April 19, 2021

Venture Debt, the Los Angeles Ecosystem, and Big vs. Small Firms in Early-Stage Investing - With Petra Griffith

Venture Debt, the Los Angeles Ecosystem, and Big vs. Small Firms in Early-Stage Investing - With Petra Griffith

Petra Griffith, Founder & Managing Director at Wedbush Ventures talks about venture debt as an alternative to venture capital, key resources that founders can utilize in their ecosystem, and about Wedbush and what they invest in. Petra also explains staying ‘focused on the product’ and her own experience with product development.


Petra's LinkedIn: https://www.linkedin.com/in/petragriffith/

Wedbush Ventures: https://www.wedbushventures.com/

Another episode on the LA ecosystem and resources for startup founders can be found here.

Transcript

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And today's a guest speaker, we have Petra Griffith, founder, and managing director at Bush Ventures and base episode. We'll talk about a lot of stuff.

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For example, we'll talk about the venture dad product that Petra was working on in the past also talk about similarities and differences between big corporations and small startups. We'll talk about L. A. ecosystem and of course, early stage investing.

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So, Patrick, alas, kick it out by you. Giving us some background on yourself and on web Busch Ventures.

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Thank you really excited to be here and I'm yeah, no excited to talk to you guys some really great different topics. I'm so excited to dig in. Doesn't introduction. I founded web which venture is about a year ago.

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I come to venture investing from a product and operations background. Um, I started my career in early stage companies. I was, um, and 3 different startups.

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1 was when we actually went and the other 2 were acquired, and then moved to larger companies, spend 6 years at Yahoo, and then actually left Yahoo to join a bank.

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And so, if they're venture banking and startup banking practice as well as lead a lead product for the bank, and then.

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I was at Netflix for 2 years and and and on the product side, and and, you know, uh, started this fun cause I really loved the early stage.

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Um,

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I love,

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um,

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you helping founders and really helping founders grow and and,

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uh,

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work for them on the product side,

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but also,

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you know,

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really have seen what I'm providing capital,

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um,

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can do and how that can can is often a missing piece as well and so,

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it was excited to start the fund about a year ago.

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We invest in the Pre seed seed stage. I'm generally invest 50 to 100,000 dollars in those stages and we can talk a little bit more about what I look for. But it's a generalist fund. But I do have a couple of things I look for and areas of of, of interest.

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100% will definitely touch onto this closer to the end of the episode. So people, if you want to hear what they invest in. Definitely stay tuned on. Right nice. Great background. I'll absolutely love it.

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So yeah, let's start with discussing your previous experiences, especially at bigger corporations. So, you were in multiple of those big corporations, what do you think is the major similarity between the big companies such as Netflix, and a small startup that has less than 10 employees.

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Yeah, I know I've been thinking about this question and to be honest, I don't know how many similarities there really are. They're very fundamentally different environments. There's pros and cons to both of them and, you know, I would say, you know, in a startup.

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Let me just go to the Pro, a big company. I think 1 thing I I've seen repeatedly is that when you have, and this is not.

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Necessarily any big company, but companies like like Netflix and Yahoo and its heyday, I can't.

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Can't speak too much about it today. Um, I left about 9 years ago, but you have a concentration of of just really smart people.

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You were thinking about the world is going you have a lot of resources. I mean, the data science resources that Netflix are are truly world class and barn none. And so it causes the thought leadership and the depth of understanding.

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That I, I'm constantly reminded of and amazed by that. You don't see as much in startups and I mean, by that, it's not necessarily. You can have it of a startup. I just think you meet so many interesting people and you have so many different data points.

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And it constantly pushes you to evolve your thinking and.

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And to see things that you might not have seen before and that's 1 thing I really appreciate about a big company. I mean, I think there's lots of big companies where you, you don't necessarily see that and.

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Where you are pigeonholed into a specific role, because that's how many large companies work, because you have a very specific role and you're very much more niche.

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And that's the,

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I think the beauty of a startup is the world,

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is that your is your oyster in many ways and you wear a lot of different hats and you're able to to play many different roles and really have an impact in a way.

