00:00:01 [Music] moving the needle on founder failure one conversation at a time I'm your host Lukas polls and welcome to startup to point out by spark XYZ join us each week as we give you access to some of the top investors and entrepreneurs around the country 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 listening to its customers and just thinks it knows better than it customers

00:00:34 has a really really hard time finding product market fit I want to see somebody that that isn't gonna stop you know this person you just feel like they're gonna they're gonna they're gonna make it work a big heartfelt thank you to Breck's 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 guarantee early on as companies grow managing expenses has become more difficult and time-consuming which is

00:01:09 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 a start ecosystem and we highly encourage you to check them out thank you so much for jumping on the show appreciate it excited to be here awesome so where we traditionally like to start out is just finding a little bit more about you and your background and how you ended up in BC how did I end

00:01:39 up in DC well it was a it was a soap it was like the the story about the frog that's in the pot heat slowly turned up and eventually find yourself as a be seen but I I've been I've probably I started out as you know I went to law in business school when I got out of the army after going to West Point was you know Airborne Ranger qualified served active duty after graduating from school and wanted to be I thought like a corporate transaction attorney doing really big deals and disabuse myself of

00:02:13 that notion after the first summer after the first year of law school when I worked at a large firm and kind of saw what happened there so the next year started the business school program and did the JD MBA UCLA nice and kind of met all the people from business school and saw the different entrepreneurial activities and basically never looked back so I started investing in 2004 and the reason I started investing is my my mentor was a gentleman named Luis Villalobos who was the founder of tech Coast angels and also one of the

00:02:53 original chair people and founder of the angel Capital Association so I had a really good mentor but he had run Monte Carlo simulations against all the angel investments that had been done up to that point in time and identified that if most angels stopped investing after 3 or 4 deals right you don't you know they'll go to a dinner you go to a tech Coast angels en't you'll do whatever you'll see it this is a pretty angel list and pre all the seed funding capability that existed for for you know

00:03:25 math nasty bullets put a whole bunch of money in in tiny amounts and one of your deals would go belly-up neig lose 25 grand and you or your spouse would go okay I did three or four of those that's a college and was in college and out of this this is too risky and I don't understand what's going on but all the Monte Carlo simulations that showed that you needed to have 20 to 25 investments in order to get take advantage of the asset classes returns for their diversification purposes unless you're

00:03:54 really lucky or a really good picker so I'm like well I love this early stage this is where I live this is my DNA I love helping entrepreneurs how can I get my 20 to 25 arrows flying to take advantage of it so my first check I wrote in 2004 into what eventually became true car so it was Scott painter and zag and and I also was like well how else do I get these little tiny pieces of equity in these things and I said well I'm pretty good at business development I know a lot about getting financing is completed so I started

00:04:27 advising inactive while I was also you know blood sweating tears in the big chunks as an entrepreneur so from 2004 to 2014 I was old school angel you know hey I love this deal I love what you're doing here's a $25,000 check them the roll up my sleeves and help oh you need more money well let me go get nine buddies and they each get a $25,000 check here's 250 grand oh wait six months later you need a bridge round okay let's go figure that out so kind of typical old-school angel work and my partner in

00:05:00 our fund moonshots capitals craig cummings also in a military veteran also a West Point graduate he was based in DC during this period and he was doing the same thing in DC so I was one of his calls for that other check you know I mean another check and he was one of my calls and we liked how each of us looked at deals and invested and in 2014 at the same time kind of contemporaneously with navall at angellist getting a new action letter from the SEC that said you could be a lead angel and take Kerry from all those other checks

00:05:33 that had just given you money and they're still doing whatever they do with their lives not helping much and kind of watching and I said well we've been doing this for a buddy a decade let's let's let's start you know getting paid for some of this work we're doing so we started running syndicates so from 2014 to 2017 we ran moonshots capital syndicates and I think we're in the process of closing our 33rd syndicate so it's an SP V check sizes range from into the company like a hundred grand at the

