Latest / The Inspired Stories Podcast / How Marshall Hawks Helps Founders Reduce Equity Dilution with Venture Debt Deals

Transcript

How Marshall Hawks Helps Founders Reduce Equity Dilution with Venture Debt Deals · The Inspired Stories Podcast

0:04
Welcome to another edition of the Inspired Stories podcast,
0:08
where leaders share their experiences so we can learn from
0:11
their successes and be inspired by how they've overcome
0:14
adversity. My name is Anthony Kotaspodi,
0:17
and today's guest is Marshall Hawks.
0:19
He is an author, speaker and advisor on venture finance and
0:24
the author of Venture Debt Deals, a book that helps
0:28
founders understand how to fund growth with less equity
0:33
dilution. Now with more than 20 years in
0:36
venture banking and lending, Marshall has held key roles at
0:40
Silicon Valley Bank, SVB, Wells Fargo and Comerica Bank.
0:45
Most recently, he led relationship management in
0:48
Northern California at SVB and was also responsible for the
0:52
bank's in house private credit team.
0:55
He has provided venture debt to hundreds of high growth tech
0:58
start-ups over his career, including Twitch, Airbnb and
1:03
Fitbit. He holds a degree in economics
1:06
from Sonoma State University and continues to share his expertise
1:10
through speaking engagements and training sessions.
1:13
Now before we get into all that good stuff, today's episode is
1:17
brought to you by my company, Add Back Benefits Agency, where
1:20
we offer very specific and unique employee benefits that
1:24
are both great for your team and fiscally optimized for your
1:27
bottom line. Imagine being able to give your
1:30
employees free access to doctors, therapists, and
1:33
prescription medications. And here's the fun part, the
1:36
program actually puts more money into your employees pockets and
1:41
the companies too. One recent client was able to
1:44
increase net profits by $900 per employee per year.
1:49
Results vary for each company and some organizations may not
1:52
be eligible. To find out if your company
1:54
qualifies, contact us today at AD back benefits.com.
1:58
All right, back to our guest today, the author of Venture
2:01
Debt Deals, Marshall Hawks. Thanks for making the time to
2:04
Share your story today. Thanks, Anthony.
2:07
Glad to be here. So how did you get your start in
2:10
the Venture world? Where did this first unfold?
2:14
If you go back far enough, and I'm going to take it one
2:18
generation, maybe 2 generations back quickly and it'll be a
2:20
quick to the present day. My parents are both originally
2:23
from Arkansas and my grandfather happened to own and run a pawn
2:28
shop of all things for almost 50 years in the northeast corner of
2:32
Arkansas, which means I sort of lived a little bit of an inside
2:35
like Pawn Stars the show for a while.
2:38
It's not nearly as glamorous as that show makes it, but pawn
2:41
brokering is kind of the earliest form of banking where
2:45
you know, you have somebody come with an item of value, you give
2:48
them some money, a loan, you keep the item of value.
2:51
If they don't come back, you keep that item.
2:53
If they do come back, they give you some money plus a little bit
2:56
that same money and then plus some interest and you give that
2:58
in back. Goes back thousands of years
3:00
actually. So makes sense that I ended up
3:03
into venture banking or lending from that perspective.
3:05
But actually my father, who also grew up messing with some of
3:09
that pond stuff, decided he didn't want to stay in Arkansas,
3:11
nor did my mom. He was a electrical engineering
3:14
degree out of University of Arkansas.
3:16
Went to a bunch of different tech roles around the country.
3:19
I was born in Texas. My dad worked for Texas
3:21
Instruments and then moved early in the 80s.
3:24
I was about 6 months old when I moved to California.
3:27
My dad went into a number of different engineering and then
3:30
more executive level roles at a variety of tech and then venture
3:33
backed tech companies to the point of helping take a company
3:37
public, being CEO of a couple different companies after that.
3:41
Then he made the transition into venture capital for, I don't
3:44
know, about 25 years now. He's been in the investing
3:47
world, which he's more retired partner emeritus guy now.
3:51
So I got to grow up in California right as Silicon
3:55
Valley was really taking off with a father who was in the
4:00
venture backed company land as a technical guy, then more of a
4:03
business guy after that. And then actually in my sort of
4:06
formative college and early career in the banking world, he
4:11
was an investor. So I coming out of college
4:13
economics degree, which as you nicely pointed out from Sonoma
4:18
State only means I can really draw a mean graph.
4:21
That's about the only skill I have from that also means I know
4:24
incentive matter, incentives matter.
4:26
But I didn't know what I wanted to do.
4:28
I didn't have a technical degree, didn't necessarily think
4:31
I can get directly into the technology world.
4:33
So I was lucky enough to go to Comerica Bank who had a training
4:36
program and a tech lending sort of arm within the institution
4:41
from an acquisition they've made.
4:42
That was my way to get into and be close to the technology in
4:47
the venture. Backed company in investing land
4:51
and never left until early in 2025 to become an author.
4:56
So you grew up around this. Did you know that you wanted to
5:00
be in it and talked with dad about, you know, what this might
5:04
look like in a path forward? Or did you kind of stumble into
5:07
that first position at Comerica? I don't think anybody really
5:10
goes to college or maybe even in high school thinking, oh, I want
5:14
to be a banker. Like banking is adrenaline pact.
5:17
Maybe some do, maybe investment banking.
5:19
I don't know, you know, that banking was not the thing.
5:21
I set out on the banking role and then roles after that were a
5:25
way for me to be sort of connected to the technology
5:30
ecosystem, which may be incorrectly.
5:32
At the time, I sort of thought you had to have a technical
5:34
degree. I wasn't ACS major.
5:36
I didn't have a double EI can do a fair amount of technical
5:40
things having grown up with five PCs in my house in the early 90s
5:44
but didn't have a degree so thought that was the way I had
5:47
to go. Which means banking just more
5:49
the avenue to have access to the so it.
5:51
Was really the tech that you wanted access to?
5:54
Yeah. For sure.
5:55
That was the draw for you and banking was a means to that end.
5:58
Yeah, banking was not the the the goal for sure.
6:01
It was just a nice conduit for me to get to talk to lots of
6:06
great entrepreneurs building interesting things.
6:08
And so where was it that you first started to build this
6:11
foundation of understanding the value of venture debt?
6:17
Well, you go into Comerica Bank, where I started my career, you
6:21
go through normal commercial banking sort of training there
6:24
of how to lend money to normal companies.
6:26
And then you go to this other group, their tech and life
6:28
science group, TLS is what they called it.
6:31
I think even to this day, though, they're just being
6:33
acquired by Fifth, Third Bank, if I recall correctly.
6:36
Comerica that is that the way that that group thinks about
6:41
banking and obviously the broader venture banking sort of
6:45
venture lending ecosystem is 180° different than how normal
6:49
banks would think about lending to normal businesses.
6:53
You know, most of the the venture backed companies in the
6:56
world are entrepreneurial companies.
6:57
Frankly early on like you have no corporate history, you're
7:00
probably not profitable. If you've raised venture money,
7:03
you certainly are not profitable.
7:04
You're going to be burning cash for a long time.
7:07
You have minimal assets, you know, know, maybe the
7:11
entrepreneurs might be first time CEOs and there's a lot of
7:14
these things that are the exact opposite of what commercial
7:17
banks in general have ever said they wanted to do with.
7:20
And, and the ideal client looks very different than that.
7:23
So for me, that was very interesting to say, oh, there's
7:26
this, this lending sort of tool or subset of tools you can bring
7:30
to bear and help this very atypical type of company go
7:34
faster, ideally help people own more of their company down the
7:40
road when they have a good outcome.
