Latest / Success Story with Scott Clary / Karl Alomar - Serial Entrepreneur, Investor, and Managing Partner at M13 | Building Structured Success

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Karl Alomar - Serial Entrepreneur, Investor, and Managing Partner at M13 | Building Structured Success · Success Story with Scott Clary

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  whatever company you're building you have to understand your customer you have to understand
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  intimately understand what they need and what they're trying to get my biggest fears came
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  true which was you put a melee of people into basically a mosh pit and just say go get stuff done
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  no one has direction no one has a target no one has motivation there's no reference to who's the
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  better engineer who's the worst engineer who's taken care of what it all tries to self-organize
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  and the idea is oh it's a utopian world they're going to figure it out with realities they duck
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  whatever it was that was seeding the business and creating the magic begins to fade because you
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  are just disappointed on happy people and you're not able to really deliver culture and secondly
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  because there was no structure the people who were true performers felt that they couldn't deliver
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  and because that makes them unhappy they leave and you're left with the people who are lower
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  performers who aren't necessarily as good a delivering so they're not as affected by lack of
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  delivery being a much better always having these like big hairy audacious goals in my life I
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  wasn't comfortable with the idea of I'm just going to go do the normal thing or approach it
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  the normal way if we really want to participate in the next generation of business technology
• 1:04
  businesses we have to accommodate the way in which that build the way in which value is required
• 1:10
  welcome to success story I'm your host scock Larry the success story podcast is brought to you
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  so uh yeah the original story as I actually grew up in England um I went to school there I studied
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  engineering at Imperial College in London uh and really uh I'm gonna age myself now but in the
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  mid 90s moved host college into Los Angeles and started really kind of trying to discover my career
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  and I started off just you know doing working for a larger engineering uh farm um relatively
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  larger not that large but kind of just doing business development and stuff like that in my early 20s
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  and it's actually when I was 24 that I first realized that you know I was destined to go do something
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  myself and it wasn't really necessarily uh excited about just following other people's orders
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  and stuff and you know just as kind of young arrogant I guess young entrepreneurs who think they
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  can conquer the world too and so um I started my my career my entrepreneur career back in 97 uh
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  launching a business which was a camera networking business kind of ala nest or or ring these days
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  but back in a time when you had dial up modems and we were just about to get DSL up and running and
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  so did pretty well considering I had to have no idea what I was doing and so spend the next three
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  four years making it up as I go um I took the CEO role I had three co-founders um and ultimately in
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  in 2020 like in the whole for anybody who kind of can admit they were around at that point in time
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  and the whole bubble bust and uh and obviously I was right in the middle of it you know in California
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  and you know it's just usually funded and just in this place where you know you're it's not about
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  making money it's just about getting gross it's just spend spend spend and so put me in a very
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  precarious situation um had a round that we'd raised to fell apart because of the the bubble
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  bursting but then luckily I had you know two or three suitors that were looking to acquire us at
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  the time so I was able to engage with them and ultimately got the company sold stayed for another
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  year left and uh a year later and went to do my MBA um in Columbia in New York and that's what
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  moved me to the East Coast which is where I've been for the rest of my career um and the
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  fighting component of that is uh you know going to do an MBA you know I'm now late 20s 28 or something
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  and I got to start doing all these basic classes around you know accounting and statistics and
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  marketing and all these things and every class I went to was like I know a hall moment of what
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  people were talking about for the past three years I'm like literally right there I don't know how
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  way easier way yeah that now it makes sense to me I want to go back and do it all again
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  and so uh taking that new family mortgage um after that and in the 2000s I said the FinTech
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  company was able to that was international was based on Chinese um manufacturing and and CPG buys
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  from Europe and the US um pretty cool kind of it into structure there are a lot of things for
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  the first time like electronic signatures uh we used a bill of cell model for the guarantees we
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  underwrote that and marked it that paper into the uh into the banking world to kind of syndicate
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  out our capital requirements and a lot of pretty innovative things that one really done not much
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  in those days that have been come come come will come in place now and um and built pretty good
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  company we grew to about 140 million in revenue sold that in early 2010 went through another
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  financial crisis with that one which wasn't fun but I guess that was just at that point in my life
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  I felt like it was just destined um and then uh after that a couple years later joined digital ocean
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  right at the at the you know at the onset of digital ocean um just as they launched that first
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  product joined a COO stuck around there for almost six years was able to build the company with
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  a great group of co-founders up to about 250 million runner eight five hundred plus people
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  by the time I left and then now obviously positive five hundred million runner eight public company
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  doing doing uh very very well which is nice and so much so although I guess at this point uh
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  it is very nice good for you yeah yeah yeah and then I jumped over to venture like two or three
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  years ago and we were at the point where we were kind of finalizing our pure readiness uh we had
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  a new CEO to come in and take over for the uh public offering and then I you know was giving the
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  option to kind of extend for four years or to you know make decisions to leave and and uh I was
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  fully kind of vested and and the likes I made the decision to leave knowing that I had this
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  opportunity to go into venture so now I'm investing in founders that's honestly my passion I've always
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  loved it I've always loved work of founders I love rather than being so like laser focused on a
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  single thing I'm now in a place where I'm able to kind of see the horizon of opportunities and
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  innovation and just really just spend great time you know um working hand in hand with with founders
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  that are just honestly very inspirational that's like it I don't know how many minutes but two minute
