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
Adam Struck, Founder and Managing Partner of Struck Capital | Thriving in Venture Capital | From Big Law to Investing Success and Building Innovative Ventures
This episode uncovers Adam Struck's transition from law to entrepreneurship and his impactful approach to venture capital. With insights into automated talent acquisition and the success of his venture studio, Adam shares valuable lessons on building and investing in startups.
• Adam's journey from law to founding Long Island Brand Beverages
• Building a proprietary talent acquisition engine at Struck Capital
• The effectiveness of special purpose vehicles in fundraising
• Insights on cultivating a strong network for deal flow
• The role of relationships in supporting portfolio companies
• The investment strategy behind Strzok Capital's venture studio
• Key metrics and signs of product-market fit for startups
• Advice on resilience and transparency for new founders and investors
All Links: linktr.ee/startup_recruiting
LinkedIn: www.linkedin.com/in/riecekeck/
Twitter/X: x.com/tech_headhunter
Recruitment: www.mindhire.ai
Youtube: https://www.youtube.com/@seedtoexitpod
So we have literally built our own proprietary in-house talent acquisition engine where we can get a JD. We can essentially scrape LinkedIn for attributes that correlate to that JD. We've built out full email automation so we can literally reach out on behalf of the CEO's candidates and the next thing you know, within like 48 hours, we've got 10 highly engaged candidates that match the attributes perfectly of who our CEOs are looking for, and then we give them to them. So it's almost like top of the funnel, fully qualified sort of talent acquisition pipeline creation in an automated manner.
Speaker 2:Today, I'm joined by Adam Strzok, founder and managing partner of Strzok Capital, a leading early stage venture capital firm. Of Struck Capital, a leading early-stage venture capital firm. Adam's portfolio includes companies like Postmates, nutanix and Mythical Games, and he's a recipient of Forbes 30 Under 30 in venture capital. Beyond Structurally Venture Investing, adam has also co-founded and runs Struck Crypto, as well as Struck Studio, which has cemented his influence across multiple emerging technologies. So today we're going to talk more about Adam's investment philosophy, how he got started in venture capital, his entrepreneurial ventures and his vision for the future of venture capital. So with that, let's get started. Welcome to Seed to Exit, the podcast where we uncover the stories, strategies and insights that power the startup ecosystem.
Speaker 2:I'm your host, rhys Keck, founder of MindHire, a talent acquisition firm specializing in helping startups build exceptional teams. Each week, I sit down with founders, investors and industry leaders to explore the journeys behind iconic companies and game-changing ideas. Whether you're building, investing or just curious about what it takes to succeed in the startup world, I want this podcast to be your go-to resource for actionable insights and inspiring conversations. Now, if you enjoy the show, please don't forget to subscribe, leave a review or share it with your network. Your support means the world and really helps bring more incredible conversations to life.
Speaker 2:All right, adam, thanks for coming on. Glad to have you. Thanks for having me, absolutely so I'm excited to chat with you. I had a chance to look over a lot of the portfolio investments that you do. You've got your hands in a lot of different spaces right now, so just excited to dive a little bit deeper into everything with you and learn a little bit more about how you invest. Sounds great, awesome. So before we get into Struck Capital, you, of course, had your own start as an entrepreneur, not in the tech space, in the CPG space. Tell me a little bit more about that and what led you into venture.
Speaker 1:Yeah, so I was originally a big law attorney at Kirkland Ellis in their M&A corporate practice group in New York. I worked on the Skinny Girl acquisition by Jim Beam and I think that kind of inspired me to just look at sort of you know, the ready to drink category and see if there were opportunities for innovation. Initially wanted to sort of do what Skinny Girl did for margaritas to actual like Long Island I see meaning like Long Island like the alcoholic beverage. And then actually I decided to pivot because there's a three-tiered system associated with manufacturing alcohol. That just makes it very difficult from a distribution perspective. And when we did a bunch of sort of market research we saw that Arizona Iced Tea was the sort of market leader. It had like 74 grams of high fructose corn syrup and we sort of just sort of entered the market at the perfect time where people wanted to be healthy. But there's definitely a greenfield opportunity. So we used reverse osmosis filtration to preserve the integrity of the tea leaf. We had organic cane sugar and people were just really attracted to the brand along the Eastern Corridor, ended up getting into 17,000 mom and pops, costco, shoprite, 7-eleven. Petitioned the USPTO for the trademark to Long Island IC in the RTD category and won and then found a PE firm that wanted to acquire us and then they actually ended up taking the company public under our brand and rolling up a bunch of other assets.
Speaker 1:So while it's not a typical direction in the sense of starting a software tech company, it definitely, from my perspective, was very sort of gritty.
Speaker 1:You know, going from zero to one, productizing every motion, getting yourself ready for scale.
Speaker 1:And I thought, um, given that experience, maybe I could be a strong strategic advisor to young founders. You know, really trying to hit escape velocity. And I was lucky to have, you know, a bunch of friends on sandhill road and uh, um, I have a cousin as well that that's had very high up positions at a bunch of tech companies. And I was able to sort of, you know, find founders and just say listen, you know, open up some allocation for me in a round and I'll put up, you know, more sweat equity per dollar invested than anybody else on your cap table. And I definitely got lucky, had a few early wins with companies like Nutanix and Postmates and sort of, after doing 18 special purpose vehicle opportunities, I then felt like I had enough of a track record to raise a discretionary fund, no-transcript. Create a track record without everyone 100% betting on you. And it was sort of scratching and clawing my way, spv through SPV that then allowed me to sort of create you know what struck is today.