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That is much broader.

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And, you know, what's interesting in a large company. You have a, you know, you, you tend to have more narrow focus roles, but you actually have larger pianos and larger budgets.

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And, um, yeah, I think that that's 1 thing that I always enjoyed and larger companies is, you know, I just remember at Yahoo, we had a 1Billion people who were logging on to Yahoo every single day. And you just make 11 minor change on.

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In an ad format, or inserts advertising, or in the search algorithm and and you just, you see the impact it has and that's there's something really powerful about that.

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Um, that that I sometimes missed in in early stage company, I love the potential, and I love the energy of early stage companies. You don't have that as much in the in the big company.

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Sure, I can I mean, to be completely honest, I have never worked at a big company. I have no idea how it feels, but I have a brother who works at Facebook. He tells me plenty of stuff from that company. So, I kind of I kind of have an idea. So, now that we've touched them to this.

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Do you think there are any strategies that the companies apply to their especially sales? Maybe customer acquisition process that smaller startups can actually use as well or do think there was just like, clearly no overlap whatsoever.

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No, I think there is amazing. I just need to touch on on sales.

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As, as 1 of the areas, because I do think there is a.

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There are processes and there's data driven metrics that organizations larger organizations use that. I actually think even startups under 10 people can really think about. And that's something I think about a lot when I talk to startups is just how.

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Um, how can you measure progress? Right? And it's hard and it's hard to find those KPI and but sometimes in large companies, it's a little bit to the.

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It's taken a little bit too far, but I think there is.

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There is a lot of benefit in using those.

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Those kinds of of metrics, and then the sales organization kind of really thinking about, uh.

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Yeah, I mean, just really thinking about branding a lot. Actually I think that's 1 thing that large organizations do very well.

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Um, and also thinking through, like, the, you know, the pipeline and as a, you know, as a startup, quite frankly, like, you might not have a brand name as much as a large companies. If you call from a call, a prospect.

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And they've never heard of you before. Don't you don't be scared of that? I think there's a lot of thought leadership that can build you built, even at a, at a startup, and make you feel a lot.

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Come across a lot more a lot bigger than you might actually be.

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Sure, true, true.

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I mean,

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honestly,

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every time someone says something like this,

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I always remember this part of it from Silicon Valley where 1 guy was pretending to be the manager,

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and just a regular employee,

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so very good point there and be authentic.

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Absolutely. Authentic and build something or not. But I see.

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1 thing I see startups do really well is is have thought leadership, like, for example, and customer success or and in spaces that are are relatively new.

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So, 1 of my portfolio companies is a company called Kuala, and they focus on customer success, and I really started to not only started. They are that leaders in that space.

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And customer success is a relatively new area. And what are the best practices and customer success? And a lot of companies are struggling with this.

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And so I think there's an opportunity for startups to become thought leaders in, in some of these new spaces. I mean, just like social media when I started my career, social media didn't exist and social media management didn't exist.

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And it was really the new companies that came about, it wasn't the who their Facebooks, I mean, pasted obviously sorry to social media but it was really like, the buddy medias of the world that talked about social media management.

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And and so I think customer success is 1 of those examples of areas that is new and.

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There's plenty more might be might be, we'll definitely see probably someday soon, but now, let's move on to the topic I really want to discuss, which is the venture debt.

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So, when you are working at a bank in the past, you were working on the venture debt instruments, developing edge for startup founders specifically, I think, right? Can you tell us a little more about this?

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Sure, yes. So I know because you on the Eliot ecosystem a little bit I left Yahoo and in 2012, and I really wanted to stay in L. A. and it was really seeing the, it's been, you know, the early part of my career. I'm up in the Bay area and had.

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You know, the benefits of the startup ecosystem.

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Um, there and L. A. was relatively I mean, it's so interesting because you have so many of the, the top engineering schools in in the country are based in L. A.

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between and not just engineering video and you, and there's play a bunch that I'm forgetting yet. The, the, the tech ecosystem hadn't really.

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When you had idea lab, a couple of of pockets, um, it was really in 20,101,112.

