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
Ariel Jaduszliwer, Managing Partner at Brainstorm Ventures | Thriving in Venture Capital | Evaluating Founders, Global Opportunities, and Reducing Signaling Risk
Ariel Jaduszliwer, Managing Partner at Brainstorm Ventures, joins us to share his journey from Intel to the world of venture capital, offering unparalleled insights into founder-market fit and strategic investment practices. You'll uncover how Brainstorm Ventures remains nimble and industry-agnostic, crafting a unique approach through smaller initial checks that reduce signaling risk while aligning economically with limited partners. Ariel's experiences and strategies reveal the intricate nuances of venture capital, providing listeners with a deep understanding of what it takes to thrive in this dynamic field.
Our conversation also turns to the critical qualities of exceptional founders and the challenges faced by small funds regarding signaling risk. Ariel provides a masterclass on evaluating founders, emphasizing the importance of simplifying complex issues and articulating a powerful vision. We explore how Brainstorm's diverse investment portfolio allows for strategic flexibility, supported by a robust network that keeps the firm informed across various markets. These insights are invaluable for anyone interested in the tactical side of venture capital investing and founder evaluation.
Ariel expands our view to the global stage, highlighting opportunities beyond U.S. borders, with a particular focus on the burgeoning Mexican startup ecosystem. Despite political risks and varying investment landscapes, Mexico presents a promising venture landscape, partly due to evolving trade dynamics with the U.S. Ariel also touches on his role with Defy Ventures, an organization dedicated to transforming lives through entrepreneurial training for incarcerated individuals. His insights into reducing recidivism and fostering economic opportunities reinforce the transformative power of entrepreneurship, offering a hopeful perspective on creating impact in diverse markets.
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It's important for a founder to be able to distill a complex problem down into layman's terms Again, we're agnostic, we're not experts in every sector and really succinctly tell the vision and solution in a compelling way. So that's something that obviously comes across in those first meetings. In terms of founder market fit, which is critically important. It doesn't only mean this nuanced understanding of the problem because they've spent years in industry, but also the experience necessary to solve it right, Whether that be technical, having the right industry contacts, et cetera.
Speaker 2:Welcome back to Seed to Exit. I'm your host, Rhys Keck, founder at MindHire, a recruiting firm that helps venture-backed startups find the technical talent they need to scale. Today, I'm thrilled to welcome Ariel Jadus-Lewer, Managing Partner at Brainstorm Ventures, to the show. For nearly 12 years, Ariel has been leading investments at the earliest stages of some of the most exciting tech startups in North America, including unicorns like OpenTable, Zappos, KIO Networks and Turing. Beyond venture capital, Ariel is deeply committed to mentorship and giving back. He serves on the board of Defy Ventures, providing entrepreneurship training to incarcerated people, and mentors for programs like Techstars Miami and Unreasonable Mexico, and he is the co-owner of an 18th century palace in Barcelona. From his early days as an impact investor to advising foundations like Gates and serving on portfolio company boards, Ariel brings a wealth of experience and insights to our conversation. We're going to talk some more about his journey, investing philosophy and what's next for Brainstorm Ventures. So with that, let's dive in.
Speaker 3:You're listening to the Seed to Exit podcast with your host, rhys Keck. Here you'll learn from startup executives, founders, investors and industry experts. You'll learn from the best about building amazing products, scaling companies, raising capital, hiring the right people and more. Subscribe and listen in for new episodes and enjoy the show.
Speaker 2:All right, ariel, welcome onto the show. Excited to have you. Thanks for inviting me, absolutely so. There's a lot of stuff that I want to talk with you about today and you know you've done some really things, both in terms of international investing, working and investing in some, you know, very large brand name companies at a very early stage. But for those of you, of the listeners, who are not familiar with your background, just before we really dive into things, would you mind giving me an overview of yourself and your background and how you got to where you're at today?
