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From Entrepreneur to Investor: Vincent Hsieh on Bridging the Gap Between Early and Later Stage Funding · 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 and
• 0:17
  today's guest is Vincent Shea, partner at Cyprus Growth
• 0:21
  Capital. They are the largest royalty
• 0:24
  based growth capital investor in the US, specializing in non
• 0:28
  dilutive financing for emerging growth tech companies.
• 0:32
  Their mission is to help entrepreneurs scale while
• 0:35
  preserving equity, offering flexible solutions that fit each
• 0:38
  company's unique needs. As everyone at Cyprus is a
• 0:42
  former entrepreneur or operator, many businesses have achieved
• 0:46
  significant milestones in revenue growth and market
• 0:50
  expansion under their guidance. Now Prior to joining Cyprus in
• 0:54
  2022, Vince spent 16 years as an entrepreneur, Co founding,
• 0:59
  building and scaling 2 industrial tech software
• 1:03
  companies that both exited to private equity acquisitions.
• 1:07
  Vince started his career as a turn around management
• 1:10
  consultant for eight years at Arthur Andersen and Alvarez and
• 1:14
  Marcel at Cyprus. Vince participates in all facets
• 1:18
  of the investment process and actively supports portfolio
• 1:21
  companies. Now before we get into all that
• 1:24
  good stuff, today's episode is brought to you by my company,
• 1:27
  Add Back Benefits Agency, where we offer very specific and
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  To find out if your company qualifies, contact us today at
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  AD back benefits.com. All right, back to our guest
• 1:57
  today, partner at Cyprus Growth Capital, Vincent Shea.
• 2:01
  I appreciate you making the time to Share your story today.
• 2:04
  Thanks for having me today, Anthony.
• 2:06
  OK. So, Vince, before we talk about
• 2:08
  Cyprus, I'd like to hear a little bit about the work that
• 2:11
  you previously did. You spent eight years with
• 2:15
  different consulting companies like Arthur Andersen, Alvarez
• 2:19
  and Marcelik. We mentioned in the intro
• 2:21
  working with private equity firms to turn around distressed
• 2:24
  companies. What did you learn during those
• 2:27
  experiences that would later be helpful in the work that you do
• 2:31
  at Cyprus? I would say the number one thing
• 2:34
  you learn working with distressed companies is that at
• 2:37
  the end of the day, cash truly is king.
• 2:40
  I know it sounds like a cliche, but you know, a lot of times
• 2:43
  companies focus quite a bit on more, let's call it vanity
• 2:46
  metrics like revenue or P&L metrics like profitability.
• 2:51
  But we all know that revenue and receipts are not the same thing
• 2:54
  in terms of money coming in the door.
• 2:56
  We know that you know what it shows on your profitability, you
• 2:59
  know, EBITDA, net income, whatever may or may not reflect
• 3:02
  the true cash flow of the business.
• 3:04
  In fact, often times, especially in a growing business or a tech
• 3:07
  heavy business or an inventory heavy business, it doesn't at
• 3:10
  all reflect the true sort of cash profitability to cash flow
• 3:13
  of your business. So I think the number one thing
• 3:15
  I learned working with troubled, you know, oftentimes high
• 3:19
  performing, high growing even, you know, recognizable names in
• 3:21
  the industries, you know, in the retail industry, restaurant
• 3:24
  industry, whatever it might be, is that cash truly is king.
• 3:27
  How that informs sort of what we do as investors of Cyprus's, you
• 3:30
  know, everything from our initial discovery and diligence
• 3:33
  processes with companies like when we're drilling in on on the
• 3:36
  financials they send us or the stories they're telling us about
• 3:39
  how they manage their business. We focus on sort of the the cash
• 3:42
  management and the cash build side of it.
• 3:44
  But also even the way we structure our investments, the
• 3:47
  way we collect money from our portfolio companies is tied
• 3:51
  directly to their cash receipts, not to their revenue to make it
• 3:54
  truly something they can afford, tied to, you know, what they're
• 3:57
  actually having coming in the door.
• 3:58
  So I think that's the number one thing I took from consultants.
• 4:00
  So the differences that you're talking about there between
• 4:03
  their cash and their their revenue is that it sometimes it
• 4:08
  takes companies a while to collect on that revenue, is that
• 4:11
  right sort of a gap there? You you might invoice $100 and
• 4:14
  recognize $100 this month, but the actual collection of that
• 4:17
  might be over a few months on the receipt side.
• 4:21
  On the same token, there are times when people prepaid or
• 4:24
  collect in advance of services and that sounds great like you
• 4:28
  collected 1000 bucks up front for for a one year service or
• 4:31
  something. But you got to make sure the
• 4:33
  company has the, the, the cash management in there to manage
• 4:36
  their expenses and manage their hiring of people and everything,
• 4:39
  knowing that they're not going to collect money for another 11
• 4:41
  months or 12 months. In terms of managing cash, both
• 4:44
  on the, the, the delayed collection side that you're
• 4:46
  referring to, but also on the prepaid collection side in many
• 4:49
  cases. And also the other part of it, I
• 4:52
  would say is that just understanding a lot of business
• 4:54
  that have, for instance, inventory, there's a collection
• 4:57
  cycle involved with or a conversion cycle tied to you get
• 5:00
  to buy the inventory ahead of time.
• 5:01
  You got to hold the inventory for a period of time, then
• 5:04
  you're gonna sell the inventory, then you're gonna collect cash
• 5:06
  from the inventory. That could be a multi month,
• 5:08
  multi quarter period of of confirming that cash you're
• 5:12
  spending on inventory into actual profitable revenue for
• 5:15
  you. So wanted to make sure that, you
• 5:17
  know, business owners and entrepreneurs understand that
• 5:19
  when they're managing the businesses so that they don't
• 5:21
  run out of cash. And you mentioned this is a big
• 5:25
  reason why you guys at Cyprus, you know, you look at the
• 5:28
  company's cash receipts. And we're going to come back to
• 5:30
  that in a minute because I think it speaks to part of the kind of
• 5:33
  unique business model that you guys have.
• 5:35
  But before we get there, let's talk about some of the companies
• 5:39
  that you were involved with. There was a RFID company called
• 5:45
  Atlas that you Co founded and eventually sold to private
• 5:49
  equity. What was that company?
• 5:50
  What? What did you do there?
• 5:52
  So Atlas initially started as a consulting firm in the 2006,
• 5:56
  2007 time frame, providing software development and
• 6:01
  implementation services for companies in like the airport
• 6:03
  industry, manufacturing different types of industries to
• 6:07
  implement RFID. This is, you know, 20 years ago
• 6:09
  when RFID was a relatively new thing that Walmart, DoD, people
• 6:13
  were adopting relatively quickly.
• 6:16
  It's real quick for our audience.
• 6:17
  Explain what RFID is. So RFID stands for radio
• 6:20
  frequency identification. It's if you ever drive your car
• 6:24
  down a toll lane and it automatically collects your
• 6:27
  money if you're it's using RFID to read that if you walk into a
• 6:32
  lot of different stores these days, they try to sell this
• 6:35
  where you can, you know, walk in and take your goods and walk out
• 6:37
  or scans the RFID tag on the thing.
• 6:39
  It's sort of a barcode ish type thing, but much longer, you
• 6:42
  know, in some cases longer read range.
• 6:44
  So you can, you know, see it from further, it's used
• 6:46
  primarily in places like manufacturing and warehouses and
• 6:50
  fixed locations where you can pass something through, like a
• 6:53
  car through a toll lane or something down in the assembly
• 6:55
  line and to scan it for information that you might need.
• 6:59
  OK. And so you it started out, Atlas
• 7:02
  started out as a consulting company and it evolved.
• 7:05
  Yeah. So we started that way and then
• 7:06
  that's 2006, 2007. By 2008, a good and bad is
• 7:11
  mostly good is we had a ton of projects lined up with lots of
• 7:13
  people. They were, they were paying us,
• 7:15
  you know, six or seven figures to go implement RFID in their
• 7:18
  operations in 2008 or late O 8, the recession hit, the financial
• 7:23
  crisis, all that a bunch of our projects, almost all of our
• 7:26
  projects all dried up, all basically either cancelled if
• 7:30
  they hadn't started yet or decided not to further pursue
• 7:33
  just given the the recession, the money was tightened.
• 7:35
  RFID was still considered relatively kind of a science
• 7:38
  project or something new. They all dried up and it kind of
• 7:40
  forced a pretty hard pivot for us, pretty hard decisions we had
• 7:43
  to make in terms of laying off people, you know, conserving
• 7:46
  cash, things like that to to to live, to fight other days, so to
• 7:49
  speak. That ultimately led to a good
• 7:52
  thing though, which is that we then focus down our efforts on
• 7:55
  one of the projects we had done in the industrial construction
• 7:58
  space, turned that into a more privatized offering, software
• 8:02
  offering with like bundled services and things like that to
• 8:06
  then go sell specifically to the one industry, in this case
• 8:09
  industrial construction. And that's where the company
• 8:11
  sort of took off with that kind of new focus and prioritize
• 8:15
  offering. What?
• 8:16
  What was the specific offering? A system that allowed industrial
• 8:21
  construction managers, operators to manage all the materials on
• 8:25
  their job site. So if you're constructing a
• 8:28
  power plant or some kind of industrial facility, the parts
• 8:32
  that need to be used are almost like Lego pieces that have to be
• 8:35
  brought in a certain time, certain order.
• 8:37
  You have to do A, then B, then C You can't do A then C, then B in
• 8:41
  some sequence. And so you need to be able to
• 8:43
  locate this material on a very large job sites or from other
• 8:46
  job sites and bring them there at the right time, right place,
• 8:49
  all that kind of stuff to, you know, more more quickly, more
• 8:54
  efficiently get the projects done.
• 8:55
  And so RFID or Atlas RFID solutions were a a way to help
• 8:58
  them expedite that. OK.
• 9:01
  And then last one before we get to Cyprus, because I really want
• 9:05
  to talk about that. You were with Geoforce for 15
• 9:08
  years and you led fundraising, the establishment of overseas
• 9:15
  subsidiaries, acquired multiple companies and eventually exited
• 9:20
  to private equity firm. It seems like you were, you
• 9:24
  know, kind of putting all facets of your skill sets to work here.
• 9:28
  What was the most exciting part of this experience for you?
