Jon Keidan of Torch Capital joins Nate to discuss The Consumer Investing Framework, The Importance of Building a Brand, And Tactical Advice for Founders on how to find Product-Market Fit. In this episode we cover:
Investing in Consumer Companies, Pain Points, Market Size, and Founder Qualities
Balancing Top-Down and Bottom-Up Investing Strategies
Consumer Distribution and Unit Economics in Early-Stage Investing
Building a Strong Brand and Moat for a Successful Business
Consumer Social Platforms and Their Potential for Growth
Fundraising Strategies for Early-Stage Startups
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Nick Moran and Nate Pierotti of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.
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Transcribed with AI: Our guest today is Jon Keidan, the founder and Managing Partner at Torch Capital. Torch is an ealy stage fund with nearly $300M under management that invests in tech-enabled consumer brands, platforms and the b2b infrastructure between them. The firm has invested in some of New York’s largest successes in consumer such as Ro, Sweetgreen and Compass to name just a few. Prior to founding Torch, Jon spent nearly a decade in talent management in the music industry and went on to co-found InsideHook. Jon, welcome to the show 0:31 Thank you. Nice to be here. 0:32 Yeah. So everyone says they have a unique path to venture. But from reading about your background, it feels like you have one of the more unique paths that I’ve seen. So how did you go from spending a decade in the music industry to eventually counting torch? 0:47 Yeah, it’s it was anything but a straight line. In fact, when I left the music business, I didn’t even know what adventure was. So what basically happened is music was my love. I was a drummer, I learned there’s a music business beginning of college, I dove straight in I end up from New York. So I interned at record labels. I interned for anyone I could do for free. I when I was at WashU, I ran the concert committee and book shows, I mean, anything I could get my hands on. And within a couple of years, I had a pretty good network, I was already starting to work with developing artists. And my big break was that I worked with Dave Matthews very early on, and they exploded while I was still in college. And so I got to see on tech terms, what like drastic scaling looks like where they went from playing, you know, 1000 persons small venues to giant stadium and like a five year period, so learned a ton. They were incredible. Coran Capshaw their managers amazing electric ton from him. And I didn’t want to go down to Charlottesville. So I want to state the move back to New York after WashU. And I had other bands I was working with. And I was actually able to get a couple bands signed to major labels. And that’s how I got in the music business. Loved it amazing. We’re talking early 2000s, it turned out historically to be the very height of the business. So as soon as I got in, it started to decline. And one of the became the but at the time, one of the biggest areas was just tech was starting to eat the margins was starting to change consumer behavior. And the music business was the first industry top to bottom to be completely disrupted by tech. And I knew nothing about tech. But I also knew that the music business leaders did not know how to manage this did not know how to innovate. And sticking with what I was doing was not going to be represented recipe for success, which at the time really turned into being a dying industry, which is we live in but it took a while. So with that I realized I didn’t have enough skills to know what else I could do what I wanted to do. And so actually a lot of people are very senior well, and people in the music business were like you should go to business school, which no one did in that world. And so ended up applying to Columbia. It was like the last thing I wanted to do. I remember I felt nauseous the first day about my GMAT book and gotten to Columbia ended up going and I loved it, it filled in so many holes in my knowledge and understanding. And also learning about business and meeting all these other entrepreneurs and people who work from different backgrounds. And that was really interesting. But in parallel Tech was becoming a stronger, stronger influence across way more areas than just music. But that said, I knew everything in Media Entertainment was going to get disrupted like music eventually, so couldn’t go back into where my natural contacts and networks were. So a friend at McKinsey’s Media Entertainment tech practice said I should apply there and I was like Kinsey, why don’t want to do that. Thought about it. And I was like, Look, if anyone’s going to be able to understand data and where the world is going, as all these changes, it would be at a place like that. And I could learn a ton by working there. So ended up from the music business to McKinsey, which is pretty weird. And just put my head down and worked really hard, learn everything I could met people, it was just an incredible foundation. I’ll talk more about art and science in how we approach venture. But it was it was the art of music and instincts and people and deals and marketing. With the hardcore analytics and data and spreadsheets and understanding what makes businesses work and how you make decisions and how you analyze markets and so on. I was a very powerful combination. So I did that for a couple years, the tech area in New York continues to explode, basically, and a lot of friends now in that world. And so I decided I want to go into it. But on the way there I meet Jack Welch. And Jack had left GE years earlier. And we actually worked because a friend and entertainment asked me to help on some episodes of this business TV show Jack was on. And he asked me to be his right hand to start this education platform. He was starting online education platform. So my first startup was really working for Jack and Suzy out of their apartment and watched the garage and really worked a ton and be on business and on how to start a company. And so we got that company up and running. I then went to another ed tech company called Mendeley, which got sold a year later. And then I started a digital media company called inside hook which is really