275. Doubling Down on Data to Discover Overlooked Founders, Teaching and Coaching CEOs, & Bullpen’s Approach to Measuring Fund Success (Paul Martino)

275. Doubling Down on Data to Discover Overlooked Founders, Teaching and Coaching CEOs, & Bullpen's Approach to Measuring Fund Success (Paul Martino)

Paul Martino of Bullpen Capital joins Nick to discuss Doubling Down on Data to Discover Overlooked Founders, Teaching and Coaching CEOs, & Bullpen’s Approach to Measuring Fund Success. In this episode, we cover:

  • Can you first refresh us on the thesis at Bullpen and then maybe give us an update on the firm over the past three years?
  • How do you define post-seed today… and is it moving as other stages have?
  • Are you still one of the few specialized at post-seed or have you seen increasing competition?
  • Is there still a strong emphasis on metrics and using the data as an early filter of deals?
  • How are you using data to source?
  • What do you look for in founders?
  • Why are you committed to coaching/supporting companies?
  • We all know the scorecard of success in VC… DPI, TVPI, IRR, PME, etc… what are the leading indicators of success that you measure and manage to make sure you’re driving success in those metrics.
  • You are a founder yourself, what advice would you give to founders right now that are building during the Coronavirus Recession
    • Wrote article: “The 2008 Recession Saved Our Company. The Coronavirus Recession Might Save Yours, Too”
  • Let’s say you have a chance to speak w/ a younger Paul, circa 2010… what advice to give?
  • What does the underdog founder look like? or What do you look for in founders?
  • What’s broken in the venture ecosystem?
  • This question is called three data points. I’m going to give you a hypothetical situation w/ a startup and you can ask three questions for three specific data points.
    • Let’s say you’re approached to invest in a post-seed stage SaaS startup…
    • The founder does not come from big tech.
    • Her HQ is in St. Louis
    • The sector is retail.
    • They launched 12 months ago.
    • and they currently have $80k MRR.
    • Again, the catch is, you can only ask 3 questions for 3 specific data points, in order to make your decision. What three questions do you ask?

Guest Links:

Transcribed with AI:

Paul Martino once again joins us on the program he is the co -ounder and general partner of Bullpen Capital a post seed stage venture fund investing in overlooked entrepreneurs across all sectors prior to starting bullpen he was the founder of a pos software acquired by intertrust and aggregate knowledge acquired by newstar paul welcome back to the show

that’s nice to see you thank you

nick yeah so last year we’re on was march of 2018 can you refresh us on the thesis of bullpen and maybe you know give us an update on what’s happened at the firm over the past three years

yeah march 2018 doesn’t that seem like a lifetime ago just on the bullpen side we are doing the exact same thing three years later that we’re doing in 2018 which is the exact same thing we’re doing in 2010 looking for companies that fall into that gap between seed and series a typically overlooked backgrounds out of out of geography deals and unsexy categories so basically if you’re a little off by one come see us and if it all goes well maybe you’ll get back on the traditional venture pap and go raise a big round next

very good and is it still i think last time we talked it was companies that have raised no more than 5 million they had about a million plus arr growing three to 4x per year burning no more than 200k per month does that still

make you looking for a job that was pretty awesome i mean we might need to hire you after that was i couldn’t have said that any better

well we take notes and and i’m you know you’re like a star now paul like every time i look online you know you’re on cnbc or or something so i’ve heard the pitch few times

good well thank you nick i appreciate it and yeah and what’s cool about it is it literally is the same thing we ate you know you you know this raising venture funds you hear about this thing called style creep there has been zero style creep in the 11 years we’ve been in business so for better and worse no style creep here

well i’m impressed so that you know this is you know stage definitions are i feel like they’re ever in flux right five ish years ago 60 to 70 posts in you know my world that was be round now i’ve got a founder that’s raising an a and he just got a few term sheets ones 50 post ones at 61 to 75 posts and that’s you know that’s a series a you know what’s your definition paul of the post seed round today and is it a moving target like some of these other stages

so if you do it by letter or traditional way it absolutely is a moving target and everybody’s definitions are completely different than one another but if you kind of do it functionally hey i do a four to $5 million round into a company that’s raised four to 5 million it kind of tells the owns that tell its own story there’s an implied valuation range and that and then there’s a an expectation that the round after it would be about 20 million so i kind of don’t care what the letters are you know we’ll go do around four to 5 million in i hope you can do 20 next you call that what you want we call it post seed

