413. How AI Will Transform Legacy Industries, The Bull Case for Vertical SaaS, and the Future of the Series A Market (Jules Schwerin)

413. How AI Will Transform Legacy Industries, The Bull Case for Vertical SaaS, and the Future of the Series A Market (Jules Schwerin)


Jules Schwerin of RTP Global joins Nate to discuss How AI Will Transform Legacy Industries, The Bull Case for Vertical SaaS, and the Future of the Series A Market. In this episode we cover:

  • Investing in Lagging Industries and Overcoming Inertia to Adopt Modern Tech
  • Market Entry Strategies and AI Adoption
  • Market Size, Competition, and Funding for Vertical SaaS Companies
  • Logistics Investments and Niche Markets
  • IPOs, Deal Making, and Valuations in the Venture Capital Industry

Guest Links:

The hosts of The Full Ratchet are Nick Moran and Nate Pierotti of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.

Want to keep up to date with The Full Ratchet? Follow us on social.

You can learn more about New Stack Ventures by visiting our LinkedIn and Twitter.

Are you a founder looking for your next investor? Visit our free tool VC-Rank and we’ll send a list of potential investors right to your inbox!

Transcribed with AI:

Our guest today is Jules Schwerin. Jules is a Partner at RTP Global, an early stage firm headquartered in New York that has backed the likes of DataDog, Delivery Hero and DataRobot to name just a few. At RTP Jules focuses on investing in legacy b2b companies, a topic that we will cover in detail today and has led the firm’s investments in TealBook and Alyvs. Jules, welcome to the show!
0:27
Thanks for having minute.
0:28
Yeah, so we’re going to cover a lot of ground today. But first, can you give us a one to two minute background of yourself how you became an investor and ultimately, what led to joining our teepee?
0:40
Yeah, I feel like just like any other investor and venture, not really a one size fits all journey. Do touch on some of the high points, though. But I started my career off and consulting. Actually, it was right after the last recession. And at the time, DC was sort of a place to be is really the place that was hiring. So I started off in DC working in consulting, spent several years there, eventually moved out to the to the West Coast, started as a data scientist at Google was there for several years. And then I was working on this like, crazy, long project. And I don’t know two years into it, it finally wrapped up. And I came up for air. And I was like, Man, I’m genuinely like an inch wide and a mile deep. And I figured it was time for something else. I was contemplating grad school, ultimately landed on business school, after some advice from some close friends and mentors. And then after that, had had this idea that maybe being invested was was the right fit for me, I sort of tested it out in between years and decided that you know what, I’m gonna go for it. So actually graduated, didn’t have a job lined up. Thankfully, I had some good friends in New York, who let me stay with him, while I sorted it out, eventually landed at Bessemer Venture Partners in New York, spent several years there, and then finally made my way to RTP.
1:55
Awesome. So what did you take away from your time at Fs firm investment is obviously a huge tier one brand name firm. What did you learn that has informed the way that you invest?
2:06
Yeah, the time investment was great. Honestly, the people there are top notch, I have nothing but good things to say about practically all my experiences there. I think one thing I took away and actually still kind of carry forward is they have this notion of roadmapping, which is basically just coming up with a thesis driven or thematic sort of investing view. For me, what I sort of internalized the idea to me was you can walk into a pitch with an entrepreneur and you can kind of skip the first few slides on like the market, the opportunity, things like that, because you’re you’re basically at least almost on the same page as them where you can say, hey, I get it. I know who your competitors are, I know what the market is, I understand your approach. Let’s talk about the business. And that I think has been pretty helpful. Obviously, not everything can be straight down and straight down the middle. And you end up talking to a lot of really interesting companies doing pretty crazy things, oftentimes. So that’s that’s been something about the job I really love. But the road mapping is probably the big thing that I took away with me. Yeah.
