involved in the VC game, and I did use the VC dash rink comm tool that you built for internal startup we had been incubating called next jam, it’s really, really useful to kind of filter down across these different dimensions, who are the funds that we should be talking to? And I think a lot of founders, it’s not even so much as like getting an intro to the funds, like, I know that a lot of the funds that we should be talking to, but they weren’t necessarily the ones top of mind for me. So just having a filter to say yes, these are the ones that based on, you know, some kind of database are probably the ones that are right for you and make some ton of sense to me. So I think it’s super valuable. I’d love to see more startups using this. And it wouldn’t solve this, like signal and noise issue when what you really want is like relevant deal flow that can make right you know, the speed for fundraising faster, right. 100%.

23:46

I mean, it’s, it’s amazing to your point, how network driven and opaque the whole fundraising landscape still is, it’s always based on referrals. And you have to have the right networking etiquette. I mean, if you go back to the origins of VC, it was a little cottage industry, you know, country clovers, and people that were insiders, Sharon deals. And that’s kind of where this industry began. But, you know, as we move forward in time, it’s institutionalized. I mean, tech is no longer, you know, a footnote in the asset class universe tech is sort of leading and driving the returns, both in privates and publics. And so I think we’re gonna see our industry, our asset class, really professionalize and become more tech fold. Right? It shouldn’t be this old insider game of who you know, and who can I get an intro to and, like, you know, can I can I get the royal treatment from the investors at benchmark I mean, amazing, firm, right benchmark, but they they don’t have a website, right? You have to know somebody to kind of get in there. And honestly, I think that’s the model of the past. I think it’s gonna die. The future is about you. Technology Solutions media, you know, having a systematic process, it’s it’s not about who you know, it’s about what you can build.

25:08

And increasingly, it’s not about where you’re located either. I mean, that’s starting to not matter at all, which used to be hugely important for VC. And even when you look at VCs who do business all over the world or across the country, you know, that geography that they do more deals, where they’re located, then states further away, like if you’re based in DC, or even if you’re based in Chicago, you know, there might be a way more deals in Silicon Valley, but you’re going to be doing more deals in Chicago, just because that’s who you run into. But increasingly, that’s becoming less and less important.

25:44

Well, I think, you know, one of the effects of COVID is no longer do I have discussions with investors that say, oh, middle of the country, investing the Tam’s too small, like the outcomes aren’t going to be big everyone? Well, not everyone, but the vast majority of folks out there realize, wow, there’s talent everywhere, you know, whether it’s talent that left the coast that moved other locations, or just the reality that great, huge, multi billion dollar tech companies are being built everywhere. We’re seeing that more and more every day, which is, it’s nice not to have to face that objection anymore. Oh, Minneapolis. Oh, yeah. No good tech companies are gonna come out of there. Chicago. Yeah. You know, you guys have your strengths, but it’s not technology. Yeah. Okay. Let’s look at you know, the cameos of the world and, and you know, these other huge successes. So it’s no longer an objection, we really have to face which is nice.

26:39

So Nick, I know, you take a very systematic approach to venture capital, kind of pioneering how to use tools and technology to make the process more efficient. I saw this survey a few months back that ranked from founders seeking capital, the number one criteria or attribute that they cared about the most was speed. Yeah, and I know you’ve interviewed a lot of funds, are there, you know, from a systematic standpoint, are there certain things you found to really speed up the investing process? Or is there any any other venture funds that, you know, obviously speeding, making a quality decision that times are enemies of each other? Right? Like, you know, how do you have you? Have you found ways to move faster in decision making, or across the VCs that you’ve interviewed? Any that really stand out to you on this dimension of speed?