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  brief of my life I guess it's very good no it's it's incredible I guess I want to I want to
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  understand your mindset when you when your second organization that you started exited
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  why at that point did you not go into venture why did you go back as an operator and do a company
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  yeah you know it's interesting so we did that and uh I started making um some uh you know early
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  bets um yeah I made some personal investments rather like pre-seed you know small checks and it
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  sounded a couple of boards um and sort of couple of founders I started kind of experiencing that
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  but doing it on on my own back um I think that business you know although we we exited we exited
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  in a very tough financial climate it wasn't as welcoming as the climate wasn't 2018 as it relates to
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  expanding venture firms and so much money going into venture that didn't really exist back then
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  I could have pursued a path into venture at that point but I think a couple of things stopped me
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  one obviously I would have been starting at a very different position and we've had to really
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  built myself up in venture um which was not my core skill set at the time and uh and secondly um I
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  felt like I had more to prove um you know I it was a good company we did while we exited but
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  you know it wasn't a public name you know the things that I achieved in digitalization was kind of
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  validation that I felt like I so I had more to do and it was also young and full of energy
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  compensated yeah and now we're talking about kids we're talking about life changes so yeah
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  it was like in a state of mind where I kind of wanted to go work 12 hours a day seven days
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  a week and kind of make something happen where I am now I feel honestly like it's different stage
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  of my life um you know everyone thinks that that uh investor just goes play golf all day well that's
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  not true I'm still working all day I'm probably working way harder than I should but but it's a very
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  different position you don't have that kind of concentrated set of stresses that you deal with when
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  you are you know that you have the world on your shoulders and and everybody's money you know
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  betting on you and and you know have a little bit more reprieve in that regard but still get to
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  enjoy um you know the successes bicariously through the fathers that we work with so this is the
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  right title it makes sense but I still think that there's lessons to be learned from when you chose
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  to join digital ocean because I I would assume that after two successful exits um you would have
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  had a very good idea you said you wanted to prove something you wanted to prove out that you were
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  still uh it could it could be that effective so you also probably had a very good understanding of
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  of what type of company you want to join and I'm going to tie this to the characteristics of a
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  company that you want to invest in because I'm assuming those things have and not they're not that
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  different so let's let's talk about digital ocean what was the type of company that you were joining
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  why did you bet your career and a period of your life on digital ocean what were you looking for
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  yeah so um what is interesting is I'm off off and asked like what's the best investment you have
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  ever made and I always say to be on a digital ocean uh the whether it's just buying my options which
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  cost you know millions of dollars at the end of the day or whether it's um you know whether it's
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  actually just the time commitment and the resources I committed to it it was definitely I love
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  that you framed it that way because it definitely was a big investment decision to do it so I you
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  know I had a lot of things coming at me back in that time frame and I was working with a lot of
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  different companies and a lot of different founders and helping them in different ways um the nice
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  thing that happened to me with digital ocean was that I had a good amount I had like two three months
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  of exposure before I really had to make a commitment I actually got in there work with them and actually
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  kind of felt how the engine worked the things that I saw was one an incredibly they had captured
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  the imagination of their customer base that a very clear and targeted audience they knew exactly
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  who they're marketing to they knew exactly the profiles you know the profiles of their audience
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  for the profiles of their founders they they understood their customer intimately and so when you
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  reflect that on how do we make investments you know whoever you whatever company building you have
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  to understand your customer you have to understand intimately understand what they need and what
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  they're trying to get um so that existed and as a result of that they really had captured the
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  imagination so when you started looking at the social proof whether it's through Twitter or whatever
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  all the means of you know the validation that this was a loved business they were building a brand
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  that was truly loved um it was very very easy to validate that and then more importantly you could
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  kind of immediately see the machine beginning to take effect and when I say that I mean this was
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  honestly something that the co-founders and I are so proud of is that even after all of us left
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  the company we could see the machine continuing to grow and build the business but you know they
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  we built an engine that um was you know building upon itself it would bring someone in
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  capture them and then build with them and we're gonna expand with them over time and then
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  the referral and the organic nature of how that grew amongst an audience was really really impressive
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  and you could kind of see it the seedlings of it in the early days what I did um when I first
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  helped them in that kind of first two three months where I was kind of helping them get their feed
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  under themselves I really rebuilt the kind of a whole structure financial structure organizational
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  and kind of the full cost and projections of the whole business and my model was telling me
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  they were going to do a hundred million at three years and so I'd only built a business that
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  you know after a few years did just offer a hundred million dollars and and I felt like oh I need
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  to sell this you know markets the capital markets on that for me and you know we're gonna cap out
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  this is a business where I saw it shooting through a hundred and going well beyond so me journey
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  for me I was like this is gonna be bigger than what I've done before there's an opportunity for
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  this need to call a billion dollar revenue business and I could cut it see the path together
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  so if I believed in the model I was building then I'd be an idiot not to consider you know taking the
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  raw so it's a little different to we don't get that much exposure honestly sometimes investment
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  decisions are unfortunately a little rushed because the market is just so aggressive that you have