Speaker 1:Yeah, definitely, I'll try to keep it brief, but, born and raised in New York City, my family's, from Argentina studied industrial engineering in undergrad, started my tech career, I guess you can say, at Intel Corporation, when once upon a time it was one of the more exciting companies in Silicon Valley, and then I've done a pretty random variety of things.
Speaker 1:So I did that for a few years and then, after getting my MBA, I worked briefly for the United Nations Development Program in Venezuela. I worked in strategy consulting for a couple of years at a group that was within Bain, called the Bridgeband Group. That works a lot with nonprofits, foundations, governments etc. And then I joined one of the pioneering impact investment firms after I realized that consulting definitely wasn't for me, worked there for a number of years investing in a mix of companies Most of them were consumer facing, some were tech, some were non-tech. And then, yeah, I think ever since, you know, 2015 or so, I've been pretty focused on brainstorm ventures, which I'm sure we'll get into, but that's our super early stage, super industry agnostic venture capital firm that we're currently investing out of its fund three.
Speaker 2:Oh, so you're a fund three already. Nice, tell me a little bit more about Brainstorm because you know I, like you mentioned you're you've kept it small on purpose and you've kept it industry agnostic. And oftentimes VCs, especially when they are a little bit smaller, they tend to specialize in, call it, two or three niche areas. I was just curious what's behind the decision to remain industry agnostic?
Speaker 1:Yeah, I mean even in terms of staying small, right, I think most VC firms, once they're able to achieve a certain degree of success, they try to grow their assets under management, try to increase the size of their subsequent funds. For us, to your point, both staying small and staying industry agnostic is really core to our strategy, and that's for a bunch of different reasons. In terms of staying small, for us, being able to write small initial checks really helps us get into some of the more competitive space constrained rounds that we're looking at. In many cases we're investing in founders before there's a round being formed, so that's not an issue, but in a bunch of cases it is, and staying small helps us get into those deals. This might be a little bit controversial, but another benefit for us staying small and writing small checks is that it minimizes the signaling risk when we're not participating in follow on rounds of some of our portfolio companies, so that we can really concentrate our follow on checks into those you know handful of best performing portfolio companies and concentrate our positions there without adversely impacting our other portfolio companies. So that's another important reason. And then I would say that I think it keeps us a little bit more economically aligned with our LPs. We're clearly not getting rich off of management fees. And then the last thing is you know it's not a reason for us in particular, but I think the data out there suggests that smaller VC funds tend to outperform larger ones in aggregate Obviously there's a huge variation from fund to fund but that that it allows us to invest in really the best deals that arise from our network, regardless of what industry, vertical or type of technology they they they land in.
Speaker 1:Um, you know, we really view ourselves as as a firm that invests in networks, as opposed to investing in particular, theses or, um, obviously, our industries or even technologies. Another reason that's a little bit particular to us is that it allows us to diversify away the sector risk within each of our funds, and that's important for us in particular, because many of our LPs are high net worths or small family offices who have very small fund portfolios. So, you know, from the point of view of a large institutional investor that's investing in 50 funds, know, one of the sectors we invest in goes to shit. Call it blockchain. That's not going to affect our fund too much as a whole.
Speaker 1:So I think that's that's important and, yeah, I would say. The other thing is, you know, I rarely invest in, you know, a thesis that I have in my mind for what the world will look like, and this kind of goes to the being agnostic. Instead, you know, I really rely on a founder to convey their vision for what they think the world will look like. That, you know, in many cases I've never thought of before and we're betting on their vision, not our vision. So I think that's that's a key component to the agnostic piece as well.
Speaker 2:Super interesting and there's so many things that you said there that I want to dig into further and I'm probably not going to remember all of them off the top of my head, but I'm going to do my best here. So, on the on the staying small side, just for context, you mentioned you're on fund three and that you remained relatively small throughout the fund. So if you don't mind me asking, what are the fund sizes of you know, say, one, two and three?