got it got it are you still one of the few specialized firms that post seed or i feel like i am hearing about a few others now that are you know at least branding themselves that way do you see more competition at this in between stage

competition is even too strong a word to use you know we’re at 1100 seed funds now or early stage funds right at the fund there were 40 and we joke that one day be 200 well there’s over 1000 now and so now that there are a half dozen or so hang out in our pond good we mean co invest you know my friend brett brett wilson who started to mogul i invested in as an angel he’s now doing a fund called swift he had a little post seed slide is that that was like awesome welcome to the party we need some we need some co investors i tend to agree

i mean we spoke three years ago and there was a huge gap in even still there is this gap prior to series a lots of great companies that just don’t quite have enough traction yet

yeah it seems like a persistent system it’s a persistent feature of the ecosystem in the early days of the fund we were worried it would be a short term arbitrage but now the way the ecosystem has played out it’s a permanent structural feature no doubt in my mind

agreed agreed and paul give us a quick sense for portfolio can construction for a post seed firm like yours you know number of investments ownership targets reserves

we look like a very traditional venture fund as much as our models a little quirky under the covers we look like any other firm it’s a anywhere between 120 $550 million fund doing 25 deals standard reserve strategy it we are as plain vanilla on that as is different we are in kind of the market when we talk to the startups so if you look at our p&l and you know our back office you go out that kind of looks like any other fund

and you standard reserve is that 112 to one

yeah just one to one i mean again it’s not even it’s not even that rigid because you know it’s a waterfall in practice and so one two ones what’s on the chart well we didn’t spend too much so we’ll do 28 deals oh we spent a lot we’ll do 22 deals

right right is you know i recall there was a strong emphasis from bullpen on emphasizing metrics and using data as sort of an early stage filter of deals is that still the case

we we actually really double down on it our new partner and lie is i mean a data scientist extraordinary and it was really we worked with her for a year two as a consultant advising us on honing our data strategy and as we were doing our gp search it became increasingly clear that her background was perfect for us and so she became our new gp in september and like i said we’ve doubled down on it we we really think that this approach is the right way to find these kind of overlooked deals if you start with the numbers you can screen a completely different set of companies than everybody else is chasing

and how do you do that right you’ve talked about how you use data to source what does that mean

so what it means is that i can go advertise i can go do this podcast and i can say are you an overlooked founder do you need four to $5 million in revenue come see me and i can ask for a deck and in 10 minutes any of my associates can tell you if this is something that fits our model that doesn’t guess what that’s a super efficient way to spend my time i can do outbound marketing directly to the ceos using traditional enterprise software channels like marketing conferences etc and my associate team can ingest a deck whether it be a cold email someone who listens to this podcast and we can be very efficient looking at these different kinds of companies and and that’s been the secret we kind of invert the funnel we put really the associates at the front of the funnel really help us out with are the metrics there and then okay now it’s time for the partners to come in as opposed to a lot of other firms got to do it the other way hey how do i know you where are you from how well do you know the partnership okay associates go write the investment memo our associates are really at the front of the funnel saying this is in our box or isn’t

what do you say to critics that that push back and say you know you’re investing in meth if you if you’re looking at the metrics too much you’re you’re missing the opportunities that are coming right you’re missing the skate to where the pucks going right you’re missing these big pops in these companies that have the right formula but they just haven’t executed enough yet to drive the traction how do you respond to that to those critics

i actually i don’t think it’s a fair criticism when you look at the portfolio because quite frankly you look at our best winners there’s a lot of zero to one style companies where they’d have a million dollars in revenue but they had the only million dollars in revenue in the category no we invest in fanduel and fantasy sports 10 years ago they had $1 million which was 95% of all of the market share and a thing called daily fantasy that market went from $1 million to multiple billions of dollars and so we love looking for these markets that are overlooked with dominating market share from an early leader now if we were playing the more traditional venture game where they’re 10 companies enterprise software going after the same thing maybe there’s a false positive in the early data i think we would have more errors like what you’re describing but when we invest in what we kind of lovingly say is the one founder dumb enough to do something you kind of avoid that problem because you’re playing the peter teals zero to one strategy and it really self selects away from that and the data is very helpful there because you’re looking at early traction in nascent markets as opposed to the traditional what’s your sas magic number type stuff

