May 1, 2022
What is a down-round and how to survive one? By Russ Wilcox
Russ Wilcox, Partner at PillarVC talks about his experience running startups himself. Throughout his career he raised 10 times and 3 times these were down-rounds. In this episode Russ explains what down-rounds are bad, how they happened to him and how he managed to survive and thrive!
Russ' LinkedIn: https://www.linkedin.com/in/russ-wilcox-2005/
Pillar VC's website: https://www.pillar.vc/
For people who want to understand how to get in touch with the right investor, a course developed by Fundraising Radio's team and myself: https://fundraising-courses.com/
Some topics we have covered in this episode:
- your fund invests in three fields, which one of those do you specialize in?
- you've raised 10 rounds of funding and 3 of those were down-rounds with an eventual happy ending, can you tell us a bit more about that experience?
- the unique trait of your fund is that most of your managers have experience building their own companies, how transferrable is that experience?
- you're an investor who likes patents, why is that and when o you think it makes sense to patent an idea/technology?
- you've recently closed your own raise for your 3rd fund - how did that go? How does that experience compare to fundraising for your own company?
- are there any deep tech investments that you've recently made that excite you the most?
Transcript
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They're releasing to fundraising
video a podcast about
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fundraising for early-stage
startups, the major rule that we
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follow here is no bullshit on
this podcast.
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No music to relax.
You know, advertisements of our
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sponsors.
We only talk about fundraising
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here and nothing else.
So let's jump into the episode
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and today's guest speaker we
have Rose Wilcox partner and
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peeler vcn.
In this episode we'll talk about
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first of all, pillar receive See
how you come to life, and how
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this is Russ's.
Third fund that you raised.
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But before that, we're going to
talk about Ross's company that
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he started and how he has
managed to close 10 rounds of
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funding and how he managed to
survive, three of those rounds
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being down rounds.
And also for those people who
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don't know what a Down Round is
we are going to explain this and
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explain the dangers of a Down
Round.
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So as let's kick it off by you,
giving us some background on
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yourself and on pillar, we see
ya.
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Good morning Constantine, glad
to be here background on myself.
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I'm started my career as an
entrepreneur, I started three
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companies.
The most important which is e
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ink, which had all those funding
rounds, you talked about and
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then one in clean energy and one
in life science.
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So I really have had a career
focused on commercializing
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Innovation, mostly science-based
Innovation and then Angel
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Investing in other, kites of
other types of startups, which
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led me to Reunite about five
years ago, with one of my good
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friends, Jamie Goldstein and
Sarah Hodges and they had
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started a new Venture fund
called pillar which we'll talk
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about.
And at Pillar.
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Now, I'm a general partner and I
focus on making investments in
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any kind of innovative company,
maybe, you know, using data or
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AI or might be new science, new
biology.
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So all kinds of innovation All
right, lovely.
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That is a very interesting focus
and we'll definitely talk a
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little bit more about that.
But, let's start with a standard
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question, for all our feces.
Can you just tell us quickly
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about what you investing from
with pillar?
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We see what stage ever check
size?
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And what industry the investing?
Yeah.
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So pillar is a seed stage
focused fund based in Boston.
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We are focused on writing, you
know, all kinds of Industries,
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but as I said, mostly
Innovation, we do.
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Right now, about 1/3 software,
1/3 biology, and 1/3 crypto.
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And our typical check size is 2
million, but it might be 50k up
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to 6 million, sort of fits the
situation.
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We have, we're on our third fund
and our third one is 170 million
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and so we have a total of 350
million under management about
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50 or 60 deal so far.
Nice.
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Congratulations on.
Getting to that level and
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looking forward to seeing that
number grow.
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I'm hopeful that's in five
years.
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I'm going to interview you with
your Force funds and we're going
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to talk about some more fun
stuff.
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But now let's talk about your
previous company.
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Let's talk about those three
companies that you have lounged.
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Let's just briefly touch on to
each one and then focus on
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eating because it appears to be
the most interesting one that
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you have run so far.
So, first question is, how many
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of those three have actually
Seeded, AKA exits.
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IP Odes were acquired or
anything that can be remotely
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close to a successful actress.
Okay.
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So Inc was the one that had
three down rounds and but then
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ultimately sold for half a
billion dollars.
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So ice I'm gonna count that as a
success you had you know, over
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100 million devices, sold with
E, Ink electronic paper screens
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and including all the On Kindle
Paperwhite, seu Z ink and a
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bunch of other devices.
A bunch of electronic shelf,
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price labels.
I think total consumer purchases
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of that either category enabled
by that technology is over 10
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billion dollars.
So that's a success, definitely
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success.
Yeah.
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And then after that, you know, I
sold that company.
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It took a year off, I travel
around the world with my family
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and came back.
I think like a lot of Founders
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Who Sold her first company sort
of consumed with the idea that I
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should Should try to do
something very risky and very
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positive for Humanity.
And so my next to Ventures were
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sort of science moonshots.
One was a new kind of
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alternative nuclear energy, that
was safer cleaner and cheaper
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that raise capital from Peter
teal.
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And another was a cure for
cancer that would polarize
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macrophages, so that the
macrophages would fight solid
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tumors and, you know, neither of
those succeeded.
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The Nuclear One ran into A new
political Administration that
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was kind of, didn't believe in
the value of clean energy.
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Let's just say that.
Yeah, and became very hard.
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And what we did with that is we
we open sourced all of our
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science.
So everything we found out we
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put out in the public domain, so
others could stand on our
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shoulders.
So, is that a success or not?
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I mean, in a way we're moving
the ball forward on this better
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form of nuclear energy and then
the cancer cure.
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We were able to A show with less
than a million dollars of
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spending that it was not going
to be, you know, not going to be
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a good enough, cancer cure.
There's a lot of things that are
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like mildly helpful, but in
order to get through, and make a
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drug, which takes a billion
dollars of capital, it has to be
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really excellent.
And we were able show very
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quickly that this was good, but
not great.
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And we stopped the project.
And so in a way I view that, as
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success in the sense that, you
know, my goal is a As a business
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person is too is you can't
change the laws of physics.
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So what you want to do with a
deep Tech is find out very
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quickly whether it's going to
work or not the kind of disprove
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your own thesis and we were able
to find out quickly and
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efficiently that this didn't
replicate robustly enough to
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justify company and okay, we
shut it down and then it was
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time for the fourth thing and
that's when I switched over to
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venture capital.
So I could try to do many of
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these projects in parallel.
Perfect, love that story of the
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The journey towards VC and
hopefully you'll keep doing some
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good stuff for the humanity
here.
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And yeah, I mean that was
definitely a success.
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If your first you have proved
that one of the options is just
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not working so other people will
not spend their time doing it so
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that is definitely a success but
let's talk about the success
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that was successful in the
financial way as well.
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So let's talk about eating.
First of all, you have raised
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Ten rounds out of those Ten
rounds.
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Three rounds were down Route.
So let's start by In our
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listeners, what a Down Round is
and was the problem with the
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Jammer out.
So, Russ game just briefly,
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explain that.
And why do VCS don't like down
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rounds?
Okay.
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Okay.
Well, of course, the when you
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raising Capital you'll pick a
share price you might raise your
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seed round at a dollar, a share
and that might represent say 10
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million valuation and the next
round 50, in the next round 200.
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In the case of you think we got
up to our series, D was a 300
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million dollar valuation and
wood.
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Raised about 100 million and so
a Down Round is you go to raise
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your next round and the
company's not doing that well,
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and it's not on the trajectory
that would justify a continued
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increase in share price.
And you can't even do a flat
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round, which would be the same
share price, really?
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There's no takers and you're
going to have to decrease the
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valuation.
And this is really bad for VC's,
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in a couple of respects.
Number one, they have to
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recognize losses and it makes
them embarrassed.
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They're LPS, number two, there's
a for you as a Founder.
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The way that most VC comes in is
as preferred stock.
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So most VCS are going to get all
their money back before you make
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anything, right?
So, if the price goes down,
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basically, they need to own a
substantial portion of what's
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left.
So, if I raised a hundred
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million on 300 and the price
went down to 50, then then I get
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nothing and they all have to
take a future.
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Percent right off and I and now
the manager team owns nothing.
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And so there's a big fight.
It's almost like going through a
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bankruptcy and every party it's
a very complicated negotiation
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because each party might or
might not put in a few more
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dollars to keep it going and
everybody has to approve the
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final deal.
And there's a question of due to
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management team get some more
stock in the new entity going
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forward.
And if so, which managers were
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to blame and should be fired in?
Which stay so it's a mess.
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It's like going through a
bankruptcy, right?
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And sound like that.
So let's talk how you survived
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three of those and second
question right away.
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Were those consecutive was it
just like an unfortunate couple
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of years or was it a different
times?
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Just because of XYZ reasons, but
those were different reasons.
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Yes, there are consecutive.
Let's see.
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Where's I said?
We'd raised a lot of capital to
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get up to a three million
valuation it during the frothy
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years in the early 2000s.
So the internet era was pumping
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all the prices and so we found
it easy to raise capital and
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then one tactic we used for
something industrial, like, you
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know, display, some VCS won't
touch that.
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So you need to get other sources
of capital.
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We did a lot of deals with big
companies.
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Motorola Intel Phillips have 12
different like Fortune, 500 size
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companies took a lot of work.
Well, a big company it's
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generally not price sensitive so
you can jack the valuation up
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and we did.
And so we had a very high
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valuation, but as the product,
you know, we ran into product
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problems, we were able to finish
the product.
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We spread our, we had so much
cash.
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We thought we'd just try lots of
different things.
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We spread ourselves too thin.
You know, hindsight is We should
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have just focused on one thing
so but when it's easy to raise
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Capital you start to spend it
without really thinking that
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through.
And then when we had our first
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down round I think we made a
classic mistake which is that
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the investors were found it so
painful that we did a partial
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down round which is a big
mistake.
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So instead of going from 300
down to 3 and restarting, you
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know really early and wiping out
all the old people all the old
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investors and just having the
new investors In we went from
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300 down to 40.
So the old investors still had a
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steak and they were still at the
table.
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They were still you know, really
complaining about the the Down
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Round And so basically the next
year we still hadn't reached the
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market.
Probably the market price would
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have been 5 million but we still
kept a partially artificially
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inflated valuation.
