April 21, 2021

“Broccoli in your teeth” How Do You Choose the Right Partners? - With Andrew Unger

“Broccoli in your teeth” How Do You Choose the Right Partners? - With Andrew Unger

Andrew Unger, Founder and Managing Partner at High Slope and Co-Founder of Better.com talks about early-stage fundraising, and how Better.com has managed to raise so much money. Andrew also speaks about finding the right partners for your venture and what qualifies a good partner.


Andrew's LinkedIn: https://www.linkedin.com/in/andrewunger/

Better.com: https://better.com/

High Slope: https://www.highslope.com/

For those who already forgot what an ICO is and how fun it can be, click here.

Transcript

And today's a guest speaker will have Andrew younger founder and managing partner at high slope and Co, founder of better dotcom that raised 405Million dollars up to the state. And in this episode we'll talk about this.

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How did they manage to raise so much money? How was Andrew involved and also we'll talk about high slope what it does and how exactly it doesn't work. So, Andrew, if you don't buy, you're giving us some background on yourself and on high slope.

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Yeah, so, um.

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Thanks I started.

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Started this this current venture after spending 3 cycles around 4 years in each at organizations folks,

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venture studios some people don't call them anything where there's essentially capital.

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Uh, research and recruiting used in service of building, new businesses from, from whole cloth. So initially did that.

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Uh, at a subsidiary of ability, enterprise software, and then maybe more relevant to to to so what we're going to talk about next.

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Did that with 10 capital, which is, um.

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Affirm that the shall guard the CEO better.

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Started over a decade ago to focus on building businesses.

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Within consumer lending 1st, business he built my uncle and took public was 1 of the 1st online suit lenders and.

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He had expertise around consumer credit and so that's where we initially started a better. And in that case.

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Uh, bought a bought an existing entity and a mortgage bank and took that and from there.

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Built what is now better dotcom.

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Uh, so high slope is.

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Similar to, I guess 1, 0 and then.

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After that redesign health,

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which is focused on building health companies,

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but in a similar format,

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where you have capital specifically allocated for new company creation,

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research and and recruiting what we do here.

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Is different in that, the research component the business idea development and evaluation is is not a component of of our firm.

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It's, it's really solely finding.

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People who are able to scale products and engineering Forbes within software software,

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enabled companies and funding those same people if they are early in,

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in starting their own companies.

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So so, yeah, so so so my day is back to back calls with.

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Founders, and people who.

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Uh, are potentially going to run the product and engineering, or for those founders, as those vendors start to really hit hyperscale.

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Nice great background. Great overview over those 2 companies. So before we move on to the major topic of discussion Z, I wanted to start with discussing a little bit of failure.

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So 1 of your previous companies, as you mentioned on our preinterview call actually did not work out because of high competition in that field. Can you tell us a little bit more about the experience? What happened there?

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Yeah, absolutely so my 1st company, which I started.

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You know, about about a year out of college was.

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A business week where we developed software for.

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Local service businesses really in this case, mostly spine salon businesses to then off peak hours at a discount. So, you know.

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Not so different from sort of Priceline model, but for, let's say, a haircut at 1 PM, if there was a salon that needed business, it was.

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You know, ultimately a model that mind body in many ways was able to execute well on is now now.

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You know, multi 1Billion dollar company and which another company I'm working with currently called gloss genius, which just raised a.

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Round and actually that's a piece. Maybe we don't say I wonder if we should, but but I can't, but I can, I can say that I can say, you know, and which gloss genius.

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You know, and the other drop everyone and class genius a company I'm not working with. I think we'll successfully.

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Uh, executed and then build a a very, a very big company. I think that's what could be 100Billion dollar company. You know, we, we were unable to.

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Get the owners of these salons.

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To successfully engage with the software to really scale. So we did get that model up to a run rate of about 5Million bucks with though margins, which really weren't great.

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And at the time, no, 1 was investing in sort of local there really, really had been very few successes there in.

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And there just weren't a lot of PCs interested in companies that were servings with many.

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Then we saw this company, which built this very simple software that was selling essentially coupons for haircuts in Chicago.

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And they were selling 2000 within 3 hours.

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Now, with group, we essentially over a weekend, built a Groupon clone, and on the marketplace side had few 100 inspires in New York and a few 100,000 users.