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  to make bigger bets and decisions without having the same level of information but some of the
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  fundamentals like you know does the business model make sense you know does it make sense at scale
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  so even if you're losing money now what does it look like when you grow is that just gonna expand
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  and you're gonna basically just dig a deeper deeper hole for yourself or are you in a position
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  where scale fixes that what is the realistic scalability like is this organically gonna scale or
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  is this something you have to fight tooth and nail every day to add a customer you know how is the
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  relationship with the customer you know do the customers love you is there a true you know
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  relationship you know do you really understand that customer journey so a lot of these like traits
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  that I was recognizing in digital ocean of the things I'm I'm ultimately looking for it in
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  businesses that we invested so you you mentioned a few things there so you mentioned like is it
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  is it scalable and you you forecasted out and the economics made sense obviously and you were
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  working with these people for two months so you started you knew the people you were working with
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  as well but one thing is interesting so you you modeled it out and I'm assuming like regular forecast
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  you you figure out Tim and you do all the things you'd figure out for regular for regular model but
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  how do you scale at that how what's the playbook to scale at that at that velocity when you've never
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  done it yourself before how do you forecast out a model it this is still early days like now
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  digital ocean compete with like AWS and and it's like a very it's at that now compete at that level
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  but when you're building out a competitor to AWS I don't know how you would model out a similar
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  growth trajectory when there's nothing else out there that has really achieved that scale before
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  yeah yeah um it's on the stage of the business so again we do two tips and types of investment
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  we'll invest in our core deals that actually have validation which means they have data they have
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  history and in those situations which is probably you know we were in the earlier stages of that
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  there's which one I started working but I could see it in real time like it see patterns being
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  created do you recognize the patterns you know where are you sourcing your customers from how much
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  of it is organic how can you drive those you know organic channels and ultimately all the model is
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  as a set of assumptions set of growth assumptions so if you if you just set up if you just have
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  an understanding of you know every customer bring in for every one customer bring in I'm going to
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  get point one referral or whatever that number is um for every um you know every customer that comes
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  in this is the average price thing in a star spending this is the growth rate of that spend over time
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  based upon what I've seen what I've experienced and you start kind of just putting those little
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  piece together with some companies where they have you know market growth strategies and they're
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  like market by market you look at what's the trend of a market launch and then how can you layer
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  new markets on top to see how that grows out of the time so there's just different mechanism just
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  got to be creative from from a perspective of how you imagine the business is going to grow and
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  translate that into a set of assumptions that drive the numbers and then you just roll the numbers
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  out and so it's ironic you know you could get one assumption wrong and your numbers will be way off
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  I want to give it a discussion for the first three years of business we hit our number literally
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  within one or two percent I don't know how it happened wasn't so easy very impressive fix but
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  years one through three it was so spot on it was it was um it was incredible and so um it's just
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  I guess I was lucky that in that business specifically those assumptions were really obvious we're
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  really clear for me at least and so documenting those and building model against them turned out
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  to be very very real um and you know there's always a difficult and new businesses way
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  you've never done it before but you know it is it's an odd as much as it is a skill like you have to
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  actually build the ability to kind of predict what's going to happen how customers will react and
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  know what those assumptions are later going to drive your business but I will say from from an
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  investment standpoint when I look at somebody's model I'm more focused on how they're thinking
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  than what the model's telling me because I understand that a model could be way off
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  and they could be completely wrong but if you actually look at the numbers and look at the
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  assumptions and you say okay so this is how you see your business you think these are the key
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  drivers you think these are the things going to affect your business it allows me to understand
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  the entrepreneur better and for me the question is is this person thinking about the business correctly
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  like do they have the right head on that shoulders to think correctly iterate and adjust those
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  assumptions as needed you know build a real kind of business you got to feed into the true assumptions
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  that are going to really drive that business so so walk me through like some of the because I want
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  to I want to understand some of the things that M13 is working on on now with organizations but
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  walk me through some of like pick a pick a few key lessons as you grew digital ocean because that
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  was probably that was the largest organization that you were you were an operator in so the key
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  lessons that now you bring over to some of the portfolio companies in terms of growth scaling
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  we already spoke about how to project that's fine but as you actually deploy the strategy what are
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  some of those lessons yeah so many I know there's a lie that's why I was like do we have
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  now I you know if I try and encapsulate it into some key things I think the first thing I really
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  love was growth is not all about just growing revenue it's about so much of it and being a
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  CLO role was this was key for me how do you actually manage the growth of the organization to support it
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  and there's plenty of examples of companies that just outgrew their ability to actually execute
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  and so definitely in an organization like digital ocean which was highly complex we had to think
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  about infrastructure DevOps data supports the you know talent organizational structure culture
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  all these different competitors that all have individually the ability to implode a business
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  if they're not executed correct and so probably the biggest piece that has the most immediate
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  effect when you really start seeing that growth one thing that we we talked about a lot back
