175. From Operator to Accelerator MD to Fund Manager (John Fein)

John Fein - Full Ratchet - From Operator to Accelerator MD to Fund Manager

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John Fein of Firebrand Ventures joins Nick to discuss, From Operator to Accelerator MD to Fund Manager. In this episode, we cover:

  • So you participated in 5 startups, after which you scaled an organization from zero to 1,500 employees and $2B/year in revenue. Talk about your background and experience at United Health.
  • Tell us a bit about your decision to raise a fund.
  • When I started raising fund I, I had calls with 30+ GPs and my target was $5M but I told him, under no circumstances would I raise more than $10M, even if things went really well. He responded that the difference between a $5M and a $10M is significant and that the story and strategy would be very different for the two. So I know that you started with a $7M target and ended at $18M… how did your strategy change and did you get any pushback from early LPs as the fund got larger?
  • How did the process play out… in what ways was it different than what you expected?
  • How early do you go?
  • How did you create urgency with prospective LPs to make a decision. From personal experience, I found a number of large LPs that preferred to wait until final close.
  • You’ve gone on the record stating that you’ll avoid investing in arrogant founders, where many VCs specifically look for this character trait in entrepreneurs. Do you think it’s the best economic decision to avoid working with arrogant founders?
  • Everyone says they’re a founder-focused VC… but when I speak with founders I find that there are very few that are actually qualify. What does this mean from your standpoint and how are you serving founders in ways that others aren’t?
  • What are some of the key strengths of your pipeline and dealflow…. how are you seeing more deals and higher quality deals than others?
  • The feedback cycle in venture is really long… you won’t truly know how your fund stacks up against others from you vintage for many years. How do you track progress and assess if you’re winning over the near term?

Guest Links:

Key Takeaways:

  1.  After working at 5 startups, John joined a larger company launching the first mail-order prescriptions.  After 4 years they had gone from zero to 1,500 employees and $2B in revenue.
  2.  The Kansas City startup community began to take off in 2012. This lead to John’s position at Techstars in 2013 as Managing Director, where he ran 3 accelerator programs and built a strong network.
  3.  After recognizing the huge potential and shocking deficit of good sources for seed capital in the region, John launched Firebrand Ventures in the summer of 2016.
  4.  Firebrand got to their first close in just eight weeks and hit their initial fundraising goal of $7,000,000 in six months, all from Kansas City LP’s. After two years, the fund is now at just under $18,000,000 and has invested in 18 companies.
  5.  John stresses the importance of staying true to his cores ideals and never compromising on a team that he’s unsure about.
  6.  A huge part of Firebrand’s evaluation process, when they go into diligence is focusing on really getting to know their founders on a personal level, in order to build a solid foundation of trust.
  7.  John successfully built urgency by offering co-investment rights to any LP that invested in Firebrand’s first close, resulting in 14-15 relatively big names in Kansas City who invested.
  8.  John closed 40% of the fund in the last 5 weeks.
  9.  Arrogance is a trait John avoids in entrepreneurs because of his belief that it negatively trickles down into various facets of the business, making recruiting/retaining top team members difficult and driving away good investors.
  10.  John’s definition of “Founder-Focus” setting expectations of a hard, non-linear progression.  He doesn’t require perfection.  He gets involved, without judgement or criticism.
  11.  A specific way he gets involved is being very responsive as a “sounding board” when his founders need input.
  12.  Guidance through asking the questions to allow founders to find the answers and relating to their struggles, is another approach John takes when building trust with his founders.
  13.  Firebrand held their first CEO Summit for their founders, focused on peer interaction and discussion on what works, what doesn’t work and best practices. John recalls the experience being invaluable and they plan on holding the event annually.
  14.  John shares his past experiences with VC’s that engaged in rude email behavior or went dark on founders after holding multiple encouraging meetings and how that behavior can prevent future collaboration with those investors.
  15.  When tracking progress, the best metric to look at is revenue growth, because it sets the stage for what’s to come in the future.

Transcribed with AI:

0:03
welcome to the podcast about investing in startups, where existing investors can learn how to get the best deal possible. And those that have never before invested in startups can learn the keys to success from the venture experts. Your host is Nick Moran, and this is the full ratchet

0:22
Welcome back to TFR. Today we feature John Fein of firebrand ventures, John set out to raise a first time fund of 7 million and more than doubled his target. And he’s located in a region that gets very little focus from VCs and LPs, Kansas City. But John made it work and work well. Now he’s on to deploying capital in the best tech companies in KC and beyond. Today we unpack the fundraise discuss his experience with LPs and also talk about his approach with founders and how that runs counter to many other VCs. Here’s the interview with a very refreshing and approachable fund manager, John fine.