And so with deep Tech, you know,
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at the beginning if you say
you've got some great
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breakthrough in our case, All
the ability to have paper that
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could rewrite itself you know, a
complete Library of Congress in
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the palm of your hand.
Very exciting stuff and so you
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get this great buzz but then you
get this trough of
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disillusionment and at that
moment you have to raise
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capital.
I mean, the actual value is very
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low.
It was shown that the tech was
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very hard to commercialize.
So anyway, my point is, if you
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have to do a Down Round, you
should bring it all the way.
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This is my advice to that.
I give now to CEOs.
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If you're in this situation, you
want to Get it down as low as
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you can and I thought
Constantine that as a CEO you
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know my job was to try to
preserve my shareholders and so
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that's why I thought 40 was
better than five.
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Yeah, but really it's very
damaging for you not to sort of
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admit reality and go all the way
down and one reason is every
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time there's a Down Round
remember all that all the Common
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Stocks getting wiped out.
So you have to restart your vest
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in clock.
So who you fooling?
218
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So what happens is you like,
okay I've been in this deal for.
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I've been working on this for
seven years.
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Now I have four more years to go
and then you few delay, the full
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00:12:22,500 --> 00:12:25,200
day of reckoning for an extra
year to buy, sort of trying to
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re hype the the down around.
You just restart your black
223
00:12:28,000 --> 00:12:30,400
again.
Two years later when I had three
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in a row.
Yeah.
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00:12:32,200 --> 00:12:34,700
And you know what you want to
do?
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If that happens is you'll have a
choice.
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00:12:36,700 --> 00:12:40,200
Do you take options or do you
try to buy back into the new at
228
00:12:40,200 --> 00:12:43,200
the new cheaper?
Doc and for tax reasons.
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00:12:43,200 --> 00:12:46,400
It's much better to buy back in
because you get capital gains.
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00:12:46,800 --> 00:12:49,700
And so the first time I bought
back in for like a few tens of
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thousands, by the time, the
second time I had to buy back in
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for about, you know, equal to
the mortgage on my house.
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Oh, goodbye.
Back in the third time, I had to
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pledge in.
Am I to take an amount of debt
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on my personal balance sheet,
which was equal, to Triple the
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mortgage on my house?
Yikes.
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And I get home.
I never really discussed that
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with anybody in my family, but I
figured if I went back into like
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management consulting and I work
for 20 years, I'd be able to
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00:13:19,808 --> 00:13:21,400
repay that debt.
So it wasn't really
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00:13:21,400 --> 00:13:26,200
irresponsible.
But, you know, it's a, it's a
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00:13:26,208 --> 00:13:29,200
really risky situation.
And again, if you go all the way
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down, then you'd only have to do
that once and it still managing.
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00:13:32,900 --> 00:13:36,400
So basically, you're going to
take a haircut, get the buzz
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00:13:36,400 --> 00:13:40,100
cut, right?
Heck at the bus cut for sure,
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00:13:40,100 --> 00:13:43,300
don't try to go.
Estelle at this point, but let's
247
00:13:43,300 --> 00:13:46,000
talk about how the common stock
is being wiped out.
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Can you briefly explain how the
system works?
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00:13:48,600 --> 00:13:51,700
So investors definitely keep
their preferred shares what
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00:13:51,700 --> 00:13:55,100
happens to the common stock.
So let's just described a
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scenario.
Let's say you have five
252
00:13:56,600 --> 00:13:58,300
investors.
All of them.
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Holds, let's say 50% of your
company in preferred stocks you
254
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as a Founder.
Hold the rest 50 in Common
255
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Stocks.
What happens when you down round
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00:14:07,600 --> 00:14:11,100
and let's say you are going from
100 million valuation to 50
257
00:14:11,100 --> 00:14:13,600
million valuation, what's going
to happen to your sock?
258
00:14:13,900 --> 00:14:18,400
So before on paper you guys have
evaluation of 100 million and
259
00:14:18,400 --> 00:14:22,400
you the founder own 50 million
worth but it's common the five
260
00:14:22,400 --> 00:14:25,400
investors each own 10 million
words so they have 50 million
261
00:14:25,400 --> 00:14:27,200
but is preferred.
So right now looks like the
262
00:14:27,200 --> 00:14:30,700
company split evenly.
However, let's say there's some
263
00:14:30,700 --> 00:14:34,900
adverse event and now your
company drops, it's no longer
264
00:14:34,900 --> 00:14:37,600
worth 100.
So the way preferred stock
265
00:14:37,600 --> 00:14:41,200
works, is its first in line.
When you sell the company, And
266
00:14:41,200 --> 00:14:46,000
it generally gets all its money
back before Common gets
267
00:14:46,000 --> 00:14:47,700
anything.
So, let's say it goes.
268
00:14:47,900 --> 00:14:50,200
Your valuation goes from 100 to
90.
269
00:14:50,600 --> 00:14:54,200
It's no longer a 50-50 split
now, they get 50 and you only
270
00:14:54,200 --> 00:14:57,600
get 40 Value goes down to 80.
They get 50.
271
00:14:57,600 --> 00:15:00,300
You only get 30 value goes down
the 70.
272
00:15:00,300 --> 00:15:03,800
They give you 20, you all the
way down to 50.
273
00:15:03,900 --> 00:15:07,800
Now, at that point they own all
of the company and you get none
274
00:15:07,900 --> 00:15:10,500
and the common stock is
worthless and if you want to
275
00:15:10,500 --> 00:15:13,600
raise Cash at that point.
What they'll do they usually
276
00:15:13,600 --> 00:15:16,400
don't erase your shares.
They just like introduce an
277
00:15:16,400 --> 00:15:20,400
extra zero sort of like you know
the currency and Argentina and
278
00:15:20,400 --> 00:15:25,300
Zimbabwe or something.
Just add more zeros and you just
279
00:15:25,300 --> 00:15:29,900
get washed out and so that and
then they might give you new
280
00:15:29,900 --> 00:15:33,000
options in the sort of with the
extra zeros on them at the end.
281
00:15:33,400 --> 00:15:34,900
Hmm.
Right.
282
00:15:35,000 --> 00:15:39,900
That is a very unfortunate event
to run into but congrats on
283
00:15:39,900 --> 00:15:43,700
Surviving 30.
Those that is some high-level
284
00:15:44,100 --> 00:15:47,800
maneuvering right there and you
did have a successful exit at
285
00:15:47,800 --> 00:15:50,700
the end.
So it was not for nothing, just
286
00:15:50,700 --> 00:15:54,700
one more question and we'll move
on to talk more about prvc.
287
00:15:54,700 --> 00:15:58,300
Specifically ends your current
Journey, but how did you manage
288
00:15:58,300 --> 00:16:01,100
to survive three, how do you
manage, was it just your
289
00:16:01,300 --> 00:16:03,900
negotiation skills?
Was it just you know investors
290
00:16:03,900 --> 00:16:06,200
who believed in you so much that
they were like you know when
291
00:16:06,400 --> 00:16:08,000
we're going to stick to it,
we're going to throw in some
292
00:16:08,000 --> 00:16:09,400
more money.
We're going to make sure that
293
00:16:09,400 --> 00:16:12,300
this company survive sore You
know, x amount of years.
294
00:16:13,400 --> 00:16:15,600
Well, I think this is the
general topic.
295
00:16:15,600 --> 00:16:18,400
I see this is how do you as a
CEO report?
296
00:16:18,400 --> 00:16:22,600
Bad news to your investors?
And there's really, you know,
297
00:16:22,600 --> 00:16:25,700
one approach is I'm going to
hide it, I'm going to downplay
298
00:16:25,700 --> 00:16:28,300
it.
I'm just gonna try to emphasize
299
00:16:28,300 --> 00:16:33,500
accentuate the positive, but I
think one thing in hindsight, we
300
00:16:33,500 --> 00:16:35,700
made a lot of mistakes.
But one thing we did well is
301
00:16:35,700 --> 00:16:40,100
that we just gave the
even-handed unvarnished reality.
302
00:16:41,100 --> 00:16:44,200
And so I think even though the
results were Results that were
303
00:16:44,400 --> 00:16:47,800
not good people.
Trusted at least that they're
304
00:16:47,800 --> 00:16:52,700
being told the truth and as long
as you then yeah you do need to
305
00:16:52,700 --> 00:16:55,900
find at least one anchor
investor who is willing to make
306
00:16:55,900 --> 00:16:58,900
a bet on you and who will lead
the recap.
307
00:16:59,800 --> 00:17:02,700
But as long as that's happening
and people leave, you have your
308
00:17:02,700 --> 00:17:07,000
integrity and you can articulate
a good plan and explain why why
309
00:17:07,000 --> 00:17:11,000
it's a better plan then?
At least some investors will
310
00:17:11,000 --> 00:17:14,099
want to come along and they want
to have seat at the table and
311
00:17:14,099 --> 00:17:15,500
they were there for good
reasons.
312
00:17:15,900 --> 00:17:22,599
And so I think being clear with
people and and giving the them
313
00:17:22,599 --> 00:17:26,000
the story they can trust, don't
wait to share, bad.
314
00:17:26,000 --> 00:17:28,099
News is a big element, the other
element.
315
00:17:28,099 --> 00:17:32,100
I'll just throw in is that, you
know, your job as a CEO keeps
316
00:17:32,100 --> 00:17:35,700
changing the company's growing
event removing really.
317
00:17:35,700 --> 00:17:37,900
It's like you have a new job
description every six months and
318
00:17:37,900 --> 00:17:42,000
if you don't prepare yourself to
keep learning, you won't
319
00:17:42,000 --> 00:17:45,000
survive.
So, One thing that we did during
320
00:17:45,000 --> 00:17:49,700
that time, which try very hard
to keep listening to feedback,
321
00:17:49,700 --> 00:17:52,600
keep improving keep reading
books, keep taking classes, keep
322
00:17:52,600 --> 00:17:55,700
listening to podcast and just
improve yourself everyday.
323
00:17:55,700 --> 00:17:58,400
And you know, if people can see
that you've got an upward
324
00:17:58,400 --> 00:18:01,900
trajectory they may be
frustrated is not all the way up
325
00:18:01,900 --> 00:18:04,900
yet, but they will.
They'll be your fans and they'll
326
00:18:04,900 --> 00:18:07,900
wait patiently more patiently
for you as long as they can see,
327
00:18:07,900 --> 00:18:09,300
you're doing your best to
improve.
