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Know Your Paying Customer (Maxwell Brown and Jamie Schneiderman) · Unstuck Pod

• Jamie Schneiderman: Hi everyone and welcome to the Unstuck Pod. excited today to have Max Brown here. Max will tell you about quite a quite an interesting background, and and obviously the the the really interesting things that he's working on today. So Max, welcome. Maxwell Brown: Well, thanks for thanks for having me. great great to be on and excited to share a little bit about the story and and and connect with you all. Jamie Schneiderman: Awesome. So so tell us like like let let's just walk everybody through. So tell us where where you came from, what you were doing, what or what you've been doing in the past that that kind of landed you where you are today. And then let's talk about where what today looks like too. Maxwell Brown: Yeah, absolutely. So I my my background really initially came from two two primary places. One, a a strong spirit of of entrepreneurialism and and and enjoying starting new things, building companies, building teams, and then also a strong sense of patriotism. And so that kind of brought me through a path of of founding and being part of a number of founding teams, both in the hardware and software. space but but then committing joined the navy and serving as an officer for for six and a half years active duty and a few years later in the reserves where I was able to specialize in and kind of bridging a lot of those new technologies that really impacted national security in a meaningful way and and helping integrate those in some of the larger, more traditional organizations like like the United States govern Jamie Schneiderman: Awesome. Very good. Okay. So so so I mean again, I think that background is you know, w I've had a few people on certainly on the pod with background in the military. and obviously everybody, you know, I remember once upon a time folks sort of looking and going, Well, you you know, when I was in the hiring space, it was well, you haven't done the job to people who were military, ex military. It's like But you've done all sorts of incredible things and you clearly are intelligent. So you know, get out of the way. Like it's it it should the two should connect and it shouldn't be an issue. So so okay, so let's jump to to now to now. Let let's talk about what you're how you're using the background, your experience, all the things you've done, and what today looks like. Maxwell Brown: Yeah, well, I th I think that's a that's an interesting point you bring up. And there's a lot of experiences that are deeply acable to leadership and management of teams, two different things, by the way. and then also a sense of of mission execution and and understanding how to get things done in no fail environments and under deadlines, under stress, etc. that that being said, I I think you know the one thing that is really resonating with me even more and more as as I help mentor folks coming out of active duty, military or or just negotiating that that transition is really around being able to sell. And I think there's maybe a perception that, you know, maybe there are some operational skill sets, but but maybe not sales. and certainly in terms of founding a company, in terms of being a CEO, those are those are Key key aspects, right? It's not just being able to be a leader of your team internally, but in terms of getting the right investors, being able to sell your product to the right paying customers in a in a timely fashion. so I think those skills are are not necessarily something that veterans do or don't have, but it's certainly something that being able to tease out and also having a background. with some of those other skills can can be really helpful and differentiating. that being said, Jamie Schneiderman: Yeah. Maxwell Brown: really what I do now is I'm an investor. So I've taken a lot of those skill sets along the way and and now help a a lot of folks across across the the infrastructure technology spectrum build build their companies today. Jamie Schneiderman: Okay, so so and and and I just to to put a pin in the first point or the previous point about skill set capability, look, lots of people have to learn new specific skills, right? The exact way to do we talk about selling, right? but it's also the willingness, the capability to go in, learn it, execute it, and then be willing to accept rejection and other things that happen inherently around. selling and things. And I I think if when you come from military background, you've dealt with things in most cases that are much more challenging than calling up someone and, you know, talking to them about your product or their challenges and how you might be able to help them. So I mean, I I think that there's a lot of things that can be learned. And I agree completely with your point around leadership, management, all the all the other pieces that you talked about. so so anyway, it's great. So let's talk I I wanna talk when you talk about the the kind of investments that you guys are making and and what you're looking for. So let's talk stage more specifics around what are they w you know, w what are you looking at now? What what are the biggest what are the key things that you're focused on today? Maxwell Brown: Absolutely. Yeah, we're we're focused on C to series A stage primarily, and then we continue to follow on investment through through growth and and sort of concentrate in those winners, build positions over time. That being said, What what is seed or series A? I I mean these days, particularly across the software