Jan. 8, 2021

Looking at key factors. By McKeever (Mac) Conwell

Looking at key factors. By McKeever (Mac) Conwell

McKeever (Mac) Conwell, Managing Director at RareBreed Ventures talks about investing in minorities through the RareBreed Ventures fund and also talks about what major metrics he personally looks at when reviewing a startup.


Mac's Twitter: https://twitter.com/MacConwell

RareBreed Ventures: https://www.rarebreed.vc/

Transcript

And today is a guest speaker, we have Mac calling well, managing director ads. Rare prevencheres antidote today.

We'll talk about dropping out of college, starting the 1st company, and making those 1st, mistakes comparing the 1st company with the last company, and starting a venture capital fund.

So, Mac, let's kick it off by you giving us some background on yourself and on rare breed Ventures.

Yeah, thank you for having me. I appreciate it. So, my name is will the 2nd, I go by Mac. If you follow me on Twitter is Mac the.

At Matt commonweal and so I guess my background is, I'm software engineer about trade.
I'm a sophomore year school in college here in Baltimore. Well, from.
I got an internship with the Department of defense and got a top secret. Clarence.
So my junior year, I dropped out of school because Northrop Grumman offered me a bunch of money. Several years as the government contractor after that went on to start to companies.

1, I ran for 4 and a half years. The other 1 was much shorter. 1 was the exit 1 was a fail.

Then I found my way to the investment offer, the state of Maryland.

There I worked on the scene investment team, making investments in companies based in Maryland.

I then last preceed fund within that organization to invest in underrepresented founders, it's the 1st, and only state that preceed funding the country for women and minority led startups.

And then August I left that company to that organization to start Ventures to see the venture fund. So that's the quick background.

Nice, we'll definitely get into more details specifically on rare breed Ventures and what you do there. But 1st, question is actually dropping out of college. So, you mentioned that you did drop out of college and my question is, do you think that was the right choice back then?

And so, would you change that decision?

You know, looking at it, right now the best decisions ever made in my life for me. I understand the mindset. So.

I don't come from means, right? So I come from very.
Humble background and so when I went to college, I went to college.

To increase my earning potential, and so by getting the internship with the Department of defense and top secret, Clarence, I was able to gain a job and and gain earning potential that I went to college to pursue. Right? So.

Within within 3 years of me, quitting school.
I was making 6 figures and I was helping my friends were just graduating school. Get jobs and get clearances themselves.
So,

for me,
it worked out really well,

I also have the personality to do it because if you're going to drop out of school and go pursue things yourself directly,

you got to get really good at self promotion and being able to talk through why, in your skill so your skill set still valuable.

A lot of people just still hire you. I'm also a software engineer, so it's also an industry that lends itself to skills more than some others. So, like, I can show you.

You know, my, my portfolio or my get hub of work, it.

Being able to get a job I don't know if you can do that in every industry. Right that's I completely understand the approach. And that approach is working in. I've seen that many times and.

That makes a lot of sense. So now let's talk about mistakes actual mistake. So when you start your 1st company.

What do you think was your major mistake? I think that was the company that didn't make it right?

Now, so the 1st company, we did make it, it was after she was after a pivot and so the biggest mistake we made.

Was I mean, we didn't know anything well, you would just 3 engineers about we could build anything, right? And so.

We instead out to build something that we thought was cool and that we solved the problem that we had and the other people had, we never validated.

Whether or not, this was a problem people were willing to pay to pass off.

So, we didn't do customer discovery and that was 1 of the biggest mistakes. The other mistake was we built all this technology, and we never priority prioritized customer acquisition.

We just thought that we built the don't product people to use it. Like there was all this. Information you build a great product.
People will come and use your product and it was all about the product.
And then we figure it out, it was.

That's not really how it works. Even if you try to get some great product.
We'll sell itself, but you still got to get it in front of people so you need the right.
No, you built everything you need along the way so that, you know.
So that you're drawing to, you're driving people towards your product and so that's a. And you'd have to figure out once we figured it out and started working smoothly for us.

All right, so what do you think you could do to accelerate that process of figuring that out, you know, and making that pivot faster?

1 done customer discovery 2.

Start off your company thinking through.

What your customer acquisition channels are going to be and start testing them out.

So, even though my 2nd company failed.

I took that learning and for the 2nd company, we were able to raise money really quickly, because I figured out how to sign up that was a B2 B product.

Catering to E, commerce, catering to like, small business owners selling products online and so we were able to set up so set we were able to.