1:11
John fine joins us today from Kansas City. John is managing partner of firebrand ventures firebrand invests an average of 200k in two rounds of 500k to 2 million with capital reserve for select follow ons. John was previously a part of five startups and spent nine years at UnitedHealth Group. Most recently, John served as Managing Director of Tech Stars Kansas City. He joins us today to discuss the launch of fun one and their unique approach. John, welcome to the program. Hey, thanks, Nick. I appreciate it. Great to be here. Yeah, it’s good to have you. So you participated in five startups after which you, you scaled an organization from zero to 1500 employees, and 2 billion per year in revenue? Can you talk a bit about your background and your experience at UnitedHealth? Yeah, yeah, that was that was an unexpected experience. But when that turned out to be an amazing learning experience for me, so I’m actually originally from Boston, Massachusetts, right, I grew up in a town called Brookline and went to college in central mass. And after college, I moved to San Diego. And that’s where I was a part of those five startups, one of which I co founded. So definitely got the whole founder experience. And then after having done five startups back to back, and none of the five were hugely successful. There were a couple of singles and doubles in there. But but no homeruns, I would say,

2:32
you know, our son had been born, we’re still in San Diego, I was kind of burned out from from doing five startups back to back and just wanted a quote unquote, normal job with benefits. And you know, and not, not some, some crazy startup. And so I got a job at this company called prescription solutions, which was sort of they were sort of at the forefront of the mail order pharmacy business sending prescriptions through the mail. And they had outgrown the facility and in San Diego. And I didn’t know it at the time. But they hired me to spin up, the main reason they hired me was to spin up their new operation Kansas City. So it went from me going in thinking this is kind of a normal job to them, handing me this 100 million dollar budget, and saying, Hey, we need you to go to Kansas City and can spin this thing up from nothing to about $2 billion a year in revenue and 1500 employees. So the cool part about it was it was extremely entrepreneurial. You know, it was kind of having the best of both worlds of running my own little startup. But having the backing of this pretty big sized company, with with a nice budget now we had to move fast. And we had to make very, very strict dates, according to legislation that was being passed, that we needed to take advantage of. But it was an amazing experience. You know, we went through tons of, of, you know, growing pains and turnover and figured things out on the fly, I got to pick my own project team. And eventually, a year into the project. I was I was out in Kansas City so much, I loved it so much. I relocated my family out here in 2006. So yeah, and after four years, we were we were at 1.5 billion a year in revenue and, and had ramped up to 1500 employees. And even today, that facility is still going strong that that company was acquired by UnitedHealth Group about halfway through that project. And the way the way I tell my experience with that is it was incredibly entrepreneurial right up until that point. And you know, nothing, nothing gets united. It’s just a huge, huge company. And that’s sort of when the entrepreneurial fun stopped. And when it got to be a lot more structured and in my mind bureaucratic and so that, you know, I ran two more projects for them after that point, but the fun kind of stopped and that’s eventually what caused me to get back to the startup world. Right, right. I feel I feel your pain with the large organization. I’ve been there as well. So yeah, tell us about the transition that

5:00
In two Tech Stars, yeah, it was probably one of the more unusual transitions of any managing director that joins Tech Stars. So I had just been engaging in the startup community in Kansas City. And it was, I was lucky, you know, just like I was lucky, at prescription solutions sort of just falling into that project, I was lucky that I engaged in the Kansas City Startup community in 2012. Because that’s when it really started to take off. I knew Brad Feld very much, just superficially, just online, I’d never met him. And I reached out to him and said, hey, you know, here’s, here’s my situation worked for this big company, you know, it’s driving me crazy, I need to get back to startups do anybody in Kansas City, I need to talk to, you say you have to talk to this person, which was Lisa Mitchell, who was like, at that time, head of head of entrepreneurship for the Kauffman Foundation. And now coming full circle. She is the managing director for TechStars Kansas City, but at a time, at least, it was I think, probably the one of the first people I met in the startup community, Kansas City, one thing led to another, I was introduced to some great people, I just started showing up to a lot of startup events, just trying to figure out sort of what my place was in the community and where I fit in. And Lisa had gone back to TechStars. I didn’t know this until much later, and recommended me to them to launch a new accelerator. So that’s how the whole thing happened. I get an email one day from David Cohen. And I asked myself out loud, why is David Cohen emailing me. And so I got back to him. And you know, we chatted and we hit it off, of course, and, and one thing led to another and I joined TechStars as a managing director in 2013. So I ran three accelerator programs for TechStars. Between 2013 2016, we had a contract with Sprint, sprint was our corporate partner. And I kind of knew that it was a three year contract. And I kind of knew that it wasn’t going to renew after the third year. And so I thought that was a natural sort of break point for me to sort of gracefully transition from TechStars. And launch firebrand, which had been trying to do, I’d been wanting to do it for over a year before I launched it. And because I just saw the need for more good sources of seed capital in the greater Midwest. And David was was hugely supportive, he became our first former adviser to the fund. Brad was a huge help to me and continues to be and so again, I was just lucky to become part of this, this TechStars network, which I’m still very, very close to with. We’ve invested in a bunch of TechStars alumni. So that’s how that happened. And, and then I kicked up firebrand in the summer of 2016.

7:41
So I suspect there’s there’s probably a, somewhat of a playbook on how to spin up, you know, a new city on the TechStars. side. There’s certainly no playbook for you know, how to start your first fund. You know, how are the two experiences different?