and hardware, different sectors, there's there's a lot of different definitions for that. really what we focus on is is the inflection point of of product market fit and and scale. and where there's ways that we can with our particular group of of advisors within within the DANU. team and our general partners be able to provide non-standard value to to a company's trajectory in ways more than just capital. And so in some senses, that provides a little bit even more nicheness than just infrastructure technology itself, which we define across the physical and digital world broadly. So that could include anything from cyber insurance to water hardware modern technology to geospatial intelligence, to drones that clean the outside of buildings. so it's it's a lot of different pieces and parts that if we feel that we can provide a significant value add in terms of talent acquisition, growth with particular customer sets, follow-on capital, all those sorts of additional things besides just a kind of an earlier stage check. then then that's something that that helps us find deep conviction in the companies we back. Jamie Schneiderman: Interesting. So would you you call it what critical infrastructure? Is that like a good Maxwell Brown: That's right. Jamie Schneiderman: critical infrastructure? And so it's not necessarily infrastructure in the pure sense of, you know, classic infrastructure like large scale projects. It's the things that support the things. and I'm that would nothing like not very, Maxwell Brown: That's exactly right. Jamie Schneiderman: very poetic for me, right? The way I said it, but it's a thing what like that's my That's my you can tell, right? I was clearly not an English major, any at any point. So so but the but the key for me when I hear that is okay, there's so many things that are important that nobody thinks about as being important. you know, when you use a term like water, you know, and it's you you kind of don't think about that in the context of a lot of, you know. i infrastructure in the broader sense of how that might impact things happening. How how do people so how do founders find you? How do they know you guys are the ones that they should be talking to? What does that look like? Maxwell Brown: Well, a lot of that is really through our personal relationships. And we've been part of a of a number of founding ventures and early stage companies, either in in very active building roles or advisors or investors. So a great deal of the initial conversations come through referrals from our founders and and colleagues over the past for some of my partners 40 plus years. So so a lot of it is these personal relationships and and and that's I think that's important too because as as many people have said in investment and and having particularly venture type partners, it it really is a marriage. And so it's it's it's important to know not just hey this is a great product this is a great market opportunity but this is a team that you know we we trust we we enjoy working with energetically this is a good experience and and and that you know there's there's going to be a level of respect and and ability to work through some of the hardest problems because that that inevitably will happen through through the the years. even though hopefully it's shorter years than longer years in terms of some of our returns, it's it's something that we all have to work through. and so personal relationships or relationships that we have recommendations from are are a huge part of that. That being said, we really do have a first principles approach. And so the infrastructure technologies we're we're backing are Are really the fundamentals of all the things that are being built on top of on top of today's sort of crumbling and and in need of die repair physical infrastructure systems as as well as some of the the digital side of that. And so when we're looking at companies and and and finding sectors, we will very actively pursue various founders and and folks who are building. in some Jamie Schneiderman: Mm. Maxwell Brown: of those places we feel there needs to be the most progress in. Jamie Schneiderman: Okay. No, it makes makes a ton of sense. and by the way, I would just add that, you know, I've heard the the comment it's like a marriage, and I would say that it's you're tied up even more so than a marriage. Cause in a marriage, not that anyone you wanted it for anybody, but you can always get divorced. I it's a lot harder when you have investors to to get divorce. And I only mean that I I mean that to to reinforce your point, which is very important that the relationship is obviously Quite strong, quite good. Everyone sees things the same way. And by the way, everyone's in it, especially when things are tough. Things are good. Sure. But when it's tough. okay. So speaking of tough, like I I wanna know, like you're dealing with people and companies, businesses that are, you know, cr cr like you said, creating the infrastructure around infrastructure. And and I and I in a lot of ways. And I'm trying to understand how what's the what's a timeline for that? Because you mentioned like seed to a product market fit to growth stage, like what does that look like for them? What do they have to have in place or what are you expecting to see in place that lets you know are there deals, revenue, product like what does that look like? Maxwell Brown: Yeah, well, and and really just to put a fire point on that, we just see a lot of the growing economy from from the sort of macroeconomic environment. Our are our funds, mega funds that are looking to be asset