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You could see that evolve in a way that I, in my experience hadn't evolved before then and I really wanted to stay in L. A. and, um.

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Was motivated to help help build the ecosystem. So I joined a, a bank to set up their started thinking division and you, they had thought about more from a hey.

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You know, if you, you think of a startup and they raise money, then that cash that's in a deposit. And that's really interesting from a basic perspective. And so, hey, startups can come help us.

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Figure out how to bank startups and somewhat easily, in hindsight, you know, set up the startup banking division, thought through what kind of products do do startups need to know we need to offer E signatures.

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We need to think about a better way to set up checking accounts and offer some free services.

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And, you know what you realize that ultimately startups need is is capital and so looked at what are different ways that you can provide capital to start ups from a.

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You know, as a bank, and as a bank, at least back, then it's changed a little bit. Now, you you couldn't invest in equity. And so, um, you know, bank underwriting is very much focused on cash flow, either assets or cash flow and.

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Um, you know, most most start, especially startup, they're looking to raise venture capital, you know, don't have enough cash flow positive.

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And if they, if they are, they're reinvesting all that money back into the company so that they can grow more quickly. So, it's really hard to.

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Do a traditional bank loan to to a startup and so, you know, looked into research the venture debt product and and was able to set up that product.

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Bank and mentioned it as interesting there's been a nice evolution of different products in the last few years between lighter capital and pipe obviously and and and a bunch of other players looking at a different

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way to be SAS,

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underwriting B to B fast because a typical.

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Your venture debt that bank's offer are really much more around companies that are already venture back and you're really underwriting.

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The investor behind.

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The company your underwriting, the business too, but your repayment method, you know, that the company most likely won't.

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Be earning enough money to pay you. So you are, you're ultimately making sure that the company will continue to get funded.

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So, that that is your primary method of repayment so, the different it's an interesting product. A great product for.

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Company that are already venture backed, um, and went a little bit of more of a.

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And it's, it's not, it's it's no, if you're not already venture backed.

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It's pretty hard to get answered that. 100%. Yeah, that's been the case with pretty much. Every single person I've interviewed on this subject. If you don't have plenty of funding you already venture. That is very hard to obtain because banks are.

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They're just not how things work that's how their business model works right now that we started speaking about building new products. Uh, let's talk about what you see, on early stages.

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Especially no founders, who are trying to figure out what should go in their product. How they approach us.

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In those terms, would you think are the major problems that you see founders making, I mean, major mistakes that you see, founders making not profits? Yeah, this is my favorite area because that's my, my background, which is product development and product management.

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And, you know, the biggest thing that I have learned is that, I mean, 1 is focus as a.

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As a startup founder, it's, it's easy to.

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Get distracted with different opportunities and so 1 thing I always look for is a founder, a founding team. That's very, very clear about the problem that they want to solve.

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Um, because I find that there's always this kind of obvious problem. Um, but when you dig into it, it looks slightly different and and.

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And it's unexpected and obvious and.

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And so I look for founders who have dug deep and who have a very specific.

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And it really understood the pain point and the consumer pain point and, or whatever, you know, because you can see where I had some, some internal issues. So, I just kind of for a minute, I think, can you start that that part?

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That the answer, because I'm not sure how much of it it was recorded.

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Oh, okay, sure. And my dog just yeah, sorry for that.

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I mean, at the same time pretty good timing right let me make a mark where we need to cut this cord the same time. I'm losing my voice as well.

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I was not prepared for slightly colder color temperature. I know it's snowing here today. So I have a little bit of a sniffilis. Every time element is I can put it on mute. So that I can. Why is she?

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Putting is cool. That's cool. I like, why and that's nice where you be tied by the way. I forgot.

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I'm up here in Memphis. Oh, for some reason I thought you were Emily.

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Yeah, I'm usually based in L. A. but I've, um, I've been working for last 3 months. Cool that I, I see I, I feel like I can hear your dog not barking anymore so we can continue.

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Was presented I asked the question to you, do you remember the question? Or do I need to repeat? Yeah, and I got the I got the question. Yeah. And product is is is is an area I love to talk about, because it's it's what I've done for most of my career.

