Luke Vernon (Ridgeline Ventures) - Why family offices are great investment partners for brands, investment timelines and do brands need product innovation to succeed?

WEBVTT 1 00:00:02.439 --> 00:00:16.559 Oh, hello and welcome to the consumer VC. I am your host, 2 00:00:16.600 --> 00:00:19.800 Mike Gelb, and on this show we talked about the world of venture capital 3 00:00:20.039 --> 00:00:25.160 and innovation in both consumer technology and consumer products. If you're enjoying this content, 4 00:00:25.239 --> 00:00:29.480 you could subscribe to my newsletter, the consumer VC DOT sub stack dot 5 00:00:29.480 --> 00:00:33.159 com, to get each new episode and more consumer news delivered straight to your 6 00:00:33.200 --> 00:00:37.520 inbox. Our guest today is Luke Vernon, managing partner of ridgeline ventures. 7 00:00:37.719 --> 00:00:43.520 Ridgeline ventures is an independent investment group that provides founders and brands a unique alternative 8 00:00:43.560 --> 00:00:48.320 to traditional investment firms. Some of their investments include code Paxi, Bobo's Oros 9 00:00:48.439 --> 00:00:52.719 and prose closet. Previously, he was the CEO of ego products, which 10 00:00:52.719 --> 00:00:56.759 he scaled from one million to eighty million. We discussed his learnings as an 11 00:00:56.799 --> 00:01:02.039 operator, why he invests in consumer brands currently, where other investor interests has 12 00:01:02.079 --> 00:01:06.640 softened the benefits of being a family office, and how he thinks about investment 13 00:01:06.640 --> 00:01:11.840 timelines. Without further ADO, here's Luke. Luke, thank you so much 14 00:01:11.840 --> 00:01:15.239 for joining me here today. How are you doing? Fantastic, great to 15 00:01:15.359 --> 00:01:19.079 be here. Oh, it's an absolute pleasure to have you on the show. 16 00:01:19.079 --> 00:01:21.719 Thanks so much again for spending time with me and for doing this. 17 00:01:21.760 --> 00:01:26.959 I really appreciate it. So you were an entrepreneur. You helped grow ECO 18 00:01:26.040 --> 00:01:30.400 products. You scaled it from one million to eighty million. What were some 19 00:01:30.519 --> 00:01:36.799 of your learnings from that whole experience? Well, it was such an unbelievable 20 00:01:36.840 --> 00:01:40.959 ride. I mean we went one year one of the in the basically first 21 00:01:40.959 --> 00:01:45.400 four or five years we went from one million to thirty six million and beyond 22 00:01:45.439 --> 00:01:48.439 after that, and I think there were, you know, a few really 23 00:01:48.480 --> 00:01:53.719 important things. Number one is I've never done anything like that before and that 24 00:01:53.799 --> 00:01:56.840 was my first time in a in a role like that leading to business. 25 00:01:57.040 --> 00:02:00.719 And I think one lesson was just because someone hasn't done it doesn't mean that 26 00:02:00.760 --> 00:02:05.079 they can't do it, and I try to carry that with me as an 27 00:02:05.079 --> 00:02:07.599 investor today. For me, I had to surround myself with a lot of 28 00:02:07.919 --> 00:02:12.479 c e o s and really understand like what made them really good leaders, 29 00:02:12.879 --> 00:02:15.800 and so I think for me it really really helped uncover the value of personal 30 00:02:15.840 --> 00:02:22.240 growth and investing in yourself. I think another one being is to not focus 31 00:02:22.319 --> 00:02:24.439 so much on the outcome or the exit, and we built that business for 32 00:02:24.560 --> 00:02:30.479 many, many years around focusing on selling it to a strategic acquire and when 33 00:02:30.479 --> 00:02:34.719 you do that, I found, any way, that oftentimes the goal post 34 00:02:34.879 --> 00:02:38.919 change over time and you don't really know what a buyer is going to want 35 00:02:38.960 --> 00:02:40.680 in your business. When you get to that point that you think it's you 36 00:02:40.719 --> 00:02:45.319 know they're going to be interested in buying it. And the reality is is 37 00:02:45.360 --> 00:02:49.199 that we made some decisions to build a business that we thought someone want to 38 00:02:49.199 --> 00:02:53.639 buy and we went out to sell the business and weren't successful in it and 39 00:02:53.759 --> 00:02:58.280 so we took a few years to kind of retool it and kind of restructure 40 00:02:58.319 --> 00:03:02.159 it to actually be the the most successful business that it could be. And 41 00:03:02.199 --> 00:03:06.639 I think the third just being that you know, just because investors say no 42 00:03:06.800 --> 00:03:09.680 doesn't mean that you can't still have a very successful business. We did raise 43 00:03:09.759 --> 00:03:14.560 venture capital and angel capital, but the reality is it was very little and 44 00:03:14.879 --> 00:03:16.719 we had a lot of people saying no to us. We we raised less 45 00:03:16.759 --> 00:03:22.599 money than we probably Um, you know, wanted to at different milestones and 46 00:03:22.639 --> 00:03:24.599 I think you know just because you know, you see the media and you 47 00:03:24.599 --> 00:03:29.400 see the news around uh, you know, capital raises doesn't mean that that's 48 00:03:29.400 --> 00:03:32.680 always the most successful path. You know, for for every business. That's 49 00:03:32.719 --> 00:03:36.719 really, really interesting. I love to dig in when you say that you 50 00:03:36.840 --> 00:03:43.120 built the business that where for a potentially a strategic require. What's different? 51 00:03:43.199 --> 00:03:46.840 What did you differently where you build a business for a potential, you know, 52 00:03:46.879 --> 00:03:52.680 acquisition from a strategic versus maybe what you would have done in in hindsight? 53 00:03:53.039 --> 00:03:57.240 Yeah, I would say it stemmed, apart from focusing more on growth 54 00:03:57.280 --> 00:04:00.439 than on underlying fundamentals of the business, this kind of almost the growth at 55 00:04:00.479 --> 00:04:08.840 all costs mentality of going out getting distribution and different buyers value different distribution and 56 00:04:08.879 --> 00:04:13.319 different, you know, channels differently and so um. So it's not just 57 00:04:13.439 --> 00:04:15.680 about going out and growing at all costs. It's about, you know, 58 00:04:15.720 --> 00:04:19.839 I think what we realized in our industry was that profitability, gross margins, 59 00:04:19.839 --> 00:04:24.800 were very, very important, really managing trade spend Um, you know, 60 00:04:24.839 --> 00:04:30.360 efficiently and and building something that was defensible and had a mote. And I 61 00:04:30.399 --> 00:04:34.480 think initially we thought that we would grow so fast and that, you know, 62 00:04:34.519 --> 00:04:39.480 being the first company in the industry to really produce a line of commercially 63 00:04:39.519 --> 00:04:44.720 compost able and high recycled content packaging that people would naturally you know, strategic 64 00:04:44.800 --> 00:04:47.399 choirs would naturally gravitate towards wanting to own it, and the reality is they 65 00:04:47.399 --> 00:04:50.240 all kind of felt like they could do it