328
00:18:11,300 --> 00:18:13,400
Right.
Yeah, honesty is the key.
329
00:18:13,400 --> 00:18:16,200
Is in the relationship with
investors one.
330
00:18:16,200 --> 00:18:20,200
You feel their trust.
You're done.
331
00:18:20,200 --> 00:18:22,900
You are done.
And the word will spread.
332
00:18:22,900 --> 00:18:27,100
For sure that part definitely
does not stay hidden for long.
333
00:18:27,600 --> 00:18:31,100
So on this note, let's move on
and talk about jewelry.
334
00:18:31,100 --> 00:18:33,900
See at last.
So, one of the unique traits of
335
00:18:33,900 --> 00:18:37,500
the fun is actually that most of
the managers managers and
336
00:18:37,500 --> 00:18:41,100
partners in the fund have Have
experience building their own
337
00:18:41,100 --> 00:18:42,800
companies, right?
Mmm.
338
00:18:42,900 --> 00:18:45,900
Yeah, that's right.
And how transferrable do you
339
00:18:45,900 --> 00:18:48,300
think the experience is?
So from what I've seen
340
00:18:48,300 --> 00:18:50,900
personally by interviewing
hundreds of investors?
341
00:18:50,900 --> 00:18:53,500
Is that a lot of them have
experience building the
342
00:18:53,500 --> 00:18:55,900
companies but is just not
relevant?
343
00:18:56,000 --> 00:18:58,700
Or they think that some
investors, especially those who
344
00:18:58,700 --> 00:19:02,800
are younger and those who have
opened, just their first fund
345
00:19:02,800 --> 00:19:06,000
think that, you know, the
business that have built is the
346
00:19:06,000 --> 00:19:09,000
Silver Bullet for startups.
I'm just going to try to
347
00:19:09,000 --> 00:19:11,100
replicate that.
That success for every company I
348
00:19:11,108 --> 00:19:14,400
invested in, they try to go into
the subjects that they don't
349
00:19:14,400 --> 00:19:16,800
quite understand.
So from your perspective, how
350
00:19:16,800 --> 00:19:19,800
transferable is that knowledge
that you have acquired by
351
00:19:19,800 --> 00:19:24,900
building your own companies for
example, That's a great question
352
00:19:24,900 --> 00:19:28,300
and I'm in year 5 and I'm still
trying to decide that for myself
353
00:19:29,600 --> 00:19:33,900
but you know, I think the the
material changes with each
354
00:19:33,900 --> 00:19:35,800
company.
The industry is different, the
355
00:19:35,800 --> 00:19:40,700
specifics are different and I
also think that it's a great
356
00:19:40,700 --> 00:19:44,200
mistake for the VC to think that
he or she knows the answer and
357
00:19:44,200 --> 00:19:46,400
that it's about transfer of
knowledge like you're working
358
00:19:46,400 --> 00:19:51,300
together to figure out a puzzle.
And so you know the clues are
359
00:19:51,300 --> 00:19:53,100
there.
R in your.
360
00:19:53,100 --> 00:19:56,100
You may not know the right
answer, but you're on the same
361
00:19:56,100 --> 00:19:58,500
side is the founder and trying
to figure it out.
362
00:19:59,000 --> 00:20:06,700
And what does help a lot is kind
of a sense of rhythm of, of
363
00:20:06,700 --> 00:20:12,000
process of con of the spirit of
just being on an adventure and
364
00:20:12,000 --> 00:20:15,700
trying to face Mysteries and not
being rattled.
365
00:20:15,900 --> 00:20:21,300
When there's setbacks so many or
you know, generalize things like
366
00:20:21,300 --> 00:20:23,900
how would Do you hire someone or
how do you do a good job
367
00:20:23,900 --> 00:20:26,700
interview?
Or you know, how to explain
368
00:20:26,700 --> 00:20:28,600
stock options to someone?
How should you write a good
369
00:20:28,600 --> 00:20:31,000
pitch deck?
So there are certain Universal
370
00:20:31,000 --> 00:20:33,200
things that are absolutely
transferable.
371
00:20:33,400 --> 00:20:36,200
And there are other things that
I think are about attitude,
372
00:20:36,500 --> 00:20:38,400
which I believe, resonate
pretty.
373
00:20:38,400 --> 00:20:42,200
Well, the founder and certainly,
when I was a Founder, I really
374
00:20:42,200 --> 00:20:45,500
preferred investors who had been
there and done that before.
375
00:20:46,300 --> 00:20:49,000
And who also were humble enough.
Not to say they had the answer
376
00:20:49,000 --> 00:20:53,800
but at least they were with me,
totally in spirit. 100% having
377
00:20:53,800 --> 00:20:56,200
humble investors who are also
knowledgeable.
378
00:20:56,200 --> 00:21:00,500
That is a rare combination right
there, very hard to find.
379
00:21:00,500 --> 00:21:03,800
So if you do run into those
definitely crab them and try to
380
00:21:03,800 --> 00:21:07,100
get them on your cap table.
So on this note, let's move on
381
00:21:07,100 --> 00:21:10,400
and talk a little bit more about
technicalities and that is the
382
00:21:10,400 --> 00:21:14,600
fact that you mentioned that you
actually like patents on our
383
00:21:14,600 --> 00:21:17,900
pre-interview call.
So question is when do the
384
00:21:17,900 --> 00:21:20,300
patents make sense?
And in which Industries, do they
385
00:21:20,300 --> 00:21:24,900
make sense?
Yeah, I'm often asked should I
386
00:21:24,908 --> 00:21:27,600
file patents?
And it can be pretty expensive
387
00:21:27,700 --> 00:21:30,100
and I can think of three
situations.
388
00:21:30,500 --> 00:21:32,700
First of all, obviously, if
you're deep tech company, and
389
00:21:32,700 --> 00:21:35,000
you're truly innovating and
you're inventing things that
390
00:21:35,000 --> 00:21:37,500
never existed before, you're
going to spend a lot of time and
391
00:21:37,500 --> 00:21:40,300
money on patents.
And actually, I wrote this whole
392
00:21:40,600 --> 00:21:43,200
guide called how to build a
patent Fortress such as on our
393
00:21:43,200 --> 00:21:45,800
website.
And that's a good thing to read.
394
00:21:45,800 --> 00:21:50,100
If you're, if you're doing that
and then the alternative, the
395
00:21:50,100 --> 00:21:53,300
other end of the spectrum is
somebody who Really inventing a
396
00:21:53,300 --> 00:21:56,500
new business model but there is
no technical Innovation.
397
00:21:56,500 --> 00:22:00,600
So, like we have an investment
in conjure, they will bring you
398
00:22:00,600 --> 00:22:02,400
furniture for your rental
apartment.
399
00:22:02,400 --> 00:22:04,100
So you show up, it's already
furnished.
400
00:22:04,200 --> 00:22:07,200
You leave, they take it away.
It's all white glove service and
401
00:22:07,200 --> 00:22:10,800
its really nice stuff that's
about, you know, a providing a
402
00:22:10,800 --> 00:22:14,400
service that meets the needs of
Millennials and gen Z, and it's
403
00:22:14,400 --> 00:22:17,000
not really a technical question,
so there's clearly not going to
404
00:22:17,000 --> 00:22:20,400
be a patent there and then in
the middle is, let's say that
405
00:22:20,400 --> 00:22:23,000
you have an innovation.
And it's just a small
406
00:22:23,000 --> 00:22:28,400
differentiation, you know, like
we use a, you know, something
407
00:22:28,400 --> 00:22:30,500
that makes our air conditioner
five percent more energy
408
00:22:30,500 --> 00:22:32,600
efficient.
It's not really going to be
409
00:22:32,600 --> 00:22:34,700
blocking the competition, it's
just nice.
410
00:22:34,900 --> 00:22:37,600
And then you would file like one
patent just to be able to say
411
00:22:37,600 --> 00:22:40,500
your patent pending.
So it really looking at the
412
00:22:40,500 --> 00:22:45,800
amount of invention and for most
people it's either none or one
413
00:22:46,600 --> 00:22:50,300
to be able to say you have one
and then in but in certain
414
00:22:50,300 --> 00:22:52,800
circumstances are going to be
spending perhaps And of dollars
415
00:22:52,800 --> 00:22:54,800
and you probably know if that's
your case.
416
00:22:55,600 --> 00:22:58,300
Hmm, right, right.
Personally, not a huge fan of
417
00:22:58,300 --> 00:22:59,800
fans.
But yet deep Tech, that's a
418
00:22:59,800 --> 00:23:02,900
different subject.
So in that case, he might be
419
00:23:02,900 --> 00:23:06,700
excused and just might as well
file for that patent.
420
00:23:06,700 --> 00:23:10,900
If it does make sense, I see the
one thing I'll point out there
421
00:23:10,900 --> 00:23:13,900
is true, you're never going to
get value from the patent while
422
00:23:13,900 --> 00:23:17,200
your startup because you don't
have the balance sheet to be
423
00:23:17,200 --> 00:23:20,100
able to sue, anybody.
Yeah, hatton's are really like
424
00:23:20,100 --> 00:23:21,600
in chest.
There's the end game.
425
00:23:22,100 --> 00:23:25,600
The patents are in endgame
asset, your acquirer will be
426
00:23:25,600 --> 00:23:28,400
able to get value from them.
Like, if IBM buys you, they're
427
00:23:28,400 --> 00:23:29,700
going to be able to sue someone
with them.
428
00:23:29,700 --> 00:23:31,800
So you you want to build them
up.
429
00:23:31,800 --> 00:23:35,000
There are important asset but
you're never going to use them
430
00:23:35,000 --> 00:23:37,600
which it's a sort of funny
irony.
431
00:23:37,600 --> 00:23:40,000
But I do think that can be
valuable for detox.
432
00:23:40,400 --> 00:23:43,000
Hmm, right.
And by the way, there is a great
433
00:23:43,000 --> 00:23:47,200
movie about specifically that
subject about small companies
434
00:23:47,200 --> 00:23:51,100
making patents and then be
companies just using those
435
00:23:51,100 --> 00:23:54,300
patents because they were
Realize that they don't have the
436
00:23:54,300 --> 00:23:57,600
money to sue them.