a nice mix of the content side and media part of my background with Exide and that company did phenomenally well, we really were sort of the destination in the US for sort of more cific guys over 30 Busy guys over 30, sir, have Thrillist and then us after that, and, and learn a ton and built the brand built the product built the team, but the sales understood where social media was really coming in, it was great. It was still in the early days of acquiring audiences. And then we had tons of brands crossing our, you know, crossing the platform who wanted to advertise with us who are online brands trying to reach your audience brands like Dollar Shave Club, and Harry’s and Casper and Warby and all of these companies. So I got to know those founders that saw how they were building these companies and how they were marketing and creating brands online. And so I guess that’s part of the other part of the story is always being attracted to talent. I loved looking for talent, when they were musicians, I also had a similar Knack in an affinity for finding talented entrepreneurs. And I started angel investing, taking some writing small checks, taking some of the money I made in the music business in 2008, nine. And so I was first money in ZocDoc and compass, early acorns and sweet green and Digital Ocean. And first money in stock has its ketchup, which got bought by Unilever. So a bunch of early hits, using a music term also propelled me to really understanding all these different businesses and the challenges these founders face as they scale as I stay close to them as they grew their businesses. 6:26 So I What was the ultimate step to torch then your angel investing Did you side institutionalize it given your deal flow or what was what was that way? 6:38 It was three things, I loved it. And it actually reminded me a lot more being a manager, you know, manager, you find talent, you really partner with their talent, you’re shoulder to shoulder thick and thin. You you you have a portfolio approach. And I realized I liked that a lot more than operating where as a company gets bigger your time is spent less creatively and how you build the company, which is important. You also spend a lot more time managing and the nuts and bolts of the business. And, you know, I love the big ideas. I love the business building, brainstorming and and it was a lot more fun. The second thing is well, we sold inside hook. So that was a good time and a reason for transition. And the third thing is I was getting really good feedback from founders. I mean, I think the approach I and now torch had is pretty differentiated. You know, everyone had torches, different backgrounds. I think we looked at the world a little bit differently. We didn’t come and work born into tech and reporting to venture. So we’re not as beholden to a lot of the ways other funds have traditionally done things. And we think a lot about brand and relationships with consumers, which is a natural trajectory from being in the music business growing an audience and it’s a hook growing an audience or customer base and sort of all the things you need to think about as you do that. And it how do you rethink that again, and again, as you scale a company? So that seemed to be real interested in that. And so as you said, institutionalizing it seemed to be the way to go. 7:55 Yeah, you alluded to this, but I wanted to circle back because it was something I’ve thought about prior to the show. And it seems as if there would be a number of analogous skills between music talent management, and also tech investing, whether it’s spotting talent, wanting the right to work with the individuals or helping them grow their career business, I guess, when you reflect on your time working in music, which skill would you say is the most prevalent or is translated the most to being an investor. 8:23 It’s definitely around identifying talent. And with that, winning the right to work with talent, you have to understand talent is unique to the Hollywood and entertainment infrastructure really is built around. That’s why like private equity folks and financial folks, you’ve just tried to muscle in there because it looks good on a white paper doesn’t work. There’s really unique aspects. And some of its being a psychologist, some of it’s just being a listener, some of it’s helping them get over hurdles that your network can help them exceed where they may, you know, right habit. So it’s just being able to see around corners, because you’ve worked with other founders or you’ve had your own experiences that helps them but it’s, it’s really that deep partnership, identifying. And then really that deep partnership that I think is most similar and relevant, of being used to that dynamic and good at that dynamic and helpful if that dynamic and being able to read the tea leaves around that dynamic that has translated to venture very seamlessly. What 9:20 would you say the commonalities are between music talent and tech founders? I’m curious to double click there and hear what characteristics might be margins? 9:29 Well, in each case, you have someone with a vision, and it’s generally not widely accepted. Otherwise, it would be unique, and there’s so many you have to have so much confidence, you have to show charisma. And that’s equally balanced with behind the scenes self doubt or uncertainty because you’re forging a new path are these decisions, the right decisions, one of the frameworks you need to make these decisions, and that especially in our world, where we really invest in the consumer ecosystem, it’s around you know, how are you building the brand And what are going to be every move you make Every sort of interaction you create for your customer or consumer? How is that going to be something to build off of, or that could be a problem later on. And there’s just so many parallels across that. But a lot of it’s really just psychology and helping founders or talent thinks think around corners and understand the ramifications of the decisions and how to make those decisions. 