27:27

Wow, that’s a tough question. Yes, we have implemented a lot of systems and processes, I can talk about that when to your ladder question on any VCs in particular, I would say that the VCs that stand out, as being great at making decisions quickly, are solo capitalists, largely, you know, when an individual is doing the meetings with the founders and can decide at first meeting or second meeting. Look, this person has the right ingredients, you know, like you’re taking all these data points, they’re mixing up in your head, we talked about this abstract concept, pattern recognition. But honestly, a lot of at bats in this industry over time, you start to figure out here are the things that I like, and you process all these data points, and you make decisions. So it’s the solo capitalists that can move quickest, because, you know, there’s no infrastructure, there’s not multiple people, there’s not, you know, a whole series of diligence. When it comes to our firm. We are not that, right. So we have a number of people at our firm that can do deals. It’s not just Nick Moran, right. And I’ve been very clear with my folks here in New sec from the beginning, this will not be the Nick Moran show. This is newstagged ventures, we are building a scalable venture capital firm. And so what we’ve had to do is get very, very clear about what we’re looking for. We kind of divided up into three segments. So when we’re looking at a deal, we look at the who, the what, and the how. So the who is the foundation, that’s the people behind it, the talent, their raw capabilities, their you know, their raw mindset. The what is kind of the business is the business, the industry, the sector, the product, is it, you know, scalable? Is it venture scale is an interesting does it have tailwinds and then the How is sort of the framework that the founders are using to access that market, build the right product. Think about you know, how we wedge into the market? How are we focused on customer needs? To that point, we did you know at the top of the interview or are we tech first. So the How is like the process that the founders are going about to access the opportunity. And then you know, at New stack we think very specifically about what are our must haves. What are important to have and what are nice to haves and across each of those three, the who, what and the how we’ve been very specific about what those three are. So we have must haves on every deal. If a must have Isn’t there we pass, we have our important hands on every deal, if a certain percentage of important to haves aren’t there, we pass. And then we have our nice to haves as well. And so that’s our attempt at taking all these patterns and all these factors that we’re vetting for, and actually codify them into a process that can be taught to young folks, you know, as we have this fellowship program of 20 young folks across the country, undergraduates, and it’s too hard to spend the next you know, five years with all of them and try and teach them all these abstract patterns, we have to codify them, we have to get very specific about here are the factors to be looking for, so that their learning curve, you know, moves quicker. And the end effect of that, Rob, is that we should be able to make a decision on a founder, and investing in that founder in less than two weeks, hopefully, less than one week. But if we know what we’re looking for, and who we are as a firm, and you know, what types of founders are positioned to succeed in a partnership with the SEC, then we can move more quickly.

31:04

I just said one more kind of a more narrow question around this process and system you have I know, one of the things they talk about in venture capitalists kind of decision making is this notion. It’s like a psychology notion of, they call it confirmation bias. And I know I’ve experienced I’ve had to sort of fight myself against is that time where I see it, even in our partnership, like the more time you spend on a deal, there’s a tendency to look for evidence to support, you know, your initial interest in that deal. And so you have this self fulfilling kind of confirmation bias to do a deal as you dig in more and more and more. Have you had any, you know, with this sort of more in this sort of system that you have? Do you have any sort of guardrails against like confirmation bias? Or have you ever felt like you’ve experienced that? And, you know, or how do you avoid confirmation bias?

31:53

It’s a good question. I don’t know, if we have an answer to that, if I’m being honest, I do know that we’ve gotten incredibly late stage in diligence on deals. I mean, I even flew with, with my deal lead to Colombia, the country to do diligence on a deal and spent two entire days, you know, in the field, like meeting with customers and whatnot, we ended up passing because something came up late stage and diligence that violated my staff. And we had to have a real honest conversation about that. And, you know, as I think about scaling this firm, I think about, you know, we need to use these moments as teaching moments of how we got to make decisions. And even if it’s even if it’s so much easier to proceed with the investment at that point, because the sunk cost is there. And the confirmation bias, is there. the right decision, if we really want to build a best in class firm, that’s going to produce great returns, and teach folks how to say no, even when you’re over committed, is you got to say no, when, when it’s right to say no. And I learned that the hard way working for dinner for years in m&a, a very aggressive acquire My god, I would do diligence on 1000s of companies, I would spend, in some cases multiple years, getting to know founders of different companies and visiting them in Spain and Italy and all around the states. And then those deals would fall apart. And so yeah, that was a painful reality in our business. I mean, we’re meeting with founders, you know, for weeks or months. And so to pull the plug on those for me is like, you know, that’s nothing. It might be harder for the younger people. But for me, it’s nothing compared to multi year. relationships.

33:39

Yeah, totally. You bet that your prior experiences is super helpful in that regard. So I think Joseph, you had a kind of a final question, right? Oh, yeah.

33:49

Yeah. So our last question here, like to ask all of our guests who come on the show, can you tell us about someone or a startup that you’ve observed executing at a really exceptional level, maybe someone in your portfolio or someone outside of your portfolio, but someone you’ve seen maybe who isn’t getting recognition for that, but who’s really killing it? There’s too many to choose from.