themselves and do it just as 66 00:04:50.279 --> 00:04:53.959 well, and so we really had to prove ourselves that we had, you 67 00:04:53.959 --> 00:04:57.480 know, some defense ability and some uniqueness and that we were doing things very 68 00:04:57.480 --> 00:05:01.519 differently. That's really helpful. Eventually sell ego products right to a strategic now, 69 00:05:01.759 --> 00:05:09.439 after ego products is sold, what eventually got you thinking of becoming an 70 00:05:09.480 --> 00:05:13.279 investor? Well, truth be told, I mean, Mike, starting a 71 00:05:13.360 --> 00:05:16.720 business, as you know, it's hard, it's mortal and I've started a 72 00:05:16.800 --> 00:05:23.480 few on my own and you know, it's not just the process of you 73 00:05:23.560 --> 00:05:26.639 know what you go through to raise money and to get a product on shelf 74 00:05:26.720 --> 00:05:30.879 or online, and it's to me one of the bigger challenges was almost the 75 00:05:31.000 --> 00:05:34.680 ups and downs on not just a daily basis but an hourly basis, both 76 00:05:34.720 --> 00:05:40.240 mentally emotionally everything. You're carrying a lot of weight when you're running a business 77 00:05:40.279 --> 00:05:44.600 and starting a company for a lot of other people's livelihoods and I have so 78 00:05:44.720 --> 00:05:47.000 much respect for founders who do that. And at the same time, I 79 00:05:47.079 --> 00:05:50.959 just found in my career, as I was progressing through it, that I 80 00:05:51.040 --> 00:05:55.560 really wanted to have my hands and multiple businesses and try to make an impact 81 00:05:55.920 --> 00:06:00.879 as much as I could multiple businesses as opposed to be just kind of focused 82 00:06:00.920 --> 00:06:04.199 on on one. And I also felt like I had learned so much from 83 00:06:04.240 --> 00:06:08.519 some of the board members and investors that were involved in ECO products and some 84 00:06:08.600 --> 00:06:11.639 of the other, you know, companies and so forth, that I wanted 85 00:06:11.680 --> 00:06:14.959 to kind of share some of those lessons and help companies, you know, 86 00:06:15.000 --> 00:06:17.319 try to grow and scale through some of the things that I've learned, and 87 00:06:17.519 --> 00:06:20.959 certainly I still have a lot more to learn today, but I just felt 88 00:06:20.959 --> 00:06:25.199 like there was also a different way to do things, you know, originally, 89 00:06:25.199 --> 00:06:29.360 and we don't have outside investors today in our business, and I felt 90 00:06:29.399 --> 00:06:31.920 like as we were raising capital, as we took on venture capital, that 91 00:06:31.920 --> 00:06:39.439 there were always some dynamics around, whether it's fun structure or different requirements that 92 00:06:39.480 --> 00:06:43.079 investors, you know, may have in their firms and funds, that can 93 00:06:43.480 --> 00:06:48.720 sometimes impact the best decision for the business. So I really wanted to kind 94 00:06:48.720 --> 00:06:53.120 of take all that pressure off and take some of those kind of artificial, 95 00:06:53.680 --> 00:06:57.639 you know, decision parameters off, and that's kind of that kind of drove 96 00:06:57.680 --> 00:07:00.680 some of my decision and ultimately, you know, that's that's how we think 97 00:07:00.680 --> 00:07:04.920 about it at ridgeline too. So I was thinking that personally, in terms 98 00:07:04.959 --> 00:07:09.639 of what you actually enjoyed, it was maybe thinking more broadly and being able 99 00:07:09.720 --> 00:07:13.839 to help maybe across category rather than having to focus on, you know, 100 00:07:13.920 --> 00:07:17.839 going back to storring to business and focusing on, you know, solving one 101 00:07:17.920 --> 00:07:21.079 problem, one thing. And also, you say, like inspiration from the 102 00:07:21.160 --> 00:07:26.000 board members that you had and those roles and knowing, you know, since 103 00:07:26.040 --> 00:07:30.959 obviously you've had incredible experience growing companies, share those learnings with entrepreneurs, which 104 00:07:30.000 --> 00:07:34.360 makes, I mean, a ton of sense. So how did ridgeline ventures 105 00:07:34.399 --> 00:07:40.040 form? Yeah, my partner, Eric started it and he had a very 106 00:07:40.079 --> 00:07:46.120 successful business previously in his career that he grew and stepped away from and he 107 00:07:46.319 --> 00:07:50.199 really wanted to kind of change the paradigm in investing as well. I wanted 108 00:07:50.160 --> 00:07:55.199 to invest in private companies and he wanted to do it in a space that 109 00:07:55.240 --> 00:07:58.399 he was really passionate about, which is health and wellness, helping people live 110 00:07:58.439 --> 00:08:03.040 a healthier lifestyle, and so he set aside a substantial portion of his capital 111 00:08:03.160 --> 00:08:05.879 to do that and to start investing, and that's where we ended up meeting, 112 00:08:05.920 --> 00:08:09.920 because he was looking for help and support to, you know, really 113 00:08:09.959 --> 00:08:15.120 open the office here and Boulder and start investing and build our portfolio. And 114 00:08:15.160 --> 00:08:18.000 so we hit it off and and really that that was the idea, is 115 00:08:18.079 --> 00:08:24.120 trying to take away the traditional kind of boundaries on investing and on investment firms 116 00:08:24.279 --> 00:08:28.759 and have autonomy over our decisions and really doing it in a in a way 117 00:08:28.800 --> 00:08:33.480 that felt really, really genuine to what we believed in and what our values 118 00:08:33.519 --> 00:08:35.039 are. And, you know, kind of underlying all that is working with 119 00:08:35.080 --> 00:08:39.279 people that we really like and that we really want to spend time with, 120 00:08:39.320 --> 00:08:41.320 because this, you know, as you know, Mike, it's it's harder 121 00:08:41.320 --> 00:08:46.399 divorced an investor than as a spouse, and and so choosing the right investors 122 00:08:46.480 --> 00:08:50.639 just so important. So that really was the genesis of Ridgeline. So when 123 00:08:50.919 --> 00:08:56.320 Eric started ridgeline ventures and and had this thesis of, you know, something 124 00:08:56.320 --> 00:09:00.799 that's very passionate that he's about, which is health and well this and, 125 00:09:01.120 --> 00:09:03.279 you know, wanting to focus as well on the innovation side of health of 126 00:09:03.279 --> 00:09:07.559 wellness, since it's, you know, private companies. When did you get 127 00:09:07.600 --> 00:09:11.279 involved and how do you break down like health and wellness, because it's such 128 00:09:11.320 --> 00:09:15.000 a large you know, I mean there's a lot of categories that kind of 129 00:09:15.000 --> 00:09:18.440 sit under it. How do you think about health wellness as well? I 130 00:09:18.480 --> 00:09:20.759 got involved kind of pretty much right away, early on, when when he 131 00:09:20.799 --> 00:09:24.799 made that decision invest in that space and and I think how we've defined it 132 00:09:24.919 --> 00:09:30.720 is products and companies that we feel good about putting on our website and that 