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And so, you know, I think the biggest thing I see founders struggle with it is focus and not.

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And both focus, I mean, I see founders having a hard time focused when they don't.

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Truly understand the dynamics of the problem that they're trying to solve and I'll give you an example. I, my, my 2nd, startup with a was it started cause he loves sports and, you know, we started. This is my own perspective.

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I think other people who were there might have a different perspective, but, you know, we started and we had this idea that we went to be an outdoor sports portal and we went to be a central place for people to come. If they were outdoor sports enthusiast.

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And I think it was, you know, I think there was a lot of research around the market and the opportunity and we were all outdoor sports enthusiast. And so.

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At a high level, that made sense, but I don't think we really ever got to, like, okay, yes, we were outdoor sports enthusiast and we liked to consume content around outdoor sports.

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But what was truly our problem, you know, what was the problem that we were trying to solve and.

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Quite frankly, you know, it took us a couple of.

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Releases and we launched the entire 1st product and we had, but we thought was an interesting goal, but it was.

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Was kind of vague it was kind of amorphous and not until we got into it. Did we realized, okay hold on a 2nd.

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You know, here are, and it's like.

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Within the outdoor sports enthusiast community.

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They're a, we can warriors and we can warriors.

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Don't have as much time and so they went to.

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You'll be able to plan their trip and find people to do it with and better understand the weather so that they can optimize the time that they have.

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To do their outdoor sports, and, you know, once we pivoted towards that, and it wasn't about like, you know, the top 10 gear list or this really cool been surfing video. I mean, that's all.

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Fun and great, but it wasn't solving a core problem.

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Once we figured out what the core problem was, that's when we got traction. And that's what I would say. Like, most founders have this, like.

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This is great market opportunity like.

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Uh, you know, like, or, you know, social media or, you know, people are paying bills and it's just so people come up with, you know, they're completely valid problems.

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General market problems are done on market opportunities, but you need to really hone in on.

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What it is, what is your, what does that keep inside and what is that must have problem that you are solving for?

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Um, and I think if you don't have that it's easy to get distracted and it's easy to.

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Solve something else, or go after a big company, offers you a contract or.

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You know, really, really.

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Partner wants to work with you, you get distracted by that. If you don't know, you know, what you're, what you're really trying to do. Um, and what your core problem is and.

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You know, you need to be able to pivot you need to be able to have like we talked about before, like, kind of and measure against them. And then.

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And then evaluate it and look at.

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Is this still the key? Like, what are my customers telling me? Like either B to B or B to C.

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You know, what are they telling me and is what I currently am offering them meeting their needs and if not.

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Why not? And then how do I evolve? Evolve our pivot.

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Perfect that, quote, was it right on point I love it. Focus focus focus. That's what startups do. That's what they got to do to succeed and that's.

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Well, our founders actually don't do, ironically, so, let's since we're started talking about mistakes 1, more question about mistakes and it's going to be about founders in terms of fund raising.

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So, when they're talking to investors, especially early stage investors, especially 1st, time connection, like, when you're just mean to founder, what are the major things that they say to you.

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They're just like, huge, huge red flags and that there were bad. If.

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I wouldn't say the red flags, but I think the, the 3 things that I think founders could do a better job of it is 1.

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Being very clear about what your insight is on the market problem and what specific problem you're going after. I think a lot of times.

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I see pitches, we're pet banners will explain to me.

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You know, the market dynamics and why there's a, maybe why there's a gap in the market or why they, they come at it from a market perspective. And that's fine. You need to understand like you explained to me the why now.

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Um, but give me your.

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Give me proof and validation that you've done a little bit deeper and it's not just kind of the outdoor enthusiasts going back to my previous example, but it's.

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Who within that outdoors sports enthusiast market are you going after? And why.

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Think that's the level of detail I often don't see. And I think the other thing is.

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Like, what makes you I always think about okay what's the problem you're trying to solve?

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Why, like, how are you going to solve it? Obviously, you know, why you and why now?

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And the, the wide you and why now often a lot of lot of founders just gloss over. And, you know, I think a lot of vendors don't realize that they're, they always, everyone always thinks that.