7:57
Yeah, that’s a great analogy, actually. Because there are definitely some similarities. And I learned a lot of, you know, my approach from from people like Brad and David, and just being very much focusing in on the founder and in the team.

8:16
But structurally, yes, it’s completely different. You know, I announced firebrand before I had raised $1 for it, which was sort of a leap of faith that I took, I really wanted to get the word out. So yeah, I started knocking on doors. I really didn’t know anybody in the high net worth community in Kansas City. Thanks to a couple of folks I knew through who were mentors to my TechStars program. They made some intros for me, right. And it was literally just going from intro to intro. You know, I probably couldn’t have been more ill prepared from, from a networking standpoint, because I had to get to know everybody from scratch and vice versa, in the community that eventually invested in my fun, but you know, it, we did, okay, you know, I got to a first close in about eight weeks, and started, you know, making some investments. I wanted folks to see that we were real, and we were making investments, and just continued doing that we would raise a chunk, invest it out and repeat. And so we had initial $7 million goal for the fund. And after we hit that in six months, all from Kansas City, LPs, and then I just decided, I remember still I had dinner with, with Brad and Lindell Egemen in in Boulder, and probably as you can relate to Nick and a lot of other fund managers, especially first time fund managers. I was basically I basically asked him, Well, I’ve already hit my target, should I just stop? Because nobody likes fundraising? And of course, they gave me the right answer, which is no, of course not. You need to keep going. You’re always going to be fundraising anyway. Just keep raising and so I reluctantly agreed, like okay, yeah, you guys are right. So I kept

10:00
Raising and eventually we got to little under 18. So I close it at 18. Actually, technically it was 17.7. And fast forward to today we’ve invested in 18 companies so far, about two years in, and by the end of next year, we’ll be somewhere between probably 28 and 30. Is that the total number of portfolio companies that you want for fun one? Yeah, yeah, the target was 30. So I think we’re pretty much on track with that. And again, you know, this is a lot of guidance from, from David and Brad and my other mentors, is, you know, have have a have a good sized portfolio, you know, if you’re a relatively small fund, make a lot of bad stuff, don’t be disciplined. But, you know, stay within your criteria, but, you know, make a good, good amount of investments. And I’m glad we did it that way. And so far, it’s, it’s working out great. Good for you. So, so John, when I started raising fund one, I had calls with about 30, different GPS, for advice and input on, you know, how this whole process works and tips and tricks. My target initially was 5 million, but one of my advisors, you know, I told them, this was my target. And I told him, I would take no more than 10. You know, I was optimistic, if the fundraise went really well, I would, I would cap it at 10. His response to me was that the difference between a $5 million and a $10 million fund is, is significant. And the strategy and the story between those two different funds is is completely different. I know that you started with a target of seven, and you ended up at 18, which is, which is an amazing, amazing success, fundraising, you know, how did your strategy change? And did you get any pushback from early LPS as the fund got larger? Yeah, great, great question. Our strategy didn’t change. You know, the only thing that changed about our strategy was looking right, you know, bigger checks. And we have a bigger amount for reserved for follow on,

11:56
which I wanted anyway. So, you know, I think it actually worked out quite well and positioned us nicely. I did get pushback from one or two LPs, my early who invested in the first close. And I think part of what threw them off was not only do we go above seven, we went above what was going to be our cap, which was 15. And because there was just interest there, and I felt like it was in everybody’s best interest that we, you know, that we there was money on the table, we take it. And so yeah, I did. I mean, the the concern from and it wasn’t a lot, it was probably one or two questions I got from LPs, it was mainly around, you know, them being diluted, essentially. And so that was pretty much it, I don’t think I think they understood that it was the best thing to do for the fund. And just put us in a stronger position. You know, anytime you can get a bigger seat at the table, it’s a good thing. So I gotta say that, as a group, our LPs are incredibly supportive. So I was very lucky there again. That’s great. That’s great. How are you thinking about the split between initial investments and follow on?

13:07
Yeah, it’s turned into about 5050, which is great. So we’re, we withhold about half the fun for follow on which we’ve already, we’ve already made 10 follow on investments. And our companies are doing quite well so far, which is great knock on wood. And that’s how we’re thinking about it. Of course, we’re not going to follow on in every single company in our portfolio. But that’s, that’s the strategy is it’s going to be about half the fund.

13:31
Got it? So, you know, talk about the early days of the fund, whether it be the raise or deploying into some of those initial investments? In what ways was it different than what you expected?

13:44
Yeah, you know, it’s, I had to come to terms with the fact that it’s, it’s not going to be this nice, steady linear flow of investments. Right. It’s not like we’re gonna be making one investment a month, every month. I think if you are, then you may be doing it just to stay on the schedule, and maybe not doing it for the right reasons. And, and so I would get nervous early on. Yeah. Because we made our first seven investments in about seven, the first seven months, it just worked out that way. It wasn’t one a month, but by the end of the first seven months, we made seven, and then we didn’t make any investments for I think about five months, nothing. And part of that was summer, but I was nervous. And again, you know, my advisers were basically just like, don’t worry about it. Like it’s, it’s always going to be peaks and valleys throughout the year. So that was one thing that I just sort of had to get comfortable with.