and i recall last time we talked we talked a bit about wag you know that’s another company in the portfolio that maybe some investors have a previous age snickered at the concept you know uber for dog walking and such i recall did you help start that company or were you help did you help formulate the idea because i believe you’re working with founders from a previous business is that true

that’s right it’s actually a fascinating story and and by the way we joked about uber for dogs before we invested in it so the joke was actually on us like we literally fold the joke before it happened and so we had previously invested in the vinner brothers prior company called chirpy in the dating space and they were in west hollywood literally brainstorming what should we do next and duncan davidson and i would periodically pop into their their little frat house or whatever you want to call it that they were brainstorming that and one of the ideas on the board became leg and it grew massively fast and while while i wouldn’t call duncan or i founders i mean we were there right we were we were in the trenches the brainstorming that led to the formation of the company and then we were also more importantly in my opinion very much there For the divestiture of the large investor SoftBank, away from the company to give it back to us and the founders. And that’s a fascinating story, because we basically told them, You ruined our company by putting too much money in it, we want it back. And we help the founders and the new management team make that happen. And that was a that was quite an adventure. Wow,

when did what was the time frame on that poll.

So that was last Christmas. So last Christmas, KKR, not KKR, sorry, SoftBank, had huge wins, from their, their investments in Alibaba, etc. And they’re like, well, we’ll write this down, we’ll take the loss, we’ll actually, we’ll get rid of our preference stack in the company. And, you know, we’ve been calling them out for really, you know, to some extent putting too much money into these companies ruining their cap tables, and, and threatening to go invest in another company, which Oh, by the way, somebody else invested in rover and it went public via spec, we always told the founders, you can’t fall for that trick, the money will go to the other company, regardless if they say, take my money, or it won’t. And we just had a lucky sequence of events, where we really put some public pressure on them as an investor, they had a big win, they took the loss, we got the company back, and I’m optimistic that our company will be a future spec candidate, even though we lost the year two, because of the what I think misguided investment.

So is that a part of what you do a bullpen a little bit of code development studio idea whiteboarding with great founders? Or was this kind of a one off,

or totally want to, I wouldn’t say one off, but totally not what we do in general. I mean, we will invest in repeat bounders. But in general investing at the cedar napkins stage, now we do it post seed, we don’t want channel conflict with our seed stage investors in front of us. But when you know, Nigel, the CEO of fanduel, comes back with flick and his wife, Leslie, also the co founder comes back with relish Of course, we’re going to put some money in that company. Same thing with our repeat founders at sherpani. We’re going to brainstorm with you we’re going to help you out. So so of course we do that because any good venture firms gotta back the repeat entrepreneurs. But no, the studio model is, I mean, that’s a lot of work. It’s not the work, I’d say we’re good at. But occasionally we end up doing it.

Got it. Got it. You know, you’ve you’ve talked a bit about your commitment to coaching and supporting companies and founders. And clearly you’ve been very engaged in some of the examples that you mentioned here. Can you talk a bit of a bit more about your philosophy on that?

Well, I’m a student of Bill Campbell. And that that is a that is a statement, I do not make lightly. I feel an actual responsibility to bill and his legacy to teach what he taught me to the next generation. You know, we lost them a couple years ago, but there’s a couple of us like me and Randy Commissar, who really, really picked up the mantle. And I have CEOs who seek me out. They’re like, I heard you can teach me what Bill taught you. And and I don’t take that assignment lightly. I don’t make that statement lightly. And at Andrew trader who started Zynga, and Madison Reed and core metrics, he heads our CEO coaching practice, we tag team on a lot of this, we’re very proud of how we’ve now doubled down we have the CFO in residence named Rick Santos, who’s been wonderful. We really do teach our CEOs how to run their companies.

What do you What does that mean? Right? Is there a rubric? Or can you give us a broad strokes on sort of the bill Campbell approach and kind of how you implement that?