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There's unique and they're the only ones doing this and the only 1 solving this problem and.

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You know, 9 times out of 10 I've probably seen, or or.

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Heard of a similar pitch already and so it's like, okay, if I have.

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You know, for companies that are all going after the same.

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Same problem statement, how do I choose between them? And so think about that think about what makes you uniquely qualified to solve this problem.

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And then, I think, finally, like, a lot of especially young founder, it's like to them, it's very much of a pitch. It's like a, I'm pitching you to invest in me and that's great. But, like, it's a 2 way street and it's a.

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Meaning it's a long term relationship. Like, I don't just invest and then.

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You know, just sit back and get in touch again in 5 years. It's it's a.

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You know, not only are, are are we.

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Talking on a regular basis and send the updates on a regular basis but.

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Especially in the early stage, and part of what motivates me as an investor is.

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Is helping and getting involved and so you should be interviewing me too. Like, do you want to work with me? Am I the right person for your for your company? Like, it's especially in the early stage is much more than just.

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Your investors are much more than just money 100% and by the way there is a.

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By the time they sat, because I was going to be released, there is going to be another episode really says going to be talking right about this. How to ask investor those questions. How do you actually interview the investor yourself?

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And how do you make sure that they are the right people so scroll down there, check it out. Try to understand how to ask investors the right question without sounding on educate or rude. So check it out.

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And we are moving on to the next question, which is talking about L. a startup ecosystem. So you've spent quite a bit of time here in Los Angeles and.

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What do you think is the major change that Angela start? Because system has experience in those years?

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It's been, it's been really fun to see, uh, in in terms of, you know, in 2012 you had the 1st accelerator.

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I mean, I shouldn't say that ideal I've had been, um, is on accelerator per se, but idea has been around for much longer than that. But it was really you had Overture, which is, you know, I joined, um.

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Overture was acquired by Yahoo and I joined that team.

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So, you have alumni from from there, you know, people who make a founder of what's up and the founder, which they were kind of part of that team and, and you see my space and now snap and you see, and there's plenty more. That is just kind of.

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Do that come to mind and once you see alumni leaving and starting the next company like that, to me, is when ecosystem really starts to mature because you have people who've gone through the experience, you can mentor and give back and that's been.

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It's really fun to see over the last, especially the last 8 to 10 years L. a really evolved. And he's already always had a lot of.

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I mean, I think that's 1 thing we forget is like, Eli's always had a lot of activity in this space, but.

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It's been put on the map more and I quite frankly, I, but I like about compared to the Bay area is.

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I mean, there is more diversity and and thought.

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In terms of like, they're just a lot more industry like my personal.

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A, take on the Bay area. It's very I mean, it's tech tech tech, tech texture. There's different, you know, there's consumer tech. There's, there's lots of different kinds of tech, but it's, it's a very.

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Like, reinforcing that work, and I sometimes feel like, I can't ever get out of it. Originally. You just have a lot, you know, you have.

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Outside of technology, real estate and financial services and entertainment obviously and so I think that diversity.

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Lens for a like, you see more diversity and thought in founders and difference in backgrounds and.

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And in general, I say it's changing, but historically, I would say there's been sort of been focused more in revenue and generating revenue and generating profits much more. So than San Francisco based startups.

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It's a vast generalization, but that's been my, especially as a banker. What I saw.

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It's changing a little bit and I think what excites me is that at least starting, I think.

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Big 2, and in the past, I feel like they were.

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Little bit more focus on profitability rate of growth.

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Yeah, as someone who's living in Los Angeles as well 1st of all, everyone already knows that I love talking about Ali. How good it is and how much better than this on Francisco is continuously encourage people to right here and.

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Yeah, we also have a good weather here, so I was going to say whether it's much better. Exactly. Come on in ali's waiting for you but.

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Moving on to the next question networking and specifically now, working for women founders. So you are a part of women founder network can tell us a little more about this.

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Yeah, absolutely, um, uh, it's, it's a great.

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Organization started here in Los Angeles.

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Does an annual I don't want to call pitch competition because it's much more than that. And for for women startup founders.