34:15

Maybe I’ll pick a couple that were slammed hard by the pandemic. I mean, terrible categories for the bat pandemic. One is Jude chewy, he runs a company called Flamingo. Flamingo serves the multifamily property industry. And it’s a it’s an events focused platform. And that thing, I mean, the events out of the business went to zero effectively last, I think, April or May. This guy is just a rock star. He built a SaaS business alongside his events business during the pandemic, grew it to the size of the events business. I mean, remarkable MRR and now the events have come back and so now he’s got I mean, it’s kind of amazing but he’s got a you know, two sided, you know, dangerous multifamily software business that does both events and, and software as a service, which are super complimentary for what he’s working on. And it’s just been amazing to see the resiliency. I mean, it would have been very easy for him to shut it down. And many of my LPs reached out and said, Is God gonna survive? And I said, if you ask him, there is no quit here. There is no, you know, pulling this business up and just super proud of him. Another one is Conrad Wallace Xu scheme in MDX at at a business called trip scout. This is a travel business that serves consumers and just got crushed, absolutely crushed by the pandemic. Many travel companies went out of business, many large travel public businesses just are on the ropes like the TripAdvisor is of the world. And these guys have just made magic of, of the situation. It’s, it’s unbelievable, how they doubled down created more content and special guests. You know, created a almost like an Anthony Bourdain, like series on travel during the pandemic, travel from home, you know, everyone’s stuck inside. How do you get the experience of being on a trip when you’re at home? And coming out of the pandemic? they close? I think they recently closed 4 million bucks from accomplice, I mean, tier one VC there. I mean, they are on this upward trajectory, like I haven’t seen. And it’s it’s kind of amazing. You know, there was never quit, there was never hesitation. There was optimism, despite a really tough situation. So those are two I would, I would just, you know, tip my cap to them. I’m glad and proud to be an investor in people like that more so than than anything. Trip scout and Flamingo. We’ll have to check those out. All right. Well, thanks

36:53

a lot for joining us today, Nick. It’s been a pleasure and best of luck as you continue to grow, you know, new stack and thanks for you know, launching VC dash rank.com. And the other work you do to support entrepreneurs and founders and of course, the podcast, which is one of my faves. So thanks for joining us today.

37:12

Yeah, thanks, Nick. Make sure you check out the full ratchet, visit the new stack website. They’ve got some great tools for founders on there.

37:20

Such a pleasure to be here guys. Thanks for having me and love the pod Keep it up. Can’t wait to see who the next guest is.

It’s not what you know. It’s not who you know. It’s knowing how to put it all together.

Execution is King.

As founders, investors, and builders, we think execution is key to success. In our new podcast, we go in search of insight and lessons. This takes us to people who have been there before, where the rubber meets the road.

Hosted by Josef Siebert, each episode features Rob or Ryan Weber and a guest who can offer best practices to startup founders building the next great global startups from wherever they may be.

Our first episodes available August 12th feature investors Justin Kaufenberg of Rally Ventures and Nick Moran of New Stack Ventures, founder Mynul Khan of FieldNation, and professional ecosystem builder Molly Pyle of the Center on Rural Innovation.

They are available on Spotify, Apple Podcasts, Google Podcasts, or wherever you get your podcasts.

Great North Ventures is an early-stage venture fund that invests in startups using technology to innovate industries dominated by analog processes. We invest early across categories and industries, and leverage a large network of advisors to help startups scale.

As a tech founder and investor, I have spent a lot of time thinking about why some startups scale and why others fail. You have to when your livelihood is riding on whether or not you can execute. And when you’re putting other peoples’ money on the line, knowing what to do and being able to do it isn’t enough, but you have to be able to explain your decisions and actions.

When I made enough money as a founder to start angel investing, I was overly focused on the idea and strategy. Why? The business I had founded with my twin brother Ryan Weber was successful in terms of financial returns, but it lacked defensibility. In my opinion, that’s what prohibited our business from scaling to an even greater outcome- we didn’t have a great idea or strategy.

Learning from this lesson from my own business, I compensated by investing in founders who had a clever idea and a good strategy. Sometimes it felt like I was just investing in a nice pitch deck. Many of these teams just could not execute, and over time, they’d fail.

You can be a brilliant founder, with a clever idea and a good strategy, and still fail. It happens all the time. If you can’t attract customers, build a team, and set and achieve goals, you’re sunk.

As a VC, I’ve had to synthesize everything I’ve learned about operating and investing into a scalable, repeatable process- to turn these lessons into actionable guidance for conducting diligence. Founders who work towards these things increase their chances of reaching an exit, and investors who look for these things increase their chances of generating a return.

These are the top 5 signs a startup will succeed.

1) The startup has founders with great soft skills. Having a great idea or writing some really kickass code isn’t enough to scale a big business. Soft skills are even more important than tech skills or industry experience. A founder/CEO’s job includes sales, recruiting top talent, management, etc. All of these are soft skills.