owners. They're they're looking to have infrastructure that over the long term Creates value from an ongoing basis. And we think that backing the tooling to create or improve that infrastructure from a cost, a security, maybe a speed of execution perspective is is really outsized upside. in addition, a lot of these companies, even in their early stage, if they're able to get in and and make a big difference in the building of that of that new infrastructure that that we're kind of creating in this we call it the fourth industrial revolution almost but with ai data centers and the communications all the the the wireless infrastructure that's being upgraded all that to us really just means that there's there's going to be you know a a lot of project finance and debt that will help grow these major projects. And so in a lot of ways, if we're able to have companies that are technology companies, venture backable companies, but that support those larger endeavors, then they actually can benefit from some of those other creative and frankly less dilutive financing opportunities, both protecting sort of founder equity and then, you know, shamelessly us as early stage investors as well. And so that's something that's an attribute that we're also looking towards. when we're underwriting companies and seeing how we can be valuable in helping create those relations and bridges with follow-on capital for growth. Jamie Schneiderman: Got it. And and okay, so let me let me let's do this. I want to know, so you're working with a range of different companies. They're they're obviously their technology, their capabilities are quite varied. what are the things that you see as you look across the founders that you work with, those companies that are Challenges, struggles that they run into most commonly? What are the things that you're seeing that are a problem for or challenging for them? Maxwell Brown: So I think there's there's two points that we see emerging more and more these days. The first is the lack of paying customer traction and and also particularly that there are maybe paid pilots that are assumed to be more long-term revenue when they're not. And and again, those could be great initial steps and and tr terrific inertia to to follow. But There's oftentimes, especially with some of these new technologies, very large firms that will do a bunch of pilot projects with a full whole bunch of competing technologies and and sort of have a bake-off, which can be very confusing and and challenging for each of those companies, but also as investors are navigating the space, it can it can cause a lot of distraction and potentially misjudgment of of traction. So Being specific about that is important. And then the other, somewhat related with these larger countries, is there often can be a in in a very early large opportunity, but which also can be very binary and is with such an enormous partner, particularly in the infrastructure space, that it can be very unwieldy. the timelines for large organizations are just different than the the speed a startup needs for execution. and so although that could be multi-billion dollars or or very attractive long-term relationship, having a good balance of of of a number of of diversified customers instead of that concentration risk is something that we more and more value in our underwriting these days. Jamie Schneiderman: That's good. That's great. and so, and so let's I want to just hit on the the first one, right? So how much of the struggle for them is so so you know, early stage companies want to grab is pilot, pilot, right? Check, check, check. I want to show you that there's traction, as much traction as possible. are are the companies for the most part very strong at doing that? And then it's a pull through. struggle and I by the way I'm not I'm not minimizing the difficulty of working with larger players and and going from pilot to rollout, which may have nothing to do with them or their capability. Or is it even or are there other challenges around how do I get more of those? Like we're good on the technology side. We've built something really good, but we don't really know how to go and call it monetize it as effectively as we could. Maxwell Brown: Right. Well, I think that's a big part of of growth of of any company is finding your true customer. Jamie Schneiderman: Yeah. Maxwell Brown: and so that that's so sometimes I I think especially with the most exquisite technology solutions or or you know these sort of world's greatest mousetraps that that have been invented, sometimes the actual connection with a customer problem. paying customer that that really needs that specific solution or or a solution that's been engineered in the in the right way for that customer, even if you know sort of the technology is very promising. That's that's that's often overlooked. one thing that we have have have valued deeply and and has been a core first principle for us is is really around proprietary data sets and and relationships with customers. So There's you know there's a lot of ways to be successful. You could have a great technology that's just so great it wins the market. You could have an okay technology, but an incredible enterprise sales function and ability to relationships to to win these large clients. You know, there's and there's a lot of trade space in between. Really, what what we find and and and we colloquial say it, my my co-founder Ryan says eyeballs are fickle. so know there used to be especially in the software sort of measurements of stage and traction well how many users do you have how many how many views