00:06:03 low end of three million at the top end so pretty sizable checks but a vast array of different types of companies you can see them all listed on our website in the syndicate section and there was a problem with the syndicates in that when we saw the really hot deals the ones we really liked the entrepreneurs we'd previously backed whatever it might be that made it interesting the conversation for putting money into a sin you know into a deal is like this I really love what you're doing it's fantastic I know Craig's and

00:06:34 my networks are gonna be able to assist here talk to these entrepreneurs we've helped before then the on screen is like great how much you know how much can you put in somewhere between 200 and 600,000 sometime in the next 90 days yeah because I have to go out and pull all the money in from the syndicate and make it happen and I can't say an exact number unless Craig and I are willing to backstop and guarantee that money in case all of our angels are in Fiji that week or two weeks or whatever there's a

00:07:01 whole bunch of herding cats that's involved with running the syndicate so we looked at each other and we said okay we have you know finished West Point airborne schools Ranger schools Craig got a PhD at Columbia we've been entrepreneurs through multiple cycles we've been investing together for years we have a really strong track record a a DC fund where we want to operate early stage is the checks eyes are gonna be about the same thing we've been doing through our syndicate and we have a process and we

00:07:32 have a team how hard can it be to raise a venture capital fund so 18 grueling and humbling months later when we did a final close on our twenty million dollar fund for moonshots we knew how we knew how hard it could be we've learned how hard it could be so so that was how we gotta got to where we can write first checks we like to lead we're kind of what we call eight seed meaning our check sizes are 750 to 1.5 million on to to call it three and a half million dollar rounds basically enough operating

00:08:07 capital to allow the company to operate for 18 months it operating metrics it can take it to the next round of financing or and a good thing we were operating this way if something really bad happens economically and it's hard to raise money you're able to take your cost down to the point where you can you know fend for yourself and be able to operate you know in a profitable basis that you know that final closed occurred in October of 18 and we've invested in 14 portfolio companies to date and our

00:08:39 thesis is centered on Wow well it's easy to kind of take a venture fund and say okay this is what you focus on from a sector standpoint that's not how Craig and I operate so if we look we look at our 88 companies that we've invested in over the course of our investing careers chapter one is angels chapter two via the syndicate in Chapter three now is as full-time VCS and you look at the factor that you can control for at the time of investment so remember early stage what factor can we control for that you know

00:09:19 when you look at a regression analysis would indicate that it ends up on the nice side of the returns not a zero not a point for return but a greater than greater than one data right so there's money returned and the only fact figure out and doing this analysis that could really closely performance quality of the leadership and the only place in the world that we know of where millions of dollars have spent training people in leadership per se is in the military so Craig and I leaned in heavily and highly

00:09:58 value deals where there's a military veteran as part of the founding team now we're not listen to that first and to date 53% of the invested capital is gone military veterans on the founding team I think full assets under management including chapters one and two of angel and syndicate I think it's closer to about 60% but it's still heavily weighted and looking at that and seeing that so that that there are very good proxies like multiple time entrepreneur that's great leadership training on-the-job training as well as you know

00:10:37 there's a lot of different ways and different things you can look at it in all walks of life but like you know Division one team athletes you know from you know from from that those types of program you work in effectively there's a little built driven in that process so that's our primary focus you know first of all can Craig and I help on the company building Craig and I have 14 operating roles under our belts so we've made a lot of mistakes you've done a lot of things wrong and hopefully avoid that

00:11:06 and then the second you know focusing on that leadership element or leadership component and third is how we when we start to trying to look at different types of sectors so that's that's how I got here that's not super exciting so you talk about strong strong leadership so we kind of kind of touched on where you kind of end up finding them from so either military a d1 program for sports but I define what is a strong leader kind of in your terms sure so I actually um I wrote a book on this subject and it's called take

00:11:46 command okay and it's 10 liters pulls I learned in the military and actually the the second part of that is input to work for Donald Trump some people may not know I won season two of The Apprentice and Donald Trump in New York for about 15 months but for instance you know passion perseverance those are the three P's pretty easy to remember but incredibly important the passion elements easy to feel excited about something for a short period of time the amount of time usually involved in building a successful company is so in