14:39
And, and, you know, just being very, very disciplined to our criteria. Just keep coming back to sort of what our true north is, which is the team, the founders, the people and, and not compromising on that. And I think, you know, that’s it’s always going to be an ongoing battle.

15:00
that weighed, you know, if you love the product, you absolutely love the markets, it’s exactly where you want to be. But there’s, you don’t have quite 100% conviction about the team, you really shouldn’t do it. And and so again, like that’s, I think those are some of the thoughts that were going through my head sort of early on,

15:18
always really tricky when you find, you know, the perfect product, right, and a great market, maybe something you’ve been searching for for some time. But for whatever reason, you’re just not aligned completely with the team?

15:33
Yeah, absolutely. You know, that’s, it’s huge for us. And so actually part of our evaluation process, when we go into diligence is, and we make pretty quick decisions, it’s rare that we take more than four weeks, from first meeting to saying yes, in. And if we know, right off the bat, it’s not a fit, will, will give quick nose, I’m very sensitive to that. But spending a lot of time with the founders is a huge part of our process. And so we may have, you know,

16:00
two or three meetings initially, most of the time, they’re not here, they’re not in Kansas City, because we mostly invest outside of Kansas City. And, you know, that means, typically, if we want to spend more time with them, we go to them. And that’s what we’ve done. So, between sort of going out and meeting with startups visiting TechStars programs, so we’re on airplanes quite a bit, but it’s huge for us, you know, there’s no substitute for getting together in person. So actually, a key step in our process is, we’ll meet in person, sort of maybe after the, you know, talking or meet with him three or four times, it will take an afternoon. And we’ll really dig into a few topics that we think are relevant for maybe two to three hours, and then we’ll go to dinner. And there’s something about going to dinner, that, you know, it’s at the end of the day, typically, people sort of have their guard down, it’s more relaxed, you really generally get to know people more as people versus the founder, investor dynamic. And so it’s really important to us, and we learned a lot doing that, and we want it to be a two way street. We want founders to, to learn about us and our backgrounds, and what makes us tick. So it’s, that’s absolutely huge for us, at the end of the day that when we do decide to invest, we feel like, hey, we really got to know these founders, and we have 100% conviction, this is the team to do this.

17:26
Got it? And remind me how early do you go? Are you willing to invest?

17:31
You know, we’ll we’ll do you know, I hesitate to use this phrase, but I’ve accepted that precede is a thing. So I’m gonna,

17:39
I’m gonna say that we will invest precede will invest pre revenue. So we’ve 18 companies in our portfolio. Now two of them are pre revenue, and will be pre revenue until probably most of next year is done. So it’s rare, we’d like to see some early revenue, we’d like to see some early indication of product market fit. So even if it’s, you know, 5k 10k a month revenue, you know, that’s great for us. There’s one company that we invested in, they were doing about 8k a month, and we invest in them. And now they’re at 200. So that’s, that’s perfect for us. Wow, that’s great. So I want to move over to the founder side. But before we do a last question on the raise and the LP side of things. So we had Samuel show on the program, and he talked about how it’s really difficult to create urgency with LPs, you know that the timing of the fundraise is kind of indefinite. And there’s just not a whole lot of motivation for LPS to make a commitment. From personal experience. I found a number of my large LPS preferred to wait until final close. It was I created incentives, but it was very hard to still get people to move. You know, how did you think about that? And what did you find in your own fundraise? It sounds almost like you were able to continually get commitments on a regular basis. And, you know, I’m curious how you were able to create that urgency and get people to make decisions. Yeah, that’s great. And, you know, I think Cemil is great. I read and listened to a bunch of this stuff. So and I tried to be as transparent as possible and follow the lead of so many other investors in the last few years have been hugely transparent, which is incredibly helpful. So along those lines, what I did was I decided to offer co investment writes to any LP that invested in our first close and use that as an incentive for them to get in early. And it worked. And so we didn’t have any huge checks in the first close, but we did have I think we had 14 or 15 LPS that invested in that first close, so that kind of kicked it off and got the momentum going. And the the key part about that was within those 14 or 15. We had a couple of relatively big names in Kansas.

20:00
In fact, a couple of them were they even outside Kansas City. And so that just served to generate more momentum. And so that was what I did. And it worked out great. There wasn’t any sort of unintended negative consequences, I wasn’t sure. But it worked out great. And then we just continued to build momentum. And then in the second close is when we brought on our anchor lp. And so it just seemed like every close, we did build a little bit more momentum and urgency, having said that,

20:30
I experienced the same thing. That’s the meals talked about, and a lot of other fundamentals have talked about in terms of, really, some are not going to get off the fence into your final close. And so I ended up raising about 40% of the fund in the last five weeks before,

20:48
which was crazy. It was a crazy, crazy time. But another reason I’m glad I sort of, you know, continue to fundraise, I guess. Unreal. So moving over to, to the founder side a bit, you’ve gone on the record stating that you’ll avoid investing in arrogant founders, where you know, many VCs specifically look for that characteristic trait in entrepreneurs.