What you know what’s so funny about it, Bill? Campbell’s approach was very Socratic, right? I mean, end of the day, what you realize is Bill learned as much from the CEOs as he taught us CEOs. And that combined knowledge, the network effect of all of the CEOs that he coached, was actually the secret. I remember one time that this is, this is when I was really an up and comer I hadn’t really done anything that had a big gold star in my resume yet. And Bill, Bill is advising me. And he comes into my office. He’s like, Paul, you know, I want to talk to you about something. He’s like, you know, Steve Jobs is contemplating whether he should get rid of his exclusive offer with at&t or not. He’s been exclusive with the iPhone on at&t for years. What do you think? What it builds, Steve Jobs should stop and go multicarrier. But that that was this big aha moment, though, when I realized this was actually what the process was. It was so kradic it was, let me talk to you about what another CEO is facing. Let me get you into your thought process. Let me teach you how to think. And it really, it was eye opening to think No, it wasn’t that he really wanted my opinion to pass back to Steve, but that this was the method. And and I again, it’s tough to explain on a podcast, what it really means to go through the bill. Boot Camp because it’s not a set of it’s not a set of lessons. A set of lessons in a book is not the way it worked. It is very one on one. It is very post personal. It’s very emotional, high EQ and And it involves a lot of Socratic method. So I know that’s probably unsatisfying to your audience. But that’s the best I can probably give you. I think

it makes sense. I mean, there’s there aren’t binary right and wrong answers in business, right. There’s a lot of gray. And there’s trade offs in everything. So asking the right questions, you know, getting to the right sort of balance of conclusions and then making the best call for you at that point in time. I mean, I feel like that that’s what Socratic helps you arrive that right? It’s a thought journey. It’s not an answer. Right. Paul, you know, we all know the the scorecard for success in VC, DPI, TVP IRR, you know, PMS? What are the leading indicators of success that you measure in managed to make sure that you’re driving, ultimate, ultimate success with those metrics?

So we have a really unique Trickett bullpen. So think about it, we find these slightly off by one companies in between season a, we think we can coach them up, we think that they can turn into venture darlings, and you know, everything from a spot hero in Chicago, to a grove and consumer goods in in San Francisco, across the portfolio. And so we started tracking a KPI internally, which was what percent of our companies raise it a big step up in valuation in 18 months. And I’m not sure that that’s the perfect metric, because a lot of those companies could be a bubble, they could go back to zero. Some of them could be undervalued in the next round. But here’s what’s so cool about that being the KPI. It’s something that’s measurable and accountable in the short run. If you’re trying to measure DPI, Nick, what metric Do you follow for DPI in year two of your fun, like, there’s not like this thing that? Wow, I can turn the DPI dial in. But on the other hand, can I find a company that can raise it maybe three xR price in 18 months and coach them to do that? That is eminently actionable. And it’s my best cheat sheet because it allows me the short horizon milestone to basically no, I’ve got a great portfolio on the back side. And consistently across five funds, that number sits at about 70%, no shield, 3x and 18. I can pick a company and coach a company that does that. I think if I keep doing that for another 10 years, we’re gonna have a great portfolio on the backside

70 plus percent 3x valuation growth in 18 months. Yep. Damn, that’s good. You know,

and even though I’m the general partner, I am a bit in the CEO role of the fund. That is a KPI that is actionable, I can do something about that I know how to track that. I know how to think about that. And and I think sometimes the CEO mentality is missing in a venture fund, because it’s so amorphous, and the numbers are far away, and you’re kind of far removed. And and I think the venture funds I really respect have someone in them that still feels like a CEO. Mm hmm.

Well, you’re a founder yourself. What advice you give to founders now that are, you know, building during this, this weird altered reality?

Well, look, it’s one of the best times ever to raise money for a company is bizarre as it sounds. This is the most buoyant market I’ve been in. And I’ve now been through a couple other bubbles, right? This is, this is crazy times. So yes, yes, you’re stuck at home? Yes, you better get along with your family, because you’re going to see a lot. Yes, you have more time on your hands. But you know why? We’re, we’re in the segment of the economy that’s making real money. And you know what your shortage, there’s gonna be no shortage of options for you for fundraising, even if it’s on a zoom. And so get your head in the game, that it’s go time for entrepreneurs to solve these problems, because of COVID. And oh, by the way, COVID gives us more time to solve the problems. I think we’ll all look on this as, as one of the glorious times to have been an entrepreneur, because it’s in disruption like this, that we have our chance to excel and shine. Mm hmm.

How about, you know, you’ve been doing this for a while now. If you had a chance to speak to Paul Martino, circa 2010, maybe 2005. You know, what advice do you give yourself?