00:12:28 that initial interaction and how we're talking to people understanding what the depth and level of the passion and the commitment that's associated with this I'm gonna I'm going to build something that changes the world no change is a part of the world that we have to feel that and see that evidenced by you know how they spend their time what are the things they're doing and that's not to say that and I write about this a lot too is you know you can't be a hundred percent on something or you burn out and

00:12:57 no you know I made that mistake during one of my first startups you know the girlfriend fell by the wayside didn't see friends for a while you know every morning up at like 5:00 a.m. and they're about 2 p.m. realize I'm still sitting in my underwear haven't you know eaten anything and I've been working around the clock on phone calls got fat never worked that hard and so I wasn't I wasn't really any good to anybody including the company after about a year and a half of that so but you know so passion is critical planning

00:13:28 it's incredibly important to have a well articulated and laid out plan with all of the appropriate assumptions around building your business and that planning component can't be a oh I'm just doing this to get some money it's actually has to be something that you operate off of and of course I haven't in all my years now met a company that made a business model and playing around how they were gonna operate and that's what it looked like later 0 the point is you're capable of having the discipline to articulate

00:14:05 and understand the fine level detail around your business model and measure along the way so that you can adjust what you're doing resources how you're attacking it what competitors are doing everything impacts that on a go-forward basis and if you're not comfortable with and understand planning and we especially like heuristic planning which is backwards planning from a goal or objective intermediate milestones and all the steps that lead up to each of those milestones makes it really difficult to manage people makes it

00:14:35 really difficult to measure yourself and where you are on that track so those are a couple of examples but they're not they're not subjective loosey-goosey let's you know it only seems like a great leader he talks really nicely in front of people he has a command voice listens like there are there are very you know quiet almost introverted phenomenal leaders mm-hmm and there are you know extroverted cheerleader like excellent leaders and they're great you know great examples and bad examples of

00:15:09 both but it over the years and because we've been through all of the training you can start to identify and understand who's good at what and it's not that you need a fantastic grade in every dynamic it's that probably most important one Integrity's then you know not there's no discussion around integrity hundred percent has to be there and that's a lot of background and one of the great things about especially from the military side somebody introduces us because you're former Navy SEAL have a

00:15:38 great idea cyber product you want to bring the market you get introduced to moonshots capital because Kelly and Craig really love military veterans before we even meet you've checked through your military network on on Craig and me and to know about us and I've done the same thing about you probably I mean talk to your former commander so to convert those conversations are like 110 percent wide open blatant like watch out for this watch out for that or to run away you don't walk away from the computer

00:16:07 whatever so so when we meet there's already a sense of you know a lot about my background and you have a high confidence in that data mm-hmm and then because we share a common vernacular and a something of a common background the speed to trust is very fast so if we end up leading the round into your deal it's possible you trust your lead investor and board member as much or more than you trust your co-founder and that's very unusual to have that occur so so it's a pretty neat dynamic awesome that's exciting

00:16:40 so you touched on a couple pieces of you diving into a little bit more about due diligence with the actual company like walk us through your actual process like the startup engages like with you like how does it go what what are maybe similar red flags that you end up saying or go into the process then maybe some of the mistakes a band of making yeah so our deal sourcing as you talked about it from a VC perspective comes through a lot of different ways and I think the most effective entrepreneurs get

00:17:14 introduced to the GPS at the funds meaning through their relationship with another entrepreneur maybe an entrepreneur that had already been funded by that but by that VC for an entrepreneur that hasn't it's well known and established and was liked what whatever you do and it's almost like any business deal that networking element or that networking component is important if one of our entrepreneurs that we've previously funded introduces a deal to us they've kind of done vetting both directions

00:17:46 right they're like okay this guy's gonna be able to put up with it when Kelly helps right in and or you know I know I know Kelly and Craig's Network are super effective and you're gonna be able to help in this way and this entrepreneur needs this type house so it's kind of a double vouching for that's already occurred so that it that we look at that you know it kind of goes to the top of the funnel versus something that just comes in off of a cold LinkedIn or whatever it might be so we're at probably I want to say last time I