10:24 to segue to torch for those that aren’t overly overly familiar with the firm, can you give a quick overview, what’s the firm’s thesis and where you guys play in terms of stage? Sure. 10:35 So we’re based in New York early stage fund, we do precede through a really focused on seed. And we look at how is technology changing consumer behavior? And what are those new companies that are going to drive those changes. And from there, we really think about as the consumer ecosystem, which is, obviously consumer facing platforms, and tech enabled consumer facing platforms, but also the infrastructure layers underneath that are powering those companies. And it’s, it’s really interesting to look at both sort of above and below the line on that. And so we invest across both equally. So, for example, that’s healthcare, that’s FinTech that’s future of work, education. But it can also be a lot of the underlying layers, whether it’s helping medical providers, doctors have better data to make decisions, or quicker platforms that help healthcare providers, I’m using healthcare as an example, get paid back more quickly, or push patients through their system or quickly set up to do all the paperwork, or whether it’s a company like vividly where we know CPG really well, but we don’t do it very often. But we love the space vividly helps manage companies manage trade spat in which there’s been no clear leader in that. And trade spends an enormous tam is basically every time a brand, per retail store per chain per region has in real life activations with their shelf space and discounts promotions, they have to figure out ROI on that. And it’s one of most complex parts of the business and software has been is created 1000 to one better solution. So in that case, that’s an infrastructure play that’s helping all CPG companies. So those are examples of where we invest. 12:16 Got it. You know, many investors seem to shy away from investing in consumer companies, some claim consumers that or the biggest wins are already behind us. And I feel like this is especially true at the early stages where a lot of investors shy away. But I guess from your perspective, what do you feel that most investors are missing about investing in the category. 12:38 So consumers the one of the biggest categories in the world, and it’s always evolving, so you can’t ever say the best companies are behind us, you could have said that, after Google and Facebook, but then came Airbnb and Uber. And, you know, there’s there’s always new problems to be solved. And if you can do it at scale, huge companies to be built. That said, it’s very easy to be very careful and thoughtful about where you’re doing that, and what sectors and there’s a reason we ended up in healthcare and fintech because those are some of the biggest pain points and the greatest inefficiencies. And those create real critical chronic pain points in those areas that desperately people want to be solved. So that’s one. So just not looking at the category doesn’t make a lot of sense. But you do have to be very cautious and look at it very carefully. And I think that brings us to something we think about, which is the art and science of investing, where part of it is instinct on a founder on a space on something that’s maybe sleepy, or there’s no technology in it, but as a massive scale Tam, but then the science is like, Okay, what’s the data? How are they going to acquire those customers? Does that work at scale? How do the unit economics evolve, we build models ourselves, even though we’re early stage, we build their own models on our own assumptions. May haven’t been in music, and no, there was no analytics. And then going to McKinsey and seeing the power of that mixing those has been a key sort of pillar of torch and the team is very much people with real finance and banking and structure backgrounds with operators who have a much more instinctual approach, you really need to mix both of those. So you can easily go down the wrong path of consumer that something that looks good at the beginning, but you haven’t been able to analyze it all the way through those can there can be ceilings, or or dead ends, and that that you have to be cautious of. Yeah, 14:27 this is subject I definitely want to go deeper on because you’ve invested in some of the most notable consumer companies row acorn, sweet green, and then just a few. And I want to understand more deeply how you guys approach investing in these business businesses, especially at the early stages, like what are the key ingredients are the must haves in each of the investments that you make in consumer? 14:52 So I’ll answer this in two parts. If you look at a general hierarchy, it’s pain point number one is this age truly critical chronic pain points, something that will not be dependent on economic cycles, something that people really need immediately, or is a massive trend, that’s not just a temporary trend, like, healthier food. And, and that’s something that people we really firmly believe want and need. The second component is market size, it’s got to be a big enough market and tam scale that it makes sense that it’s a venture bet, and if they if they fulfill, to solve this need is that a big Is there a big enough audience there. And the third part is founder. And that’s the thing, I think that’s the most important after the first two, because more of the business model, because great founders when they know where they’re headed when their Northstar is the business model may change, they may find things are different when they’re in the ground, but they will figure out how to get it done. And and then business model, of course, has to make sense. So those are the four sort of overarching underneath that there’s certain things we really love. We love subscription models, we love founders with a really unique perspective or experience or capability to solve a specific pain point. We love the ability and understanding of how they’re going to upsell and cross sell once they own that relationship with a customer, consumer. Generally, software across the board, no physical components, we will break that sometimes, but the vast majority of software, and, and when all of those things, and then there’s an element of morality of surprise and delight, that really makes companies start to go on their own volition. Beyond just marketing spend, or every marketing dollar goes a lot faster. Because you acquire a customer, they tell 10 people, and they’re a bunch of examples of companies that did this very well. They created tremendous brands. And what’s interesting is when you look at the market leaders in all of these sectors a brand was created, and the one who created the best brand one. So products can be copied and models can be copied. But if you have the brand and the customer trust you, that becomes much harder to break. And that’s how you really get to be the number one sector leader kingmaker. 