133 00:09:30.799 --> 00:09:35.240 we feel good about either feeding to our kids having our kids wear, and 134 00:09:35.279 --> 00:09:41.000 that really just have a positive impact on the world and on consumers. And 135 00:09:41.080 --> 00:09:43.919 that can be, you know, pretty broad, like the world of Desserts 136 00:09:43.919 --> 00:09:46.919 and indulgence, for example. There's lower sugar, there's better for you, 137 00:09:46.960 --> 00:09:50.919 there's dairy free, there's clean ingredients, and I think for us it's a 138 00:09:50.919 --> 00:09:56.080 lot of that is a personal decision, but underwriting it is just alignment in 139 00:09:56.320 --> 00:10:01.679 values more than anything. So there's a couple of categories that we call off 140 00:10:01.759 --> 00:10:05.320 limits and we just won't invest in, but for the most part, you 141 00:10:05.320 --> 00:10:07.159 know, if we believe that a company is having a positive impact in the 142 00:10:07.200 --> 00:10:11.480 world, is somehow contributing to people, you know, being healthier better for 143 00:10:11.519 --> 00:10:16.720 the planet, then that's all in games. For us. Cool, that's 144 00:10:16.720 --> 00:10:18.639 great. It's okay. So it's quite broad, but obviously it's health of 145 00:10:18.679 --> 00:10:24.000 wellness within consumer. Now Ridgeline it's you don't take any outside capital. Is 146 00:10:24.039 --> 00:10:28.200 that right? Yeah, we we haven't today. Doesn't mean we won't in 147 00:10:28.200 --> 00:10:30.879 the future, but we haven't so far. Yeah, got it. got. 148 00:10:30.879 --> 00:10:33.879 It's a what's the strategy there as well? You know, being a 149 00:10:33.080 --> 00:10:37.240 somewhat you know, family office. I think it's too pronged. You know. 150 00:10:37.360 --> 00:10:41.559 Number one is the autonomy that comes with investing your own capital and the 151 00:10:41.600 --> 00:10:46.600 flexibility that has afforded us in terms of picking the companies, in terms of 152 00:10:46.639 --> 00:10:50.320 the stage we invest in, you know, the types of businesses. I 153 00:10:50.320 --> 00:10:54.120 think the other thing is that as we think about the future and continuing to 154 00:10:54.159 --> 00:10:58.120 build Ridge line and if we do raise outside capital at some point in future, 155 00:10:58.159 --> 00:11:03.360 we have a pretty sell track record now under our belt and which we've 156 00:11:03.399 --> 00:11:09.200 invested our own capital in a pretty meaningful way to demonstrate that we know what 157 00:11:09.200 --> 00:11:13.799 we're doing. And so I think, I think those are two important kind 158 00:11:13.840 --> 00:11:16.440 of approaches for us as we think about building this for the long term. 159 00:11:16.639 --> 00:11:22.519 There's been a couple advantages for us. Just the timeline has been nice Um, 160 00:11:22.559 --> 00:11:24.879 you know, not getting caught right away as we kind of build our 161 00:11:24.919 --> 00:11:30.039 investor track record of having to deploy a fund within the first, you know, 162 00:11:30.120 --> 00:11:33.120 three to five years and really kind of financially engineered businesses to try to 163 00:11:33.120 --> 00:11:37.279 harvest returns and so forth, that we've been able to really focus on building 164 00:11:37.279 --> 00:11:41.799 the best foundation. I think at the same time, it's helped us build 165 00:11:41.919 --> 00:11:46.279 a really strong competency around how do you mitigate risk, because for us, 166 00:11:46.320 --> 00:11:50.159 like going to zero is just not an option. We don't want to lose 167 00:11:50.200 --> 00:11:52.240 any of our own money, as we wouldn't want to lose anyone else's money. 168 00:11:52.440 --> 00:11:56.159 So we just don't think about it from the standpoint of, you know, 169 00:11:56.600 --> 00:12:00.759 if we have ten portfolio companies, once a home run, three, 170 00:12:01.200 --> 00:12:03.519 you know, re doubles, three return capital and three year losers. So 171 00:12:03.639 --> 00:12:07.000 we just for us we want every single one to be a winner, and 172 00:12:07.039 --> 00:12:11.679 a winner could be across a broad spectrum of you know, returns. But 173 00:12:11.000 --> 00:12:13.840 going to zero, frankly, we just, you know, something we just 174 00:12:15.320 --> 00:12:16.919 you know, really aren't aren't willing to do. Well, I think this 175 00:12:16.960 --> 00:12:22.000 is also kind of interesting as well, and I actually had a conversation with 176 00:12:22.000 --> 00:12:24.679 this with a few people last week. How do you think about, you 177 00:12:24.679 --> 00:12:28.080 know, fundraising for consumer or the current landscape venture capital for consumer? And 178 00:12:28.480 --> 00:12:31.080 I kind of feel like I love your perspective of this too. A lot 179 00:12:31.120 --> 00:12:35.799 of investors have shifted away from consumer. Not to call him out, but 180 00:12:35.840 --> 00:12:39.200 like the software more oriented investors, and part of the reason, I feel 181 00:12:39.399 --> 00:12:45.039 is because I think of what you described in terms of portfolio construction and that 182 00:12:45.080 --> 00:12:48.679 you don't really have power law dynamics as much in working with consumer brands. 183 00:12:50.080 --> 00:12:54.360 It's more so it looks like which, you know, that's kind of traditional 184 00:12:54.480 --> 00:12:56.600 venture capital, like kind of like you have those power law dynamics. You 185 00:12:56.639 --> 00:13:00.519 might have quite a few companies that go to zero right, but U in 186 00:13:00.600 --> 00:13:05.200 consumer it more looked like maybe like a private equity portfolio done at, you 187 00:13:05.240 --> 00:13:09.120 know, earlier stage, because you do have a lot more winners, even 188 00:13:09.120 --> 00:13:11.919 though those winners might not, you know, be like fifty x and that 189 00:13:13.000 --> 00:13:15.879 it could get to in software right, or dred x. How do you 190 00:13:15.960 --> 00:13:20.159 think about like the current maybe like investor landscape when it comes to consumer, 191 00:13:20.240 --> 00:13:22.840 and do you see that consumer has maybe gone out of favor in some areas? 