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Meet the VC

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Meet Tony Conrad, Partner at True Ventures

Conrad is the co-founder & CEO of about.me, and he previously co-founded Sphere

Innovation series by Steven Loeb
January 9, 2016
Short URL: http://vator.tv/n/4280

There has been a big debate over the last few years over whether the Series A crunch is real or not.

What everyone can agree on, though, is that there are definitely more seed and early stage funds now than ever before, and more people willing to give money to young companies looking to make it big.

But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?

We're highlighting key members of the community to find out.

Tony Conrad is a Partner at True Ventures.

He is also a co-founder & CEO of about.me (acquired by AOL in 2010). Prior to about.me, he co-founded Sphere (acquired by AOL in 2008). 

He is a board member of the Tony Hawk Foundation, an advisor to SF-based Noise Pop and a T40 National Co-Chair of Technology for President Obama.

Conrad holds a BS in telecommunications, with a minor in business, from Indiana University.

VatorNews: What is your investment philosophy or methodology?

Tony Conrad: I think investing is very different depending on the stage. When I look at what we do at True, we have a very consistent thesis, we want to be the first institutional investor in the company because that allows us to maximize the amount of risk we take, but also maximize the opportunity for us. We are ownership sensitive, 20% is our goal. Being the first institutional investor puts us in a position where we can be supportive of the founder, or the founding team, around the DNA of the company. Because we’re there first, we’re part of and understand the nuances of a specific culture and it puts us in a better position to help a founder(s) protect, preserve, and accentuate that DNA. 

When you look at each partner, we all have slightly different ways of going about it, and that's fine. We’ve created an environment that allows each of us to play to our strengths within our thesis, as opposed to a force fit way of investing. And we found that that works for us collectively and as individuals.

VN: What do you like to invest in? What are your categories of interest?

TC: I'm all over the board. I've done everything from robotics, retail, hardware, apps, consumer software to SaaS type companies. And that's because I think I end up following the founder. It's allowed me to invest in some stuff that, in the moment, it felt maybe a little weird.

Some Partners at True are more thesis, space driven. And that's fine, that works for them really well. They might say, "Listen, I want to do SaaS deals and that's all I really want to do. We want to support that approach vs force fitting everyone to invest in a similar manner"

VN: What would you say are the top investments you have been a part of? What stood out about those investments in particular?

TC: When we invested in MakerBot, it was weird yet we were one of the first checks. Hardware was not in fashion as it is today so our investment was definitely a contrarian play. When we sat down to talk to Bre Pettis, what was clear to us was that he was special. And while he may not be the not founder of 3D printing, he certainly had the capacity to become the face of it, and really one of the founders of that movement towards the possibility of being able to print 3D objects in your home, in your office, in your hospital operating room, everywhere, anytime.

He had such crazy vision and conviction around 3D printing, that if you just listened you could see a path to a very large, disruptive opportunity. Vision alone isn’t enough, you always have to marry up a founders passion with the market opportunity and when we did, it was really clear that, "Wow, this can be very disruptive. And that it’s possible. And this is the kind of person who can pull it off." 

Another example is Blue Bottle Coffee. Super contrarian and off focus for a firm like True Ventures, where 99.2 percent of our deals have been in tech companies, to all of the sudden be investing a disruptive coffee business. What got us there was not just the magic of the brand. By the time we saw Blue Bottle Coffee, it had existed in the market for a number of years.  James Freeman was a very well established founder, they had a very compelling business here in the Bay Area, but what was clear when we sat down with James was that he thought about the coffee industry in a way that was radically different from almost anybody else that we had incurred, in any sector. He's kind of a little obsessive about certain details, and certain philosophies, that, to me, just screamed, "Hey, I may not have created coffee but I am going to be one of the founders of this artisanal approach to making coffee. And I'm going to be one of the people that helps to introduce people to a much more beautiful, elegant, delightful experience around coffee drinking."