Cole's the billion-dollar codes
437
00:23:57,800 --> 00:24:01,200
recommend to everyone who is
interested in looking how cheesy
438
00:24:01,200 --> 00:24:04,100
Google is.
All right, so on this note,
439
00:24:04,100 --> 00:24:08,700
let's move on and talk about the
investments in deep debt that
440
00:24:08,700 --> 00:24:10,400
you've made.
So, is there anything
441
00:24:10,400 --> 00:24:12,800
particularly interesting that
you would like to share before
442
00:24:12,800 --> 00:24:18,600
we wrap up the episode?
Well, we have a range of deep
443
00:24:18,600 --> 00:24:23,500
Tech Investments and as I said,
we're right now doing one third
444
00:24:23,500 --> 00:24:26,600
of our investing in biology and
bio Tech.
445
00:24:26,600 --> 00:24:29,100
And all of that is, is in a way.
It's a deep Tech.
446
00:24:29,100 --> 00:24:34,000
So it's so exciting.
And at struggle to pick out one,
447
00:24:34,000 --> 00:24:38,500
you know, one we just had now
it's a 50 million dollar series,
448
00:24:38,500 --> 00:24:42,100
a is cool.
A bio Kula is using microbes to
449
00:24:42,100 --> 00:24:46,600
manufacture nitrogen.
Fertilizer, and so You get
450
00:24:46,900 --> 00:24:50,600
fertilizer in a fully
sustainable package so you just
451
00:24:50,600 --> 00:24:53,000
spray the stuff on your field
and then you don't need to put
452
00:24:53,000 --> 00:24:56,700
chemicals on your on your soil.
And so, it's organic.
453
00:24:57,600 --> 00:24:59,300
You can be made in sustainable
way.
454
00:24:59,300 --> 00:25:02,700
It's not requiring.
Any fossil fuels, it doesn't
455
00:25:02,700 --> 00:25:05,100
have any nitrogen runoff, so it
keeps the nitrogen out of the
456
00:25:05,100 --> 00:25:10,100
water and it could be if the
yields get to where we want.
457
00:25:10,100 --> 00:25:13,000
It could be cheaper than
haber-bosch and so it could
458
00:25:13,000 --> 00:25:15,800
revolutionize the fertilizer
industry, which is 100.
459
00:25:16,000 --> 00:25:19,100
Our industry.
So that's an example of how
460
00:25:19,100 --> 00:25:23,100
biology is changing everything
that they're in the middle of a
461
00:25:23,108 --> 00:25:26,800
great revolution in biology.
And so it's new kinds of
462
00:25:26,800 --> 00:25:28,500
fertilizer.
We also have Investments new
463
00:25:28,500 --> 00:25:32,500
kind of synthetic cotton
synthetic leather, you know,
464
00:25:32,500 --> 00:25:36,200
sustainable coffee, all sorts of
products in addition to
465
00:25:36,200 --> 00:25:40,100
medicines and cell and tissue
therapies being invented.
466
00:25:40,100 --> 00:25:43,200
It's a really fertile moment for
biology.
467
00:25:44,300 --> 00:25:46,600
It sure is.
I've definitely heard a ton of
468
00:25:46,600 --> 00:25:50,000
invasions in that space and
seems like they're being off.
469
00:25:50,000 --> 00:25:54,500
Maybe one day, you won't be
hungry at last on this notes.
470
00:25:54,500 --> 00:26:00,100
That whole, let's go to the call
to action and Which is, which is
471
00:26:00,100 --> 00:26:02,800
the last question of today's
episode and it's very simple.
472
00:26:02,800 --> 00:26:06,100
Would do you want the listener
to do right after this episode
473
00:26:06,100 --> 00:26:10,800
is over rust?
Okay, go to pillar dot VC and
474
00:26:10,800 --> 00:26:12,900
check out something.
We have called the founders
475
00:26:12,900 --> 00:26:17,800
playlist and this is like a
multimedia playground with all
476
00:26:17,800 --> 00:26:21,300
sorts of entrepreneurs and
investors giving advice on
477
00:26:21,300 --> 00:26:24,300
hundreds of different topics and
so you can pick out whatever.
478
00:26:24,300 --> 00:26:28,100
The problem of the day is that
you're facing and check it out
479
00:26:28,200 --> 00:26:30,800
and in particular I'll just draw
attention to his cool tool.
480
00:26:30,800 --> 00:26:32,900
We have, they're called the term
sheet greater.
481
00:26:33,200 --> 00:26:35,900
So we go out and you raise
Capital, you get a term sheet.
482
00:26:35,900 --> 00:26:38,300
You're like, is this good?
These people trying advantage of
483
00:26:38,300 --> 00:26:39,900
me.
You can just go to our term
484
00:26:39,900 --> 00:26:43,400
sheet greater and plug in your
term sheet and find out if it's
485
00:26:43,400 --> 00:26:46,900
fair or not.
Oh, is that technology automate
486
00:26:46,900 --> 00:26:49,000
or is it?
Someone on the back end, just
487
00:26:49,000 --> 00:26:52,100
actually checking it out.
We know it's automated.
488
00:26:52,100 --> 00:26:54,900
You have sort of Sliders, mmm,
really it all term.
489
00:26:54,900 --> 00:26:56,700
She's like, there's five or six
shots.
490
00:26:56,700 --> 00:26:58,700
Yeah, it's really simple.
For the VC is pretty.
491
00:26:58,900 --> 00:27:00,800
Much multiple choice on each
question.
492
00:27:00,800 --> 00:27:02,900
Yeah, it's no.
We just asked you like, which
493
00:27:02,900 --> 00:27:05,200
did they pick?
And then you can computer score.
494
00:27:06,400 --> 00:27:08,100
Alright, that is very
interesting.
495
00:27:08,100 --> 00:27:10,500
I'll be sure to leave the link
in the description to this
496
00:27:10,500 --> 00:27:12,300
episode.
As usual, of course, there's
497
00:27:12,300 --> 00:27:14,200
gonna be linked to Russ's
LinkedIn.
498
00:27:14,200 --> 00:27:17,400
And, of course, there's gonna be
my Shameless plug in mentioning
499
00:27:17,400 --> 00:27:20,500
the course that our team has
developed specifically, for
500
00:27:20,500 --> 00:27:22,800
Founder's trying to figure out
how to reach out to the right
501
00:27:22,800 --> 00:27:25,400
investors.
If you want to try to figure out
502
00:27:25,400 --> 00:27:28,300
how to do that in a right way.
Definitely check out the
503
00:27:28,308 --> 00:27:30,700
description of this episode
because the links are going to
504
00:27:30,708 --> 00:27:33,900
be there.
And as usually have a good day,
00:00:05,200 --> 00:00:07,800
They're releasing to fundraising
video a podcast about
2
00:00:07,800 --> 00:00:11,400
fundraising for early-stage
startups, the major rule that we
3
00:00:11,400 --> 00:00:14,600
follow here is no bullshit on
this podcast.
4
00:00:14,600 --> 00:00:17,100
No music to relax.
You know, advertisements of our
5
00:00:17,100 --> 00:00:19,600
sponsors.
We only talk about fundraising
6
00:00:19,600 --> 00:00:23,000
here and nothing else.
So let's jump into the episode
7
00:00:23,100 --> 00:00:26,100
and today's guest speaker we
have Rose Wilcox partner and
8
00:00:26,100 --> 00:00:28,700
peeler vcn.
In this episode we'll talk about
9
00:00:28,700 --> 00:00:32,200
first of all, pillar receive See
how you come to life, and how
10
00:00:32,200 --> 00:00:35,100
this is Russ's.
Third fund that you raised.
11
00:00:35,500 --> 00:00:38,500
But before that, we're going to
talk about Ross's company that
12
00:00:38,500 --> 00:00:41,500
he started and how he has
managed to close 10 rounds of
13
00:00:41,500 --> 00:00:45,700
funding and how he managed to
survive, three of those rounds
14
00:00:45,700 --> 00:00:48,400
being down rounds.
And also for those people who
15
00:00:48,400 --> 00:00:52,000
don't know what a Down Round is
we are going to explain this and
16
00:00:52,000 --> 00:00:53,700
explain the dangers of a Down
Round.
17
00:00:53,900 --> 00:00:56,600
So as let's kick it off by you,
giving us some background on
18
00:00:56,600 --> 00:00:59,800
yourself and on pillar, we see
ya.
19
00:01:00,000 --> 00:01:03,800
Good morning Constantine, glad
to be here background on myself.
20
00:01:03,800 --> 00:01:08,200
I'm started my career as an
entrepreneur, I started three
21
00:01:08,200 --> 00:01:10,400
companies.
The most important which is e
22
00:01:10,400 --> 00:01:13,500
ink, which had all those funding
rounds, you talked about and
23
00:01:13,500 --> 00:01:17,600
then one in clean energy and one
in life science.
24
00:01:17,600 --> 00:01:20,700
So I really have had a career
focused on commercializing
25
00:01:21,100 --> 00:01:25,100
Innovation, mostly science-based
Innovation and then Angel
26
00:01:25,100 --> 00:01:28,700
Investing in other, kites of
other types of startups, which
27
00:01:28,700 --> 00:01:32,800
led me to Reunite about five
years ago, with one of my good
28
00:01:32,800 --> 00:01:37,100
friends, Jamie Goldstein and
Sarah Hodges and they had
29
00:01:37,100 --> 00:01:40,500
started a new Venture fund
called pillar which we'll talk
30
00:01:40,500 --> 00:01:43,000
about.
And at Pillar.
31
00:01:43,100 --> 00:01:46,600
Now, I'm a general partner and I
focus on making investments in
32
00:01:46,600 --> 00:01:51,100
any kind of innovative company,
maybe, you know, using data or
33
00:01:51,400 --> 00:01:56,500
AI or might be new science, new
biology.
34
00:01:56,800 --> 00:02:00,600
So all kinds of innovation All
right, lovely.
35
00:02:00,600 --> 00:02:03,000
That is a very interesting focus
and we'll definitely talk a
36
00:02:03,008 --> 00:02:05,900
little bit more about that.
But, let's start with a standard
37
00:02:05,900 --> 00:02:09,600
question, for all our feces.
Can you just tell us quickly
38
00:02:09,600 --> 00:02:12,300
about what you investing from
with pillar?
