Seed to Exit
Welcome to Seed to Exit, the ultimate podcast all about startups, scaling, and venture capital. Your host is Riece Keck: Startup veteran and recruitment entrepreneur.
Join us as we dive into the journeys of startup founders and venture capitalists who share their insights, successes, and lessons learned from seed stage to successful exit.
Each episode, we bring you candid conversations with startup founders, executives, and investors. Whether you're looking for inspiration, actionable advice, or a deeper understanding of the startup ecosystem, Seed to Exit offers invaluable knowledge and real-world experiences to help you on your entrepreneurial journey.
Tune in to Seed to Exit and get ready to be inspired, educated, and connected with the exciting and ever-changing world of startups and venture capital.
Seed to Exit
Greg Castle, Managing Partner at Anorak Ventures | Key Startup Success Strategies | Future of Tech
Unlock the secrets to becoming a tech investment powerhouse in our latest episode of Seed to Exit, featuring Greg Castle, the managing partner at Anorak Ventures.
Greg’s incredible journey from a retail business founder to a pivotal figure in early-stage tech investing will leave you inspired and informed. Hear about his unique transition into the tech world through a company serving the video game industry, and how that experience with 3D software and real-time tools ultimately led him to Oculus.
Greg dives deep into his fascination with groundbreaking technologies like AI, robotics, and computer vision, sharing how these interests have shaped his successful investment strategies.
In this episode, we also shine a spotlight on the paramount importance of hiring top talent for startups, as demonstrated by the success stories of Flexport, Anduril, and Rec Room.
Learn from Greg’s hard-earned lessons on the necessity of a "hell yes or hell no" hiring approach to ensure quality over speed.
We also discuss key geopolitical trends shaping the defense sector and the crucial advice Greg offers to pre-seed and seed-stage founders. Whether you’re a budding entrepreneur or a seasoned investor, this episode is packed with invaluable insights and strategies for navigating the future of tech.
Don’t miss it!
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Welcome to the first interview episode of Seed to Exit. This is your host, rhys Keck, and, for those of you listening, super excited to have you here and I hope you get a ton out of this. For the first episode, I'm joined by Greg Castle. Greg is the managing partner at Anorak Ventures Now. Greg has a ton of experience as an operator, founder and an investor. He's invested in over 150 companies at a very early stage and he has hit some 150 companies at a very early stage and he has hit some absolute home runs like Oculus, flexport, anduril and Mux. Greg brings a ton of value, both regarding his past experience as well as where he thinks the future of tech is heading in the interview today. So very excited for you all to listen. Let's get into it.
Speaker 1:You're listening to the Seed to Exit, subscribe and listen in for new episodes and enjoy the show. The early stage of venture because you're investing really in ideas and founders with some traction, but not a ton at this point, and some of the technologies that you have been investing in for the past several years are really on the cutting edge between AI, robotics, 3d software, computer vision, and so really excited to dive a little bit deeper into all that with you today? Yep, excited to chat Cool. So I'm curious, you know, again, you you're fairly broad in terms of the, the industries that you're investing in, but all of them are you know, like I said, on that bleeding edge level of tech. So I'm just curious what, what originally drew you to those spaces? And then, how do you stay ahead of the curve when it comes to identifying, you know, emerging trends and new technologies that are coming out?
Speaker 3:So my investment career began well before my investment career. I was a founder myself and so got experience raising capital, building a business and after that exercise and founding a company and operating it for about five, six years, I then jumped into tech. So my business actually wasn't in technology, it was actually in retail. We had to deal with a bunch of technologies in that, in through the front door, you had some exposure to user acquisition and what it took to get people through the door and what it took to accept things like online orders and things like that. But it wasn't my, you know, I wouldn't say I was a technologist, but it was something that always fascinated me. I then made the jump into technology by joining a company that was servicing the video game industry and it was essentially a software that game developers used to create games, and through that I got exposure to 3D software in all capacities, from model creation to various real-time tools and technologies, game engines and whatnot, and at that time the video game production space was very fragmented. There were a lot of different tools that game developers needed to use. Since then there's been some consolidation. There still are a bunch of different technologies that game developers needed to use, but I was in a really fortunate position that I was able to interface with a whole bunch of different people in the industry and learn a ton during my time in at that company. We subsequently were acquired by Autodesk. I then joined on Autodesk and had exposure to a whole lot more in terms of all of the suite of software tools that Autodesk offers that cater not only to games but also to TV, also to movies, and their bread and butter, of course, is CAD software. So BIM software and other kind of softwares related to building homes, building commercial buildings, civil engineering all that stuff, simulation software. And you know, the interesting thing about that is that a whole bunch of this software that was used to kind of model the real world is a bunch of the same software that underpins a lot of the emerging technologies that are happening today in self-driving cars, in robotics, in computer vision, all these different things. They're all essentially trying to do the same thing, which is replicate the real world in 3D.