• 9:32
  Yeah. So honestly, all that anything
• 9:33
  you described there with M&A and international expansion and
• 9:36
  fundraising, all, all great and great skill sets and very
• 9:39
  typical skill sets that people have in, in, you know, growing
• 9:41
  and building, you know, tech companies and things.
• 9:44
  I think the most exciting thing about Geoforce and Atlas for
• 9:46
  that matter was really the, you know, seeing the careers that
• 9:50
  blossomed and the people that grew.
• 9:52
  If you never worked at a startup, it's hard to really
• 9:54
  appreciate this, but you really as a as a professional or as a
• 9:57
  person, you grow quite a bit working at any startup, just
• 10:00
  being in the Crucible of fire of, you know, the demands of
• 10:02
  being a start up, the having to wear multiple hats every day,
• 10:05
  you know, doing this and that and everything because you know,
• 10:08
  you're always resource constrained, both in financial
• 10:11
  resources, but also people resources.
• 10:13
  So everyone there learned a lot. I think the most exciting thing
• 10:15
  was watching, you know, these these people at Geoforce grow,
• 10:19
  you know, hiring them, you know, out of college or hiding them
• 10:21
  out of wherever and seeing them just learn so much.
• 10:24
  Like I would say in like 1 year they learned the same as someone
• 10:26
  learning at a big company five years of work, the stuff they
• 10:30
  saw. So I think that was the most
• 10:31
  exciting thing was just watching the team grow, seeing them go
• 10:33
  off to do good things, join other start-ups, start other
• 10:35
  start-ups, move into, you know, increasing leadership positions
• 10:39
  in their roles, different places as well.
• 10:42
  That's an interesting answer. So do you have a particular
• 10:45
  leadership or management style that you think contributed to
• 10:51
  each of these employees development process while they
• 10:53
  were with you? I think it just comes down to
• 10:55
  really treating each person as a person, you know, as an
• 10:58
  individual person. I should say it's much like
• 11:00
  having kids. I have three teenagers, same
• 11:03
  parents, same upbringing, pretty close in age, completely
• 11:07
  different personalities, completely different ways of
• 11:10
  motivating and inspiring and disciplining them that work.
• 11:13
  So very similar to, you know, with managing people, there's
• 11:17
  no, there's plenty of textbooks and podcasts and whatever you
• 11:20
  can listen to about you should do this or this or that.
• 11:22
  But at some point, just humans relating to humans and every
• 11:25
  interaction, interpersonal relationship can be different.
• 11:28
  It's learning to, you know, to relate to them at that personal
• 11:31
  level, spending time building, you know, three key
• 11:34
  cornerstones, I think, which are like trust, respect and kind of
• 11:38
  a fondness for each other, right?
• 11:40
  So people want to work with people they trust and respect
• 11:43
  and they like in general. And so sort of establishing that
• 11:46
  relationship upfront, both with employees, in this case that
• 11:48
  we're talking about, but also with vendors or partners or
• 11:51
  portfolio companies as an investor, spending time upfront,
• 11:54
  getting to know them as people. So they like you and they, they
• 11:57
  want to be able to bring around you and spend time with you.
• 12:00
  But also, you know, being almost like, again, my parenting,
• 12:03
  having that trust and respect with each other that comes from
• 12:05
  in many cases, just saying we doing what you say you're going
• 12:08
  to do, taking time to establish that and and never breaking
• 12:11
  those bonds of trust. And it sounds like you're
• 12:14
  genuinely, you know, interested in the overall personal
• 12:18
  development of these employees because you talk about how you
• 12:20
  get excited, you know, when they move on to other opportunities.
• 12:24
  A lot of folks don't think that way.
• 12:25
  It's like, hey, I've invested all this time in this person.
• 12:28
  Like I want them to stay here and, you know, give me more
• 12:30
  return on that investment. But you've got a different
• 12:33
  thought process there. Yeah, I mean, I think one of my
• 12:35
  proudest things and and this guy might actually be listening to
• 12:37
  this podcast too. Eventually we had a controller
• 12:40
  at Geo Force for about four or five years, did did a great job
• 12:44
  with us, eventually left us to take a higher position at
• 12:48
  another startup. And then eventually there was
• 12:50
  promoted to CFO and has since been the CFO of two different
• 12:54
  private equity back tech companies that both exited.
• 12:58
  So imagine what he was doing with us 1015 years ago or
• 13:00
  whatever it was, you know, learning under Geo force
• 13:03
  learning, you know, growing a company and all that.
• 13:05
  We, we sold the private equity and now he had, you know, he had
• 13:07
  his stint as CFO of two different companies that sold
• 13:09
  the private equity as well, or sorry, we're private equity back
• 13:12
  that this sold to strategics. So it's just it's great seeing
• 13:15
  that and and kind of, you know, I know I'll take this in a
• 13:18
  condescending way, but almost a proud dad or proud parent moment
• 13:22
  to see that happen. I get it.
• 13:24
  Yeah. OK.
• 13:24
  So now how did the Cyprus growth capital opportunity come about
• 13:28
  for you That's. So the connection's pretty,
• 13:31
  pretty direct. Cyprus was the first
• 13:34
  institutional investor in my second startup in Geoforce.
• 13:38
  So back in 2011, we had grown to about 5-6 million rear revenue
• 13:42
  kind of on a bootstrap friends and family basis.
• 13:45
  We were looking to grow faster. We had grown, we're profitable,
• 13:49
  we're doing fine, but there's so much more opportunity ahead of
• 13:52
  us. As an example, a lot of our
• 13:53
  customers in oil and gas in let's say, the US, they also had
• 13:56
  operations in international markets like Brazil and
• 13:59
  Australia and the United Kingdom, and they wanted to use
• 14:02
  us there too. But to do that, we needed to be
• 14:04
  able to expand faster and hire a team there for sales and support
• 14:07
  and operations. Our organic profits wouldn't
• 14:10
  allow us to build that team out fast enough.
• 14:12
  Our organic profits probably let us hire, I don't know, one or
• 14:14
  two people a month or 1/4. But to take advantage of that
• 14:18
  market opportunity that our customers are bringing us to, we
• 14:20
  need to do that faster and spend some money establishing an
• 14:23
  entity in Brazil, establishing an entity in Australia, things
• 14:26
  like that. We needed to hire a true head of
• 14:28
  sales who had enterprise sales experience scaling companies
• 14:32
  from 5 million to way beyond 5 million, something that we had
• 14:36
  no, no, no real experience doing directly.
• 14:38
  So we want to attract that type of sales persons.
• 14:40
  We need to grow capital to do that, to attract those types of
• 14:44
  people. Found Cyprus through an
• 14:46
  introduction from some who actually is at Cyprus now but
• 14:48
  wasn't in Cyprus at the time. They invested back in 2012 up
• 14:53
  the scale from about 5 million to 30 + 1,000,000 recurring
• 14:55
  revenue sold to private equity. I stayed on the board of the
• 14:59
  company but then transitioned to an investor role of Cyprus about
• 15:02
  3 years ago. So it was a relatively seamless
• 15:05
  transition. The sense that I knew the team,
• 15:07
  you know, the team that was already working here, worked
• 15:09
  with me for 6-7 years, knew the investment model and the
• 15:12
  criteria. They're looking for how they did
• 15:14
  it. The only, you know, challenge or
• 15:16
  the big transition was going from being an operator, an
• 15:18
  entrepreneur, A doer, a problem solver, AI call a dad of a
• 15:22
  company, like one company, you're the dad to being an uncle
• 15:26
  to many companies as an investor, or you're not the dad
• 15:29
  and responsible for running the company or raising the company
• 15:32
  or discipline the company, so to speak.
• 15:34
  You're the uncle who's responsible for working with
• 15:35
  lots of different nieces and nephews as a, as a fun uncle,
• 15:39
  hopefully, but also a uncle that can provide some mentorship and
• 15:42
  guidance to the companies as well.
• 15:44
  So that that was the biggest transition was going from
• 15:46
  operator or entrepreneur to investor.
• 15:48
  But everything else was was straightforward in the sense I
• 15:50
  already knew the team had worked with.
• 15:51
  How challenging was that transition?
• 15:54
  I think I would say I'm still making that transition.
• 15:56
  It's been 3 plus I guess three years now.
• 15:59
  Part of me still wants to be a dad sometimes and get in there
• 16:02
  and, and quote, UN quote, do the work with the company or roll my
• 16:05
  sleeves and drill in on a problem to solve it.
• 16:08
  But the challenge, obviously as an investor is our job is not to
• 16:10
  do that. Our job is to motivate and guide
• 16:12
  and provide some perspective, but also then have them go solve
• 16:16
  the issues, you know, directly have them, you know, make the
• 16:19
  hiring decisions, have them make the the tough decisions and all
• 16:21
  that. You know, again, with our
• 16:23
  guidance and our mentorship and all that.
• 16:24
  But ultimately that part of it's that part of it's also the
• 16:28
  transition is knowing that you can know everything.
• 16:30
  You know, if you're the dad or the running company, you sort of
• 16:34
  know all the things about your company, your technology, your
• 16:36
  customers, your people, all that.
• 16:38
  As investors, we're much more, as one of our Co founders here
• 16:41
  says above the fray. It's a more strategic view.
• 16:44
  We understand where they're going, where the industry's
• 16:46
  going, where the market might be going, what the opportunities
• 16:48
  are for the company, but kind of the nitty gritty of the details,
• 16:51
  the tactics of the of the company.
• 16:53
  That's not necessarily a responsibility.
• 16:55
  And so in some ways that's actually intellectually
• 16:57
  stimulating and invigorating for me as well, having the ability
• 17:00
  to be, you know, challenged by seeing lots of different
• 17:02
  companies and different industries at different stages
• 17:05
  of growth and helping them through those challenges.
• 17:08
  Because no matter what the company is and where, what
• 17:10
  industry they're in, every company at certain scales going
• 17:13
  through the same issues. Kind of like no matter where you
• 17:15
  grew up, nor what your race is, nor what you are, if you're a
• 17:17
  teenager, you're a teenager, you're dealing with the same
• 17:20
  stuff. Companies are the same thing,
• 17:22
  you know, no matter what they are, they're going through the
• 17:23
  same stuff. We're able to help them with
• 17:25
  that, but from a, again, uncle perspective, not a dad
• 17:28
  perspective, trying to, you know, be the the parent, you
• 17:30
  know, I. I love all of these like
• 17:32
  familial references, being a dad, being an uncle, you know,
• 17:36
  references to teenagers which you're very experienced with.