3:02
And we’ll get into some of the areas that you’re interested in later in the show. But that obviously led to RTP. But for those that aren’t familiar with RTP global, can you tell us a bit about the firm your thesis in the area that you focus on specifically at the firm?
3:17
Yeah, I think one of the most unique things about RTP is we don’t have a traditional structure as most venture funds are. In a nutshell, basically, our structure is such that we can reinvest their winnings. So if we invest in a company, for instance, we invested in data dog, we’re one of the first institutional rounds, obviously that company is public now, we can reinvest the proceeds from that directly back into the fund. So again, back to the nutshell, our previous success is effectively funding our future bets. But we’ve been around since 2001. We’ve been in New York since 2011. We’ve invested in companies like data, dog and soul care in the US. We invest in delivery here on some up and Europe and companies like credit and MPL in India. So we’ve got an office here, and one of the partners running the office. We also have an office in London, about two investing partners there. And we have an office in India as of two investing partners there. So we, I mean, it’s in the name parts of the global. We kind of have to be global by default. So that’s us when I joined and 2020. The office used to be run by two partners. One was Carell Shankman, and the other was marohn. feature is now at CRV, and Murat left a few years before Carell actually retired, he reached the twilight of his career and decided to hand the reins over, which is part of the reason why I joined RCEP it seemed like a much more entrepreneurial experience to really inherit a firm basically that had really good bones and build out from that success.
4:46
So going back, you mentioned that you can actually recycle some of your winnings it sounds like beyond the three to five year deployment period for most funds. What I guess what allows you guys to recycle those pro recedes back into a Future Fund is that the structure of your LP base? Or how does that? What does that allows you guys to do that? Basically,
5:09
it’s a very flexible, LP base. So as seen, obviously, we will still make distributions and LPs are quite happy with that. But they’ve given us enough flexibility to actually just roll forward the winds and to grow the font. And so our funds, the size has grown from 50 at the first one, but 2,000,200 to 650. And the most recent funding rolled out in June is a billion and committed capital.
5:33
Well, congrats on closing the new farmer. Appreciate it. It’s
5:37
an interesting time to be raising. But Well, it
5:40
sounds like it was a successful one. Nonetheless, you know, one of the one of the topics I wanted to cover today was how you think about investing in my VC spaces where we’re at in terms of the venture ecosystem, and the adoption of some of the startup products serving those spaces. But, you know, first, maybe taking a step back is both at Bessemer. And RTP. You’ve been pretty active in these spaces, whether it’s automotive or supply chain, trucking, and we’ll get into the specifics, but overall, what is appealing you about these industries that have lagged behind technology adoption?
6:20
Yeah, I mean, almost by definition, since there are sort of lagging industries, in the sense of technology adoption, there’s just not as much software. So you can think of them sort of like Greenfield opportunities in a lot of ways. And also definitionally. Because these markets are smaller, like trucking or trash hauling or scrapyard software. Not a lot of folks are exposed to it. So there’s not a lot of awareness, there aren’t folks coming out of Georgia Tech, or MIT or Stanford saying, you know, I’ve got a great startup idea, instead of building Uber for whatever, I’m going to build an operating system for industrial scrap yards. That’s, that’s my passion. So these markets are largely untouched by modern tech. And that presents a pretty interesting opportunity. In my opinion.
7:08
One of the common reservations that I hear from investors that they often cite is when it comes to the scrap yards, recycling companies, what have you, is the lack of catalysts that are aiding in market adoption for a startups product, or the why now component. So yeah, buyers are becoming younger and more tech native. But aside from this, there appears to be fewer trends that are eating and adoption of these modern solutions. So I guess maybe a two part question. One is first who agree with that sentiment that there are not as many catalysts in these spaces? And then secondly, do you believe that there must be a strong tailwind in the niches that you’re interested in? Or is simply providing a product that is an order of magnitude better enough to drive strong growth?