Speaker 1:You know. So funds one and two were slightly less than 10 million each, fund three at 15 million. Um, we'll start raising fund for next year and we won't exceed call it 25 million by any um stretch of the imagination. So so that's. That's. That's what we mean by small, pretty small.
Speaker 2:Okay, and so then, what are the initial uh checks that you're typically writing for? First investments, not, not follow-ons.
Speaker 1:So I would say, on average it's about $250,000.
Speaker 2:Okay, and then you mentioned that you also you don't want to write too big of checks also so that it's not too large of a signal for potential follow-ons.
Speaker 1:Just curious how frequently or what percentage of the time are you doing a follow-on investment from an initial yes, and I think the signaling risk has less to do with the checks that we ultimately write in the follow-ons and more to do with the fact that, since we're this small pre-seed and seed fund, for the most part there's no expectation that we're going to be playing a role in our portfolio company's series A.
Speaker 1:So when we do choose to participate in the series A great, and we can do so in a concentrated fashion, a large check for our relative size. But when we don't participate in the series a, the, the, the new investors that are coming into that, that are leading that series a, they're not going to ask oh, why isn't brainstorm participating? It's like no, brainstorms is a little fun. They did our pre-seed and or our seed there's because we're small there, there's no expectation that we'll be in in those in those series A's, for example. Um, I think you know we we tend to do meaningful follow-ons and let's call it three to five of of the companies in each fund's portfolio and, just for context, we typically invest in about 25 companies per per fund.
Speaker 2:Okay, so math wise about 10, 15%.
Speaker 2:Um, yeah, yeah, um, yeah, yeah okay so so, really, when you're talking about signal, you're, what you're looking for is to avoid it being seen as a negative signal, that it's like you don't have faith in the founder and it's like, no, we kind of did our part in what we were meant to do. 100 exactly got you okay. Um, I'm just curious. I mean, you know, of course, particularly atseed level, it's such a large risk. I mean, what are you even really looking for at the individual company level? You're, you're a hundred percent right.
Speaker 1:Um, you know at the stage we invest in um, we look for strong founders and founder market fit for, uh, first and foremost, um, what is that right? It's, you know, kind of demonstrated ability to be able to hustle, to be able to hack. Um, it's important for a founder to be able to hustle, to be able to hack. It's important for a founder to be able to distill a complex problem down into layman's terms Again, we're agnostic, we're not experts in every sector and really succinctly tell the vision and solution in a compelling way. So that's something that you know obviously comes across in those first meetings.
Speaker 1:In terms of founder market fit, which is, you know, critically important, it doesn't only mean you know this nuanced understanding of the problem because they've spent years in industry, but also the experience necessary to solve it right, whether that be technical, having the right industry contacts, et cetera. And you know we, I think, as most folks, we love seeing repeat founders and co-founders with the history together. It's a. It's a little bizarre, but I think two of our current portfolio companies have co-founders who are married to one another. Oh, really.
Speaker 2:Oh, wow, yeah, OK.
Speaker 1:Which I think is probably statistically above the majority of VC firms out there. But you know, being a repeat founder isn't isn't necessary. And then there's, you know, the other things that folks typically look for. Right, we want to see an opportunity to build a huge business with strong unit economics so that you know, if successful, the company can scale efficiently and become very profitable one day. You know, therefore, the market has to be large or become large in the next five or 10 years and ideally, the product or service that the startup is offering is an order of magnitude improvement over the status quo right that exists today.
Speaker 1:I would say we, you know, given the stage at which we invest, we want to believe that there's the potential for a hundred X return in each investment If everything plays out as well as possible. We we think about it from that point of view instead of having specific ownership targets in mind. For example, you know, this outcome can look really different for a company in which we invest at a $3 million valuation in the initial round, versus one where perhaps we came in at a $40 million valuation in the initial round. And, in terms of our due diligence when we're evaluating investment opportunities, what we try to do to be efficient is to identify and get comfortable with what we perceive to be the you know really small set of key risks that would prevent that particular company from achieving this type of 100X or unicorn type outcome and, you know, really honing in on those instead of doing a blanket due diligence on every aspect of the company. So, yeah, that's kind of how we approach investing and how we think about risk at the stage at which we're investing.