• 17:39
  Now in the moment, you know, I do the same thing with, you
• 17:43
  know, as I try to think about sort of the psychology of folks
• 17:46
  that I'm working with. I've got two young boys who are
• 17:48
  8 and 10. And I often reference back to
• 17:52
  what is sort of the core things that drive them because I think
• 17:56
  deep down we're all still sort of, you know, little kids, yes,
• 18:00
  inside of our brains. And so when we can understand
• 18:03
  and see sort of the raw emotions of younger groups, teenagers,
• 18:07
  you know, little kids, it, it, it kind of carries on.
• 18:11
  Your point about 8 and 10 years old, I think that that's the
• 18:13
  funnest age for kids. Like, I don't have any adult
• 18:15
  kids yet. My kids are teenagers, but I
• 18:18
  think when they're really young, like in diapers, they're fully
• 18:20
  dependent on you. They're not independent at all.
• 18:23
  When they're teenagers, they almost want to be too
• 18:24
  independent and they don't, you know, they dismiss a lot of what
• 18:27
  parents will say to them and they're kind of on their own.
• 18:29
  They start driving the kind of their own life and everything
• 18:32
  when they're kind of like, I don't know, 5 to 10, five to 12,
• 18:34
  kind of the age your kids are now.
• 18:36
  They're old enough to be pretty independent and have independent
• 18:38
  thoughts and have conversations with you.
• 18:40
  They're not so old that they think they know everything and
• 18:43
  want to go off and do their own thing.
• 18:44
  They still like look up to dad, so to speak, or look at the mom
• 18:47
  and everything. I think that's the funnest age
• 18:49
  for kids. And I bring that back to Cyprus,
• 18:51
  which part of what I like about Cyprus is that we're working
• 18:54
  with companies that are at that age.
• 18:55
  We're not working with companies that are like garage startups
• 18:58
  with an idea and no revenue, IEA baby and diapers.
• 19:01
  We're also not working with super mature cubbies already
• 19:03
  grown up and just need to optimize a few things.
• 19:05
  We're working with cubbies. They're still kind of like quote
• 19:07
  UN quote 5 to 10 year old kids for, you know, have customers,
• 19:11
  have revenue, have real products, market fit, things are
• 19:13
  working, they're profitable, they're doing fine, but they're
• 19:16
  still learning a lot in terms of how to scale and grow the
• 19:18
  company. And so that's where we can be
• 19:20
  very impactful as uncles again, you know, so we like working
• 19:23
  with that age of company essentially which is the age
• 19:25
  where your kids are now. So Cyprus, you guys have a
• 19:29
  little bit of a different model as it pertains to funding.
• 19:33
  Explain that for us, Vince. Yeah, so, you know, typically
• 19:37
  people are and I'm focused here on they call it B to B.Tech
• 19:39
  companies or software companies. Companies are building something
• 19:42
  that requires development of hardware, software, you know,
• 19:45
  processes, things like that, service services and things like
• 19:47
  that. So some of this may or may not
• 19:49
  apply to, you know, non tech companies.
• 19:51
  But in general, what I would say is this, that if you're an
• 19:54
  entrepreneur building a company, you know, highest level, you can
• 19:57
  fund things obviously with your own pocket called bootstrapping
• 19:59
  or your friends and family or your people like Angel investors
• 20:02
  if you want to be people you know, in a network or
• 20:04
  individuals. But if you want to go outside of
• 20:06
  individuals and to let's call it institutions or companies or
• 20:10
  banks or things that lend money, there's high level kind of two
• 20:13
  buckets. There's debt and there's equity,
• 20:15
  right? Debt is the benefit is that you
• 20:17
  know, you know what you're going to pay back, it's going to cost
• 20:19
  you 10% interest or whatever. You're going to borrow 1,000,000
• 20:22
  bucks and pay back 1,000,000 bucks plus interest over time,
• 20:25
  things like that. The, the, the issue of debt is
• 20:28
  it also comes with usually covenants that say you have to
• 20:30
  have this much profitability or this much whatever that
• 20:33
  potentially could restrict what you're doing as you're trying to
• 20:35
  grow and build a business. It often times at the early
• 20:38
  stage comes with personal guarantees where you're
• 20:40
  potentially putting your house up or your, your, your personal
• 20:43
  type assets up to, to guarantee the loan.
• 20:46
  But it has a place for sure as debt or bank financing of some
• 20:49
  sort on one hand. On the other hand, there's
• 20:51
  equity, which typically comes from like venture capital firms
• 20:55
  or private equity firms where they give you money.
• 20:57
  You don't need to pay back any money every month like you do
• 21:00
  with bank debt. But when you eventually sell the
• 21:02
  company or exit the company some way, you're going to give them a
• 21:05
  percentage ownership of your company.
• 21:07
  So at a high level, if they they bought, you know, 10% of your
• 21:10
  company today, when you eventually sell down the road,
• 21:12
  you're going to give them 10% of the profits or 10% of what you
• 21:15
  make at a high level. A lot of intricacy there, right?
• 21:18
  So that's equity on one side. It has a benefit of you don't
• 21:21
  have to pay anything for a long time until you sell, but it can
• 21:23
  also be very expensive if you're growing quite a bit.
• 21:26
  So if you're growing a lot and if you're a tech company, you're
• 21:28
  generally, you know, at this stage valued as a not a
• 21:32
  percentage, as a multiple of your revenue.
• 21:34
  Meaning if your revenue is X, you get paid 5 extra revenue or
• 21:38
  10 extra revenue is what you're worth as a company.
• 21:41
  And so you can imagine the faster you're growing your
• 21:43
  revenue, the faster that equity value is appreciating.
• 21:46
  And therefore equity is the most expensive thing for a fast
• 21:49
  growing company in the sense that if you were to 10X your
• 21:51
  business the next few years, the value of equity also 10X.
• 21:55
  So $1,000,000 will cost you $10 million when you when you sell
• 21:58
  the company down the road if you're a rapidly growing, you
• 22:00
  know, company valued on a multiple revenue.
• 22:02
  So where does Cypress? Cypress sits between debt and
• 22:05
  equity. We're all former entrepreneurs,
• 22:07
  former operators. We've all raised money before.
• 22:09
  We know the benefits of debt and benefits of equity.
• 22:11
  We also know the cons of debt and equity and our hypothesis,
• 22:15
  our thesis has been proven out over 15 years, is that when
• 22:18
  you're at an inflection point of growth, you're rapidly growing
• 22:22
  by far the most expensive resource besides your time, the
• 22:25
  most expensive resource you have is your equity.
• 22:27
  Because again, if you're going to 10 extra business, your
• 22:29
  equity is going to cost you 10X. So we set up a structure called
• 22:32
  royalty based financing that to your point during the
• 22:35
  introduction, we're the largest firm in the United States doing
• 22:38
  this right now. Royalty based financing that's
• 22:41
  sort of a hybrid of debt and equity combines the best of both
• 22:43
  elements, allows owners, entrepreneurs to preserve their
• 22:47
  equity for a little longer. They might eventually want to
• 22:49
  raise equity when they're bigger and they need to raise 20
• 22:51
  million bucks or 10 million bucks or whatever.
• 22:53
  But that's not the, that's the time and place later for now,
• 22:56
  this inflection point of growth, our structure allows them to
• 22:59
  preserve that equity in a manner where, you know, it's light debt
• 23:02
  because it's non dilutive, which we'll talk about later maybe.
• 23:06
  But it, it gives them this flexibility.
• 23:08
  They're paying us a percentage of what they collect from
• 23:09
  customers every month. To my earlier point about cash
• 23:12
  versus revenue, they're paying us a percentage of what they
• 23:14
  collected cash every month. They keep paying that until they
• 23:17
  eventually hit a multiple of something like 1 1/2 to 2X in
• 23:21
  general of what they took from us.
• 23:23
  And once they hit that multiple over time, then they're done
• 23:25
  paying us. And the idea is that for most
• 23:27
  companies, they'll probably pay us back, call it 2X in a few
• 23:30
  years. And the 2X is way cheaper than
• 23:32
  equity, which might have appreciated again by 5 or 10X
• 23:35
  and cost them 5 or 10 million for that million or as ours only
• 23:38
  cost 2X, way cheaper than equity if they're growing quite
• 23:41
  rapidly. But also much more flexible than
• 23:44
  debt because the payments aren't fixed.
• 23:46
  There's no fixed end date like with debt or with debt, you
• 23:49
  know, matures in three years. You got to pay it back in three
• 23:50
  years no matter what. And there's no covenants or
• 23:53
  personal guarantee like it might come with debt.
• 23:54
  So just sort of a good hybrid solution in between equity and
• 23:57
  debt that gives entrepreneurs a few 1,000,000 bucks help grow
• 24:00
  their company but in a non dilutive fashion.
• 24:03
  Yeah. And you've used that word non
• 24:04
  dilutive versus dilutive. Explain that in a little bit
• 24:07
  more detail. Yeah.
• 24:08
  So in general, dilutive means like it's watering down your
• 24:12
  ownership. It's where dilution comes from,
• 24:15
  right. So equity in this case, right.
• 24:17
  So dilutive capital like equity if you own 100% of your company,
• 24:22
  now if you raise equity, you now only own 80% or 50% or whatever,
• 24:26
  it's diluting your ownership down.
• 24:27
  It's watering down your ownership.
• 24:29
  Non dilutive it's the opposite like debt where you pay back
• 24:32
  someone's debt but doesn't do your ownership, you still own
• 24:35
  100% of the company, right? So high level dilutive is equity
• 24:39
  and non dilutive as I say debt and it it refers to the dilution
• 24:42
  of your equity ownership as a as a owner of the company.
• 24:45
  So let me see if I'm kind of wrapping my head around this
• 24:48
  correctly. So more traditional investment
• 24:51
  for equity has the potential to deliver much greater returns to
• 24:55
  the investor. It does.
• 24:58
  A more traditional debt structure is going to return
• 25:04
  much smaller returns to the the lender right to the investor.
• 25:08
  But the the key thing there is risk.
• 25:10
  So the equity investor could get 10X or 100X if things really
• 25:13
  take off, but the risk is if it goes to zero they get 0.
• 25:16
  There's no collateral on it because it's not a loan.
• 25:18
  It's like you get. Zero.
• 25:19
  You either get 0 or you get 10X. I'm betting on you, yeah.
• 25:22
  What what are the percentage? Or let's say you have a 20%
• 25:24
  chance of getting 10X and a 80% chance of getting 0X.