He talked about sourcing beans, supporting farmers in 3rd world countries that could not afford, or gain, any certification, but being qualified themselves to be able to go there and determine if they were actually adhering to the highest standards or organic farming and sustainability. He talked to us about the glassware, about how it drove him crazy that people got espresso drinks in “to-go cups” because espresso drinks are temperature sensitive and should be consumed on premise when the flavor profile is optimal. Just everything about it was a little quirky, a little obsessive, and just really amazing how strongly he felt a beautiful coffee experience to start your day is incredibly meaningful, "I'm doing all that because what I do is important because there's a lot of people in this world that wake up, and one of the first things they do is they have a cup of coffee and why shouldn't that be a delicious, simple experience?”.  It’s a very elegant point of view. When you come into a Blue Bottle cafe, you're not going to be barraged with an overwhelming number of choices. There's no small, medium, large. no flavors. They just really strip it down and make it a very elegant experience because James, as a founder with a vision, has done a lot of the thinking for you.

That kind of obsession, married with the brand and the data, made it really easy for somebody like me who never thought he was going to be an investor in a coffee company, to go to my partners and say, "I know this sounds crazy, but I met this founder who's incredibly special, who represents these characteristics we look for in founders of movements, and this is why I think we should get excited about this." And we ended up doing their first round of capital. Since, Blue Bottle has raised nearly $100 million to scale and we now have cafe’s in Tokyo, New York, Brooklyn, Oakland, Los Angeles and San Francisco. It's a very highly valued company, and rightfully so, based on metrics. 

I think the other thing we get excited about collectively, along these same lines, are just that occasional product idea that, as crazy and weird as it might feel, just really sparks our imagination. Our curiosity. I didn't lead this deal for us (True Ventures co-founder Jon Callaghan led the investment), but stuff like Fitbit, 3D Robotics, Little bits or most recently, Peloton. These hardware companies where you think, "Now that's weird! Are people really going to put something on their wrist and they're going to measure their steps? That sounds kind of crazy." But once you get into it and ask Jon, "Why?" He’d say, “It’s because people want to be active, this is a really simple, beautiful tool that helps to spark activity, it's just that little nudge that you need." The FitBit founders just nailed it. And you look at the results of that company and it’s impressive. That investment was possible because it was a product that sparked our curiosity and our imagination. 

On a personal basis there's WordPress, there's Slack, there's 
about.me. There's a lot of companies I've been privileged to be a part of that have had really exciting success. I'm just proud and I pinch myself that I get to work with people like Matt Mullenweg (Founder Automattic/ WordPress), James Freeman, Bre Pettis and many more like them.

We as a firm, and that's really what's most important, have had a lot of success following our thesis. We’ve had big exits in  companies like Brightroll (acquired by Yahoo for $640 million), MakerBot and FitBit. We're large investors in high growth companies like Namely, Bandcamp, Puppet, Ring, Handshake to name just a few - all kinds of companies that are scaling very very fast.

VN: What do you look for in companies that you put money in? What are the most important qualities?

TC: For me, given that we're investing so early, I really over index on the founder. I think if you actually test the thesis of wha that means to me, it's 100 percent accurate, with the way that I look at things. When we're writing that first check, honestly, typically there's not a lot of other stuff beyond really following the quality of that founder and really digging into what's driving their motivation? I think that's the thing that we probably do really well that's different than others.

I'm trying to identify founders that I think can be the founders of movements in new or existing categories. The thing I spend an inordinate amount of time really digging into is the “why?” - why do you need to do this? What is it about this idea that's really in alignment with you?  What's driving you crazy? You feel like you've got the right approach, why? And I think what comes out in that back and forth, and sometimes those conversations will take hours, can be a strong signal of how special the founder is and how disruptive their vision may be. We don’t spend much time talking about market size, I’m really digging into their motivation, the excitement around why a founder is obsessed with their idea. I think you ultimately have to walk away from every conversation, especially when it's at the very beginning stages and be excited by the passion of the founder, the depth of their thinking, the quality of their early team, but you also do have to go back and double check in your brain, "Does this make sense?"

And, for me, what that does is open up the possibility of investing in stuff that I would never have sat down and said, "This is going to be my thesis for the next year." 

Often, the markets actually don't exist for the most disruptive companies. That's where we're taking maximum risk with maximum upside. In some companies, like WordPress, there was clearly a market already. There was Blogger, Moveable Type and LiveJournal. What set WordPress apart was how it was building it’s company on top of open source approach to create a new footprint for a company. Once again, Matt Mullenweg is founder of a specific type of movement around the democratization of media, but within an established category. 