Speaker 2:So that's super interesting. So you started out was it your own funds that you were investing that? You got through the exit from Long Island and then, once you built that track record with your own funds, then that's when you said, okay, now I can go out and raise money from LPs.
Speaker 1:Yeah, so it was my own funds, but because I had access to companies that people knew about, people maybe wanted to like talk about on the golf course or something like that. It was also funds from external investors as well, and what I would do is I would structure it as like zero and 20. So I wasn't taking any management fees. I would only sort of win if they won and I would purposely put, you know, as many people in the SPV as I could. You know, sometimes like 7080 people, and I did that because I just wanted as many people as possible to have, you know, sort of strong brand equity with me and what I was trying to create. This is also like before the AngelList days. So I was doing all like the you know, structuring the legal documents, the subscription agreement, operating agreements, myself like handling the K-1s. It's like a lot of admin work, but that wasn't the best way to get started.
Speaker 2:Cool, awesome. So you had a really interesting background. So were you doing the Kirkland and Ellis? Were you doing that alongside founding the iced tea company, or was it one and then the other?
Speaker 1:Yeah, yeah. So I started Long Island Brand Beverages with my brother. So I was sort of working like crazy at Kirkland but also very passionate about this sort of external side gig. And then, once it started getting very material traction, I left my day job. But you know, kirkland also is like a day and night job.
Speaker 2:I was gonna say big law is not for the faint of heart.
Speaker 1:It's not, it's not. Yeah. And then, and yeah, then I jumped in. But even when I jumped in, the business was still super early, had a lot of risk, and I remember my mother was very upset with my older brother because she thought it was influencing me to leave law. But you know, I tell everybody, you know you have to think about the totality of your journey and when you're able to take risk and really sort of you know swallow and come back from failure. So for me, you know, as a young person, you know I didn't have you know swallow and come back from failure. So for me, you know, as a young person, you know I didn't have, you know, a wife yet or kids or anything like that. So it was a great time to bet on myself and I think I got very lucky that, you know, I was able to be successful and then propel me into, you know, sort of not only investing in companies, but now we also create companies through our venture studio.
Speaker 2:When was the inflection point? This isn't really the point of the this overall podcast, but for you know, but for those who are thinking about starting their own entrepreneurial journey, when is the inflection point? When you felt leaving K and E to take the plunge into your own thing? Full-time Is it when? Replaces your full-time income? Is it something else? Yeah, yeah, Great question.
Speaker 1:So for me it was like the way I interpret that as like what does product market fit feel like? And for us it got to a point where there was so much demand that we couldn't get enough line time from our co-packer to sort of fill that demand. You know, we would expand into, you know, 15 stores, 20 stores, no-transcript. So it was almost like enterprise-esque, where we would land and expand very materially, materially. So once I got to the point that we could see the velocity in which these sort of single unit packs or six or a dozen were sort of flying off the shelves and then we got to the point where we outgrew our co-packer, then I was like, oh, this is really serious. But in terms of it still wasn't. It was an equity game. I wasn't paying myself nearly as much as I was making it at Kirkland and Ellis. I can game. I wasn't paying myself nearly as much, you know, as I was making it at Kirkland and Ellis.
Speaker 2:I can imagine. So it sounds like you've had some really strong influence. You had your brother, you had your cousin, who you'd mentioned has worked in big tech who have been some of your overall biggest mentors or influencers, and what lessons have you learned from them that you still keep now?
Speaker 1:Yeah, you know, david Blumberg from Blumberg Capital was, you know, very inspirational to me. He was an early investor in Nutanix and you know also sort of started out with sort of SPVs and sort of created a large fund with a ton of you know sort of a ton of wins through that process. I think that was was definitely one that you know sort of inspired me. That was definitely one that you know sort of inspired me. But when I was really really early thinking about venture and entrepreneurship, I remember reading Ben Horowitz's the Hard Thing About Hard Things. You know, obviously he's a well-known name, but what I loved about just sort of the ethos of how he was writing is you almost felt like you were, you know, in the room with him, you know, having a coffee and really just talking. You know, you know, sort of honestly and truthfully about not only all the amazing things associated with entrepreneurship but you know, the concept of like eating glass and swallowing it and continuing to go.
Speaker 1:You know, I've also been very motivated by just the story of my, my grandfathers. Both of them respectively, you know, were immigrants and you know both actually came to South Africa and started with absolutely nothing and in their own way, created large companies and unfortunately they then dealt with things like hyperinflation and all these things that can come with maybe trying to scale in South Africa in sort of the 70s, etc. But you know, from my perspective I kind of always felt like I came from very strong entrepreneurial genes and I felt like you know, if they could do it, you know I think I can do it. So I think that that memory and that story also was very influential for me.