21:10
Do you think it’s the best economic decision to avoid working with the arrogant founders? You know, what’s your what’s your take on this?

21:17
Yeah, you know, so there’s there are these founders that have been successful that people refer to as arrogant, but they sometimes forget, you know, these are sort of one in a million type deals. There’s a lot of other founders, probably that expressed a degree of arrogance that were not successful. Yep. And

21:35
I just believe having, you know, hey, we don’t have it all figured out. We never will. We’re early on and firebrand, we’ve been doing this for two years, and I invested, you know, out of the TechStars fund for three years before that, just based on the patterns that I’ve seen, is, if you really have a high degree of arrogance, and it’s a turn off for people, I think, most of the time, that’s going to be bad for your business, I think it’s going to be difficult to recruit and retain, you know, top team members, I think it’s going to turn off good investors. And sure, there are always going to be founders that people consider to be arrogant, that becomes successful, we’re gonna take our chances with founders who are confident and curious. We love founders that believe in themselves believe in their vision, but also are emotionally intelligent enough to know, they don’t have it figured out to act like they haven’t figured out nobody expects them to. And they, as a result, they learn. We want our founders to learn constantly along the way, how to get better how to how to improve every facet of their business. And of course, we’re standing by to help them however we can, as well. So in generally, I find that founders that are not arrogant, are more willing to accept that help. And so I just think that sometimes when you have founders, people consider to be arrogant, that closes off a lot of opportunities for them, their personal growth, and also the growth of their business. And so, you know, that’s sort of the the angle we take.

23:12
Got it? Yeah, I couldn’t agree more. And just in general, it’s, it’s a lot nicer working with those folks that that want to get better and want to work with you and recognize that they don’t have all the answers, at least from my standpoint, that it tends to be a really productive working relationship. Absolutely. And, and, of course, you know, we’re in this to make money for our LPs, that’s the deal. And so it’s not about my personal preference of I like this person that I want to work with them. But I think that’s a, it’s a, it’s an indicator, right? It’s, if these people we find them to be great to work with and pleasure to work with, we can sit in a room with them for for hours, we can spend a ton of time with them. And we just want to spend more time with them after that, like you just get energized by me with these people. We can’t be the only ones who feel that way. Right. And so those are the types of founders we want founders who will be like magnets for for good, you know, team members, customers, partners, investors. So I think it’s, it’s more than just hey, this, they’re really likable, we really, really enjoy spending time with them. It’s that those are the sort of attractor type founders that we’d love to invest in, because we think it’s just great. Great for their business. Sure. Other investors, partners, employees, customers. Yeah, it, it extends to a lot of different facets of the business. So John, you’ve said that you’re a founder focus VC. But when I speak to founders, I find that very few VCs actually qualify as founder focused. What does this mean for Firebrand? And how are you serving founders in ways that that others aren’t?

24:50
You know, I kind of the analogy that I think about sometimes when it comes to founder focused investors and really, you know, really backing up your promise

25:00
to be that way, is, you know, it’s kind of like it shouldn’t be this way. But it’s out in the in the business world, it’s, for whatever reason, it’s still a competitive advantage to have remarkable follow up skills, and do what you say you’re going to do every single time.