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And so we were able to sort of flip a switch and over the course of 6 months before Groupon came to compete, get closer to 35Million dollar, run rate raised.

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And then local was super investable because everyone's trying to put money into coupon raised significant capital scale.

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Of the team, and had my 1st, real experience of hypergrowth, which was exhilarating and, and it's a respect 1 and having to frankly recruit and build a great team.

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Part of that team was CFO. 1 of the smart people I know is now.

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Chief risk officer, Pacific life, a brilliant guy who said to us.

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Earlier than most companies, the LTV of these clients is going to be a special opportunity lower than the CAC year. And so basically, we, you know, that was the case and that there really wasn't.

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A mode, and and or loyalty from the customers buying these coupons and all of a sudden what was sort of a novel concept for local businesses to sell services coupon.

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ization became a commodity market and so, whereas initially call up a salon. They'd say, like what I explained to me exactly. They're going to buy a thing, then, you know, you call us long and they'd say, well, I got by with me online for living socials online.

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Say, what kind of prizes can you get me? It was just a total bloodbath, in terms of people's prices, because there was very little barrier to entry space.

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You needed a website and a bunch of people to make phone calls and a tremendous amount of venture flooded into the space, billions and billions and billions of dollars.

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And so I think that's where ultimately, though we did stop selling coupons and try to pivot sooner than others eventually died a slower longer death 1 company that made it out of it.

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Run by some of the most brilliant people. I know. It was able to pivot into a data forecasting model and they're the only ones I know survived. And that partly.

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Uh, their, their survival partly informed my.

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My view on businesses and I tried to sell to them, they wanted to buy us the other cofounders that I didn't want to do it, but they were smart folks. I know. And I said they're going to we'll figure it out. They will, and they did, but anyway, that was my.

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So I guess that was my appreciate that was my experience where my appreciation for, for real most really, literally seared my brain.

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Nice thanks. Cool story and sounds like yeah, that that was the crowded space. Very fast. Crowded space. Nice work there. Yes, so, let's let's talk about bury dot com. I mean, raised enormous amount of money. 405Million dollars.

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That's a decent decent amount of money change a little more. How were you involved in this fundraising? And why did you leave the company?

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Yeah, so so in terms of the the.

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The fundraising it was, it was actually.

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Pretty interesting, and it's very different story than than many. So essentially, as I think, I said, when when we opened up the conversation, we know this is a situation in which we actually.

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Acquired asset. All right I'm unlike most Starbucks. So, you know, that was for most venture investors.

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Too strange. So, you know, they were wow, you know.

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Uh, we like the idea it makes sense, you know, we.

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We like the team,

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and I'll get into sort of how the team played into the fundraising,

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but they just didn't they just didn't like that model of hey,

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you have this legacy asset now,

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I think,

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because of better and some other businesses,

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it's more acceptable.

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But then it just, it just was strange and different and therefore, some venture investors, once I respect and who are brilliant, I still work with soft light but others.

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Pass stupid so no, no offense to.

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No, no individuals will be but but essentially so, Goldman Goldman, we raised the initial 30 from nice day.

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Well, well, yes, well, well, 2 things are interesting there and, like, it was the 1st investment Goldman made.

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That had anything to do with mortgages after the mortgage crisis, the amount of diligence they did.

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On us rightfully. So, it probably cost them more than 30Million bucks. I mean, it was, it was in.

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Tense they were not gonna touch anything that wasn't really kosher and and that they felt very good about it. And for them.

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For Goldman 30Million dollars. Really nothing right and so I think for them, it was like, this is interesting, it really is, you know, the wouldn't move the needle.

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Now, they've, they've done more in subsequent rounds and I think they'll, they'll better will be 1 of the best investments that they've ever made and they've been able to scale it up. So it'll be even more meaningful. But but they, I think it took to learn.

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Right, I think I think for them, which is smart, I think they invested. I did think they think they get a return, but I thought if it doesn't work.

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We're going to be on the inside with these really interesting folks who we're going to take the top technologists and apply great product design and engineering thinking to

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this incredibly outdated industry and we want to know about that.

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And so I wasn't on the inside of their memos, right on that side of things, but I wouldn't be surprised if.

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That was part of their motivation and that's sometimes how I end us. I mean, there are some things and how Michelle has already the CEO of a better invest and sort of I learned I learned that sort of stands from from him. So looking back.