39
00:02:12,300 --> 00:02:14,500
We see what stage ever check
size?
40
00:02:14,500 --> 00:02:17,100
And what industry the investing?
Yeah.
41
00:02:17,100 --> 00:02:21,600
So pillar is a seed stage
focused fund based in Boston.
42
00:02:21,900 --> 00:02:26,800
We are focused on writing, you
know, all kinds of Industries,
43
00:02:26,800 --> 00:02:29,400
but as I said, mostly
Innovation, we do.
44
00:02:29,500 --> 00:02:35,500
Right now, about 1/3 software,
1/3 biology, and 1/3 crypto.
45
00:02:36,100 --> 00:02:40,900
And our typical check size is 2
million, but it might be 50k up
46
00:02:40,900 --> 00:02:43,700
to 6 million, sort of fits the
situation.
47
00:02:44,200 --> 00:02:49,000
We have, we're on our third fund
and our third one is 170 million
48
00:02:49,500 --> 00:02:52,900
and so we have a total of 350
million under management about
49
00:02:52,900 --> 00:02:58,200
50 or 60 deal so far.
Nice.
50
00:02:58,300 --> 00:03:01,200
Congratulations on.
Getting to that level and
51
00:03:01,500 --> 00:03:03,100
looking forward to seeing that
number grow.
52
00:03:03,100 --> 00:03:05,300
I'm hopeful that's in five
years.
53
00:03:05,300 --> 00:03:08,000
I'm going to interview you with
your Force funds and we're going
54
00:03:08,000 --> 00:03:10,100
to talk about some more fun
stuff.
55
00:03:10,100 --> 00:03:12,100
But now let's talk about your
previous company.
56
00:03:12,100 --> 00:03:14,600
Let's talk about those three
companies that you have lounged.
57
00:03:14,900 --> 00:03:19,100
Let's just briefly touch on to
each one and then focus on
58
00:03:19,200 --> 00:03:22,600
eating because it appears to be
the most interesting one that
59
00:03:22,600 --> 00:03:25,900
you have run so far.
So, first question is, how many
60
00:03:25,900 --> 00:03:29,700
of those three have actually
Seeded, AKA exits.
61
00:03:29,700 --> 00:03:35,300
IP Odes were acquired or
anything that can be remotely
62
00:03:35,300 --> 00:03:38,900
close to a successful actress.
Okay.
63
00:03:38,900 --> 00:03:42,900
So Inc was the one that had
three down rounds and but then
64
00:03:42,900 --> 00:03:44,900
ultimately sold for half a
billion dollars.
65
00:03:44,900 --> 00:03:50,000
So ice I'm gonna count that as a
success you had you know, over
66
00:03:50,000 --> 00:03:55,600
100 million devices, sold with
E, Ink electronic paper screens
67
00:03:55,600 --> 00:04:00,300
and including all the On Kindle
Paperwhite, seu Z ink and a
68
00:04:00,308 --> 00:04:02,400
bunch of other devices.
A bunch of electronic shelf,
69
00:04:02,400 --> 00:04:05,300
price labels.
I think total consumer purchases
70
00:04:05,300 --> 00:04:09,500
of that either category enabled
by that technology is over 10
71
00:04:09,500 --> 00:04:12,800
billion dollars.
So that's a success, definitely
72
00:04:12,800 --> 00:04:14,000
success.
Yeah.
73
00:04:14,000 --> 00:04:16,700
And then after that, you know, I
sold that company.
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00:04:16,700 --> 00:04:19,899
It took a year off, I travel
around the world with my family
75
00:04:19,899 --> 00:04:23,100
and came back.
I think like a lot of Founders
76
00:04:23,100 --> 00:04:26,900
Who Sold her first company sort
of consumed with the idea that I
77
00:04:26,900 --> 00:04:29,000
should Should try to do
something very risky and very
78
00:04:29,000 --> 00:04:32,300
positive for Humanity.
And so my next to Ventures were
79
00:04:32,300 --> 00:04:35,600
sort of science moonshots.
One was a new kind of
80
00:04:35,600 --> 00:04:39,700
alternative nuclear energy, that
was safer cleaner and cheaper
81
00:04:40,100 --> 00:04:42,300
that raise capital from Peter
teal.
82
00:04:42,800 --> 00:04:47,900
And another was a cure for
cancer that would polarize
83
00:04:47,900 --> 00:04:50,400
macrophages, so that the
macrophages would fight solid
84
00:04:50,400 --> 00:04:54,400
tumors and, you know, neither of
those succeeded.
85
00:04:54,400 --> 00:04:59,700
The Nuclear One ran into A new
political Administration that
86
00:04:59,700 --> 00:05:02,700
was kind of, didn't believe in
the value of clean energy.
87
00:05:02,700 --> 00:05:05,500
Let's just say that.
Yeah, and became very hard.
88
00:05:06,000 --> 00:05:10,400
And what we did with that is we
we open sourced all of our
89
00:05:10,400 --> 00:05:12,900
science.
So everything we found out we
90
00:05:12,900 --> 00:05:15,200
put out in the public domain, so
others could stand on our
91
00:05:15,200 --> 00:05:18,400
shoulders.
So, is that a success or not?
92
00:05:18,400 --> 00:05:22,000
I mean, in a way we're moving
the ball forward on this better
93
00:05:22,000 --> 00:05:26,700
form of nuclear energy and then
the cancer cure.
94
00:05:26,700 --> 00:05:28,900
We were able to A show with less
than a million dollars of
95
00:05:28,900 --> 00:05:34,200
spending that it was not going
to be, you know, not going to be
96
00:05:34,200 --> 00:05:36,300
a good enough, cancer cure.
There's a lot of things that are
97
00:05:36,308 --> 00:05:40,000
like mildly helpful, but in
order to get through, and make a
98
00:05:40,000 --> 00:05:44,000
drug, which takes a billion
dollars of capital, it has to be
99
00:05:44,000 --> 00:05:46,000
really excellent.
And we were able show very
100
00:05:46,000 --> 00:05:48,200
quickly that this was good, but
not great.
101
00:05:48,600 --> 00:05:53,100
And we stopped the project.
And so in a way I view that, as
102
00:05:53,100 --> 00:05:57,700
success in the sense that, you
know, my goal is a As a business
103
00:05:57,700 --> 00:06:00,900
person is too is you can't
change the laws of physics.
104
00:06:01,100 --> 00:06:03,600
So what you want to do with a
deep Tech is find out very
105
00:06:03,600 --> 00:06:06,600
quickly whether it's going to
work or not the kind of disprove
106
00:06:06,600 --> 00:06:09,600
your own thesis and we were able
to find out quickly and
107
00:06:09,600 --> 00:06:13,800
efficiently that this didn't
replicate robustly enough to
108
00:06:13,800 --> 00:06:17,400
justify company and okay, we
shut it down and then it was
109
00:06:17,400 --> 00:06:20,900
time for the fourth thing and
that's when I switched over to
110
00:06:20,900 --> 00:06:22,600
venture capital.
So I could try to do many of
111
00:06:22,600 --> 00:06:27,000
these projects in parallel.
Perfect, love that story of the
112
00:06:27,200 --> 00:06:31,100
The journey towards VC and
hopefully you'll keep doing some
113
00:06:31,100 --> 00:06:33,100
good stuff for the humanity
here.
114
00:06:33,300 --> 00:06:35,000
And yeah, I mean that was
definitely a success.
115
00:06:35,000 --> 00:06:38,400
If your first you have proved
that one of the options is just
116
00:06:38,400 --> 00:06:41,500
not working so other people will
not spend their time doing it so
117
00:06:41,500 --> 00:06:45,400
that is definitely a success but
let's talk about the success
118
00:06:45,400 --> 00:06:48,300
that was successful in the
financial way as well.
119
00:06:48,400 --> 00:06:51,700
So let's talk about eating.
First of all, you have raised
120
00:06:51,700 --> 00:06:53,800
Ten rounds out of those Ten
rounds.
121
00:06:53,800 --> 00:06:57,400
Three rounds were down Route.
So let's start by In our
122
00:06:57,400 --> 00:07:00,700
listeners, what a Down Round is
and was the problem with the
123
00:07:00,700 --> 00:07:02,400
Jammer out.
So, Russ game just briefly,
124
00:07:02,400 --> 00:07:06,400
explain that.
And why do VCS don't like down
125
00:07:06,400 --> 00:07:07,800
rounds?
Okay.
126
00:07:08,300 --> 00:07:11,800
Okay.
Well, of course, the when you
127
00:07:11,800 --> 00:07:14,700
raising Capital you'll pick a
share price you might raise your
128
00:07:14,700 --> 00:07:18,300
seed round at a dollar, a share
and that might represent say 10
129
00:07:18,300 --> 00:07:21,800
million valuation and the next
round 50, in the next round 200.
130
00:07:22,400 --> 00:07:25,600
In the case of you think we got
up to our series, D was a 300
131
00:07:25,600 --> 00:07:27,000
million dollar valuation and
wood.
132
00:07:27,200 --> 00:07:32,200
Raised about 100 million and so
a Down Round is you go to raise
133
00:07:32,200 --> 00:07:35,000
your next round and the
company's not doing that well,
134
00:07:35,000 --> 00:07:38,900
and it's not on the trajectory
that would justify a continued
135
00:07:38,900 --> 00:07:42,200
increase in share price.
And you can't even do a flat
136
00:07:42,200 --> 00:07:44,300
round, which would be the same
share price, really?
137
00:07:44,300 --> 00:07:47,300
There's no takers and you're
going to have to decrease the
138
00:07:47,308 --> 00:07:51,200
valuation.
And this is really bad for VC's,
139
00:07:51,200 --> 00:07:54,300
in a couple of respects.
Number one, they have to
140
00:07:54,400 --> 00:07:57,000
recognize losses and it makes
them embarrassed.
141
00:07:57,200 --> 00:08:01,500
They're LPS, number two, there's
a for you as a Founder.
142
00:08:03,000 --> 00:08:07,500
The way that most VC comes in is
as preferred stock.
143
00:08:07,500 --> 00:08:11,600
So most VCS are going to get all
their money back before you make
144
00:08:11,600 --> 00:08:15,400
anything, right?
So, if the price goes down,
145
00:08:15,400 --> 00:08:18,500
basically, they need to own a
substantial portion of what's
146
00:08:18,500 --> 00:08:20,300
left.
