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June 16, 2022

Ariana Thacker (Conscience VC) - What it means to invest in deep tech x consumer, How she raised her first VC fund, and Her definition of a moat

Ariana Thacker (Conscience VC) - What it means to invest in deep tech x consumer, How she raised her first VC fund, and Her definition of a moat

Our guest today is Ariana Thacker, founder of Conscience VC. Conscience invests into early-stage & science-led consumer startups. We’re going to discuss why science-led consumer startups is contrarian in itself, what are real tangible defensible moats, and her approach to fundraising her first fund.

  1. Why did you want to break into VC?
  2. Why did you decide to start your own fund?
  3. What was the fundraising process like?
  4. How do you partner with founders?
  5. What’s your approach to portfolio construction and fund construction? I.e. are you more concentrated or less concentrated, what are your Gen-Z apprentices role within the fund / scout program
  6. What do you mean by the intersection of deep tech and consumer?
  7. How do you think about defensible competitive advantages?
  8. Walk us through why you invested in Nimbus or gained conviction?
  9. How far along does a founder need to be in order for you to be at your stage?
  10. Are there specific categories that you mostly focus on?

3 buckets

  1. What are some of the challenges investing in deeptech? Why do alot of fund managers stay away?
  2. What’s your approach to sourcing opportunities?

Go through multi pronged approach

  1. What’s one thing you would change about venture capital?
  2. What’s one book that has inspired you personally and one book that has inspired you professionally?

4 agreements - dont personally, dont make assumptions, always do your best, be impeccable with your word

Disciplined entrepreneurship ->

  1. What’s the best piece of advice that you’ve received?
Transcript
WEBVTT 1 00:00:12.439 --> 00:00:16.920 Hello and welcome to the consumer VC. I am your host, Michael, 2 00:00:17.160 --> 00:00:20.960 and on this show we talked about the world of venture capital and innovation in 3 00:00:21.000 --> 00:00:25.480 both consumer technology and consumer products. If you're enjoying this content, you could 4 00:00:25.480 --> 00:00:30.519 subscribe to my newsletter, the consumer VC DOT sub stackcom, to get each 5 00:00:30.519 --> 00:00:34.640 new episode and more consumer news delivered straight to your inbox. Our guest today 6 00:00:34.679 --> 00:00:39.719 is Ariama factor, founder of conscience VC. Conscience invests in early stage in 7 00:00:39.840 --> 00:00:44.960 science led consumer startups. We're going to discuss why science led consumer startups is 8 00:00:44.960 --> 00:00:50.079 contrarian in itself. What are real, tangible, defensible modes, and her 9 00:00:50.119 --> 00:00:59.960 approach to fund raising and organizing her first fund without further ADO, here's Oriana 10 00:01:00.719 --> 00:01:04.799 Arianna. Thank you so much for joining me. How are you? I'm 11 00:01:04.840 --> 00:01:10.239 doing well. Haven't you doing great and doing great thigs. So why did 12 00:01:10.280 --> 00:01:15.120 you want to break into vc? That wasn't a super obvious question before the 13 00:01:15.200 --> 00:01:19.239 last like five years, so before even even touching venture, I was an 14 00:01:19.239 --> 00:01:23.239 engineer, worked in a variety of different roles, started doubling in startups and 15 00:01:23.280 --> 00:01:26.799 then realized I love working with founders so much, way more than building tech, 16 00:01:26.920 --> 00:01:30.159 and I saw VC as the most scalable way to do that. So 17 00:01:30.439 --> 00:01:36.439 that got me attracted to VC. Started off mainly doing deep tech investing and 18 00:01:36.480 --> 00:01:38.840 now, in the present day, building conscience, the the fun I run. 19 00:01:38.959 --> 00:01:44.120 Yeah, so tell us a little bit about conscience and why did you 20 00:01:44.680 --> 00:01:49.519 go the route with VC to eventually start your own fund? Yeah, so 21 00:01:49.640 --> 00:01:53.000 it was first stabbling and these startups that I realized, wow, I founders 22 00:01:53.000 --> 00:01:57.359 are driving extraordinary impact. They're creating the jobs or driving the economy, they're 23 00:01:57.400 --> 00:02:01.760 solving these incredibly hard problems and I just really love that. conceptually, I 24 00:02:01.760 --> 00:02:05.680 don't know if I would necessarily run a venture back start up. So I 25 00:02:05.680 --> 00:02:08.719 wanted to play this sort of supporting role and I saw vc as this kind 26 00:02:08.719 --> 00:02:14.039 of Mesh of a different types of jobs, like from being the head hunter, 27 00:02:14.199 --> 00:02:17.719 right, you're essentially head hunting D CEO's to run companies in a way 28 00:02:19.120 --> 00:02:22.199 via voting through your check. I saw it as this kind of service rule 29 00:02:22.240 --> 00:02:23.879 as well. You're you're really opening up your network, you're finding ways to 30 00:02:23.879 --> 00:02:28.400 