• 25:27
  Like it's a, it's a more binary type outcome with equity as an
• 25:30
  equity investor, as a debt investor, it's a, you're getting
• 25:34
  paid every month, you're getting a monthly interest payment or
• 25:36
  even a monthly principal and interest amortization payment.
• 25:38
  And you're only going to make a little bit.
• 25:40
  Like you're going to make a lot less.
• 25:41
  You're going to make, you know, 1.3 on your money, not 10X on
• 25:44
  your money. But you're almost, I don't say
• 25:47
  guaranteed, nothing's guaranteed, but you have to your
• 25:49
  point collateral, you're getting a monthly payment, you're
• 25:51
  getting paid back no matter what in three years, right?
• 25:54
  So all those things I said are from the investor or the lender
• 25:56
  perspective, the flip size for the entrepreneur.
• 25:59
  The problem with equity can be that it's uncapped costs if
• 26:02
  you're really successful, because the more successful you
• 26:04
  are, the more expensive it is, right?
• 26:07
  If you are not that successful and cost you 0X or 1X, if you're
• 26:10
  very successful, it might cost you 100 X as the entrepreneur.
• 26:14
  Whereas debt has the lower potential cost, but it's not as
• 26:17
  flexible because you have to make a monthly payment.
• 26:20
  Every month you're paying $50,000, a $100,000, no matter
• 26:23
  what. In two or three years you own a
• 26:24
  balloon payment, almost like your mortgage payments, if you
• 26:26
  will. You know all that.
• 26:28
  It comes with things that might tie you down, like covenants,
• 26:31
  you know, that say you must do this every month.
• 26:33
  You have to have this every. You can't go below this number.
• 26:35
  Therefore you got to restrict your growth.
• 26:37
  You can't hire too many more people because it it cost you,
• 26:39
  you know. Negative.
• 26:40
  You don't have those kinds of. Restrictions in there.
• 26:42
  We have no covenants, no personal guarantees, no fixed
• 26:45
  payment like debt, no fixed end date.
• 26:47
  You just keep paying the monthly royalty percentage of the cash
• 26:50
  you collect. You keep paying that till you
• 26:52
  hit a cap. Yeah, Say more about say more
• 26:54
  about that because you, you touched on on this before Vince
• 26:56
  about the importance of looking at cash receipts versus revenue
• 27:00
  booked. And that's you guys are looking
• 27:02
  at cash receipts, how much cash they're actually taking in when
• 27:06
  calculating you know what it is that their payments that.
• 27:09
  That's right. So we take a small percentage of
• 27:11
  their cash collections every month, not their revenue.
• 27:15
  So you can imagine a company where their revenue is $100
• 27:18
  every month, but maybe this month they only collected $20.
• 27:21
  Well, if they only collected $20 on 100, they're going to pay us
• 27:24
  a percentage of $20, not a percentage of $100.
• 27:27
  But if next month they collect $200 instead of $100, they'll
• 27:30
  pay us a higher number, right? But they can always afford the
• 27:32
  payment because there's a percentage type to the actual
• 27:35
  cash coming in the door. Basically you only pay me when
• 27:37
  you get paid. That's clever.
• 27:40
  Now you've got a specific set of criteria for identifying
• 27:45
  potential entrepreneurs you want to invest in.
• 27:47
  Can you dive deeper into what you look for?
• 27:50
  Yeah. So what what are we looking for
• 27:51
  in entrepreneurs here? So first of all, we're all
• 27:53
  former entrepreneurs and operators.
• 27:54
  So we generally, I'm, I'm not saying we're perfect, but we
• 27:57
  have a better sense I think of, you know, what a good one is and
• 28:00
  what a bad 1 is, so to speak. And kind of see could cure it in
• 28:03
  their voice seed and all that, you know, on a, you know,
• 28:05
  introductory media introductory call and things.
• 28:07
  But a couple of things that we're kind of looking for with
• 28:09
  most of these people 1 is a growth mindset.
• 28:12
  So if you're familiar with these terms of growth, you know,
• 28:15
  learner mindset versus like a more fixed mindset, like someone
• 28:18
  who wants to learn, wants to absorb more information, is
• 28:20
  constantly asking questions, doesn't assume they know
• 28:23
  everything, right? We want someone who's got that
• 28:25
  growth mindset because the company's only going to grow if
• 28:28
  they grow. Like the company will only grow
• 28:30
  because the entrepreneur and his or her team is growing.
• 28:33
  Otherwise the the company won't grow.
• 28:34
  No matter how what the product is, the people have to make it
• 28:37
  grow. And we want them to be able to
• 28:39
  absorb, you know, some of our, our, our thoughts and our
• 28:42
  guidance. You know, there's someone who,
• 28:43
  who's willing to absorb all that type of stuff and benefit from
• 28:46
  the, you know, the guidance that we can potentially provide for
• 28:48
  them. So #1 is a growth mindset #2 is
• 28:52
  a sales mindset. So I don't mean they have to be
• 28:54
  a salesperson. I mean they have to understand
• 28:57
  like how to convey value and how to, you know, make sure they
• 29:00
  know how to read a room, so to speak, and convey, convey and
• 29:03
  communicate the right stuff to their audience.
• 29:06
  In in this case, it's called customers, but also they have to
• 29:08
  understand that, you know, sales is the most important thing that
• 29:11
  will drive a company forward. I don't care how good your
• 29:14
  product is. I don't know how how slick your
• 29:15
  engineering is. I don't care how how nice your
• 29:18
  accounting system is or how nice your office is.
• 29:20
  What really matters is you got to sell stuff.
• 29:21
  You don't sell anything. You don't have a business.
• 29:24
  So again, they don't have to be a salesperson, but they have the
• 29:26
  mindset of, you know, how to communicate and how to, you
• 29:29
  know, generate sales. But also understand that sales
• 29:31
  is important. If they lead by showing us a
• 29:33
  product demo or they lead by showing us their code, so to
• 29:36
  speak, that's a pretty big turn off.
• 29:37
  Probably won't lead anywhere, but they lead with understanding
• 29:40
  like audience, like knowing how to read a room and have a
• 29:42
  communication, you know, skills and all that.
• 29:46
  That's a highly valued trades, that sales mindset.
• 29:50
  A third thing I would say is resourcefulness.
• 29:52
  These are early stage companies, few 1,000,000 bucks in revenue.
• 29:56
  You know, I've said this word a few times, but they're generally
• 29:58
  pretty resource constrained financially on people on, you
• 30:01
  know, assets, whatever to go do things.
• 30:03
  They could be someone who can like, you know, a term I always
• 30:06
  use is MacGyver. Like MacGyver could figure
• 30:08
  things out. You know, he's got duct tape and
• 30:10
  a pocket knife. He can figure anything out.
• 30:12
  Well, can this person also do that, You know, at this early
• 30:14
  stage, can they be resourceful, you know, capital efficient, all
• 30:17
  that kind of stuff to drive a business forward?
• 30:19
  We don't need this person to have like everything set up for
• 30:21
  them to be successful. This is a start up.
• 30:23
  They're not going to have everything set up for them
• 30:25
  properly. The last thing I would say is
• 30:27
  that you know, we want them to be able to attract and retain a
• 30:31
  good leadership team around them.
• 30:33
  They may or may not have that team yet at the early stage.
• 30:35
  It might just be a solo person with like a couple of people
• 30:37
  helping them do stuff. But we always say that at the
• 30:41
  beginning to build a company and get maybe the first few
• 30:43
  customers that potentially is an individual sport.
• 30:46
  Like a sole entrepreneur can go figure things out, get the first
• 30:48
  few customers few 1,000,000 bucks in revenue wherever going.
• 30:51
  But for them to get meaningful scale and really build the
• 30:53
  company out, it becomes a team sport.
• 30:56
  They have to have, you know, and a team has like, you know, think
• 30:58
  of a baseball team has like a first baseman and a catcher and
• 31:01
  an outfielder. Everyone is a part of a team.
• 31:03
  They all know the specialists that their their role that
• 31:05
  they're, you know, catching the ball or pitching the ball,
• 31:07
  whatever it is. And so they need to be able to
• 31:08
  start building out a team on sales, operations, finance,
• 31:11
  marketing, whatever it is. And they have to be able to
• 31:14
  track and retain a players to be able to do that with them.
• 31:17
  If they can't do that, they're not going to scale.
• 31:18
  So we want to test for that. Like have they been able to
• 31:21
  bring on people they or before, did their former boss invest in
• 31:25
  them, right? Does some of their former
• 31:27
  colleagues like join their their start up, things like that when
• 31:30
  they have a, when we have a meeting with their leadership
• 31:32
  team, does only the founder or CEO talk or does the other
• 31:35
  people in the room talk as well? Because the other people who are
• 31:37
  in the room don't talk. Either the CEO or founder
• 31:39
  doesn't trust them or they're not good enough, right?
• 31:42
  Or something in between, right. So we want to test for that kind
• 31:45
  of stuff. So let me see if I've got some
• 31:48
  numbers here correct. Vince, you've in at at Cyprus,
• 31:51
  you've invested in 59 companies, there's 35 exits, 24 active
• 31:55
  investments, nobody has closed their doors.
• 31:59
  Even more remarkably, the equity value of your company's grows an
• 32:04
  average of 10X after your investment.
• 32:07
  Do you, first of all, correct me if I got any of those numbers
• 32:11
  wrong, but do you attribute all of that success to all of those
• 32:15
  criteria that you pointed out just now that you guys are
• 32:19
  looking for? When you find people that check
• 32:21
  all those boxes, you feel like you're on a pretty sure path
• 32:25
  with them, as sure as you can be.
• 32:27
  Everything you said was correct except I would slightly correct
• 32:30
  the statement that no one's closed their doors, you know,
• 32:32
  early on and we're in fun 5 now, you know, in fun one many years
• 32:37
  ago, we did have a couple companies that you didn't turn
• 32:40
  out too successfully. So you know, slight modification
• 32:43
  we said there. But everything else you said
• 32:44
  about 10X equity appreciation and 35 exits that were very
• 32:48
  successful so far are all very are very true.
• 32:52
  I would say that two things kind of drive that.
• 32:55
  One is that we are very patient. To go back to the baseball
• 33:00
  analogy, we wait for our pitch to come.
• 33:02
  We don't like swing wildly if things are outside the strike
• 33:04
  zone. So what does patience mean?