00:18:18 checked were close to 150 deals a month inbound and so so we definitely have a process for that sifting and sorting direct intros get a next level of sorting you know of review no matter what happens because I hope you know that entrepreneurs going out of his or her way to help me with my business and I appreciate that and I want to look at it closely because they've probably done a good job at vetting so we have individual partner meeting both partner meeting we have a pretty expansive network of expert entrepreneurs across

00:18:54 different fields our syndicate base that I talked about before from chapter two was primarily entrepreneurs that like investing and like the way Craig and I look at things and want to put money in so there's 500 or so in that network that we can call on and part of their involvement is they like to look at and help and do different things and then separately we can reach out to third parties if there's a technology that's beyond Craig's and my and our networks knowledge or experience base to be able

00:19:23 to make decisions on or understand how it fits into an environment and I'd say so so that gets us kind of the bare-bones technical yeah we understand it there's something there they know how they know how to code that kind of stuff kind of the more important element is almost no deal shows up it's perfectly set right so you know the founders have done whatever the founders have had to do to get to that point they've taken money from people they like they've taken money from people they don't like

00:19:51 they've done side letters they've done whatever our job if we're going to invest into the company is to help that entrepreneur succeed right we will we want to help them succeed and you can't have a side letter from Uncle Bob that says he gets 5% of an Ike any IPO that occurs in the future just for example you're not going to get an institutional financing seen that more than once there are there are all sorts of those types of hooks in weird sidelight and a lot of stuff happens there also probably what

00:20:20 we would describe is kind of non-conventional breakouts of equity amongst founders so a lot of those first interactions as we look through stuff is really understanding whether or not we're gonna be able to work with those founders when I say work with like Craig and I have 14 operating roles under our belts they we don't what you don't do what we say we're not running the company that's not we're not a private equity fund that places the CFO or CEO and to take it and you know exactly what we're gonna do this is exactly how it's

00:20:51 gonna operate we're gonna roll up a lot of that no we're we're betting on you now we do want you to listen doesn't mean you do what we say it means you actually heard the words like don't do that deal or if you do that deal it has to be like this or you're gonna get screwed later yeah and of course sometimes we don't get listened to and sometimes we're wrong but a lot of the times because we've done this before and seen it meant seen the show many times um we're right and we get the tail between the legs like okay you're right

00:21:21 I'll listen from now on and it's that it's it's that ability to listen ability to hear us and incorporate that into the decision-making so that chemistry and that ability to I don't know almost like be coached mm-hmm that exists in this environment and we can find that out quickly right if you have to restructure your cap table for us to put our money in ie go back to these three co-founders who don't work here anymore and say you're getting crammed down or you have to invest or something or we're not

00:21:48 raising money entrepreneurs who successfully go execute on those things show that they can listen and that they understand what's important and that they can also go execute and those are very uncomfortable conversations to go hat so that's one example of understanding the human element and the chemistry the coachability and whether or not they're gonna be able to execute and when it gets tough yeah like that a lot of founders don't really realize they and to bring into mental whiplash a lot of time when you and so

00:22:20 they end up blocking stuff out a lot of time you need to end up just sitting there and just listening and taking in all the information then deciding whether it's actually good for your business or not but I think that the end of putting a blocks a lot of the time on everything they're like I'm just gonna go this way it's like look there are very experienced people that have done a lot of this before they it's probably giving you some great advice that you should probably at least take part of towards your business so I agree with

00:22:47 the personality and the learning right can they learn yeah meaning they can go make a mistake of course but then they actually after-action review whatever you want to call it but there's a look-back learning and say okay that's I'm never gonna make that mistake again so I've been do it so what are some of that actual so you test from a few so the side letters the cap table what are some of the other mistakes oh don't a--first make early on I think that the tension between showing a very strong

00:23:24 revenue growth with I still need to have appropriate assumptions is always a tightrope walk right very you want to look really exciting to a to an investor but you also kind of have to show real realistic numbers for how you're building something and again this is like this is part of the plan the planning process you're not gonna have it right but you do have to have it reasonable right from both standpoint right and I I don't believe that any initial forecasts that I've looked at as part of the investment due diligence and