16:55 Yeah. How do you guys think about top down versus bottoms up investing top down? Meaning, you know, there are these spaces that you identify where there might be opportunities, whether that’s healthcare FinTech, which you alluded to, versus bottoms up, which some of the best consumer investments we’ve seen are these very strange or contrarian ideas and spaces that people didn’t think were that interesting. But when you hear the founders vision and their narrative behind what they’re building, all of a sudden, like, your ears perked up, and all of a sudden, like the light bulb goes off. So from your perspective, how do you balance building a thesis in the space versus keeping the open mind in finding that founder that has that very unique insight in a space that maybe wasn’t that interesting from the outside looking at? 17:44 Totally, it’s funny, there’s a in our pipeline today, a company that’s a marketplace for cattle and livestock, which clearly we know nothing about. But it wasn’t an outright past, I think we’re gonna dig deeper, there were so many interesting market dynamics that sounded on, you know, theoretically, really, really compelling. Second that founder. So yes, you have to be open minded. But the truth is, it’s a balance, there’s certain things we know and as a lot, most things we don’t know. And so our deal sourcing is really, it’s not divided at all sort of comes together. But we have things that are top of mind that are theses we have one, for example, is we think small businesses are the biggest power of the US economy they’ve grown, it’s 3x, it’s growing 3x times the rate of the economy. It’s just massive, that includes solopreneurs, side hustles, turning into main companies, independent contractors, and so on. We look at them as consumers. And we think they don’t need enterprise tools or want that they need a whole new set of tools to manage business, or someone who doesn’t really know how to manage business, they know how to do something that they love that makes the money. But they don’t know how to manage that as a business, from taxes and accounting and employees to just marketing spend, and how do you think through payments and finances and working capital, etc. So we’ve done a lot of investing around that. So our ears are very tuned if we see something in that category, to jump on it. And we have a lot of experience and investments that we can reference check, gut check, industry check, etc. So that’s sort of a top down approach, but with a very open mind about what could fit into that category. Bottom up is you find a great founder, a great idea that we never thought of that goes back to the art of the art and science. And it’s really, as you said, being open minded. And we’re very careful not to lose that because I think we’ve done very well as a fun and torch really keeps an ethos of Have you got the thing that’s obvious is probably not the thing that’s can become a really big company. So having you’re here today, like what is that thing? That’s a little not obvious, but that can be something very powerful. 19:43 Yeah. Another thing I was curious about from your perspective is so much of consumer seemingly lies on distribution, like getting the market and unique way where you’re able to acquire these customers in a CAC that makes unit economics work. Are there any frameworks that Think about, broadly speaking, and I’m sure this differs on the type of consumer business. But how do you guys think about distribution, given that these companies are so early, and whether or not they’re gonna be able to crack that, to really scale? 20:13 It’s critical. So the first thing we do is our own chord analyses. So we will take their assumptions on scale and acquisition costs. And then we will put our own assumptions. And we have a lot of from experience and past companies and knowledge on the team. And we’ll scale those up and see what does that look like at X amount of users or, or consumers or customers, and why and like, those numbers go up a lot. I mean, when you have you think of his concentric circles, when you hit your target, it’s probably pretty cheap. It’s a need to have for a bunch of people, you capture them, when you go one center concentric circle out, if some people may need to have and you have to reframe your messaging, and it gets more expensive. Also, if you start to do really well, they’ll be competitors driving up prices. This is the big issue with pure consumer plays. And we do a lot more than that. So that’s us saying anything about the consumer ecosystem. And frankly, right now, we’re doing very little that we’re doing a lot more b2b to see that b2c, because we see it’s so hard for folks to get distribution. But that said, coming from inside hook has been very helpful. There’s content marketing, community marketing, product, lead marketing, there’s so many other ways to get traction, outside of normal acquisition spend. And we are very much looking for, for founders with the edge on that with knowledge or from the backgrounds where that can be a real propellant to get them out of the gate without just spending. But in this environment, where capital is scarce, spending to get out of the gate isn’t gonna work. Just no way. 21:38 Yeah. What do you is it fair to say that most investments you make at seed have traction? Or will you also do pre revenue for these consumer? So we’ve 21:48 done that we’ve looked when we started in 18, it was mostly post traction, early traction, then that changed. And so now it’s definitely pre traction, it’s generally post product. But yeah, I mean, there’s no other way to to be a good early investor, you’re really talking eight rounds, I think if there’s real traction or later than seed, I think, good founders who have a very clear vision, and especially they built a good product, it’s up to the funds to figure out what that audience is, and if they believe they can capture that audience. So I would say a third is traction. And probably two thirds is maybe some beta testing or just pre traction. Got 22:24 it. But there’s enough meat on the bone to do cohort analysis. 