You know what, you know what I feel good about? I don’t know that I would have a lot of advice in this regard. I had such good mentors from 95 until 2005. And I took the coaching. So maybe that’s the lesson Martino keep taking the coaching. Because I see some entrepreneurs they fight with the coaching, right? And so by the time by the time I was in this business a decade, call it 2005. I learned that taking the coaching was the trick. I didn’t always know the answers. I admitted when I didn’t know the answers, but I always took the coaching so just a reminder hey martino a guy like bill campbell is going to teach you how to do it better freakin listen randy commissar is going to be on your board you better listen you know you’re going to start a venture fund with rich melman who started electronic arts you better listen and i feel good about wow all i only wish i knew blank years ago i feel good about that the main lesson i teach my entrepreneurs which is to know when you don’t know something and teaching coaching is something i actually did these last 10 years as opposed to shit i wish i could go back and tell myself that i’ve done that

who’s the coach for paul these days you know now that the bill is gone or do you find yourself doing more coaching than receiving it

the beauty of it is i learned from my ceos the way bill did so the cycle actually continues now that i’m by no means bill let’s make no mistake i’m a pale impersonator of him but if i’m sitting in his seat i get his trick now i am constantly improving my database of anecdotes stories and teaching and coaching moments as the result of all of the new ceos who come into the program to some extent and so i actually get it the way bill got it now and no i don’t it’s not that i don’t have other people who are more senior to me who can still teach me things but the primary modality of me adding to the debate database is actually the people i’m coaching randy said this many times that was always the trick to the model i love it

i love it we have it we have a question in our our final deal memo before we make a decision and it’s if you weren’t working here at new stack doing this would you go work for the founder of tomorrow right no questions asked and if the answer is not an emphatic yes to that we don’t do the deal and i mean it’s amazing what happens when you surround yourself with like these world class people that just you learn from all the time that inspire you and and when they get together with each other it’s like it’s a special

yeah now and then by the way that’s a great that’s a great cheat sheet for your investment memo well done well thought out way to call the question

yeah well one of many right we’re all voting for a lot of things i mean is this kind of an area that you look for in founders like coachability and having an open mind or you know what are some of the key factors that make for a winning founder and some of these maybe non traditional background or overlooked areas

you know coachability is i mean that arguably the number one characteristic i mean there’s you know how it’s it’s so subjective the eq stuff is so hard to quantify but coachability is something there is no partner meeting where we’re deciding on a business where we are not talking about the coachability the ceo that that that is at the top of the list any meaning even if it’s a second or third time founder even if it’s a founder we’ve worked with coachability is still top of the list

is arrogance a deal breaker for you

um you know there there is brash and there is arrogance brash we’re pretty good with you know hey i can do this i got this you bet against me i’m gonna go kick your butt that’s a little different though than arrogance which is how dare you don’t you know who i am that’s a very fine line and i think we’re good at knowing what the difference between the two of those are because brash and swagger we like a lot arrogance and i went to this you know i kind of i went to this school and i came from here guess what that doesn’t play so well at bullpen with our kind of blue collar mantra but brash hey you’re gonna underestimate me because i went to the i went to the unsexy school in the philly suburbs yeah we kind of like that

as well as as well you know last time you were on the show you had this great quote i can’t remember exactly what it was but it was something to the effect of vcs are not innovative that was three years ago i i’d be curious to see if you think it’s changed or you know how do you see the the venture industry around you and you know what are the i guess what are the what’s broken about venture what are the challenges that you still see

so i think that this still is the big challenge most venture funds are started because it’s my turn it’s my turn to get back it’s my turn to be on the other side of the fence i want to be just like so and so but better i wanted to be just like so and so but i’m better looking that’s a hard way to go and one of the things i always monitor are who are the people going into ventures with true truly unique and different models and i tend to hear a lot about them because my lps will go hey martino somebody came in with an idea as crazy as your 10 years ago you want to meet them and it’s funny us us different thinkers in venture all end up knowing each other because the lps who don’t know what to do with us refer us to each other and hope to get an opinion i always love it actually when an lp says i heard this crazy idea you want to meet him or her i guess i want to meet him or her yes i will To help that person, as opposed to, you know, again, it doesn’t mean you aren’t better looking and better than the person in front of you. But just like product differentiation and enterprise software, I’d rather be different than better, better is harder than different. Very good.

What do you do in situations where you’ve got a portfolio company, you know, metric looks down, you invest, you’re working with them, and something is not clicking. Right. The product market fit just isn’t there. There’s there’s a lot of positive signs. You really like the business, but you can’t get velocity, you know, and traction in the desire market? You know, how do how do you work with those founders? And, you know, where do you go with the companies that kind of stall a bit?