7:42
That that sort of tool venture debt was what you started to
7:46
learn about. And you know, hopefully you get
7:49
a few companies to take when I started at Comerica Bank.
7:52
So really 25 years ago when I started my careers where I
7:54
started to really understand the the lending ecosystem that could
7:57
be brought to bear with technology companies.
7:59
So it's interesting that you cut your teeth at a more traditional
8:03
bank because it. Yeah.
8:04
As you were sort of saying, and is as an outsider to the
8:07
industry, I think about it and I'm like, yeah, bank, they want
8:10
collateral, they want revenue, right?
8:12
They want proof that you're basically they want proof that
8:16
you don't really need their money, right.
8:18
Exactly. And, and so how is it that how
8:21
many years ago was this 20 some years ago that Comerica was
8:24
like, Oh no, we're going to approach this differently?
8:27
I mean, Comerica was coming in almost in the middle of the game
8:29
to be honest. If you go back to the early,
8:31
late 70s, early 80s is really where the industry got started.
8:35
At a very small level. You have Comdisco, which was
8:38
doing equipment leasing or venture leasing, which is
8:42
collateral based financing of equipment to venture back
8:45
start-ups. So it's risky but still has
8:47
equipment sort of sitting behind it, which is probably the
8:51
earliest version of venture debt if you want to call it that.
8:54
The first private credit fund focused purely on lending to
8:57
venture backed technology start-ups was Western Technology
9:00
Investment or WTI started I think in 1980 or 81.
9:05
SVB, my former most recent employer of 16 years, started in
9:08
1983, ironically with a bunch of guys sitting around a poker game
9:12
where they all worked or were related to Stanford University.
9:17
And the husband and wife couple that was trying to get a bank
9:20
account opened when they founded Cisco Systems couldn't get a
9:25
bank. So they said, oh, in in addition
9:27
to the lending part, which is sort of secondary, like how can
9:30
we create a bank? This group of guys who had, you
9:33
know, money and time, they created SVB, which became the
9:37
first really venture bank that was focused purely on these
9:42
types of companies. Comerica again in the 80, sorry,
9:44
in the 2000s, they had come in, they bought a another bank
9:49
called Imperial Bank and they had decided that was a sort of
9:53
slice of the ecosystem they wanted to go after.
9:56
So they were. They were good at it, but they
9:58
were not certainly early and they weren't the largest by any
10:02
stretch of the imagination. SVB, where do they rank in terms
10:06
of size in the venture debt space?
10:10
Certainly over the last 30 or 40 years SVB is deployed by far the
10:15
most capital to venture backed start-ups of all types probably
10:19
around the world. So have a few countries.
10:22
That's because you know, all of the companies that are earlier
10:25
on in their life cycle who are taking venture debt would take
10:27
it from a bank. We could talk about the
10:28
difference between banks and private credit funds if you'd
10:30
like at some point. But banks do the largest number
10:33
of deals by far. And if you have that all up,
10:36
aggregate dollars deployed or even larger.
10:39
SVB was as before March of 2023 when SVB had its really shining
10:45
moment in the sun. For anybody who didn't know SVB
10:47
at the time, they all knew the name when the bank sadly went
10:50
through a failure, but it was the £800 gorilla.
10:54
It worked with 50 plus percent of the venture backed companies
10:58
at the time and today it's nicely the US organization as
11:03
part of First Citizens Bank. A bunch of great former
11:06
colleagues of mine are still there and I would call them more
11:09
of like the 650 to £700 gorilla now.
11:11
They're still very, very dominant player in a lot of
11:14
industry or a lot of these sub niches within venture backed
11:17
technology. And I'd say they're probably
11:19
still the largest. While I don't know the exact
11:20
dollars having left almost a year ago now from SVBII would
11:24
argue that they are still by far the largest deployer of venture
11:28
debt in terms of numbers of deals, total dollar size.
11:33
But there are a number of other players both in the venture
11:36
banking world pre and post SVPS or failure than acquisition.
11:39
And then private credit is kind of the asset class du jour these
11:44
days for people in the investing world.
11:46
Venture debt is a small slice within that, but there are now
11:49
way more players in venture debt from private credit than there
11:52
have ever been for a number of reasons.
11:54
OK. So break that down for us.
11:56
Assume that I don't know anything about venture debt or
11:58
private credit. Out of these two worlds
12:01
intersect, What's the difference between them?
12:03
Well, venture banks, that second word, right?
12:05
They're looking to be the bank to the companies they work with.
12:08
So they want that company or companies to use them for all
12:13
the banking services, products, you name it, thing that just a a
12:17
business is going to need. So that could be, you know, your
12:19
basic checking account, running payroll, paying vendors, credit
12:23
cards, foreign exchange, all of that stuff is not, you know,
12:27
related to lending. That's just that, you know, bank
12:29
wants to work with people, particularly venture banks.
12:31
The idea is they're trying to work with someone from the start
12:33
up, you know, dog garage idea phase through to what they hope
12:38
is a multi billion dollar public company.
12:42
They'll do lending. I'll come back to that to us in
12:44
a second. Private credit funds are
12:46
structured purely to provide debt to companies.
12:50
So they don't care about the banking at all.
12:52
You can do whatever you want with your money.
12:55
From a cash management perspective, you could have 5
12:58
banks, you could have 1, you could have 20.
13:00
It really doesn't matter and they're structured.
13:03
Private credit is structured a lot more like the venture
13:05
capital industry in that they raise a pool of money mostly
13:09
from private investors. Some have public entities as
13:12
well and they're looking to get a return on those dollars that
13:17
is equivalent to sort of not the venture capital world in terms
13:21
of time duration, but a lot of the same IR, Rs and sort of 20%
13:24
returns are are there in the private credit world.
13:28
So, sorry, real quick to to get 20% returns in the private
13:32
credit world. Am I correct in believing then
13:35
that the interest rates that they're charging are well north
13:38
of that? Yeah, not well north of it
13:40
they're below 20%, but I'll tell you how they get to the
13:42
economics. Let me spectrum of when
13:45
companies raise money from who. So the the venture banks
13:48
primarily are looking for companies early on in their life
13:53
cycle so they can do all the banking and they use venture
13:55
debt in a lot of cases is customer acquisition financing.
13:58
They would say, OK, Anthony, you've raised some money Series
14:02
A financing from a number of venture firms or a venture fund,
14:05
let's lend you a little bit of money on top of that so you can
14:07
get a little further with the equity and debt.
14:09
And for that you're going to move all your banking and do all
14:12
that with us that time that type of capital tends to be on the
14:17
less expensive end of venture debt as companies scale give.
14:22
Us an idea of the range. Today, in today's Mark, it's
14:26
going to be sort of Wall Street Journal Prime plus, call it 1 to
14:29
2%, meaning you take that underlying index, add a spread
14:32
on to it, that interest rate floats based on the underlying
14:35
index. Most of the time most venture
14:38
lenders will have a fee or fees on the front end and something
14:41
on the back end of the life of the three to five year piece of
14:44
capital and they will ask for a ownership stake in the business.
14:50
So venture debt is not, you might hear it described by
14:54
different lenders depending on how honest they are as non
14:57
dilutive capital. And while that's mostly true,
15:01
it's less dilutive, less dilutive, That's the better way
15:04
to describe it. It's the more honest way to
15:06
describe it by comparison to raising venture capital dollars,
15:09
it's way less dilutive, but you're still as a entrepreneur
15:12
and a company going to give your lender a ownership stake in the
15:16
business via a warrant, which is a stock option.
15:19
But for a company, essentially it's the right to purchase stock
15:23
in the future to set price. The dilution that that comes
15:26
with that is, you know, order of magnitude or magnitudes lower
15:30
than the same amount of equity dollars.