We do try to square up the market sizing but it's rare that we go off and do a bunch of research, it’s just too early in most cases. We did on Blue Bottle Coffee, that was kind of easy to do, but for most of these we don't. There's just not that much to go on. 

As a company we invested in early gains momentum, and it evolves, then it's our responsibility as an investor to support the company as it merits additional capital. We have a responsibility as an investor to move from our instincts toward what the data informs us. Then I think things like, "Is that market growing? Is it an interesting market or not? How's the company faring against the competition in that space?" Those are all things we kind of dig into much more deeply for follow on investments. It’s much easier because we're already investors in the company so it's not like we've gotta start from a cold spot. It's pretty fluid and we already have a kind of innate understanding of how the space is unfolding or developing. 

VN: What kind of traction do you look for in your startups? And can you be specific? Are you looking for a number of customers or order volume?

TC: There's certain companies/ spaces that lend themselves better to showing early traction. For instance, the AdTech space.  For those opportunities, there should be early traction because often these companies are driven more by a thesis and an idea around product that is ahead of the product itself. And so they should be able to get certain customers, or at least a couple of trial accounts to demonstrate early proof of concept. We're not huge investors in ad tech, we did Brightroll, and that was an amazing outcome, and we have a few others that are doing well, I don't want to come across as being negative about the space, but we just don't have a ton of investments in that sector.

SaaS companies, a lot of them, you should be able to see some early customer adoption and beta usage. A very thin, MVP'esque product. If it's a founder that we've worked with in the past, or a founder that just blows us away, we might be inclined to invest just on the idea itself or them, but most of the time you have at least a working prototype, or at least a mock up of how it's going to work.

VN: Given that these days a Seed round is yesterday's Series A, meaning today a company raises a $3M Seed and no one blinks. But 10 years ago, $3M was a Series A. So what are the attributes to get that Seed round? Since it's a "Seed" does it imply that a company doesn't have to be that far along?

TC: Seed rounds have gotten quite big. I think we'd like to see them smaller, to be honest. We believe scarcity of capital is a good thing in a lot of ways for founders and investors. It forces focus, and it also works, I think, to the founder's advantage as well, because they're able to find out much earlier if they've got a good idea or not. In an odd way, it forces them to be disciplined around getting to that answer. And if they don't, for us, when we're writing a check for under $750K, as part of a collection of funds that total over $1 billion, we're pretty comfortable with the founder losing the money. I mean, that's part of the risk you have to be comfortable with as an early stage investor - we are very comfortable with that risk. We're intellectually honest about that comfort internally and externally. We don't want to send the message out there, "Hey, we want you to lose our money," but we don't want people to be afraid to take the risk and to take the shot on goal that they said they wanted to take. And to be able to look at the outcome and say, "Boy, this is a good idea," or "This is a bad idea." 

If you're showing some glimmer of hope, or you're still working on the hypothesis, and we've got a good working relationship, which we generally have, trust that we'll continue to support you in a way that makes sense. It just takes the pressure off of everybody in a good way. It allows people to do their best work, and take a really good shot on goal, versus, when all of the sudden you’ve got $3 - $5 million to pursue a seed idea, oh my gosh….you’ve got four people working on the idea, and you're just trapped. Entrepreneurs, I don't care what they'll tell you, you can tell them until you're blue in the face that it's ok to shut down and return money, and they won’t. I'd say less than 1% of them can actually do that. It just feels like admitting failure in such a public way that it makes it really hard to just shut down with a lot of money in the bank. More money probably means more time and occasionally that works out, but for the most part I think the founder ends up spending a lot more time spinning their wheels on an idea that the market already spoke isn’t needed, and they would have been better to move on to the next thing. I don't think it's a hypothesis, I think it's just reality. Get to the answer as quickly as possible, that serves everyone best.

VN: What are the attributes of a company getting a Series A?

TC: It depends, if it's a hardware business you need to have moved from sketches to working prototypes, have a clear sense of your BOM and see some pre-orders that confirm market traction. We just invested in a company, a little over a year ago, called Glowforge. It's a laser-based 3D printer based in Seattle, founded by Dan Shapiro, Mark Gosselin and Tony Wright. They took investment dollars from us, Foundry Group and some high profile angels. They then they did a pre-order campaign and sold over $40 million of machines in 3 months. So that's a pretty clear indicator for us investors to double down and write much bigger checks if the company wants a path to scaling faster.