be helpful to support the companies, especially at the earliest stages. So I 31 00:02:28.439 --> 00:02:31.319 just saw VC including all these different elements that I love and and just deeply 32 00:02:31.400 --> 00:02:37.520 resonated with. I tried initially before breaking into venture, running my own consulting 33 00:02:37.560 --> 00:02:40.439 firm and working with a variety of different startups in that type of capacity, 34 00:02:40.520 --> 00:02:45.159 and I quickly realize there's a cap to what I can contribute in terms of 35 00:02:45.199 --> 00:02:49.599 my time and services. Doing more consulting roles, I found myself limited to 36 00:02:49.639 --> 00:02:53.479 at most three projects or four projects at a time and at that point I'm 37 00:02:53.520 --> 00:02:57.879 just completely tapped out from a mental standpoint but also time standpoint. So I 38 00:02:57.919 --> 00:03:01.479 saw venture as just a way more scalable model of being able to serve founders 39 00:03:01.479 --> 00:03:06.199 and that's just deeply resonated with me and I really love it. I'm having 40 00:03:06.240 --> 00:03:08.280 a lot of fun doing what I'm doing. That's awesome. That's really cool. 41 00:03:08.280 --> 00:03:12.680 And your background is in, as you mentioned, like deep tech and 42 00:03:12.719 --> 00:03:16.120 you're very much deep and deeptech. If you can tell us a bit more, 43 00:03:16.199 --> 00:03:21.439 we haven't done too many podcast episodes where deep tech has kind of come 44 00:03:21.520 --> 00:03:24.080 up, so would love to kind of kind of understand a bit more about 45 00:03:24.080 --> 00:03:28.919 how you think about deep tech in terms of with with that kind of consumer 46 00:03:29.000 --> 00:03:31.400 Lens. I'm flexing the term deep tech a little bit, and the firm, 47 00:03:31.439 --> 00:03:36.039 so I'll explain how how? I'm defining it a bit more and I 48 00:03:36.039 --> 00:03:38.759 guess first I'll start with what is conscience even do? In the first place, 49 00:03:38.800 --> 00:03:42.240 there was not a lot of information on US online. We're intentionally quite 50 00:03:42.280 --> 00:03:46.759 stealth. So we're investing at the intersection of consumer and science, and I 51 00:03:46.759 --> 00:03:51.439 have an asterisk on both consumer and an asterisk on science. So by consumer 52 00:03:51.479 --> 00:03:54.240 I mean driving some sort of value for an individual, the end user, 53 00:03:54.280 --> 00:03:58.240 and that can be a patient, that can just be any sort of end 54 00:03:58.360 --> 00:04:02.680 user. So that would eliminate automations within the enterprise. Feel that would eliminate 55 00:04:02.719 --> 00:04:06.800 a lot of software related to design, anything that more so benefits the enterprise 56 00:04:06.919 --> 00:04:11.919 versus the individual. And then for the science piece, I'm looking for businesses 57 00:04:11.919 --> 00:04:15.000 that have some sort of technical defensibility. A quick litmus test for that is, 58 00:04:15.240 --> 00:04:18.319 Hey, look, if it takes a really smart group of engineer, 59 00:04:18.439 --> 00:04:21.800 scientists, researchers, essentially fill in the blank for a type of role, 60 00:04:21.839 --> 00:04:25.639 to hack what you're doing in less than twelve months, it's not enough technical 61 00:04:25.680 --> 00:04:29.920 defensibility for us. So it doesn't necessarily have to be quote unquote deep tech 62 00:04:30.120 --> 00:04:32.399 as as the industry defines it today, and it doesn't necessarily have to be 63 00:04:32.399 --> 00:04:36.839 a scientific breakthrough, but we are looking for a technically defensible companies. When 64 00:04:36.879 --> 00:04:42.160 I think of technically defensible companies, I think of like heavy R and d 65 00:04:42.360 --> 00:04:46.720 costs and just a lot of, obviously, money towards building. And I 66 00:04:46.720 --> 00:04:49.360 think what's really interesting about if that's fair to say, and I think what's 67 00:04:49.399 --> 00:04:54.720 interesting about conscience, is since you're it seems like you're invested in pretty early 68 00:04:54.839 --> 00:04:59.519 stages, right where maybe the product isn't built out yet, I'd imagine, 69 00:04:59.720 --> 00:05:02.959 or kind of how far along does the product need to be? It seems 70 00:05:03.040 --> 00:05:06.959 like buildings him as very defensible, not only takes time but it also takes, 71 00:05:08.000 --> 00:05:10.680 you know, a lot of money. So how are you thinking about 72 00:05:10.680 --> 00:05:13.439 whereaf how far long the founder needs to be in it also, the same 73 00:05:13.519 --> 00:05:16.360 time, how much founders are typically trying to raise? The Way I think 74 00:05:16.399 --> 00:05:20.600 about this is less so the endput time and cost to reach the stage that 75 00:05:20.639 --> 00:05:24.959 our founders reach, but more so the timeline to get to a commercialized product 76 00:05:25.079 --> 00:05:29.160 or a major inflection point within the business. So sometimes the businesses or the 77 00:05:29.160 --> 00:05:31.839 founders come to me and they've already