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  in those days was a quote that I think came from from Mark Andreessen which was the software
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  is eating the world and also this whole concept that software easy well was the driver for white
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  people need to cloud and then the concept that when you have product markets fit then it's you know
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  you're not trying to find growth you're trying to keep up with it it's you're just basically running
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  as fast as you can to keep up with the growth because you have product market that's all we had
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  and so what do you do you have to build quicker you have to hire quicker you have to do
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  you know a lot of things to build an organization that can support it we in the space of the
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  second year I was there so I joined in 2013 early 2013 in 2014 we added a hundred people to
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  organization 80% of which were engineers just in a completely flat disorganized way
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  I will say that it was not my choice to do it that way we had lots of battles about how to do it
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  but the ultimate you know understanding was we need as much resources we can and and you know
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  different powers and that be you were kind of driving to say let's just hire hire hire we just need
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  people at the table and my biggest fears came true which was you put a melee of people
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  into a basically a mosh pit and just say go get stuff done no one has direction no one has a target
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  no one has motivation there's no reference to who's the better engineer who's the West engineer
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  who's taking care of what it all tries to self-organize and the idea is oh it's a utopian world
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  they're going to figure it out but reality is they don't and there's two things that happen
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  one because now you're in a situation where you have so many people you cannot create a human
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  connection with every one of them culture gets lost so whatever it was that was seeding the
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  business and creating the magic begins to fade because you got just disappointed unhappy people
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  and you're not able to really deliver culture and what culture is designed to do is to optimize
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  the performance of the team and secondly because there was no structure the people who were true
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  performers felt that they couldn't deliver and because that makes them unhappy they leave and
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  you're left with the people who were lower performers who aren't necessarily as good a delivering
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  so they're not as affected by lack of delivery so it became a really like we got into like this
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  what we would call a cultural crisis by the end of 2014 and we had like a you know like an intervention
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  of sorts in the very beginning of 2015 and said this needs to all change and so at that point
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  we totally restructured the organization built layering and organization around the the engineering
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  team is built management structures and they're brought in Matt Hoffman who's still watching out
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  at m13 to run talent and start building a culture program and literally a year later I think we
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  were voted best place to work in New York or like one of those ratings so we were from cultural
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  you know a bis to best place to work and it was all very very structured and planned and you know we
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  we did we totally changed our communication strategy we created biweekly what we called AMAs
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  which will ask me anything which the idea of it was you know put the executives in front of the
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  whole company and just also whatever question they have and how how how how it is and just being
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  vulnerable and opening up just creates that bond and even though you've got a bigger organization
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  and so what I learned was that you know the growing pains are the things that can kill at least
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  at minimum hold back your company and so think about your head of talent higher early think about
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  them as someone that's going to optimize the performance of your team not just higher people
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  or not just give people things that they like it's how do I optimize for it's how do I
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  hide the best people on board them as as good as possible and keep them so engaged and tied into
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  the culture and the mission of the business that they are delivering at 110% every day and that's
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  the ultimate you know talent leader and most most y'all entrepreneurs were like out with 30 40 people
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  we don't need a talent leader now we can grow a double triple before we need anyone or maybe we
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  just hire a recruiter we don't need a talent person but ultimately everybody that we've invested in
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  that tired a talent leader has come back three six mosaiders have that's the best how we could
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  ever make because it just increases before and there's a handful of other roles and other structural
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  things like technical program managers is another thing that most people don't realize that they need
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  but I learned about all the little nuances in an organization that make an organization perform
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  better than that I think that's probably the single greatest lesson that I'm on in that in that
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  always very I've never heard that before and I think that that's it's industry and category
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  agnostic so that's a very interesting point I guess just to double to double down on that quickly
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  and I mean you can move over to m13 and what you're working on and now and why you even started
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  m13 but that's great I understand the rationale and the logic behind it for a first time
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  founder or even a serial founder um how do you hire that individual because I think a founder is
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  either like an engineer or product focused individual or a sales and marketing background but I
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  I've worked a start-ups and I don't know a lot of founders that come from HR leadership so how do
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  you even find that right person who can recognize the beauty as you don't you you don't have to
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  take the art with talent to be able to figure out that role um I think it's a hard role to hire for
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  but it's a very puzzle higher you know you're talking about the person it's going to carry
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  your culture and your brand into the organization it's going to represent you know if call is
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  starting a company or a squad is starting company um it's going to be a thousand people but how's
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  everybody going to still be that kind of representing that that brand or that representation
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  of the squad wants to represent who is the person that can deliver that message and I think it's
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  it's a very um it's a very personal uh connection and role where you really feel like the reflection
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  of what you want to see in your company coming through this one person you know the tactical way
• 26:20
  of hiring this person as just the usual routes whether it's a LinkedIn poster whether you're getting
• 26:25
  a recruiter or or through network or connections like you'll see people you'll create a pipeline
• 26:31
  but the way you select the person is just really trying to make sure that first of all they can
• 26:36
  represent you effectively and secondly they have like the EQ um and and the emotional
• 26:43
  taverns to you know carry in and build energy in the organization you know and then behind the scenes
• 26:52
  all of the organizational and kind of capabilities program management capabilities are actually
