00:00:01 moving the Neto unfound your failure one conversation at a time I'm your host Justin Gordon and welcome to startup 2.0 by spark XYZ during each week as we give you access to some of the top investors and entrepreneurs in the country to help you think through and overcome the top challenges that startups face I think there's no better place in the country to be investing than Los Angeles what is the problem that you're solving and for who like what is that specific pain point sometimes when a company is not

00:00:29 listening to his customers and just thinks it knows better than it customers has a really really hard time finding product market fit I want to see somebody that that isn't you know this person you just feel like they're gonna they're gonna they're gonna make it work today's guest is Carl Alomar who is imagine partner m13 previously he was also the CEO at digitalocean which he helped grow to more than 200 million dollars in annual recurring revenue Carl was also serial entrepreneur who had two previous exits Carl welcome to the show

00:01:07 hi thanks for having me yeah obviously a lot to discuss with your fun so with m13 what areas is the firm kind of focus on now so we're we just define ourselves as a consumer tech firm having said that to be more specific about our thesis and kind of really focus on consumer behavior and the main avenues on which consumers you know spend money and you know interact with commerce but our focus is the technologies that are changing that behavior over the next 10 years so the thesis we have is that

00:01:38 we'll invest into technologies that drive the change in consumer behavior over the next 10 years we want to move with the flow of the currents and make sure that we're always thinking about where the consumer is going rather than just kind of filling in gaps of quick fillings of short-term need by their by the consumer we see a kind of 5 to 10 year horizon on investment so we like to think about you know what the consumer is gonna be doing 5 to 10 years from now right and then with the firm itself into

00:02:04 what is kind of average check sizes what sales you're investing in as well yeah it's a couple hundred million fund our check side our sweet spot check sizes are like let's say 2 to 7 million is kind of where we've ranged you know letters are fungible so series Lia no light seed series a an early series B it really just depends on the way that the customer the sorry the companies are defining it I would say we we kind of invest in two categories we have our core positions where we have you know we

00:02:33 want to get a certain amount of ownership we want to put in a nice size check we also are interested in what we call feeder checks where we look at companies and earlier stages we either really believe in the founders or just think there's something really exciting about the business but they're not at a stage yet that warrants a big multi-million dollar investment yeah and so we'll do a 250 500 thousand dollar check to kind of get in the game help the founders you know try and get the the business to a point where we really

00:02:58 feel it's ready for a Series A or whatever you want to call it right and then for you guys then what is that due diligence process look like as you're going through these companies yeah so the the feeder due diligence is a lot lighter it's really more of a belief and it's kind of really driven by the partner that's that's driving in the intent of that partner as we get into core investments or the more meaningful checks it's it's obviously a much more structured delusions process you know we have a process that can be kind of

00:03:25 pulled into a two-week sprint if necessary but generally you know it is spread over a long period of time it's sequence of meetings you know in terms of just making sure that we have a relationship with the founding team and with the you know the executives and then ultimately we go into a process where we do an initial review do like a one-page memo it gives a outline of the business outline of the market what we think the opportunity is we then bring the company in to present to the investment team we do that I've you know

00:03:56 on Monday so always inviting a couple of companies every Monday to come and present whether it's remote through video or in person yeah and then we go through a much deeper dive you know if we decide to move forward we want to go in and look at the customers we want to go in and look at the financials and the metrics we want to really really build a relationship with the executives and have true belief that they're the ones that can build the business and that culminates into a much more detailed

00:04:19 analysis that we present into the committee and then there's four committee members we vote and ultimately that's the decision making process by which make an investment yeah and then going a little bit deeper into those founders themselves and what other questions you're asking them and what you're trying to figure out from them if they are the right team to move forward with yeah yeah it's tough because you know it's very common that founders not a full team of founders isn't gonna last the life of a business right so we got

00:04:45 to think about how strong these founders how far can they take the business at what point does the business need to start bringing on other talent right we really focus on a couple of key things what's the vision you know is there a big horizontal vision usually there's very you know focused attention in the early days which we respect and we actually want to see yeah but ultimately where's this thing gonna go and is the the you know have they do they really understand their business yeah do they really understand the

00:05:16 market do they really understand the metrics the economics is this really you know is this team really can we sit back and just trust that they know exactly how this whole thing's gonna run yeah and with that too in that process then what are some of those maybe red flags or things you like yep that's just a no-go for us where are some of those things that diligence process yeah so definitely vision as I said is one big thing so we want to make sure that we're dealing with an opportunity that is that