are you getting and some of those metrics are are really meaningful and and distribution it matters but they can also be somewhat fickle and so understanding what are the attributes with a specific company a specific market niche what what matters in terms of truly validating that the customer cares. And a lot of that for us, I think, is is conversations with a a customer or multiple customers within within a company's sort of purview. and and we typically know a lot of those groups in the area we do we don't really invest in areas generally that we we don't know well. but but really understanding both the market perception, the understanding of competitors and having conversations with customers is something that if you're able to share, I think as a as a founder or or company with your investors or or with other customers can be very powerful in in validating and just moving forward, the rightness of fit. It might not be a the right relationship, but better to find that out sooner rather than later. Jamie Schneiderman: Yeah, yeah. No, no. I I I love it. And I think look, I couldn't agree more that yeah, too many companies don't think enough about who's my customer and start from who their customer is. and so to Maxwell Brown: It seems simple, but it's hard. Jamie Schneiderman: Yep. yep, it's the biggest problem that I probably the single biggest problem that I see that exists with with companies. So fascinating. no, and and it and it's very in your case, right, the customers are so specific, like you talked about, right? These niche very but very, very critical, large scale in terms of the opportunity, but niche in terms of I assume the number of customers that you you would be targeting with in the space, so really knowing the matters. So, okay. So w if you had to give advice, like you were, you know, you're working with a lot of different founders and you're working on a you know, whether it's for thinking about getting financing or how to drive their business or anything else you've seen, what what advice would you give them at all about what they should be doing? Maxwell Brown: Well, I I think just like knowing your customer, knowing your potential investors is really important. And so doing as much research as you can to understand what language and lexicon to speak to them in, what would matter to them in terms of how they've previously backed companies in in their portfolio, even if that that thesis per se is less public with some firms versus others. Really having a solid understanding of that is is is key. Because it's an indicator of exactly how you'll negotiate and f attain other relationships and other key customers in growth. And then I think the other aspect is having some serious thought, not just, hey, here's my organized use of funds and how I spend each dollar that I'm intending to raise, but but really the the why of of the scale here. not every company is is is maybe in our words, sort of a a venture outcome. There's in some senses perverse incentives for for investors who are looking within a very specific time horizon for very specific returns. And so making sure that there's true alignment, there's so many successful companies that could could be acquired or or exited or just fabulously returning operating businesses for a couple of founders. That might not be the best fit for for a venture. Maybe there's a lower middle market private equity player, maybe there's some other debt or creative financing opportunities to get to a next stage. But just really having some thought about the why you're raising versus versus just trying to get to the to the next to the next month of payroll. even if that is the case. What is the trajectory you're trying to get to and and what are those milestones that could really change things because that that's one of the things that I think particularly in kind of the North American markets it is that's why we get really inventive new technologies, right? Is is folks who are willing to put some capital at risk to really change the status quo. and so bringing together a very pragmatic understanding of how how the the finances and and and how each party's incentives can be maximally aligned, but also being able to to to show a a vision and and sort of a a new future is is kind of the holy grail, I think, in in terms of fundraising and and growth. Jamie Schneiderman: Love it. That was amazing. okay. So definitely people will want to reach you. How do they find you? How do they get hold of you? What's the best way? Maxwell Brown: Yeah, absolutely. Well, we are accessible on the internet easily through through LinkedIn or or on our website danu d a-nu-v g dot com danu venture group. So happy to have a conversation. We we like to be what we call creative flirts. So as we get to know various companies, we we always try to make introductions to either other investors, other c potential customers, maybe talent, other folks. So we we because it may not be a fit for our particular fund thesis or stage, but maybe it's that particular individual's second or third company after that that's that's the the perfect fit for us. And so we always enjoy taking conversations and seeing ways we can be helpful. Jamie Schneiderman: Awesome. All right. Well, Max, this was great. Thank you so much for joining. This was awesome. Really appreciate it. And some great insights, thoughts. And obviously just learning about what you what you've done and what you're doing is is fantastic for everybody. and to everybody who's out there watching, listening, thank you for doing that. And until next time. Maxwell Brown: Thanks, Jamie.