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I think that could have been part of why, but, but to your point, it was it was not something that most traditional VC wanted to.

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Tax because it just look different, right? And yes, this is another cool story. How by the way, how do you manage to get them to invest? How do you reach out to them? Was it you or was it someone from the team who mentioned get in touch with them?

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Was it was it like no, no, no, no, no, no. At this. At this point.

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At this point, he, he taken a company public prior to this New York, and also, you know, New York.

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Unlike the Bay, there's far fewer.

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Great technology companies in New York.

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But far more sort of great traditional financial institutions, right? Goldman being 1 of them. So the 2 worlds, they, they do overlap quite a bit and so, fundraising in and of itself.

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Starts to become a different, not easier or not, but there are folks who I've built companies with who formerly were sitting on the other side of the table. Add an investment from the same is true.

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Adventure, but there are just less people in venture meaning, like, at any given firm. Right shaquoti has, I don't know how many people in less than less than Goldman let's say. Right.

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And so being connected in a meaningful way, to very senior people at Goldman Sachs, if you're someone in New York, who's been building businesses for a long time for myself or others and this was even true.

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And a brilliant guy, who was our 1st CMO happen to be also related to another extremely senior person at Goldman. So, New York finance.

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You know,

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which is where we ended up racing from really not Silicon Valley in our 1st round Kleiner and all the typical and laid around was,

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was not was not a cold outreach kind of world people knew people for various deals,

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had been done and relationships that had been built.

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Interesting and, yes, I mean, sometimes you don't have to raise from Silicon Valley has just especially not now during the, but let's move on to the next topic, which is I, by the way forgot to include in the description of the sample.

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So people surprise surprise. We are going to talk a little bit about the.

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Hiring process, so Andrew has quite a bit of experience in recruitment actually. So Andrew, can you tell us a little bit more about recruitment specifically for early stage? Well, well, yeah, and I'll actually I'll tie that to the fundraising story with better.

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So, I'll tell you 1 thing that we know. Yeah. Well, 1, part of that diligence that I thought was what was really something very savvy and smart that Goldman did was they had this question.

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Are you guys going to be able to recruit.

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Top tier engineers away from saying, are you going to be able to get the most brilliant minds and technology to work on mortgages? Right? And.

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Wasn't an obvious thing. Uh, so so, 1 way.

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The answer to that, the best answer that question.

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Is not to say you yes, it's like we've done it and we're, we're, we're in the middle of it and this is what our recruiting pipeline looks like. Right? So a big piece of the diligence.

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Was then working with me, and Eric Hertz and founding there who had he had run machine learning Spotify so he was really like, our sort of our anchor in terms of being credible.

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But but but they asked for and we provided this is prior to goldman's initial investment, our whole recruiting pipeline, sort of all the resumes who was at what stage, right?

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How closer to closing them and I think that was a big piece of that story. Because you could believe the idea, but if you couldn't get really people to build a tech.

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You know, you couldn't build it, so so maybe that's just a side note. But but 1 of the dovetails into the fundraising piece.

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Nice. Nice. Nice. Nice. That's perfect. Yeah, let's actually talk. I completely forgot to talk more about py slope, which is the thing that you're working on right now. So let's talk about that more.

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Would you invest in through high slope? Was your major focus there?

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Yeah, so, you know, brilliant people who are doing things and highly regulated complex areas. So that that's, I think of, um, you know, the other.

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Companies I've built as my investing my time in those kinds of people. So when I was working with Michelle guard, you see a better.

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I made a massive bet on him. I met him.

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I got to know him and I bet at all and.

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Um, I said, I'm going to I'm going to follow this guy through hell and, you know, because I think he's going to build a massive enterprise and an incredible business and culture and change the 1 interesting way.

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And the same with Brett shocking. Who's the CEO of redesign and so those that sent me so far seem to have been pretty good knock on wood. And so where I.

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Invest now is if I encounter those types of folks very early on,

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in their process of building a new company,

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and that can be,

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you know,

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while they're sort of transitioning out of their last venture,

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it can be when they're coming back from taking some time off it could be anything could be their 1st,

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1 and so that's that's a little harder to to underwrite.

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Of course the last day. Do you have the harder? It is to sort of tell who's extraordinary, but if I can.