8:00
I mean, no, telephones are always nice. And there’s more nuances to each industry. Trucking, for instance, I’m sure you’ve revenues are getting squeezed pretty pretty heavily lately. And technology that makes them more efficient, obviously can help with that. So occasionally, you do have tailwinds. Overall, I don’t think tailwinds are necessary. If you can build a product, it’s really an order of magnitude better. It’s just it has to be something that’s just so obviously, needed. I think you can get away with not having tailwinds if a couple of other things are true as well. What are those other things? So essentially, I guess we can get into sort of like what makes the market good. But what makes a market good in my opinion, but the other things would just be probably the presence of incumbents. So I’ll go back to the last investment I did at Bessemer. Because it’s kind of interesting. And the last one was shop monkey. We love their series B right before I left. And the big incumbent was a company called Mitchell one. And this was in like 2020, so to speak, COVID. And I thought it was kind of entertaining, or at least sort of ironic that the incumbent Mitchell one was founded at the date of the last pandemic 1918 Spanish flu. So when I’m talking about combat, I’m not talking about incumbent and like the venture cliches and saying, Oh, that company that was founded in 2018. They’re already an incumbent, they’re already legacy. No, this is truly, truly legacy. So if you have companies that have actually been around for that long, and it developed software that hasn’t been updated, and so many, so many years, often, you can really come in with a 10x better product even usually offer a better price. And that’s generally enough to break loose some of the folks that are already using that and come into this space.
9:43
How do you think through the inertia of switching costs for some of these legacy incumbents? So even if, for example, the incumbent was founded in the 80s, the 90s It looks like Windows 98 application But still, some of these spaces are a little bit reticent to adopt new technology that’s cloud based. Like how do you think about the inertia of the buyer actually ripping and replacing technology for a more modern solution? Like, are there other cases where you’ve seen it not work? And then other cases where you’ve seen it work quite well? And like, is there a general framework that you think through in order to get the conviction that they’re gonna be able to maintain venture like growth as they penetrate the market?
10:28
Yeah, that’s a really tough because often, one of the characteristics of a successful vertical software company is that they can be what I like to call us for the operating system of the business. So in every regard, really a system of record, as you probably know, it’s really hard to rip out a system of record, because it’s essentially how you manage your business. That kind of goes into some of the troubles of scaling these businesses in the early days, which is customer support customer success. I haven’t seen like a silver bullet, that is just hey, we’re, we’ve figured this, like x tactic out, therefore everyone will be willing to switch. Generally, it’s just a matter of how much better is your product than than whatever’s in the market today. And generally, if you have a team that’s really familiar with the market, and maybe has actually worked in the market, or own one of these businesses, or been a part of an organization, they can kind of hone in on that hair on fire problems. That’s generally what I focus on, is, let’s say you’re using an old software. And there’s just one pain point that really just aggravates everyone, if you can hone in on that, and almost like harness that emotion behind the hatred, everyone’s everyone’s worked in their life, probably with some system that they thought, Man, this is truly terrible. I think back to like TPS reports and office space, you can have that office space moment, where you’re like, Man, I would love to get rid of this printer, or these TPS reports, you can kind of harness that to really be an initial wedge for your product. And then generally, once you’ve gotten to that stage, the markets are pretty small and generally very interconnected. So if you can land a few marquee customers, word of mouth is usually a pretty effective marketing tactic after that, and generally, folks, if they see others demonstrating uses of product are willing to sort of go along with the with the hurt, or at least investigate. Yeah.
12:19
So going back to that acute pain, would you say that’s a homogenous characteristic across many of your investments in these legacy spaces, that the the entry point into the market is very thoughtful? And maybe they coexist with the system of record, perhaps if they can’t displace it immediately? Or how do you think about the entry point in general, I guess,
12:41
I think the entry point, so that pain point is generally homogenous across companies. I mean, it is, frankly, across most enterprise sales, or most other sales for that matter. If you can’t find a hook, like in fishing, if you just can’t find a hook, like something that you can pitch easily and quickly and articulately. It’s really hard to make a sale, if you come in and say, hey, my product does 12 things. And let me tell you about all 12. And I’ve got a slide for each one. That’s not a very good sale, you need to come in with a very pithy response, say, Hey, do you have a problem with x Grid? I have a solution. And also, by the way, it does all this other stuff? Yeah.