So, if I raised a hundred
147
00:08:20,300 --> 00:08:25,200
million on 300 and the price
went down to 50, then then I get
148
00:08:25,200 --> 00:08:27,000
nothing and they all have to
take a future.
149
00:08:27,100 --> 00:08:30,200
Percent right off and I and now
the manager team owns nothing.
150
00:08:30,500 --> 00:08:34,000
And so there's a big fight.
It's almost like going through a
151
00:08:34,008 --> 00:08:37,799
bankruptcy and every party it's
a very complicated negotiation
152
00:08:37,799 --> 00:08:39,900
because each party might or
might not put in a few more
153
00:08:39,900 --> 00:08:43,100
dollars to keep it going and
everybody has to approve the
154
00:08:43,100 --> 00:08:45,500
final deal.
And there's a question of due to
155
00:08:45,500 --> 00:08:48,800
management team get some more
stock in the new entity going
156
00:08:48,800 --> 00:08:51,100
forward.
And if so, which managers were
157
00:08:51,100 --> 00:08:54,700
to blame and should be fired in?
Which stay so it's a mess.
158
00:08:54,700 --> 00:08:57,000
It's like going through a
bankruptcy, right?
159
00:08:57,200 --> 00:09:00,000
And sound like that.
So let's talk how you survived
160
00:09:00,000 --> 00:09:03,500
three of those and second
question right away.
161
00:09:03,900 --> 00:09:07,200
Were those consecutive was it
just like an unfortunate couple
162
00:09:07,200 --> 00:09:09,700
of years or was it a different
times?
163
00:09:10,000 --> 00:09:14,700
Just because of XYZ reasons, but
those were different reasons.
164
00:09:15,900 --> 00:09:18,800
Yes, there are consecutive.
Let's see.
165
00:09:19,100 --> 00:09:21,500
Where's I said?
We'd raised a lot of capital to
166
00:09:21,500 --> 00:09:24,800
get up to a three million
valuation it during the frothy
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years in the early 2000s.
So the internet era was pumping
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all the prices and so we found
it easy to raise capital and
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then one tactic we used for
something industrial, like, you
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know, display, some VCS won't
touch that.
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So you need to get other sources
of capital.
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We did a lot of deals with big
companies.
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Motorola Intel Phillips have 12
different like Fortune, 500 size
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companies took a lot of work.
Well, a big company it's
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generally not price sensitive so
you can jack the valuation up
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and we did.
And so we had a very high
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valuation, but as the product,
you know, we ran into product
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problems, we were able to finish
the product.
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We spread our, we had so much
cash.
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We thought we'd just try lots of
different things.
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We spread ourselves too thin.
You know, hindsight is We should
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have just focused on one thing
so but when it's easy to raise
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Capital you start to spend it
without really thinking that
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through.
And then when we had our first
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down round I think we made a
classic mistake which is that
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the investors were found it so
painful that we did a partial
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down round which is a big
mistake.
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So instead of going from 300
down to 3 and restarting, you
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know really early and wiping out
all the old people all the old
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investors and just having the
new investors In we went from
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300 down to 40.
So the old investors still had a
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steak and they were still at the
table.
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They were still you know, really
complaining about the the Down
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Round And so basically the next
year we still hadn't reached the
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market.
Probably the market price would
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have been 5 million but we still
kept a partially artificially
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inflated valuation.
And so with deep Tech, you know,
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at the beginning if you say
you've got some great
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breakthrough in our case, All
the ability to have paper that
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00:11:17,200 --> 00:11:20,900
could rewrite itself you know, a
complete Library of Congress in
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the palm of your hand.
Very exciting stuff and so you
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00:11:23,600 --> 00:11:27,400
get this great buzz but then you
get this trough of
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disillusionment and at that
moment you have to raise
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capital.
I mean, the actual value is very
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low.
It was shown that the tech was
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very hard to commercialize.
So anyway, my point is, if you
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have to do a Down Round, you
should bring it all the way.
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This is my advice to that.
I give now to CEOs.
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If you're in this situation, you
want to Get it down as low as
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you can and I thought
Constantine that as a CEO you
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know my job was to try to
preserve my shareholders and so
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that's why I thought 40 was
better than five.
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00:11:56,100 --> 00:12:00,400
Yeah, but really it's very
damaging for you not to sort of
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admit reality and go all the way
down and one reason is every
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00:12:03,600 --> 00:12:06,400
time there's a Down Round
remember all that all the Common
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00:12:06,400 --> 00:12:09,600
Stocks getting wiped out.
So you have to restart your vest
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00:12:09,600 --> 00:12:12,600
in clock.
So who you fooling?
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00:12:12,600 --> 00:12:15,900
So what happens is you like,
okay I've been in this deal for.
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00:12:16,000 --> 00:12:18,400
I've been working on this for
seven years.
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Now I have four more years to go
and then you few delay, the full
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00:12:22,500 --> 00:12:25,200
day of reckoning for an extra
year to buy, sort of trying to
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re hype the the down around.
You just restart your black
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00:12:28,000 --> 00:12:30,400
again.
Two years later when I had three
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in a row.
Yeah.
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And you know what you want to
do?
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If that happens is you'll have a
choice.
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00:12:36,700 --> 00:12:40,200
Do you take options or do you
try to buy back into the new at
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00:12:40,200 --> 00:12:43,200
the new cheaper?
Doc and for tax reasons.
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00:12:43,200 --> 00:12:46,400
It's much better to buy back in
because you get capital gains.
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00:12:46,800 --> 00:12:49,700
And so the first time I bought
back in for like a few tens of
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thousands, by the time, the
second time I had to buy back in
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for about, you know, equal to
the mortgage on my house.
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00:12:56,900 --> 00:13:01,000
Oh, goodbye.
Back in the third time, I had to
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pledge in.
Am I to take an amount of debt
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on my personal balance sheet,
which was equal, to Triple the
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mortgage on my house?
Yikes.
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And I get home.
I never really discussed that
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with anybody in my family, but I
figured if I went back into like
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00:13:17,300 --> 00:13:19,800
management consulting and I work
for 20 years, I'd be able to
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00:13:19,808 --> 00:13:21,400
repay that debt.
So it wasn't really
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00:13:21,400 --> 00:13:26,200
irresponsible.
But, you know, it's a, it's a
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00:13:26,208 --> 00:13:29,200
really risky situation.
And again, if you go all the way
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00:13:29,200 --> 00:13:32,900
down, then you'd only have to do
that once and it still managing.
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00:13:32,900 --> 00:13:36,400
So basically, you're going to
take a haircut, get the buzz
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00:13:36,400 --> 00:13:40,100
cut, right?
Heck at the bus cut for sure,
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00:13:40,100 --> 00:13:43,300
don't try to go.
Estelle at this point, but let's
247
00:13:43,300 --> 00:13:46,000
talk about how the common stock
is being wiped out.
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00:13:46,000 --> 00:13:48,400
Can you briefly explain how the
system works?
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00:13:48,600 --> 00:13:51,700
So investors definitely keep
their preferred shares what
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00:13:51,700 --> 00:13:55,100
happens to the common stock.
So let's just described a
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00:13:55,100 --> 00:13:56,600
scenario.
Let's say you have five
252
00:13:56,600 --> 00:13:58,300
investors.
All of them.
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Holds, let's say 50% of your
company in preferred stocks you
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as a Founder.
Hold the rest 50 in Common
255
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Stocks.
What happens when you down round
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00:14:07,600 --> 00:14:11,100
and let's say you are going from
100 million valuation to 50
257
00:14:11,100 --> 00:14:13,600
million valuation, what's going
to happen to your sock?
258
00:14:13,900 --> 00:14:18,400
So before on paper you guys have
evaluation of 100 million and
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00:14:18,400 --> 00:14:22,400
you the founder own 50 million
worth but it's common the five
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00:14:22,400 --> 00:14:25,400
investors each own 10 million
words so they have 50 million
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00:14:25,400 --> 00:14:27,200
but is preferred.
So right now looks like the
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00:14:27,200 --> 00:14:30,700
company split evenly.
However, let's say there's some
263
00:14:30,700 --> 00:14:34,900
adverse event and now your
company drops, it's no longer
264
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worth 100.
So the way preferred stock
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00:14:37,600 --> 00:14:41,200
works, is its first in line.
When you sell the company, And
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00:14:41,200 --> 00:14:46,000
it generally gets all its money
back before Common gets
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00:14:46,000 --> 00:14:47,700
anything.
So, let's say it goes.
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00:14:47,900 --> 00:14:50,200
Your valuation goes from 100 to
90.
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00:14:50,600 --> 00:14:54,200
It's no longer a 50-50 split
now, they get 50 and you only
270
00:14:54,200 --> 00:14:57,600
get 40 Value goes down to 80.
They get 50.
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00:14:57,600 --> 00:15:00,300
You only get 30 value goes down
the 70.
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00:15:00,300 --> 00:15:03,800
They give you 20, you all the
way down to 50.
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00:15:03,900 --> 00:15:07,800
Now, at that point they own all
of the company and you get none
274
00:15:07,900 --> 00:15:10,500
and the common stock is
worthless and if you want to
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00:15:10,500 --> 00:15:13,600
raise Cash at that point.
What they'll do they usually
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00:15:13,600 --> 00:15:16,400
don't erase your shares.
They just like introduce an
277
00:15:16,400 --> 00:15:20,400
extra zero sort of like you know
the currency and Argentina and
278
00:15:20,400 --> 00:15:25,300
Zimbabwe or something.
Just add more zeros and you just
279
00:15:25,300 --> 00:15:29,900
get washed out and so that and
then they might give you new
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00:15:29,900 --> 00:15:33,000
options in the sort of with the
extra zeros on them at the end.
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00:15:33,400 --> 00:15:34,900
Hmm.
Right.
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00:15:35,000 --> 00:15:39,900
That is a very unfortunate event
to run into but congrats on
283
00:15:39,900 --> 00:15:43,700
Surviving 30.
Those that is some high-level
284
00:15:44,100 --> 00:15:47,800
maneuvering right there and you
did have a successful exit at
285
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the end.
So it was not for nothing, just
286
00:15:50,700 --> 00:15:54,700
one more question and we'll move
on to talk more about prvc.