15:33
But let's say in today's market for those bank deals, you're in
15:36
the, I don't know, 10 to 30 basis points of fully diluted
15:41
ownership, which again, that's a little technical, but it's .1 to
15:44
.3% ownership in the business. You go to the upper end where
15:48
private credit tends to play. I should say venture banks are
15:51
kind of 0 to call it $20 million of capital right now is where
15:55
that breaking point starts to show up.
15:56
And then beyond that, you'd have private credit firms that are
15:59
willing to provide companies 50, a hundred $150 million of
16:04
capital. And to your question, the cost
16:08
of that capital given sort of how much they're providing, the
16:11
lack of any kind of bank competition up at that end, the
16:15
real risk of providing, you know, companies fifty, $100
16:18
million. And if that company doesn't work
16:20
out, that's a problem. Private credit firms tend to be
16:23
somewhere in like the 11 to 1213% interest rate.
16:27
The underlying index may vary. They'll have a fee on the front
16:31
end, a fee on the back end. So you get to probably about 15%
16:33
return in there. And then the return on top of
16:35
that is the equity position they will take via warrants.
16:39
Sometimes they want to invest in companies as well by giving the
16:41
company dollars then they hope to get a return in the future.
16:45
But the best private credit firms are going to be able to
16:47
get sort of in that 20% IRR number or greater.
16:50
The multiples on the dollars, again, very, pretty technical
16:53
thing there is very different than the venture capital
16:55
industry. The multiples are way higher and
16:58
venture capital because they go longer duration 10-15 years
17:02
before a company becomes successful and private credit
17:04
lines you're getting your money back much faster.
17:06
But the IRRS are sort of similar.
17:09
And you've got some sort of a early like a first position on
17:12
those loans then? Collateral position, yeah.
17:16
So they whether you're a bank or a fund, you're always going to
17:19
have a lien on the underlying business down.
17:21
Back to the start of our conversation, These businesses,
17:24
if a venture backed business depending on its scale doesn't
17:27
work out, there may not be a lot of assets there.
17:30
There may not be lots of things that have any real value.
17:33
But yes, lenders are going to be aside from a few people ahead of
17:37
them in the payment waterfall. Things like statutory
17:41
obligations in the United States that's like PTO or vacation days
17:45
or number of things for employees that would get paid
17:47
out first. But any other proceeds of any
17:50
kind of wind down or sale of a business or just not good
17:55
situation that's going to go to your.
17:57
It's interesting, I didn't realize that those employee
18:00
benefits, the PTO, etcetera would would need to be paid out
18:03
first. I mean, it's, it's glad to hear
18:05
it, but it's great. But I don't think it makes
18:07
employees feel that great in those situations because all
18:09
their stock has gone to 0 because they're at the bottom of
18:12
the waterfall typically in common stock.
18:14
But but yes, they get certain things that are viewed a bit
18:18
like earned wages paid out before anybody else, including
18:22
lenders. Difference between private
18:24
credit and venture banks would be venture banks are always
18:28
going to be first. They have a first lien private
18:31
credit funds of all types, lending to any kind of parties,
18:33
including venture backed companies are a lot more willing
18:36
to be in a second lien or junior position, which means they're
18:39
behind somebody else. There might be a bank ahead of
18:43
them or they they're willing to provide capital in a variety of
18:45
forms. So one of the benefits you might
18:48
say, why would I take money at higher cost from a private
18:50
credit fund is that they're willing to do things with a bit
18:53
more flexibility around the banking side or the lean
18:55
position it'll take. Whereas banks are a little bit
18:57
more within a subset of sort of rules they live in.
19:02
Now, I don't know if you can share names, but let's dive into
19:07
an example of whether it was at Comerica, SVB or one of your
19:11
other stops where a venture debt deal worked out really well for
19:15
the client and why. Sure.
19:18
Well, in the book that I wrote, Venture Debt Deals, I have 5
19:21
case studies, four of which are companies that I personally lent
19:24
money to and was the lead on. And the 5th is actually a story
19:28
of SU BS process of going through the failure in March of
19:31
23, coming out the other end and sort of the lived experience of
19:34
a relatively senior person within the firm.
19:38
Of those four case studies that I wrote about in the book, one
19:41
in particular that I'd call out that is a great example of what
19:45
you just asked, Anthony, is Twitch, which most people would
19:48
know if you happen to have kids or you're a E sports or video
19:52
game person. They are, to this day, sort of
19:55
the dominant E sports media company owned by Amazon now.
20:01
It's like a broadcast platform for people who are.
20:03
You can go watch people, you can watch live as other humans play
20:07
video games. That's that's what E sports
20:10
generally is. You can also very easily
20:12
broadcast your own play to, you know, your parents, dozens of
20:16
watchers or you know, maybe 10s of thousands.
20:19
They've live, they have video on demand, sort of the whole video
20:24
suite for people playing digital sports.
20:27
So video games. We worked with that company.
20:31
It was literally the first transaction I did when I joined
20:34
SVB in January of 2009, which was, if you might recall, you've
20:39
got same amount of Gray hair as I do.
20:40
That was when the financial world was sort of ending and all
20:43
kinds of things in the banking world unrelated to SVB, you
20:45
were, you know, having problems. But at the time, the company
20:49
wasn't called Twitch. It was called Justin TV, and
20:53
that was named after one of their founders, Justin Kahn.
20:56
And they were just trying to be live streaming video of any type
20:59
for anything on the Internet. They thought it'd be a novel way
21:03
to attract viewers and consumers by strapping a camera to
21:07
Justin's head and live streaming his life for I think a number of
21:10
months 24/7, like literally camera up here.
21:13
I think they turned it off for the bathroom, if I recall
21:15
correctly. But like that was these days
21:18
maybe less, less novel or less interesting.
21:21
But back then that was sort of, you know, must see TV.
21:24
And we, because of the, you know, the venture investors
21:29
involved and they went through Y Combinator, one of the best, if
21:32
not the best incubators on the the planet tech incubators based
21:36
here in San Francisco. We lent them a little bit of
21:39
money, not sure exactly we knew what the business was going to
21:42
be, but we lent them a small chunk of money.
21:45
And then over the span of the next two or three years, they
21:48
had to work hard to see if they could make that business of live
21:52
streaming to others a thing. And most of it frankly didn't
21:57
work all that well. At least there wasn't a good
21:59
business there, but they figured out there was one piece of the
22:02
business where they got huge amounts of time on site, huge
22:05
amounts of interaction from users who would come back every
22:09
day to watch people, and it was people who were broadcasting
22:12
video game play of all things, bizarrely.
22:15
So they made the decision to pivot, to be focused purely on
22:20
that, renamed as Twitch. And I wouldn't say the rest is
22:23
history. There's a ton of hard work, all
22:24
of this successfully driven by the founders and the team there.
22:27
I was lucky just be involved in sort of helpful.
22:29
We provided a bunch of capital over the years, sometimes when
22:32
it made sense, sometimes when arguably we were a little
22:34
worried that that money was going to be not coming back to.
22:38
US and so each time you're putting in more capital, is it
22:40
in the same sort of venture debt structure where there's some
22:45
interest rate attached to it and you're getting another slice of
22:48
equity? Yes, in the case of Twitch, that
22:51
was what happened. I think 4 strips of capital
22:54
across the span of four years where back then also clouds or
22:58
servers were not a thing. They were having to buy, you
23:01
know, infrastructure servers to run all this live video and
23:05
needed to finance it. Otherwise they'd have to use the
23:07
equity dollars they'd raised, which is not a very good use of
23:10
that kind of money. So yes, we provided not even
23:13
tied to equipment, we just gave them, hey, you guys can use this
23:15
money for equipment or anything else you'd like.