13:15
In one of the things I’m curious about from your perspective, is when you’re doing diligence, do you find that the market is generally receptive of new technology? Or do you find that there are a lot that fall into the late majority, or, you know, the very, the laggards. Because I feel like, at least one of the things that we’ve seen is when you talk to the market, it’s like, oh, that sounds great. But yeah, we’re not ready for something like that. And we often find that there’s a lot of pushback, despite it solving a hair on fire problem. So I’m guess from your standpoint, like, what have you seen, when you’re doing market research and diligence talking to customers? Do you find that there’s an inordinate number of customers that they can validate the problem, but they may not necessarily validate that they’re ready to buy today?
14:09
Yeah, that’s a pretty hard one to solve. I mean, generally speaking, getting quality customer feedback is hard. Books generally have a bias to the positive and say, oh, you know, I like your like your system? Yeah, I would say to that, my entry points typically around the Series A, so I’m typically talking to companies after they’ve got some modicum of product market fit and at least a bit of revenue on their top line. So at that point, it’s really a matter of figuring out what was the buying journey? Like, how did they discover these products, because mostly, the marketing budgets are quite small. So it’s generally an outbound sales motion. And the folks I mean, by definition, the folks that are the early adopters of a product are really on the other side of that curve. But you can really get to how big was the pain point? How painful was the transition? And if you can check all those box doesn’t say, you know, the pain point was gigantic and our business runs much better now. And oh, by the way, we didn’t incur too much brain damage while implementing the new solution. That’s sort of your Goldilocks zone where, you know, hey, this is a big problem. And it’s not too much of a lift. I’m still at that. I guess the flip side of that is if the replacement cost is too low, you make yourself open to disruption. Later on, you have fast ballers.
15:27
Yep. I want to go back to the notion of these market catalysts. Because now we have a technology catalyst with AI and AI has been around for a while, but we’re seeing generative AI for some of these spaces that maybe have not seen venture scale growth companies like in legal tech, for example, we’re seeing that now enable that possibility. I’m curious, from your perspective, are you seeing AI? Cause some of these markets that maybe you weren’t interested in three years ago, five years ago, all of a sudden make some of these markets in segments more interesting? or what have you seen from your perspective?
16:06
Yeah, from my perspective, I’d say my style is I feel like I should have been on the show Dirty Jobs micro, I tend to end up in like these very manual jobs for one reason or another. And I haven’t seen a lot of AI there, everyone’s got some offering that pushed AI into some form, function or feature. I haven’t really found the killer feature across any of the verticals I’m really paying attention to yet. I think fundamentally, AI is going to be horizontal, at least by the time we get closer to Artificial General Intelligence AGI. I think it’s going to have a slew of applications. And it’s fundamentally going to change many, many, many things. And none of these markets will be immune from that. But I don’t know in my my experience, and my sources. So far, I haven’t found anyone that has a duck killer feature for one of these markets. That just is a no brainer. Yeah.
16:55
Yeah. In some of these niche markets, how do you think about the size of the outcomes, because we’ve seen only a handful of companies that have reached a 5 billion $10 billion market cap at exit in these vertical SAS, are in regards to vertical SAS. And now it feels that these multistage farms are requiring not just $10 billion outcomes, but 20 $50 billion outcomes, given how much capital that they have on hand. And so I’m curious how you think about market size when it comes to some of these niche spaces? And how you think about there being downstream funding, just given how large some of these funds are getting in the outcomes that they’re seeking?