Speaker 2:So to press back a little bit on the industry agnostic component, of course that does diversify your risk, as in, like you said, if blockchain goes to shit like it did in 2022, then your whole thesis is sunk. But doesn't that give you some sort of limitation in terms of how well you can evaluate what that market will look like in the next five to 10 years? Because naturally, the founders are going to be optimistic. That's why they're founders, right.
Speaker 1:Yeah, I would say good question. I mean in cases in which we're further removed from the particular technology or industry, we lean pretty heavily on. You know what we think is a really strong network of folks that we're really close with and have built relationships over the last dozen, two dozen years and you know they help us assess those types of questions because, yeah, clearly our personal opinion on you know, we're invested in and currently doing an SPV in a really a really novel, groundbreaking gene insertion biotech company. That's kind of at the intersection of computer, computational bio, machine learning and biotech. My opinion on where that space is going means little to nothing. So we we lean close, we lean in on folks that are close with us, right, and that's what helps us get there so important to just have a strong advisor network.
Speaker 1:Yep, yeah both formal advisors and informal 100%.
Speaker 2:Okay, and then do those folks just typically come from your network? Are they LPs, other founders you've gotten to know over the year?
Speaker 1:Yeah, it's a mix. It's our network right, but what our network really means is it's peers, other VCs that may be focusing on those spaces, founders that we've previously backed, that they themselves understand those spaces or know folks that do, and just folks that are, you know, leading really, really interesting organizations across a variety of different segments of the kind of broader tech ecosystem.
Speaker 2:Gotcha, how do you approach it when you know, let's say, you meet a really good founder and they seem to have that founder market fit that you're looking for, but you think the model is not bad, but, you know, maybe not the best. Let's call it a, you know, six, seven out of 10. Is that still something you'd consider investing in because of the founder themselves, or what do you look like from that perspective?
Speaker 1:Yeah, I mean, I think my cop out answer is that it depends on how kind of demonstrably great the founder is and how you know mediocre or you know decent the business is. I think the devil is really in the details and kind of how well the founder can can make that case. Um, so in that case one of the risks that we would identify is shit, this market doesn't seem that attractive, either because of size or competitive landscape or or kind of inherent economics or what have you. How can we get comfortable with what the founder is trying to portray? Right?
Speaker 2:I guess. And also there's also the thought that if there, you know, is a, you know, mediocre to semi-good business opportunity, how great is the founder if they're pursuing something that doesn't seem that great, you know, does that speak to their decision-making skills? 100%, that's exactly right. So when you're talking about the investments and you mentioned 100x earlier, which is really what you would be looking for in an ideal scenario how many on a percentage basis? How many do you expect to actually hit that threshold?
Speaker 1:Yeah, I mean 100x. I mean we can return a fund several times over with one or two investments in our portfolio of 25 that reach those types of returns. Anything more than that is, you know, obviously icing on the cake. I think you know it kind of depends from fund to fund. There could be one fund where we have a bunch of 10 to 30x returns. It could be one fund where we just had one 200 X return and the rest of the portfolio wasn't. That didn't perform that well.
Speaker 2:Yeah Well, and I think too, the other thing that people often think about when they think about early stage VC is that it's all or nothing. It's either you hit that a hundred X or it's a total loss right, and I'm sure there are, you know, plenty of, plenty of total losses in the portfolio. But then you also have those companies that get to say the Series A, you mentioned earlier, the Series B, and then things may not go quite as planned, but then they do get a buyout or an acquisition level at that offer and you still get some meaningful return.
Speaker 1:Yeah, obviously, at the point of investment, we're always shooting for these home runs, but the reality is that you're happy when you know several of the companies in your portfolio end up getting these doubles or triples, especially if they had to overcome, you know, adversity, um difficult situations, and they still manage to to to have a pretty good outcome, right absolutely and you have had some home runs.