• 26:57
  organizing a team of a hundred two hundred three hundred people I mean obviously that team's
• 27:02
  going to grow time team's going to grow as your as your organization grows but um yeah it's a very
• 27:07
  puzzle high I think it's it's difficult if I was walking with you hand in hand and I go to know
• 27:13
  you then I could probably help you figure out what that person looks like but I think it's different
• 27:17
  for for every sound very good no it's it's it's great advice just to be cognizant of as you're
• 27:22
  as you're growing your business I just I've never heard that advice before but it just it makes
• 27:25
  really good sense um okay let's let's pivot into M13 because I know we can probably go into like
• 27:31
  you said there's a lot of stuff that you've learned to do but um it could be a thought
• 27:35
  do it a part three we'll figure that out we could do that we could do that I listen I just
• 27:38
  found it here in Miami I'll I won't do like I know how every day it's all good yeah I'd love it
• 27:43
  man I'd love it all right um okay M13 so what was the what was the concept so yeah you you you made
• 27:49
  some money that's great and you want to invest in companies also that makes sense but um there's
• 27:53
  a lot of incubators there's a lot of uh private equity firms PE firms VC so what's what's the
• 27:59
  difference that M13 what are you what are you bringing to the table that that Y-combinator wouldn't
• 28:05
  yeah so um it you've mixed in a lot of different types of stuff that's true I was really unfair
• 28:12
  that was that was really important I'm sorry you're in other rate uh you know peony it's a whole
• 28:16
  other end of the scale venture sits in the middle somewhere uh then there's these studios that
• 28:21
  you know uh that incubate from the ground up so there's the different types of models we're
• 28:26
  purely we are truly an investor we're a venture firm at the stage of investor um really the you
• 28:33
  know I started actually I connected with the two founders I came in for fun to fund one was
• 28:37
  much more of a family office type fund it wasn't as much of a institutional fund but there were
• 28:41
  lots of incredible investments made out of that I think they've they seeded seven or eight
• 28:46
  unicorns out of that fund so just really really incredible performance and that's allowed us to
• 28:51
  build fun too and beyond but in uh the beginning I left dishwasher at the end of 2018 but at the
• 28:56
  beginning of 2018 I kind of took on an advisory role with culture and cornyry and my partners at M13
• 29:05
  to help them devise what does if we really wanted to make a mark in venture if we really wanted to
• 29:10
  like progress venture where it needed to go and and really help founders be successful what is it
• 29:16
  that we need to do how do we need to structure this to make them all um being an entrepreneur and
• 29:22
  always having these like big hairy audacious goals in my life I wasn't comfortable with the idea
• 29:26
  of I'm just gonna go you know do the normal thing or approach it the normal way most first time
• 29:31
  funds are gonna be either a pre-seed 20 million or maybe they'll do a 60 or 80 million dollar fund
• 29:37
  um and and you know they'll they'll be very traditional very tidy thin team and they'll focus
• 29:42
  purely on like let's just go use our relationships to find the best investments prove ourselves
• 29:46
  an overtime perhaps build to the next level of investment we really came in strong you know
• 29:52
  the culture corny and I all agreed that we needed enough capital to really allow us to build
• 29:57
  an operation that was going to differentiate us so we built our first fund around 190 million
• 30:02
  dollars uh or fund two rather fun three now that we're in is 400 million so we've doubled since then
• 30:08
  but 190 million dollars and with that we all what we did is we we started to think about
• 30:16
  in my experience and in their experience and in all our friends who have found this experience
• 30:21
  what is the thing that everybody was sell like lacking in their relationship with investors however
• 30:26
  great the investor is there's definitely investors out there that are a backseat investors
• 30:30
  but there's also investors out there that'll sit in the driving seat with you but the key thing
• 30:34
  that was consistently missing was that you you never had a true partnership and an investor it was
• 30:40
  it was usually very however helpful they were it was kind of always at a distance it was always kind of
• 30:45
  like a um you know more of a guidance or a directional and a very reactive sensibility
• 30:50
  toward how investors help you like you get into a problem okay then they might help rather than
• 30:55
  being proactive so what we said is you know what we really need a more uh some that's built more
• 31:01
  I cannot pray for where we have the skill sets and the capabilities to really go in and become
• 31:07
  like this extended team or this this bench that you know that your founder team can mean on and
• 31:13
  pull in as needed to get key things don't make decisions better you know I've spent that cultural
• 31:20
  crisis I talked about we spent a year spending our wheels minimal advancement of the company trying
• 31:25
  to deal with that if I had the right partners with me uh at the beginning they would have said to
• 31:30
  us you are about to go into a cultural crisis you need to build structure and we would have fixed
• 31:34
  it right up front when we would have bought ourselves a year of growth and so how do we do that for
• 31:39
  other founders whereby they don't have to face all of the challenges and all the problems we face
• 31:45
  because they're just they're basically being given the guidance and the support and the strategic
• 31:50
  direction needed to solve that and it's not just in one function it's in multiple function that
• 31:55
  all relates growth so there's the pieces that drive growth whether it's brand products um you know
• 32:02
  formats marketing things like that or the pieces that that support growth which is like your data
• 32:09
  or your finance your operations the things that you need to manage growth rather uh and so what we
• 32:14
  did is we on top of the fund we actually invested you know an initial amount of money three years
• 32:20
  worth of operational money to build a team of these executives I brought in my Hoffman and Rob Olson
• 32:27
  from dishwasher with me there were the two best people that worked for me at dissolution uh one
• 32:31
  ran talent one built a whole data organization that uh we brought in you know Christine Choi who had
• 32:37
  been running brand and comms for Richard Branson at uh virgin for 12 years we brought in um you know
• 32:44
  uh Lizzie Farsis who was CMO at guild group CMO at go group so just this caliber of people that
• 32:51
  was just so beyond anything an early stage company could get and we we trained it to be the ideal
• 32:58
  kind of executive team of of a growth company and all of them had been in the very early stage
• 33:04
  mid stage and even through the public company stage they'd all been through that whole experience
• 33:09
  and and we decided we wanted to build a true partnership with our founders our thesis was
• 33:16
  not to be capitalistic but rather to say if we can focus on just making our founders as successful
• 33:23
  as they can be partnering with them and helping them become as successful as possible the economics
• 33:27
  will follow the economics will take care of themselves and so that team has oriented over the last
• 33:33
  three years to build a set of programs and an approach where we truly truly partner with our founders
• 33:40
  and truly help them along that path and do as much as we can to really help them become
• 33:45
  successful as possible and the results of that you know I think our NPS with our founders is
• 33:49
  somewhere like 88 which is obviously incredibly high um I think if you asked most of our founders
• 33:56
  whether we were the largest investor or not like in terms of value most of them would tell you
• 34:01
  that we're most valuable investor they had and and we just built such great bonds and
• 34:05
  relationships with our founders and not just because we're nice people but because we truly have
• 34:09
  been there with them through the tough times and the good times and help them make better day-to-day
• 34:14
  decisions along their journey to all to a result and kind of better outcomes and so that's how we
• 34:20
  differentiate and what's interesting is you hear our every VC is going to say the same thing
• 34:25
  and stuff but I don't think any other VC has taken their own economics put it in on the table
• 34:30
  purely for operational reasons to basically over deliver at at these early stages of investment
• 34:37
  most other firms really are just much more heavily focused on investing and the ones that have
• 34:43
  built platforms more recently have done so but again it's not as hands on it's not it hasn't taken
• 34:48
  as much external investment as what we've committed to to kind of create this differentiated experience
• 34:53
  success story is part of the HubSpot podcast network in the network there are other incredible
• 34:58
  podcasts like the ops authority hosted by Natalie Gingrich every week on the ops authority
• 35:03
  Natalie discovers actionable strategies to move your business forward and transformational
• 35:08
  stories of powerhouse business owners who value operations you can't ignore backend pieces that
• 35:13
  have to work together and flow smoothly in order to build a brand grow a movement or disrupt
• 35:18
  an industry if the operation side of your business is a mess putting out fires will always take
• 35:24
  priority leaving no room for creative innovation visibility or networking with powerhouse peers
• 35:30
  or even wannabe powerhouse peers you got to get your house in order and to do that you have to
• 35:35
  listen to the ops authority wherever you get your podcast I completely respect that I think it's
• 35:40
  incredibly valuable and that's why I didn't want to just label you as an investor because I think
• 35:45
  that somebody who invests so heavily in operations and even the fact that I didn't know that you
• 35:50