2) The startup has a culture of accountability, and is focused on key growth metrics. Creating a metric driven, accountable culture is challenging. It is easier to do with a 4-person startup than a large-scale growth business so it is a critically important early piece.

3) The startup is good at new product development. Teams that are good at product development are analytical and creative. They run experiments before building a complete product which enables them to avoid focusing on building the wrong product with the wrong features.

4) The startup is focused on finding and perfecting one scalable customer acquisition channel. Experimenting is expected in the very early going, but eventually you need to bet on the one channel that can get you to scale. It could be digital media-focused customer acquisition, a referral program, or viral social strategy, anything that creates compounding returns. You need to be world-class at whatever your dominant channel is to succeed. For most of the best startups, growth is designed into the product or some other kind of clever growth hack is utilized. Look at Airbnb’s famous spamming of Craigslist (Airbnb Growth Study (benchhacks.com)) or DropBox’s famous early referral incentives. This is the scrappy team, focused on the right things, that has found the right product, and a way to scale.

5) The startup has an adaptable, entrepreneurial team. Early-stage is not the time for a team fixated on management systems. The time for investing more heavily in management systems is when your startup approaches 20–50 employees or more. In the beginning, you need a team with entrepreneurial skills, including customer empathy, product engineering strength, and go-to-market strength.

For former founders-turned-investors like myself, we need to be particularly aware of not being overly attracted to clever ideas in big markets, but instead focus on identifying the teams that can find their North Star to take them from point A to point B so the startup has an opportunity to start compounding. Execution is everything.

Welcome back to the Great North Labs newsletter!

With so many great startups getting acquired or going IPO lately, one wonders: What do founders do when they score these big windfalls?
 

How Do Founders Spend Their Cash?

Rob Weber was curious, so he asked other successful founders from the region about their post-exit strategies. Do they do the kind of flashy things coastal entrepreneurs do? You know, like buy an island or a 100-foot yacht or something?

From Lamborghinis to Hamm’s beer signs, traveling the world to giving back to their local entrepreneurial communities, these founders have quite the stories. 

Read the full article in BuiltIn Chicago,

The Weird and Wonderful Things Midwest Founders do After They’ve Had a Big Exit“. 
 

How University of St. Thomas Raises Up Startup Entrepreneurship


The University of St. Thomas (UST) has ~10,000 students, with over 34,000 business school alumni around the world. Recently, UST announced the end of their full-time MBA offering. At first glance, that may seem like a blow to the future of entrepreneurial development at the university. We dug into the details to get a better of picture of what’s going on at the university to support innovation, startups, and entrepreneurs. 

“We Don’t Need No [full-time MBA] Education” highlights the meaningful startup and entrepreneurship efforts at UST, as the university innovates its own educational offerings. 

Our Senior Analyst, Mike Schulte (JD/MBA ’17), shared his experience and insights into the university including these highlights: 

Events

Here is a mix of upcoming events for investors, founders, and/or ecosystem supporters. All events listed are virtual unless otherwise noted.

Portfolio News

Flywheel is new to the Great North Labs portfolio! Flywheel is the leading research data platform that provides the tools needed for data import, automated curation, image processing, machine learning workflows, and secure collaboration. By leveraging cloud scalability and automating research workflows, Flywheel helps organizations scale research data and analysis, improve scientific collaboration and accelerate discoveries.

Allergy Amulet launched their product! “The world’s smallest & fastest consumer food allergen sensor” quickly sold out. Sign up on the Allergy Amulet website to receive info on future release dates. 

“Flywheel raises $15 mn co-led by Beringea and 8VC”. Flywheel’s series-B round included Great North Labs as well as well-known global VCs.

“Venture capitalists invested a record $1.9B in Minnesota in 2020”. The $1.9B in VC included EmpowerU’s recent raise, along with Bright Health, Arctic Wolf, and Revol Greens. 

See our Job Board

May newsletter
Great North Ventures

$40M Fund II Raised!

Great North Ventures Raises $40M Fund II
Great North Ventures

Great North Ventures Raises $40 Million Fund II

Investment Thesis: Fund II Strategy
Great North Ventures

Investment Thesis: Fund II Strategy

Investment Thesis: Community-Driven Applications
Great North Ventures

Investment Theme: Community-Driven Applications

Great North Labs Newsletter December 2017
James DonFrancesco

Great North Labs Newsletter – December 2017

Rob-Back-To-The-Future-wide
Rob Weber

A Letter To My Younger Self

mixed icons with brown color and tech theme
James DonFrancesco

Great North Labs Newsletter