building companies on top of over ten years 78 00:05:31.839 --> 00:05:34.839 of R and D, But there are twelve months or eighteen months away from 79 00:05:34.879 --> 00:05:40.160 a commercialized product. So that's more so in my will house, I would 80 00:05:40.199 --> 00:05:44.040 say almost all of the investments, but a small handful or our pre product, 81 00:05:44.120 --> 00:05:47.319 prerevenue. But I wouldn't say they're proven fundamentals and they're not pre proven 82 00:05:47.439 --> 00:05:51.399 traction. So typically they show up with some sort of pre orders, allowise, 83 00:05:51.519 --> 00:05:55.720 some a mastered weight list demonstrating market attraction and then, in terms of 84 00:05:55.720 --> 00:05:59.079 the product, they've proved out the fundamentals or some sort of prototype or or 85 00:05:59.199 --> 00:06:01.720 MVP. So that's typically the stage they come to me. I do a 86 00:06:01.759 --> 00:06:04.800 lot more under writing around. You know whence the next major inflection point in 87 00:06:04.800 --> 00:06:10.000 the business, and it is all precede or early seat stage and investing. 88 00:06:10.160 --> 00:06:14.879 Got It. So most of the Rd maybe or that without no Pard, 89 00:06:14.959 --> 00:06:18.839 that's somewhat proven out in order for you to get involved. It's maybe twelve, 90 00:06:18.920 --> 00:06:21.439 as you say, like twelve or twelve, eighteen months before they're able 91 00:06:21.439 --> 00:06:26.120 to actually commercialize the actual product itself. But it seems like it's pretty far 92 00:06:26.160 --> 00:06:28.920 along and turned to the actual Rd side of things. Yeah, and it 93 00:06:28.920 --> 00:06:31.000 depends a lot, a lot more on the product like, for example, 94 00:06:31.160 --> 00:06:35.720 for hardware or any any sort of like physical product like that. We tend 95 00:06:35.759 --> 00:06:39.680 to look for a lot more market validation, even though they don't have as 96 00:06:39.759 --> 00:06:43.560 much developed on the product front. That's okay for us. For let's say 97 00:06:43.639 --> 00:06:46.920 more of a Therapeutics Company, we do look for quite a bit of data 98 00:06:46.959 --> 00:06:49.519 before we feel comfortable investing there. But I would say as a firm generally 99 00:06:49.519 --> 00:06:54.519 we leaned towards taking more technical risk versus market risk, which is a bit 100 00:06:54.519 --> 00:07:00.920 outside the norm and venture. What was the fundraising process like, considering not 101 00:07:00.480 --> 00:07:04.360 deep tech, mixing the conversion specially of you know, consumer and science. 102 00:07:04.600 --> 00:07:09.319 It's quite differentiated, I would think, in terms of what was out there. 103 00:07:09.360 --> 00:07:15.240 What was the fundraising process like in order to convince potential lps to invest 104 00:07:15.240 --> 00:07:17.399 in conscious I would say it was really hard until it wasn't. I think 105 00:07:17.399 --> 00:07:20.759 it did take some initial convincing to get to that first close. I don't 106 00:07:20.759 --> 00:07:23.360 know, I thought it was funny. I guess other people thought it was 107 00:07:23.360 --> 00:07:27.399 funny's either going to make you laugh or cry or just say what why I 108 00:07:27.439 --> 00:07:30.600 wrote this article called raising a first fund during a pen to make one hundred 109 00:07:30.639 --> 00:07:33.600 and one on Linkedin and it just takes you through the twenty five tactical steps 110 00:07:33.639 --> 00:07:38.240 of of fund raising, basically a solo GP without a network, on your 111 00:07:38.279 --> 00:07:42.360 own, while simultaneously running everything that goes into a venture firm. That's a 112 00:07:42.399 --> 00:07:46.160 fun read if you're just curious or if you're also going through that journey. 113 00:07:46.199 --> 00:07:50.199 But I realized early on that the first kind of inflection point I would need 114 00:07:50.240 --> 00:07:56.120 to reach to have social credibility with LP's was to get to that first close. 115 00:07:56.639 --> 00:08:01.160 So I optimized for getting the best possible names and getting to a first 116 00:08:01.160 --> 00:08:05.160 close asap. So in that first close I had folks like foundation capital, 117 00:08:05.399 --> 00:08:09.680 Carda, Toba capital, cannonball capital, they all came in and after establishing 118 00:08:09.720 --> 00:08:13.360 that social proof, things got a little easier. But the whole process took 119 00:08:13.360 --> 00:08:16.319 a lot longer than you would think, like from forming the entities still the 120 00:08:16.360 --> 00:08:20.000 final clothes. It took nearly eighteen months, and that's a grind and it's 121 00:08:20.000 --> 00:08:22.759 not like a slow paced marathon, it's it felt like a sprint the entire 122 00:08:22.879 --> 00:08:28.279 time. So to be raising for that long and that intensely took just enormous 123 00:08:28.360 --> 00:08:31.960 levels of energy wall running everything else that goes into running a firm, like 124 00:08:33.320 --> 00:08:39.960 selecting your service providers and sourcing companies and building process and looking for talents, 125 00:08:39.039 --> 00:08:43.559 running due diligence, portfolio value add, etcetera, etceter like. These aspects 126 00:08:43.559 --> 00:08:48.279 of the business didn't stop. So it was just hundreds of rejections through this 127 00:08:48.320 --> 00:08:52.879 process and it took that as as I mentioned with the eighteen months, to 128 00:08:52.879 --> 00:08:54.919 get to that final close. So I would say it was hard, probably 129 00:08:54.960 --> 00:08:58.960 the hardest thing I've ever done and also pulled off. So quite challenge. 