Yeah, well, I think I think the best example of this was we were in a company called doubledutch was one of the first mobile only CRM systems, we invest in the company and a half million in revenue, it, you know, got big time investors made it the 35 million in revenue. But ultimately, the product market fit wasn’t even at 35 million in revenue. The product market fit was really not there. And as I think, you know, Nick, those are the hardest companies to deal with, where you just, it’s painful, because you kind of feel like you did all the stuff on the checklist. And it just didn’t work. And and doubledutch, I think is our poster child for that where ultimately, they had a direct sale for a couple million dollars after having raised a big amount. And they just never really had the product market fit. The product was a little too bespoke for each of its customers. And it just didn’t work. And those are tough. And by the way, most of our failure mode, and bullpen is like that. It’s boring. Sometimes you get asked Tell me about a Tell me a great story about what didn’t work. And like they’re all boring. It’s like, the company got there. And the product market fit wasn’t so good. Or we hired the wrong salesperson like sorry, the the stories aren’t really all that fun. I mean, I can tell you about the time someone tried to throw me in jail for running an illegal gambling operation at Bandol. That’s a fun story. But But, uh, the ones that didn’t work are really boring, huh?

Yeah, you know, here at our firm we think about because we invest in companies all across the country that aren’t in the bay or in New York City, right? or, in some cases, the founder profiles aren’t quite central casting and, and maybe the business is a little off center. So it’s not pure software. And we think a lot about what do these founders lack, you know, being based in, let’s say, Omaha, that they have being based in the valley? I’d be curious to hear from you, you know, what can you help with most besides just from coaching and advising, but what, what can you help with most for some of these, these founders that don’t have all the advantages that founders, you know, within a stone’s throw of 15 other founders and every venture firm do have in the valley?

So Nick, let me geek out for a second, how much of a math geek Are you remember, remember Newton’s method from calculus class, vaguely? Like Newton’s methods from calculus classes, take a guess at what the answer is iterate a few times. The trick that the Silicon Valley founders have they start closer to the answer? Yes, you start closer to the answer, you have less iteration cycles to get to the answer. Good point. And that is the trick. And even when, and now it’s all different. Now with COVID. And the epicenter in San Francisco, I don’t think will ever return I think a lot will return to the valley in the suburbs. But the iteration time is so much faster. Because the random lunch meaning you have gets you closer to the answer when you guess the next time and can’t replicate that in Omaha or Nashville. And so now that the world is flat with zoom, maybe there’s going to be a way to mine that quickness of iteration cycle. But that’s always been the trick that Silicon Valley wielded over everybody else. Interesting.

Love it. So So Paul, I’m going to give you a question called three data points is a hypothetical, hypothetical situation with a startup. And you can ask three questions for three specific data points in order to make your decision. Okay. So let’s say your approach to invest in a post seed stage SAS startup, the founder does not come from big tech. Her HQ is in St. Louis. The sector is retail they launched 12 months ago, and they currently have 80,000 of MRR. Again, the catch here is you can only ask three questions for three specific data points in order to make your decision with three questions. He

asked, why did you start the company? You know something to the effective? What did you know that nobody else knew. I want to get at the insight that the founder had. And that’s very telling to me. So that’s a touch of your failure. One. Second one is I’m going to want to understand what the length of this sales cycle is great. Your 80k and revenue? Are they all sales that you did personally? Do you actually have anybody on your sales force that selling? Is it all founder lead? Are they a year to sell? Or three months? So sales cycle? What insight? Did you have their one and two? And then probably number three is going to be, you know, the corporate history? How much money have you raised? How much are you burning? It sounds really boring. But guess what, that’s the set of questions that are most predictive for our analytic model.

Wow. Okay, good. Good. You know, Paul, one final question about your model, and something that we think about a lot. You know, when you invest, I think you want to be a contrarian investor, right? You want to be contrarian and right. But there’s a line, right? Like, if you get too contrarian and too

out there.

Even with progress and metrics. If something is a little too off center, it can be very, very difficult to raise that that series A, from a good quality investor. So you know, where do you draw the line? And how do you? How do you figure out, you know, what’s contrarian and worthwhile to pursue? And then you know, those categories and those sectors and those profiles that may be a little too out of Vogue, that it’s, it’s going to be just an uphill climb.