• 33:06
  It means waiting till they're at least a few $1,000,000 in
• 33:09
  revenue if not more. So we know that something's
• 33:11
  working. It's not just a garage startup
• 33:13
  as an idea. There's customers who actually
• 33:15
  paid them money and pay them on a recurring basis or for a
• 33:18
  couple years to use their product.
• 33:19
  So something's working. We're patiently waiting for a
• 33:22
  few 1,000,000 bucks in revenue. We're patiently waiting for them
• 33:25
  to establish product market fit, meaning that the market is
• 33:29
  accepting of their product and they're paying them, like I said
• 33:32
  earlier, paying them on a recurring basis or whatever to
• 33:34
  use it. So there's some semblance of
• 33:36
  some proof that the product they're offering fits a market,
• 33:39
  whether that market be a small one, big one, ideally a big one.
• 33:42
  Of course, we're also patiently waiting to see that they have
• 33:45
  some kind of scalable sales engine like it might be and just
• 33:49
  be the founder as the first salesperson.
• 33:50
  Oftentimes that's the case or they have a couple salespeople,
• 33:53
  but potentially. But the point is that they have
• 33:55
  some semblance of what works in sales.
• 33:56
  Like we should sell these types of people in this way.
• 33:59
  We should go to conferences, we should do this, this or that.
• 34:01
  We should market to these people.
• 34:02
  We should market this way when they have a semblance of what
• 34:05
  that looks like and it's starting to work, we can provide
• 34:07
  capital and council that'll help propel that more like it's
• 34:11
  working in South Dakota. Let's go do the same thing in
• 34:13
  North Dakota, right? We don't want to just go try
• 34:15
  North Dakota. We want to know that we're to
• 34:16
  South Dakota, so to speak, right?
• 34:18
  So we want to look for that kind of stuff in the entrepreneur
• 34:21
  that they've done that, that sort of thing.
• 34:22
  And then everything else I said earlier about resourcefulness is
• 34:25
  true. You know that that's all, all
• 34:27
  stuff. We patiently wait for it.
• 34:28
  We want to test for that kind of stuff.
• 34:30
  And then the second thing I would say is that, and this is
• 34:32
  Tooting a little bit of our own horn, but we're all former
• 34:34
  entrepreneurs, former operators. We've all been in the seat
• 34:37
  before. We've done it before.
• 34:38
  We we've had success, we've had failures as well, right?
• 34:40
  We sort of generally know what we're looking for and I think
• 34:43
  that that allows us to be much better than other investors at
• 34:45
  picking and vetting people on the front end.
• 34:48
  So we have a sell section. We only quote UN quote admit
• 34:51
  good companies will probably be successful anyway and we're
• 34:54
  trying to help them be even more successful, if you will.
• 34:56
  And that comes to the second point, which is given our
• 34:58
  backgrounds, we would spend a lot of time probably obviously,
• 35:01
  and in my week, probably 25 to 33% of my week is spent
• 35:05
  counseling and helping My Portfolio companies.
• 35:07
  So we spent a lot of time helping them and that drives
• 35:09
  them to, you know, make sure they make good decisions.
• 35:12
  Never, no decisions, never perfect, but they make as best
• 35:14
  decisions as they can, you know, with some of our help.
• 35:17
  And if they're start initially some course correction or some
• 35:20
  steering, I guess things are, you know, maybe running a little
• 35:22
  bit close to the ditch, we're able to help them steer that
• 35:24
  steer that way before they fall into the ditch.
• 35:27
  So I think that helps us drive some of that success as well.
• 35:29
  And and how did these, what will eventually become portcos find
• 35:33
  you or how did you find them? What's sort of the, I don't
• 35:36
  know, the great lever that you pull in terms of sales or
• 35:38
  marketing for yourselves? So right now we talked to, or I
• 35:42
  should say talk to, we look at 50,000 companies a year.
• 35:46
  We probably talked to, you know, of those 50,000 maybe like 5 or
• 35:49
  10,000 are actually kind of good fits for what we're doing at a
• 35:52
  high level, you know, in terms of the revenue profile, the
• 35:54
  industry profile, things like that.
• 35:57
  We probably talked to just under 1000, you know, we call it A to
• 36:00
  900 a year and we actually have deep conversations maybe 50 to
• 36:04
  100 and invest in five or six. So the funnel from 50,000 to 10
• 36:09
  thousand 1000 down to 5 or 6 investments is a pretty tight
• 36:14
  funnel, if you will, very process driven.
• 36:16
  You know, we're all former operators.
• 36:17
  We know, we know how to set up processes and all that.
• 36:19
  Your question was how do we find them?
• 36:21
  There's kind of two primary ways we get to them.
• 36:24
  One is we spend a lot of time in our network, in our ecosystems
• 36:28
  of tech companies with other investors, with with accounting
• 36:32
  firms, law firms that work with tech companies, with wealth
• 36:36
  managers, with investment banks and banks that lend to these
• 36:40
  people. We get to spend a lot of time
• 36:42
  knowing these people in the ecosystem, the people who know
• 36:44
  entrepreneurs and they feed us a lot of deals.
• 36:47
  They're feeding us deals almost every day of, hey, I came across
• 36:49
  this company, I talked to you. They're too big or too small for
• 36:51
  me or I can't lend to them yet. Or I, I incorporated them a few
• 36:55
  years ago. Now they're raising money.
• 36:57
  You know, if I'm a law firm or I do their taxes and I know that
• 37:00
  they're 10 million in revenue and they told me they're looking
• 37:02
  to raise capital. These types of people are kind
• 37:05
  of our business development network, feed us deals all the
• 37:07
  time. And probably like in our last
• 37:09
  fund, 3/4 of the deals that we funded, 12 out of 16 came from
• 37:13
  that network of channel people. We know in certain geographies
• 37:15
  around the country like Atlanta, Nashville, Kansas City, Denver,
• 37:20
  Phoenix, Dallas, of course, that's half of our deal flow.
• 37:23
  The other half of our deal flow are teams of analysts and
• 37:26
  associates. They spent a lot of time
• 37:28
  researching companies. A lot of this is now AI enabled
• 37:30
  obviously, and AI supported to, to, to get to things faster.
• 37:34
  They researched tons of companies.
• 37:35
  They identified good ones. And then we have some systems of
• 37:38
  programmatic outreach either through warm introductions from
• 37:40
  people we know or through just pure truly cold outreach, direct
• 37:44
  e-mail campaigns, if you will to these people who then respond
• 37:48
  based on the the message resonating with them on growth
• 37:51
  capital, help accelerate things, non dilutive entrepreneurs and
• 37:54
  operators that can help you. That message resonates, they
• 37:57
  respond. We have meetings with them that
• 37:59
  way. So basically the channel network
• 38:00
  we have and the kind of programmatic outreach.
• 38:03
  You know, with all these companies that you get to
• 38:05
  interact with, it seems to me that you're in a not a unique,
• 38:09
  but a special position of being able to have a front row seat to
• 38:14
  all the conversations that are going on around AI, how
• 38:17
  transformative it is now and will continue to be.
• 38:21
  I'm curious, from where you sit, Vince, are do you think there
• 38:25
  are things that the general public is missing or
• 38:30
  misunderstanding about the state of AI and where it's going?
• 38:35
  So I'll say two things on that question.
• 38:38
  The first one is sort of there's not an original statement for
• 38:40
  me, but AI is not new at all. Like you could think back to
• 38:44
  like 1997, I think it was Big Blue IBM beat.
• 38:47
  It was a Kasparov in chess, you know, AI robot or engine,
• 38:51
  whatever beat beat the chess master, you know, in 1997, so 30
• 38:55
  years ago almost. And then even back, if you
• 38:57
  remember Paul culture, like a like one of my favorite movies
• 38:59
  growing up was Terminator. My Terminator was talking about
• 39:02
  Skynet and an AI whatever coming to destroy the world in the what
• 39:05
  9 I think in 1984, forty plus years ago, AI was in the movies
• 39:10
  that we all watched, like the Terminator, Arnold
• 39:12
  Schwarzenegger, everything. So AI is not new at all.
• 39:14
  But what is new is sort of the the media getting a little bit
• 39:17
  more focused on it. Let's call it the hype cycle.
• 39:19
  And if one thing we all know from, you know, media hype
• 39:21
  cycles that the media is usually a little bit of a lagging
• 39:23
  indicator. Like it it doesn't catch on till
• 39:25
  something's already kind of already been happening for a
• 39:27
  little bit. So that would tell me that like,
• 39:29
  you know, AI is about to really take off in terms of commercial
• 39:31
  application, everyday use, you know, true testament that is not
• 39:35
  just as business using it, but did your grandma use it or did
• 39:38
  your mom use it? You know, and that's trying to
• 39:40
  become a little bit more prevalent.
• 39:41
  All right, so I think the first thing I would say is that AI is
• 39:43
  not new. The second thing I would say the
• 39:45
  more business application side here is that a lot of the media
• 39:48
  focus recently is on like the foundational layers of AI,
• 39:51
  right? The the building blocks the
• 39:52
  infrastructure of it, like with the companies you hear them
• 39:54
  talking about. But the real value where we're
• 39:56
  investing and where the real true value going forward is
• 39:59
  going to be is the business applications.
• 40:00
  You know, of taking AI and applying it to legal tech or to
• 40:03
  healthcare or to accounting professions or whatever, or even
• 40:06
  us researching companies as an investor group here, right?
• 40:09
  Like the true application's that it's not the infrastructure.
• 40:12
  It's no different than, you know, like Al Gore famously
• 40:14
  invented the Internet, right? But the Internet itself, which
• 40:17
  is the, the infrastructure view. Well, the true take off was once
• 40:21
  people start building applications on top of the
• 40:22
  Internet. Like websites and you know,
• 40:24
  e-commerce, that kind of stuff. So I think we're probably at
• 40:27
  that part of AI now. We're making that transition
• 40:29
  into the going from the Internet to, you know, apps, if you will,
• 40:33
  or I guess apps or mobile, but like websites, if you will.
• 40:37
  Like almost like because I mean, a lot of services now and
• 40:40
  software they're, you know, they're starting to integrate AI
• 40:43
  capabilities into what already existed.
• 40:46
  That's right. Do you see a movement towards?
• 40:48
  I don't even know what this would look like.
• 40:50
  Like AI first. AI native they call it, Yeah.