130 00:09:00.159 --> 00:09:03.919 But we did successfully hit our final clothes at the cap of ten million dollars 131 00:09:03.960 --> 00:09:09.360 with some fantastic LP. So very excited about that. That's amazing. That's 132 00:09:09.399 --> 00:09:13.519 amazing. And I you just mentioned how you raise this fund initially when you 133 00:09:13.559 --> 00:09:16.480 did not have a VC network. Right, right, I would a limited 134 00:09:16.639 --> 00:09:20.639 LP network, actually almost no LP network. I started off pitching like K 135 00:09:22.000 --> 00:09:26.159 en K even k check writers, and then that kind of snowballed from there. 136 00:09:26.200 --> 00:09:30.120 I did know a very small subset of VC's, but they're not you 137 00:09:30.159 --> 00:09:33.399 know, those more like analysts or associates at other firms from the prior form 138 00:09:33.399 --> 00:09:35.840 I worked at. It was in anyone that was really going to push anything 139 00:09:35.840 --> 00:09:39.480 forward for me in terms of the fundraising process. Yeah, I just would 140 00:09:39.480 --> 00:09:43.279 love the kind of here just from anyone that's listening that's speaking of trying to 141 00:09:43.320 --> 00:09:46.399 find or, you know, just wants to start their own find. How 142 00:09:46.399 --> 00:09:52.600 were we able to build relationships when you maybe didn't come from since you did 143 00:09:52.639 --> 00:09:56.919 have maybe limited LP exposure? I think it comes down to being high trust 144 00:09:56.960 --> 00:10:01.600 with these LP's. I'm still doinging extensive investor updates. My last q one 145 00:10:01.679 --> 00:10:07.360 update was literally twenty eight pages long. So really sharing a lot about what 146 00:10:07.440 --> 00:10:13.519 I'm doing with incredible radical transparency and also just being very persistent. There are 147 00:10:13.559 --> 00:10:18.799 folks that originally rejected or ghosted me and they circled back months later actually quite 148 00:10:18.840 --> 00:10:22.639 interested in investing. Also, a lot of the lps ended up doing a 149 00:10:22.639 --> 00:10:26.879 lot of reference checks, so those were positive. Also, I did a 150 00:10:26.879 --> 00:10:30.840 lot of content and a lot of just brand building. So typically on Linkedin. 151 00:10:30.919 --> 00:10:33.559 I don't have a twitter, so it is all on Linkedin. So 152 00:10:33.840 --> 00:10:35.919 growth hacked. I mentioned this in in a few places, to have around 153 00:10:35.960 --> 00:10:39.919 three hundred and eighty five thousand followers on there, which at some I think 154 00:10:39.919 --> 00:10:43.720 it's more than in recent now less than sequoia up on there. So that 155 00:10:43.799 --> 00:10:46.879 stood out. Tell P's and folks were just curious how and why that happened. 156 00:10:46.919 --> 00:10:50.879 So I called that kind of like peacocking, like a dating term, 157 00:10:50.000 --> 00:10:54.360 just to get initial intros, which is the hardest part. A lot of 158 00:10:54.360 --> 00:10:58.480 it was optimizing for who your target quote unquote, customers right in terms of 159 00:10:58.480 --> 00:11:01.720 your LP and for my fund size. Even though we did end up getting 160 00:11:01.759 --> 00:11:05.799 some institutional players, they're not, they're not the main customer type for us. 161 00:11:05.840 --> 00:11:09.320 So it would be more so individual. So ended up getting more so 162 00:11:09.399 --> 00:11:13.759 like Unicorn founders, families, partners and notable funds, just other folks like 163 00:11:13.799 --> 00:11:16.919 that. Like focusing a lot on the individuals to fill out the full ton. 164 00:11:16.240 --> 00:11:20.159 And once you get a handful of LP's in these Alps, then open 165 00:11:20.240 --> 00:11:24.480 up their networks to other folks that can also come in. So it's a 166 00:11:24.519 --> 00:11:28.399 snowball effect and you just have to show this persistence and you have to keep 167 00:11:28.440 --> 00:11:31.519 going and also keep in mind this is a long haul. Like this is 168 00:11:31.559 --> 00:11:35.240 going to take likely twelve to eighteen months to close your fund and mostly I 169 00:11:35.279 --> 00:11:39.399 see closer to the eighteen month mark for fun ones. Walk us through a 170 00:11:39.399 --> 00:11:43.279 little bit about your due diligence process when you actually meet with founders. Are 171 00:11:43.320 --> 00:11:48.480 there specific categories that you are kneed punt. Yeah, I would say I'm 172 00:11:48.480 --> 00:11:52.720 