00:05:42 you can have an impact on consumer behavior sure so you know feature versus products there's a lot of things we think about like are they just presenting a feature or is this such a full product that has a potential to expand into a suite of offerings and and how wide is it just a very tight vertical audience or is this something that can be applied across a wide marketplace so just really understanding you know those components of the business really allows us to understand if the business has true potential

00:06:10 you know the underlying economics of the business are really important to we just really want to know that the business is actually gonna build towards you know positive economics doesn't have to be positive economics today yeah but does the model make sense and often we've seen companies where they present this business it's growing like crazy then we look and go but you're never gonna make money it's just no mechanics here unless you direct pricing or do something really disruptive to to the growth that

00:06:35 you're you're enjoying so those are some of the key things that you we're really paying attention to and we make sure that are in a good position so that we can actually you know make a commitment to kind of join the journey yeah and for those who aren't like familiar like how long does this diligence process take obvious it's gonna be varying across different companies everything but like you talked to like how long this process can take yeah listen the ideal scenario the way we always think about it is when you get

00:07:00 involved with a founding team you're it's getting into a marriage right it's not I've it happens and it happens regularly but I always feel like there is a risk you're taking when you just dive into a deal and within two weeks you're giving a check to a founder so it's a high risk you don't know what you're dealing with and you know in a month the whole thing can blow up for reasons that have nothing to do with the business and so for us you know we try and establish relationships we're trying to build a community of founders we're

00:07:25 trying to get introductions early establish relationships early part of the reason why we do these Feder checks is because it allows us to kind of really get to know the company really understand their business well before we're writing a big check and becoming you know a meaningful member of the cap table and so we you know the ideal scenario is we're in roulette in a relationship with the founders for months before we get to the point that we're actually looking to make an investment yeah now the reality is that

00:07:54 doesn't you don't have that luxury right so so as I said we've we've created a system whereby if necessary if it's a competitive in we can go through a pretty good solid heavy process over two weeks and get to a decision and move forward it is tight and in some situations we've lost deals because frankly you know other other investors are willing to jump the gun and jump in I mean our caution is that it's as bad a move for the founder as it is for the investor to move that quickly yeah but you know you know different people have

00:08:28 different you know decision methodologies around that so we can't judge that but I think the ideal the most realistic time frame is like a four to six week time frame from the point that we start initial conversations we socialize amongst the partners we have the founders meet one or two partners we bring them in to actually present to you know the the company and the investment team and then ultimately we you know negotiate and decide on the constructive of the relationship and I think that also gives us enough time to

00:09:02 really begin to get to know the you know a founder and a founding team yeah before we make the commitment to dive in as a full-fledged partner yeah I can talk to the actual decision-making process between you and the other partners like how does that actually work and how's that go together so we have an investment team of nine people four of which are on the investment committee okay five partners four of the partners on the investment committee and then there's a fifth investing partner and essentially every deal has to have a

00:09:28 partner sponsor so wherever we're sourcing it from whether it's coming from upon a relationship or whether it's coming from an associate or principle that's sourcing the deal the every deal has to have a partner associated with it so that partner really carries the flag into the team and says I believe in this business because yeah the there's a lot of back-channel conversation usually you know I'm an investing partner and deal I'll usually bring in one other partner or something at some point to confirm

00:09:58 make sure I'm not crazy make sure that you know we're looking at all the right things maybe even get some kind of feedback that I can drive you know due diligence questions around so that it's a bit more of a broader view on the business but ultimately before it actually comes to the investment committee and the investment team you've got a couple of partners that are supporting it you've got you know a team together whether it's the associate or the principle behind the deal also we have a whole back bench of executives in

00:10:23 our organization kind of a unique way that we've approached the business and usually we'll pull them into deals that are relevant to their expertise and so we'll have a deal team we will present a case and that case in the early stages of the discussion will go into the investment committee into the investment team as a whole and as an investment team we review and we kind of do this internal poll and we figure out you know who's warm on it who's called on it and we use that session to really collect

00:10:51 the what needs to be true statements from across the across the teams so you know for this business to but to be a viable you know needle mover or whatever for our fund here are the three or four or five things that need be true that drives our diligence questioning and then what we do is when we come back with a full memo we come back with most of those questions well pretty much all those questions checked off and answered one way or the other yeah and then that is the determination at which point we go back to the

00:11:19 investment committee and we say we want to do a formal vote we have a half hour one hour sometimes to our discussion on the business and then ultimately all go through the polling to a vote and determine whether it's the right deal for us and we have a interesting point system between the four of us that kind of validates essentially says you got need to have three out of the four that only somewhat committed and supportive of the deal yeah and what they're finding - and how many investments roughly are you making per year we're