• 40:54
  So if you look at our invest, you mentioned we invest in 59
• 40:57
  companies. Looks like the last decade we we
• 40:59
  went back like in our portfolio, looked at what had AI all that a
• 41:03
  decade ago. We were investing in companies
• 41:04
  that had AI elements in their in their software offering a decade
• 41:07
  ago. And we we didn't, I don't even
• 41:09
  know we called it AI. We just said we're investing in
• 41:11
  a company that does this with their software, right.
• 41:13
  And then you look at the trend like 10 years ago there was one,
• 41:16
  few years ago there was like a few a year last year.
• 41:19
  Every investment we did has some AI in component, whether it be
• 41:22
  machine learning, it could be, you know, lots of different
• 41:25
  types of elements of AI in the things we did with drone
• 41:27
  detection software, medical chatting software, patient
• 41:30
  engagement software, medical records retrieval, legal tech
• 41:34
  software going to exit in that was using AI to do stuff with
• 41:37
  legal documents and things like that.
• 41:38
  So almost everything we've done recently has some AI component
• 41:41
  or AI enablement in it. More recently, like recently,
• 41:44
  recently, now we're starting to invest in like AI native
• 41:47
  companies, meaning they started AI native like from the
• 41:50
  beginning, they were built, you know, on a large language model,
• 41:52
  whatever in the AI world, very similar to you go back to like
• 41:57
  Facebook. So Facebook was built in a, a
• 42:00
  web-based world. Like they're a website.
• 42:03
  You went to facebook.com on your laptop or your desktop to engage
• 42:06
  with Facebook whatever 20 years ago, you know, when they started
• 42:09
  Facebook and then like late 2000s, you know, let's call it
• 42:12
  the post iPhone era or iPhone era tie tied in, you start
• 42:15
  moving to mobile and Facebook had to move to mobile.
• 42:18
  Facebook was not mobile native, at least Facebook was, you know,
• 42:20
  web web native, if you will. And they had to go through some
• 42:23
  growing pains. They had to go acquire Instagram
• 42:25
  to develop some of the capabilities to become better at
• 42:28
  that. And now they're, you know, most
• 42:29
  everyone interacts with Facebook on a mobile device since
• 42:31
  Instagram, all that stuff, everything.
• 42:33
  What I think they own WhatsApp too or something, right?
• 42:35
  So all that's in the Mobile World.
• 42:37
  So we're starting to invest in companies that are more like
• 42:39
  Instagram than Facebook, right? Where they started in a, let's
• 42:42
  call it AI world, not started in a non AI world and transition
• 42:45
  into it. And that's definitely kind of
• 42:48
  intriguing for us. And it requires a lot of, you
• 42:51
  know, paradigm shifts and how we think about companies.
• 42:53
  One, they can be a lot more capital efficient because they
• 42:55
  need fewer people to do the job. You know, you just have 10
• 42:58
  people in QA. Now you have two people in QA as
• 43:00
  an example. You can you can grow companies
• 43:02
  faster. A lot of that plays into our
• 43:03
  playbook. We want capital fishing
• 43:05
  companies. Anyway, one of our partners
• 43:07
  Cliffs Intel was a entrepreneur in the healthcare space for many
• 43:11
  years and then exit his company strategic strategic acquirer.
• 43:15
  He has a couple patents in AI at his company.
• 43:18
  He was like chief technology chief strategy officer.
• 43:20
  So he spent a lot of time working on the AI in the medical
• 43:23
  world. And so a lot of times when we
• 43:24
  get into kind of AI heavy things, you know, he becomes our
• 43:27
  subject matter expert. Looking at that.
• 43:29
  And obviously, to my early point about growth mindset, all of us
• 43:31
  at Cyprus, Cliff included, are still learning about AI every
• 43:34
  day and make that a point as part of our days to to do what
• 43:38
  we can to learn more about what's happening in that world.
• 43:41
  It's we've talked about a lot of successes that you've
• 43:45
  experienced, very hard working, very bright guy.
• 43:50
  Sometimes we don't talk enough about the mistakes, and
• 43:52
  sometimes, you know, there are mistakes that seem like a
• 43:55
  mistake at the moment that end up becoming our greatest
• 43:57
  teachers. Yeah.
• 43:58
  I'm wondering if there's an early career moment that seemed
• 44:01
  like a set back to you but actually propelled you forward
• 44:04
  in some way. There's, there's probably 2 I
• 44:08
  could talk about one sort of professional, one sort of
• 44:11
  personal that led to a professional growth as well.
• 44:14
  If you, if you don't mind, I can probably talk about both.
• 44:16
  The one that comes to mind, my first start up, we talked about
• 44:20
  Atlas RVID. So Atlas RVID, there's an
• 44:22
  inventory component, you got to buy RVID tags and RVID
• 44:25
  equipment, let's call it. Then it gets installed at a
• 44:27
  manufacturing plant or construction site.
• 44:29
  And then they use our software to go consume the information
• 44:32
  and do, you know, run their business like the main drivers.
• 44:34
  Obviously the software, we need hardware to enable it.
• 44:37
  So I go back to the time we were talking about earlier.
• 44:40
  We landed a bunch of projects and like call it O seven O 8 and
• 44:43
  it is our first two years of business.
• 44:45
  It was great. We had all these projects.
• 44:46
  We ramped up hiring to like 50-60 people to go deliver all
• 44:48
  the projects, all that. Then the O 8 recession hit and
• 44:52
  all these companies turned down all these things and guess who
• 44:54
  was left holding the bag with cash on all the inventory that
• 44:57
  we bought? Like I'm talking about millions
• 44:59
  of dollars of inventory that we have pre bought in advance of
• 45:01
  delivering these projects, right?
• 45:03
  The hardware was going to enable the software, but now there's no
• 45:05
  software to deliver, so there's no hardware to deliver, right?
• 45:07
  So we had all this hardware and the mistake we made was like
• 45:09
  buying way in advance. We should have done better in
• 45:12
  negotiating prepayments from the customers.
• 45:14
  We should have been better about like negotiating payment terms
• 45:16
  with our vendors, but we were so excited by this.
• 45:19
  We're like, oh this is great, we got 13 projects, let's just go
• 45:21
  buy all the hardware. All going to get delivered in
• 45:23
  the next 6 months anyway. All that kind of stuff.
• 45:25
  So that was a big mistake. Almost sank the business.
• 45:28
  We almost ran out of cash. We had to pay the vendors.
• 45:30
  We haven't got, we're not getting paid at all in this case
• 45:32
  from the customers because they all cancelled the projects.
• 45:34
  So massive layoffs you had to make.
• 45:37
  Didn't pay ourselves. You know the Co founders for a
• 45:39
  long time, right? Because we're running out of
• 45:40
  cash. What do we do?
• 45:42
  So we said that one of our operations guy said, hey, and
• 45:45
  hope maybe he'll listen to this podcast and go hear his story
• 45:46
  here. And this is a great story here
• 45:48
  of personal growth and professional growth for Shane.
• 45:51
  We said, hey, why don't you go sell this inventory on eBay?
• 45:54
  It was back when eBay was a big thing.
• 45:56
  He had a better idea. This is an entrepreneur in him,
• 45:58
  even though he was like probably 25 years old at the time.
• 46:00
  Why don't I go create a little website and I'll sell, you know,
• 46:03
  e-commerce site, if you will, and I'll eliminate the middle
• 46:06
  man. We'll make more money.
• 46:06
  I said, whatever you sell, you get 10% of the profits.
• 46:09
  So he was motivated to, you know, sell at a higher price or
• 46:12
  keep more money, Whatever you started this site, start selling
• 46:14
  in the excess inventory head on online.
• 46:17
  It became so successful that few years down the road it was the
• 46:20
  number one website in the world. I think, I don't know if it's
• 46:23
  still true, but in the world for selling like third party RFID
• 46:26
  stuff, like almost a wholesaler of RFID stuff.
• 46:29
  And what was the advantage for the customer to buy it from you
• 46:32
  guys? Wholesale pricing essentially,
• 46:33
  well, initially we were just trying to get rid of inventory
• 46:35
  at a lower than cost. Initially it was like.
• 46:38
  But why? Why does the end customer end up
• 46:39
  buying from you rather than initially?
• 46:42
  It was because like, it was 100 bucks.
• 46:43
  We were selling for 20 bucks or whatever to try to get rid of
• 46:45
  stuff like to get some cash back, right, initially.
• 46:48
  But eventually it was because he became a wholesaler, right?
• 46:51
  He's a typical wholesale model. He got enough volume going that,
• 46:54
  you know, it worked, right? So eventually that company or
• 46:56
  that's the online site that was just supposed to be a way to
• 46:58
  liquidate some inventory turned to a business that we sold for,
• 47:02
  you know, call it 10 figures to another investor that we use as
• 47:06
  growth capital to fund our core software business.
• 47:09
  Just wait just to make sure. 10 figures or or 10 million.
• 47:14
  Hold on, let me say this. Right.
• 47:16
  Sorry. 8 figures. 8 figures. OK, I meant to say 8 figures.
• 47:19
  Yeah, I was trying do the numbers in my head.
• 47:20
  Yes, you're right, Eight figures.
• 47:21
  OK, so. So rather than throwing in the
• 47:24
  towel, you guys were like, hey, let's see what we can do with
• 47:27
  this. Let's go liquidate this and I'll
• 47:28
  give you know, kudos to the the the guy I'm talking about, Shane
• 47:32
  Armstrong. If he listens to this, his idea
• 47:34
  was don't do it on eBay. Let's go build our own site.
• 47:37
  And I said, fine, you, you go do it as long as you're in your own
• 47:39
  time. He built the site that turned
• 47:41
  into the thing that we sold to go capitalize, you know, growth
• 47:44
  capital for a core software business.
• 47:45
  Then a lot of success there, right.
• 47:47
  We didn't have to talk about non diluted capital.
• 47:49
  That's our own capital. Or like we, we, we built it
• 47:52
  ourself and and raised the money, right.
• 47:54
  So that was a great like sort of like almost failing, almost out
• 47:56
  of business, out of cash, all that didn't pay ourselves until
• 47:59
  like, hey, here's what propelled that Ford.
• 48:02
  The other one I want to talk about that's a little more
• 48:04
  personal is sort of personal growth too.
• 48:06
  That also professional growth. So probably a decade ago or so,
• 48:09
  my wife had a major medical issue kind of suddenly, Long
• 48:12
  story short, we ended up at the Mayo Clinic for like 6 weeks.