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00:15:54,700 --> 00:15:58,300
Specifically ends your current
Journey, but how did you manage
288
00:15:58,300 --> 00:16:01,100
to survive three, how do you
manage, was it just your
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00:16:01,300 --> 00:16:03,900
negotiation skills?
Was it just you know investors
290
00:16:03,900 --> 00:16:06,200
who believed in you so much that
they were like you know when
291
00:16:06,400 --> 00:16:08,000
we're going to stick to it,
we're going to throw in some
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00:16:08,000 --> 00:16:09,400
more money.
We're going to make sure that
293
00:16:09,400 --> 00:16:12,300
this company survive sore You
know, x amount of years.
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00:16:13,400 --> 00:16:15,600
Well, I think this is the
general topic.
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00:16:15,600 --> 00:16:18,400
I see this is how do you as a
CEO report?
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00:16:18,400 --> 00:16:22,600
Bad news to your investors?
And there's really, you know,
297
00:16:22,600 --> 00:16:25,700
one approach is I'm going to
hide it, I'm going to downplay
298
00:16:25,700 --> 00:16:28,300
it.
I'm just gonna try to emphasize
299
00:16:28,300 --> 00:16:33,500
accentuate the positive, but I
think one thing in hindsight, we
300
00:16:33,500 --> 00:16:35,700
made a lot of mistakes.
But one thing we did well is
301
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that we just gave the
even-handed unvarnished reality.
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00:16:41,100 --> 00:16:44,200
And so I think even though the
results were Results that were
303
00:16:44,400 --> 00:16:47,800
not good people.
Trusted at least that they're
304
00:16:47,800 --> 00:16:52,700
being told the truth and as long
as you then yeah you do need to
305
00:16:52,700 --> 00:16:55,900
find at least one anchor
investor who is willing to make
306
00:16:55,900 --> 00:16:58,900
a bet on you and who will lead
the recap.
307
00:16:59,800 --> 00:17:02,700
But as long as that's happening
and people leave, you have your
308
00:17:02,700 --> 00:17:07,000
integrity and you can articulate
a good plan and explain why why
309
00:17:07,000 --> 00:17:11,000
it's a better plan then?
At least some investors will
310
00:17:11,000 --> 00:17:14,099
want to come along and they want
to have seat at the table and
311
00:17:14,099 --> 00:17:15,500
they were there for good
reasons.
312
00:17:15,900 --> 00:17:22,599
And so I think being clear with
people and and giving the them
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00:17:22,599 --> 00:17:26,000
the story they can trust, don't
wait to share, bad.
314
00:17:26,000 --> 00:17:28,099
News is a big element, the other
element.
315
00:17:28,099 --> 00:17:32,100
I'll just throw in is that, you
know, your job as a CEO keeps
316
00:17:32,100 --> 00:17:35,700
changing the company's growing
event removing really.
317
00:17:35,700 --> 00:17:37,900
It's like you have a new job
description every six months and
318
00:17:37,900 --> 00:17:42,000
if you don't prepare yourself to
keep learning, you won't
319
00:17:42,000 --> 00:17:45,000
survive.
So, One thing that we did during
320
00:17:45,000 --> 00:17:49,700
that time, which try very hard
to keep listening to feedback,
321
00:17:49,700 --> 00:17:52,600
keep improving keep reading
books, keep taking classes, keep
322
00:17:52,600 --> 00:17:55,700
listening to podcast and just
improve yourself everyday.
323
00:17:55,700 --> 00:17:58,400
And you know, if people can see
that you've got an upward
324
00:17:58,400 --> 00:18:01,900
trajectory they may be
frustrated is not all the way up
325
00:18:01,900 --> 00:18:04,900
yet, but they will.
They'll be your fans and they'll
326
00:18:04,900 --> 00:18:07,900
wait patiently more patiently
for you as long as they can see,
327
00:18:07,900 --> 00:18:09,300
you're doing your best to
improve.
328
00:18:11,300 --> 00:18:13,400
Right.
Yeah, honesty is the key.
329
00:18:13,400 --> 00:18:16,200
Is in the relationship with
investors one.
330
00:18:16,200 --> 00:18:20,200
You feel their trust.
You're done.
331
00:18:20,200 --> 00:18:22,900
You are done.
And the word will spread.
332
00:18:22,900 --> 00:18:27,100
For sure that part definitely
does not stay hidden for long.
333
00:18:27,600 --> 00:18:31,100
So on this note, let's move on
and talk about jewelry.
334
00:18:31,100 --> 00:18:33,900
See at last.
So, one of the unique traits of
335
00:18:33,900 --> 00:18:37,500
the fun is actually that most of
the managers managers and
336
00:18:37,500 --> 00:18:41,100
partners in the fund have Have
experience building their own
337
00:18:41,100 --> 00:18:42,800
companies, right?
Mmm.
338
00:18:42,900 --> 00:18:45,900
Yeah, that's right.
And how transferrable do you
339
00:18:45,900 --> 00:18:48,300
think the experience is?
So from what I've seen
340
00:18:48,300 --> 00:18:50,900
personally by interviewing
hundreds of investors?
341
00:18:50,900 --> 00:18:53,500
Is that a lot of them have
experience building the
342
00:18:53,500 --> 00:18:55,900
companies but is just not
relevant?
343
00:18:56,000 --> 00:18:58,700
Or they think that some
investors, especially those who
344
00:18:58,700 --> 00:19:02,800
are younger and those who have
opened, just their first fund
345
00:19:02,800 --> 00:19:06,000
think that, you know, the
business that have built is the
346
00:19:06,000 --> 00:19:09,000
Silver Bullet for startups.
I'm just going to try to
347
00:19:09,000 --> 00:19:11,100
replicate that.
That success for every company I
348
00:19:11,108 --> 00:19:14,400
invested in, they try to go into
the subjects that they don't
349
00:19:14,400 --> 00:19:16,800
quite understand.
So from your perspective, how
350
00:19:16,800 --> 00:19:19,800
transferable is that knowledge
that you have acquired by
351
00:19:19,800 --> 00:19:24,900
building your own companies for
example, That's a great question
352
00:19:24,900 --> 00:19:28,300
and I'm in year 5 and I'm still
trying to decide that for myself
353
00:19:29,600 --> 00:19:33,900
but you know, I think the the
material changes with each
354
00:19:33,900 --> 00:19:35,800
company.
The industry is different, the
355
00:19:35,800 --> 00:19:40,700
specifics are different and I
also think that it's a great
356
00:19:40,700 --> 00:19:44,200
mistake for the VC to think that
he or she knows the answer and
357
00:19:44,200 --> 00:19:46,400
that it's about transfer of
knowledge like you're working
358
00:19:46,400 --> 00:19:51,300
together to figure out a puzzle.
And so you know the clues are
359
00:19:51,300 --> 00:19:53,100
there.
R in your.
360
00:19:53,100 --> 00:19:56,100
You may not know the right
answer, but you're on the same
361
00:19:56,100 --> 00:19:58,500
side is the founder and trying
to figure it out.
362
00:19:59,000 --> 00:20:06,700
And what does help a lot is kind
of a sense of rhythm of, of
363
00:20:06,700 --> 00:20:12,000
process of con of the spirit of
just being on an adventure and
364
00:20:12,000 --> 00:20:15,700
trying to face Mysteries and not
being rattled.
365
00:20:15,900 --> 00:20:21,300
When there's setbacks so many or
you know, generalize things like
366
00:20:21,300 --> 00:20:23,900
how would Do you hire someone or
how do you do a good job
367
00:20:23,900 --> 00:20:26,700
interview?
Or you know, how to explain
368
00:20:26,700 --> 00:20:28,600
stock options to someone?
How should you write a good
369
00:20:28,600 --> 00:20:31,000
pitch deck?
So there are certain Universal
370
00:20:31,000 --> 00:20:33,200
things that are absolutely
transferable.
371
00:20:33,400 --> 00:20:36,200
And there are other things that
I think are about attitude,
372
00:20:36,500 --> 00:20:38,400
which I believe, resonate
pretty.
373
00:20:38,400 --> 00:20:42,200
Well, the founder and certainly,
when I was a Founder, I really
374
00:20:42,200 --> 00:20:45,500
preferred investors who had been
there and done that before.
375
00:20:46,300 --> 00:20:49,000
And who also were humble enough.
Not to say they had the answer
376
00:20:49,000 --> 00:20:53,800
but at least they were with me,
totally in spirit. 100% having
377
00:20:53,800 --> 00:20:56,200
humble investors who are also
knowledgeable.
378
00:20:56,200 --> 00:21:00,500
That is a rare combination right
there, very hard to find.
379
00:21:00,500 --> 00:21:03,800
So if you do run into those
definitely crab them and try to
380
00:21:03,800 --> 00:21:07,100
get them on your cap table.
So on this note, let's move on
381
00:21:07,100 --> 00:21:10,400
and talk a little bit more about
technicalities and that is the
382
00:21:10,400 --> 00:21:14,600
fact that you mentioned that you
actually like patents on our
383
00:21:14,600 --> 00:21:17,900
pre-interview call.
So question is when do the
384
00:21:17,900 --> 00:21:20,300
patents make sense?
And in which Industries, do they
385
00:21:20,300 --> 00:21:24,900
make sense?
Yeah, I'm often asked should I
386
00:21:24,908 --> 00:21:27,600
file patents?
And it can be pretty expensive
387
00:21:27,700 --> 00:21:30,100
and I can think of three
situations.
388
00:21:30,500 --> 00:21:32,700
First of all, obviously, if
you're deep tech company, and
389
00:21:32,700 --> 00:21:35,000
you're truly innovating and
you're inventing things that
390
00:21:35,000 --> 00:21:37,500
never existed before, you're
going to spend a lot of time and
391
00:21:37,500 --> 00:21:40,300
money on patents.
And actually, I wrote this whole
392
00:21:40,600 --> 00:21:43,200
guide called how to build a
patent Fortress such as on our
393
00:21:43,200 --> 00:21:45,800
website.
And that's a good thing to read.
394
00:21:45,800 --> 00:21:50,100
If you're, if you're doing that
and then the alternative, the
395
00:21:50,100 --> 00:21:53,300
other end of the spectrum is
somebody who Really inventing a
396
00:21:53,300 --> 00:21:56,500
new business model but there is
no technical Innovation.
