Mike (3:59)

But I, I think that when people think about power law, I know you said for example, you know, 8 to 12x. Right. Which is incredible. And this is where I think at the same time, I think when people think about, you know, power law, and this is where I think venture can get a little bit romanticized. They think about, oh, 100x or a thousandx, you know, the Uber, the. Which obviously is consumer, but more thinking about maybe consumer goods and, and, and other categories within consumer. But I, I kind of think venture because it's because in consumer that you can't really like, can you achieve like 100x return in consumer? I think probably not. But what's your take?

Michael Duda (4:46)

Listen, now we're talking about the difference between moonshots maybe and power law in this.

Mike (4:52)

Yeah.

Michael Duda (4:53)

What is the average venture capital firm return? Like, what is like median? I think it's something, it's under 2x. It's maybe like 1.6, 1.7x at most. And you have very few that return a 3x plus. So we can romanticize 100x's, but I think it's like one investment out of every 100 at max will go over it. Like go over a 10x or 15x. The great thing about venture capital is as an investor, we get to celebrate the ones that hit it big and just celebrate that because that makes your money many times over. So listen, God bless other asset classes. I love consumer. That doesn't mean I hate everything else. But somehow venture capital has gotten me completely synonymous with tech. And that doesn't necessarily have to be the case. Venture capital in its purest form, if you go back to the Arthur Rock days to geek out, is to give promising entrepreneurs the funding and nutrients they need to get their startup off the ground. Yet now you have venture capital firms investing in OpenAI at a half trillion dollar valuation. That's great, but that doesn't seem to be really what venture capital is. So I'm a romantic at heart and that, but it's, you know, I don't think an 8, 10 or 12x is, is anything to sneeze at. But yeah, we all, we all want to write about the 100x's and the 300x's those are so rare. They're achievable, but they're so rare.

Mike (6:18)

Well, that's what I think is kind of interesting because they are so rare. And I think that the assumption is every fund has one of them because of how like the distribution happens when you have. Maybe if you invest in 10 companies, right, with power law, maybe you have, I think in traditional venture, you, you could say that you have one or two of those 10 companies, you know, achieve all of the returns from, from the, from, from the rest of it. And maybe this is traditional tech investing, but maybe, maybe seven of the seven or eight of those companies go to zero and that you have one of these, one of these two outliers that can achieve. Maybe it's a 50x return or a 30x return, but, and that of course funds your entire fund and funds every, and obviously funds everything in your, in your carry. But at the same time, but at the same time, like very, very few funds are actually able to actually get on or be in one of those companies. And what I think is actually pretty interesting about consumer is, and I'm curious about you and your portfolio, how you think about it is a distribution a bit more even where it's not just like one or two companies that are kind of driving the overall return for your portfolio that it actually is a bit more evenly distributed. Because that would be my hunch.

Michael Duda (7:40)

Yeah, the outliers may not look as outliery as others, but there's certainly out there. And listen, let's level settle a bit. Not every fund finds their 100x. I mean, in fact, there's fewer VC funds as we do this in late 2025. There's less VC funds now. I think there's like something like 6,000, just 6,200 VCs in the US versus like 83, 8,400 back in 2021 when capitalism was easy. So yeah, in consumer. And if you follow the playbook I mentioned earlier, if, if we're expected, like let's, let's bet on companies before they reach a $20 million valuation. If they sell at 200, 250 million, huzzah, that's a 10X, that's great. But that's not always the case. And every now and then you might get the IPO or you get the aura ring or you get the peloton in the, in the warby parkers of the world. So they're out there. But it's. Yeah, you might have a better chance return money, but there'd be more stability to it, quite frankly. But as much stability as there can be in venture capital. So yeah, it may be the. There's a lot less zeros, but then there's a lot less likelihood of 100 or 200x too. Yeah, that's part of the strategy.

Mike (8:49)

Yeah, exactly. I mean, I don't think. And there's also only one. There's like, it's, I think it's really hard to achieve or you're probably not, not ever going to achieve like, like the a, a, a lowercase capital fund one, for example, like in consumer. Probably you'll never do that, but then again, probably no one will ever do that again. So, you know, but invest in pure tech. You know, you do have that opportunity, however small of an opportunity. But there is that kind of opportunity that you can do it because you might have one or two companies that truly get to maybe 100 extra 200 return. And that's just not the case in consumers. So I, I don't know. I think is, is consumer power laws and not power law. It really kind of depends on your definition of power law because if it's like 100x or nothing, then no. But at the same time can you like 3x or 4x a fund which is really meaningful and really freaking impressive and still extremely hard to do. But can you do that in consumer? Absolutely.