22:28 Yeah, because we know who is their theoretical audience, and we there are all sorts of comps we can run in? And also, what’s the strategy, if they don’t have a good answer and haven’t thought this all the way through through multiple points of scale. And that says a lot about the founder, they actually don’t know what they’re doing well enough for us to want to invest. But if they’re like, Look, I’ll give you example, now, organics, one of our company, it’s about to be FDA approved, but new infant formula that’s different supply chains much better for you, organic, healthy, etc. We knew when we invested FDA approval is going to take two to three years. It was us in initialized and Ally court. And so she spent perfecting an FDA approvals and doing all of that. And that’s all she could have done. But that’s not all she did. She came from a product background. And she created an app for new moms to create a community around asking questions, especially around feeding with a with a timer of when you should feed kids and breastfeeding versus formula and all these things. And she has something like 500,000 users on this app, but she hasn’t even launched yet. That’s a founder has thought about this. And granted, the moms come and go. But she’s got a great base for when she launches her product. That’s the it’s she’ll use her own platform to do her own advertising that will be zero cost. And so founders who thought do these things are the sort of attractive Tingler years that we want them back. And if they’re just like, oh, we’ll just spend on Facebook and then do media? None. That’s not going to work in today’s environment. 23:53 Yeah. Are there other elements or parts of the framework beyond distribution? I mean, we talked about unit economics a bit. Are there any elements that are less obvious that you as you guys think pretty deeply about as an investment team, when making when making decisions on consumer companies? 24:11 Yeah, I mean, I think there’s a bunch, and we’ve covered sort of the main frameworks, but then it really starts. So he talks about a founder being unique or having unique perspective or advantage. You know, what does that really mean? And we will reference deeply, deeply probably 10 people in an industry and five people around minimum you sort of you know, could be he could be 12, but really reference checking and using our network. And one of the key points with torch is we’re a new fund, we didn’t come for venture. So we needed to have tentacles to get smart fast. And so we did a really good job of pulling in an investor base for us and LP base of experts in various fields. And that has been one of the smartest parts of our strategy, very hard people to reach. But once you have them in play, they can get you smart in areas where they know how to directly to so we can get much smarter on an industry than than just like what our own team can research. And that’s, that’s been a huge area. I also think, you know, per sector, we have our own expertise, you know a lot about healthcare, whether it’s providers, you know, all the different stakeholders, providers, payers, you know, health systems, hospital systems, different ways of getting customers, the pharmacy side, like there’s so many different components, we now understand that world well enough that we can have a much more sophisticated perspective. So we have different lenses as we go through different sectors. Got 25:33 it. But one of the things that we think about quite a bit, and we’re primarily b2b investors, but is how the company is going to build a moat over time, like the trajectory of the moat. In you, you’re talking about Brandon, this was really interesting, because it had me thinking, like, what are the companies that have done an excellent job at building brand? versus those that maybe have done a mediocre to poor job? What did they do differently during the lifecycle of their business? Like, is there anything tactically, that founders should be thinking about from day zero, or they want as they’re building their company, in building their moat, primarily through brand, but what differentiates a company that builds a great brand versus one that builds poor to mediocre? 26:17 Excellent question. It starts with the founder. So I tell a story. When we were especially we started how we think about founders, you ask a founder, not even investing just in general, having precede them, you ask a founder, Hey, how’s your company doing? A lot of founders who say, especially in San Francisco, we’re doing great, we just raise this much money from this fund, which is a means to an end, that’s a terrible answer. And that’s not good. That’s bad. The second answer is like, Oh, we did this much revenue, increase the margin and all that. And that’s a perfectly fine answer, to focus on the business and driven by the business. But the third founder says, does a talk even mention those things, all they’re talking about is the product that they’re building, and the new innovations they’re making to it, and how it’s gonna affect the end user. And every single one of my biggest companies have invested in that you. You met any of those founders by introducing today. And I got them on a conference call said hey, how’s the company doing? That’s all they’re going to talk about. You’ll have to talk about numbers eventually. And they won’t even talk about how much they’ve raised. Whatever, it’s irrelevant to them. It’s just, that’s just getting them money so they can do more. It is a really clear delineation, the sweet green grass pride best in the world at that row guys are best in the world today, acorns best in the world at that, you know, you name it, every compass was amazing at that Rob wrapkin. All it wants to talk about is his agents, and what he’s doing and the new things that are creating for them and make their lives easier, or for their customers easier their clients. So that is a really clear delineation, a lot of non venture funds, don’t think enough about that. So what does that mean, underneath the hood? What’s your messaging? What should be very clear value