Speaker 3:And I did that for a little while and started to get exposure to a bunch of different startups. One of the companies that I got exposure to was Oculus in the early days, and Oculus was founded by a few of my very close friends and essentially had a front row seat to everything that they were building over there. And that exposed me to a whole bunch of other areas as well, including robotics and hardware and a couple of other things, and my interest grew in these areas. It was really interesting to see, you know, the team from Oculus. There were four of them. Three of them had come from the gaming background and who I had worked with beforehand, and the fourth one was this kind of hardware prodigy who was Palmer. But as the three of them from the software industry started to spin up on robotics and hardware, I also was able to glean a bunch of interesting tidbits and facts from all of that. And you know one of the co-founders, brendan, who's a close friend of mine, his superpower is recruiting and he did an amazing job of recruiting kind of the best in the business on all of these, in all these different areas like mechatronics and and robotics and computer vision, and you know we would have these late night talks about all these exciting things that they were doing, and so my interest really was piqued by all of this stuff.
Speaker 3:Um, when Oculus ended up, uh, exiting to meta, I then was capitalized and and and started to make my own investments as an angel investor and was fortunate enough to be in a position where I could quit my day job and just start kind of full-time investing and rolling up my sleeves and and building a network in the startup community in San Francisco.
Speaker 3:And you know it was a really fortunate situation where, you know, at the time, the exit to Meta was something that everybody was excited about, not only the existing investors but the whole VC community.
Speaker 3:And so, you know, the fortunate thing about being a part of an exit like that in a technology that's so nascent, is that all of a sudden you become an expert in this field that you know you only have 18 months head, go out and speak to other VCs and speak to other founders, and really took that time to use the platform and build a platform for myself.
Speaker 3:You know there were people who were building VR-only funds and I felt as though the opportunity was so nascent that just to limit myself to VR didn't feel right, and so I started investing in a bunch of other areas that were kind of adjacent and then less adjacent to VR, or the thesis that I started to develop was that there's a whole bunch of these technologies that were being developed that, to those who understood them and knew how to wield them, had the potential to change industries, all kinds of industries, from waste disposal to defense, to security, to, you know, elder care and, and you know, essentially what I started to do is really look for these founders that had this knowledge in some of these really exciting areas and we're coupling that knowledge with specific industries or problem sets that they were excited about where there was a viable and a viable business there already, and look for investments according to kind of that thesis.
Speaker 3:And to this day, that's what I do. So you know we're going on a decade now and essentially Anorak is a continuation of that very thesis. You know we look for technical founders that are solving difficult problems across industries.
Speaker 1:Do you think it was a little bit of your background in terms of a founder in a non-technical space that played into your passion for using technology to solve problems in existing industries like you mentioned waste disposal, elder care, things like that industries?
Speaker 3:like you mentioned, waste disposal, elder care, things like that.
Speaker 3:Yeah, absolutely, I think kind of what I look for is the marriage of the technical knowledge and the business acumen you know, because we're investing so at such early stages, I don't necessarily need the founder to have built a business beforehand, but I need the founder to respect the business side of the business.
Speaker 3:It sounds very obvious, but oftentimes when you're investing in technical founders, that is not the case. They get incredibly excited about specific technical applications without real, without deep thought about the business that they're going to create around it, as well as without kind of deep thought and respect for some of the areas that perhaps seem a little bit more boring or easy, like user acquisition, profit margins, hiring and firing firing all of the basics of business. I think people can, especially technical founders can overlook how difficult that stuff is and it's a you know it's a different part of your brain that you need to kind of exercise for that stuff. You know it's. No, it is not often that you find founders that really understand both sides of it well, but when you do find them, they can be the unicorn founders, the Steve Jobs, the Elon Musk, the people who really understand both the technology and the business.
Speaker 1:Musk, the people who really understand both the technology and the business Well, and I think to an extent that's also why the sort of classic founder combination that often gets investments is you have the co-founders, right yeah, the jobs and the whys. Exactly right. And so do you tend to avoid startups that have the two co-founders and you really just look at technical co-founders, or what is the logic?