17:40
Yeah, I think that that’s a fair point. And I don’t know, maybe failed veiled criticism at some of the big crossover funds. I think that the market size is like the thing I think about when I look at any market, like what the markets I mentioned, I actually have looked at, he’s got several portfolio companies across logistics, logistics, generally speaking as a percentage of GDP, like a whole number of percentage of GDP, which is no small beans. I don’t know, if someone were to come up come to me with like an operating system for f1 teams like, clearly that markets way too small. And I don’t watch f1. I don’t know how many teams there. I would I imagine it’s probably not a danger outcome there. But yeah, look, I think that the nature of the market is such that you can essentially be a market leader. So let’s say the market size is $10 billion. You can capture if you can capture substantially most of that market, and then winner take most fashion, I think you can build a real nine figure top line business. I also think by default, playing in enterprise software, we’re not going to see the big outcomes like Google’s the Facebook’s, or metas of the world. And I’m okay with that, for instance, but like one of our most successful investments today, it was dashed or sorry about that part was, I want to say Dashlane was data, dog data dogs in a ballpark $30 billion market cap. Yeah, that’s not a small outcome. It was incredibly meaningful for us. The company’s doing very meaningful work. But we’re not really playing in the same league as the Googles and the or the alphabets in the medicine of the world that are hundreds of billions of dollars in market cap. So I think I’m okay with that. I still do believe that there is a large enough sufficiently large market downstream for these companies, if they’re growing in the fashion that I’ve seen many of them grow that they’ll be attractive targets for for downstream funding. Do
19:33
you find that the rounds are less competitive, and you don’t see these multistage firms show up because you’ve seen the other side as well being at Bessemer. And probably competing with the top 10 names that we’re all familiar with. And now RTP, obviously a big name as well, but focus on perhaps a different category of companies. So if you compare and contrast the two, what does competition look like in turn? terms of the names that you see show up in the Bessemer deals versus the companies that you’re looking to lead a Series A of at RTP? Are the rounds more or less competitive? Yeah,
20:11
I mean, I think as a rule, the best companies will always find funding, no matter the macro conditions. And to that, to that end, we’re not really seeing it be less competitive. In fact, often these companies that we’re finding out there, they have really good metrics, they have really good teams, they’re often attacking quite large markets, at least in the hundreds and hundreds of billions of dollars. So there is still plenty of competition. And so far, from what I’m seeing from my own portfolio, there’s still plenty of downstream appetite. I think so long as they continue to grow in a capital efficient way in large markets with really good growth metrics, and really strong teams. There’s going to be appetite for those. And at least so far, in my own experience, I wish the rounds would be less competitive. I don’t know what can I say that the award every every other investor off have great growth. Great team, great market.
21:02
Yeah. I’m curious to get into the founding teams here in a moment. But I’d be remiss if I didn’t ask you this, what are some of the markets or opportunities that are the most attractive to you right now, any markets that you especially have your eye on?
21:18
Yeah, so since I’ve joined as spending a lot of time in logistics, that’s a pretty broad term, obviously. But I’ve made three investments sort of in and around that theme. So far. The first one I made actually, when I got to RGP was to book but you can think of the kind of like a zoominfo, for ERP. So the thinking was basically, hey, procurement is generally the largest cost center inside any big enterprise. Automation, given at the time, like some nascent AI, just generally, digital transformation is always a huge push. The obvious beachhead for any of those efficiency, pushes would be your biggest cost center. And the realization I had was that there’s no good data within your within your ERPs, particularly within caremount. So in order to solve a data problem, you need good data, your software could be the most clever software in the world, and you still can’t solve the problem. So I found to book they’re growing really well. The team had a ton of domain expertise. And I made that investment in their series A back in 2020. There’s also Alvis, the most recent one. So they’re an all in one TMS Transportation Management System. Think of this as like the operating system for any broker or asset backed carrier, so overground transportation. So moving physical goods from I don’t know distribution hubs, Walmart, or anything in between. That’s an interesting one we can maybe talk about a little later, because I did them as a seed rounds. But this is one of the few products I’ve actually seen come out this, like, properly enterprise ready. So we will talk and talk on that later. And then next move sort of related to logistics as well. They’re a solver. So they’re essentially, in the field of Decision Sciences, there’s solvers that basically mathematic problem solvers. They’re competing with legacy solutions, like groby, and IBM. But their trick is they can allow non PhD specialists or devs to solve these really complex problems like routing. So like, last mile delivery, last mile, logistics, food delivery, routing, optimizing across many, many variables. So the I’d say logistics, sorry to go down a rabbit hole there. But I’d say Logistics is sort of like Northstar, at least for now. And I’ve found a lot of different ways to play it along the way. Yeah.