more of this like technical generalist. I have seven domain experts that I lean 173 00:11:52.879 --> 00:11:58.559 heavily on to do more of the technical due diligence and I try to get 174 00:11:58.759 --> 00:12:03.240 external folks involved as well just to cover my gap. So the seven experts 175 00:12:03.279 --> 00:12:07.600 span like biotech, just generally, like therapeutics and bioregulated industries, hardware, 176 00:12:07.639 --> 00:12:11.480 just general healthcare, sustainability, AI. So I have folks to kind of 177 00:12:11.519 --> 00:12:16.679 go deeper on those seven categories. More broadly, if I were to just 178 00:12:16.720 --> 00:12:20.120 bucket the thesis into three separate buckets, would be consumer and bio, consumer 179 00:12:20.159 --> 00:12:24.679 and physical products, so and consumer and digital. So bio could cover Syn 180 00:12:24.720 --> 00:12:30.720 biotherapeutics, longevity, etc. Physical products could cover like hardware, mobility, 181 00:12:30.759 --> 00:12:35.679 CPG, new types of food, and the third digital largely Ai. So 182 00:12:35.000 --> 00:12:39.080 I try to find technical advisors to cover all those different categories. So there's 183 00:12:39.120 --> 00:12:43.000 no way I can be an expert in everything. It's just more so can 184 00:12:43.039 --> 00:12:46.759 I attract the talent to help me do a lot of the heavy technical due 185 00:12:46.759 --> 00:12:50.879 diligence. So how, then, do you think about structure your firm, 186 00:12:50.919 --> 00:12:52.960 because I know it's single GPS, your first fund. How do you think 187 00:12:54.000 --> 00:12:58.960 overall about the actual firm structure and maybe all the different kind of points for 188 00:12:58.960 --> 00:13:01.720 for conscience in terms of whose internal externals to the team? So it's a 189 00:13:01.720 --> 00:13:05.799 solo GP structure. I brought on a full time investor. We brought on 190 00:13:05.799 --> 00:13:11.120 all as well, nine Gen z apprentices. There's also a parttime operations lead. 191 00:13:11.159 --> 00:13:16.399 I've on boarded around vent scouts and three Berkeley venture capital fellows, five 192 00:13:16.519 --> 00:13:22.799 cornel venture capital fellows, the seven domain experts that are mentioned and fifty plus 193 00:13:22.799 --> 00:13:26.519 other VC firms that I partner with on a quarterly basis. So I think 194 00:13:26.600 --> 00:13:30.840 with them we actively share deal flow and those those partner for firms are either 195 00:13:30.919 --> 00:13:33.879 in this consumer or deeptech kind of bucket. Right. I'm not meeting a 196 00:13:33.879 --> 00:13:37.879 lot of folks doing both, so I want to just span both possible categories. 197 00:13:37.919 --> 00:13:41.360 So I'm actively sharing deal flow. We're going to start formalizing that a 198 00:13:41.440 --> 00:13:45.919 lot more. And then in terms of the digital side, so that covers 199 00:13:45.960 --> 00:13:48.440 the people piece. For the digital side, we've automated as much as possible. 200 00:13:48.440 --> 00:13:54.360 We have hundreds of locations that were scraping data and getting updates from we've 201 00:13:54.399 --> 00:13:58.639 automated just a lot in terms of how we think through our process. We 202 00:13:58.720 --> 00:14:03.720 have now attempt almost a templatized initial screening process. We definitely have a templatized 203 00:14:03.799 --> 00:14:07.919 prescreening process and just general process in the firm, and now we're starting to 204 00:14:07.919 --> 00:14:11.759 templatize how we conduct a reference checks to so we're in this process now. 205 00:14:11.840 --> 00:14:16.279 We just like converting things into being more templatizes as we scale, especially as 206 00:14:16.320 --> 00:14:20.159 I bring on more people on the team and as I'm approaching a fund to. 207 00:14:20.240 --> 00:14:24.720 I want to be able to bring on more folks pretty seamlessly and not 208 00:14:24.879 --> 00:14:28.320 have a hit or have inconsistencies in terms of how we're working with founders and 209 00:14:28.360 --> 00:14:31.879 in our process. Got It. That's helpful. I love this. You 210 00:14:31.919 --> 00:14:35.960 know how you have gen Z appenticies. He tell us a little bit about 211 00:14:37.039 --> 00:14:41.159 how that kind of works and how you intially had this idea? Yeah, 212 00:14:41.279 --> 00:14:46.879 so I wanted to get more tapped into Gen z psychology, trends, etcetera, 213 00:14:46.919 --> 00:14:50.799 and I also have this lean towards mentorship, towards community building. So 214 00:14:50.320 --> 00:14:54.399 I just saw this as kind of the best way to optimize for both of 215 00:14:54.440 --> 00:15:00.799 those outcomes and we ended up interviewing hundreds of different possible apprentices for this program 216 00:15:00.840 --> 00:15:03.320 the selection rate was less than four percent for the folks that ended up getting 217 00:15:03.360 --> 00:15:07.559 in, and they're incredible. They're the leaders, they have high intellectual horsepower, 218 00:15:07.600 --> 00:15:11.440 they're very creative, high