25:19
And you wouldn’t think that that’s a competitive advantage. But it is because not everybody does it, it’s kind of the same thing. For founder focused investors, I think a lot of people talk about it. But not everyone follows up with their actions. And maybe, you know, it’s could be easier for us, because we’ve been through the grind of being founders, we’ve been on the rocky startup journey. And one of the things that we like to tell our founders, even even founders, even before we’ve invested in them, let’s say we’ve had a few meetings with them, we want to make it clear to them that we don’t expect them to not screw up, we don’t expect this like nice, smooth, linear path to success. We know there’s going to be ups and downs, we know there’s going to be mistakes. And we not only do we know that we expect that from them from their business. And I think once we are able to articulate that to them, there’s kind of this sense of relief on their part, like, well, I don’t have to be perfect. You know, I don’t, I don’t have to work 100 hours a week, making sure I don’t make any mistakes. And so that’s like, early on one of the things we do and say, and then of course, we have to back it up. Right. And so, you know, we see our role as we’re going to do whatever we can do in our power, to to help them Our job is to help, our job is not to lord over them. Our job is not to judge them critique them, pointing out all the things are doing wrong, it’s to roll up our sleeves with them. One I forget who it was, but one well known investor called it being a co conspirator with our founders. And that’s, that’s how we we see ourselves as, as really just being partners with them. Because everybody wants the same thing. Everybody wants a successful business. And so, you know, we just have to earn that, you know, that sort of approach through our actions? And, and, you know, show them that that’s really what we stand for. What are some of those things you do on the portfolio management side? You know, in what ways are you rolling up your sleeves and getting involved? Any way we can. So whether it’s, first of all being super responsive, seven days a week, I just think that’s really important. They need to know that, even if it’s just for it to use us as a sounding board, you know, if it’s, you know, fundraising strategy, thinking about raising a bridge, round, sales, marketing, bizdev, whatever it is, and it’s not that we have all the answers we don’t. But if we don’t have what I consider to be, you know, valid feedback and input, we’ll make sure to connect them with somebody who does in our network. And I just think that type of responsiveness and willingness to make introductions is, is one of the things that really helps. And then also, just being a sounding board in general, you know, I’ve talked to plenty of our founders where they’re just stressed. You know, they’re, it’s an incredibly stressful endeavor, as we all know, and sometimes they just need someone to bounce things off of, and do a reality check, whatever it is. And it’s sometimes it’s not even business strategy. Sometimes it’s just Look, man, I’m completely stressed. I feel like I’m getting burned out, what do I do? You know, I have all these people who are depending on me, and, and just sort of helping them serve. And it’s not that we have all the answers, again, just sort of guiding them and asking them the right questions. Yep. And letting them figure it out for themselves, I just think is hugely important sort of taking that more Socratic method of asking them questions versus telling them what to do, also, I think, helps to build trust, and also relaying the struggles that that I’ve had in my career, and the mistakes that I’ve made, you know, say, hey, look, you know, we’re all, you know, none of us are perfect, we’re all continuing to learn every week. So let’s, let’s learn together and figure it out. And I think once they fully sort of, get their arms around the fact that that’s how we operate, that again, there’s there’s sort of a lowering of the guards, like, okay, like, I can share anything with you guys, I can share the worst of the bad news with you and, and we’re just gonna work together to try and figure it out. So that’s, that’s always what we tried to do. And, for me, personally, you know, a side effect of that is, is also just more fun, more fun that way. And so that’s what we that’s what we tried to do when we are, we’re here to help. We’re a sounding board. And, you know, wherever we can put our two cents in. If we’ve seen something before that, that might work for them. We’ll do that too.

29:55
I noticed I think maybe it was on medium or one of the blogging platforms that you had read

30:00
You recently had a summit with a number of your founders in attendance. You know, how do you think about the cadence of interaction? How often? Are you getting together with your founders? Is it mostly over the phone like quarterly calls and updates? Or do you make sure that, you know, there’s in person opportunities every, every year or so?

30:18
Or more on? Yeah, you know, we’re, we’re definitely still figuring that out. But I would say as far as cadence goes, it’s anything and everything you could possibly imagine. For us, you know,

30:29
it is, you know, we’ve 18 companies now. So I’m in touch, it’s rare that a day goes by, we’re not in touch with one of our CEOs, either by phone by text, you know, some some real time method of communication. And, you know, but having said that, absolutely, there’s, there’s no substitute for being there in person. And so, first of all, we travel a lot. And we often go back to the same cities where we have investments. And so that’s always top priority for me is, is making sure that we we connect with them, if they’re in town, and get an in person, you know, sort of update on both sides. And that CEO Summit was awesome. It was the first time we’ve done that I know a lot of funds do that these days, it was just invaluable, getting everybody together and having them learn from each other, and get to know each other. And also, a side benefit for me was, it just sort of reinforced how awesome our founders are, they’re just good, in addition to being smart, talented entrepreneurs are just good people. And so it was an amazing experience. And when we’re definitely gonna keep doing once a year, then, you know, we’re very much into data. And so we surveyed everybody afterwards, and we’re gathering the feedback for them to make it even better next time around. But yeah, I think whenever there’s an opportunity to get together in person, I never, ever squander that. I think it’s hugely important. It’s amazing what happens when you get them them together, right? I, we had an event annual event, we call it our, you know, our firm launch event in August. And I had, you know, the founders fly in and come in for it. And we had 10 of the 12, folks with us. And since that event, I’ve been surprised, a bit surprised, but also very pleased with how much interaction is going on between them lots of support between the founders that you know, finally had a chance to all meet each other.

32:22
Yeah, it was so cool, you know, just the organic things that came out of ours as well. One of the one of the founders, who was actually traveling, probably the farthest distance of anybody to come to Kansas City, he sort of just like, initiated this thing where he came in the day before. And, you know, reached out to all the other CEOs, I think, a bunch of them, you know, sort of saw the sights in Kansas City that day together, which I thought was awesome. And then, after the summit, you know, a bunch of them, were saying, oh, man, let’s let’s get a Slack channel together, you know, at the risk of, of slack overload, you know, let’s get a Slack channel together and just just continue to start, you know, continue sharing information. And that was their idea.

33:02
And so, I just love those, those organic things that came out of it, and just show me just how valuable that peer interaction is. And that was a big chunk of our actual summit was was peer discussion, based on topics that they had requested. And, and just the sharing, just knowing that other people are going through what you’re going through, and best practices, what’s worked, what didn’t work, you know, it’s just, it’s just invaluable. And I think the more founders can tap into that. It’s better for their business. It’s also just better for their mindset than personally as well. Yeah, for sure. For sure. You know, John, as as you were talking about, you know, being founder friendly, you know, I was thinking for a minute, you know, what about the VCs that aren’t so founder friendly? And I don’t want to go super negative here. But do you have any specific examples of things that you found and working with other VCs without naming names, but things that maybe are counterproductive to, to the startups mission?