397
00:21:56,500 --> 00:22:00,600
So, like we have an investment
in conjure, they will bring you
398
00:22:00,600 --> 00:22:02,400
furniture for your rental
apartment.
399
00:22:02,400 --> 00:22:04,100
So you show up, it's already
furnished.
400
00:22:04,200 --> 00:22:07,200
You leave, they take it away.
It's all white glove service and
401
00:22:07,200 --> 00:22:10,800
its really nice stuff that's
about, you know, a providing a
402
00:22:10,800 --> 00:22:14,400
service that meets the needs of
Millennials and gen Z, and it's
403
00:22:14,400 --> 00:22:17,000
not really a technical question,
so there's clearly not going to
404
00:22:17,000 --> 00:22:20,400
be a patent there and then in
the middle is, let's say that
405
00:22:20,400 --> 00:22:23,000
you have an innovation.
And it's just a small
406
00:22:23,000 --> 00:22:28,400
differentiation, you know, like
we use a, you know, something
407
00:22:28,400 --> 00:22:30,500
that makes our air conditioner
five percent more energy
408
00:22:30,500 --> 00:22:32,600
efficient.
It's not really going to be
409
00:22:32,600 --> 00:22:34,700
blocking the competition, it's
just nice.
410
00:22:34,900 --> 00:22:37,600
And then you would file like one
patent just to be able to say
411
00:22:37,600 --> 00:22:40,500
your patent pending.
So it really looking at the
412
00:22:40,500 --> 00:22:45,800
amount of invention and for most
people it's either none or one
413
00:22:46,600 --> 00:22:50,300
to be able to say you have one
and then in but in certain
414
00:22:50,300 --> 00:22:52,800
circumstances are going to be
spending perhaps And of dollars
415
00:22:52,800 --> 00:22:54,800
and you probably know if that's
your case.
416
00:22:55,600 --> 00:22:58,300
Hmm, right, right.
Personally, not a huge fan of
417
00:22:58,300 --> 00:22:59,800
fans.
But yet deep Tech, that's a
418
00:22:59,800 --> 00:23:02,900
different subject.
So in that case, he might be
419
00:23:02,900 --> 00:23:06,700
excused and just might as well
file for that patent.
420
00:23:06,700 --> 00:23:10,900
If it does make sense, I see the
one thing I'll point out there
421
00:23:10,900 --> 00:23:13,900
is true, you're never going to
get value from the patent while
422
00:23:13,900 --> 00:23:17,200
your startup because you don't
have the balance sheet to be
423
00:23:17,200 --> 00:23:20,100
able to sue, anybody.
Yeah, hatton's are really like
424
00:23:20,100 --> 00:23:21,600
in chest.
There's the end game.
425
00:23:22,100 --> 00:23:25,600
The patents are in endgame
asset, your acquirer will be
426
00:23:25,600 --> 00:23:28,400
able to get value from them.
Like, if IBM buys you, they're
427
00:23:28,400 --> 00:23:29,700
going to be able to sue someone
with them.
428
00:23:29,700 --> 00:23:31,800
So you you want to build them
up.
429
00:23:31,800 --> 00:23:35,000
There are important asset but
you're never going to use them
430
00:23:35,000 --> 00:23:37,600
which it's a sort of funny
irony.
431
00:23:37,600 --> 00:23:40,000
But I do think that can be
valuable for detox.
432
00:23:40,400 --> 00:23:43,000
Hmm, right.
And by the way, there is a great
433
00:23:43,000 --> 00:23:47,200
movie about specifically that
subject about small companies
434
00:23:47,200 --> 00:23:51,100
making patents and then be
companies just using those
435
00:23:51,100 --> 00:23:54,300
patents because they were
Realize that they don't have the
436
00:23:54,300 --> 00:23:57,600
money to sue them.
Cole's the billion-dollar codes
437
00:23:57,800 --> 00:24:01,200
recommend to everyone who is
interested in looking how cheesy
438
00:24:01,200 --> 00:24:04,100
Google is.
All right, so on this note,
439
00:24:04,100 --> 00:24:08,700
let's move on and talk about the
investments in deep debt that
440
00:24:08,700 --> 00:24:10,400
you've made.
So, is there anything
441
00:24:10,400 --> 00:24:12,800
particularly interesting that
you would like to share before
442
00:24:12,800 --> 00:24:18,600
we wrap up the episode?
Well, we have a range of deep
443
00:24:18,600 --> 00:24:23,500
Tech Investments and as I said,
we're right now doing one third
444
00:24:23,500 --> 00:24:26,600
of our investing in biology and
bio Tech.
445
00:24:26,600 --> 00:24:29,100
And all of that is, is in a way.
It's a deep Tech.
446
00:24:29,100 --> 00:24:34,000
So it's so exciting.
And at struggle to pick out one,
447
00:24:34,000 --> 00:24:38,500
you know, one we just had now
it's a 50 million dollar series,
448
00:24:38,500 --> 00:24:42,100
a is cool.
A bio Kula is using microbes to
449
00:24:42,100 --> 00:24:46,600
manufacture nitrogen.
Fertilizer, and so You get
450
00:24:46,900 --> 00:24:50,600
fertilizer in a fully
sustainable package so you just
451
00:24:50,600 --> 00:24:53,000
spray the stuff on your field
and then you don't need to put
452
00:24:53,000 --> 00:24:56,700
chemicals on your on your soil.
And so, it's organic.
453
00:24:57,600 --> 00:24:59,300
You can be made in sustainable
way.
454
00:24:59,300 --> 00:25:02,700
It's not requiring.
Any fossil fuels, it doesn't
455
00:25:02,700 --> 00:25:05,100
have any nitrogen runoff, so it
keeps the nitrogen out of the
456
00:25:05,100 --> 00:25:10,100
water and it could be if the
yields get to where we want.
457
00:25:10,100 --> 00:25:13,000
It could be cheaper than
haber-bosch and so it could
458
00:25:13,000 --> 00:25:15,800
revolutionize the fertilizer
industry, which is 100.
459
00:25:16,000 --> 00:25:19,100
Our industry.
So that's an example of how
460
00:25:19,100 --> 00:25:23,100
biology is changing everything
that they're in the middle of a
461
00:25:23,108 --> 00:25:26,800
great revolution in biology.
And so it's new kinds of
462
00:25:26,800 --> 00:25:28,500
fertilizer.
We also have Investments new
463
00:25:28,500 --> 00:25:32,500
kind of synthetic cotton
synthetic leather, you know,
464
00:25:32,500 --> 00:25:36,200
sustainable coffee, all sorts of
products in addition to
465
00:25:36,200 --> 00:25:40,100
medicines and cell and tissue
therapies being invented.
466
00:25:40,100 --> 00:25:43,200
It's a really fertile moment for
biology.
467
00:25:44,300 --> 00:25:46,600
It sure is.
I've definitely heard a ton of
468
00:25:46,600 --> 00:25:50,000
invasions in that space and
seems like they're being off.
469
00:25:50,000 --> 00:25:54,500
Maybe one day, you won't be
hungry at last on this notes.
470
00:25:54,500 --> 00:26:00,100
That whole, let's go to the call
to action and Which is, which is
471
00:26:00,100 --> 00:26:02,800
the last question of today's
episode and it's very simple.
472
00:26:02,800 --> 00:26:06,100
Would do you want the listener
to do right after this episode
473
00:26:06,100 --> 00:26:10,800
is over rust?
Okay, go to pillar dot VC and
474
00:26:10,800 --> 00:26:12,900
check out something.
We have called the founders
475
00:26:12,900 --> 00:26:17,800
playlist and this is like a
multimedia playground with all
476
00:26:17,800 --> 00:26:21,300
sorts of entrepreneurs and
investors giving advice on
477
00:26:21,300 --> 00:26:24,300
hundreds of different topics and
so you can pick out whatever.
478
00:26:24,300 --> 00:26:28,100
The problem of the day is that
you're facing and check it out
479
00:26:28,200 --> 00:26:30,800
and in particular I'll just draw
attention to his cool tool.
480
00:26:30,800 --> 00:26:32,900
We have, they're called the term
sheet greater.
481
00:26:33,200 --> 00:26:35,900
So we go out and you raise
Capital, you get a term sheet.
482
00:26:35,900 --> 00:26:38,300
You're like, is this good?
These people trying advantage of
483
00:26:38,300 --> 00:26:39,900
me.
You can just go to our term
484
00:26:39,900 --> 00:26:43,400
sheet greater and plug in your
term sheet and find out if it's
485
00:26:43,400 --> 00:26:46,900
fair or not.
Oh, is that technology automate
486
00:26:46,900 --> 00:26:49,000
or is it?
Someone on the back end, just
487
00:26:49,000 --> 00:26:52,100
actually checking it out.
We know it's automated.
488
00:26:52,100 --> 00:26:54,900
You have sort of Sliders, mmm,
really it all term.
489
00:26:54,900 --> 00:26:56,700
She's like, there's five or six
shots.
490
00:26:56,700 --> 00:26:58,700
Yeah, it's really simple.
For the VC is pretty.
491
00:26:58,900 --> 00:27:00,800
Much multiple choice on each
question.
492
00:27:00,800 --> 00:27:02,900
Yeah, it's no.
We just asked you like, which
493
00:27:02,900 --> 00:27:05,200
did they pick?
And then you can computer score.
494
00:27:06,400 --> 00:27:08,100
Alright, that is very
interesting.
495
00:27:08,100 --> 00:27:10,500
I'll be sure to leave the link
in the description to this
496
00:27:10,500 --> 00:27:12,300
episode.
As usual, of course, there's
497
00:27:12,300 --> 00:27:14,200
gonna be linked to Russ's
LinkedIn.
498
00:27:14,200 --> 00:27:17,400
And, of course, there's gonna be
my Shameless plug in mentioning
499
00:27:17,400 --> 00:27:20,500
the course that our team has
developed specifically, for
500
00:27:20,500 --> 00:27:22,800
Founder's trying to figure out
how to reach out to the right
501
00:27:22,800 --> 00:27:25,400
investors.
If you want to try to figure out
502
00:27:25,400 --> 00:27:28,300
how to do that in a right way.
Definitely check out the
503
00:27:28,308 --> 00:27:30,700
description of this episode
because the links are going to
504
00:27:30,708 --> 00:27:33,900
be there.
And as usually have a good day,