In SaaS, by the time you go to raise an A, your MRR/ ARR needs to be growing. We want to be able to ideally understand what the churn looks like. There's very clear metrics that SaaS investors look for. As you move up to the B, then to the C, eventually a D, a pre-IPO round or a public offering, key metrics have to improve at each one of those steps as the bar gets higher. By the time you want to raise a $10M+ B or C round, you should be moving towards a $10 million ARR, have low churn (sub 2.5%) to attract high quality investors.

In consumer businesses it's a little bit different for each company. Online, I think the main thing that we're looking for is product/market fit, early traction. I don't think we're expecting meaningful revenue (or any) in consumer businesses that are early in the cycle. Not that we're against it, but often chasing revenue early limits the size of the opportunity. Let's take WordPress as an example, which has a freemium business model. Imagine if WordPress was just a paid for model. It'd probably have higher revenues than it does today, but it would have a much smaller number of customers, a much smaller footprint, much smaller ability to have any kind of lifetime value or opportunity against a very large base of people. You know, 25%+ of the Web now runs on WordPress, and that number keeps going up. So our opportunity, long term, is enormous because we're already doing real revenues, it's already a profitable company, it's a very well run company, it's growing, and the revenue opportunity for the company continues to open up on a large consumer base of users. We can be patient to turn a free user into a paying user over time by developing products 5+ year later that are all of the sudden appealing to them. There's such a strong trust and affinity with the brand that it’s become an incredibly sizable opportunity. 

Something like Blue Bottle Coffee, you need to see unit economics, channel contribution and same store revenue growth performance. Also, you learn about how long it takes, once you build a cafe, to pay back the money that you needed to build it. If it cost you a $250K to build that cafe, how quickly can you generate $250K in profits that get you back to zero? The industry standard is somewhere around 2’ish years. In the case of Blue Bottle, it's just over a year. That's a metric you look at and go, "Wow, I got it. Let’s double down!”

VN: Given all the money moving into the private sector, I believe there's more money going into late-stage deals in 2015 than there was during the heyday, back in 2000, do you think we're in a bubble?

TC: I started investing back in 1997, so I’m going on my 19th year of doing this, I've been through quite a few cycles. There was a true bubble in 1999-2000. We got to the other side of that. There was a financial market collapse in 2008. By the way, about a week after that we made our investments in MakerBot and Fitbit. When everybody else was stopped investing, we made two of our best investments in the weeks following that crash. 

There's all the talk about bubble and market corrections, but I think you're talking about a couple hundred companies that are unicorns, that people are wondering if they're unicorpse. We certainly are investors in a couple of unicorns. Slack and WordPress. I'm not going to talk on behalf of Slack because I'm such a small personal investor, so it's not fair for me to comment. WordPress, I'm on the board of and we are a large investor and we couldn't be more bullish, based on the data that we see. So in those cases we just don't buy it, that there's a collapse coming. And if there is, the nice thing about great companies, certainly WordPress, is that they're profitable and not dependent on the whims of the market. Just because the market is valuing something really high or valuing something really poorly, really doesn't impact great companies if they don't have to take money.

My father used to have this saying, "The truth always comes out in the wash." And I think that applies to the real valuation of companies over time. So if there's a correction, so be it. It's because they were meant to be corrected. And if there's not, then whatever.  In all overheated cycles, some companies will be able to take advantage of that in a fundamental way because they'll be able to generate exits that are overvalued, or they'll get funding at a really high, attractive rate.  In the latter, be careful, you might get what you asked for…..high valuations and too much capital can come back to haunt you by creating a structural issue to raise your next round if your company doesn’t live up to the previous valuation. It looked good in the moment, and now it's your burden to bear. 