Speaker 3:there. No, that's a great point of clarification, which is that I'm looking at the founding team, I'm not looking at I don't need both the business and the technology in one person, but I need it in the founding team. And so, yeah, oftentimes, you know, I think there's pros and cons but there's no right answer between you know single founders that have the respect of both the technology and the business, or multiple co-founders that kind of can cover those two topics.
Speaker 1:So it makes sense. So as long as the total package is there, it doesn't really matter how they're distributed in terms of the founders or how they're distributed in terms of the founders yes, and the founders. The deep respect between the founders and their relative areas of expertise, I think, is also very key, so I didn't realize that you had such a front row seat to the founding and ultimate exit of Oculus. From a business lessons perspective, what are some of the biggest takeaways you had as you watched that company grow?
Speaker 3:The biggest takeaway was definitely the hiring part. You know how difficult and how much effort it requires to hire and retain the best people. I don't need to tell you this with your background. Yep, I'm preaching to the choir here, but is the part that I didn't understand. I didn't have a deep appreciation for and going through Oculus.
Speaker 3:That was something that I saw firsthand and that was absolutely key to to their, to their success. Bringing on the best in whatever field they knew was going to be super important to the company was key to them. Building, you know, the best team. I mean, look, I haven't had front row seats to many kind of generational companies, so I can't I can't speak to it, but you know they were. The team that they were able to assemble was the best for what it needed to do. They had been able to attract the best people in every field, both technology and business, to be able to build this machine. That ultimately led to, you know, one of the most successful exits from a time perspective and from monetary perspective perspective, I think, of all time. It goes 18, 19 months from founding to exit for close to $3 billion.
Speaker 3:That's incredible, and that was when the stock of Facebook at the time was trading at 70. And there was a good chunk of that deal that was done in stock. So the close to 3 billion was actually a lot more for people who were employees, who had hold periods, and for investors who are willing to hold on to the stock.
Speaker 1:Well, good for them. And yeah, I think you're right and obviously you're preaching to the choir when you say that but I think an underrated part, specifically when it comes to startup recruiting and particularly being uncompromising and building the best team, is that it is really hard to attract those best of the best candidates because you're working with limited resources you don't have, you can't pay them what a Facebook or an Apple can pay them, and so you have to be able to convince them to you know, more or less accept this massive potential opportunity cost to come, take a risk with you, and you know someone like me. We can do all we can, but if you don't have, you know, the founder or the executive team that really believes in recruiting can really sell that story, then ultimately that company is not going to be successful. So when you mentioned that one of the co-founders I think he said his name was Brendan his superpower was recruiting. That can make really all the difference.
Speaker 3:Yeah, absolutely. And one other thing that makes it even more challenging for founders is the hair on fire problem that so many founders have right when it's like we need, we need this person yesterday and, and you know, ultimately it can lead to people settling Yep, um and again. Like, even just speaking, even just hearing my own words, I think it is, um. I think two things. One is like people who tune into this podcast of somebody like yourself, who had success in recruiting, can listen to this and be like, oh, of course he's going to be saying this on your podcast. To be fair, I didn't bring it up hiring and retaining good people is just like it is like as deep as the ocean, like it is such a difficult thing that I think gets overlooked so frequently. Yeah, but not overlooked by the successful founders. I'll say that.
Speaker 1:Yes, well, and you're, and you're so right with settling too, because there is, it is very much that trade-off of. You know, time to hire, and I need this position filled yesterday with is the is to hire, and I need this position filled yesterday with is the is this the best person that's available at the moment that I can get? And you know it's, it's, it's in terms of the looking for quality, I think the one, the trap there on the other end, is that, oh, you know, I might always think there's someone better, and just never really having what it takes to pull the trigger. But what I'll often tell hiring teams when we're, you know, when we're debriefing or figuring out if we're going to hire someone, is that if it's, if it's not a hell yes, then it's a hell no, and you cannot be in a position to compromise because, I mean, ultimately, everyone mishires, it's just, we're all humans, it's a, it's a fact of life. But the chance of doing it when you're settling is so much higher and that just, ultimately, is such a a much more detrimental loss to the company than if you just waited, you know, maybe an extra month to find that right person.
Speaker 1:So, moving on, you know, obviously I'm in recruiting. I won't uh, I won't sit here and preach to the choir all day, but, uh, but glad that we're on the same page there Umoming out a little bit. So you know, you've been running Andirect now for nearly a decade and you've had a lot of home runs besides just Oculus. You've invested in Flexport, you invested in Anduril, you invested in Rec Room, all of which have reached unicorn status. Were there common traits that you saw, you know, early on, either with all these companies or with all these founders that signaled like, yes, this is a company we think is going to be a real winner.