34:00
You know, I think you’re always have those those situations come up. And one of the many, many benefits for me of working at TechStars was watching and helping all these TechStars founders raise money. Right. And so some of the sort of not so great behaviors we saw were things like, you know, having a couple of meetings, including in person meetings with with VCs, and everything is sounding great. And they’re, they’re using very, very encouraging language, when they’re talking to the founders and then going completely dark. And they never hear from that VC again. I think that’s pretty awful. Another one is just just rude, sort of rude behavior over email. Now I’ve seen a founder get a warm Intro This has happened more than once. Founder gets a warm intro to a VC and includes either you know, a short deck or one page or something like that in the email, and then they get a one word answer analysis.

35:00
As I pass on the email, I saw that one time, it just blew my mind. And actually, it was when I was seeing all these things. I was at TechStars, I was thinking, Man, this is just a great opportunity for a normal VC, who respects founders, maybe because they were founders right to come in and actually treat them the right way. And, and so, you know, that was one of the things that made me think there’s just a desperate need for more, you know, more great early stage funds that actually work with founders and are respectful than, you know, these sort of, you know, he sees that haven’t quite learned out yet.

35:41
It’s amazing that these these folks still exist, you know, if I’m providing a warm intro for somebody, and I saw that sort of behavior, I don’t think I’d be sending many intros to that person. But they’re still out there. There’s a lot of investors that feel like they have all the power. Yes, there is, you know, and it’s unfortunate, because in a lot of cases, investors who have that type of non founder friendly approach are in underserved communities. Right. So these are in communities where there aren’t a ton of investors, and so that the power dynamic has shifted even more to the investor. And they feel like they can, they can do that in and so again, you know, these are some of the communities that that we invest in, where, you know, I hope that tide will, will turn all the way. And, you know, if and again, you know, it’s not, you know, a battle against these VCs who haven’t quite figured out the founder friendly approach, but, you know, hopefully, they’ll come around, because, because let’s face it, you know, especially in the middle of the country founders need all the available capital they can get, you know, we just need to make sure that it’s good capital. Yep. Yep. So you guys are focused on the greater Midwest, you know, a lot of ground to cover. You mentioned before that you had CEOs coming in for your Summit, from various areas, some from great distances. Can you talk about the pipeline and deal flow a little bit, maybe key strengths that you guys have? And, you know, how are you guys seeing greater volumes and greater quality of deals than that? Maybe other folks are?

37:13
Yeah, you know, you know, just very fortunate, you know, I would say, I started building up my network at TechStars, in this space. And so the nice thing was, by the time, you know, three years later, I transitioned from TechStars to firebrand, I had all these VCs that I had gotten to know. And so it was basically just a function of me reaching out to them and saying, hey, you know, I’m launching this fund, and a lot of cases, I had reached out to them with questions and wine, their advice? And, and, you know, it’s really like, hey, you know, I’m launching firebrand, do you want to share deals? And, you know, they unanimous Of course, they’re like, Yeah, of course, it sounds great. So, so that was sort of formed the foundation of our of our VC network. And it’s just obviously grown since then. And we’ve been very, very fortunate to co invest with, with awesome funds, even since fairly early on, you know, just folks like Union Square Ventures and founder group have been fantastic to, to invest with. And then you know, TechStars itself is, is a great source of, of deal flow for us. And, you know, I’m obviously, you know, friends with a lot of Tech Stars, managing directors still. And so, you know, we I visit quite a few and mentor meet a lot of the companies there. So that’s, I feel like it’s just a, it’s a great sort of pre vetted source of, of startups. And it doesn’t mean we’re going to invest in every single cohort. But I really like what, you know, what we’ve seen so far, coming out of TechStars programs, and having run three programs, I know exactly how that process works and what they’re going through. So that helps, too. And then, you know, just by visiting a bunch of different startup communities, over the years, you naturally build up relationships there as well. And so, we also get deal flow just from community folks, you know, in places like Detroit, Minneapolis, you know, Cincinnati, Columbus, places like that, where it’s just, thankfully, sometimes they think of us and, and send us some deals. And so, that’s it, those are probably the three main sources of deal flow for us. You know, our, our investor network is, is awesome, because we feel like we’re surrounding ourselves with like minded investors, which you don’t, you know, you never really know sometimes, but, you know, now, you know, looking at all the other VCs that we share deals with, we all have sort of similar approaches, and I think that really helps, you know, sort of accelerate that process when you’re looking at deals.