00:24:05 we go we go in we go line item by line item we get you know a finance expert involved we work with the company and we agree on a budget as part of the as part of the round of financing and it it goes through many iterations we've never kind of gone back and said hey we ended up with a higher forecast we think you're spending too much on people cost or anything like that so it's always the reverse so ensuring that you have a very good handle on the financials down to the unit economics of your business

00:24:45 is absolutely critical just assuming things with no validation or background or customer feedback and not being able to defend those positions is almost almost like a you know a death call I mean it's it's really bad right it shows you haven't done the homework you don't you're not that excited about it you haven't figured out exactly what you're doing or you don't have financial chops or capability to do it I think that's I think that's one second and this this goes to like what I all entrepreneurs

00:25:20 can get better at and that's really understanding the legal docs mm-hmm I'm talking about you know the 15 to 25 page shareholder agreements the write all the rights offering components everything that exists inside of those documents it's your baby you just you know Gunderson Cooley the list is endless of really smart lot of great law firms with great it you know lawyers and all of them so what yeah your business you need to understand it and I think very few like less than 10 percent really get a

00:25:53 good handle on the legal box when I meet especially early-stage any early stage investor knows and when you're pitching them or presenting them as the entrepreneur I'm not only looking at what you're capable of doing right now and that you're being able to build the business for micro funds for smaller funds or angel groups you have to be able to raise the next round of financing no so you have to have the knowledge and chop and understanding of deal terms to be able to talk to them and understand what they are otherwise

00:26:28 you're just kind of like a little lamb proceeding down the path I won't say the slaughter you need you need to very much understand exactly what those docks are there's so much available online that there's no reason they you know ten years ago fifteen years ago you could argue uh takes a lot of time and money from attorneys going through everything still could do it but now there's no excuse there's enough available description and information all over the internet to enable you to get smart on

00:26:57 what all the deal terms are at a legal box nice yeah not agree especially with the metric speeds I can't tell you how many founders tell me especially if they're really stage you're like oh well we don't have a cat I don't have an LTV it's like look I want you to estimate it so that at least I know how you're actually thinking about it so that you have a good process around it so that you do have enough data to be able to actually tell me what it is that you already understand what it is going forward so that yeah you're enough

00:27:26 published public company proxies yeah somewhere between uh whatever a Casper whatever you can pick something in your domain it's available its public it's at least data points to anchor your thought process so you have a plan against which you can operate yeah I agree so let's dive into let's dive a little bit into team so there are a lot of team dynamics from starting clients moving the hierarchy to a lot of challenges that start ups end up facing and a lot of times they're a lot of starts will end

00:28:02 up ending because of co-founder conflicts so what are some of the challenges you see teams face early on I'm sure it's a lot more apparent now because everyone's a little more squeezed and things are not going as right as they that could be call it three or four months ago so walk me through some of the dynamics that you end up seeing and then maybe how they can either avoid it or go in and fix it yes so founder dynamics managing expectations team build company growth by stage that each of those is an

00:28:45 hour-long discussion for sure i I've seen everything from you know a co-founder you know acting in kind of mutinous fashion to hijack the company I've seen it give its run the gamut from I thought I was always gonna be in charge of product you know even though they'd never managed more than four people and there's a 500-person staff I mean the the different variables are astounding on every there's there's no one right way to do it no and I would say though that that the coachability element that

00:29:25 I talked about at the beginning and it's a weird combination of massive amount of confidence to do something audacious and it's gonna disrupt an industry there's a certain type of inside drive that needs to be allowed to do that and coupling that with some humility of listening and learning and understanding where they fit or don't fit potentially in organizations super important and I would say that this conversation around kind of what am I going to be as we grow the company what's my role and how does

00:30:00 that how do I fit there's you know everything from you know professional growth to money to title and ego all wrapped up in this so there's a lot of psychology that's associated with it but it's it's one of the especially and it happens most and companies that are being successful because that's where the most change is occurring as it's growing now when things go bad we can talk about different stuff also but like as you're growing is the reason there are more people required and or they were growing internationally now in