23:18
Yes, those are the right economics.
23:19
We got a little bit of equity stake.
23:22
We even helped bridge to the sale of the business to Amazon.
23:26
At the time that it happened, they had gone through a couple
23:29
of previous bidders and we helped get them to the end
23:33
outcome where they got bought for a little bit more than a
23:35
billion dollars. And at the end of it, if you did
23:38
the modeling, you know, the amount of capital we provided
23:42
relative to what they at the time, we sort of they thought
23:45
about could we raise equity versus venture debt?
23:47
Because usually the companies that raise venture debt still
23:49
could go raise equity if they want to.
23:51
In fact, that's, that's actually a good place to be because that
23:54
means maybe you got things that are generally pointed in the
23:57
right direction. Things are working.
23:58
But if you get a little bit more time from the runway that the
24:02
venture debt provides, the next time you go out and raise equity
24:04
will be at a better price. And therefore, you're getting up
24:07
less of your business to new investors, less dilution.
24:11
That's good for everybody. So at the end of the day, it's
24:13
probably something like 5 to 10% of the ultimate outcome of
24:16
Amazon's purchase of Twitch that stayed in the pockets of
24:21
primarily the founders, the employees and the existing
24:24
shareholders, which also included SVB.
24:26
At the time. We were a little bit less than
24:28
like 1% owner when they got bought, but.
24:31
You're saying by using the venture debt structure that SVB
24:34
was offering that the whole Twitch umbrella got to keep an
24:38
extra 5 to 10% equity in their pockets versus going out and
24:43
raising more traditional like venture capital?
24:45
Yeah, they raised and they've raised plenty of venture capital
24:48
already. But had they gone to raise more
24:50
because they needed it earlier, they would have given up.
24:53
And we knew some of the data because they talked about what
24:56
they might raise equity at, at what valuation.
24:58
So we did some of the math and yeah, the business ended up
25:01
being able to have more of the proceeds of the good outcome
25:05
that they earned and deserve from having used venture debt as
25:10
part of their capital structure. So that's one of the best
25:13
examples I have of, you know, sort of trusting that
25:16
entrepreneurs are going to figure it out early in their
25:18
career. We provided more capital as
25:20
things started to really point in the right direction and work.
25:24
And then they were able to find a great home for the business
25:28
and are again still the dominant player almost, you know, 20
25:33
years later now within Amazon. OK.
25:37
So that is a case study from your book venture debt deals of
25:41
how things worked out really well.
25:44
And we would love to say that that's how it always goes.
25:47
But is there a case study we can talk about where things didn't
25:52
work out so well? Sure.
25:55
Venture capital backed companies, you talked to any
25:58
investor or even any entrepreneur, if they're, you
26:01
know, honest or a repeat founder, you know, the default
26:04
outcome is still failure even. And we're talking in late 2025
26:08
right now, Anthony. And there's sort of this mania
26:11
around AI businesses, what not, but even the most AI business,
26:15
I'm going to be willing to bet all kinds of money that I have
26:18
they're going to end up in failure.
26:19
They'll be some great successes. But that is the model, right?
26:23
One out of 10 venture backed companies you hope turn into the
26:27
next SpaceX or Open AI or Apple, you name it.
26:32
But most of them don't. They don't become household
26:34
names. So there is a lot of real risk
26:37
both in venture capital land that your dollar is going to go
26:39
to 0. But in venture lending,
26:41
certainly the thing you're always paying attention to as a
26:46
lender, you're a little bit like Yosemite Sam.
26:47
If you happen to watch the Looney Tunes like we were as a
26:50
lender, always walking around with a dark cloud over her head
26:52
just raining on us. Like as we're thinking about the
26:55
how many different ways could something not work?
26:57
And how do we make sure we anticipate that and avoid it.
27:01
But inevitably, if you've been a lender in the tech ecosystem for
27:05
anything more than a couple of years and you're going to be
27:08
faced with situations where there's real potential loss of
27:13
capital, companies that are not working, companies that are
27:17
going to fail, companies maybe that spectacularly fail.
27:20
So yeah, there's definitely plenty of plenty of that.
27:25
You hope to avoid some of that just with your early
27:26
underwriting. You also hope to avoid, you
27:28
know, really bad scenarios by everyone around the table, the
27:31
board, the company and the, the bank or lender, private credit
27:36
funds sort of coming to an agreement that maybe this isn't
27:38
working and maybe a little more of a softer landing.
27:41
But I've had a number of scenarios.
27:43
I, I talk about another one in the book that I actually
27:45
anonymized because I felt like it.
27:47
I didn't want to throw salt in the wound of anybody, but sort
27:51
of an early fintech company that we lent money to where they've
27:58
been going for a while. They're on their Series G
28:01
financing. Anytime you get to the middle of
28:03
the alphabet and venture capital land, unless you happen to be
28:07
right on the cusp of going public, generally speaking, if
28:10
you're in the middle of the alphabet of the the sort of
28:12
named equity rounds that you raised, that's not a good thing.
28:17
There's been ups and downs. This company certainly had
28:19
plenty of that. They had customers, they had
28:21
some revenue. They were in the single digit
28:23
millions of revenue. We had lent them a bunch of
28:26
money, SVB that ironically had been a member of another bank
28:29
I'd worked for, right. Customers are not a member.
28:31
When I was working out of the bank, we had lent the money
28:33
years ago. So I sort of knew a bit of the
28:34
history as I came to the company.
28:38
I came to work with company SVB via a promotion to run a
28:41
separate team that had this company within it.
28:43
And my team and I started to work and sort of get under the
28:47
covers of the whole portfolio. I look at this company, I'm
28:49
like, oh, I know the history of this particular company.
28:51
It's called Phone Tap and the the book.
28:53
That's not the real name. They were going to raise that
28:58
Series G and they were not giving us the signs that it was
29:03
going to go well. They didn't have a lot of
29:06
traction. They told us sort of out of left
29:10
field at one point as we were asking for status updates.
29:13
And this is within 30 or 60 days of me taking over and running
29:16
this new team with an SVB that it wasn't going well and they
29:21
thought they might have to start the shutdown process of the
29:24
business the next week if there wasn't something going well.
29:28
And that's never a good thing to hear as a lender, first of all.
29:32
Second of all, when it surprises you that that might be the case,
29:36
that's bad. And then we actually talked to
29:39
the board members of the company, which we do, any lender
29:42
does regularly. That's a normal thing of
29:44
checking in at the initiation of a debt deal ongoing.
29:47
And certainly when things aren't going well.
29:51
We talked to the 2 main board members, people we knew really
29:54
well, talked to for a long time, worked with over a litany of
29:58
different portfolio companies. And it's one of the clearest
30:01
examples on the other end of from Twitch where they said,
30:04
guys, we are kind of done. We're not going to invest any
30:07
more money in this business. We don't have the capacity.
30:10
It's been going for too long and they haven't made progress on
30:13
this new fundraising. It's rare that you hear that
30:18
kind of explicit we're done statement.
30:22
Not sure that was getting to the founder and CEO.
30:25
The original founder was still a CEO.
30:27
We sort of came back to a conversation with them within a
30:31
couple of days, and this is paraphrasing a lot, but they
30:34
actually asked to borrow a little bit more money and we
30:38
said no, we can't do that unless you have other equity coming in
30:42
alongside it because we don't want to be last money into the
30:44
business. The founder and CFO didn't take
30:49
that news very well. They viewed me as the new guy
30:54
who basically said your baby's not beautiful and you know, how
30:58
dare you say no to us. And that CEO read me the riot
31:04
act in front of a number of other people.