192 00:13:24.519 --> 00:13:26.279 Yeah, I think you nailed on the head, because I think going 193 00:13:26.279 --> 00:13:31.240 back five, eight years ago and even over the past few years, there 194 00:13:31.279 --> 00:13:33.960 seemed to be any way, a lot of kind of traditionally, you know, 195 00:13:35.039 --> 00:13:37.759 tech oriented investors who really did, you know, tech more than anything 196 00:13:37.799 --> 00:13:43.080 else, who started to invest in consumer and I think in part because of 197 00:13:43.120 --> 00:13:46.159 competitiveness of tech deals, I think in part because wanting to diversify and finding 198 00:13:46.519 --> 00:13:52.720 opportunities. But I think the reality is that further elevated valuations across consumer and 199 00:13:52.759 --> 00:13:56.399 I think the reality is it's just harder to get ten x, fifty x, 200 00:13:56.519 --> 00:14:00.399 hundred x, you know, you know return like they might getting, 201 00:14:00.559 --> 00:14:03.159 you know, a couple of their portfolios across tech. And so I think 202 00:14:03.320 --> 00:14:07.200 over the next few years, I you know, and particularly in the next 203 00:14:07.240 --> 00:14:09.840 year or two, I think we're going to see the client and tech investors 204 00:14:09.840 --> 00:14:13.159 wanting to invest in consumer. If you look at some of the private equity 205 00:14:13.159 --> 00:14:16.559 reports out there, like being capital, for example, they're their annual poor 206 00:14:16.039 --> 00:14:22.360 consumers actually one of the worst performing sectors across across private equity, and almost 207 00:14:22.360 --> 00:14:28.440 seventy GDP has spent on consumer consumption. Right. So it's still I mean 208 00:14:28.480 --> 00:14:31.840 it's still a massive driver and I think, I think for us you know, 209 00:14:31.919 --> 00:14:35.000 that's kind of where we have our operating experience, like all of our 210 00:14:35.039 --> 00:14:39.279 partners have, you know, run businesses. Um We understand consumer very, 211 00:14:39.360 --> 00:14:41.559 very well. We know all the Inter you know a lot of the nuances 212 00:14:41.639 --> 00:14:46.639 around supply chain, around, you know, manufacturing and Channel Strategy and pricing. 213 00:14:46.639 --> 00:14:50.399 Strange there's just a lot of nuances, as as there are in other 214 00:14:50.480 --> 00:14:52.000 sectors too. But I feel like, you know, it's it's such a 215 00:14:52.039 --> 00:14:56.759 core competency for us that we feel like that's kind of where we have, 216 00:14:56.240 --> 00:14:58.960 you know, I have, the strength to be able to generate returns. 217 00:15:00.360 --> 00:15:01.679 I certainly agree with you. I also think too, when it comes to 218 00:15:01.720 --> 00:15:07.559 tech and software investors, that and I think sometimes the word DBC brand it 219 00:15:07.799 --> 00:15:13.000 could be a little bit dangerous, because I kind of feel like DDC brand 220 00:15:13.080 --> 00:15:18.759 sometimes entails that these businesses are fundamentally different to a retail business or a wholesale 221 00:15:18.799 --> 00:15:22.759 business. And maybe what gets really excited about you know, software tech investors 222 00:15:22.000 --> 00:15:28.279 is that you're using obviously technology e commerce to market and, you know, 223 00:15:28.320 --> 00:15:31.960 distribute your product, and so it sounds like it's almost like a software product, 224 00:15:33.039 --> 00:15:35.759 but of course the product itself is not actually technical. In a lot 225 00:15:35.759 --> 00:15:41.000 of ways when the vast majority of businesses actually on the product side like it 226 00:15:41.080 --> 00:15:43.960 needs to work in retail in order for it to, you know, be 227 00:15:45.080 --> 00:15:50.679 a large company. Right. So there's also been like that maybe like confusion 228 00:15:50.720 --> 00:15:54.240 about it as well, where BDOC is a channel but it's not actually like 229 00:15:54.759 --> 00:15:58.279 a fundamental business change to like a business, you know what I mean? 230 00:15:58.679 --> 00:16:03.799 Totally agree, totally great and any business that is a DDC business and their 231 00:16:03.799 --> 00:16:07.240 examples of some that have stayed D Toc. But but at some point there's 232 00:16:07.279 --> 00:16:11.519 the question of how do we get continued growth, and that can come from 233 00:16:11.559 --> 00:16:15.960 new products and it can come from new distribution and new channels and cost structure 234 00:16:17.039 --> 00:16:21.919 and infrastructure required to go to retail is very different than an infrastructure required to 235 00:16:21.960 --> 00:16:26.000 do DTOC. is very different from an infrastructure to have your own brick and 236 00:16:26.000 --> 00:16:29.720 mortar and so I think that's spot on. I also think that, I 237 00:16:29.759 --> 00:16:33.759 guess, going back to investor landscape across consumer to me there's, you know, 238 00:16:33.840 --> 00:16:38.159 I think there's a real value and focus and, like entrepreneurs, one 239 00:16:38.159 --> 00:16:44.879 of the most common things we see is just chasing the shiny object and inability 240 00:16:44.919 --> 00:16:48.879 to really kind of focus on the core and build a core until you're really 241 00:16:48.879 --> 00:16:52.200 proven and ready to expand. And I think for us that's, you know, 242 00:16:52.240 --> 00:16:55.279 that's something that we take to heart and how we're building our business, 243 00:16:55.320 --> 00:16:57.600 that we want to you know, focus and and I think, you know, 244 00:16:57.679 --> 00:17:03.679 consumer I think investors who maybe have been investing from other areas into consumer. 245 00:17:03.039 --> 00:17:06.319 You know, hopefully, you know, that will prove out well for 246 00:17:06.359 --> 00:17:08.319 all those entrepreneurs and investors and at the same time, I think it may 247 00:17:08.359 --> 00:17:11.799 prove that, you know, focus is going to be really important, whether 248 00:17:11.839 --> 00:17:15.880 you're starting a business or whether you're investing. So, with all this being 249 00:17:17.000 --> 00:17:21.480 said and how when it comes to obviously, return timeline, for in a 250 00:17:21.519 --> 00:17:25.839 traditional vetro capital fund, it's maybe quite different to you know, ridgeline because 251 00:17:26.039 --> 00:17:30.039 you have, are able to have and pursume more flexibility since you don't have 252 00:17:30.079 --> 00:17:33.000 outside investors. How do you think about returns? And also, I know 253 00:17:33.079 --> 00:17:37.480 that when you said you started, you know, ECO products and we're part 254 00:17:37.480 --> 00:17:42.079 of that company, one of the big learnings was about let's not try to 255 00:17:42.119 --> 00:17:45.440 build this or let's build this as hell to a strategic and that ended up, 256 00:17:45.599 --> 00:17:48.559 you know, not maybe being the right strategy of the time and you 257 00:17:48.559 --> 00:17:52.559 had to pivot your strategy. How has that influenced you as an investor when 258 00:17:52.559 --> 00:17:56.920 you're looking at deals? It's influenced us from the standpoint of, you know, 259 00:17:56.960 --> 00:18:00.599 when we go into an investment and whether we're buying a company and whole 260 00:18:00.720 --> 00:18:04.279 or we're investing in a growth equity round. As much as we can is 261 00:18:04.319 --> 00:18:08.720 focusing everyone on building the best business possible and what are the decisions that need 262 00:18:08.759 --> 00:18:12.759 to be made right now to build the strongest kind of most fundamentally sound business 263 00:18:14.160 --> 00:18:18.880 and that, over time, will create the best options for whatever type of 264 00:18:18.920 --> 00:18:23.400 monetization method makes sense in the future for shareholders. And so we have six 265 00:18:23.519 --> 00:18:30.759 years under our belt as investors and we are at a variety of stages of 266 00:18:30.799 --> 00:18:33.640 our with all of our companies. We invest most of our businesses we invested 267 00:18:33.720 --> 00:18:37.440 