The advice that we always try to give founders when they’re growing quickly is, "Cut out the noise, make good decisions, figure out what feels right, not simply what you can take advantage of, and go make that happen" Even if that means cutting your valuation back, figure out the right answer to the question. Don't just try to gauge the market, by doing so, you’ll eventually probably pay a price for that approach. I think our founders have been amazingly disciplined. We've got a lot of companies that could have been, if they pushed, unicorn companies in the 2014/15 market. But, just because the market was going to value like that doesn't mean they should do it. And most of them didn’t when they sensed it was premature.

VN: If we're in a bubble, how does that affect your investing?

TC: I never think about it. I think you only think about it when the company is showing some merit to have that conversation. I remember for WordPress, that was a pretty easy conversation. We felt the company had been undervalued and maybe even under appreciated by the market for a long time. We felt like it was a company that should be a unicorn company, in terms of its valuation profile. So that was a really easy conversation to have. 

We have a few other companies where it's super early, they're showing amazing growth but it's so early despite initial compelling sales data, but the rest of the data is still missing. And those are the hard ones to make the call on. You have to spend a lot more time thinking through it. Key data can be missing like churn, product returns, or a competitive risk that you didn't anticipate when the big companies realize, "Oh shoot, there's a real market over there. We should go get into that." Those are the ones that are more difficult to think through. 

VN: Tell me a bit about your background. Where did you go to school? What led you to the venture capital world?

TC: I never thought I'd be a VC. I have a very modest background. I grew up in a small Indiana farming community of 5,500 people. My high school was about 500 people, there were 122 kids in my graduating class and I think 9 of us went to college. So it's not a glamorous start. I had an amazing family. I'm very proud of my roots, but I always knew, at least from the time I was four years old, that that wasn't going to be where I was going to be when I grew up. It's just something I knew. 

I went to Indiana University and I did very well. I was a little overwhelmed by school in the beginning, because I grew up in a place where education wasn't that valued and I just wasn't that well educated. I was clearly capable and intelligent, but I didn’t have a lot of academic exposure in my early years. I was a good student, but I worked incredibly hard and I got really good grades because I think I worked harder than any other college student in the history of the world in my first year of school. I really do. I studied a lot because I felt so ill prepared, so overwhelmed and so unworthy to be a college student. So I worked myself into a total panic and I ended up with really great grades.

Throughout my college experience, even my adolescence, I was always industrious. I worked very, very hard. I worked a wide range of weird jobs. I did everything from umpiring Little League, mowing lawns, baling hay, working in a factory on a glue machine, being a janitor at a pharmacy to delivering drugs, being a basketball and tennis camp coach. I was the janitor in my fraternity, you want to talk about something humbling. Cleaning up after your fraternity brothers is a pretty humbling experience. I worked for the student newspaper, I was a writer, I sold ads. I just did all kinds of things and developed a pretty good work ethic over time. And I was able to adapt. I learned a lot of different environments, and that, I think, has proven to be the greatest gift and asset in my life.

I lived abroad for about 10 years, I learned a few languages. I spent time in India, 5 years in France and 4 years in Indonesia. I learned a lot about marketing, business development, finance, mergers & acquisitions. I worked for BSN (Groupe Danone). The thing that I always knew, throughout, even when I was working 10 years for BSN, was that I liked autonomous, entrepreneurial environments. I was an expatriate and what that means is you have a lot of autonomy and it's really on you to figure it out how to make it work without a lot of guidance.

I was using the Web pretty aggressively when I was in Indonesia. So, I saw what was happening with the Web early on from afar. I was desperate for a connection back home. What was happening in the Valley in the 1990’s intrigued me, so at the end of my tenure in Indonesia, I felt like it was time to move back to the States. I had a wife, two kids, a dog and I wanted to come home, so I decided to make a geographical decision. I chose the Bay Area because it was a great place to live, raise a family, but also great stuff was happening around tech/ entrepreneurialism. You could see that in the early/ mid 90’s. So I moved here in '96, and I started investing, and, like a lot of people, I got lucky. If you were an investor in 1996-1997, you'd probably did ok.

We were involved with a bunch of really good early investments. Stonyfield Farms, Danger, a bunch of cool stuff. I went through the boom and eventual bust period of that time. I remember in 2002, thinking that "This sucks.” It felt like everybody ran when the bubble burst. But my ear was really close to the ground and the thing that I think I could feel was that each time I took stock of what was happening, it was getting bigger. It wasn't getting smaller. We were using the Web more and more. Companies I talked to, even through failures, were growing their users. They couldn't figure out how to make money but they were growing.