00:11:48 making I mean we've moved pretty quickly this year we've seen an interesting I think because we just launched the second fund we had probably a backlog of a lot of relationships that works before so we have somewhere around eight core investments this year we'll probably do another 12 or so next year get us to about 20 core investments and I think that's our target for the fund we may go to 22 or 25 with some follow-ons on the feeders yeah we have more feeders I think we'll probably end up doing 30 or

00:12:18 40 feeders some of which will graduate into series a some of which may even graduate in the next fund into series a depending on the timing of their evolution and so the yeah that's that's kind of the the range probably 10 to 12 core big cheque investments a year 20 total so it's like a two-year you know investment strategy around that and then a whole bunch of feeder investments to go behind that yeah and then just for context how many deals how many companies a roughly like seeing you think your we didn't saw this right so

00:12:53 1500 you'll see in a year not all of them get discussed and reviewed I mean a lot everything gets reviewed at the top of the funnel yeah but obviously that filters down pretty heavily pretty quickly so we actually set our target to 1,500 were actually on pace to see more than that there's a lot of stuff out there not all of them are the best ideas but of course there's some fun ideas and there's some actually really good ideas and you know pick and choose and we're not gonna always catch the best we we actually

00:13:21 have a process by which we review the market on a quarterly basis and make an assessment of hey all that deals that we didn't even see that we should have seen or other deals that we saw and said no to but then some big you know player in our space came in behind it and why and what was the reasoning for our decisions and you know we're just checking ourselves and making sure we're making good decisions yeah knowing that number of investments you're making and you're seeing though that that many companies I

00:13:46 mean how many are you or how are you keeping tabs and ones that are no right now but you're thinking on the on the border and maybe on the fringe like how are you tracking those ones or how do you keep in touch with those people then yeah yeah well we have a real focus on community in general so we like to retain community we've you know building out a newsletter we do a lot of events there's a lot of things we'll do that the people that we really believe in whatever that's them or not we want to

00:14:10 invite want to make part of that we as all partners you know we retain relationships with the network of founders that we know as well so you know we kind of maintain that relationship there's two scenarios there's a scenario where we did not get into a later stage deal at which point the recognition is that you know that deal is by the time it goes to its next phase of funding it's going to be too big for us we're going to be in a position to do it so you know we'll keep tabs from a market perspective but what

00:14:40 we'd kill ourselves if we're constantly watching every single company we said no to so we just don't generally follow those yeah the smaller deals that a to early stage for us to do a core investment in if we like it we'll do a feeder yeah and that's the way and then we track it as part of our portfolio and then you know we'll see it mature to the to the next phase and then the ones we really like that are at that two to seven million dollar sweet spot obviously we put the check in and those are in our core portfolio so yes then

00:15:07 it's being to the portfolio itself I mean can you talk to maybe Warrenton companies that you do really like and the reasons B research reasons behind that and how why they've been successful to this point just curious by anyone in particularly yeah absolutely you know different stages so one company and probably the most advanced stage of the companies were working with is come to call capsule it's a digital pharmacy based out of New York right now you know they'll do probably more than hundred million in revenue I believe in

00:15:33 New York this year and they're expanding they they took a big investment we actually took an abnormally big check but an abnormally small amount of equity in the business because we just see the opportunity to be so big in order to allow them to expand to something like 23 or 25 states yeah so we see a model that is proven that is solid that is making money and growing organically it is very applicable to markets outside of kind of the metro New York market and the only limitation they've had is

00:16:03 Geographic and if we're funding their ability to take that geographic limitation away there is just a very natural growth trajectory there there's really very little to prove it's an operational challenge and we really believe that the team is strong capable to execute on that operational challenge so to us that is a pretty amazing opportunity you know to be given the opportunity to participate in that alongside some pretty great and other investors so we're super excited about that and that's probably the latest

00:16:33 stage of the businesses that we've invested in today some of the earlier stuff we have a business out of San Francisco called lightning labs they actually provide the transactional underlying protocols for Bitcoin financial transactions on the Lightning Network and they are very dominant in that space in the Lightning Network space which is a kind of highly coveted environment for developers and we believe that they're building a platform on which I think they have somewhere between five and ten thousand developers

00:17:10 building apps on top of they're building a platform on which a whole industry is going to be built which is very aligned with how we see consumer behavior and finance in the future yeah so as digital currency becomes much more transactional we book we believe its we're gonna come much more part of general consumer behavior so to us again we got into a very highly contested round and we're able to participate were you know welcomed into the into the group which was very you know an honor for us to be