23:31
Aside from logistics, are there any more niche markets that might be surprising? Or perhaps that you were surprised by after you got the pitch? And you’re like, Wow, I
23:40
never thought that market would be as interesting as it is. But the way that the founder is able to articulate the landscape and the opportunity, all of a sudden, I actually think there could be a few outcomes or the way that there could be in logistics.
23:55
Yeah, I think logistics, I mean, we’re just gigantic, you can have many, many, many outcomes. I think there have been a lot of interesting pitches along the way. One that was actually pretty good. And we’re still talking to so I won’t mention that company by name is an operating system for country clubs and public golf courses. So think, welcome door. Yeah, I think open door for tee times or for pickleball times or for tennis court times. And all things in between. When I got the pitch initially, I was thinking like, well, that’s. And then I actually sat down and engaged with the founder and really did some work on it. And I thought to myself, like, wow, this is actually kind of a problem. It’s usually done on pen and paper today are a whole host of modern systems that, particularly if you’re touching consumers, their preferences matter deeply. There aren’t a ton of solutions that are really consumer ready, in the sense that in the sense that any consumer app would be ready for mass market.
24:52
Yeah. So going back to your time at Bessemer. You mentioned this concept of roadmapping. And one of the things that I was curious To get your insight down is how you actually think about going deep on a particular space. So like logistics, for example, I’m sure you’ve mapped out the key players, the segments that are the most interesting. But when you’re thinking about what’s next in spaces that are going to be the most interesting for you, and they’re going to adopt some of these modern solutions, but wonder, what are some of the antecedents that you’re looking for at the outset? Looking looking in? And how do you identify these spaces that you want to go deep on in the first place?
25:33
Yeah, okay, so identifying the spaces. Honestly, oftentimes, it feels like boiling the ocean cliche term, I know. But if you think about it, by definition, these spaces are generally less well known. They don’t have a ton of talent from the tech community flowing into them. So they just don’t have great tech, they’re often hard to find, unsurprisingly. But fortunately, we have a network of operators. And we also have several investments in and around these spaces. So I think our best deal flow comes from founder referrals, it seems like, even let’s say you invest in a mechanic shop, like your local mechanic in your hometown, or wherever you live probably knows a lot of the other mechanics, they all know each other. Similar for the founders, the founders in one space tend to know founders in an adjacent space, just the same way your local mechanic would probably know, I don’t know, your local park store person or your local windshield person. So we get a lot of warm referrals. We also have a team of associates here that are out in the market talking to different folks, I find we’ve we find really good inbound opportunities where folks have seen some of the work with them for and said, Hey, I liked your thinking on this. What do you think about my product? Yeah.