Acquire a 120 sellers in 2 weeks Pre product, all willing to pay 20 dollars a month.

Right and I was able to use that information to raise myself a nice little preceed ground to get the get moving. Right? So.

Had I done that the 1st time.
I would have been a whole lot larger. Right? So.

In terms of fundraising, because it's fun. I just have to touch on that topic. Did you raise money for the 1st or the 2nd company?

So, we didn't raise any money for the 1st company. But we were able to raise money for the 2nd company.

And the thing was for the 1st company, we started trying to raise money too early because what we were fundamentally trying to do was we had a product, and we didn't have customers. So we figured if we found some investors to give us money, we could put that money towards marketing.

And so really, what we were trying to do was trying to throw money at a problem that we didn't know how to solve. And we just figured money consolidate.

It's not really how that works at that early stage of the company that you already have to know how that money's going to use. It can't be using your money just to throw it a wall and try to figure out what sticks. So.

For the 1st company, you didn't read fundraise and when we pivoted to what we ultimately end up selling off.

So, a division of a Fortune 100 company, from when we did the pivot day, 1, once we started getting our B to B, customers who were profitable, we were making money. And so we didn't need the race. So we were just trying to.

And getting traction and build up leverage and that if that was happening, we just hadn't to get an acquisition.

Nice to have somebody come to us and assets for acquisition. Right?
Um, are not really acquisition they asked to buy the from us, right? Mm. Hmm. Same difference. Um.

For the 2nd company, I did raise money and it was really easy. I did it really quickly, because I knew exactly what I wanted to do day 1. I figured out what the problem was not validated it.

I then signed up, I got an email list of a bunch of sellers who are willing to pay in wanting to pay.

And I already had a network of investors that I knew from my previous experience, running a company. So I was able to use all that to my advantage.

And so, and, like, under the span of 6 weeks, I put a team together, raise some money and got into an accelerator, which is we could fats.

But also doing it, so fast was like, a big mistake that we made.

Quick questions here, by the way, before we move on to talk about, you know, the team of semblance and how it ended up, why did you decide to go to accelerate? So, for me, personally, Missouri is a place for someone to speed up their learning process.

Always start world, so for someone who's not fair experience since you already had a previous exit in the company, why did you decide to go with accelerator?

So, accelerate is good for 2 things.

Generally speaking, in my estimation, money your connections.

Right. You know, very few accelerators do both. Well.

They usually that's sure so, the reason going to the accelerator 1.

There was some additional capital, but you go into an accelerator like that. You tend to have a spotlight on you. There's brighter.

Than any other time in your business before, and you get to like a series B. Right.

And so the opportunity at the very early stages to have a bunch of interest to be top of mind for people, and then being able to use the cache, or the name of that accelerator to get additional to break into additional networks was just appealing.

Like, I had a network and I had grown a network from my previous company, but it was in a different industry.

So, I need to get I need to get more and more contacts and connections within the realm of E, commerce and I also just wanted the eyeball. So, you know.

I figured, you know, I'd take that money and I was using plus at the time. So we end up going to dream adventures in Philadelphia and that the time dreaming was still a top 5 maybe top 10 accelerators. The name carries some weight.

Okay, yeah, that does make a lot of sense. So now, let's move on to the topic of assembling. It seems. So you said that, in a matter of, like, 6 weeks, you've assembled the team, you've raised money, and you've moved on in the process and the company on our Pre to call.

You mentioned that the company ended up failing because of the.
Team issues. So can you tell us a little bit more about that? Yeah, so, you know.

At the 1st, time around.

When I put the company, kevin's me into my best friends, right. As I had gone through the process of building the company over, I thought gone through the process and.

Um, I've been in the ecosystem, I've met a bunch of people along the way so when we started my 2nd company, I just reached out to some of those people like, hey, I'm looking to do something new. Would you be interested in scientist assemble a new group of folks.

And I was lucky that you now, I just had these names and these people I could pull off, you know, very quickly. What I did wrong though was I put the team together too quickly. So, like I said, in the matter of 6 weeks, I put the team together.

Raise some money, and we got to an accelerator so, you know, some of these people had full time jobs when they start working it was a cool idea to do nights and weekends. And so we went from doing on this nice weekends project, talking through things that everybody put your jobs are moving to Philadelphia.

We're doing this accelerator.
Not everybody was preparing for that, and I didn't take the time to get to know everybody. Well,
enough to know who was ready for that transition who was because everybody tells you,
they are everybody says,
yeah,
I'm in the way I want to be I want to be a startup founder,
you know,
we're going to build a Google thing,
but when you actually get there you got to do the work.
That's the sandborne yet.
Extra benefit, so that's kind of what happened.
Right so what is your recommendation to the founders for starting their companies right now?