Speaker 2:I love that. I mean you clearly have the scrappiness, both with starting the beverage company, as well as the SPVs and Struck, which we'll get to in a minute, both with starting the beverage company as well as the SPVs and Struck, which we'll get to in a minute. I'm really curious how does the SPV vehicle that you mentioned work? I mean, I know what a special purpose vehicle is, but you mentioned getting 70 to 80 people in there. So are you then functionally doing almost like syndication or small level crowdfunding from, call it, 70, 80 investors and saying taking maybe three to 5,000 and then going to a seed fund or a seed level owner and saying I can write you a $250,000 check? Is that your model?
Speaker 1:Yeah, so typically what we would do you know what I would do is I would first secure the allocation with a portfolio company. Cause what we don't want to do is sort of promise an allocation and a hot startup and then all of a sudden you, you raise the capital but you get everyone to sign some scripture agreements. Then you can't get into the deal. So so I would try and secure the allocation, but then the minute I would secure it, it would create fear Cause it's like oh my God, now I have to fill it.
Speaker 1:That's not so easy, but yeah, so typically like what I would do is I would secure like 250, k, 500k, you know, million dollar, you know allocations and various startups. I would then create you know sort of proprietary materials, you know sort of our investment memo, you know financial model, all those types of things. And then it's really about just sort of you know pounding the pavement with people in your network that you think would be attracted to sort of having exposure to this type of you know to venture as an asset class and maybe this particular company taking lots of calls. And you're really being a salesman, right, you're sort of selling your ability to source the deal but, most importantly, you're selling what you believe are going to be the future prospects of the company. So you know there were times where I would lock in like a 250K allocation and that would be heavily oversubscribed and then maybe the founders would give me more allocation, or sometimes they didn't, and you know we've had times.
Speaker 1:We had times, I remember, where there was like a deal where I had like $7 million of interest but my allocation was only like a million dollars. So then what we would do is we would lower every lower, everybody per RADA and then give them their, their allocation. So that's kind of the thing, right is you push really hard by adding value to the founder to have them be like, hey, I'm going to give you some of this allocation. And then you have to go out and sort of raise the capital and just hope that all the ducks sort of fall in a row prior to closing, because you also don't want to be that person that is delaying a closing or having to come in on second close. You know you could ruin your reputation really quickly. So yeah, I mean, basically we would get the allocation, you know, prepare proprietary materials and then you know, just run a good process to get everybody coming in at the appropriate time to then not delay the company's closing with other institutional investors time to then not delay the company's closing with other institutional investors.
Speaker 2:I mean, it's really fascinating because it's a little bit opposite from how the traditional venture model works, right, where you raise a fund and then you go and you deploy that capital. It's like you get the allocation, now shit, now I have to go raise the money. Did you ever run into a situation where you got the allocation but you weren't able to raise the capital and then, if so, what happened?
Speaker 1:Yeah, if so, what happened? Yeah, so, luckily, you know, knock on wood, uh, that has never happened. Uh, now what I will say?
Speaker 1:there have been times where, like the closing is happening tomorrow and I'm like hadn't filled it and that's very stressful, um, but but generally I think we did a good job. You know getting sort of indication of interest from different people. You know having having um. You know various. You know lps. You know various. You know LPs that have deep pockets. You know we're excited by various opportunities and you build a lot of trust.
Speaker 1:You know, one of the interesting, interesting things for me is one of the family offices that cut me like a 50k check for like my first SPV ended up anchoring my first fund, which is a $32 million fund. So that was really just over years of growing with them and then respecting my lens and how I conducted diligence and again, my proprietary access to deal flow. But you are right, it is sort of backwards and you're sort of forced to do it backwards because you know I didn't go to Stanford and sell a SaaS company. You know it was a different sort of background. So I thought the way that I could get people to invest in me was not having them underwrite me but underwrite the company. But that meant that I had to secure the allocation to the company, you know, before actually making it happen.
Speaker 2:I love that approach. When you mentioned the proprietary deal flow, what does that mean? Is that just because you have a large network Did you have access to some data sources?
Speaker 1:Yeah, I mean. So now, like at Struck, we have extremely proprietary access to deal for plethora of reasons. You know. We've got, you know, incredible connections with downstream and upstream VCs that want to do deals with us and share everything. We've got a really strong founder network. These founders, you know, are now leaders in their fields and when employee number 10 from their company leaves and does something else, they're going to send them right to us because they had such a good experience at the seed round. We have, like, early access to a bunch of accelerators like the Y Combinators of the world, and then, most importantly, we have our own venture studio where we're actually creating our own companies. So that's as proprietary as it gets.
Speaker 1:The way I would have defined it, you know, sort of early in my career from an SPV perspective, was basically just being, as you said, well-networked.
Speaker 1:So the cousin that I mentioned just as an example was global head of business development at Spotify, then chief strategy officer at Snapchat, chief strategy officer at Chime, so that's a pretty incredible network, right.
Speaker 1:So being able to tap into those people, meet founders and, you know, go to someone like Bastian Lehman, you know founder of Postmates, and say, hey, like I'm just looking for like 100k in this series A or series B and like tell me who you're looking to hire, tell me, like who you're trying to talk to and I'm going to show you what I can do. So it's all about sort of understanding the totality of your network and your social graph and just being super gritty with founders and ideally right reminding them of themselves, because no founder has gotten to series A or series B without having to send them to do the non-scalable gritty things to find product market fit, and I still believe that the bar for value add and venture capital is super low. So I think I was able to stand out by leveraging my network in front of the right people and then like literally pestering them with value add until they let me into the round.