Speaker 3:Yeah, obsession is probably the thread that ties all of these founders together Flock, safety and Mux and you know, all these founders are completely obsessed and dedicated to their business, and I think that is what is required if you're going to do something. I mean, if you really think about it, it is an incredible feat. It's not a normal thing to do. It's not how businesses are normally built. This whole wacky kind of venture capital model of building a know, building a company to multi-billion dollar, to a multi-billion dollar valuation, and, you know, within a few years, like that normally takes a very long time to do, and so if you're going to do it in this compressed timeframe, you need to absolutely dedicate everything to making that happen.
Speaker 1:Yeah, because there's sort of two schools of thought there. There's the ultra passionate, obsessed founder and then there's also the types of companies that say well, you know, I might not be the most passionate about waste management to go back to an earlier example but I recognize a market need and I have the know-how and resources to implement this sort of solution and I think this is something that could do well as a business, which I don't think is a bad approach. But when we're talking this needs to be explosive, high growth, then that's when the obsession comes in.
Speaker 3:Yeah, I don't think it's an either, or I think you can be deeply passionate about the topic at hand, but I think, ultimately, really, where you need to be passionate about is building. You need to be passionate about building a team. You need to be passionate about building a product. You need to be passionate about building a customer base. That's what I look for. So, yeah, I think that the topics are important. You obviously need to be willing to spend, you know, the next 10 years of your life focused on whatever topic you're going to pick, but, more importantly, I think you need to be incredibly passionate about kind of the mission and what you're built and kind of building.
Speaker 3:So passionate about all aspects of of growing the business, not just necessarily the problem that you're solving yeah, okay, love that so yeah, because I I think that passion I've worked with founders who have a passion for a specific industry or solving a specific problem and that passion can kind of blind you to the business, to kind of the growth, to the building you know it's especially in, you know, with our thesis of investing in technical founders. You can have a lot of founders who get incredibly passionate about the technology, but that can be tricky. I think you need to be passionate about building the product, building the company, building your customer base. So I think passionate passion can be a double-edged sword in some cases.
Speaker 1:Yeah, well, and I'd imagine you, you probably have to have a higher percentage of tough conversations with technical founders, maybe where it's like, hey, the technology is brilliant, but just the market opportunity you know, something like the CAC or what have you is just not enough to make this a viable business. Does that ever happen to you?
Speaker 3:Yeah, that happens to me all the time, absolutely All the time. It is a real balancing act and that's why, also, you know, I think I kind of thinking, I kind of think about building a business in terms, in terms of like gears on a car where you need to shift through the gears in order to reach your desired speed. The gears in order to reach your desired speed, and those shifts, I think could be big things. They could be replacing a CEO, they could be, you know, pivoting the business. They could be, you know, they could be any number of big changes to the business in order to reach that desired speed.
Speaker 1:So, when you think about these early stage startups because I know you're primarily pre-seed and seed, so particularly at pre-seed and also looking at these emerging tech fields that might not have an obvious product market fit yet, other than what we've talked about so far evaluating the technical founders, making sure they have the full breadth of business and technical experience what else do you look at when it comes to making an investment decision?
Speaker 3:There's really two components there's the founding team, there's the people, and then there's the market that they're going after. The belief is essentially that if you find the right team that is attacking the right market right, then they should be able to figure it out. You know, I think venture investors and investors in general generally talk about, like the people, the product and the market. At the earliest stages, the product is a big question mark, and so, really, what we're focusing on is the people in the market. Do I believe that this market is a large and growing market that is right for disruption, and do I believe that this is the right team to be able to execute?
Speaker 1:And in terms of the market, I know you'd mentioned to me one of your superpowers is skating where the puck is going, which sounds like that has the most relevancy to the market component. So how do you do that? What does your strategy look like when it comes to figuring out what the next big market looks like?
Speaker 3:Reading a lot about.
Speaker 3:You know what's happening in the world. Um, I think you know you can working in Silicon Valley doing what, what I do you can certainly, you know, I, I, I kind of think that there's like a bunch of different kind of news categories that are important to pay attention to. Your TechCrunch and your Hacker News and things like that are one of them. But another one of them is also kind of the macro statistics around what's happening there. So, how much money is going into different areas?