integrity, high cultural fit for the firm. 219 00:15:11.440 --> 00:15:16.399 So I feel really lucky to be working with all the apprentices. And the 220 00:15:16.399 --> 00:15:20.279 way it's structured is that we have weekly educational sessions with the apprentices covering sourcing, 221 00:15:20.360 --> 00:15:24.960 due diligence, founder value add talking through trends, talking through specific deals 222 00:15:24.960 --> 00:15:28.080 that we were reviewing. We have weekly deal flow meetings too that we loop 223 00:15:28.120 --> 00:15:33.000 the apprentices into. We have opportunities for cash bonuses, so if they do 224 00:15:33.039 --> 00:15:39.120 something pretty extraordinary or if we have like services that we want done in the 225 00:15:39.120 --> 00:15:41.639 firm, will set up a contract directly without apprentice and pay them for that 226 00:15:41.639 --> 00:15:45.919 work. Outside of the educational piece that we're doing, and we're also inviting 227 00:15:45.960 --> 00:15:48.879 them to all of our founder calls as well, so they're seeing in real 228 00:15:48.919 --> 00:15:52.720 time how the due diligence process works, and then we have this slack channel 229 00:15:52.799 --> 00:15:56.000 together where we're having different discussions around it. So I think this is just 230 00:15:56.039 --> 00:16:02.840 as heavy education piece and it's described as an apprenticeship, not an internship. 231 00:16:02.879 --> 00:16:06.080 For a reason. I really do want to go deep and continue to go 232 00:16:06.120 --> 00:16:10.720 deep with the apprentices right and have this very much long term relationship versus this 233 00:16:10.840 --> 00:16:17.200 kind of like churn cycle internship experience and program what are some of the challenges 234 00:16:17.240 --> 00:16:22.919 when investing in in deep tech or some of these very technical businesses? It 235 00:16:22.960 --> 00:16:26.639 takes a long time sometimes tender write the technology and you do have to often 236 00:16:26.720 --> 00:16:30.720 lean on these advisors and experts, so coordinating with their schedules and getting them 237 00:16:30.759 --> 00:16:34.480 on calls and understanding the technical nuance. Like you. You have to constantly 238 00:16:34.519 --> 00:16:40.759 be learning and reading these white papers and reading through patents. I think it's 239 00:16:40.799 --> 00:16:44.879 just very challenging. It's not really a space where you can you can invest 240 00:16:44.960 --> 00:16:48.279 in in a first call. You do actually have to go deep and understand 241 00:16:48.360 --> 00:16:52.600 the technology. I think that piece makes it a lot more challenging and also 242 00:16:52.440 --> 00:16:56.879 I don't I don't know if there's really a lot of supportive folks in the 243 00:16:57.000 --> 00:17:00.919 venture ecosystem for these deep tech companies, and I mean that in terms of 244 00:17:02.080 --> 00:17:07.920 there's just so much content and partnerships and service providers available for these more software 245 00:17:07.000 --> 00:17:11.720 driven companies. I think we're just now starting to see that kind of ecosystem 246 00:17:11.720 --> 00:17:14.920 getting built up for for the deep tech side too. So I think that's 247 00:17:15.000 --> 00:17:18.119 that's another challenge. There isn't really a lot of entrepreneurial support, particularly at 248 00:17:18.160 --> 00:17:23.279 the early stages. How do you think about defensibility within mootes? I think 249 00:17:23.279 --> 00:17:26.279 walking through what did it take to get to the point that they're at. 250 00:17:26.319 --> 00:17:30.720 oftentimes I like to think of it as in terms of five wise. So 251 00:17:30.920 --> 00:17:33.680 why is this the right problem to be solving in the first place versus this 252 00:17:33.799 --> 00:17:37.039 other problem that lives over here? Why this solution wise, is the best 253 00:17:37.039 --> 00:17:40.960 solution to this problem? So kind of having this five wise type analysis to 254 00:17:41.000 --> 00:17:45.880 even understand why their solution makes sense and then going through an understanding what makes 255 00:17:45.880 --> 00:17:48.920 it defensible and it doesn't necessarily have. The companies that we've invested in didn't 256 00:17:48.920 --> 00:17:53.519 necessarily have to hold patents at the time of investment, but understanding how long 257 00:17:53.559 --> 00:17:56.960 it took them to get to that point, but also the amount of technical 258 00:17:57.039 --> 00:18:00.599 know how it took to get to that point right. I guess on the 259 00:18:00.599 --> 00:18:03.799 extreme end, like there's if there's only a small handful of folks that can 260 00:18:03.880 --> 00:18:07.720 even do what you're doing by virtue of their only being like one to three 261 00:18:07.799 --> 00:18:11.119 labs and the entire world that focus on that pressular domain. Than that that 262 00:18:11.119 --> 00:18:15.039 would be quite defensible. But if what you're building is largely off the shelf 263 00:18:15.079 --> 00:18:19.160 technology that pretty much any entrepreneur could