• 48:15
  And you can imagine like I'm the husband or all that.
• 48:17
  This is 10 plus years ago. My kids who are teenagers now
• 48:20
  are probably like, I don't know, 3-4, five years old at the time.
• 48:23
  So on the home front, big struggle way to go to the Mayo
• 48:26
  Clinic and have a lot rely on a big network of people in Dallas
• 48:29
  because we don't have any family in Dallas to help with the kids
• 48:32
  with food, all that kind of stuff.
• 48:34
  On the professional front, this is 10 plus years ago, still
• 48:36
  building Geoforce in this case, second company at a very early
• 48:41
  stage, almost like the company was still a baby as well.
• 48:43
  And I had my hands in a lots of different things.
• 48:47
  And what I learned from this whole, you know, trial, if you
• 48:49
  will, was both on the personal front of my kids and the family,
• 48:52
  let's call it. And the professional front with
• 48:54
  Geoforce was the power of like trust and delegation and, you
• 48:58
  know, having other people stepping up to help you.
• 49:00
  And in the professional side, at least them helping to step up
• 49:03
  and do stuff actually drove a lot of the growth in the people
• 49:06
  in Geo force, right? Like it's a little bit like, you
• 49:08
  know, if dad's doing everything, the kids won't grow.
• 49:11
  But over time, the the kids have to learn to make some of their
• 49:13
  own mistakes and grow from it. And that's how they become
• 49:15
  better. And to my earlier point, they
• 49:17
  move on to, you know, better things after they even leave
• 49:19
  your company, if you will. But I think that's sort of
• 49:21
  forced a lot stepping up, if you will, within the company, within
• 49:24
  the household, so to speak, when my kids were young, but it drove
• 49:27
  a lot of growth for them as well-being more independent with
• 49:29
  mom and dad gone for six weeks, if you will, you know, and not
• 49:32
  in a good spot in a hospital, like, you know, surgery, all
• 49:34
  that kind of stuff. A little bit like I, I remember
• 49:37
  like when I was the oldest, I left my family and go to
• 49:40
  college. My younger brother became a lot
• 49:42
  more responsible because now he was the oldest, you know, and
• 49:45
  the same thing happens in a company.
• 49:46
  If you know, the older brother or the boss, whoever leaves,
• 49:49
  then they, the the non bosses, so to speak, step up.
• 49:52
  So I think I learned a lot. That was a very difficult
• 49:54
  situation. Like my wife was in a in a bad
• 49:56
  spot again, Mayo Clinic, all that stuff.
• 49:59
  But it's sort of forced in a very sudden moment.
• 50:02
  You know, a lot of you know, learning how to delegate,
• 50:05
  learning how to like build, you know, establish trust other
• 50:07
  people knowing hey, they actually they can do these
• 50:10
  things like without you, like, you know, your, your son can't
• 50:12
  walk without you holding their hand, you know, kind of ideas.
• 50:16
  Yeah, you're sort of letting multiple people in your life
• 50:19
  kind of spread their wings and fly the coop, so to speak.
• 50:22
  I mean, your kids, obviously they're not actually leaving the
• 50:25
  nest, but yeah, they learn to become a little bit more self,
• 50:28
  you know, sustaining because, you know, mom and dad aren't
• 50:32
  there, you know, to to rely on as much.
• 50:34
  And you're, and again, sort of the same like making the family
• 50:37
  comparisons to like what happens in, you know, grown up adult
• 50:41
  life. Like, yeah, in a business
• 50:43
  environment, you've got employees who are sort of
• 50:45
  looking to you like a sort of the, the, I don't know if the
• 50:48
  buffer is the right word, but sort of like the buck stops with
• 50:51
  you kind of a thing. And oh, well, we got a question.
• 50:54
  You know, there's a problem. You know, Vince is going to help
• 50:56
  solve this. Well, now Vince is out of pocket
• 50:58
  and like, well, now I've got to be the guy.
• 50:59
  I've got to step up into that role.
• 51:01
  And it forces people into uncomfortable places where, you
• 51:05
  know, I think that's where a lot of the growth takes place.
• 51:08
  Yeah, I've always, I remember someone saying this to me a long
• 51:10
  time ago, like a rubber band like has it's supposed to be
• 51:13
  stretchy and and that's how you grow, right.
• 51:15
  But you, if you just keep the rubber band tight and doesn't
• 51:18
  ever stretch a little bit, it's never going to grow right.
• 51:19
  You're never going to stretch that rubber band out a little
• 51:21
  further. And so humans grow by stretching
• 51:24
  themselves. I like that.
• 51:27
  And you know, it occurred to me that we sort of skipped over
• 51:29
  something here and I don't think we actually explained what
• 51:32
  Geoforce did. Yeah.
• 51:34
  So Geo Force provided GPS tracking solutions for tracking
• 51:39
  field equipment in industrial companies like oil and gas,
• 51:43
  construction, mining, logistics, airports, anywhere.
• 51:47
  We had like a lot of field equipment.
• 51:48
  Think of like containers, baskets, generators, light
• 51:51
  towers, things you see on the side of the freeway at a
• 51:54
  construction site, things you see in the middle of the ocean
• 51:56
  like an oil rig, things you see on construction sites in remote
• 51:59
  areas, things you see at airports, things you see in
• 52:02
  mining sites. Like all the equipment, the
• 52:03
  physical equipment RG our proprietary GPS tracking devices
• 52:07
  were bolted onto this equipment and then used our software
• 52:10
  again. Started actually web-based in
• 52:13
  2007 timeframe, but became mobile based to my earlier point
• 52:16
  about Facebook for tracking this equipment, for operational
• 52:20
  efficiency, for dispatch, for service verification, for
• 52:23
  delivery verification, for getting things in the right
• 52:25
  place at the right time, all that kind of stuff.
• 52:27
  So in the operational world, but in the industrial tech world as
• 52:30
  well. Yes, we were talking about sort
• 52:33
  of AI and the fact that it's been around for a while and you
• 52:37
  know, looking back at some of the investments you made and
• 52:39
  sort of, you know, tracking their progress from, you know,
• 52:42
  several years ago. I'm curious if there are other
• 52:45
  emerging trends that you're noticing, whether they're tech
• 52:49
  specific related or general business trends.
• 52:53
  Yeah, I would say that there's a general shift in, I'm talking
• 52:59
  about tech companies now away from the coast, I shouldn't say
• 53:02
  away from the coast. Things are still happening on
• 53:05
  the coast towards the coast as well.
• 53:07
  So one statistic like a year or two ago, something like 85% of
• 53:12
  investments or what's called venture capital growth equity
• 53:14
  type investments were in three states, California, New York and
• 53:18
  Massachusetts. Within California, Massachusetts
• 53:21
  assume it was mostly kind of San Francisco, New York and Boston,
• 53:24
  like city or geography specific, not even state specific, right.
• 53:27
  So 85% to 3 states, meaning 15% was in the other 47 states or
• 53:32
  other, you know, percentage of the population around the world
• 53:34
  or around the country. So in the last part, 10 or 20
• 53:38
  years have been a shift towards, you know, startups and, you
• 53:40
  know, investors things investing outside of the coast, Like what
• 53:43
  we're doing, we're investing in the Southeast, the Southwest,
• 53:46
  the Midwest, places where they tend to be more capital
• 53:49
  efficient because it's cheaper to get businesses going.
• 53:52
  Places where the entrepreneurs themselves might have grown up
• 53:55
  in, like, you know, in the agriculture sector in the
• 53:57
  Midwest or the music industry in Nashville or, you know, oil and
• 54:01
  gas in the South, right. Somewhere like, let's say,
• 54:03
  Texas, Louisiana. They're actually closer to the
• 54:06
  sub being subject matter experts than someone growing in Silicon
• 54:09
  Valley, New York or Boston. If you're in certain industries,
• 54:11
  if you want to be in fintech, yeah, maybe you want to be in
• 54:13
  entertainment. Yeah, LA, of course, you know,
• 54:15
  or now entertainment's elsewhere as well.
• 54:17
  But we actually think that not only the more capital efficient,
• 54:20
  in some ways they're actually better suited to start
• 54:22
  companies. Because again, if you're going
• 54:24
  to start AG tech, who better than someone who grew up as a
• 54:26
  rancher in Wyoming and now lives in, you know, in Kansas City or
• 54:29
  whatever? You know, if we're going to be a
• 54:30
  music tech company, why wouldn't, why wouldn't you
• 54:33
  invest in ones in Nashville versus one that's in, you know,
• 54:35
  San Francisco or Silicon Valley down the road or something,
• 54:37
  Right. So we actually think those
• 54:39
  companies are better at doing the things.
• 54:40
  And they also tend to be able to attract people who want better
• 54:43
  quality of life, you know, cheaper quality of life, if you
• 54:45
  will, at a high level than living in the Bay Area, living
• 54:48
  in New York or whatever. And so you can attract more,
• 54:51
  let's call it talent, you know, salespeople, software people,
• 54:53
  operations people to do the job. So I think a big shift in the
• 54:57
  industry is like this move towards the, the, the non
• 55:00
  coastal markets for building tech companies and growing them.
• 55:03
  And the entrepreneurs are there now the tech, the tech investors
• 55:06
  are starting to get there. You know, we've been doing it
• 55:07
  for 15 years, but people are starting to get into this
• 55:09
  industry as well in these spaces.
• 55:12
  It's starting to accelerate quite a bit.
• 55:13
  And I think that's something, if you want to be successful as an
• 55:16
  investor or an entrepreneur to think long and hard about.
• 55:19
  Do I need to really be in Silicon Valley to do that?
• 55:21
  Maybe I could be somewhere else on both the start up and the
• 55:24
  investing side. Vince, do you traditionally find
• 55:28
  a lot of competition in the deals that you guys are
• 55:31
  interested in with other investors?
• 55:33
  And do you, if so, do you find less competition when you're
• 55:37
  targeting companies that are in the South and Southeast because
• 55:40
  maybe they're not getting as many eyeballs?
• 55:42
  That so we don't even look at companies in California and New
• 55:45
  York and Massachusetts. We just don't even, we just
• 55:47
  don't even waste. I don't say waste time.
• 55:49
  We don't even invest any time looking into those.
• 55:51
  So we don't ever compete with people trying to raise money in
• 55:53
  Silicon Valley. We don't want to talk to
• 55:56
  companies that like are not very capital efficient.