Speaker 2:I love that. Okay, so you did really well with the SPVs. You then raised your $32 million first fund. What has happened from raising that first fund to today? Yeah so definitely a lot.
Speaker 1:So that first fund is what we call struck capital, and that's basically like our B2B closed ended software fund. We are now investing out of a new fund, struck capital, fund two, which is $75 million. We're going to be going out for $100 million fund three in January. I'm just waiting for those interest rates to drop a little bit more. Just waiting for those interest rates to drop a little bit more.
Speaker 1:One of the things that we also did that was very opportunistic was one of the SPVs that I invested in. I ended up selling to Bittrex, which, at the time, was one of the largest cryptocurrency exchanges, and I was actually approached by a relatively large fund in the LA area that said we want exposure to crypto. We've heard about your exit. You have proprietary access to these exchanges, and that was during, like the ICO craze. You can get these projects listed. So we're going to you know, essentially amend our LPA, turn ourselves into a fund to fund, cut you a $5 million check and then that can anchor a crypto fund. So we did that as well. That was a 2017 vintage. That fund today is sort of like a hybrid open-ended fund, where we, you know, can invest in early stage venture capital deals, but then we can also trade those tokens after a sort of token generation event. There's around a hundred million or so in that fund that the NAB changes, you know, essentially daily.
Speaker 1:And then the third leg of the stool, so to speak, is our venture studio and that was sort of born at the height of 2021, where I would find founders, develop strong relations with them for six months, add a ton of value, and then I'd write them a term sheet and then they'd call me and say a junior partner at Tiger Global that I just met yesterday is offering 3x what you're offering and they don't even want a board seat and they don't care about any of this.
Speaker 1:That's like I'm just taking it as easy money. And it happened like numerous times and I kind of just felt like gosh. You know, even as a venture capitalist. You know on the you know sort of forefront of innovation, all early stage, real sort of value add. You know sort of sweat equity intensive investor I still find that because of the macro environment, I have like no ball control and I can't really get deals done according to my sort of investment criteria and you know sort of valuation framework. So I said you know what? Like I'm an entrepreneur, I've got a lot of entrepreneurs around me.
Speaker 2:Why don't I just?
Speaker 1:launch a studio so I can be master of my own domain and create my own companies. So I teamed up with Michael Montero, who was my CTO operating partner at the time. So I teamed up with Michael Montero, who was my CTO operating partner at the time. Mike's incredible because he built Resi. So I'm sure you've used Resi to make a restaurant reservation and we's been really cool about that is we raised it.
Speaker 1:We raised the capital from a bunch of tier one VC funds. So we've got like Andy Weissman from Union Square Ventures, rob Chesney from Chicago Ventures, revolution Liquid 2, great Oaks US Venture Partners. So these funds have all invested in us because they view it as a way for them to have proprietary access to deal flow. And then what's great is we can leverage their information asymmetries to be like, hey, where do you see greenfield opportunities? Where should we build? Obviously, I also created a lot of cross pollination between the struck investment teams and the studio, because it also helps to understand what to build.
Speaker 1:And yeah, for me we're now like two and a half years into the venture studio. We've created four companies to date. You know they've been funded. They're real companies. It is a really fulfilling situation for me.
Speaker 1:You know, I just find that for a lot of VCs out there and I'm sure a lot of them are great operators If you create a company 20 years ago, before the explosion of Gen AI, and before having to deal with, like hybrid teams, like it's just not the same, I don't care what anyone says. So for me, for me, you know, with the studio it's sharpening my pencils and sort of keeping me strong on the investor side. Because you know, if a founder tells me like oh, we can do PDF extraction with LLMs and like that's how we get, you know, get through integration, and I'm sitting there saying when we are fine tuning LLMs and trying to do PDF extraction, it's abysmal. I know that they're BSing me. You wouldn't know that unless you're like building today. So you know, I think the studio has made me a sharper investor. And then I think being able to market, map and understand where things are going from the investor lens, that impacts what we're building at the studio. So it's become this really sort of virtuous, like one plus one equals three.
Speaker 2:Yeah, totally, that's fascinating. Can I ask what the four companies are?
Speaker 1:Yeah, yeah for sure. So one is called Gibson AI. It's a dev tool but it's laser focused on data models. So data models are sort of like the foundation of all of your source code. It's like the blueprints for a house. If the data models are right, you're going to be in a really good place. If they're wrong, you're going to be in trouble and updating data models and having those changes cascade through millions of lines of code. It's very difficult, very manual, very laborious. So essentially what we can do is we can ingest all of your code, we can spit out full unit tested, context aware data models and we can turbocharge existing engineering teams or, you know, teams that want to create new products and set them up in microservices. So that one's been really exciting. And we were able to bring on a CEO named Harish who was chief product officer at LeafLink. He was like very high up on the product team at Apple for Siri. He was at Microsoft for 10 years and he's like a master's in CS, so he's been awesome.