00:30:33 sales and the person who's running sales never ran sales before anywhere much less than an international growth piece so that that initial interaction of how coachable are they and what they want to do is super important and then on the growth trajectory it also becomes very important when you decide to take money from kind of a non micro fund so as a micro fund the math on how we return capital to our investors the LPS that invested in us it's it's it's the same map that applies to a billion dollar fund however

00:31:08 the size of the return required ie what the company becomes worth is a much much much higher bar when you get out of kind of micro VC territory and start taking money from the well 'not well-known well-established phenomenal V sees that had a lot of value but it is a shift in mindset for the founders so it's in the team it's okay you know if we got a exit for 150 million or 200 million before we get to a series be kinda that's potentially legacy changing for the entrepreneur it's amazing for the

00:31:44 employees all the early stage C Company you know a seed seed investors angels smaller funds like the return on that is pretty fantastic right and by the way oh my you just so built about two hundred million dollar company like wow like it's amazing that doesn't happen in the war we're so in the cone of oh it's a billion dollar unicorns a billion other unicorn like all of them end up that way yeah unbelievable to think that you could create that value over whatever six to nine years is kind of timeframe

00:32:14 or less and when you decide hey we're taking tier 1 billion dollar fund money going long ball you're literally now playing long but like we're playing for big like we're spending we're we're taking dilution so every time you get diluted besides the pie has to get bigger for you maintain the value but that's that's all that's just a mindset so who you invest in an understanding that rationale and psychology for weird what your why are you doing this why are you building this company you just want a solution and if

00:32:46 the strategic partner wants to buy you for 100 million in six months or 12 months is that what you're doing cuz it maybe it's your first time or maybe second time the first one didn't work out well that could be a really good outcome for you and it could great outcome for moonshots we own 10 or 15 percent and it sells for a hundred million that's over half of our twenty million dollar fund return in one deal like but if you took ten million from a big fun they spend two or three years at it they needed to be a billion

00:33:15 dollar exit or whatever half ability like a big a big big number so you know really understanding why the entrepreneurs are doing what they're doing and what their realistic expectation is and experience around how they want to end up can it at least give you some insight into what's gonna happen when you when you do have those problems and you always you always have some problems I don't I don't honestly think that entrepreneurs think about it from the VC perspectives enough like even in that like even in that example

00:33:45 its they it yeah I mean it's tough from the their perspective on understanding [Music] what the VC needs to do to accomplish their on end all fund goals by taking that they think that they've been able to access form 100 million dollars but yeah Humphreys not right if you end up taking it from a name brand call it VC that returns behind dollars they're not going to allow you to exit for a hundred million it's like look we're gonna force you to run up the game at going forward I don't think they think about

00:34:27 valuations very much either a lot of times they'll end up taking too much capital or to have a valuation early on they want to be able to hit the valuation that they're actually looking for and so they end up taking down round and I don't think that there are enough there's enough foresight or thought around that kind of whole trajectory in that entire cycle so I understand agree yeah well your year when you're giving away a major chunk of your company for a lot of money there are strings attached

00:35:02 right there are covenants in your agreements that say you can't sell the company without ex approval know you can do another round of financing without ex approval now I your your statement of they won't let you sell the company if if you really do lose an entrepreneur's interest to grow it depends how integral that entrepreneur is into it if they've if they've evolved and they become CEO to maybe had a product or and from head of product to whatever no and now it's pretty what's to build something

00:35:34 else that's the story of Silicon Valley right that's and and building a company from five or five people to five hundred people is really really really hard for one person doesn't usually have all those skill sets doing that much less to five thousand and there are people who know exactly how to grow from 50 to 500 to 5000 it might be different people so again it's okay this is my baby I built it I Wendy when do you release or let go and then there are some people who can evolve all the way through that cycle

00:36:08 they're rare um but they but they can and some don't want to know some orders figure it out after two times hey I'm I'm in ideation well I can can you know I can tell a phenomenal story I can get money from investors I get people to run into walls for us until we get through it and convince customers to pay us in advance for vaporware until it's ready like ours or they know they're good at that part okay when I have 15 reports and it's you know the system's the engines running now what feature do we