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Find those folks get involved very early and now lucky enough to get involved also on the side of investing capital and and sweat. I guess that's when I do it.

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So,

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I happen to know because my experience more about healthcare and and and fintech and let them because they're highly regulated complex areas but I don't in any way.

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Look.

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Oh, but anything that's anything where I know someone who knows the space extremely well and can sort of do that kind of diligence, which.

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That's another good thing about having a network and recruiting and, you know, you kind of know an expert in many things. If I know an expert in the field.

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And I think highly of the entrepreneur I'll invest.

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Nice understood and do you usually invest just sweat equity or cash as well?

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No, I know I invest I invest cash more often in that.

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I, the amount of time I have is, I guess, more height and that.

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And that the.

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Many entrepreneurs, understandably you want to.

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Um, uh, well, let's let's say.

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I'm able to and I'm not the only 1 by any means is the case, there's a few companies and firms doing this together and I'm able to get allocation into deals because.

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Of the sweat, so it's a different kind of sweat used to be like, okay, I'll work for you.

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I want some of the company right now it's let me invest.

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Right I know you're only, you know, I know I know I know you only have say a 1Million of allocation, you're seat and you've got this celebrity and this thing and this, but like.

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You know, ask around, ask these founders, ask Michelle, ask whoever you want if I will be value, add in terms of, you know, find. Even if I find you 1 amazing person for your early team, it's worth it.

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And usually, I can get any deal because I, I do think that's the most important thing by far and building a business. And that's all. That's all I do. So, I would say the, the sweat sweat allows me to invest the equity. I mean, the capital.

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That's because these days the dynamics are such that anything that I think is obviously a terrific early stage deal is up.

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You know, like crazy and oversubscribe within a week.

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Nice and, yeah, I mean, sweat equity is the new trend without sweat equity you can really yeah.

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Allocation in any company or at least, I hope you can always has to be this, you know, healthy mixture of cash and what equity or at least, I hope.

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And that's how everyone else is investing anyhow on this note.

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Any advice to early stage founders who are trying to figure out how to raise their very 1st check in 1st time entrepreneurs have never done before. What would you tell them? What are the major 3 things they should focus on to raise that? 1st check.

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Yeah, I'd say, uh, in this environment.

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If you are out there.

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And can't raise capital.

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Within a short amount of time. It doesn't mean you shouldn't.

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Build your business. That's certainly not true. And that definitely wasn't true. You know, even a short time ago, I would say.

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If you're out there and, you know, you've tried to reach out to various funds and let's say, you know, have unsuccessfully, tried to raise money for some extended period of time.

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You should take a a really sort of.

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Deep introspective look at why that is. I mean, we are in the best time in the history of, of, of, of business, of, of humanity of humans to, to raise capital.

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It's the amount of capital people are raising to just.

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Think about an idea to to.

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You know, to do our work, the amount of money that's being raised on a deck and the team, you know, there's, there's 2, there's, there's a lot of capital out there and let's just say.

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Maybe, there's been a signal that you've put out in the world that, you know oh, I talked to this VC and, you know, like most other people, most of the professions mostly sees follow trends and are scared to do things other people aren't doing.

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And so they, they are not.

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Always original thinkers or risk takers and so there might be oh, you know.

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They asked their file, we pass on this we pass on this if you get sent to 1 VC from another.

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That's not a good sign like, oh, this is not in our wheelhouse. I mean, it's that's sort of.

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Sometimes the case, and yes, there are companies that only invest in some firms only do post some amount of revenue. Whatever it is that said, you know.

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Anyone who sees something good in an investment and is a savvy investor.

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Is going to jump on it either personally, or, you know, or or hand deliver it to someone in another fund saying this, you gotta do this. So if you're getting kind of like, you should talk to this person and people are like, letting you get away just.

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Think like, okay, what is it? And listen to investors and what they say now don't change your business based on what they did if they say, like, you know, they might, you know what often they might be saying without saying it.

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We don't think you're bankable as a as a, as a person because, you know, I'll tell you, like Mark Lori right? Or just even and forget it. bazel saying that they could come in with a a blank deck and say, I'm not telling you.

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If Mark Lori came in to I'm totally serious. I think it would be crazy. He could say I'm not telling you what I'm doing.

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You can invest at 100Million Pre, pay.