proposition? Is that the right one? How are you messaging that? How are you marketing that? Are you fulfilling that? Are you backing that up? If they’re issues with consumers, Casper, I think part of the reason their brand was their messaging and branding, you know, illustrated design was great. But they had incredible, incredible customer service. That was surprise and delight that people told their friends about customer service as part of it product is equal to messaging. And how’s that? And then how does that evolve over time? And how do you re message what you’re doing over time? And how do you make people want to follow you over time, there’s so many components to this that have to be kept in mind. And where we see the biggest challenges for companies that have success is your boards are saying, Tell us your recruiting, you know, your recruiting and hiring and tech builds and finance and all the stuff, it’s very quick that even if you nail that at the beginning, that is the cause of your success. That gets lost in the shuffle. It’s become a B, C, and D RAM company. And those founders that continuously make every single decision, from their brand promise to their customer that builds trust, are the ones that do best. And this is there’s not one company as seen that hasn’t crushed that some companies have Uber because it was such an unbelievable experience to be able to get it was the best product, they might have had the best brand imaging but like for a customer, not for the drivers, but for the customer. You have a car showed up it was reasonably priced. And it got you where you want it, you have to wait that long. Like that was the brand promise, they fulfilled it. They may have done even better, but Lyft had murkier promise. And they their product isn’t as good frankly. And so it’s it’s you and they’re not as big your company. So you really see how that elevates. But all those things come into play. And you have to balance them with everything else. And they evolve as you grow. And that’s where torch has really been helpful is we’ve seen this and we’re reminding in the boardroom, hey, if you make this decision, how is this gonna affect this customer? And what’s going to be what are the pros and cons? constantly thinking about your end consumer? It sounds obvious. Let me tell you is us an investor, you know, it starts to get sidelined really fast by a bunch of more seemingly urgent things. And those founders that are always razor focused on that end consumer are the ones who are able to build those brands. Yeah, yeah. 29:59 I want to talk about the current environment a little bit more later. But along this thread, you mentioned something earlier. And that is around you need to be careful when investing in these spaces, you need to you need to be pretty exacting and precise with the areas of consumer that you’re investing in. And I mean, you have the luxury of time where you’ve been angel investing porches now, I believe almost six years old. And over time, like we’ve started to seen, we’ve started to see the performance of some of these consumer companies like Allbirds and Warby Parker, that they had a lot of clout around them, they’re doing quite well, they even IP owed. But now we’ve sort of seen a reckoning in the market, it’s for a variety of reasons, which we don’t need to get into. But from your perspective, have you changed your lens on what types of companies used to be interesting, that are no longer interesting? Or has it always remained fairly the same? 30:58 So we have but we took a very open, non conditioned view and we started torch. And that’s exactly how we end up in healthcare. We didn’t start towards saying hey telcos, come here, because vertical, we started torch obviously had a great background in tech enabled consumer, and, and CPG, and a bunch of things that people assume we were going to be in. And we looked at the environment, and we’re like, No, those are not the best opportunities. And I think those companies were built were phenomenal companies, they built great brands, there’s still even at their worst day ability, you know, billion dollar plus company. So let’s that’s very serious, but they were tech companies. And the VC community treated them like tech companies. And they were built at a time when the cost of marketing and acquiring customers was much, much cheaper in the in the mid 2000 10s. You could build those today. And so we realized that, frankly, and we realize healthcare, bigger tam software’s effects could create much bigger impact, create accessibility, lower prices, much better customer experiences, and there’s almost an infinite amount of help that the people needed around health care. And that became our biggest vertical. So to start with, we never ended up anchoring the fund in those spaces, although it seems like we would we really anchored in healthcare and fintech seemed to be the first to, you know, just many, many opportunities, and then SMB, you know, small business VCs. But that said, we have evolved, we did a lot more consumer facing companies in those categories, and fun one and fun two, we’ve done fewer. And we’ve done a lot more b2b, b2c, or pure infrastructure companies. And that’s because just as you said, it’s very hard to build those companies at scale and maintain growth. But we still through understanding those companies. We know the layers below what’s needed. And those companies have infinite companies to serve an infinite sort of b2b customers to serve. And that’s where we’re spending a lot more money. So yes, it has evolved. But it didn’t evolve from doing pure consumer to now it evolved from doing sort of different types of categories and taking our consumer brand lens in sort of more categories, or that has been ignored or has been a terrible experience, and bring our consumer lens tech companies that can really transform those verticals. 33:14 You know, last question around just the topic of consumer prior to proceeding. It’s something that I’ve heard coming up quite a bit in conversations I’ve been having with other investors, and it’s around consumer Social, I’m curious to get your take on how interesting consumer social is these days from, from your point of view, it the posit that I’ve heard from a number of folks is that we’re due for another Snapchat or Instagram or Facebook, which it feels like a reason that is, is pretty light. Like it feels like there’s a lot of air and that would without a lot of substance. Do you feel similar that consumer social is interesting? And enough? So I’m curious, what what are the reasons that are driving that interest? 