26:42
So going into the founder persona I,
26:45
I want to pose maybe it’s not a question, but I’m curious to get your opinion on it. Because it’s somewhat polarizing, where, on one side, you have investors that feel like they want the CEO with deep domain expertise they want the person that understands the market knows the landscape, the buyers, etc. That’s one bucket of investors. And then on the other hand, you have investors that feel like the largest outcomes actually come from CEOs that are very naive about a space and actually don’t know it well. So they approach it with a very open mind. Where do you fall on that? That debate? Are you more in the Campo? If you want the CEO in these legacy spaces that has that expertise? Or do you actually find that the CEO that’s more naive, and is approaching the space not really know what they’re getting into? are the founders that actually build the larger businesses in these legacy areas? Yeah,
27:43
that’s, I’d say, an age old question here. I mean, look, there are very good arguments on both sides. I think the guiding principle for me here is does the team somewhere within it have deep industry expertise, because I don’t know, take a pic, booking fitness classes. For instance, let’s say, I’ve never been to finish golf, my life never stopped from the gym. And I wanted to build mind body back when mind body was built. I don’t know, I think fundamentally, you have to have a right to win. And in any given market. And the right to win is generally predicated off of industry knowledge is generally credited predicated off of understanding the consumer in a way that you’re not completely and utterly relying on on, essentially reference calls. Because as we talked about earlier, those are really hard to do. So if the CEO is a little bit naive, but they’re grounded by some other folks on the founding team that have that domain expertise, I gain a lot more comfort, and I find those teams are often quite dynamic. So that’s sort of a non answer, answer. I will take it.
28:47
What are there other challenges that you feel like the founder needs to be uniquely prepared for when selling into these spaces versus a more nascent and growing market like data infrastructure or cybersecurity? Like, did they need to have a stronger muscle in a certain area, given who they’re selling into in the personas that they’re dealing with?
29:08
Yeah, that’s a it’s an interesting question. So you mentioned cyber and, and data infrastructure. And those in those domains, you can build a product. I mean, you can really put something together relatively quickly. And it’s conceivable some of your first customers could be massive enterprises. You could be selling into Goldman Sachs before your seed rounds done. The same as generally as a rule not true. And vertical markets are typically ones I’m interested in. It’s very seldom you’ll see a company come out of the gate, where they have an early stage product that’s truly ready for the big enterprises. And often the form of these of these vertical markets is distributed more towards longtail, like any. It’s still a standard distribution where you have a couple of big incumbents that are doing a lot of the business, but the tail tends to be a lot longer in these markets. So generally, you find yourself starting, essentially selling it SMBs, which is a completely different profile to like a cyber or an infrastructure company, I can think of very few cybernet for companies that are big today that started selling into SMBs. And SMBs have a completely different go to market motion of smaller ATVs. And they’re for smaller, smaller ACBS and therefore, smaller LTVs. They certainly have a different term profile given SMBs typically go out of business at a higher rate than then large companies. And then completely different customer support needs as well. So there are a lot of things that are fundamentally different. There are a couple that have sort of broken that rule. Alvis is a good example in our portfolio. The founder of that actually scaled his own freight brokerage company to a pretty impressive scale over about a decade, and decided all the TMS systems he was using, were not meeting his needs. So he actually built one internally. So this is one of the few that actually bucked the trend, where they’ve spent many years actually building the product out and are essentially eating their own dog food. So that’s one that’s very different. If you find a company like that, those are super interesting. If you can actually make enterprise sales on day one similar to a cyber company, our data infrastructure company, that’s one where my ears perk up, and I start to read it pay attention. But that’s the exception to the rule nine times out of 10. Yeah,
31:21
I wanted to shift gears a little bit. So away from talking about legacy spaces, but there’s been some news over the past couple of weeks that it feels like the venture ecosystem has been waiting for. And that is we finally have a few companies that have IPOs. And from your perspective, do you feel that the IPO window is open? Or what do you expect in the next six to 12 months regarding IPOs?