• 55:58
  They need to spend $1,000,000 a month a burn on software
• 56:00
  engineers. They want to see, you know, have
• 56:02
  Bono at their Christmas party because that's what we have to
• 56:04
  do in Silicon Valley. We want them to spend the money
• 56:06
  building the company, building the product, building customer
• 56:08
  base, all that kind of stuff. Turn to your question on
• 56:10
  competition. We have competition of course
• 56:13
  like anybody does. Anyone who says they don't is
• 56:15
  lying obviously, right? But it tends to be a little less
• 56:18
  because people invested the seed stage before us quite a bit.
• 56:22
  This is people who might write checks of like a few 100,000 to
• 56:25
  1,000,000 bucks to companies that are pre revenue or very
• 56:28
  limited revenue. There's lots of people who do
• 56:30
  that at the early stage. There's lots of companies that
• 56:32
  write like $10 million plus checks and the companies are 10
• 56:35
  million plus in revenue. On the to my earlier analogy,
• 56:39
  write checks to teenagers or write checks to babies, right?
• 56:42
  Too small for us, too big for us.
• 56:44
  But that sweet spot we have is like use the kid analogy, 5 to
• 56:47
  10 year old kid companies are like 5 to 10 million in revenue.
• 56:51
  They only want to raise a couple 1,000,000 bucks 'cause they know
• 56:54
  they can use it very efficiently.
• 56:55
  To my earlier point about they know their model works.
• 56:57
  They have product market fit is need a little bit more capital
• 56:59
  to go accelerate things in a certain direction, right?
• 57:02
  So they're in that sweet spot where like the bigger firms only
• 57:05
  want to write bigger checks into bigger companies.
• 57:07
  The C stage guys want to write smaller checks in the smaller
• 57:09
  companies. They're sort of a chasm that's
• 57:12
  existed for 15 years that we're trying to fill, which is
• 57:14
  companies are a few million plus in revenue and want to raise,
• 57:16
  you know, just a few 1,000,000 bucks in capital.
• 57:19
  That's where we play. So our combination tends to be
• 57:22
  like the bigger companies want to write bigger checks and
• 57:23
  entrepreneurs like I'm not quite sure I would spend 10 million.
• 57:25
  I only want to raise 3 million or the C stage investors want to
• 57:28
  write a half a Millar check and that's not really going to move
• 57:31
  the needle for me. I need a few million.
• 57:32
  All right. So we're sort of in that middle
• 57:34
  there and we do it in this non dilutive fashion.
• 57:36
  That's pretty unique. So usually our competition is
• 57:39
  like I could go raise bigger equity or I could do Cyprus.
• 57:42
  Like when I was taking money from Cyprus, my other options
• 57:45
  were six term sheets from equity, right, and $10 million
• 57:48
  plus checks. We ended up doing 5 million from
• 57:50
  Cyprus, right, and then eventually doing equity down the
• 57:52
  road. So a lot of times our
• 57:54
  competition is an equity firm and they'll say no to that.
• 57:56
  They'll use Cyprus, they'll use Cyprus to grow from like 5
• 57:58
  million to like 12 million revenue and then they'll go
• 58:01
  raise big equity from someone, right.
• 58:03
  So that that's what our competition usually is usually
• 58:06
  an equity firm running a bigger check or they cobble together
• 58:09
  like some friends and family money or C stage type
• 58:11
  investments. But the keyword there is they
• 58:13
  have to cobble it together, which is kind of a one stop
• 58:15
  shop. So you're.
• 58:15
  Typically not bumping up against other royalty based financers.
• 58:20
  No. It's it's still a very unusual
• 58:23
  model. That's right.
• 58:27
  Vince, if you had to recommend a particular resource, a course, a
• 58:30
  podcast, a book that you think would be really instructive to
• 58:36
  founders of young companies, what would that be?
• 58:40
  Have you heard of the five dysfunctions of a team from
• 58:42
  Patrick Lincione? Sure.
• 58:45
  So it's like a parable. It's written like a parallel.
• 58:47
  And Patrick Lincione is like a management consultant has
• 58:49
  written a bunch of books. It talks about the five
• 58:51
  dysfunctions of a team. All right, so earlier we said
• 58:54
  that, you know, starting a company might be individual
• 58:56
  sport. If you're going to scale a
• 58:58
  company in a meaningful way, it becomes a team sport.
• 59:00
  You have to have a team around you and you know, in sports
• 59:03
  people care about like team building and is that good as the
• 59:05
  team player, all that stuff. Well, same thing in in business,
• 59:08
  business, like a sport, you're trying to, you're trying to win.
• 59:10
  So you're trying to grow, you're trying to, you know, win a
• 59:11
  championship or whatever, right. And so 5 dysfunctions of team
• 59:15
  talks about the common dysfunctions within a team
• 59:17
  around like, you know, not being candid enough with each other,
• 59:20
  collaboration in terms of collaborating and feedback,
• 59:22
  things like that as a, as a very pointed 1.
• 59:24
  And I think that's one that everybody should read and
• 59:26
  understand. Like they're, it's a very short,
• 59:28
  but it probably takes like, I don't know, 45 minutes to read
• 59:30
  in one sitting, You know, again, written like a parable, not a,
• 59:33
  not a textbook. I'd say telling a story, a
• 59:35
  fictional story of a, of a, of a company and all that.
• 59:39
  Every team, I would say suffers from at least one, if not all
• 59:42
  five of the dysfunctions. So the better you can get at
• 59:44
  like overcoming those and become a better well oiled team, the
• 59:47
  better you will perform as a company because ultimately the
• 59:49
  company will only grow as fast as the team grows and more
• 59:52
  specifically, as fast as the leadership team can grow, right
• 59:54
  That everyone else follows. So I.
• 59:56
  Have to put that one on my reading list that hasn't hit my
• 59:58
  radar before. Vince, I've just got one more
• 1:00:01
  question for you, but before I ask it, I want to do 2 things.
• 1:00:03
  First, I'm going to invite all of our listeners to go ahead and
• 1:00:06
  hit the follow button on your favorite podcast app.
• 1:00:08
  We've had a great interview today with Vince Shea from
• 1:00:11
  Cyprus, and you want to continue to get more wonderful interviews
• 1:00:14
  like this. Vince, I also want to let people
• 1:00:17
  know the best way to either get in touch with you or Cyprus or
• 1:00:21
  to follow your story directly. What would that be?
• 1:00:24
  So Cyprus, we're on cyprusgrowthcapital.com.
• 1:00:29
  So Cyprus like the tree, like every investment firms a tree or
• 1:00:32
  a number or something, right? cyprusgrowthcapital.com is our
• 1:00:36
  website. To get in touch with me
• 1:00:38
  directly, the best way to find me is LinkedIn.
• 1:00:41
  Vincent Shea HS i.e. H I'll respond to the LinkedIn
• 1:00:45
  message as long as you actually type a real message, not just a
• 1:00:48
  connection request. Kind of explain like, hey, you
• 1:00:51
  know why you think we would benefit going to mutually, you
• 1:00:54
  know, mutually benefit from connecting.
• 1:00:56
  And I'd like to set up an actual call with the person before I
• 1:00:58
  connect with them. So actually, you know, really
• 1:01:00
  know the person I connect with on LinkedIn.
• 1:01:03
  Probably the best way to reach out to me.
• 1:01:04
  That's great. We'll include links to both your
• 1:01:06
  LinkedIn profile and your website in the show notes.
• 1:01:09
  But last question for you, Vince.
• 1:01:11
  Let's say you and I stay in touch and we reconnect in a year
• 1:01:14
  from now and you're celebrating one thing.
• 1:01:17
  What's that one thing? So the one thing to celebrate
• 1:01:21
  besides obviously my son graduating from high school
• 1:01:23
  which is supposed to be happening almost exactly a year
• 1:01:25
  from now is we at Cyprus are now launching a growth equity fund.
• 1:01:32
  So earlier I mentioned that we invested this like kind of you
• 1:01:35
  know 5 to 10 year old kid or five to $10 million revenue
• 1:01:38
  stage. Many of our companies we
• 1:01:40
  mentioned 35 exits, many of them exit us to a growth equity round
• 1:01:44
  where like we invested let's say $5,000,000 to help accelerate
• 1:01:47
  them from 5 million to 15,000,000 revenue.
• 1:01:49
  Now that this next stage and they want to raise 10 million
• 1:01:51
  plus to kind of do even more acceleration on, on different
• 1:01:54
  aspects. Often times they go somewhere
• 1:01:57
  else to go do that because we don't have that kind of fund.
• 1:01:59
  We're in the middle of raising a fund that would be those types
• 1:02:01
  of checks and those types of companies.
• 1:02:03
  Very similar profile to what we're doing now, you know,
• 1:02:05
  capital efficient, B to B software, tech enabled services
• 1:02:08
  type companies, not on the coast, you know, really good
• 1:02:11
  entrepreneurs. They're just to the next stage
• 1:02:13
  of growth. So right now we're their
• 1:02:15
  elementary school teacher. We would like to also now be
• 1:02:17
  their middle school or high school teacher, if you will.
• 1:02:19
  So we're launching this growth equity fund later this year.
• 1:02:22
  So a year from now when we talk, hopefully we're talking about
• 1:02:24
  our first few investments out of that fund.
• 1:02:27
  Really exciting time for Cyprus as we're growing in that
• 1:02:29
  direction into you know larger checks of the larger companies.
• 1:02:34
  So that's something we literally.
• 1:02:35
  And so that new fund will be structured more like a
• 1:02:38
  traditional equity investment as opposed to the the model that
• 1:02:42
  you guys use at. That point they can afford it
• 1:02:44
  and they're bigger, right. They've we've helped them use
• 1:02:47
  the non dilutive mechanism to get from you know 5:00-ish to
• 1:02:49
  like 10 ish 20 million inch in revenue.
• 1:02:51
  Now they can, I want to say A4, but it's definitely a little
• 1:02:54
  more palatable when you're a little bigger and you, you know,
• 1:02:58
  have have a lot more growth ahead of you still.
• 1:03:01
  Vincent Shea from Cyprus Growth Capital, I want to be the first
• 1:03:04
  to thank you for sharing both your time and your story with us
• 1:03:07
  today. I really appreciate it.
• 1:03:09
  I enjoyed it. Thanks a lot, Anthony.
• 1:03:11
  Folks, that's a wrap on another episode of the Inspired Stories
• 1:03:14
  podcast. Thanks for learning with us
• 1:03:16
  today.