Speaker 2:I mean you back to unicorns. You've backed open table zappos in the early stages Turing. I'm just curious. I mean, are there any common traits that you saw when you were doing that early stage investing that you felt like Chuck Templeton at OpenTable Tony?
Speaker 1:Hsieh at Zappos and both Jonathan and Vijay at Turing were all proven strong operators with a really clear vision for where they saw the world going. In the case of Chuck, he was literally an operator as an army ranger prior to founding OpenTable, which at the time was called Easy Eats. You know, we have to kind of go back in time to a period when reservations were done by pen and paper. He saw a really interesting opportunity to disrupt this huge restaurant industry with software, beginning with managing the reservation process that restaurants have to do and and and, yeah, and. Then, with you know, tony Hsieh, who you know, as you know I'm sure, sadly passed away four years ago, next month actually. He had really rolled up his sleeves as a fellow board member at OpenTable and so we saw kind of his operating ability there and he had this novel vision for Zappos at the time that involved, you know, not carrying inventory and offering really incredible customer service for an e-commerce play like Nordstrom's at the time and still does, I think, offer in its brick and mortar locations. And you know now it sounds really trivial, but at the time this kind of relentless focus on the customer and servicing them didn't really exist in e-commerce. So we bought into his vision there and we knew what his kind of operating skills were.
Speaker 1:And then with, with more you know, much more recently with Jonathan and BJ at Turing. They had previously founded another startup called Rover, which they exited and where they actually used engineering talent overseas to scale that company more efficiently, and that was their inspiration for Turing, which you know, as you may know, is kind of completely AI powered platform to assess, match onboard and even manage top tier remote software engineers for what is now like a very long list of Fortune 100 customers. So, yeah, I would say those are the kind of. If you had to some kind of find commonality, those would be the two traits. It's the the operating skills and the and the the clear vision.
Speaker 2:Yeah, well, and it's also. It's funny. You mentioned that the you know, the focus on the customer and e-commerce seems like table stakes. But that's isn't that really? Just what a lot of unicorns do is is take something that at the time is novel and grow it so successfully that, yes, it then becomes just part of the public consciousness. Like, of course, I can reserve a reservation on my phone, why wouldn't I be able to? Um, I actually did not know. I I know. I know what turing is, I'm familiar with it outside of doing research for the podcast. I did not know that the founders of rover were, uh, also the of Turing, so that's interesting.
Speaker 1:It was a company called Rover AI. It was a recommendation engine, not a dog walking, Not the dog walking. Okay, I was going to say those are two very different things.
Speaker 2:Good to know. Okay, so you also then count. And obviously you know second time founder is great. You mentioned earlier for a time that they don't have to be, and over at OpenTable his background was an army ranger, so it doesn't necessarily have to be. You know company operating experience like biz ops or something like that, but something where expectations are high. You have to perform at a high level and for a consistent period of time, for a consistent period of time.
Speaker 1:Yeah, Although you know, just realistically, the overwhelming majority of folks we see have much more quote-unquote relevant operating experience.
Speaker 2:Of course, but yeah, yep, well, I love that you can see the potential. Yep, awesome, switching gears a little bit. You don't just invest in US-based startups, you also invest in Mexico City-based startups or Mexico-based startups. I was just curious where did the inspiration for that come from and how is the Mexican VC ecosystem yeah, good question.
Speaker 1:So I'll preface it by saying that you know we've been investing in Mexico on and off since 2000,. Believe it or not, I think that makes us the first kind of US-Mexico cross-border VC firm out there. We wrote the first check in Mexico's first unicorn, this company called Keo Networks, where we actually played a role transferring the initial technology that Keo Networks was based on from a company in our network in Silicon Valley. My partner, eduardo Rayo, grew up in Mexico, studied in the US and spent most of his adult life in the US, but grew up in Mexico. My family, as I mentioned earlier, is from Argentina and randomly, kind of over the years, had built kind of an interesting network of folks in the tech space in Mexico. So that's a little bit. You know why we continue to, to invest in in in the ecosystem, on top of a bunch of reasons for which we're bullish about Mexico specifically and also, honestly, latin America in general.