00:17:37 a part of it and ultimately we see an unbelievable opportunity on the other end of that because we think the businesses just got a very natural inherent future place in in kind of consumer behavior another interesting company here in Los Angeles called emerge haptics technology arv are basically provides the ability to touch and feel you know three-dimensional visual objects without any gloves or without any kind of attachments it's like the future right in front of you and it is really really exciting much more

00:18:12 conceptual whereby the other two you can kind of see the applications capsule you can see application today yeah lightning labs you can see the application in process being developed by by you know the community and then emerge you see the applications for the future it's much more visionary and so with emerge there in the stage where they've built this incredible technology they've proven it like we can touch and feel it's amazing and now they're beginning to build that developer audience that's gonna build the

00:18:40 applications on top of it it's a much longer-term vision but it for us it feels like a very natural progression and how consumers are going to interact in a RvR how they're going to interact with three-dimensional imagery whether it's right now it's with glasses but in the future you can have three holographic televisions and all these different three-dimensional environments and it just becomes a very natural extension off of off of that direction of technology yeah and you mentioned having high competition again one of

00:19:08 these deals I mean what is that like trying again in on some of these deals when it is high competition how do you think you have an advantage to do that how can you speak to that a little bit yeah I think we really are trying to break the mold we're all operators so we think about as entrepreneurs investing in entrepreneurs I've you know been involved in a number of companies myself most recently at digitalocean I was chief operating officer for six years and so kind of we've experienced a lot

00:19:31 of the growth a lot of the growing pains the various members of the team are either horizontal experts or vertical experts but at a very very high level yeah and so you know when we go in to companies and meet with founders there's a certain amount of empathy that we have for what they're dealing with and what they're going through which I don't think every investor has I think we have a unique advantage there and I think that we're able to connect with them on a real entrepreneur entrepreneur level now obviously there's

00:20:00 a lot of entrepreneurs turned investors sure the value add I think on top of that is that our mission our kind of vision of going in is how do we partner with these founding teams and how do we actually supplement their capabilities with the backbench of resources we have so they are able to actually come in and actively help them you know achieve their goals make better decisions get through strategic problems that could take them months to resolve without the right expertise and I've personally had

00:20:28 a lot of experience where being an amazing high-growth companies but we've spent a year spinning our wheels on an issue that we just don't know how to resolve and that's just a lack of expertise and a lack of you know particular knowledge on on the bench and so we present ourselves and present the way that we want to work with these companies right from the first conversation we're talking very strategically about their businesses and helping them think about the problems they're facing and we found that you

00:20:55 know with our relationships and our core skill sets across our team we've been really welcomed by the by the founding community they really recognized the value the companies are already in our portfolio are incredibly positive about the impact we're having speak very highly become incredible references for us so we're kind of really just presenting a different way to think about your investors and how you want to work with your investors and I think that's making that's creating a real attraction from the founders perspective

00:21:28 so there's a lot of deals it's actually not just founders yeah even other investors coming to us and saying we want you in this deal their space you know it's not what you want it's not you know the full position you want but there's enough space to include you and we want you in this deal because we think you can add a certain amount of value and we've gone to both from founders and from the investor side and we've had founders introducing us to their other investors saying that we're super helpful and you know meet me 10 13

00:21:54 they've been amazing for us and so it's just a early days yet because we just built the structure but it's really it's it's seeming to really prove itself as a valuable construct of how ventures should be thought about and now we'll take a quick break and hear from our sponsor Breck's a big heart felt Thank You Tube Rex who without their support this show would not be possible we've seen firsthand the difficulties accessing basic corporate credit without providing a security deposit or personal

00:22:22 guarantee early on as companies grow managing expenses has become more difficult and time-consuming which is why we've partnered with Breck's to offer a corporate credit card that is not personally guaranteed offers higher credit limits provides Auto reconciliation and integrates with erps using receipt capture Breck's is the credit card of the start ecosystem and we highly encourage you to check them out and back to the show so speaking to that expertise and kind of that experience you guys have on the

00:22:51 operating side of it I mean what are some of those challenges entrepreneurs face typically you've seen how can you help them kind of through those things yeah I mean there's pros facing these challenges right so every challenge is different every company is unique you know the first challenge I would put right on the table is that most entrepreneurs most founding teams especially first-time founders meet each other in a coffee shop or because they went to college together or you know you know be careful this one but because

00:23:19 they're family sure right so you you never have a perfect meld you know founding teams are generally not engineered founding teams so there's always going to be the risk that your team is not fully qualified to execute on the job in front of you so what I found pretty consistently is when teams comes together of four or five people three four five people within the first year or two of operation some of that team is gonna just move away either because you know they were right for the time but they're not right for growth or