Speaker 1:Another one, maybe less sexy but very interesting from our perspective, it's called PawCare. It's a vertical SaaS solution in the pet care space, but specifically going after groomers, boarders and daycare. So there's been so much venture dollars going into veterinary but there's really not much in terms of like groomers, boarders and daycare, and they need a vertical SaaS solution, they need payments. So we've been scaling heavily with that and you know we actually were approached recently by one of the incumbents talking about acquiring us because they heard oh my God, the C2 of Resi is now entering the Pender space. We're a little concerned. So that one's been a lot of fun and scaling dramatically. We have another one that we're actually raising for right now, called Balto. The way you should think about your Balto. It's in the healthcare space. It's sort of like your 24-7 personal sort of healthcare assistant, but we go after a B2B2C use case.
Speaker 1:So what we want to essentially do is, when companies are going through open enrollment and they're selecting, you know which benefits they should have. You know, should I do the platinum plan, the bronze plan, the silver plan, all of this stuff? We can essentially ingest all of this you know data, life events and recommend you to the right plan and then, once we do that, there's essentially a very, very accurate sort of co-pilot that when you have questions like hey, I've got an emergency, should I go to the urgent care. How much will that impact my deductible? You know, hey, I want to get this medication. How much is it going to cost me? So we're really trying to ease the burden of HR teams dealing with employees who are asking very specific questions about their plan and billing and healthcare, that they're just ill-equipped and the worst thing that you can do as an HR persona is tell your employee to go call their carrier Like it's a very negative Glassdoor review so we can prevent all of that.
Speaker 1:And then the last part of the Baltro product which we think turns it from a point solution to a really sort of holistic platform offering is we can ingest your EOBs. So when you go and you know, say you went for a routine checkup, you thought it was covered by your insurance. The next thing you know you've got a $500 bill. You get what's called an explanation of benefits from the carrier and if you've ever tried to read an EOB like you might as well be in a different language carrier and if you've ever tried to read an EOB like you might as well be in a different language. Most of the time there's errors in these EOBs and people are just like I don't have the time to like go and appeal this and do all this stuff. So we can essentially like ingest those EOBs, we can pick up where there's been you know, sort of the wrong billing codes, errors. We can do the appeal on behalf of the, you know, of the employee. And what's great about this is the employer pays for all this. And you know, with the current customers that we have, like they're talking about like four, five, six dollar per employee per month, which for them, when they're spending thousands of dollars per employee, you know this can really increase satisfaction and decrease burden on their HR leader, hr team. There's a lot of ROI there. And then the last one is very interesting we're just about to officially launch it and raise. So the product's built. We've got a great CEO. We've got a bunch of design partners.
Speaker 1:I don't know if you've ever heard of companies called SecureFrame or Vanta, which basically changed the way that internet companies would get SOC 2, type 1, type 2 compliance. If you want to go and get a big enterprise customer, you have to all of a sudden become like SOC 2, type 1, type 2 compliant. Yeah, exactly, so that determines, like how you hold data, like privacy, security, all of these things. So we, and then Vanta and Sec Secureframe are, like you know, unicorns and what they've done is they digitized that, that compliance burden SOC 2, type 1, type 2 compliance and then, once you use them as a system of record platform to get you know sort of those credentials, they then continuously monitor you and and sort of become you know, as I mentioned right that, that system of record platform for compliance and monitoring.
Speaker 1:So we want to do the same thing, but specifically for food manufacturers. So there's something called a HACCP plan which is essentially like your food and safety plan. Like, let's just say, you are, you're creating something and there's chicken or there's egg, or you know what's the temperatures, like how, how many times do you have to check the metal detectors on the line to make sure that there's no metal in the foods? All these different things the FDA is very robust what are called HACCP plans. So we want to start out as essentially like a HACCP plan builder, you know, similar to like what Secure Frame and Vanta did for SOC 2, type 1, type 2 compliance. And then we can, and a lot of these major manufacturers, you know, like ones that are doing hundreds of million dollars a year, they have manual sort of safety personnel on the floor that are checking these with paper and pencil, but we can digitize that entire process and put them with an iPad, have essentially a dashboard that a manager that's even remote can review and they can see every temperature check. You know all the real time monitoring, et cetera. Temperature check, you know all the real-time monitoring, et cetera. So it's a very similar go-to-market motion with Vantan SecureFrame, but very much focused on food and safety compliance for food manufacturers.
Speaker 1:What's also really interesting, just as a quick note, is there's a ton of macro tailwinds right now. I don't know if you saw, but McDonald's literally, like last week, had an E coli outbreak. I did see that, yeah, and it lowered their stock by like 9% when that happened. So there's a lot of pull right from major players and what we've realized is for some of these manufacturers, if they can go to their customers and say, hey, we just moved away from our manual system to a digitized, like AI enabled system, they can actually get more revenue right and close you know, close customers quicker. So it's something for us that we think you know prevents the loss of revenue through being shut down by the FDA, but we also think it's a revenue driver because it's. We've noticed that it's helping our design partners in their business development processes. So, yeah, that one's called Protocol Foods and got a killer CEO for that and we're we're excited to raise for that shortly.
Speaker 2:Wow, okay, so you're doing all that. You've got the crypto side, you've got the investment part. Do you ever sleep?