Or, just in the process of assembling that team, trying to figure out if that's actually the team that's can last for 10 years or does that kind of the team that's going to fall apart in 6 months how how would you recommend them approached this problem?

I don't know if there's a way to really approach that other than, you know.

Protect yourself put everybody put an operating agreement together where equity is already figured out and you make everybody invest over 4 or 5 year, period, and you put a 1 year clip so that if they leave within a year, they get no equity right?

Make sure everything's set up and implement. They're writing.

And understand this, right?
The average team to get started 3 people 3 to 4 people.

By the time we get to your series B, only 1 of those original founders is left the company the company usually by then.

Series B Series C. so in general, the team you start with probably going to be the team that carries this thing to the finish line. You want to make sure you have the right people with the right skills sets to get you to your next stage and that's all you can really account for at that time.

Nice. That's actually a really good advice. I was not aware that so many people actually drop out on the way. There were just surprising to me actually. So, yeah. Now, let's talk about reread Ventures. Would you invest in? What stage?

What check size? What industry.

Yeah, so me and my team and rare breed Ventures, we're industry agnostic. We stay away from my sciences. It's not our skill set. Like, we don't know how to evaluate therapeutics and things like that, but we'll do just about anything else on our target check size is 250000.

We can go slightly larger, slightly smaller if need be about 200 fifty's where we like the be.

Um, and what was the other question.

What's the check size industry and I forgot the last part of it check size industry.

And stage stage that that were Pre seed seed so we do without the anything sub 2M impulse money evaluations.

We'll go higher than that if this were the right company, but 2M is kind of where we like, 10M are below is where we like to be. So preceed to see is really the stages that we live in.

Perfect great. So, um.

Now, let's talk about how you actually evaluate the company so that's that's a question that a lot of founders get when they start applying to VCs on their websites and they're like, okay, you know, I assume that those vc's are gain hundreds of those applications every single month, how.

Can I send out by showing some particular memory? So question is what are the major factors of the company that you'll look at while you're reviewing the application?

The 1st thing I'm going to look at it is.

Is this in a market that can support a 1B dollar company if it can't it's an automatic like, it's easy path. Like, we are you in a quarantining like, if you don't have the potential to become the unicorn sniper will work the next day.

I'm going looking for is what's your traction but, like, right you don't actually need to have a lot of traction for us.

Um, but you able to talk through how you got your traction and know exactly how you get your customers. But, you know, if you have.

I mean, growing really quickly, and, you know, you've figured out something unique in the marketplace we're going to want to dive into that.

Well, and that's really where it starts. So, like, do you have a big market.

Have you figured out how you get customers, how you're going to go about getting customers that make sense or unique or something? Clearly repeatable.

That you can talk through, does your business model or unit? Economics makes sense.

Right and that's kind of the starting point we can figure out everything else from there care so much about what industry you're setting your end because.

There's going to be plenty of industries and sectors. I don't know enough about that. I don't like where you can still have 1B dollar companies. Right? So, I'm smart enough to know that I have biases and I need to get my biases not the way.

100%, that's true. Speaking of traction, I personally love traction as well and my center advice to founders get traction as soon as possible, even if you don't have literally any product at all price still try to sell us sell idea, sell the idea.

Try to get a letter of intent, do whatever just to get that traction. But in your opinion, what do you think is the most appropriate stage to actually start generating that traction?

As soon as possible, like, from my for my 2nd company, we didn't have a product, but I was able to show I had 120 people who are willing to pay 20 dollars a month.

Because what we're solving when someone was so important for them, right? Like, yeah. How do you show that those people who are willing to pay 20000 a month?

I had a had assignment where people had signed up and put in your credit card information and set them up. Right?

So, like, when I went to investors, like, I didn't have a product and you have anything, but, like, hey, here's the list of 120 people with their credit card information store.

Well, that's what we're impressive. Actually that is very impressive. Quick question on that. How do you manage to get so many people sign up for a product that does not even exist yet and 20000 dollars? That's a lot.

So, basically, you know, so we were basically at the time since 2014.
Reaching out to people who were selling products from histogram, but didn't have stores.

And so the way you sold products in the ground back, then was you have to do everything to, like, email and text messages.

The 4th, and so we said we're creating a product that will allow you to sell or and. Or from a mobile device, just like, you went on Instagram, but faster and easier.