Speaker 1:Um, so some of these things your listeners might know, some they might not, but you know Mexico is the world's most popular Spanish speaking country. Mexico city is the world's most populous. Um, spanish speaking city. Mexico is the world's most popular Spanish speaking country. Mexico city is the world's most populous Spanish speaking city and one of the world's top depends, I think, how you measure it, but handful of cities in the world population wise, very high digital penetration. I think Mexico city is Spotify's largest market in the world and Mexico country is Uber's second largest market after the United States. Obviously, mexico shares this 2000 mile long border with the United States and I think roughly 10% of the US population is of Mexican descent.
Speaker 1:We're currently experiencing this really interesting and exciting near shore shoring momentum with everything that's happening with with China. I was actually at an event in Mexico City a couple of weeks ago with Ken Salazar, who's the US ambassador to Mexico, and he told us that Mexico just surpassed China as the United States largest trading partner, which, which is interesting. Honestly, I think some of the growth in trade is actually from Chinese companies who set up shop and manufacturing facilities in Mexico to both avoid tariffs and take advantage of NAFTA. I guess now it's called USMCA, you know, but still, directionally, you know things are moving in the right direction and you know this is more at a regional level, but despite the growth of the startup ecosystem in LATAM, which, you know, we've experienced firsthand over the last, you know, five or seven years, there's still relatively low VC investment as a percentage of GDP in the region as compared to similar regions, like Southeast Asia is the one that comes to mind. Yet Latin America has had more success cases than Southeast Asia or some of these other regions that are comparable. So I think there's still a really important opportunity for VCs in Mexico and Latin America.
Speaker 1:Another thing that I've noticed is that in you know, in the early days, what would happen is you would see a lot of founders in Mexico and I think this is true for Latin America as a whole that we're basically tropicalizing models that worked in the US and just applying them to their domestic market in Mexico and just fine tuning the model based on the realities of being on the ground in Mexico or in Argentina or what have you instead of in the US More and more. Which is, you know, makes me proud is you're seeing founders still do that, but you're seeing a lot of founders that are actually building companies in Mexico and Latin America now that are innovative companies worldwide and they're competing on the world stage, and they just happen to be companies that are based in Latin America, um, but they're competing with players around the world Um, and I think that's been um, you know, kind of a strong um indicator of of the their ecosystem you know, really progressing Um. So it's been, it's been great to see.
Speaker 2:You mentioned that there's been less activity, despite more GDP, in Mexico as opposed to Southeast Asian countries. Why do you think that is? You mentioned that there's been less activity, despite more GDP, in Mexico as opposed to Southeast Asian countries. Why do you think that is?
Speaker 1:I don't know. I mean, I think I think part of it might be that I don't really have a good answer for that. I think there's people view Mexico and Latin America as having a lot of political risk. I think naturally a lot of the dollars that would go into Mexico, for example, would come from the United States, but the United States has this huge, vibrant tech ecosystem of its own, Whereas maybe in Southeast Asia there's more wealth nearby that they don't have as many alternatives for where to invest that capital as money in the US would have. That's just kind of a hypothesis.
Speaker 2:Is there a language barrier at all, or do most of the founders tend to speak English in Mexico?
Speaker 1:Most of the founders speak English. Yeah, and honestly, you know, culturally I think when you compare the US to Mexico, culturally there's so much more aligned and you know there's a lot of US-based and Sand Hill Road-based VC firms that invest a lot in or historically invest a lot in Israel, in China, that's kind of kind of comes to a halt. Culturally, time zone wise, etc. There's just so much more commonality with Mexico and Latin America that I think that's a non-issue. If anything, I think that's a reason to invest in Latin America.