Speaker 3:Um, ideally, if there's an area where a ton of money is pouring in it's not an area that I'm that I that I necessarily want to play in where competition is super high, there's a ton of money that's being poured into it. Where competition is super high, there's a ton of money that's being poured into it. You know, I like to go, perhaps, where there isn't that much money being poured into a particular area Underserved markets. And then, lastly, kind of the macro picture of what's happening in the world, taking venture out of it population growth trends, you know, aging growth trends, crime, military activity, economics, all those different areas to kind of get a sense of where I think opportunities are.
Speaker 1:When it comes to macro events, how much do things like the overall economy affect what you're doing, like, for example, there's talk about rate cuts coming from the Fed? Do things like that affect you much other than your, obviously, your cost of capital, if you're raising outside funds?
Speaker 3:They do for sure. On the fundraising side, they certainly do. Yeah, it's certainly something that I take into consideration. So, yeah, it's certainly something that I take into consideration. How difficult is it potentially going to be for companies to attract the capital that they need to grow?
Speaker 1:OK, so if you look over the. But essentially.
Speaker 3:I'll say I'll say this also is that, like I look at it as my job to deploy the capital that I've been given by my partners. To deploy the capital that I've been given by my partners, and so, whether or not the economy is good or bad, there are always opportunities there. The public markets is a really easy example to point to of whether or not the stock market is going up or down. There are people who are making money, and so I look at it as my job to be deploying that capital and I adjust the strategy according to what's happening, you know. So if I think that it's going to be difficult to attract capital over the next three to five years, then companies that are more, that are going to require a lot more capital need to factor that in when making an investment decision Makes total sense.
Speaker 1:So, and talking about the future, you know, when you think about trends that investors should be paying attention to and founders just call it over the next three to five years, what areas do you see those being?
Speaker 3:I think global stability from a military and geopolitical standpoint are definitely one of those things, and I would say, probably the most pressing with what's happening right now. Um, but otherwise you know, there's so many moving pieces in this, in this world. I would be reticent to point to one thing in particular. I think that founders always need to have their head on a swivel in terms of what's going on in the macro economy, to react accordingly If money is really cheap to borrow, leveraging that to borrow, leveraging that money is really expensive to borrow or to obtain, you know, really being more efficient in your business operations, staying tighter. There's just so many different factors in there, but one thing that I'm paying a lot of attention to is what's happening on a global stage from a geopolitical standpoint.
Speaker 1:Interesting, and so you know, the obvious ones that are top of mind for most people right now are, for example, the situation in Ukraine, the situation in Gaza, so I'm assuming you're probably obliquely referring to those things and other related things. So are you, are you saying, for example, like defense technology at the moment?
Speaker 3:I think the two things that are happening that are really important are one it's a very unstable situation, and when there's a lot of instability, then there's a lot of spending on hardware and software that helps keep people safe and feeling at ease. And then, secondly is I think this monopoly that the defense primes have had on the US government for such a long time is starting to be challenged, and so the opportunity for incumbents to come in and shake things up and build real businesses is realer than it's been before. It's still incredibly difficult, but I think that it is. There is more opportunity than there has been in the past, and I think that that trend will continue.
Speaker 1:Reminds me of that Game of Thrones quote chaos is a ladder. So last question for you when you think about advice that you might give to founders who are in that pre-seed, that seed stage area and they're working on disruptive technologies that maybe you think the market isn't quite ready for yet, or they're just starting to get initial traction, what would your advice be to those types of founders?
Speaker 3:There is a philosophy that I really believe in, which is like it's A to B and A to Z, and I think that founders need to be able to both explain how they're going to get to A to B and how they're going to get to A to Z, and what I mean by that is essentially having real achievable milestones in the near term that are going to create that, those underpinnings of a viable business, but also being able to excite venture investors as to that long-term vision that they're building.
Speaker 3:And it's not something that I see that often from the outset with founders when I do, I kind of tend to pounce on it, but I think it is an incredibly important way of thinking that can really help founders attract the kind of money that they're looking for from venture investors, and I don't think they do it enough. Really, just the real simplicity of like here's how we're going to get to a million in ARR. Here are the step-by-step ways that we're going to do it. This is the timeframe we're going to do it in and, in the longterm, this is going to enable us to do this create the next defense prime, create the next major search platform, create the you know, whatever it is. I think both of those strategies need to be really succinctly explainable to investors. Love that.
Speaker 1:Well, greg, you dropped some awesome wisdom. Thank you so much for coming on the podcast today, and I think our listeners are going to get a ton of takeaways from this. Thank you so much. Pleasure to be here, thank you.
Speaker 2:Thanks for listening to See to Exit. If you enjoyed the episode, don't forget to subscribe and we'll see you next time.