31:06
And the big group meeting he wanted to have the next couple
31:08
days after that said that I should never be in a position to
31:12
leadership, that I should never make decisions about lending
31:14
ever again in Silicon Valley. And a variety of really.
31:19
A lot of big emotions. There a lot of big emotions and
31:21
because of the way lending works, you worry about things
31:24
like lender liability. So you really can't sit there
31:26
and have a debate, at least the person who was making decisions.
31:29
So I'm sort of sitting there in a meeting with four people when
31:32
this guy's yelling at me for about 58 minutes of a 60
31:34
meeting, 60 minute meeting. Company ultimately started sort
31:39
of a shutdown process within the next, I call it next month or so
31:43
because they just couldn't get equity interest to the degree
31:48
they needed it. Ultimately, we got paid back out
31:51
of that because they had some IP that ultimately was valuable.
31:55
Unfortunately, none of the employees found a home.
31:57
The founder that yelled at me, you know, he never worked again.
32:02
I think in a real context, mainly because he was sort of
32:05
the tail end of his career and it's one of the only times I
32:09
can. It's a very vivid memory of just
32:11
being, you know, accosted for the better part of an hour from
32:14
someone who blamed, you know, individually, solely me for his
32:19
business. Was there any part of you that
32:22
like took that? How do I want to ask this?
32:25
I mean you take it personally because somebody's like reading
32:28
you the riot act in front of peers and Co workers and but did
32:33
you believe what he was saying? Was there any part of me that
32:36
you believed in how he was demeaning you?
32:39
Like, oh, maybe he's right about some of this.
32:41
No, no, not in this the more disparaging comments.
32:46
As time has passed, I think I've gained a a lot of empathy both
32:51
when that initially happened to this day around just how much
32:57
having seen it with both my dad, this particular CEO, other
33:00
founders I've worked with, just being the founder and CEO, this
33:04
of a company that's your baby and these things you live and
33:07
die by how good or bad these companies are doing.
33:10
And a lot of times there's a lot less good days and there are bad
33:13
days. Just the level of stress, how
33:16
lonely that role can because he may not have been able to
33:20
express how frustrated he was to anybody else within the company.
33:23
Because you want to have a good sort of shadow of a leader that
33:27
you're not worried or anything like that.
33:30
So I'm just getting a lot of empathy for like I, I can
33:32
appreciate why he was fresh and we were an easy, I was an easy
33:36
person to blame, even though not really the cause of anything and
33:40
he could take it out on me. And that I don't, I don't fault
33:43
the guy for that. I certainly wish him well and
33:45
and later in life, but I think it also gave me again, empathy
33:49
for just how personal and intense the journey of any kind
33:54
of business, let alone venture back.
33:56
But just, you know, running a business as a founder and you
34:00
know, the success or failure of that company is going to you.
34:06
You're going to wear it on your sleeve.
34:08
You're going to, you were going to have that tattooed on your
34:11
arm. Forever you, you called it the,
34:12
the baby. You know, it's your baby.
34:14
And for people who haven't been through the process before, it
34:18
just sounds like one of those things you just say for somebody
34:22
who's been through it before, it it, it feels like a child,
34:26
right? And when it works well, it's the
34:29
most elating thing in the world. Excuse me.
34:32
And when it doesn't, I don't mean this to sound like over the
34:36
top. It really feels like a death,
34:39
Yeah. Like when something you have
34:40
worked on, you put your blood, sweat, tears and money into and
34:43
it doesn't work out and you have to wind it down it.
34:46
There is a mourning process that takes place that I think that
34:48
people who haven't been through it don't appreciate.
34:51
For sure, having not even directly gone through it, but
34:53
I've seen by extension, lots of people, this one entrepreneur,
34:57
but lots of others where it wasn't them yelling at me, but
34:59
just like the the business didn't work and they did great.
35:03
They gave everything they had, you know, something just didn't
35:05
work out for whatever reason. It's not necessarily always just
35:08
the company got something wrong. The market could have moved.
35:10
The technology was early, you name it thing.
35:12
And seeing them have to go through that and both the, you
35:18
know, personal and professional implications of failure are, you
35:21
know, felt pretty, pretty uniquely by by founders.
35:26
So Marshall from your nearly for two decades plus, I should say,
35:31
in venture banking, your experience, what's the most
35:33
common misconception that founders have about raising debt
35:38
and how does your book venture debt deals dispel the myth I.
35:44
Talked about it pretty early on, just how and when to use venture
35:47
debt is probably one of the things that people, not as a
35:52
MIS, it's not a misconception, but I'm just not sure that
35:55
people always have a fully thought out process of when to
35:58
use this capital. And by that I mean, a lot of
36:01
people say I'm going to raise equity, doesn't matter when I
36:04
raise it. I'm going to raise a series of
36:05
ABCD and then immediately go raise venture debt after that to
36:09
get a chunk of sort of additional runway and capital.
36:13
And I got the benefit of that for years and SVB and other
36:17
places where people would do that and they would sort of just
36:21
have it as an insurance policy. They didn't necessarily have to
36:23
borrow the money immediately and they could decide when to draw
36:27
it down South. So that's not actually a bad
36:30
thing per SE. But I think the best use cases
36:33
for venture debt and it's a tool like any other.
36:36
There are places where you should pull it out of the
36:38
toolbox and there are plenty of places just like venture capital
36:42
fundraising, like you can royally mess up your company if
36:44
you take on too much equity or you take on too much debt.
36:47
Like both those things are very bad.
36:50
But I think companies having a well thought out use case or at
36:54
least a scenario planning ABC of OK, I'm going to borrow this
36:59
money and I need to know where and how I'm going to deploy it
37:04
to get further hit another critical business milestone or
37:08
two that will meaningfully drive the valuation of my business
37:14
when I go raise equity. Or if you're later stage
37:15
company, maybe it's you're going to be able to you think credibly
37:19
get to break even or be profitable by the time you, you
37:22
know, get to the tail end of the debt.
37:24
Some of the best companies have thought that through.
37:26
I would say most companies when they come to lenders haven't
37:30
fully given that, you know, the the depth of thought it might
37:34
need to be. So just making sure you thought
37:36
through before approaching lenders, you know, where and how
37:40
you might use this capital, I think is something that I've
37:43
tried to talk about in the venture, venture debt sense in
37:46
the book. And I think it'd be helpful for
37:50
people when they decide to, you know, pull that tool out of the
37:54
toolkit. Yeah, you make that the point in
37:56
the book that really venture debt is meant to extend your
37:59
runway, not replace good operating discipline.
38:04
Are there some flags, red or green flags, that indicate maybe
38:09
a founder is using this for the right or wrong reasons?
38:14
Well, the inverse of what I just described of trying to like get
38:17
people to always have a good use cases.
38:18
Some people would just say, hey, I need more runway just for the
38:21
sake of runway and hadn't really thought through where and how
38:24
that capital could be could be used.
38:27
That's usually a red flag or at least a yellow flag.
38:31
I guess I wouldn't call it like a red, red, red flag, but a
38:33
yellow flag. Other places where you know
38:37
venture debt can get off the rails is if you are trying to
38:40
raise it with less than sort of one year of your own runway.
38:44
That can typically get a lot of gets a lot of lenders sort of
38:48
Spidey sense and red flags up where or throws off a lot of red
38:52
flags where if you're that close to having to raise another
38:55
equity round, you know a lot of what's going to drive that
38:58
equity round is sort of known. And if you think you need debt
39:02
at that point, the the odds that you're going to be able to go
39:06
raise additional equity successfully is percentage wise
39:10
lower. We should stop for a second to
39:13
save most of what pays back venture debt from either banks
39:16
Oregon private credit funds. While it is certainly driven by
39:20
the performance of the business, the functional part is that a
39:25
company will go raise more equity from venture capitalists
39:27
in their next round, hopefully at higher valuations.