  invested so much of your budget in in building this executive team out but even the fact that
• 35:56
  you are an operator and you are moving into this you it's not like you're just a bunch of like
• 36:01
  that's a just a bunch of but you know a bunch of people that have access to capital who wanted to
• 36:06
  play like you've actually been an operator I find that's always the best kind of investors because
• 36:12
  the worst thing you can have is an investor that doesn't doesn't have any experience being in
• 36:17
  the trenches and and trying to understand what a founder's dealing with and they've just never
• 36:22
  done it themselves so I think there's merit to that so I you know you you call yourself just an
• 36:26
  investor but at the end of the day what does a founder need whether or not it's with an incubator
• 36:31
  or with the PE or VCE or investment it's it's it's help it's it's it's help because
• 36:38
  you don't know what you don't know yeah I mean we think of ventures ventures of service is kind
• 36:43
  of the next generation of venture it's not just gonna ask is this like what everybody's moving
• 36:47
  to like is it almost like it's necessary to have that operational experience in in venture now
• 36:53
  is that that's starting to be the de facto or the norm I we feel like I mean we've invested in
• 36:58
  that right I think we if not we were very early if not the first to kind of truly throw ourselves in
• 37:04
  the ring like how hard it me in that you can say the Andrew since the world started it you know
• 37:09
  15 years ago when they started building platforms but I think we've taken it to another level
• 37:14
  hopefully even beyond that but what I would say is now when you know money has become a commodity
• 37:22
  we find that the best opportunities and the best deals are looking for partnership you know
• 37:28
  they're looking for that support mechanism and they know they can get the money from pretty much
• 37:33
  anyone they want it from and it's more of a question of you know what do you you know what's
• 37:38
  the relationship we're going to have how we're going to you know we're going to be 10 year
• 37:41
  ponders in this is this the right partnership to make and so we found ourselves being invited
• 37:46
  into great deals we found not only from founders but also from you know other venture firms that
• 37:52
  have found you know have enjoyed working with us and then seeing the value we provide and so
• 37:57
  it's just made it easier and easier over the past three years to just build a better and better
• 38:03
  portfolio is we get more and more access to kind of really exciting opportunities throughout the
• 38:08
  let I'd be curious to know like what some stories from some of the portfolio companies so
• 38:15
  what are some of the companies that you've worked with and what are some of the things that
• 38:19
  they've had to overcome as they've grown so like let's let's talk about some success stories in
• 38:24
  your portfolio yeah I mean it's probably the companies that are kind of the pinnacle of success
• 38:32
  um capsule is probably the biggest company that's in our existing portfolio and I'm not
• 38:37
  including one one has a bunch of unicorns but again that was pre-model the throw from two
• 38:42
  rainy um capsule is digital pharmacy based out of New York it's now in multiple markets um they were
• 38:49
  you know obviously on a later stage for what we usually invest but uh but again just kind of
• 38:54
  helping them think about their market launches and stuff I think we've probably had more of an
• 38:59
  effect on the layer that sits right under them so companies like chef which is the home cook uh
• 39:05
  kind of grab hub solution uh we you know we help them navigate they start in San Francisco
• 39:12
  we help them get into New York the main launch Los Angeles and they've begun to kind of build out
• 39:16
  the different components of um of the market you know they built a really incredible
• 39:22
  relationship with Christine our brand of comms person who really helped them shape a lot of
• 39:27
  their messaging a lot of how they've gone to market so they've had kind of the most you know
• 39:31
  highest level support from a true comms um you know skill set to kind of build a message that
• 39:38
  is really resonated in market and you know they just did around I think a few months ago at around
• 39:43
  a five hundred million dollar valuation so that we came in I think eleven million dollar valuations
• 39:48
  where we started with them so you know we've really seen them rise through that
• 39:53
  all the couple come we call road banking it's an SMB banking solution um uh great founders Alex
• 39:59
  and Everett um and uh they were building you know they are building again they did around it
• 40:05
  about a five hundred million dollar valuation too they are building uh kind of the most integrated
• 40:10
  banking solution integrates with all of SMB's financial systems whether it's QuickWorks or NetSuite
• 40:15
  and kind of into great all the services and to our platform to make it really easy um and
• 40:21
  again similar thing when we joined them when we started working with them they were really kind
• 40:27
  of nascent in their development of the product of the market um you know they had a small team
• 40:33
  we helped them kind of organize a structure how they want to build their team they're a great
• 40:37
  example of kind of um getting them to focus on that talent higher they're one of the you know
• 40:42
  ever it's taught me the CEO's taught me a bunch of times that that's possibly one of the best
• 40:46
  highs he could have made like he totally ceased the value of it and so just really guiding them
• 40:50
  through how to think about building the organization um has been really really helpful um it's kind of
• 40:55
  called lightning lightning labs anybody that's in the web 3 or crypto world would know them uh
• 41:00
  lightning is the second layer platform it's an open source platform it sits on bitcoin um and
• 41:05
  allows for transactions real time inexpensive transactions on bitcoin and uh lightning labs
• 41:10
  you know has built all the kind of the infrastructures to support that and 90% of the lightning
• 41:15
  market is sitting on lightning labs at nd nodes as they're called um and uh with them we you know
• 41:24
  the incredibly talented team but kind of very raw in building that product put it out that
• 41:30
  you know we help them navigate thinking about data how data plays a role help them kind of
• 41:35
  structure how they want to think about um kind of the data stack and and how they want to use
• 41:40
  data to basically make decisions and build that whole component around their business which is
• 41:44
  another key learning I got from digital ocean in terms of the power of data and how influences
• 41:48
  companies uh since then I think they raised the most recent need around a 600 million dollar
• 41:52
  valuation again another company we came in very early on so there's there's like a list of the
• 41:57
  success stories I think what's really interesting is the next generation that haven't quite gotten
• 42:01
  there yet that are just now growing um couple of really exciting ones uh there's one um uh uh
• 42:10
  guy called guy from Yale who actually left Yale on a on a teal fellowship um called Mike
• 42:16
  Chiang started coming called prepared which is really this massive disruptor of the 911 system uh
• 42:23
  really built full multimedia solution around 911 where you know now dispatches can handle multiple
• 42:29
  incoming inputs on a particular event with video audio all potentially NLP to kind of reduce to
• 42:36
  a core set of information that's truly valuable so that when you get to the first responders of
• 42:40
  vehicle that information is delivered in in an incredibly valuable way and you don't get situations
• 42:45
  where you know you can see just from the news of the last few years where you know first responders
• 42:50
  have gone the wrong understanding of the situation they're going into and mistakes that we made
• 42:54
  so this allows from much smarter um first responder strategy across the board and just uh I started
• 43:03
  we made a small investor in him right being discussed we believed in him so much and over the
• 43:07
  past year or two he's just built out an incredible machine helped him the whole way alarm like
• 43:12
  figuring out the strategy of you know the business the customers who are the customers how are
• 43:17
  you going to charge them what's the pricing model who are the different stakeholders really mapping
• 43:20
  out the whole organization we just worked hand in hand with him the whole way to get to a place
• 43:25
  where he's really now gotten to a rhythm with his part where his co-founders are building this
• 43:29
  business and in the last month or so it's just in the midst of an incredibly um
• 43:36
  incredible round of investment he's doing where just he's being essentially bombarded by incoming
• 43:41
  interest it's just so much interest in the market around what he's doing and that that's a real
• 43:45
  exciting I think there's an exciting opportunity for him going forward in terms of uh where that's
• 43:50
  going to go um but just very very tightly integrated in terms of helping him get from where he was to
• 43:55
  where he is now and I'll finish with one more which is an okay then I have another I have one more
• 44:01
  I have a follow-up please you mentioned some successes I want to speak about some missed
• 44:05
  opportunities to because I'm sure you've seen so okay so this one is leaning I'm digressing
• 44:09
  towards missed opportunity so let me first of all talk about um one more really interesting story
• 44:15
  which is a company that was presumed to have sailed because of COVID that um so it's a basically
• 44:21
  it started as a platform to manage field marketing field marketing activities mainly for the liquor
• 44:27
  and beverage brands so you can imagine COVID comes along everything shuts down there's no fuel
• 44:32
  activity so they went from a high-flying growth trajectory into like nothingness overnight
• 44:38
  and we had a situation where even within our own thumb we were debating like is this does this
• 44:45
  company have a future or not is there anything there I was on uh I was observed on the board and