Speaker 1:I don't sleep a lot. I've got two daughters as well, and I try and be an active father. So, no, there's a lot going on, but I've got an incredible team around me and just amazing people that push me and I push them, and there's a lot of energy. So I'm only 36 years old. I got a lot of room to run, so all good things. It's a good problem to have.
Speaker 2:Those are a good problem to have. So you place a really big emphasis on the. You know putting in more sweat per dollar than any other venture firm is going to do.
Speaker 1:What does that look like?
Speaker 2:in practice.
Speaker 1:Yeah. So first off, in our office we've got a neon sign that says sweat equity is the best equity. So I really believe that. But over the years now we have completely productized that motion. It's a finely oiled machine. And again, no disrespect to my other venture fund colleagues, but I still think a lot of VCs think the definition of value add is calling a founder once a quarter and asking for KPIs, like I literally think that's what they think and you've got a lot of some of the mega funds out there maybe less now, but like at the height of 21, they were they'd say we don't even want to board Seabrook to give you like 2 million bucks to hire McKinsey, because we don't even want to, don't want to help.
Speaker 1:You know, post investment, from my perspective, I fundamentally believe and I tell founders this all the time you know I'm never going to know more about your business than you will. You're doing this every single day. But I've I've created this really robust horizontal lens watching many companies go from zero to billions of dollars in enterprise value. And I fundamentally believe there's pattern recognition. No matter what sector you're in, there's pattern recognition where you're going from zero to one. So the best founders are the ones that will leverage sort of my horizontal lens and if we can do it in the right way, I can maybe put them in a place where they're proactive instead of reactive, which I think can make the difference, make or break a company in the early stages. So, in terms of what that looks like, we have a whole platform team and we have a bunch of offerings. So like we think that the minute our company is raised, if they can get you know, 10x or you know 10X talent into the company, you know that's going to, you know, materially sort of increase their enterprise value and ultimately their exit value, especially across the totality of a portfolio.
Speaker 1:So we have literally built our own proprietary in-house talent acquisition engine where we can get a JD. We can essentially scrape LinkedIn for attributes that correlate to that JD. We've built out full email automation so we can literally reach out on behalf of the ceo candidates and the next thing you know, within like 48 hours, we've got 10 highly engaged candidates that match the attributes perfectly of who our ceos are looking for and then we give them to them to close. So it's almost like um top of funnel, fully qualified, uh, sort of talent acquisition pipeline creation in an automated manner, so that's so. That's like something that we do on the talent acquisition side For business development. We've mapped out our whole social graph. So we don't even know. It's not even just about like, who are my LinkedIn connections. It's like who are the secondary connections of my LinkedIn connections and because of Capital, Crypto and Studio and just all of our LPs and our advisors, it's a really robust social graph. So we do a very good job. Like when we onboard our companies, we're like give us sales paraphernalia that we can use because we're going to know buyer personas, we're going to outreach on your behalf and like we're going to set you up with qualified leads in your pipeline. So we track that. We're super sophisticated about that.
Speaker 1:We really want to move the needle from a go-to-market perspective. You know we've got in-house like marketing as well. So the minute they get, you know the, the minute they get funded, we get them in tech run or Forbes or something like that. And you know we believe that that helps with sort of three different things. It helps drive a go-to-market business development, it helps drive talent acquisition and it also, you know, drives downstream investor interests. You know ideally can help them preempt the round. You know, we have just, I think, a lot of VCs. They look at product market fit and they just assume that if the product market fit is there, the product will have enough scale to service those customers.
Speaker 1:But what I've learned is it's really, really important to pay attention to the actual tech stack itself and sort of the sort of tech debt associated with that. You know, are these teams unit testing their code? Are they investing in regression testing? Testing their code? Are they investing in regression testing? Are they running monoliths where there's a bug and it's going to shut everything down and they're not going to know sort of where the bug is? Have they broken up that monolith and shifted to microservices?
Speaker 1:We're very, very granular about sort of the tech stacks and the code that we invest in and the way that we sort of our founders will see that during the diligence process.
Speaker 1:But then what we'll do is we'll set them up with someone like Mike right, who's the creator of Brezzy, to do like a monthly call to just go out, go, you know, go over everything and just make sure that you know, while they're pushing really hard to ship features, they're also, every time they write a new line of code. They're writing a unit test and test how that new line of code interacts with the rest of their source code. So we're just very, very hands-on on all the things that we believe can make or break a startup in the early days and we try and treat it like our own product roadmap and essentially ship new features and upgrade existing features on a continuous basis. Like literally right after this I've got a call with my platform team to talk about what the sort of platform product roadmap you know is going to be for the rest of the year and like Q1 of next year. We really view it in the same way as software companies view sort of like their product.
Speaker 2:I have so many questions, but I absolutely love all of that. You've clearly put your money where your mouth is in terms of actually truly helping the portfolio companies. You mentioned the knowledge graph. I'm just curious what platform do you use? What does that look like? How do you build and maintain that?