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And also do some great education and networking events as well. Definitely recommend checking, you know, checking that out. A lot of founders outside of Los Angeles.

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I've also gotten involved and that's 1 of the.

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The nice side benefits of code. There are, um.

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You know, other I think, I think 1 thing I've seen with founders in general, is that.

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Finding your tribe helps.

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Give you a support network that and I think having a support network as a founder is really important and, you know, for some people, it is finding.

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You know, people who look like you who are the same gender as you get gives you that comfort level.

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For others, it's more about subject matter, or how much they've known, or a person or.

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You know, colleague networks of of people that they know from the past. So, I think everybody needs to find whatever their support network is. And I think.

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For a lot of women, especially 1st time women founders having.

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You know, a group of women where you can just open up and talk about things that aren't going so great and and ask them to what might be considered specific questions.

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I think it's just important for you to have that kind of group, regardless of your age, gender, or.

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Other 100% is, it's the case for me as well, you know, my support group as our team at the fund where I work at. Sometimes I'm just like, hey, Brian, what is it? Like? It's a state.

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It has nothing to do with it. You've got to have those people who you can just reach out, ask questions. That might be actually extremely dumb and.

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Just be comfortable with them, so yeah great advice here speaking of advice for 1 more question about female failure specifically. So I'm probably going to say it over 33% of our listeners are actually women and I wanted to ask you, would, would you recommend those women founders?

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Female founders.

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Are there any resources that you would recommend them?

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To hear your life right now, and hopefully your ratio of women listeners will go up above 33%. Dangerous to my best. Sounds good.

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Yeah, no, I mean, look, I forget I think there are just just general resources for.

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For startup founders in general, I sometimes have on the 1 hand I'm very supportive of women and I'm very proud that.

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Of the ratio of of women founders in my in my fund.

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Um, and there's a lot of research around just women founders, how just in general are much.

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My prudent with use of funds and efficient and.

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And have tend to have better outcomes. Yeah, the same time. Like, I don't like to harp too much on gender.

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Um, I, I go back to go find your tribe where you feel comfortable and use that as a support network. Um, that said I know there are a lot of women find it harder to fundraise and and.

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You know, I think for that, you know, find.

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Women women,

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venture capitalist,

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if that makes me feel more comfortable,

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find other women founders,

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so that you can have that kind of conversation with them and see what has worked for them to find that network and specific resources.

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I don't know. I mean, I think, you know, places like the woman founders network and there are other women networks I think, depending on where you are.

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Find some of the resources in your area, there's also a limited product, which is has been super powerful and very open conversations. Like, I think of those resource, smart places where you can just ask this open and honest question a 100%. That's definitely the case.

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And, yeah, I mean, there are tons and tons of combinations sponsored by.

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Funds that are run by women founders as well. So yeah, just.

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Google it Google, it's all of them are online right now. You don't have to travel so search it up. Probably you're gonna find something.

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Cool. But also I'll follow up with Petra to see if there are any.

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Particular searches that shorter recommends, and I'll include those in the description of this episode and speaking off description this episode moving on to the last question of today's episode, which is a call to action.

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So, Petra, would you want to do as soon as the episode is over.

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Keep go back to your product,

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keep on working if you are interested in funding and if you're in a Pre seed or seed stage,

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and you are working on a software technology product in areas,

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I love our fintech E commerce.

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Enablement.

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Um, content, technology go check out com.

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Um, and but in general, you know, I just, um, thank you for the opportunity to come here and, and, you know, my thing I just always think a lot about is staying focused on product tracking and evolving and, uh, you know, that's that's 1 message.

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I can leave that's that's.

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Probably the message, I think about the most, I'm not sure it's the fun message, but definitely useful message. That's for sure.

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My conversations can be follow petra's message of course, follow her call to action and go to the descriptions this episode. I'll leave a bunch of useful links in there. 1 of them is going to be linked to Patrick's LinkedIn.

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So, if you want to follow her, if you want to see what she's up to definitely do that, and you're going to find all this good stuff and descriptions and stuff. So, check it out and is usually have a great day.