39:50
Got it? Got it. So John, that you know, the feedback cycle and venture is quite long. You won’t truly know how your funds stacks up against others from your vintage for me

40:00
yours? How do you think about progress? How are you tracking progress? And know whether you’re you’re winning or not over the near term here? Yeah, you know, that’s another thing, you know, to your earlier question about some of the things I had to get used to, you know, it’s very unnerving. Right? Like, like you said, you don’t know, maybe five to seven years, something like that. Yeah. You know, so, to us, you know, we’re, we’re really focused on on the fundamentals of the businesses we invest in. And so, you know, to me, like, there’s no better metric than revenue growth, you feel like, you know, if you’re growing revenue at a really nice clip, good things are gonna happen, you know, eventually, you know, if you need to continue to raise money, you’ll raise it at a higher valuation, eventually, you’re probably going to have a nice exit and continue to grow quickly. And so it’s not a growth at all costs, necessarily. But, you know, a couple of years in, I think that’s probably the most valuable metric that we have. And, you know, we don’t necessarily invest purely based on traction. We’ve definitely, like I said, before, you know, gone gone pretty early, based on just we thought the team was phenomenal. But certainly not just revenue growth, but sustainable revenue growth, good unit economics, are really important to us at this stage. And again, you know, we think it’s, it sets up the foundation for everything else.

41:20
John, if we could cover any topic here on the program? What topic do you think should be addressed? And who would you like to hear speak about it?

41:27
Oh, man, and I’m so biased and comes to this. You know, the, the easy one. And by the way, we’ve had Brad, we’ve had Lindell. I mean, we could have them back. But But yeah, you know, if you’re going that direction.

41:40
Well, I was gonna, I was gonna mention, Brad, just because he’s so good talking about mental health, which I think is a hugely important topic these days. Yeah, he’s not he’s not the only one, of course, but he’s really open and outspoken about it. So that was the easy one I was going to talk about, you know,

41:59
it’s, it’s always great to talk to, you know, of course, I’m thinking of folks that are closer to me. But talk to folks like David Cohen and sort of how they made what made them make these early investment decisions, like pre product, investment decisions in companies like Uber. Like, what, what was it about Uber? And for David, it’s also, you know, what was it about SendGrid, Twilio? pillpack. You know, how did they what went into making these decisions? I think that’s, that’s always enlightening. It’s always enlightening, for me, for sure.

42:36
So I think, you know, I think I think that’s always good. But then, of course, I’m biased about the Midwest. And when we say Midwest, we mean, a huge swath of the middle of the country. Right. Right. And so I always love hearing from, from people like Steve Case, or others, that his rise of the rest funds, because they’ve been so critical, and such amazing supporters of of these sort of underserved communities. And we’ve invested with them a couple of times now. And so anytime, you know, I can hear them talking about sort of the promise that they see, and the opportunities that they see, which is right in line with what we do in these sort of greater Midwestern communities. I think it’s awesome.

43:15
That’s great. That’s great. John, what investor has influenced you most? And why?

43:21
Oh, boy, there’s so many to choose from.

43:24
You know, I’d say probably, you know, David, David Cohen, and Brad Feld, both. They don’t they don’t have, you know, exactly the same investment approach. Obviously, they’ve different models. But But again, you’re just learning just very, very lucky, right? I mean, I didn’t recognize when I joined TechStars, how, how lucky I would be to just learn from investors like that. And not just their sort of team first approach, but just how they think about teams, and how they sort of, you know, the way we’ve done it, I don’t know, this is how they think about it specifically, but the way we’ve broken it down when we evaluate teams is sort of two categories, Category A, or just sort of all the prerequisites that you look for in team members. The basics, yep. Honesty, integrity, smart, reliable, hard working, good communication skills, good follow up, you know, those are just sort of all the all the prerequisites. And then Category B is a lot longer list and a lot more complex and might have to do with things like have they been personally affected by the problem they’re solving, why are they so obsessed with solving it? Things like that? Yeah.

44:35
But going through the process, and and seeing how they invest, seeing how they weigh in on the picks that we had for our program, and other programs. And I also I’ve sat on selection committees for several different TechStars programs, huge learning experience. And so that’s really what I learned, among a lot of other things from David or Brad is sort of the success

45:00
they’ve had and, and while they’ve had it, I think so much of it does just boil down to, to sort of really, really understanding the individual team members, the founders, and all these different, you know, in those two different categories I talked about. huge for us. And it’s, it’s never, you’re never going to be 100%. Right. That’s the other thing is, it’s it’s nothing is foolproof, nothing is guaranteed. But again, sir, what were mentioning before, if you can look back and say, Hey, we invested for the right reasons in this team, then, you know, I think you can feel okay about it, even if it doesn’t work out.

45:37
Very good. And finally, John, what’s the best way for listeners to connect with you?

45:41
Yeah, I mean, they can reach out to me on Twitter. My Twitter handle is at John fine JOHNF e i n, where they can email me directly and my email is John at Firebrand. vc.com All right, there it is. He’s John at Firebrand. vc.com. John, it’s been a real pleasure connecting with you today. I’m glad our mutual friend Ryan Negri connected us back in July. I look forward to sharing some cap tables at some point here. Absolutely. Same here. Nick really enjoyed it.

46:17
All right, that’ll wrap up today’s interview. If you enjoyed the episode or a previous one, let the guests know about it. Share your thoughts on social or shoot him an email. Let them know what particularly resonated with you. I can’t tell you how much I appreciate that. Some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same, a compliment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over prepare, choose carefully and invest confidently thanks so much for listening