So in 2003 I got introduced to this really cool company which I think had a great outcome, and I still think is the most important company I've been involved with in a lot of ways. It was called Oddpost, and they were one of the early developing on AJAX. They built a webmail client. What blew me away was they did it while working in libraries. One of the founders sold his car to be able to start the company. They were doing it for so little money and that was really kind of this little light bulb that went off in my head that was like, "Oh my gosh, this Moore's law concept of the cost structure going down is actually happening" and all of the sudden you're starting to see the early hosting and just all kinds of stuff, and how it was really driving costs down. So I invested in Oddpost, it ended up getting acquired by Yahoo, it runs all of Yahoo Mail today. It was a celebrity company in a lot of ways because it was 2004. There was Blogger, Flickr and Oddpost that got acquired. It was a new genre of company, and I learned so much by being around that and that was really cool, eye opening.

I thought, not only was that a cool company to invest in, but I thought why couldn't I start one of those companies myself? It's kind of the thesis of my own personal work and founding companies. Sphere, and then about.me, both had great outcomes. When I was working on my idea for Sphere in 2004, Phil Black had set up a little office over in the Presidio, and he was just investing himself. He raised a very small fund of around $5 million and was an investor in Sphere and eventually WordPress. A year later he and John Callaghan were developing this thesis that we just talked about, about the need for early stage institutional investors and they decided to start True. They came to myself and Toni Schneider, who was the CEO of WordPress, and asked us if we'd like to join. And we did. We were just four people that knew each other. Interestingly, we added Om Malik and Puneet Agrawal, both great investors, along with our CFO Jim Stewart, but the core team, largely outside of those additions, is the same team and we've had some amazing good luck, good fortune and success. It's been a great chapter. You fast forward, its 10 years later, and, "Wow, we got that right." 

VN: What do you like best about being a VC? What makes you excited?

TC: What I like is the way I've been able to develop my role, which is to be both an active founder and also a full fledged Partner in a VC firm. So I get the best of both worlds, where I get to be an operator most of my day, and I get to be an investor at the same time. It's a privilege. Not a lot of people get to do both. So I'm super thankful about the opportunity. 

I love how  the roles are symbiotic, and yet they're so profoundly different. I love that when I sit in a board meeting, getting to work with founders like Matt Mullenweg, Hiten Shah, you learn so much. This is what they're thinking about, this is what's working, this is what's not working, how they build culture, treat money, take calculated risks. You just learn so many things. And then the advantage I get is I get to go apply them to my own company. As an example, I would never ever have started a company based on a distributed team framework. There's just no way I would have ever done that. But I got to see it firsthand from WordPress, how it worked, the advantages. So I learn a lot of lessons being an investor in these companies, and I love that. 

I love working with founders. As you get older, and you have a little more success, you can become more balanced. Some people it works the other way, I know, but for me it's helped to balance me and make me a little more introspective. When I get to work with a founder that I feel particularly in synch with, I feel like I can be the best confidant and the best steward of their agenda possible. I think that's really empowering. And I love that. I love that role of just being a good partner. A good mentor, however you want to think about it. 

I don't like a lot of other aspects of venture capital. I don't want to manage the fund. Managing a fund, I'm so lucky that Phil and Jon take that responsibility and they've built out an amazing team with Jim Stewart, Uli Kellmereit and all these amazing people, who do all make it feel seamless for the rest of us. They've made it possible for all of us who are part of the firm to be able to play to our strengths, play to our whims. They've created a culture that embraces individuality and it's just empowering as hell. I'm so thankful that I don't have to do any of that stuff because I'm just not good at it, and I don't enjoy it. And it would detract from my ability to try to spend time trying to build a company and find great investment opportunties. So I like all that.

The things I like about being a founder, is that when you're a founder, other founders look at you differently than they look at VCs. I'm one of them. I'm not one of the other guys and as symbiotic as the roles need to be, and as the communities need to be, they're very distinct groups of people. Founders hang out with other founders, and VC’s hang out with other investors. If you drew a Venn diagram there's definitely an overlap, and there's plenty of events where both of them are present, but there's lots of stuff where you're invited because you're a founder. And there's lots of stuff I get invited to because I'm an investor. So I love how the two work together. 