00:23:47 because they're just not you know qualified to execute on the responsibility that they have right there or that they're just not comfortable once you raise money and you have to build hierarchy and it's not a flat organization anymore so yeah it takes a very unique type of person to be a founder and that has its benefits but it also has potentially its problems so a lot of you know things we see right at the beginning is just what is the dynamic between the families themselves you know how they working together how

00:24:16 they are able to get the most out of each other who's taking the de-facto leadership you know position in the team in-house you know how's that all coming together and working and I think that's an important consideration for family teams right at the outset I think then you know the challenge of problems really comes with the timing of the business as you go through we've actually mapped it out in terms of what's this you know business life story arc ran from inception right through to growth and

00:24:47 like late stage funding and we've identified different components across that path where you're able to say you know at this point they just raised ten twenty million dollars they're gonna go into a high-growth hiring mode they're gonna have certain cultural issues they're gonna have to introduce hierarchy thing and have to think about culture in a different way there is a lot of issues and responsibilities that we can be proactive and helpful in that because we can make sure that they don't shoot themselves in the foot just create

00:25:13 an imploding machine there are business model challenges where you say okay this business is tapped out in its ability to to expand with these economics it's gonna have to consider either a broadening of its offering or a different economic set different acquisition cost and so if they don't navigate those or repricing or things your market pressure things if they don't navigate those things that again can be a problem so we can get ahead of that I think maybe one of the biggest problems we see is when businesses don't

00:25:44 listen to their customers and so often not often thanked thankfully thankfully but sometimes when a company is not listening to its customers and just thinks it knows better than their customers has a really really hard time finding product market fit yeah this is usually before a series a because you kind of have to demonstrate some level of fit ticket or you get to get a real check but it is in the feeder cheques and in the earlier stage of the business it is a significant risk cause you may really believe in the model really

00:26:13 believe in the vision but if they're not actually executing on the product in a way that speaks to the customers then you're taking a real risk that you're just not going to get the the traction you're not going to get the validation you want and so those are some of the things I mean there's a multitude of them but those are some of the things that we look out for and if we're partnered in the business and we very proactively trying to help resolve and think through those before they become a problem for the company yeah as

00:26:41 you say that so how do you communicate communicate those things to that no because you startups obviously try and grow their company and I think they know what's best yeah they also bring you on board because of your operating experiences stuff so how do you communicate that to them like hey you know what we seem in the past this is something that you're turning towards X Y Z I'm just curious on how that kind of yeah so we we have a protocol when we make a core investment in a business we set up what we call an onboarding it's

00:27:05 an opportunity to get our operating kind of executives or backbench team at the table with the founders to do a full three four-hour session where we're going through you know core set of strategic discussions about where the businesses what they're trying to do etc etc from that we identify the areas on which we can be helpful and we let them know hey these are the things we think you need to be thinking about these are areas we can be helpful here the people that we have that can help you with that

00:27:29 and I think pretty much in every case the founders come back and go yes please yeah come get involved we set up a slack channel with them we you know have communication pause and we have multiple connection points with them there's always the lead investor that really owns a relationship will sometimes have a board seizure but we have a multitude of different connection points across our team that all have kind of an opening to participate and get involved in a very planned way with these companies to be as impactful as possible

00:27:58 yeah and so we're right from the outset we're proactive about figuring out where they're going on what they're doing yeah you know a lot of the alternative is we make an investment we sit back and you know we wait for the first board meeting but that's just not the way we approach yeah we approach these businesses I mean especially with like your expertise yeah I mean it just makes a lot of sense for that person I think that's what they're kind of expecting from us when they take our money so we didn't do it gonna be

00:28:24 helpful on the cap table they're just looking overall I kind of startup ecosystem I mean what are you what industries your area is you most excited about Technologies anything that you've most excited about right now yeah this there's so many growth areas that are really interesting I think some of the key things we're thinking about is you know we we we like finance currency personal finance we really think is trending more towards digital solutions and you know a little bit more democratization of kind of financial

00:28:57 controls kind of putting in the hands of the consumer yeah and so we believe in man we've kind of done a couple of investments in digital currency we believe in health care especially relates to wellness somewhat of the democratization of kind of big farmer and big healthcare and kind of bringing it into much more boutique offerings that are really catered to to you know to the individual to the consumer as I mentioned mental wellness is a big part of that so not just a care and service offerings but actual products that

00:29:30 support and promote mental mental wellness something that we're really supportive of we think that's a big transition in the way people think about healthcare yeah in the market and over the next 5-10 years we believe in transportation short-term transportation clean tech transportation we've got really interesting investment in clean tech like premium clean tech vehicles but we think that there's a lot of changes in the way that people are moving around we don't think that you know the new gen Z market is really