39:30
But even if not, some of those dollars will be used to repay
39:34
venture debt. So what all lenders care about
39:36
is likely access to capital. Who are the existing investors,
39:42
how much money those funds have to support companies if needed.
39:47
What is the history of those and you know venture investors and
39:49
supporting their portfolio through good and bad?
39:52
I mean, all of that is a big piece of the underwriting of
39:57
this kind of capital. You talk about how lenders
40:04
evaluate companies in your book, right?
40:06
Venture debt deals, financials, cap tables, investors, and the
40:11
intangibles. I'm using your quotes.
40:14
If you had to rank what really matters most today in this macro
40:18
environment? End of 2025, what's moved up or
40:21
down the priority list? I'm not sure that the priority
40:27
list changes too much depending on the macro scale, but what
40:31
people might think would be the ordering is probably different.
40:34
If you've never been a lender or taken on venture debt, Obviously
40:40
the the thing I just described, cap table investor syndicate,
40:45
what not is actually near the top of everyone's evaluation of
40:49
a business. Who are the existing equity
40:51
investors? What do we think of the pedigree
40:53
of those people? What's their track record?
40:56
How new or fresh are the funds that they have raised to invest
41:00
in these businesses? There's a huge amount of
41:02
diligence that goes into the cap table and even the human
41:05
dynamics of the people involved that is not other than the cap
41:09
table being for the company, like you're not looking at the
41:11
financials of the business yet, you're not looking at the
41:13
projections. You're looking at just who are
41:15
the owners. Because again, the likely
41:17
repayment of most venture debt comes from follow on equity
41:22
investing, which would be sometimes from that cap table we
41:25
just discussed, sometimes from new investors.
41:26
But understanding those dynamics are pretty key #2 is going to be
41:31
financials and projections. Historical financials might not
41:35
matter, particularly if it's an early stage business that just
41:38
started because they have none. Projections are always going to
41:42
be interesting. The number one thing every
41:44
lender knows with certainty is that projections are always
41:46
wrong. Just a question of which
41:48
direction. And what you're really looking
41:51
for with projections is how are these people running this
41:54
business thinking about the business?
41:56
What are the assumptions that went into it?
41:57
We don't care that the numbers on the page are going to move or
42:00
change or be meaningfully different like that's fine, but
42:02
the just the thought process around it.
42:05
So it's probably your top two things you look at.
42:08
There's other things that get near at the top of the list
42:11
depending on the particular type of business we're talking about.
42:14
Particular industries are going to care about thing like in the
42:17
life science and healthcare world, you're going to look at
42:19
FDA approval pipeline and a number of other things that are
42:22
pretty specific to that industry.
42:24
If you're building something physical, you're going to look
42:26
at, you know, what is in the build of build materials, where
42:30
you building this with a contract manufacturer or
42:33
yourself and that kind of thing. At the bottom of the list,
42:37
ironically enough, is sort of I don't want to I guess I'm
42:40
generalizing here, but like team is something that I think
42:43
venture investors look at a lot venture lenders sort of by
42:48
extension that there's already equity investors in the
42:51
business. What we and I say we as though
42:54
I'm still a lender. I'm an author now, but the the
42:58
you're you're willing to suspend disbelief and say, hey, listen,
43:03
venture investors that we know and like have bought this person
43:07
or these founders are at least credible at going after, you
43:12
know, whatever market they're trying or technology they're
43:15
trying to build. You could you make your joke
43:16
about the quality of venture capital investor diligence here
43:19
if you'd like, but the venture lenders get to not have to worry
43:23
about or spend as much time there because usually they're
43:26
not deep technologists, the lenders.
43:29
So you kind of have to take it on faith that these people might
43:31
be able to figure it out. So you sort of put team other
43:34
than if somebody has AI, don't know they're a terrible human or
43:37
something that you just don't enjoy working with.
43:39
Like team is kind of at the bottom.
43:40
And then you mentioned intangibles somewhere in the
43:43
middle, like investors, most venture lenders who are good see
43:49
tons of companies, even the ones they don't lend to.
43:51
And you start to get pretty good at pattern recognition of both
43:56
what's normal and in the good sense of like, OK, these guys
43:58
have their governance or structure of the business
44:01
figured out, OK. And not necessarily that the
44:03
company's going to be a rocket ship or what not.
44:05
But also the other version of like pattern recognition where
44:08
something, I don't know, a company just stands out uniquely
44:11
and how it feels or looks or you talk to 1000 founders over your
44:16
career. I'd probably talk to that or
44:17
more in my time. And you know, there's several
44:19
that you just remember and stand out.
44:21
Both bad in the sense I had one yelling at me in a room for 15
44:24
minutes of a 60 minute meeting, but good on the other end of
44:28
wow, this founder just had me roped into what this business
44:33
was going to become and it felt so different.
44:35
Another case study in the book I wrote about was Airbnb that I
44:38
was lucky enough to work with early on in their life.
44:41
Provide them some capital. I remember sitting in a meeting,
44:43
both walking into their office in their Rhode Island office
44:46
here in San Francisco before they moved to their current
44:48
headquarters. Both the office and culture just
44:52
felt starkly different than almost anything else I'd come
44:55
across and my career at the time.
44:57
And then sitting in a meeting with both their great CFO and
45:02
treasurer at the time, as well as Joe Gebbia, one of the three
45:05
Co founders and sort of telling the story of the business.
45:09
I you just we came out of those meetings and you know, the
45:12
intangible part of wow, this felt like a culture.
45:17
You know, we talked about culture being great, but you
45:19
could sort of feel it at that time back in 2011, 2012 when we
45:23
first sort of looked at providing capital for business.
45:25
And that kind of intangible pattern recognition is what I
45:29
think the best lenders use, not as the primary part of how they
45:32
diligence a company, but on the margin it would make you either
45:35
be, you know, more willing to be flexible or provide more capital
45:40
or in the other direction you might as well.
45:41
I maybe these things over here look great, but on the
45:43
intangibles tell me this is just not something's not right here
45:46
and we're going to not be as flexible as we might have been
45:50
otherwise. So Marshall, it's clear in
45:52
talking to you that you're very passionate, very knowledgeable
45:55
about venture debt. Is this the reason that you left
46:00
a comfortable job at SVB because you had to write a book about
46:03
this? What's the fire going there?
46:06
Yeah, my, my wife is really stoked that I left a nice good
46:10
paying, you know, relatively senior job to go be an unpaid
46:14
and depending on when this comes out, potentially even
46:16
unpublished author. The book comes out on January
46:18
20th, so 26. So we'll see if I'm published by
46:21
the time this comes out. I've also gained a better
46:24
appreciation of entrepreneurs everywhere by going into burn
46:27
mode in my personal life, taking our own money, putting it in a
46:30
barrel, lighting it on fire. That's that's really, really
46:32
fun. I had this idea back in 2011,
46:37
2012 actually about the same time when I was talking to
46:38
Airbnb, because in fact it's a prior guests of your show.
46:43
Brad Feld, general partner at founder group long standing
46:47
venture capital fund based in Colorado.
46:50
That is very well known. He's a big Blogger.
46:53
Over the years, he and his partner Jason Mendelsohn wrote a
46:55
book called Venture Deals. Obviously, my book is sort of a
46:59
play on their name that he was thankfully fine with.
47:02
That book was a sort of deep dive into how does a venture
47:06
capital investment process work, What you're going to encounter
47:10
as an entrepreneur, what is going to show up in a term sheet
47:14
from an investor where all these things mean?