have access to with enough hustle, then 264 00:18:19.359 --> 00:18:23.160 that's that's a lot less defensible. So it's it's kind of this the spectrum 265 00:18:23.359 --> 00:18:26.599 of how we think through it. There wasn't this like a hard cutoff, 266 00:18:26.599 --> 00:18:29.240 like the twelvemonth role that we have in the firm is, you know, 267 00:18:29.359 --> 00:18:32.559 cut a little hand wavy, but it just it just symbolizes more. So 268 00:18:32.599 --> 00:18:34.680 this is the quick lipus test. We we think through if this is like 269 00:18:34.720 --> 00:18:40.319 more of a dragon dropper or off the shelf type of product, it's less 270 00:18:40.359 --> 00:18:42.799 so for us. I particularly like that. We you said about, you 271 00:18:42.799 --> 00:18:45.440 know, asking the question, why is this the best solution for this problem, 272 00:18:45.440 --> 00:18:51.799 because we talked about how on this show. You know sometimes the entrepreneur 273 00:18:51.839 --> 00:18:55.839 solution maybe you validate that that the problem there is actually very, very real, 274 00:18:55.839 --> 00:18:57.759 but you maybe not convinced that that their solution is the best. But 275 00:18:57.880 --> 00:19:03.599 you might make the bet on the entrepreneur because you believe that eventually they'll figure 276 00:19:03.640 --> 00:19:07.279 it out and be able to pivot to the right kind of answer or solution? 277 00:19:07.680 --> 00:19:12.440 I'd imagine deep tech it might be, or investing in products that are 278 00:19:12.480 --> 00:19:17.720 heavily technical. It might be a little bit different, since the Rd costs 279 00:19:17.720 --> 00:19:21.559 and the actual to build that that defensibility. It's a lot. And so 280 00:19:21.839 --> 00:19:26.079 how do you think about this idea pivoting when you look at companies and do 281 00:19:26.119 --> 00:19:30.079 you have to be maybe more rigid as an investor? It goes into the 282 00:19:30.119 --> 00:19:34.079 earlier example related to hardware. Even right like those products are harder to rapidly 283 00:19:34.119 --> 00:19:38.799 iterate. So what we look for is extensive customer discovery and depth of understanding 284 00:19:38.799 --> 00:19:42.720 of the problem too, and as well as some other psychological aspects and the 285 00:19:42.720 --> 00:19:48.640 founder, like their ability to really succeeded when all the factors were against them, 286 00:19:48.640 --> 00:19:52.160 this ability to just win. So we look for these other kind of 287 00:19:52.160 --> 00:19:56.359 psychological components too. But going into these types of businesses, there does need 288 00:19:56.440 --> 00:19:59.880 to be a lot more thoughtfulness around who the customer is and and their depth 289 00:19:59.880 --> 00:20:03.039 of understanding of the problem and just a lot more thoughtfulness around why this specific 290 00:20:03.079 --> 00:20:07.279 solution to the problem, because the RD penalties, to your point, are 291 00:20:07.400 --> 00:20:10.799 are high. It's harder to pivot a lot of these types of businesses. 292 00:20:11.200 --> 00:20:14.519 What's one thing you would change about patric capital? You know, I think 293 00:20:14.559 --> 00:20:19.400 initially I would have said technical, taking more technical resources market risk actually to 294 00:20:19.480 --> 00:20:22.920 the to the detriment maybe of my own firm. I think, as mentioned 295 00:20:23.240 --> 00:20:27.039 throughout the PODCASTS, as preference for investors take on market risk in the form 296 00:20:27.119 --> 00:20:30.960 of new business models or tapping into new markets. But I think we are 297 00:20:30.960 --> 00:20:36.359 missing out on tremendous impact through these scientific breakthroughs. This is like a tagline 298 00:20:36.359 --> 00:20:38.680 on my linkedin where the future vitality of our economy, which is tied to 299 00:20:38.759 --> 00:20:44.680 driving value, will depend to a large extent on the scientific advances. So 300 00:20:45.039 --> 00:20:48.599 I see what I'm doing as this mechanism to directly commercialize a lot of these 301 00:20:48.599 --> 00:20:53.480 breakthroughs and innovation. So I really would want to see more technical risk being 302 00:20:53.599 --> 00:20:57.839 had in venture capital and I think it would lead to improved outcomes for for 303 00:20:57.920 --> 00:21:02.160 the world and for the in viduals. How would you also think about maybe 304 00:21:02.240 --> 00:21:06.160 billing your network or strong yourself with the right people that in order to be 305 00:21:06.200 --> 00:21:08.079 able to kind of play some of these bets I'm always of the mindset that 306 00:21:08.119 --> 00:21:11.680 any any problem can be solved. So I think approaching that from a first 307 00:21:11.680 --> 00:21:17.880 principle's approach, like first words or opportunity in the market, where do you 308 00:21:17.920 --> 00:21:22.599 have strong conviction, but also interests, that technical solutions can can solve those 309 00:21:22.599 --> 00:21:26.400 problems? The Way I think through career and doing what you want in life 310 00:21:26.480 --> 00:21:29.319 is usually the overlap of three things like one, what does the market value 311 00:21:29.400 --> 00:21:32.160 to what are your authentic interests? In three, what are your strength? 