Speaker 1:Yeah, yeah, so the talent acquisition engine is completely internal. The go-to-market sort of engine is various different tools that we sort of piece together. So we have Affinity, which is our CRM, so that allows us to sort of track like every single email, every single person. Affinity will automatically pull from like LinkedIn and Crunchbase to develop essentially cards for each of these personas. So that's super helpful. And then we use another software company called Atlas, which is created by Hunt Club, and Atlas is the one that allows us assuming we can sort of upload all these contacts into their system and get you know, sort of like our LPs and our advisors and our employees to opt in. Atlas then can tell us who the primary and secondary connections are of all of our connections. So that's been like super, super helpful.
Speaker 1:Because you know we just made an investment on the capital side of a company called Rapid Flare. And what Rapid Flare is? It's a verticalized agentic system that's trying to replace sales engineers, but specifically in the electronics and semiconductor space. So there's a lot of AI. Verticalized agentic systems are like oh, we're going to replace your sales engineer in SaaS, like that's really crowded. There's no one like doing anything for companies like AMD and like massive chip manufacturers.
Speaker 1:So when we were, you know, we were really excited about the deal, the founding team, et cetera. Like. One of the things that we did, though, is we went through Atlas just to make sure that we had a bunch of connections to buyer personas, because if we didn't, we wouldn't be the right fund to lead the deal. So, yeah, the go to market motion by just understanding not only who are the primary connections of my entire network, but who are their secondary connections, and then maybe leveraging something like Apollo to get their email addresses. We were seed investors in Apollo. That's been one of the best investments I've ever made.
Speaker 1:So sort of leveraging, a combination of Affinity, atlas and Apollo allows us to really move the needle from a go-to-market perspective. And then the critical component, too, is when we're doing onboarding calls with our portfolio companies, just explaining to them exactly what we mean by, like, the sales paraphernalia that we need to see. That's going to drive conversion. When we do our outreach, you know, sometimes you'll ask a founder like, hey, give me a blurb or give me some materials that will send you like you know, like bad grammar and like you know, like it just doesn't look professional. We want our companies to have like really slick sales materials, because it makes it easier for us to drive conversion when we take the time to do the outreach.
Speaker 2:Got it Okay. You mentioned product market fit a few times and obviously at the stage that you're investing, that's you know can the company find. That oftentimes is the big question. Are there certain KPIs or metrics that you are looking at to determine, or even a framework to determine if a company has found product market fit?
Speaker 1:Yeah, 100%. You know. What I'll say is what's kind of interesting in this current environment. People always ask me like, oh, like you know, because it's a, I guess, like a high interest rate environment and it's you know, it's still a bunch of macro headwinds and uncertainty from the election like, does that mean that your valuations, your average post-money valuation for your investments has gone way down? And I say no, actually it hasn't. The post money valuation has stayed the same. The difference is the traction that we can see for that post-money valuation has gone way up.
Speaker 1:So we're typically in a situation now where we're doing seed rounds at, you know, maybe like an 11 to $13 million post and they've got like 250K to maybe even four or 500k of arr um. That same amount of traction at the height of 2021 would have gotten you like a 10 million dollar round at a 40 post for a series a um. So for us, right, we don't mind the valuation staying the same. But what's really cool is we can see a lot more cards that are turned over right, whereas typically in a different market, we can't um. So I'm we're literally in a place now where we can do like full net dollar retention analysis on our companies, because these companies have enough revenue to actually show you know we land revenue. We can now, in a productized motion, expand revenue from our defined ICP. There's like no churn, we're not having a bunch of downgrades. So a net dollar retention, sort of that metric, and really seeing the product size expansion motion which is typically something you would only expect at like Series A we are now seeing in the seed round. So those types of things are very critical to us when we're just doing like a quantitative assessment on whether or not there is product market fit. Another thing that we pay a lot of attention to is just sort of the economics of the motion. So how do your ACVs correlate to your sales velocity? Right? So if you're in a situation that it's taking you 250 days to go from a qualified lead at the top of funnel to a signed contract and it's a $10,000 ACV, like you're upside down from an economics perspective, so even if you think you have a lot of customers, that's not true product market fit. If there's true product market fit, there's going to be a pull and like a ratio that we want for like 100k ACVs, like a 90 day sales cycle. So things like velocity of sales motion and how it correlates to contract size. That's obviously another another sign of product market fit.
Speaker 1:Um, you know earlier, because sometimes companies don't have that, you know some of the things that we will look for. Even if they're still maybe in like a bit of customer discovery phase, they've got one or two real lighthouse customers. Are those customers pulling and pushing them to ship new features that they fundamentally believe won't be non-recurring engineering? These are not idiosyncratic features just for that customer. These are features that would allow you to still to feel like you're creating a sort of utilitarian mindset.
Speaker 1:You know the greatest number. You know features that will provide the greatest good for the greatest number of buyer personas within my ICP. So something like that right, like with RapidFlare, for example, this deal that we just did, this verticalized agentic system in the electronic space, they're getting a lot of pull from AMD as sort of a lighthouse customer and AMD has gone from like a 12K contract to a 30K contract to a 60K contract. They're meeting with them all the time. So that's also a good example of product market fit, even when things are maybe a little bit early. So yeah, hopefully that answers it.
Speaker 2:No, that does Absolutely early. So yeah, hopefully that answers it. No, that does Absolutely. How do you think about the LTV to CAC ratio for product market fit? I know traditionally you want like three to one, Is that? Or do you still consider that to be the gold standard at the early stage?