47:16
What are the firms, you know, thinking about in the
47:20
background? And that was kind of a similar
47:22
work because there was a lot of asymmetry at the time between
47:25
entrepreneurs over here and investors over here.
47:27
Investors could look at hundreds if not thousands of companies
47:30
and negotiate the stuff all the time.
47:32
An entrepreneur might raise on one hand, you know, a number of
47:35
equity rounds in their life. And so you had potentially a not
47:40
only asymmetry but, yeah, power imbalance.
47:43
You know, entrepreneurs who weren't educated may be getting
47:45
taken advantage of in certain situations.
47:47
That book was hugely impactful. We bought a ton of copies of it
47:51
at SVB, but it took off an entrepreneurial community.
47:55
Tom's 4th edition. Still top one to book in venture
47:57
capital today, 1415 years later. Anyway, when that book came out,
48:02
I sort of said hey, there should be a venture debt version of
48:04
that book. After I read it, I was not the
48:08
right guy to write it at that time, both because I had more
48:10
hair on top of my head and less Gray on everywhere else and also
48:15
having a full time job and writing a book.
48:17
Even though Brad and Jason did it, I don't know how they did it
48:20
because it seems a lot. It seems almost insurmountable
48:25
to try and write a book while fully employed.
48:27
So Fast forward to the last year or so.
48:30
I happen to be at a conference put on by another great venture
48:33
firm, Lobby Capital, formerly August Capital.
48:36
David Hornick is also a big long time Blogger.
48:38
He and Brad are friends as a conference in Hawaii every year.
48:42
Hard life. I could I got to go there a lot
48:44
as a sponsor at SVB of it over the years.
48:48
My wife never gave me a lot of sympathy when going to a work
48:50
conference in Hawaii. By the way, they have a bunch
48:53
of. Rough jobs, somebody's got to do
48:56
it. Yeah, hard, hard life.
48:57
Someone's got to do it. User generated content is what
48:59
they call it. Or UG CS, where there's no other
49:02
content other than the attendees of the conference set up and
49:05
sort of lead conversation about interesting topics.
49:08
I sat in a conversation with Sarah Lacy, who was
49:13
investigative journalist for a number of years, founded the
49:15
site Pando Daily, sort of doing technology news for 15 years.
49:21
She's written three books. She's very delightful, human,
49:24
but also wildly inspirational. She gave a talk about how to
49:26
write your first book, and me and three other people in that
49:30
conversation of about 15 decided all to start writing a book.
49:34
From that conversation, I mean you had the idea of percolating
49:37
for a long time, but that was sort of the the spark that.
49:40
She she, she was impressive enough in her conviction that
49:44
she thought, you know, not should we, but you know,
49:46
generally people, she thought everyone has a book inside of
49:48
them. Question of like what it is and
49:49
how you get it out. Anyway, three guys, including
49:52
me, all on different topics, decided to go write books.
49:56
The two other guys kept their day jobs and kept writing their
49:59
book. I left mine just because I
50:01
didn't think I could juggle that, having a young family at
50:05
the same time. And then actually the other
50:06
thing about writing a book on the topic I'm writing it about,
50:10
there's time for him to do it. Working for a corporation and
50:13
writing a book on something that corporation might do, you know
50:16
you're going to get the amount of lawyers and legal review
50:19
involved in writing a book would be substantial anyway, but
50:22
certainly even more so in this case.
50:24
That was another reason to leave.
50:25
And then the third was to be viewed as a independent voice on
50:30
the topic. I don't think you could be
50:32
credibly employed by a lender providing said capital and then
50:36
write the book about it. Venture capital is a bit
50:39
different with Jason and Brad. There's so many venture firms.
50:41
It's a very diffuse industry. There aren't that many venture
50:43
lenders. So to sit at what is still the
50:45
largest one and write a book about it seemed a little bit
50:47
like shooting myself on the foot.
50:49
So that was the other reason I decided to leave.
50:51
So what now? Like, let's say the book comes
50:54
out and it's very successful. What do you hope that this could
50:59
lead to, you know? One of the best parts about
51:02
leaving to write the book is that, and some people I think
51:05
have thought I'm a little crazy for doing this is like, I don't
51:07
know what the answer to that question is after the fact.
51:09
Partly because I truly don't know, partly because depending
51:12
on the success or lack thereof of the book, you know, your
51:16
options might vary, right? Like if I can only sell this
51:19
book to a dozen people who are my immediate family, that's
51:22
that's one end of the spectrum. You might see me back as a
51:26
junior member of another lender somewhere else afterward if it
51:30
on the other end become sort of the venture deals equivalent for
51:33
venture debt, which is hopefully my aspiration to impact, you
51:37
know, the community that substantially and help a lot of
51:40
people. Like that means you have a lot
51:41
more things open to you, whether that's speaking training, maybe
51:47
going working in different industries, venture capital,
51:51
private credit, I don't know. There's a whole litany of
51:52
things. I'm sure for your your journey,
51:56
Anthony with podcast has been, you know, sort of things open
51:59
various avenues open up that you might not have expected based
52:02
on, you know, the ramp and who you talked to and interesting
52:07
conversations you had that you I'm sure didn't expect when you
52:10
started. And so you've got an idea of
52:13
where you would like this to go, but the reality of life is that
52:19
it's just unpredictable. And who knows what doors or
52:22
windows this is going to open for you.
52:24
And so it's I think it's great that you've just got sort of
52:28
this, I'm open, I'm curious, come on, universe, throw at me
52:32
whatever is next kind of a a mentality here.
52:35
Yeah, I also think just in my career at 4 institutions that
52:40
did venture banking and lending, most of that at SVBI was never
52:43
someone who also had the let me here's my five year plan, here's
52:46
my next thing I'm working towards you certainly anybody is
52:50
going to have aspirations or maybe things you think you can
52:53
achieve. But I was never really formal.
52:55
I don't know about you, but I wasn't really hard or formal
52:57
about it with really distinct goals that in some ways serve me
53:02
well because it frees you up to just do good work and what
53:05
you're currently doing, maybe be intellectually curious, learn
53:08
learn a lot about a lot of things.
53:09
But that seemed to bring people seeking me out to do a variety
53:16
of things within the context that should be in a variety of
53:18
places. I got to work in three countries
53:19
across 9 different roles without me seeking any of those things
53:24
out. I literally never applied to an
53:26
internal role. I kind of got asked to do
53:29
something new, which I feel very fortunate about.
53:32
But that was sort of the nice part of I wasn't planning for
53:34
any single path of just sort of doing good work.
53:37
And then if you do good work, most people can tell when
53:41
something is done well by another human and you'll
53:45
hopefully get sought out. You know, and as we're talking
53:47
about this, it strikes me you're very knowledgeable about the
53:50
subject matter, but translating that knowledge into writing a
53:56
book, putting it into a digestible format, you know,
54:00
chapters and just learning sort of the the whole business of
54:05
writing and publishing a book, that's that's like a whole other
54:09
skill set. Just because you know about
54:11
something doesn't mean that you can write about something.
54:13
I think that's what I'm ultimately trying to get at
54:14
here. Have you found that to be true?
54:16
Has this been a kind of a challenging transition for you
54:19
to take this subject matter that you're an expert in and
54:23
translated into a digestible book?
54:28
I think I'd categorize it more as an interesting transition
54:32
from a you get to go back to having beginner's mind or, you
54:37
know, 20 plus years into a venture banking and lending
54:40
career. I didn't know everything, but I
54:41
know a lot of stuff about how the world works, how my
54:44
institution I worked with worked and others.
54:47
I still know all that. But writing a book, there's a
54:49
whole litany of other skills to your point, both just like how
54:52
how do you write a book? Can you write well?