31:46
Look, if I can, because I could predict market timing, I’d probably be on some beach somewhere right now. Getting definitely still be in my job that maybe just more beach adjacent. Yeah, look, I think it’s fundamentally impossible to time the markets. It’s a fool’s errand. And also, it’s probably less relevant at an early stage than it would be if I were a growth investor, who was at one of these multi stage funds, then I would be really acutely tuned in to exactly what’s going on with all of the tea leaves. But overall, I mean, obviously, I still read the papers, and I still pay attention because I care about the macroeconomic environment. Obviously, it’s soft at the moment, and that’s affecting everything. But I don’t have any sort of sage wisdom on whether the IPO windows open when it’s going to open. I do think we’ve seen some super mixed results. Yeah. And I heard Birkenstock is going to be IPO in soon and folks are looking at that. with bated breath. I didn’t have Birkenstock IPL 920 23 Bingo card, but that’s something I will be watching.
32:45
Yeah. Well, I guess what about your stagers series? A? What are you seeing in terms of deal making in general in terms of PACE velocity? And one quick anecdote I was actually reading today I believe is Hadley Harris, had a tweet saying that the bar for series A’s are the highest that he’s seen over the past 15 years. And it’s no longer a million arr. It’s closer to two with strong retention, growth rates, etc.
33:12
I’m curious what you’re seeing actually being a Series A investor. And again, I know it’s hard to predict the future. But do you think that the bar is going to be as high as it currently is, at least for the next 12 months or so?
33:29
Yeah, interesting. Well, I guess you started your question doesn’t matter or for series A investors? I’d argue now, not as much like it’s not really affecting valuations. You can also take, you can afford to take more risks mispricing an asset at an early stage, that obviously it’s not good. But you can do it, too. There’s a lot of arguing that Wall Street and Main Street have fundamentally decoupled. Whether that’s true or not. What is true is that a strong economy is good for most of our companies. I’ve noticed a lot of companies that I’m talking to recently, complaining about elongated sales cycles. Offensively, that’s from all companies across the board. Really reexamining their p&l? Yes. I think it’s a good time to be a company selling something with a really firm hard ROI. Because that’s, I mean, it’s always a good time to be one of those companies. But I think in general, the volume we’ve got some internal tracking tools instead of RTP that our CTO maintains. We had a meeting about this last week, actually, it was on one of the slides. And I think the figure was something like 60% I can’t recall if that was deal volume or total dollars invested. The series A is down as soon as the market is down in the US year to date. So far, what I’m seeing as a lot of companies that I think the bar should be higher to be frank. I don’t think the bar is higher than it’s ever been, or at least here the bar is about the same as it’s always been. You We’re seeing a lot of companies that are coming forward that probably even a few years ago, I wouldn’t have judged as being above the bar. So I think the volume has gone down a bit. The quality at least anecdotally has gone down slightly. I think the bar is relatively unchanged. I also think generally giving advice saying, Hey, you have to be at a million arr. You have to have this net dollar retention, you have to have this other metric and this other metric. It’s not a one size fits all solution. I think it’s general advice. That’s generally somewhat useful. I don’t prescribe to that. Yeah, Jules, if
35:34
we can feature anyone on the show, who should we interview? What topic would you like to speak about?
35:40
Ooh, that’s a good one. I would love to hear the new CEO of Twitter, on why she took that job and what she’s changed so far. I feel like that would just be a pretty interesting conversation in general. Yeah,
35:55
that that definitely would be I haven’t heard that. Or that answer yet. But interesting conversation if you know her, Hey, we’re happy to have her by the way. So yeah,
36:03
I so sadly, I don’t I guess it’s x. Now I’m on Twitter. I’m pretty much a Luddite. When it comes to that stuff. I don’t even really have a Twitter. So I’m not probably not the best person to help you there. And
36:14
then what’s the best way for listeners to connect with you? I’m guessing, not on Twitter.
36:20
I mean, you can try Please, someone hearing this. Don’t make a Twitter for me. If you do. I’m happy to let you answer my messages. But email is fine. Usually the best way is to get a warm intro through someone. I’ve worked with a portfolio company and stuff like that, and I’m generally pretty responsive to those. Awesome.
36:36
Well, thanks again for coming on the show. It’s a pleasure to have you.
36:39
Thanks. Thank you.