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Right, yeah, of course not to you. If you pass on it, you'd be f*** you know, everyone would be funny that pays us if he came in and said that I'd say I invested 5Billion dollars. I don't care.

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Well, yeah, that's right. I would so, like, let's be honest. Right same with a lot of other people and a different less extreme extends others. Right?

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And so, I think that, you know, you you might, but of course, as human beings, we don't want to hear that, or say that to other people who are feelings. But I think that, you know, you might want to, you might want to ask a VC, like, hey, you know, be real with me on this.

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You're talking about the LTV, the tax and what if I got this person and you show my LinkedIn profile to be.

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And you show them, like, you know, someone who who you back no matter what.

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Right see what and see if I could do that.

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Would you invest? I mean, see what they say? Right? And maybe what the answers you shouldn't do that.

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Right, I mean, that's the thing, right? That's what I sort of realized.

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In my career, it was like, you know, do I necessarily.

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You know, to be the most successful I can be in building new businesses. Do I have to do that from a C suite?

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Do I want to do it from 0? See, it is he going to be the way that I create the biggest businesses and contribute to starting what I think will be, you know, big business in a world. It's very hard. Like building startups is rough.

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So, I think that's a that's a framework to look at.

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And most people don't because people aren't honest with each other. They think they're being nice, but they're really just being dishonest the young people and chases to do bullshit.

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100% very true. And that's 1 of the very common characteristic, especially for the West Coast. I would say so if you are on the West Coast yeah, this is.

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Standards we talked to new investors, like, oh, yeah, we'll get back to you come back to us with this, like, no, it's bullshit. It's optionality. It's being nice, but it's not being nice. It's actually being cool. So, I try to tell you, I'm from New York, born, raised people.

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I tell people I tell people what the way it is and because it gets them to the truth faster and getting to the truth faster creates less pain.

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100% there is always, you know, a.

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There is always, of course, balance between it'd be nice and, you know.

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Just telling bullshit to people so be careful which out to this investors don't like seeing hard now because it just now it closes that opportunity forever. So they will say whatever.

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Just not to say no, no, no, no. Yeah. Yeah. I, I'm not yeah, that's the difference. I, I'm not yeah, I've never suggest someone it would be crazy for any investor to ever say.

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Like, I'd never invest in business because that's absurd. Of course, they would in certain circumstances, I think what I'm saying is to to to address.

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To to be truthful to be truthful with people in a way that serves that now constantly. And if you said to me, you know, it's the thing with broccoli in your mouth right? Like, if you're talking to me, and I could see you and you had, like, broccoli your teeth. Right?

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And I said, you know, is the nice thing to do to not tell you.

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And let you walk around. No, it's a nice. And you call it out and say, hey, come up, you got broccoli energy, right? No, but I think it should be, like, hey, guys quietly breath into the bathroom, take it out. Right?

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Like, that's the good right that's the kind caring actually care. Right? Yeah. Love it is going to be cold broccoli and your teeth. I swear.

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I love I love this optimistic notes. We're moving on to the last question of today's episode, which is a call to action. So, Andrew, would you want to listen to do as soon as the episode is over.

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What I want to listen to or what I want to do he said, when do you want to to do? So, the person who is like, what do you want them to do? Yeah.

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Oh, yeah, well, if you're if you're a, if you're a founder of an early stage company.

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Reach out to me, probably the best way to do it in a, in a filter filter easy enough way to be through sort of linked in my name.

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You know, I try to keep my channels.

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Brief, and only work on a few of them is there's a lot of distraction. Yeah, we reach out to me if you're interested in joining.

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Something that I, at least have, I conviction will at least 10 X from where we're standing right now and you want to go on a journey as part of it early team reach out.

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If you're starting something reach out.

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And if you want to hear what might be in between your teeth, let me know honest as honest as I can in 8 of people realizing their goals.

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I really find it amazing to see that. And when I've contributed to that through back in great founders or recruiting great people who are now, leaders of big org, it's a gratifying thing. And I love to be able to do that as much as possible.

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Perfect awesome. Great call to action. Mike alterations can be follow andrew's call to action and also check out the descriptions. This episode leave all the links in there. So there's going to be a link to Andrews links in.

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There is also going to be a link to a high slope, and there's probably going to be a link to something else. So go check it out and as usually have a good date.