00:30:03 interested in buying cars there's different approaches towards leasing there's different approaches towards rideshare yeah there's a lot of interesting things happening in the way that consumers kind of use technology to to advance their ability to be mobile we also think the workplace improvement is a really interesting environment it's an interesting thing for us because we think of it as a B to B to C it's it's still affecting the consumer but the consumer in their workplace right and thinking about you know platforms that

00:30:29 are focused around real-time messaging you know versus old-school email and and just one of the technologies that is changing the way in which people work we know that the workplace is becoming much more distributed there are a lot of technologies that are speaking to the idea of a distributed workplace how to make it more effective how to manage it so those areas in which I think we also have a particular interest yeah exciting there's a lot of everything that's going on obviously a lot of things to know

00:30:53 guys when you have to include CBD but I was but that's a pretty exploding market clearly the Wild West but there are some interesting platform based opportunities there as well yeah of course I will see where it goes and how have you seen kind of the adventure world itself kind of evolved recently how you see that going yeah I think it really the big changes that I recognize that as an operator really started you know ten years ago and dreesen kind of led the way a little bit and in terms of thinking about platformers investment as

00:31:24 a platform rather than investment ism as a banker I think historically investment has been a very financial consideration a lot of people were investors from the beginning of their career and and you know became investors for life and some really amazing ones that just have an incredible knack and understanding of you know how to judge companies potential success I think that what's happened in the last ten years is people have started realizing that you know there's there's always these herbs and

00:31:53 flows in terms of how people think about companies growth so back in the 90s and early 2000s founders were often formally replaced at a very early stage of business with formal executives and they would take you know whether it's you know positions within the organization's or positions at the board level the founders would kind of stay remain part of the organization but they would have you know professional managers coming in and operating I think with the evolution of companies like Facebook there was a

00:32:22 transition to this belief that founders the you know great founders were the ones that should run the company through the life of the business and over the last 15 10 15 years that's been a real mainstay and then recently with Rison outcomes of some major companies and the problems they've had with you know core founders and their ability to transition into a real corporate role right you see more and more hints that people are thinking again back at oh should we be thinking about professional managers

00:32:51 should be thinking about changing the way in which the way in which people you know run companies or grow companies so yeah I think that the way we think about it is we still believe in founders we believe that if you're good at putting the right founding team together there is a heart and soul to that team that is difficult to replicate we do think that supplementing founders with the right talent is meaningful and helpful and required but that the core founders do provide real value in terms of the

00:33:25 future story and the vision of the business and what we think the change is being is that as opposed to solving the problem of founders with less experience by just replacing them we think the future is the people who have proven themselves the operators turned investors yeah that is kind of been the the burgeoning segment of the investment market have to be more actively involved in the guidance mentorship and success of the founders yeah within their portfolio and so we've taken it to another level beyond that to say that

00:34:01 actually as an organization we should be committed to the success of the founders in our portfolio we should only work with founders that we believe have real potential to build businesses and we should actively get involved with helping them figure out where they're missing information where they have what we in a blind spots where they actually need support and help and even how we can help them hire to fill in longer-term needs for the business and so I think in terms of where what's the direction of the investment community I

00:34:29 think the you know we're setting an example of making a huge financial commitment ourselves and building investing ourselves and the talent needed to help these founders and I think more and more will be you know credibility will be put to the model where if you're actively involved in driving founder success you can have a better performing portfolio you're gonna have happier founders you can have more success in general yeah and that's gonna drive better economic so I think that's the direction

00:34:57 that VC will continue to go over the next 5-10 years and these will become you know it's kind of a collapse between the separation of incubation and acceleration type operations and purely investment operations and there's this kind of meeting in the middle where you're you're not actively incubating but you are driving acceleration and support that helps founders find yes yeah way beyond just the money the funny like it makes a dimension and it's a point of helping founders themselves and I mean what are

00:35:27 some of those things they should be thinking about the fundraising side so obviously we talk to like the VC side from a VC perspective of them but what should the actual founders themselves be thinking about or questions they should be asking through that process of fundraising yeah so we touched on this earlier I think founders that take money a week after they met someone is just a risk right yeah I think founders should start their fun debate fundraising effort months before they actually focus

00:35:51 so they should go out and find you know good investors that they can build relationships with they can get guidance on make sure that they share a sensibility share a belief system you know can work together and then when it comes down to the investment itself comes a lot easier to have those conversations and actually bring those people in as partners so I guess that's it the first thing is these are your partners these are not like Tory investors these Center reports who wants a quarter these are your partners and so