when they were fifteen million or less in revenue and we have companies now, 268 00:18:37.519 --> 00:18:41.160 six years in, who are, you know, several of who are approaching 269 00:18:41.200 --> 00:18:47.119 hunter or over a hundred and several that are smaller than that. And for 270 00:18:47.240 --> 00:18:49.480 us, if we were to put a timeline on those investments, I think 271 00:18:49.519 --> 00:18:55.519 there's the chance that we could be leaving value on the table. And you 272 00:18:55.559 --> 00:18:57.480 know, I think a typical kind of you know, if we had a 273 00:18:59.119 --> 00:19:02.759 common fund struck, sure we could be asking ourselves the question how do we 274 00:19:02.839 --> 00:19:06.839 monetize an investment in order to, you know, generate the track record to 275 00:19:06.880 --> 00:19:11.759 go raise another fund, and I think we would not be able to obtain 276 00:19:11.880 --> 00:19:14.880 the same type of returns over the long run if we were to do that 277 00:19:15.039 --> 00:19:18.000 then hold. So I hainte. You know, we'll have a couple of 278 00:19:18.000 --> 00:19:21.359 exits over the next you know, to three years, hopefully if we're if 279 00:19:21.400 --> 00:19:25.599 we're fortunate. But I think if you look at that, then we'll actually 280 00:19:25.599 --> 00:19:30.440 be operating within the same kind of timeline as as most investment firms. We 281 00:19:30.519 --> 00:19:33.640 just haven't, from the onset, put the confines of a you know, 282 00:19:33.720 --> 00:19:37.440 tenure structure on us. So I would love toose guys as well how you 283 00:19:37.480 --> 00:19:41.680 evaluate founders and how you actually invest in businesses. So kind of what's your 284 00:19:41.359 --> 00:19:45.680 criteria all the way from maybe like top of funnel of how you think about 285 00:19:45.720 --> 00:19:49.359 as well, sourcing opportunities, and then all the way down to your actual 286 00:19:49.440 --> 00:19:53.279 due diligence process. Sure, yeah, well, sourcing for us has been 287 00:19:53.480 --> 00:19:57.759 entirely from so far with all of our investments, has been through relationship based 288 00:19:57.839 --> 00:20:00.799 channels. We haven't that are bought a business that's been, you know, 289 00:20:00.880 --> 00:20:04.039 quote, a bank deal or auction deal at this point. It doesn't mean 290 00:20:04.079 --> 00:20:07.640 that we wouldn't in the future, but we just we just haven't. We 291 00:20:07.799 --> 00:20:10.519 you know, we we really spend a lot of time getting to know the 292 00:20:10.599 --> 00:20:14.880 team and getting to the founders and that being a driving part of our decision 293 00:20:14.920 --> 00:20:18.160 process. So when we think about our criteria, we have what we call 294 00:20:18.160 --> 00:20:22.599 it just kind of eight first line criteria that we go through. It stems 295 00:20:22.680 --> 00:20:25.880 from is it a backable team and a group that we want to work with 296 00:20:25.920 --> 00:20:27.400 and believing can help lead? And if there are gaps, do we help? 297 00:20:27.480 --> 00:20:30.359 Do we believe that we can help fill those with our network? Second 298 00:20:30.440 --> 00:20:33.160 being, is it in a big market and could it be a big company? 299 00:20:33.640 --> 00:20:37.000 So, you know, will it could it turn out to be, 300 00:20:37.160 --> 00:20:40.359 you know, really sizeable business? There being, is it a do they 301 00:20:40.359 --> 00:20:42.720 have a sound channel strategy and is there a place on the shelf that actually 302 00:20:42.720 --> 00:20:45.599 exists? You know, there's a lot of a lot of products out there 303 00:20:45.680 --> 00:20:51.279 that it's a great product, but the reality is retailers might not have a 304 00:20:51.279 --> 00:20:53.920 place for it on their shelf or they might not be willing to allocate enough 305 00:20:55.200 --> 00:20:56.799 space for it. For the criteria being, you know, do we believe 306 00:20:56.839 --> 00:21:00.160 in the product and do we do we feel like it meets a consumer need 307 00:21:00.559 --> 00:21:06.119 and then doesn't have sufficient growth margins being the fifth criteria, the sixth being 308 00:21:06.480 --> 00:21:10.440 is the company APP profitability or have an attainable path to profitability, and that's 309 00:21:10.480 --> 00:21:15.039 something that's very important to us and we continue to believe that over time that's 310 00:21:15.039 --> 00:21:19.119 going to really prove out to be very important for strategic buyers. Seventh being 311 00:21:19.200 --> 00:21:23.400 is an operationally sound both from a supply chain and manufacturing perspective? And an 312 00:21:23.440 --> 00:21:29.000 eighth, are the valuation expectations in line with what we believe is fair and 313 00:21:29.039 --> 00:21:30.720 we're not trying to get just the best deal out there. We want to 314 00:21:30.720 --> 00:21:34.359 win win for for all parties. So so that's kind of the criteria that 315 00:21:34.400 --> 00:21:37.839 we go through. But underwriting all of it, more most importantly, is 316 00:21:37.880 --> 00:21:41.119 just the team. What are some of the ways that you analyze teams? 317 00:21:41.119 --> 00:21:45.440 Because, of course, I'd imagine, I mean, the markets actually probably 318 00:21:45.440 --> 00:21:48.680 a different one in maybe deals aren't moving as fast, but I'm going to 319 00:21:48.759 --> 00:21:52.880 assume that deals are still still moving pretty fast. How, then, do 320 00:21:52.960 --> 00:21:57.920 you analyze teams, build trust, build confidence that in these entrepreneurs where you 321 00:21:57.960 --> 00:22:03.200 feel comfortable making investment. As much time as we can spend with them ahead 322 00:22:03.240 --> 00:22:06.599 of time. Sometimes, will you know, we may do things on a 323 00:22:06.599 --> 00:22:08.880 personal basis, try to try to spend time with them outside of just kind 324 00:22:08.880 --> 00:22:15.920 of normal business conversations. In some cases we have had strategic planning sessions where 325 00:22:15.960 --> 00:22:19.240 we've kind of facilitated strategic planning sessions for the founder in the in the team 326 00:22:19.240 --> 00:22:22.519 to really kind of get to know each other under that environment and understand how 327 00:22:22.559 --> 00:22:27.400 they think and operate. We check references, reviewed and looked at kind of, 328 00:22:27.839 --> 00:22:33.240 you know, done personality tests and assessments to understand kind of what drives 329 00:22:33.720 --> 00:22:37.000 individuals. So just looking at a lot of companies and a lot of founders, 330 00:22:37.000 --> 00:22:41.440 you can start to kind of pattern recognize what fits with you and what 331 00:22:41.519 --> 00:22:44.200 doesn't, and I think that that's a big part of it. But it 332 00:22:44.240 --> 00:22:45.960 all stems from just being able to spend a lot of time with them. 333 00:22:47.079 --> 00:22:51.160 How do you think? And we talked about distribution marketing. You touch on 334 00:22:51.200 --> 00:22:55.119 those things. What about product there's been a debate as well on the show 335 