Speaker 2:And do then most of those I know you mentioned. Some of the startups are now competing on the world stage, but would you say most of the Mexican startups are servicing the Mexican population, or what percentage of them tend to go international? That SaaS products. Anyone can use it Good question.
Speaker 1:I think most of them are still targeting the Mexican market, but I think there it's, there's, you know, step one is the Mexican market.
Speaker 1:Step two oftentimes is is becoming market leader in Latin America, whether that be Spanish speaking Latin America or Latin America including Brazil, which is kind of an animal of its own but obviously a huge market. But there there are companies in Latin America that and some of them are in deep tech, for example that are from day one targeting the global market. I think that's one place where Mexico might be at a slight disadvantage of, let's say, in Argentina, where, you know, mexico in and of itself is an attractive enough market, where a lot of founders just view becoming the market leader in Mexico as a win, whereas countries like Argentina or, you know, basically all the smaller countries in Latin America, have a mindset that's a little more similar, I would say, to Israel, where they know that their domestic market is small and then so from day one they're building for a global audience, because they can't achieve significant success just from being a dominant player in their local market.
Speaker 2:Yeah, it's like if you're the number one in Ecuador. It's like you're the biggest kid in the neighborhood.
Speaker 1:So that actually works as a little bit of a disadvantage to founders in Mexico in some ways versus founders from smaller countries.
Speaker 2:Super interesting. Okay, so that's the opportunity. What are the challenges from an investment standpoint?
Speaker 1:I mentioned that before. I think there's always currency risk. You know, for us in particular, we're more focused on Mexico and I should say, you know, in each of our funds I would say you know, 75 to 80% of our portfolio companies are US based and then the remainder tend to be Mexico based. But I would say that, you know, for the Mexican peso in particular, it's been relatively stable versus the US dollar for the last eight years or so. So we don't view that particularly as a risk, but I think other folks do.
Speaker 1:I think it's important to in order to be able to get into the more most interesting deals. It's important to put in the effort, obviously, and invest the resources to maintaining and growing a presence and a network in country, right. And then you know I will say that things have gotten more competitive in Mexico with the entrance of many US and Sand Hill Road based VC firms over the last five years or so, given a lot of the reasons that I gave before. But obviously, on the flip side, that's a great development for Mexican founders and I think it's great for the ecosystem overall.
Speaker 1:Another challenge that not only affects Mexico but I think affects Latin America as a whole and probably all kind of developing ecosystems or most is, there tends to be a lack of growth capital. So you tend to see a lot more early stage funds in the early days and less growth stage funds that can kind of take those companies from. You know, beyond the series A that's changing slowly in Mexico, you know, beyond the Series A that's changing slowly in Mexico and I think with this kind of interest over the last five years or so from US-based firms, that's another source of growth capital. But there have been, you know, kind of new local growth stage VC firms that have kind of arrived on the scene over the last couple of years, which is a great development. But that over time historically that's been an issue is access to growth capital for some of these Mexican and Latin American startups.
Speaker 2:And when we're talking growth capital, just for the clarification of anyone listening. So it's, you know they can raise their pre-seed or seed fund round from you. But when it comes to getting that series A, series B, series C, et cetera's, that's where the major challenge comes. In 100, I would say, it's particularly series b and beyond gotcha. Okay, um, to switch gears a little bit again. So the the story of mecom, um, it's a, it's an interesting story in the sense that, uh, you know, it was wholly owned and then eventually, um, transitioned into what you know now has become known as icloud. Uh, tell me the story about that. I'm very curious to know, sure.
Speaker 1:You did your homework. Yeah, I mean, you know, mecom is a somewhat unique case in which we incubated the company, as we did with Keo Networks, but where we did own it outright, unlike Keo Networks where the company raised a bunch of outside capital. We initially owned the domain name. We brought in someone from our network named Mac Tilling to buildmecom into what at the time was kind of like an online repository for users' personal information, and then Apple eventually reached out to inquire about acquiringmecom. But you know without saying that they were Apple.