34:03 Sure, social is interesting in theoretics. In practice, it’s virtually impossible. There’s so much noise, there’s you need to get an like, usually get a network effect. That’s like enormous Steven just got off the ground. You know, there’s some tick tock competitors and so on. None of them are real competitors like, and the only way you do that is you create a product and experience so drastically different and gets like in the in the mind of people like like a in the back and you subconsciously grabs them so severely, that they can’t help themselves but use it. And for that to happen. It’s so hard and difficult. I would definitely not call it a category that’s investable. Is there an interest as you said at the beginning, and we talked to the beginning, is there a founder as a unique idea and perspective and the capabilities to build a product and they beta tested and they see immediate traction and morality? Yes, but that’s just the beginning to get those scale is hard. So are we due for one I don’t know. We’re due for something if someone creates something truly brilliant, will it gain traction? Absolutely. And we’re always keeping an eye out for that, you know, no one saw the Tick Tock phenomenon coming. But they created something so special and unique and differentiated from Snapchat and instant everything else, that people couldn’t help using it. And then the network effects blew it up. And there were algorithms, they were phenomenal tech builders, but all politics around an aside, phenomenal tech builders, you know, their algorithms are unbelievable. And you can engage someone for hours on end, and they do so but it’s not do it’s not like, you know, customers again, bored of all this, let me see the next thing. Somebody has to hit them over the head and all their friends and their friends, friends and their friends, friends, friends, and then maybe it has a shot. So I would call that hype, but you always have to be open. Someone is going to do that in the next two to three years. But is it a category? Yeah, 35:49 yeah. Yeah, on this topic of building a great product over the past few years feels that rounds, they’re just getting larger and larger. But you mentioned this before the show, the best way to find product market fit is by solidifying a killer product with a lean team. But today, it feels that these rounds are getting so large, and they’re breeding behavior from founders that actually makes it more challenging to do this, or seemingly so I’m curious if you feel that way. Or I guess, what do you what is your perception, their current environment with how rounds these large, how large these rounds are getting to find? I 36:30 completely agree with you when around is too big, it is the biggest detrimental piece to a founder. If they hit everything out of the park, maybe it ends up okay. But too much capital allows you to be distracted over hire, not focus on your product market fit pay for growth. It’s like every bad behavior, even the best founders are subjected to it. And so I totally agree, it’s it’s independent evaluations are higher, so then the expectations are higher. And if you don’t fit those valuations, you’re really in a lot of trouble and can kill the company, a good company can be killed that way. So yes, big rounds to early disaster. That said, I don’t actually agree, I think with the exception of AI rounds have come down a lot. And valuations have come down a lot in the early stages. I mean, frankly, in the growth stages, almost no rounds are getting done period. And it is probably true. The best ones are getting overinflated because there’s growth, investors are so nervous to write a check into anything that they all sort of crowd around a couple of winners. And that over inflates them. And that creates some of the problems were discussing. But in the early stage rounds have come down a lot. I think the numbers are inflated because of AI. But the the therefore if the valuations are down, they’re raising less money, and it’s in a much healthier place, I would say we only did two new deals last year, we normally do eight, and we’ve done seven this year already. And that’s just a testament to that most of them have been in the 10 to 15 million cap range with founders raising from one and a half to three. That’s the right amount that gives you enough to see if you can prove something and you absolutely don’t want to perfect something you want to deliver product, tested, iterate, test with a very lean team and make that money lasts as long as possible. Because let me tell you getting to an A round in this environment is really tough. The a round metrics that are required look like be rounds two years ago, and you have a lot to prove out. And you’re probably not going to get much more money than that easily. But that really focuses founders and focuses their team and their goals and things don’t work, they have to pivot or change very quickly. And I think that’s very healthy for a company. Because by the time it starts to get traction, and they get that a round, they deserve it. And they’ll probably know what they need to do with their money. And it creates a much healthier dynamic for a scaling a company successfully. 