00:22:55.519 --> 00:22:59.240 and and also I post about as well as I've gotten great comments both ways 336 00:22:59.559 --> 00:23:07.079 about consumer do you have to have a differentiated product to be a large company 337 00:23:07.079 --> 00:23:10.319 where it makes sense? I mean you could build a very, maybe successful 338 00:23:10.359 --> 00:23:12.960 business, but maybe not one that you know needs investor money. But, 339 00:23:14.160 --> 00:23:18.200 Katie, build a large business where investment money makes sense, where you actually 340 00:23:18.279 --> 00:23:22.559 don't have maybe, um I P or a sense of product differentiation or just 341 00:23:22.599 --> 00:23:26.160 how do you think about PDUCT differentiation in general? Yeah, I think it. 342 00:23:26.440 --> 00:23:29.079 mean, it's a great debate and I could probably argue both ways. 343 00:23:29.119 --> 00:23:33.160 To be honest with you. I think my my more common thought is that 344 00:23:33.240 --> 00:23:38.960 I have is that product differentiation is ultimately really important and I think the best 345 00:23:38.960 --> 00:23:42.920 product supported by the best team is going to be the winning business and the 346 00:23:42.920 --> 00:23:47.920 winning formula. So you can have a similar product. And it all depends 347 00:23:47.960 --> 00:23:49.319 on the size of the market. I mean there's some markets that are big 348 00:23:49.400 --> 00:23:55.680 enough where you can have multiple winners and I think that's you know. So 349 00:23:55.839 --> 00:23:59.160 so it really kind of depends on category in sector. But at the end 350 00:23:59.160 --> 00:24:03.200 of the day, if you have a product that's easily replicated and low defensibility, 351 00:24:03.240 --> 00:24:06.640 then I think number one, not only is it going to be harder 352 00:24:06.640 --> 00:24:08.680 to attract investors. Number two, you're gonna have to you know, the 353 00:24:08.720 --> 00:24:12.160 strategy, the winning strategy is probably gonna be run faster than everyone else, 354 00:24:12.680 --> 00:24:17.359 and that's fine for a little bit Um that also means that you might not 355 00:24:17.400 --> 00:24:21.079 be as efficient with your money that other people could. You know, could 356 00:24:21.160 --> 00:24:23.799 replicate it or, you know what's what's on trend today might be off trend 357 00:24:23.839 --> 00:24:27.119 tomorrow. So at the end of the day, I think defensibility is, 358 00:24:27.240 --> 00:24:30.759 to me, is the more you know more important attribute. So and I 359 00:24:30.799 --> 00:24:36.039 guess that that go kind of two ways. One defensibility and the product itself 360 00:24:36.200 --> 00:24:38.960 or defensibility in the brand itself. So that makes sense. What do you 361 00:24:40.000 --> 00:24:44.119 find when you're meeting with entrepreneurs? Besides raising money? What are you finding 362 00:24:44.160 --> 00:24:48.880 that entrepreneurs need or struggle with maybe the most when you meet with them, 363 00:24:48.960 --> 00:24:52.039 and maybe what how you also think about how that place your strength in terms 364 00:24:52.079 --> 00:24:56.599 of value that you can provide. I think probably the more the most common 365 00:24:56.880 --> 00:25:00.480 or a couple of the most common ones are. It's just the broad question 366 00:25:00.559 --> 00:25:03.640 of, you know, how do I grow? How do I get the 367 00:25:03.680 --> 00:25:07.000 business from, you know, here to there? And a lot of that 368 00:25:07.039 --> 00:25:12.559 stems from distribution strategy and channel strategy and not having the capital to invest internally 369 00:25:12.559 --> 00:25:15.599 in the right team and or, you know, not know how how to, 370 00:25:15.799 --> 00:25:18.720 you know, find and spot the right talent and, you know, 371 00:25:18.759 --> 00:25:22.759 and maybe not not knowing how to kind of coach that talent to I think 372 00:25:22.920 --> 00:25:27.480 another one being pricing strategy being a really important one, that each channel having 373 00:25:27.480 --> 00:25:30.960 a, you know, a different approach in that regard and how do you 374 00:25:30.000 --> 00:25:34.799 kind of balance that over time? And then in general being you know, 375 00:25:34.839 --> 00:25:38.839 how do you just scale operations of the business and, you know, knowing 376 00:25:38.839 --> 00:25:44.079 when to add add certain people and knowing when, you know you need to 377 00:25:44.119 --> 00:25:48.480 think more about different supply chain and redundancy. So I think it's a broad 378 00:25:48.519 --> 00:25:52.000 spectrum. When does it make sense in your mind, if you also have 379 00:25:52.079 --> 00:25:56.400 any examples as well, to be great, but when to diversify channels, 380 00:25:56.599 --> 00:26:03.680 your sales channels? Maybe that's going from e commerce to going to actually building 381 00:26:03.720 --> 00:26:08.359 out your whole fale retail business, or or maybe that's already in a series 382 00:26:08.359 --> 00:26:11.880 of sores and it's it's going and diversifying and getting into another series of stores. 383 00:26:12.000 --> 00:26:17.279 How do you think about channel diversification? Well, we like to see 384 00:26:17.640 --> 00:26:19.640 some diversification from the start I mean, I know, you know, as 385 00:26:19.640 --> 00:26:22.240 a startup you can't do it all, obviously, but when you get to, 386 00:26:22.880 --> 00:26:26.079 you know, the size of called five million, ten million, fifteen 387 00:26:26.079 --> 00:26:32.279 million, ideally you will have tested enough channels to know what works and what 388 00:26:32.319 --> 00:26:34.720 does and you'll have a little bit of a base in several different channels. 389 00:26:34.720 --> 00:26:40.440 And I think what can be hard is that companies that maybe historically have been, 390 00:26:40.960 --> 00:26:45.279 you know, retail oriented products that don't, you haven't yet invested in 391 00:26:45.319 --> 00:26:47.799 d two C and you know, believe it or not, there's still a 392 00:26:47.839 --> 00:26:49.799 lot out there that are kind of in that boat. You know, it 393 00:26:49.839 --> 00:26:53.039 can be hard to prove the unit economics going into d two see if you 394 00:26:53.079 --> 00:26:56.079 don't have a high enough a o V and depending on what Kak is, 395 00:26:56.400 --> 00:26:59.960 and so it can be a pretty big lift to try to build that big 396 00:27:00.200 --> 00:27:03.160 us. And just the inverse, like we talked about, if you're focused 397 00:27:03.240 --> 00:27:06.640 only on DTWOC, to go into a retail channel and, you know, 398 00:27:06.680 --> 00:27:10.200 have a different sales team and, you know, build competency around how do 399 00:27:10.200 --> 00:27:12.680 you manage brokers, I think that can be equally as big of a lift. 400 00:27:12.759 --> 00:27:15.279 So for us, for us it's you know, and I think for 401 00:27:15.640 --> 00:27:19.160 you know, just building a business in general. I think diversification is really 402 00:27:19.200 --> 00:27:22.640 important to understand, you know, in an early age, to understand what's 403 00:27:22.680 --> 00:27:26.720 going to hit and then you you kind of put fuel on the fire and 404 00:27:26.759 --> 00:27:30.599 the channels that are really really making, you know, working the best. 405 00:27:30.000 --> 00:27:36.640 That's really helpful within the broader health of wellness. What are some particular categories 406 00:27:36.759 --> 00:27:40.759 that you're really excited about and maybe some also categories that and they could be 407 00:27:40.799 --> 00:27:45.000 also attractive to other investors and maybe, if there's any categories we might have 408 00:27:45.160 --> 00:27:48.640 like a conterion take or one that it may not seem that excited on the 409 00:27:48.640 --> 00:27:52.319 surface, but you think that actually is a lot of potential for innovation. 