00:36:22 think about your investors as partners get to know them and make sure that there is some complimentary support mechanism within that group so if you as a CEO are very strong in certain areas you will need to supplement that you know your blind spots with appropriate mentors and guides and advisers basically your board in your investors in a way that they can be really supportive and helpful in the areas where you need support and help so I do think it's it's really about making sure you signing up for the right

00:36:55 relationship making sure that you're getting value beyond money yeah there's a lot of money out there get value beyond money and and focus on how's this actually going to have a long-term impact on your business and yourself as an individual your growth yeah and Carl how did you get to this point of being adventurer yeah so very long story 25 years to eventually get into venture so i I've been an operator for a long time I I founded my first company in 97 I sold it in 2000 and then went to do an

00:37:27 MBA in 2001 and then after that I had another company which exited in 2010 following which I joined digitalocean and obviously left that bill to help build it from the ground up and left that company at the end of last year you know at that point 250 million run ray you know 500 plus people like a pretty good well-established growth company at that stage and so for me I'm not getting any younger and where I had boundless energy 10 20 years ago I don't have as much boundless energy and God bless all the

00:37:59 founders out there that you know eat ramen for two years and you know don't sleep a night to try and you know you know experience they're both you know find their vision yeah you're not still on that type of love no I'm kind of I've done that a few times and I feel good with what I've done that's fair I think the thing for me that I've really enjoyed in the last few years as I become more mature in my role and I've become more kind of maybe recognized as an operator in the industry is the time I've spent with younger founders that

00:38:30 are building new companies so I've had the opportunity to work with a mentor a handful of different companies invest in some cases of the last nine years eight nine years and it has been a naps the joy like absolute pleasure for me in realizing their success and seeing people really kind of grow and shine and you know find success of their own and that that's been the most enjoyable part of what I've done outside of all the direct work that I've done myself building and so you know coming to six

00:39:03 years into digitalocean at the time like five five and half years into digitalocean I was really thinking about you know what's the next stage of my career and I really felt as though a horizontal rather than kind of this vertical focus on a single company a horizontal opportunity just to work with a great portfolio of really really great founders was directionally something that I would really really enjoy something that I think I could be really good at because I felt like I really added value to the companies I've worked

00:39:28 with today and so I met well I've known Carter I'm corny for a long time the founders of m13 and we started talking at the end of 2017 and then I started advising them in in 2018 on a periodic basis to help them kind of build the structure for this fund to that we just launched and ultimately you know we really saw id a lot of the philosophies we really think about investing in an opera you know as an operational company not as just a finance company right we really think about disruption innovation kind

00:40:03 of changing the model changing the way people think about it becoming more impactful as a result and it was a real blessing to kind of have them as you know in my network and as a relationship and over a period of year we kind of framed out and designed exactly what we're landing on now and it just was a very natural time for me to move on and kind of come into this and so I actually told digitalocean I was gonna leave in the summer of last year and then ended up staying till the end of the year to

00:40:33 help you know transition myself out and then joined in January joined m13 and then helped build the team we have today you know really was part of just getting to the point where we've closed out this pretty good-sized fund and executing on the model that we put on them on paper so you know feel really good about having landed here and I'm enjoying it I'd say probably best job I've had in my life loving it and so every day is a joy yeah and okay we have to go back for a second because you exited two companies

00:41:03 and also helped digitalocean go like a couple hundred million I mean what are some insights you have from those experiences obviously like you said 25 years like what are some insights though they that founders would find useful from that because to not ask about that if I go be hit to service to the show yeah actually I mean listen I I have a mountain of just things that I've seen whether they've been directly affecting mirroring companies that I've mentored sure and so I just have a huge amount of

00:41:27 pattern recognition I can also recognize you know issues that companies are gonna face before they face them I can also recognize you know how to think about building a business model that can truly grow in scale and I've seen plenty that don't have that capability so you know just there's a lot of things around just the process of building a business that I've just seen you know it's a lot like I couldn't hey you know it's a book right so I think the one commonality is that every situation is unique and different

00:42:03 there are patterns you can recognize and there's guidance you can give but at the end of the day your gut is still gonna drive a huge amount of how you approach a situation you know there's guidelines obviously but still your gut is gonna be the ultimate ultimate way and then honing the gut is really the key so how has my experience honed my gut to help me recognize a problem set and solve it etc etc but everybody's journey is unique I will say to people reading books is amazing and important don't

00:42:32 think a book is gonna write the answer all your questions don't read a book and just follow the instructions agency like take books for what they are they're a set of experiences that you know add to your you know arsenal of references when you deal with the situation's you're dealing with and so a lot of a lot of the times I've spent of reference things that have happened in other companies but time changes a lot circumstances change a lot and a lot of things are different for every situation that these