• 44:50
  Rob was was the board member and we worked very closely with the team to navigate how they managed
• 44:56
  their COVID period and establishing the predictions of what happens coming out of COVID and then
• 45:02
  it says you restructuring their business from what was this field marketing tool to a full remote
• 45:08
  task force SaaS platform the now facilitates services across multiple different categories of
• 45:14
  activity so kind of like a um you know uh like I want to say I don't want to say a Salesforce but like
• 45:26
  service now type platform but for remote task management so like a big SaaS solution and
• 45:32
  and and since they have made all that transition rebranded repositioned everything is this kind of
• 45:39
  task force SaaS platform they have uh reconstituted growth they've exceeded their pre-COVID
• 45:46
  numbers pretty significant they're accelerating in a pace faster than they ever have and after a year
• 45:51
  of everybody thinking this company has a future now they look like they could potentially be a real
• 45:55
  high-flier at the market and we were so heavily involved in the process of helping them navigate
• 46:00
  not panic but navigate from we're in trouble to where in a position where we've actually used
• 46:06
  this time to just both stop the business in the incredible way and so those are the types of
• 46:11
  things that that we've gone through from true success stories to suffering companies that we've
• 46:16
  helped kind of turn into central success stories so to follow up on that I'm just curious I
• 46:22
  and you don't have to go through like an an entire list but you can if you want it's going to be
• 46:26
  caught a set of time but for you but um miss opportunities but also I'm curious about largest
• 46:33
  failures like a large failure and why what was what what happened in a large failure that you
• 46:38
  went into but also a missed opportunity that's always fun to hear too yeah lucky today we haven't
• 46:44
  had many large failures keep it up yeah I also got missed up I talk about one missed opportunity which
• 46:50
  was um maybe short-sightedness on our part um so we had an opportunity to invest in data labs which
• 46:59
  um you know uh launched in the atop shot and kind of has become this NFT hub for our
• 47:06
  priority um kind of talent and opportunities um and we had an opportunity to come in and invest
• 47:14
  in them that it was a token play they wanted us to buy tokens our fun too was not structured to
• 47:19
  take all terms of assets we kind of were trying to play it by the book and we you know it was a
• 47:24
  million dollar investment and we thought you know it just not really doesn't fit like we we want to
• 47:30
  invest in the platform we'll give you money directly but they want selling equity they wanted
• 47:34
  to sell tokens fast for 12 months that one million dollars would have been 360 million dollars
• 47:41
  so add economic decision what we've done since that is realized that you know not only is the model
• 47:51
  of the companies where investing in the services would not only of those evolving but the underlying
• 47:56
  structure of these companies are like web three is totally changing the the concept of investing
• 48:02
  and structural structure investing and so what we've done with fun three of really structured
• 48:06
  ourselves to be able to do these more kind of uh non-stand deal structures like tokens and things
• 48:13
  like that where it makes sense knowing that if we really want to participate in the next generation
• 48:18
  of business and technology businesses we have to accommodate the way in which that build the way in
• 48:22
  which value is the quiet and so adding that was a big learning from that but that's the you know
• 48:28
  that's an obvious miss where you know we could have you know paid twice the fun back in 12 months
• 48:33
  would be a pretty good IRR but it didn't quite go down that way with which of me you living you learn
• 48:39
  you living you learn um I want to do a few rapid fire to close this out but just just to to give you
• 48:46
  you know just one last uh if you want to speak about where you want M13 to go in the future
• 48:52
  some of the companies you would love to look at in the future as well as you know open call to
• 48:59
  people to want to connect with you where should they go should they find you on social should
• 49:03
  they email you what's the website all of that so what where's where's the future of M13 going
• 49:09
  so I think a you know as I said like our holy thought is about the relationship with the founder
• 49:14
  and driving for founder team success that's the goal right so we've been thinking about what does
• 49:19
  that mean for us and where do we invest and where do we establish those relationships and I think
• 49:23
  we're looking at the full life cycle of of the founder journey it starts earlier than where we
• 49:28
  put us bait now and it goes later from where we can be effective so thinking about allocating a
• 49:35
  component of our of our funds towards a preceded strategy where we can kind of really go and work
• 49:41
  from the ground up and identify opportunities and really great talent and support them at the
• 49:46
  the earlier stages but then also looking at opportunity funds where we can actually be impactful
• 49:51
  in future rounds and and you know the true life cycle of you know the private company until it gets
• 49:57
  to its exit point so from a structural standpoint we're thinking about kind of expanding rather than
• 50:03
  just purely be focused on seed an A it kind of gives us the opportunity to play on on the full
• 50:09
  life cycle of of the business in terms of where we want to invest you know we've got four core
• 50:15
  categories that we kind of think about at least for fun three obviously it always changes fun to
• 50:19
  fun but everything is centered around two key themes one is you know the future in the from the
• 50:26
  perspective of a consumer and the second is how does what are the opportunities of web 3.0 type
• 50:33
  integration into these futures and so the four key categories are future of money which is
• 50:39
  fintech but also crypto or so prop tech things like that the future of health and wellness which we
• 50:44
  think about telemedicine we think about mental health you know we think about you know a lot of
• 50:48
  aspects of how consumers are going to experience health and wellness longevity things like that in the
• 50:53
  future the future e-con which is not you know CPG but it's much more platforms and solutions
• 51:02
  that are centered around e-con video integration social integration like a lot of the different
• 51:08
  ways in which consumers again are going to experience e-commerce and the tools and systems that support
• 51:13
  that and then so we do health money e-con and the fourth one is you might need to edit this part
• 51:25
  out no not I it's going to come to me one second but basically ideas we have these four key
• 51:33
  categories and they're all about the consideration of the future of how you know how people think
• 51:39
  about how people think about those categories so that's where we want to apply our money that's
• 51:45
  where we want to invest that's how we think that technology is going to change consumer behavior
• 51:49
  over the next decade the future of m13 and then where to reach you and then we can go right into
• 51:54
  rat the fire yeah so the future m13 is really you know as I said we you know we focus on really
• 52:01
  working with founders and kind of being part as to founders so the idea is we're thinking about
• 52:05
  extending that that life of the founder because the founder begins their journey well before they
• 52:11
  come into where we invest today and they continue well after our investment you know investment
• 52:15
  kind of period or period of most value so from a fun standpoint structural standpoint we're
• 52:19
  thinking about you know advocating funds towards precede kind of getting into kind of the earlier
• 52:27
  germination of the ideas with with great founders that we really believe in and also building
• 52:32
  opportunity funds kind of extend down parts of Spain be part of the journey beyond kind of our
• 52:37
  core focus that exists right now but in terms of what we want to invest in it's pretty simple
• 52:44
  you know obviously this evolves from fun to fun but for fun three specifically the way we've
• 52:48
  defined it is everything centers around two core themes one is how does the consumer look at the
• 52:53
  world and the other one is you know are there opportunities for web three integration and kind of
• 52:58
  crypto blockchain type technology integration into some of these different categories but there
• 53:03
  are four main areas that we focus on what is the future of work which is basically everything related
• 53:10
  to how consumers how you know the future generations are thinking about work like balance you know
• 53:16
  remote working gig working shift working you know just controlling your choices way more than people
• 53:22
  have done historically and all the different ways of that manifest and in how people optimize their
• 53:27
  lives around work as well as the tools and the capabilities that are out there that support
• 53:33
  you know SMBs and the like and future of health multi-talented medicine mental wellness things
• 53:40
  of that nature future of money which is not just fintech but also crypto and then also we
• 53:45
  think about prop tech and that category is kind of an investment vehicle and finally future
• 53:49
  of econ which is really how to consumers think about shopping in the future it's not CPG
• 53:53
  but it's much more the platforms and the solutions that facilitate you know shopping whether it's
• 53:58
  video social things like that so that that kind of encompasses the full gambit of the areas that
• 54:04
  we're interested in and what we want to invest in it's kind of all centered around you know the
• 54:08
  changing consumer behavior of the next 10 years and the technologies that are kind of feeding that
• 54:13
  and and then if people want to reach out and they can just chat with you or they want to
• 54:19
  yeah I'm sure you get a lot of pitches but they want to pitch M13 where do they go?