410 00:27:52.680 --> 00:27:56.759 I'll say one because we're invested in two different apparel companies and a lot of 411 00:27:56.839 --> 00:28:02.640 investors shy away from apparel, and I'll say the reason why we have invested 412 00:28:02.640 --> 00:28:06.480 in apparel. I mean, for one, we felt like the teams were 413 00:28:06.599 --> 00:28:11.720 very exceptional in those businesses. Number two, we felt like the markets were 414 00:28:11.880 --> 00:28:17.400 enormous and specific areas that the brand's code of Paxi and Oros apparel being the 415 00:28:17.400 --> 00:28:19.759 two companies, what they were going after, the target consumers. There was 416 00:28:19.839 --> 00:28:25.880 just plenty of room for disruption. Code of Paxi being more style oriented and 417 00:28:25.880 --> 00:28:27.319 and a little bit more fashion ry and with some technical, you know, 418 00:28:27.440 --> 00:28:33.480 packs and gear, and Oros is a very technical type driven fabric and I 419 00:28:33.519 --> 00:28:37.440 know you had Michael Marksburry on the show, so you understand both of the 420 00:28:37.440 --> 00:28:41.160 businesses and and I think for us, you know, it's certainly apparel can 421 00:28:41.200 --> 00:28:45.559 be more capital intensive. At the same time, if you build a really 422 00:28:45.559 --> 00:28:51.640 good product, there's opportunity to really target your core consumer and there are good 423 00:28:51.680 --> 00:28:53.920 margins in apparel and I think once you get to scale it can be a 424 00:28:55.039 --> 00:28:57.839 very solid business. It's just you know, how long will it take to 425 00:28:57.880 --> 00:29:02.720 get to scale? So I think that's one where we've gone a direction that, 426 00:29:02.920 --> 00:29:04.799 you know, maybe a lot of investors kind of shied away from. 427 00:29:04.960 --> 00:29:10.440 I think manufacturing as well, like on the food side, and even other 428 00:29:10.480 --> 00:29:14.279 types of manufactured like we're investors in the pros closet, which is the largest 429 00:29:14.839 --> 00:29:18.759 UM seller of pre bikes in the world, soon to be the largest seller 430 00:29:18.799 --> 00:29:22.079 of all bikes Um, you know, in the world, and they effectually 431 00:29:22.160 --> 00:29:26.039 kind of remanufactured bikes. They take used bikes bring them into their you know, 432 00:29:26.119 --> 00:29:29.759 hundred thirty Thousand Square fift facility and on the other side it looks like 433 00:29:29.799 --> 00:29:33.200 a brand new bike and it's really incredible. And you know, and in 434 00:29:33.240 --> 00:29:36.920 the food world, we're invested in and own a couple of food businesses that 435 00:29:37.079 --> 00:29:41.000 self manufacturer and I think there was a movement by a lot of investors of 436 00:29:41.079 --> 00:29:45.599 the past several years to move away from manufacturing heavy businesses, you know, 437 00:29:45.680 --> 00:29:52.519 asset light businesses, to the ones that co packed and we actually like manufacturing 438 00:29:52.519 --> 00:29:56.480 oriented businesses because you can control more your supply chain, you can control your 439 00:29:56.519 --> 00:30:00.759 product quality, you can control a lot more factors, you know, that 440 00:30:00.839 --> 00:30:07.000 help you scale and grow your business and there's something from an investor standpoint that 441 00:30:07.119 --> 00:30:11.960 owning assets actually you know, just it's just more comforting and security of a 442 00:30:11.960 --> 00:30:15.559 certain extent than just simply a brand. What were some of your learning to 443 00:30:15.599 --> 00:30:19.359 drink covid? I was totally wrong from the standpoint and when covid hit, 444 00:30:19.799 --> 00:30:22.440 I thought the markets were gonna, you know, be hammered for a long 445 00:30:22.519 --> 00:30:26.960 time. I thought it was gonna consumer sentiment would be really challenged for a 446 00:30:26.960 --> 00:30:30.119 long time, and boy was that wrong on that one. So take this 447 00:30:30.279 --> 00:30:33.240 for for what it's worth, but I think some of the lessons being that 448 00:30:33.680 --> 00:30:37.480 you do need to, you know, be prepared to move quickly. I 449 00:30:37.519 --> 00:30:41.599 think our companies did react very, very quickly with plans in place to figure 450 00:30:41.640 --> 00:30:45.559 out how to how to move, you know, how to work remotely, 451 00:30:45.720 --> 00:30:49.720 how to modify their supply chains. So from that standpoint, I think are, 452 00:30:49.759 --> 00:30:52.200 you know, companies do really well and that was a lesson in that 453 00:30:52.279 --> 00:30:56.559 regard. I think from an investor standpoint, I think just having patients being 454 00:30:56.960 --> 00:31:03.160 very important. We were thin two weeks away from closing on a deal when 455 00:31:03.400 --> 00:31:07.440 kind of mid March, when covid kind of really hit hard, and we 456 00:31:07.559 --> 00:31:11.680 talked with the seller about negotiating a ninety day extension and, you know why, 457 00:31:11.759 --> 00:31:15.039 it made sense for not just us but also them to kind of see 458 00:31:15.079 --> 00:31:18.160 how this played out, and it worked out really well and we ended up 459 00:31:18.160 --> 00:31:22.599 moving forward with the investment. And so I think just patients being really important 460 00:31:22.599 --> 00:31:26.160 in times of uncertainty, in a real big time of uncertainty right now. 461 00:31:26.440 --> 00:31:29.279 Some people say that, you know, the markets have gone down as low 462 00:31:29.279 --> 00:31:32.400 as they have. You know, I think there could be another floor that 463 00:31:32.400 --> 00:31:34.480 that we could see, you know, for a while longer, and so 464 00:31:34.519 --> 00:31:41.359 I think just patients is so important and the valuation that you buy a company 465 00:31:41.559 --> 00:31:45.160 or invest in in a company at the end of the day drives a lot 466 00:31:45.200 --> 00:31:47.680 of returns. In my opinion, it's you know, I have a hard 467 00:31:47.720 --> 00:31:51.799 time agreeing with the philosophy that the valuation doesn't matter. I mean it does 468 00:31:51.920 --> 00:31:56.039 matter because because if you've, you know, invest too high, especially in 469 00:31:56.079 --> 00:32:00.559 the consumer space, you know you have too high of a hurdle in your 470 