00:43:03 these founders are facing maybe one other common thing is you know find the right partners find the right mentors put the right people in the seats at the table and on the bus like that's probably the most important thing you can do to say self are for success yeah and looking back at those things too so obviously it's two exits - I mean what did you look for at the time in terms of opportunities like how did you look at businesses you wanted to start or even digitalocean pursuing them I actually joining them

00:43:30 like what did you look for at the time yeah curious about that - so it's different the first one was just not having a clue what I was doing with a bunch of people I liked and just think about some crazy I wanted to build something so it was just much more random I would say every every big decision I made became a little bit more coordinated yeah the second business so the first business was a kind of it's in the late 90s it was a business - its kind of the similar technology to when a store or ring have ended up with a

00:44:05 camera technologies but it was all in one camera solution that could create a network of camera you know video capabilities and access you know across an industry and we applied it to a lot of different industries and put it out and you know in a pretty decent volume and and you know back then the technology was very very different but that was really I mean I didn't know I honestly didn't have a clue what I was doing we were just an engineering firm trying to get it out there the the second one was a

00:44:35 little bit more structure I mean it was literally me after having finished my MBA thinking you know what's something I can do that's gonna be interesting and bartering with different friends of mine and then landing on something which seemed to be a real need it was in fin tech and it was much more global and it seemed to be a real need you know had a you know my co-founder at the time who became chairman was actually running a pretty big company and that was facing this problem and so I partnered with him

00:45:00 and I built the system to solve the problem for this company but ultimately allowed me to solve the problem for a much wider audience and so that was again still pretty big risk we still built the business model from 0 up yeah and so the only thing to recognize was that there was a big need and there was a big market opportunity and we were going to a very dysfunctional space that just didn't have the benefit of Technology so those were the markers that made it very interesting for me with digitalocean because it was an

00:45:28 established business they had just launched their product I was able to really really look at much more of the real evidence like there was definitely product market fit there was huge traction you could I mean it's very early days they were doing I know I think the first month I walked in $50,000 a month and bookings right so very very different what came but you could just see month over month the amount of engagement and excitement and attachment and energy that was not only within the team but with the consumers

00:45:57 that were connecting with the product and in that situation I actually spent a couple of months working with them before I officially joined and I helped them build their financial model on that plan and it was just a great business model yeah I mean you just played it out and you could just see this incredible organic growth and you know I was projecting out for them that they could do 100 million dollars in three years and everyone was like you're crazy I'm like but you know the numbers just tell

00:46:22 me all right so when I had to make the decision to join like well if I really believe the numbers that I'm putting I think paper then I should do it and for those first three years we hit those numbers spot-on so it was incredible to kind of see that growth and see it come to reality but that was different because that was where I was being adopted into an existing team right I you know was seeing a real existing business a real existing model and you knows lots of lows and highs in the whole six year

00:46:50 journey but ultimately it's just been an incredible experience learning experience growth experience you know great success it's just been a really good experience for me the whole time yeah and you bring all that then to your investments yeah exact some people who are watching this know a type of experience you had and then one thing as well in the last interest curious bodies like how is your time spent day-to-day yeah so I end my time of the partnership I'm the one that's really responsible for the backbench and the operational

00:47:17 piece of the business you know you know I spend my time blended between helping navigate how we want to apply our resources to the portfolio of companies we have and how impactful were being with those companies yeah and then the other half of my time on kind of building the network of relationships necessary to find great investments in you know in the market so it's a blend between those two activities a lot of you know as we're building our systems and processes were kind of at this point sign to build a full community platform

00:47:49 for you know four founders a lot of those pieces you know squarely on me yeah so I'm working with my team to kind of build out product requirements for our platform you know build our strategy as it relates to community and and you know activities in that regard build our processes and our kind of institutionalization of all the services and and kind of knowledge and capabilities we have into a way that they can be delivered to these portfolio of companies and then ultimately managing how or applying our resources

00:48:22 to these different companies to get maximum impact yeah and Carl where can people go to reach out connect with you learn more they can connect with me at calamar NYC KA LOM AR NYC so that's on Twitter on Instagram obviously LinkedIn and then also just m13 Co they can jump on the website kind of take a look at what we're doing and you know always happy and excited to talk to people and see where they're up to awesome thank you so much time today thank you appreciate it thanks for checking out stir up 2.0 from

00:48:56 spark XYZ if you want to learn more about startups and investing and check us out join the ecosystem at spark XYZ dot IO