• 54:23
  So M13 website is easy M13.co as that's always easy to kind of just look us up but for me
• 54:30
  plus in the at a LinkedIn is probably the best way to find me call out more in LinkedIn
• 54:35
  also have twitter, calmore and yc but but I tend to be more active on on LinkedIn and then obviously
• 54:41
  with M13 M13 has LinkedIn page 2 so feel free to reach us out reach out to us there and then you
• 54:46
  know we can clear perfect okay let's do a couple rapid fires pull out some some career insights
• 54:52
  life insights biggest challenge you've overcome in your professional life yeah I'd say the
• 54:58
  biggest challenge I ever came up professional life was probably the financial crisis of 2008
• 55:03
  so I was in a fintech business and the whole financial world seized up on me so I was just in a
• 55:09
  really really precarious situation and you can ask my my current wife who was you know not my
• 55:14
  wife at that point but definitely stood by me and supported me as I kind of went through the
• 55:19
  daily struggles of dealing with the next you know big you know pin to drop I guess on this whole thing
• 55:26
  so the real the real way the thing that I really none from that is my ability to get through that
• 55:35
  and kind of actually come out of that with a growth business was centered around two things on
• 55:40
  a personal side the support mechers was ahead around with my wife and the people that was
• 55:44
  supporting me personally but more importantly or not more importantly but equally as importantly it
• 55:48
  was that the on the business side the board we did established the mentors that I'd established
• 55:54
  around me I'd built a really really good set of people around me that were just incredibly
• 56:00
  influential and capable and and just very supportive throughout the kind of difficult journey
• 56:06
  that we had to go through over those six months or so until we started to reset to the business
• 56:12
  and so we've really just learned that you know it is so much about the people you put around you
• 56:17
  and the support mechanisms you have around you because it's in those tough times
• 56:21
  have become hugely valuable one person obviously there's been many but one person who's been
• 56:26
  highly impactful influential in your life who was that and what do they teach you
• 56:30
  very interesting there's been yeah there's been kind of an evolution of different people
• 56:38
  and different times in my life that have been you know really really impactful and really really
• 56:44
  helpful to me I think you know when I was building the FinTech business my partner at the time
• 56:52
  actually someone I went to school with was obviously had built a pretty big farm he was running
• 56:56
  a business there was at the time that I started working with him doing about a billion in revenue
• 57:01
  and about two billion by the time that I'd finished totally separate to traditional finance
• 57:05
  but really kind of gave me some good insights on you know just thinking about growth thinking
• 57:10
  about scale you know really helped me to kind of navigate the way I was I was you know we were building
• 57:15
  that farm and definitely not a lot from him on that but I think that in every juncture of my life
• 57:22
  all my learnings have come from kind of key people in those moments I haven't had a single mentor
• 57:27
  that it's bound through the entirety of my career but I've kind of always identified key people
• 57:32
  in each of those key moments that that have just been the the best guidance point for me in
• 57:37
  terms of figuring out how to how to deal and address that part of my career it had a pretty
• 57:42
  eclectic career so it's interesting to kind of very different industries so kind of you know
• 57:47
  meaning on different people at different times to really grow in that a book podcast source that
• 57:53
  you recommend people go check out yeah definitely lots of books out there that are really really
• 57:58
  interesting if I go to a couple of old school ones you know Eric Reese's need startup is just
• 58:05
  that kind of changed the way I thought about business building but you know obviously it's a
• 58:09
  very common book at this point and if I look at myself I've got let's see never
• 58:17
  split the difference it's a great book about a negotiation it's actually an FBI
• 58:23
  negotiator who who you know kind of tells all and all the strategies and things around
• 58:29
  negotiation you know there's there's a zero to one is a great book the hot thing about hot
• 58:36
  things is is a great book about kind of building businesses and going through you know lots of
• 58:41
  struggles there's some really interesting books out there that definitely kind of give a good story
• 58:45
  for you to look those are all pretty damn good suggestions so can't can't fault you if you
• 58:52
  if you check those out those are those are good places to start for sure if you haven't read them
• 58:56
  if you could tell your 20-year-old self one thing what would it be figure out what you're doing
• 59:00
  before you start your first company so you can understand you can you can you can you can understand
• 59:09
  with this yeah get an education now I think actually the best thing I would do at you know what
• 59:13
  I would actually probably do is I'd say be very critical about the quality people you hire and
• 59:19
  learn from them because I think that's probably the best way to get an education at that age you
• 59:24
  know the MBA was hugely helpful for me but I think there's a lot I could have learned on the job
• 59:28
  if I had the right people around me that brought that knowledge to me so and I definitely learned
• 59:33
  later in my career that the quality of people you put it around you is really the recipe for success
• 59:37
  that's what makes things work so at the age of 20 I would have said just make sure you pay
• 59:42
  attention to the team and make sure you learn from everybody you you you bring on board I think
• 59:46
  that would be the best advice they're very good advice and last question what does
• 59:53
  the success mean to you success is interesting for me it's really just about the quality of life
• 1:00:01
  that I can live but more importantly the quality of life that I can give to my family
• 1:00:06
  and I'm not talking about opulence I'm talking about you know just experience comfort is a
• 1:00:11
  baseline but then experiences and the ability to really you know choose your own adventure so
• 1:00:17
  all the things all the things that we achieve in life and everything that we we you know get more
• 1:00:23
  you know gain monetarily to me it doesn't you know but the financial component of it doesn't matter
• 1:00:28
  other than the fact that it gives me the option to experience more to learn more to do more to give
• 1:00:33
  that ultimate family and to kind of see that that grow so success is living the life that you would
• 1:00:41
  choose if they will know the myths to your options and and you know very few people get to do that
• 1:00:48
  unfortunately but it's a it's a very very fulfilling you know life to live for sure