VN: What is the size of your current fund?

TC: The current fund is $290 million. We have 4 funds, plus a Select fund with around $1 billion under management. 

VN: What is the investment range? How much do you put into each startup?

TC: The initial check can be anything from $750,000 to $2 million. There's always a couple of outliers, deals where it's a founder that we want to work with but they've worked with a lot of different people in the past, and so they have other relationships that they need and want to honor. Yet we want to become a participant and they want to open up the loop and let us in. We'll put $250,000 in, in those kind of deals, just to get involved. Then there's the other end of the spectrum, where, once again, it's a special idea or a special founder and they're going to raise $5 million right out of the gate and we want to be the lead and so we do $3 million, or $3.5 million, whatever it takes to get our ownership position. 

VN: Is there a typical percent that you want of a round? For instance, do you need to get 20% or 30% of a round?

TC: We are very clear that we too are running a business. We too have a thesis of what success looks like and it's important that the founder understand what's important to us if we’re going to be great partners. Very few founders actually ask a lot of questions about our goals. They're pitching and don't actually take a step back and say, "Hey, wait a minute, I forgot to ask you, what's important to you guys? What's going to make you wake up and be super psyched about being an investor in my company?" When they don't ask that question, we proactively answer that question for them.

What that looks like for us is 20% ownership. Sometimes it can be slightly lower, higher but if you look across the 200+ companies we've invested in over the years, our average median ownership is just north of 21 percent for the first check that we've written. You had time frames in 2008 when your dollars bought you a lot more of a company, then you've got 2014 where those same dollars bought a lot less. But things have tendency to average out. There's ebb and flow to the market. Sometimes the pendulum swings to the founders, sometimes it swings back to the VCs, and I think we just try go figure out what the right answer is no matter where the pendulum is swinging. 

Once we have our ownership then we feel like we're in total alignment with the founder and with the company. When we don't have that ownership, then we're not as in sync as we would ideally like to be. We explain that and then we try to figure out what's the check size needs to be to make that happen, and that the founder feels good about. 

VN: Where is the firm currently in the investing cycle of its current fund?

TC: Pretty deep into fund four. I don't know exactly the percent, but we've got a pretty healthy, large portfolio. It's not a new fund, it's a few years old. 

VN: What percentage of your fund is set aside for follow-on capital?

TC: We have a several companies where we have invested $20 million, if not more. So our funds are purposely designed to be small, compared to the market, but it allows us to make a lot of bets and then when you have certain companies that have a profile that really merits deep capitalization, we're in a position in our funds to do so, both through a growth vehicle, which we call Select, but also through the specific fund that that portfolio company is in. So we're not scared to ratchet the number up.

Once you start getting up into those high numbers, you gotta have a lot of data to believe it's a winner. WordPress, Puppet, 3D Robotics, Blue Bottle, Fitbit, those are the kinds of companies where you'd see up creeping up. 

Typically we set aside $7.5 to $10 million per company, but you obviously have a lot of companies that never take all that and that's what frees up the opportunity to really load up in others. 

VN: What series do you typically invest in? Are they typically Seed or Post Seed or Series A?

TC: The classification of seed or A, it's so maligned. The focus for us is to lead the first round a founder goes out to raise beyond a couple hundred thousand dollars from friends and family. Call it $1+ million. What percentage of our deals are in that round? I'd day 90 percent, if not higher. 

VN: In a typical year how many startups do you invest in? How much do you reserve for each company.

TC: Two to four. A fund the size of our current fund probably can have up to 50 to 70 companies. If you did 70 companies and all of the companies worked, in theory, you've got $4 million per company. That's not the way it works. You have plenty of failures. So it ends up averaging out to $7.5 to $10 million per company. 

VN: Is there anything else you think I should know about you or the firm?

TC: I think it's a great firm. Jon Callaghan and Phil Black are the founders of True Ventures and they’ve created an amazing culture. They're awesome. There's six full time Partners, and then there's a whole team supporting us in so many ways. It’s really great to see how well it can work when you create an environment that empowers people to follow their instincts within a clear investment thesis framework.


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