Speaker 1:Yeah, yeah, I mean I think three to one is definitely what you want. You know, typically for us we're dealing with more like enterprise sales, very large ACVs, so you're not usually going to be in a situation that you really have to worry about. You know you're not doing like performance marketing from a customer acquisition perspective where you have to worry about, like you know, economic degradation at scale. So we would look at LTV to CAC usually more. If there's like a consumery, like elements maybe to the acquisition motion. If you're doing enterprise sales and there's a path to six figure ACVs, we know that the LTV is going to massively supersede CAC.
Speaker 1:But what's important from our perspective is what is the velocity of the sales motion right bottoms up, PLG, self-serve motion. That can you know. You know sort of put you in a really good place where you're not having to invest a ton of time and energy and you're getting strong ACVs and you can land expanded. That's amazing. If you need to do more like top-down hand-holding, account-based marketing, that's okay. But you really need to make sure, as you said right, there is a quote, unquote CAC or just cost generally to that motion. So you really need to make sure that the juice is worth the squeeze from an ACB, or I guess you could call it LTB perspective.
Speaker 2:Got it Okay. So looking forward. So you mentioned you're planning on raising a third fund of a hundred million, I think you said starting in the next couple of months. What are you hoping to accomplish with that? Are you changing the investment strategy at all the criteria? What does that look like?
Speaker 1:Yeah, no, we're not changing the criteria, the strategy. I think what we're doing is really working basically investing in incredible early stage companies with a B2B motion, and you know there's specific areas or sub verticals within there where we feel really strong, because we have a bunch of information asymmetries and a lot of founders that have hit escape velocity. So we'll definitely want to sort of double down and lean in there. I think the desire for us to go from like 75 million to 100 million is just because we are noticing sort of like, you know, maybe those like three to $4 million seed rounds where we still want to make sure that we can take half the round and lead the round, and I think getting up to 100 million would just allow for that. We also just have a bunch of our competitors, you know, you know in our space, that have similar fund sizes.
Speaker 1:And I think when you look at sort of portfolio construction theory even if you're still leading, you know writing one half million dollar checks to 25 portfolio companies in three million dollar rounds if there's an extra 25 million to just give you more dry powder to exercise pro rata rights for your winners and sort of maybe instead of being a 50-50 split between initial investment and follow on it becomes 40-60. I think that's healthy Generally for us. We are what I would consider a more concentrated venture fund. We're typically only doing around 20 to 22 deals per fund. There are funds out there that are doing 30, 50, 70 deals. I don't understand how you can lead rounds and add a ton of value post-investment if you're spraying and praying like that.
Speaker 1:But yeah, there does come a time where there's a really hot company. They raise a one and a half $2 million pre-seed round and they're now going out for that $5 million seed round, we want to be able to say, hey, we need to cut a $2.5 million check to leave that round we can, whereas right now, with a $75 million fund, it would be very difficult to get that through. I see, just from a sort of concentration risk perspective.
Speaker 2:So final question for you. This could either be to new investors or to new founders. What's the best piece of advice that you could give for those who are on the rise?
Speaker 1:Yeah. So I mean, I think, for new founders, I would just say that you know, for me, the best founders I've ever worked with, not only are they super passionate, do they feel like they have, you know, a very unique sort of lens in the space and, most importantly, they know how to deal with adversity. They know how to get punched in the face, they expect it and they get back up. And when they're going through adversity, they're hyper honest with their investors. So there are a lot of founders out there that I've met that you know. I asked them hey, like what's going wrong with your company? Oh, nothing's going wrong. There's nothing going wrong. Like there's, it's supposed to, there's supposed to be things going on by its early stage.
Speaker 1:And they don't want to sort of you know, sort of tell their cap table like what's keeping up at night, what am I most scared about? Because they think that it's going to create problems. What they don't realize is the more open and honest you are and the more you can sort of leverage the totality of your cap table, the stronger you're going to be. You know founders that don't have product market fit and they think that they should just keep building features constantly because hopefully, if I build it, it will come, but they're not actually taking the time to do the work, to understand what does the customer really want.
Speaker 1:That's another sort of pitfall that I see a lot of early founders, young founders falling into. So what I would just say generally is it's supposed to be hard, it's supposed to be like chewing glass. You're supposed to make mistakes. My advice is if you bring the work ethic and you feel like you understand the space, just be really honest when you're feeling the most vulnerable, because in my opinion, that creates self-awareness and that also makes your investors feel like you're being open, you're being honest and ideally it's going to make them want to push harder to make you successful.
Speaker 2:Love that All right. Well, thank you so much for coming on, Adam. That's a ton of valuable advice and I really enjoyed the conversation. Yeah, thanks so much for having me. Thank you for tuning in to this episode of Seed to Exit. I hope you found today's conversation insightful and valuable. If you enjoyed the episode, please take a moment to subscribe, leave a review and share it with your network. Your support means the world helps us continue to grow and bring more incredible guests onto the show. Now for more content and updates, follow me on LinkedIn or Twitter, or you can check out MindHire, where we help startups build exceptional teams. Thanks again for listening and I'll see you in the next episode of Seed to Exit.