54:54
But even beyond those two things, how do you, depending on
54:58
which route you're going, traditionally publishing or
55:00
self-publishing or somewhere in the middle, you know, how do you
55:03
get the book formatted properly? How do you do cover design?
55:07
Who and how is the book going to be printed?
55:09
If it's going to be a physical version, how do you then get the
55:12
book into production and the different retail channels you
55:17
wanted to be in? And all these things are sort of
55:19
like running a small business. And if you do traditionally
55:22
publish that path, a lot of that might be handled by your
55:26
publisher. But there's, you know, a variety
55:28
of ways and things you have to really learn how to do.
55:31
It certainly takes a leap of faith and I, you know, leaving
55:34
to write a book when I've never written one before and I've done
55:37
writing internally in a corporate sense.
55:39
But just getting the belief that you could do it takes some time.
55:45
And there's just like probably any entrepreneurial track where
55:50
early on for me, it was like, I'll get one good day of writing
55:53
was followed by two bad days of just no motivation.
55:56
She really had to make sure you could mentally keep pushing
55:59
through and keep keep writing. But to me, that was actually
56:02
pretty interesting to go from a more, I don't know, stable bank
56:06
failure in March of 23, notwithstanding sort of
56:09
corporate job to then an author of a book that you are the only
56:13
person writing. Like, OK, it's all on your
56:15
shoulders. You know, you you get to own the
56:20
good or bad outcome, whatever it is.
56:22
So here we are, four, 5-6 weeks away from the launch of the
56:26
book. What's left to be done at this
56:28
stage? So I'm doing sort of a more
56:34
complex hybrid self-publishing set up, which means I don't have
56:37
a traditional publisher doing a lot of the work that's both good
56:40
and bad. There's pros and cons to either
56:42
side of it. So for me, I've got to make sure
56:44
the, you know, book gets out of the offset printer that it's
56:47
currently in, in the state of Michigan to a third party
56:49
logistics firm that's going to go fulfill a bunch of orders
56:52
that are already in, as well as, you know, get into Amazon and a
56:56
bunch of other places. I've got a print on demand
56:58
company doing all the international markets and
57:00
there's all these things you sort of have to piece together
57:02
within your supply chain. Obviously having a bunch of
57:05
conversations, great ones like this one with you, Anthony
57:07
around just talking about the book marketing.
57:09
There's a lot of a lot of that kind of stuff leading up to the
57:14
launch week in late January. And then you sort of do some
57:18
ongoing marketing and support. But a lot of the heavy lift of
57:20
both the like the writing is done and the book design is
57:25
done. Now it's more about how do you
57:27
get the physical in this case, I'll have a, you know, Kindle
57:29
and audiobook version too. But the the physical printed
57:33
hardcover book, how do you get it to the places it needs to be?
57:37
Same problem anybody who's ever built any kind of consumer.
57:39
Why? Did you decide to tackle all of
57:41
this on your own rather than using a a traditional publisher?
57:47
I think there's a lot of, again, there's pros and cons to both
57:49
talking to a number of authors, including Brad Feld in the lead
57:53
up to sort of making my own decision for a niche non fiction
58:00
business book where I'm coming out of the industry with lots of
58:04
connections. You know, the publishers not
58:06
going to help you write that book.
58:08
You got to be a good or bad writer, That's all on you.
58:12
But then the amount of like marketing support and other
58:16
things that they very well might be able to give to somebody
58:19
who's not the writing, I don't know, fantasy novel or a big
58:25
broad audience where being maybe in a physical bookstore matters.
58:29
There's a number of other things that that's important for, but
58:31
for the industry that I was writing, giving up what you give
58:35
up when working with a traditional publisher, certainly
58:37
the first time author is you don't control your intellectual
58:39
property anymore. You basically sign it away to
58:42
the publisher. The time frame that you're going
58:45
to operate under is more theirs than yours and the royalty rate
58:49
or what you will make per book sold will be substantially
58:53
lower. The benefit is they have all
58:55
these people who make books all the time.
58:56
They can do a lots of other things that you don't have to
58:59
deal with. Whereas now I'm going to
59:01
self-publishing route where I control my IPI can move as fast
59:04
or slow as I'd like and the royalty rates are three to four
59:07
times higher. Assuming I can again, can sell
59:10
more than a dozen books to people who aren't my immediate
59:11
family. But I have to learn and wear all
59:15
the hats of all the roles that they would help me with or a
59:19
traditional publisher would. So I made that choice because I
59:22
kind of wanted to learn it. And it's sort of interesting
59:25
from the entrepreneurial sense to understand the publishing
59:28
process, time frame, skill sets involved as a, you know, novice,
59:34
which was sort of a number of the things.
59:37
But that in particular was a big reason why I decided to do it on
59:39
my own. Marshall, I've just got one more
59:42
question for you today. But before I ask it, I want to
59:45
do 3 quick things. First of all, anybody who wants
59:47
to get in touch with Marshall Hawks, you can do it at one of
59:51
two websites, marshallhawks.com and Venture debtdeals.com.
59:56
We'll have those links in the show notes for folks.
59:59
Also, as a reminder, if you want to get more employees access to
1:00:02
benefits that won't hurt them financially and carries a
1:00:05
financial upside for the company, reach out to us at AD
1:00:08
back benefits.com. Finally, if you'll take just a
1:00:12
moment to leave us a comment or review on your favorite podcast
1:00:15
app, you'll hold a special place in my heart forever.
1:00:17
Thank you. So last question for you,
1:00:21
Marshall. I traditionally ask, what's
1:00:23
something you hope to be celebrating a year from now?
1:00:25
But I think I've got a pretty good idea of what that's going
1:00:29
to be for you. So let's just do a fun one.
1:00:31
What's something you enjoy doing outside of work?
1:00:37
It's not the most regular thing, but I have really enjoyed it the
1:00:42
last couple of years. My dad I've talked about a
1:00:45
little bit already. He is in his mid 70s, a spry 70
1:00:49
year old 75 year old man. He again grew up in Arkansas
1:00:52
alongside my mom, did a bunch of hunting and fishing.
1:00:55
In fact, in addition to the pawn shop I mentioned, we also my
1:00:58
family had a some early competitor to Cabela's and bass
1:01:01
pro shops that they won. We lost.
1:01:03
But anyway, hunting and fishing has been a thing for him in the
1:01:06
last five or six years. He joined a duck club here in
1:01:08
Northern California. And I've gotten the benefit of
1:01:11
going to get my hunting license and I don't go out there with
1:01:14
him. I'm not a member of the duck
1:01:15
club on the regular, but sort of once a season I get to go out
1:01:19
with him. Maybe twice a season I'll go
1:01:21
out. And just to get to go duck
1:01:23
hunting with your dad, whatever. The thing is, duck hunting
1:01:25
notwithstanding, like getting to spend time with your your
1:01:27
parents as they get older and doing something you both can
1:01:29
enjoy that's, you know, physical, outdoors.
1:01:31
Thing is pretty great. As a new parent myself I
1:01:35
appreciate that even more so did that last week.
1:01:38
I might have another trip coming up in January.
1:01:41
That's a That's a fun thing I don't do regularly, couple times
1:01:44
a year, but means a lot to me. I love it.
1:01:49
Marshall Hawks, author of Venture Debt Deals book
1:01:52
available January. 20th. 20th, 2026 I want to be the first to
1:01:59
thank you for sharing both your time and your story with us
1:02:01
today. I really appreciate it.
1:02:03
Thanks for having me on, Anthony.
1:02:05
Folks, that's a wrap on another episode of the Inspired Stories
1:02:07
podcast. Thanks for learning with us
1:02:09
today.