So our last section of our investment memo is downstream financing risk and exit path. And that’s why that’s the last thing, it’s the sanity check on how off the reservation Are we going to go? If you can write in that final section, how it goes from out of the mainstream to in the mainstream, it’s probably not one we’re gonna do. Like, you have to tell me your story about Yeah, you know, what, you know, this, this, this little cosmetics company that’s using influencers and, and I can see how that company can be a billion dollar company. That’s our company Ipsy exceeded a billion in revenue last year, holy crap, right. We invested in them when they were at 5 million in revenue. And and you sat there you said, Can that company really become a big company even though it’s literally back then influencer marketing applied to the cosmetics vertical? I mean, is that really a venture business? But we quickly understood that the first movers in influencer marketing were going to be like the first movers in SEO, and they’d be big companies. yelp became Yelp because of SEO Ipsy became a Pepsi because of influencer marketing. And the first movers get to do that, and their venture outcomes. And so that is the last section of our investment memo. And so No, there are things that are too far off the reservation, because we can’t picture a world within a limited amount of time where this comes into the mainstream, which is our final sanity check.

If there’s one common reason that you pass on startups, so assuming they make the metrics and everything and you’re engaged, if there’s one reason that you most often pass what is that reason?

a founder coachability, it was what we talked about before, if there are many companies, they check all the boxes, and then we just get down to you know, does the founder have it for lack of a better word. And by the way, we like to do that last, a lot of venture firms, in my opinion, make the mistake of doing that screening first. That’s the only question that gets asked at the top of the funnel, that that question gets asked at the bottom of our funnel. And if there’s a common reason for us, ultimately saying no to a deal, we’ve done real diligence on it. We can’t get comfortable with how many mountains the CEO can move, and how coachable he or she is.

Paul, just to wrap up here you know, what are what are maybe the biggest red herrings are tech fads in the valley right now that you think will be gone in a couple of years.

Oh, I Geez. Thank God. I’m not in the valley for the last year. Right. Cuz, you know, it eats its own dog food a little bit too much. You’ve been in Philly for the entire year. Almost Right. I mean, with the quarantine rules. I have a house in Mountain View that I I can’t go there for 10 days, right. I mean, so it has been you know, I’ve been in my house in Silicon Valley, I don’t know five days in the past year. And so I have been out of the bubble for certain. But But you know, there are there are any number of fads, they come and go, I’ll actually answer the opposite question you asked. What’s one I don’t think will go away. I actually think the SPAC thing is for real because it solves the small IPO problem that went away. Right there used to be the two moguls that went public at 200 million traded up to 800 million. I think the spec is here to stay. So if I was going to bet on all the other crap that is probably crap in Silicon Valley, you could have it. I think the spec thing might be for real though.

see hmm interesting yeah i think last time i saw you it came by your office in downtown san francisco is probably one of the last times you know i made a trip and saw people in person


paul what resources have you found really valuable that you’d recommend the listeners whether they be founders or investors

there’s always a couple go to books they’re largely from people that we’ve worked with a lot david peterson’s play bigger on marketing and category design randy commissar is getting to plan b about dashboarding i mean these are these are indispensable tools for how to run your company and they’re perfectly in line with our mantra teach you how to run a company i’m sure there are newer books as well but those are two of my go twos

paul what do you know you need to get better at

these what do i need to get better at but you know i need to get better at no just being in a spot where i’m more comfortable with the new COVID world that we’re in right i’m fighting it’s still right i i had this nice rhythm i had i had this you know i was two weeks in california i was two weeks home and it was i did it for 10 years i got so good at it i knew who the flight attendants were on the plane i was going to be on right and and my body has been fighting this new COVID world yes things will eventually go back to normal but things are never going to really kind of be the same people are going to do more meetings on zoom permanently people are going to go to less conferences permanently they will go to conferences again and so i got to get better at fighting my desire to go back to what it was i like and accept that things are probably going to be different for a while

any anything we didn’t touch on that you’d like to leave with the listeners before we we wrap

well i tell you i think we hit a lot here i nick as always i appreciate it i can’t believe it’s been three years since we last talked i know we talked in person since then i do hope at some point we can do one of these in person

agreed and then finally paul what’s the best way for listeners to connect with you and follow bullpen

i’m best on email i know that dates me as an old fart send me an email paul at bullpen cap exactly what it should be i’m super responsive on email you got a pitch you want to tell me about something you’re looking for advice when you’re starting your fund i’m always happy to help always love to meet a new entrepreneur send me an email the website’s www bullpen cap calm but send me an email

that’s the easy thing there is paul you’re the man thanks for doing this really enjoyed it

good to see you nick thank you

you too take care paul