38:43 Yeah. You alluded to this, but maybe more tactically, or if there was a series of checkboxes when a company is starting out, how do you think they should be thinking about fundraising and then allocating the capital that they have. 38:57 So that maybe the only capital they get used to be like a year, year and a half or two to three years. So they better be very, very careful with it. And they better not spend much on growth or anything except finding real traction, before they put any more money behind it. That I mean, they just got to make it last is that until they find traction, when they get traction, they should pour a little more money. If that starts to move the needle, then that’s a very natural time to go out and raise a seed extension or even in a for they proven it out. For example, we have a company durable. That’s a platform for as we talked about SMBs a lot for you know, new, new new founders, new entrepreneurs who don’t know anything about business, sort of services businesses, we’re not really talking tech across the US. It starts with a wedge product and building a website in 30 seconds answering three questions that takes you CRM takes customer data and it takes payments. And it really helps you get your business up and running. But the whole point of the platform it does everything around. I know nothing about business, but I do X service, it makes money. What do I do and it manages all that for you. that web builder was a very viral turned out to be a very viral product. And they built since launching last spring, 5 million websites, there were around a 3 million arr. And the truth is he had a ton of money from a seat in the back, he had a small precede and a normal seed. And he had probably 75% of the money in the bank as when he got to like a 2 million error or like four months or something. So that’s an example. And then we started saying, Look, you shouldn’t be spending more now to market and really, you’re showing you something that people want. Now you got to start really getting it out there. And he ultimately decided to do an A and we had a phenomenal hey, we’d like seven term sheets and spark capital event A and it hasn’t been announced yet. But it’s very exciting. And, and he’s got most of the seed money, let alone this money. So he’s got a ton of runway, but that’s the way you do it. But he created the product. It was him in a couple of people’s like three or four people, Max, he never even had a marketing until he showed traction. He was just so iterative about the process, that if things hadn’t gone so well, he had a year or two to continue to figure things out before he really needed to be in a cash out situation. Yeah. 41:01 How would you assess the current environment where we’re at today? Especially with the IPOs? I mean, we saw cloud do Instacart? The they underwhelmed a bit? What do you think the IPO market will start to open back up? 41:16 I think it’s going to be uneven. I wouldn’t say it’s totally closed. But people are saying, Oh, does this mean it’s open? And I think it’s not. There’s so many headwinds and economic uncertainty right now, interest rates that everyone thought were sort of past the rising interest rates, I think that’s gonna continue to rise. And there’s a bunch of levers that that are clearly on the macro level, making this a very, still a very uncertain environment. Plus the recession. Everyone said could come hasn’t but it doesn’t mean it won’t. And if it does, that’s going to also have a big impact on a lot of these companies and where they’re spending. So with all that uncertainty markets or psychology, it’s not a great time to IPO. I think there just has to be even if things get worse, that’s okay. But people just have to feel we’ve hit the bottom. And we’re not there yet. We’re also not there repricing growth rounds and pre IPO rounds. You know, those companies were much better than anyone anticipated at cutting costs or raising extension rounds. So they haven’t been repriced yet. Some famous ones have but some have a lot haven’t been repriced. And so even as a category, we don’t even know where they’re sitting before they go public. So there’s the uncertainty and in the late stage growth, and there’s uncertainty in the IPO market. So I think it’s going to continue to be rocky, where I am starting to see a little bit of movement as in m&a. And I think that will pick up as there’s more of a repricing or acquires feel more confident in what they need or what the value of some of these companies are that earlier. And I think with that you’ll have some companies growing by m&a, which will make them more IPO. What ready more quickly. But I think we’re we could be in pain for another year. But definitely another six, six months. I wouldn’t say before the spring, I expect to see any sort of signs of daylight. 42:49 Yeah, certainly feels that way. John, if we could feature anyone on the show, who should we interview on what topic would you like to speak about? 42:57 Like an investor, investor, 43:00 founder, whoever comes to mind? 43:01 Well, there’s one investor I do think is really interesting, who I’m a big fan of and he’s doing things differently is Dan Turon. He’s a fascinating story he built managed by q two very successful New York startup, sold it to WeWork, at the height of WeWork, where a lot of the week, crash TV show takes place, sat next to the inner circle of Adam at the height of the success and all the way down and learned a ton and beyond just being a founder that had success. And so the craziness just a fascinating subset of stories of being inside we were a huge portion of his team that worked for him has gone on to create successful startups. And when you can create a dynamic that you have all these people who feel confident and have enough skills, they learned that they can go do something on their own. That’s pretty special. That’s the first half. The second half is he started a fund called gutter. And I love it. It’s called gutter. It’s all places people, other people that look for investments. And he again is very contrarian, and has very deep specifics as he thinks about investing because he’s both a real operator. And he also saw scale and we work he built his own company from scratch. And he’s investing and I just think he’s a fascinating guy. I’m actually NLP in this fun, because of all this not not telling you not to it’s not because I’m no penis front. I’m a fan of it. So I’m also put my money where my mouth is. But I think he’s a really interesting guy. And he’s not very public. So he’d be a very interesting guest for you. 44:22 And John, what’s the best ways for listeners connect with you and torch 44:27 listeners can hit us up on the website is probably the easiest way. And you know, whether it’s a founder, you know, we’ll have the right person on the team, check in with them, but go to the website, and there’s an email there and that’s the best way to reach us. 44:40 Awesome. Well, thanks again for doing this. Appreciate your time. 44:44 Yeah, appreciate it. Great questions. There’s 44:46 a lot of fun. Thanks, Jon.