312 00:21:32.279 --> 00:21:36.359 So I'm just kind of brainstorming that and then filling in folks to hedge against 313 00:21:36.359 --> 00:21:38.119 where your gaps are. Right, you're not going to know it all, 314 00:21:38.160 --> 00:21:41.519 and you know I there's a lot of these businesses where it's my first time 315 00:21:41.839 --> 00:21:47.000 seeing and hearing of these technical concepts, so I do have to ramp up 316 00:21:47.079 --> 00:21:49.200 quickly. So if you have this like kind of super learner mentality and you 317 00:21:49.359 --> 00:21:53.559 this openness to just learn and constantly be learning, like I'm constantly watching youtube 318 00:21:53.640 --> 00:21:57.720 videos and reading white papers and reading textbooks and just I'm talking to experts, 319 00:21:57.720 --> 00:22:00.920 talking to scientists, talking to PhD's, like if you have this impulse to 320 00:22:00.960 --> 00:22:04.240 just always be learning, and especially around technical subjects, even if you don't 321 00:22:04.240 --> 00:22:07.079 come from a technical background, I think you can find ways to kind of 322 00:22:07.119 --> 00:22:11.720 hack it, but I think like having a technical degree does help in terms 323 00:22:11.759 --> 00:22:15.480 of the right mental models to think through in a technical way and also to 324 00:22:15.519 --> 00:22:19.160 build relationships and have residents with with these types of founders. I think any 325 00:22:19.160 --> 00:22:23.559 problem can be solved with enough creativity and effort. What's one book that's inspiety 326 00:22:23.720 --> 00:22:27.039 personally, one book that has inspired you professionally? I would say, for 327 00:22:27.119 --> 00:22:30.400 the personal front, the four agreements. So if you haven't read that book, 328 00:22:30.400 --> 00:22:34.279 there's there's four buckets. Theirs don't take things personally, don't make assumptions, 329 00:22:34.279 --> 00:22:37.240 always do your best and be impeccable with your word. So this is 330 00:22:37.240 --> 00:22:41.680 really been an Earth Star and how I operate personally and professionally. It's helped 331 00:22:41.680 --> 00:22:45.000 me a lot in terms of managing my own psychology, but also bringing my 332 00:22:45.039 --> 00:22:49.319 best self and leadership qualities to my work and how I show up in life. 333 00:22:49.359 --> 00:22:52.440 And then, in terms of professionally, I would say discipline entrepreneurship, 334 00:22:52.440 --> 00:22:56.279 which is one of the most understated books for entrepreneurs. I've actually bought this 335 00:22:56.279 --> 00:23:00.480 book for several founder friends and it breaks down building a company into these twenty 336 00:23:00.480 --> 00:23:04.960 four really actionable steps and such clear language, direct language. I really love 337 00:23:06.000 --> 00:23:07.920 it. And that was written by Ball, I'll let so. I strongly 338 00:23:07.920 --> 00:23:11.200 recommend both of those books. My final question to you is, what's one 339 00:23:11.240 --> 00:23:15.079 piece of advice that you've received that has stuck with you? I think this 340 00:23:15.079 --> 00:23:19.799 piece of advice struck a quarter with me specifically because I have so many interests 341 00:23:19.880 --> 00:23:23.240 and I think I've tried a lot of things and it's taken time to really 342 00:23:23.319 --> 00:23:26.640 find my fit in the world like it was this. It wasn't the straight 343 00:23:26.680 --> 00:23:30.720 line path and to venture. It was fairly Zig Zag and it took me 344 00:23:30.839 --> 00:23:34.440 time to really know myself fall enough to be able to start conscience. So 345 00:23:34.599 --> 00:23:37.599 that piece of advice is strategies, what you don't do, really stuck with 346 00:23:37.640 --> 00:23:41.559 me and really resonated with me. But I don't know if that advice is 347 00:23:41.559 --> 00:23:45.720 particularly that piece of advices is helpful for just anyone, but it just it 348 00:23:45.759 --> 00:23:48.920 just really worked well for my my personality type. Just always remembering that and 349 00:23:49.400 --> 00:23:52.960 what I do. I love that. Oh Yeah, I thank you so 350 00:23:52.000 --> 00:23:53.920 much for your time. This is so much fun to chat. Yeah, 351 00:23:55.000 --> 00:23:56.400 so much fun. Thank you, Mike. Appreciate it, and there you 352 00:23:56.440 --> 00:24:00.359 have it. It was a pleasure chatting with Arietta Ilie. Recommend following her 353 00:24:00.359 --> 00:24:04.880 on Linkedin at Ariana dacker. If you enjoyed this episode, I love it 354 00:24:04.880 --> 00:24:08.160 if you'd read a review on the apple podcast. You're also welcome to follow 355 00:24:08.200 --> 00:24:11.400 me your host, Mike, on twitter at Mike Gelb, and also follow 356 00:24:11.480 --> 00:24:34.960 for episode announcements at Consumer VC. Thanks for listening, everyone,