Speaker 1:We think you know that was to avoid us raising the asking price. So you know, fortunately Mac eventually figured out it was Apple and we ended up selling for a good price, and the rest is history. We can't take any credit for it whatsoever. But, to your point, it eventually evolved into what is today iCloud, but it's nice to have played a small role in the creation of iCloud. We actually still have LPs and folks within our network that use their uh mecom emails, which is always, always fun to see, really, I still see a few of those occasionally.
Speaker 2:Yeah, what, um, what was it like? I'm going to pause here. Um, if you want me to not ask this question, I was going to ask, like, what, what? What was it like being on the M&A process side, like, as like the seller as opposed to the VC? Do you want to avoid that?
Speaker 1:Oh, yeah, beyond what I said, I wouldn't say anything.
Speaker 2:Okay, all right, we'll cut this out. Okay, all right. Sorry, I'm just gathering how to mentally take it back and change the subject. Yeah, well, that's. I mean, that's super cool. Just to play a small part of history. I love that. And then, a little bit outside the scope of what we normally talk about on this show, but you're also the treasurer and you're on the board of DeFi Ventures and I looked it up, did some research. I absolutely love the mission of what you're doing. Could you tell listeners a little bit more about what it is and your involvement in it?
Speaker 1:Yeah, I'd love to Thanks for asking. So DeFi Ventures provides entrepreneurial training to people who are incarcerated. So Defy Ventures provides entrepreneurial training to people who are incarcerated. The premise is putting the hustling skills that you know many folks that are in prison possess to good use and to, in turn, reduce recidivism and create economic opportunities for both them and they're often underserved communities when they're eventually released from prison. So, you know, some end up making the business plans that they worked on during the DeFi Ventures programming a reality once they parole and become entrepreneurs.
Speaker 1:Others, you know, they gain employment, often with the help of DeFi Ventures, but end up applying the kind of the skills that they learned through DeFi Ventures to being more entrepreneurs at the companies or places at which they're hired. And you know, either way, we see that as a win. I've been on the board since 2019. Honestly, the leadership team did an outstanding job navigating a tough couple of years after I joined the board during the pandemic, where a lot of kind of in-person programming at prisons was shut down, as you can imagine, and things got pretty tough If you think that you know folks on the outside had it hard during the pandemic.
Speaker 2:Yeah Well, I love that mission because I just think it becomes such a catch 22 when people get out of prison. It's like, okay, well, you want to avoid, you know, doing something wrong and having to go back, but then also no one wants to hire you because you were in prison. So it's like, how do you support yourself, except for the you know, perhaps involvement in the previous activities that got you there in the first place?
Speaker 1:Yeah, no, 100%. You know, fortunately we have a growing number of kind of fair chance hiring partners that you know see the value in hiring these folks and you know we're able to make these connections to get gainful employment. But yeah, I mean honestly, after the pandemic, defi Ventures has been killing it. They're in seven states, including California and New York, rapidly growing within those states and also looking to expand to new states. So, yeah, things are on the up and up, super passionate about it and yeah, they're doing really good work. Barack Obama actually lauded them back in the day. Oh, really, yeah, yeah, that's awesome, yeah, yeah yeah, that's awesome.
Speaker 2:Well, harry, this has been a super good conversation. I've really enjoyed it. If someone wants to get in touch with you, either to pitch or to potentially invest, what's the best way for them to do that?
Speaker 1:Yeah, I would say via LinkedIn is probably the easiest. I'm getting better and better at replying to messages on there, so, whether it be regarding Brainstorm Ventures or Defy Ventures, please feel free to reach out on LinkedIn. I actually don't have social media. I've never had social media, not even Twitter, so I think that's the best way.
Speaker 2:All right, awesome, sounds like a plan. Well, again, thank you for coming on. Really appreciate it. Thank you, thanks for having me.
Speaker 3:Thanks for listening to See to Exit. If you enjoyed the episode, don't forget to subscribe and we'll see you next time.