I'm seeing the same customer base and, like, all these sellers said yes, I want this. Let's go kind of thing.

So it was just that we hit on a problem.
That was really, really big and that people want it solved. Really, really bad.
Right nice and great work to be honest, I have not heard that many cases of, you know, people

manage to get so much traction so early on with no product and still gain that sign up information with the credit card information. That's just great.

So, here, let's move on to the question that's more of an entertainment, I guess, but I personally love that question. So.

What is the craziest idea you've ever seen your startup life career or the idea that was speech to you as the managing director of urban Ventures?

So, I'm gonna work for the state of Maryland. We saw a lot of stuff coming out of universities and things like that.

1 of the craziest is a company creating a tool that basically their goal is.

4 people that have had traumatic injuries that are, like, where your significant blood loss.

They creating a process where they're trying to freeze that part of your body.

To slow down the blood loss and flow with that part of the body to preserve it long enough to get you to surgery to increase the timeline to save a person's life. Nice. And how, how did that work out.

They haven't had a successful 1 yet, but they've gotten close that they've extended the lifespan where people have actually gotten to surgery where they normally don't even get that far. Right? So, there's some promising, like, indications there.

But, like, if somebody figures that out, the yoga will be billionaire. So we're like, cool. But, like, that's just.

Fundamentally right out of this world to a higher percent. That sounds very, very strange to me. I very strange, but sounds very ambitious as well. So good luck to those people who are doing this.

All right, so here we're moving on to the last 2 questions on today's episode. 1st 1 is what's your advice to founders who are trying to raise money right now? And during this but dynamic getting closer to being, over supposedly with the vaccine being developed?

What's your advice to those people who are trying to raise their 1st check? Right now, during these times I'll tell you.

Focus on building your business more than you are raising money. So, at the end of the day, the business is what gets you paid? Not your pitch deck. That's your storytelling.

But the business itself,
so we want to have a strong foundation and B,
and as unique and innovative as you are,
and the product that you're building be,
just as unique and innovative in your customer acquisition customer acquisition, gets you paid through revenue attraction,
which can then,
lead to additional fund.

It's 100% focus on the right things. Hungry customer acquisition.

Insanely important, and for those who might be not very good that we do have a bunch of episodes on customer acquisition customer interviews. Just go to our official website and type it in.

Customer, you'll get a bunch of great episodes there on this note, we're moving on to the last question of today's episode. We choose a call to action. So Mac, what is the 1 thing for Sarah to do? As soon as the episode is over?

This episode is over, go to Twitter and follow me back the VC or commonwealth and W. E. L. L. if you are an accredited investor and interested in being an L. P.

and rare re, Ventures raising undefinable, succeed designation, which means I can publicly disclose so rare VC.

That's rare breed dot VC. There is a button you can click on to become an L. P fill out that quick form and you will get you will get.

Uh, access to our legal Docs, our pitch deck and all the other good stuff. So, if you're in, by the way our minimum buy in for an right now is still 10 K, that will change sometime next year.

So, if you got your an accredited investor, and you got 10000 with Laura, you'd like to put into a venture fund that's changing the world.

Feel free to check out. Let's check us out. Rare breed that VC. Click the button become an LP. Perfect. I'll make sure to leave a links to.

Those I'll make sure to leave those links into the description of this episode sounds pretty good mail check size of 10000 dollars.

Very impressive. Actually, I have not seen that.

Frequently, so it's a nice move and also thanks for closing that as 5 and 60. I was getting word there for you just closing. It's on the podcast.

I'm glad you on this positive notes. I'll wrap it up. Michael. Jackson's me of course.

Go to the description of this episode I'll leave and billing stats Mac mentioned in this episode specifically to his Twitter to rear Brad Ventures and.

Maybe to something else, maybe not, but are going to be a bunch of links that are useful. So go check it out and as usually have a date.

Learn more about Mckeever from the following:

“Mac’s Bio”

https://www.cavnesshrblog.com/mckeever-mac-conwell-ii-of-rarebreed-vc-bbj-tech-10-investor-founder-disruptor

“McKeever Conwell launched a VC fund to address a gap for founders at the earliest stages”

https://technical.ly/baltimore/2020/10/29/mckeever-conwell-rarebreed-vc/

“Faces to Watch 2021: McKeever "Mac" Conwell, RareBreed Ventures”

https://www.bizjournals.com/baltimore/news/2020/12/31/faces-watch-2021-mckeever-mac-conwell-rarebreed.html