00:32:00.559 --> 00:32:04.680 next round if you don't show the growth on that business and and then it 471 00:32:04.839 --> 00:32:07.480 just makes the returns that much more difficult to get. No, exactly, 472 00:32:07.519 --> 00:32:13.559 because also, you know, exits in consumer they're just typically not as big 473 00:32:13.880 --> 00:32:16.400 as you know, software and tech and you know, even getting like a 474 00:32:16.400 --> 00:32:21.920 billion dollar outcome, it's extremely rare, if not impossible. It's still amazing 475 00:32:22.039 --> 00:32:28.200 how many entrepreneurs we see who who will look for a four or five times 476 00:32:28.279 --> 00:32:34.519 or even ten times you know revenue multiple because they point to pe ratio of 477 00:32:34.599 --> 00:32:38.240 public company or they point to a you know, strategic acquisition that was done 478 00:32:38.240 --> 00:32:42.839 at some crazy multiple. The reality is when you're raising a minority kind of 479 00:32:42.880 --> 00:32:45.039 growth equity round, or even when you're selling a business and it's a small 480 00:32:45.079 --> 00:32:50.480 sub twenty million dollar business. If you expect the valuation, that kind of 481 00:32:50.640 --> 00:32:55.640 outlier valuation, then you're setting yourself up for a very challenging future because the 482 00:32:55.759 --> 00:33:00.160 valuation that that investor comes in at every Ester is gonna want to at least 483 00:33:00.279 --> 00:33:05.319 three x their money. So you can do the math of what does the 484 00:33:05.400 --> 00:33:08.480 valuation have to be to three x the money and what is your revenue have 485 00:33:08.559 --> 00:33:13.000 to be on a normal, you know, kind of adjusted basis, you 486 00:33:13.039 --> 00:33:16.680 know multiple, and can you get to that level the next time? Unique 487 00:33:16.680 --> 00:33:22.359 capital and it's oftentimes it's nearly impossible for founders to pencil out. But at 488 00:33:22.359 --> 00:33:25.640 the same time there's so much capital out there is still investing in it that 489 00:33:27.119 --> 00:33:30.960 you know, these valuations are still happening and I think over the next kind 490 00:33:30.000 --> 00:33:34.960 of year or two it's gonna flush out a little bit. What's one book 491 00:33:35.519 --> 00:33:38.599 that's inspired you personally? In one book that's inspired you professionally? My favorite 492 00:33:38.599 --> 00:33:45.799 book of all time is a book called endurance about Ernest Shackleton voyage across Antarctic 493 00:33:45.839 --> 00:33:51.519 Cup and to me this was so pivotal, I think personally and even professionally, 494 00:33:51.599 --> 00:33:54.359 but it just showed the value and having a good team show the value 495 00:33:54.400 --> 00:34:00.640 of having a good leader. It's also this just incredibly Um all consuming read 496 00:34:00.720 --> 00:34:05.279 that you just want to turn every page until it's done. And when you 497 00:34:05.319 --> 00:34:10.920 think they've hit the hardest point of their journey, another even more difficult obstacle 498 00:34:12.000 --> 00:34:15.960 comes. It's unreal. So highly recommend that one. From a professional standpoint, 499 00:34:15.960 --> 00:34:22.039 blue ocean strategy was one of my favorites many years ago and at ECO 500 00:34:22.079 --> 00:34:25.920 products I bought that for our management team to read and I think it really 501 00:34:27.320 --> 00:34:30.679 at least for me, it helps shape how I thought about really zigging when 502 00:34:30.679 --> 00:34:35.159 others are zagging and trying to be innovative and different and you don't have to 503 00:34:35.280 --> 00:34:38.239 follow a you know, a certain template or cookie cutter formula to build a 504 00:34:38.280 --> 00:34:43.440 business. Awesome, awesome. We've had quite a few folks recommend endurance. 505 00:34:43.480 --> 00:34:46.519 I still need to read it because everyone has that same reaction when they describe 506 00:34:46.639 --> 00:34:50.599 endurance, so I definitely need to put that on my reading list. My 507 00:34:50.679 --> 00:34:53.920 final question to you is, what's the best piece of advice that you've received 508 00:34:54.199 --> 00:34:57.920 or something that you kind of see yourself and your head over and over again? 509 00:34:58.440 --> 00:35:01.440 I think one, you know, maybe that that I'll just state here 510 00:35:01.480 --> 00:35:07.559 because there's probably entrepreneurs listening and having started businesses myself, and that was after 511 00:35:07.199 --> 00:35:10.760 one of the companies I started did not succeed, a mentor of mind told 512 00:35:10.760 --> 00:35:15.559 me, Luke, you are not your business, your identity is not your 513 00:35:15.599 --> 00:35:19.599 business, and you know, after you go through the process of starting a 514 00:35:19.599 --> 00:35:22.840 company and if it isn't as successful as you want or if it doesn't succeed, 515 00:35:23.559 --> 00:35:27.880 you feel like your whole identity is tied up in that and if it 516 00:35:27.920 --> 00:35:30.639 fails, you feel like a failure. It's so easy to feel that way 517 00:35:30.760 --> 00:35:36.599 and being able to separate yourself from Your Business and your identity from Your Business, 518 00:35:36.639 --> 00:35:39.079 to me, is one of the most important ways to bounce back, 519 00:35:39.679 --> 00:35:44.119 because you can. You know you can remake yourself and remake your career and 520 00:35:44.159 --> 00:35:47.719 reshape it so easily, and so it's just separating your identity from your business 521 00:35:47.800 --> 00:35:52.559 is one of the underlying things that I remember most from what a mentor mindset. 522 00:35:52.960 --> 00:35:55.559 I really do love that piece of advice because, especially in the early 523 00:35:55.599 --> 00:36:00.199 innings, when you're working what it seems like you know all day and all 524 00:36:00.280 --> 00:36:04.440 my building your business and your business is your life. It's really important to 525 00:36:05.320 --> 00:36:08.079 make sure you don't tie that up with your identity, especially if things don't 526 00:36:08.079 --> 00:36:13.079 go kind of according to plan, since you know very small percentage of entrepreneurs 527 00:36:13.079 --> 00:36:16.400 their business has actually become businesses right, and so don't also kill yourself and 528 00:36:16.519 --> 00:36:20.880 kind of tying your identity to your business. Totally agree, Luke. This 529 00:36:20.960 --> 00:36:22.639 has been so much fun. Thank you so much for your time. Thanks 530 00:36:22.639 --> 00:36:24.960 for having me, Mike. Appreciate it. And there you have it. 531 00:36:24.960 --> 00:36:28.960 It was amazing chowning with Luke. I hope you all enjoyed it. If 532 00:36:29.000 --> 00:36:30.679 you enjoyed this episode, I love it if you'd write a review on the 533 00:36:30.679 --> 00:36:35.320 apple podcast. You're also welcome to follow me your host, Mike, on 534 00:36:35.360 --> 00:36:38.599 twitter at Mike Gelb, and also follow for episode announcements at Consumer VC. 535 00:36:38.920 --> 00:36:47.920 Thanks for listening, Everyone, oh