00:36:39 build I'm like I'm bored now I solved a big problem what's my next big problem to go solve so really understanding again the expectations of that entrepreneur and vice versa the entrepreneur understanding expectations of the investor is important on the front end know so we have to talk about it so the koban is obviously Branca it's changed the outlook especially for the next call a year year and a half until there's a vaccine so how do you see maybe I was taken from the bench perspective how do you see the venture

00:37:13 capital landscape changing or shifting do you see the types of deals getting funded drastically shifting over the next year and a half or do you think it's more of a pause button until things get a little bit back to normal well I think the numbers are already in for q1 and the that was significantly fewer I don't know if it was 20 to 30% fewer seed you know early deals done and then were anticipated and/or year-on-year comparison yeah and valuations I understand at least from general surveys but of like 400 plus VCS

00:37:53 that at least a 20% downward pressure on price and I and I was a part of at least two deals where you know last now all of these deals that close had started pre ovid right no there was already something there was already momentum right and there was already agreement on general terms and everything else not final final sign wires yeah and I know one that got traded down 30% on value just like hey we're gonna drop at 30% you know the pre-money valuation and then it's like a pause and like okay can

00:38:32 you wire today yeah let's get some money in because we got to get the money in right you know fortunately for you know the vast majority of our fun fun one deals we had one invested the deals had closed in the second half of 19 so some in queue you know in q1 we got one closed and end of January and in all instances we had targeted 18 months of runway with operational metrics that would support the next round or take down your costs because they're already in revenue but take down the cost and then we and then we had a couple deals

00:39:12 that have been hit accelerated to profitability so operating profitably because of the circumstances around what the virus did to behavior they benefited from that online can't go to the store that type of stuff so but the the conversations with each of the founding on you know founders entrepreneurs was not okay we need to adjust the adjust the business plan on a forecast its new new new forecasts new business plan it's not us it's not like oq2 is gonna be a little slow it's like now let's talk

00:39:48 about it differently and let's reset expectations and manage costs and figure out how you know we kind of see what it looks like what the new normal will be on the other side No cool so what so this is kind of what's happened like what industries are used are there any specific industries that you're a little more interested now because of it going forward yeah is there anything specific that your yeah so one of the interesting dynamics for moonshots for our fund is we have close ties to and with DoD not go so in fund

00:40:29 one we head to what we call dual use so the commercial application and then DoD application and kind of generally speaking and historically most VC funds kind of shy away from anything that has a government contract associated with it if as they're incredibly difficult to forecast you get them fantastic right typically have a paying customer right they're not going to not pay if they sign signed on a deal right that's I'm to the pros suddenly who knows what and when and how and you got more money yeah

00:41:06 so in in q4 of 2019 army futures command which was the first new command I believe about 40 years for the army and its mission with a twenty billion dollar fund basically was to invest in commercial applications and commercial innovation that have applications to soldiers on the battlefield and that can be across the six pillars or like communications transportation medical like so they're really interesting and if you think about our thesis and this and they selected they did like the Amazon new distribution center search

00:41:45 for city and they select the Austin Texas so my partner who's based in Austin Craig Cummings he you know assisted with helping hit land softly in Austin no we in fact had the VIP at dinner announcement at Craig's house so that kind of center of gravity for as you might imagine a lot of military people very interested this a lot of money and a lot of that money is non diluted so in the form of grants or whatever it might be and having that all in one spot whether it's also commercial innovation it's pretty

00:42:20 interesting for us so we've expanded our aperture and look have dual use applications so that's that's a very big one and then I think anything related of AR and VR while we're still farther farther away on the mass consumer adoption and having technology that supports that I think that the b2b components are pretty significant yeah it's definitely getting a lot more interesting well especially now because training and trying to are important keys at home is slightly more difficult than in person so yeah

00:42:58 definitely they're very interesting to the future work awesome so Kelly how do people reach you so our websites moving shots capital comm on LinkedIn Kelly Purdue awesome well Kelly honestly appreciate the time thank you so much for coming on and look forward to chatting again soon I had a great time talking with you [Music]