Michael Duda (9:49)

Yeah, you absolutely can. And it's, it is hard to do and it's like we don't sign up like oh, we think this is a 3x or 4x. But quite frankly any fund would be able to like do backflips if you can do a consistent franchise of 3-4x net and you know, to date. And again this is to date of this recording, not indication of future returns. It's like we've not returned anything less than a 3.3x net so so far. But it's like it's still a long way to go and businesses that we weren't or we were like in the past want to be my goding like later. So it's the consumer is the sentiment I think is turning certainly less negative. I'm positive on it just because the nature of the entrepreneurs we've been seeing of late is super exciting and they're also realizing again the goal isn't to raise capital, it's build a viable business. So you know, if you win over a consumer, we gotta forget it's the consumer asset class. Focus on who your consumer is, whatever product you're doing and win them over. And what are the big incumbents not doing to satisfy her or what's the opportunity in a world where there is new technologies and new things and less time and all that. So there's, there's, there is constant innovation that's only going to keep accelerating as our lives get busier, economics get tighter or better depending on what you're lower class, middle class, upper class. But there's the key thing is have the sound strategy and, and not be afraid to like execute it versus like hop onto the new strategy every six or eight months or every other fund. And I think that's what's been going on with the fund industry and among other reasons.

Mike (11:26)

Well, how do you think about overall your fund? What I find really interesting about Bullish is I've had on of course funds that are much more well, you do cpg, but I've had it on funds that only do cpg. For example, I've had on funds that Only do consumer tech. When I think of Bullish, I think that you're one of the few consumer generalists, I would say, and that as long as you're selling to a consumer, Bullish could be interested in. How do you think about balancing that though, from being a consumer generalist? And you can. And you can let me know if I'm thinking about it all wrong.

Michael Duda (12:01)

No, I mean, here's what Bullish looks like. If you are a US based B2C. Not D2C necessarily, but B2C business model, we're open for business and we don't care what that looks like. We're agnostic across categories and we want the end consumer to be the main revenue driver of it. So that's why we don't do media brands where the consumer might spend all the time on like say Meta, but you're actually monetizing the advertisers that go there. Right. So. But a lot of that stuff has been goods over the years. Like we're very proud. Hue Chocolate certainly did very well for us. God, Harry's is a razor. And now they're all over the place, mammoth brands. We've also done stuff that has like a service component or subscription. Like Peloton is a hardware. It's a proc. You buy, but then there's a great subscription. We've dabbled in marketplaces, you know, in the advent of the creator economy and different things, it's going to maybe challenge the purity of that. But as long as the consumer is the main engine in terms of revenue model, there could be other elements of it, but that's where we stick to our knitting. It's like, God bless, Peloton is go back to Peloton, which is album one in our trajectory. Peloton had amazing technology and all these things too. But at the end of the day, that didn't matter was what was the benefit for the consumer. And so that's what we really focus on is that like, not so much the how we do care about it because that goes into gross margins. But for the why. And this wonderful nation of 340 million Americans, it just like, how are you appeasing them? How are you winning them over? And what do they need more than how it's done? Because that can change pretty often, actually.

Mike (13:40)

So do you underwrite differently when it comes to a technology company or a company that has a technology component versus a consumer good, for example?

Michael Duda (13:53)

Not necessarily. I mean, where we maybe look at underwriting and look at the future differently is like if there's a four wall concept that we're going to invest in because that takes real estate and then you have to do a lot of that. I mean peloton kind of fell into that. Right. Warby Parker wound up doing that almost accidentally after invested after a pop up store in Washington street actually drove a lot of awareness and so and then they as they built out stores they realized the customer that goes online then buys in their stores more valuable than one that just goes online. Oh that's interesting. So I think there's various things what are the capex realities of a business versus like what is the cost of technology and those things. There's always caveats, there's always outliers like if you look at the success of a Bobby or whatever they had to go through a lot. If you're doing any infant formula you have to do a lot of FDA and a lot of testing and there's a lot of legal stuff before you can even go above. So those factor in. But we don't look at it too differently but we certainly look like what is the amount of capital that's going to have to be raised for this to get what we would like to see as product culture fit.

Mike (15:03)

How do you think about in terms of amount of money raised? Because I feel like maybe one of the differences between in consumer depending on which part of consumer but that over raising really can bite you. I mean don't get me wrong, overraising just in general can really bite you. But if you're for example relying on a strategic to maybe acquire or like that's like the path that actually is the outcome that makes sense or what have you. Just how do you think overall in terms of the overall trajectory of a company when it comes to capital raising once you invest?

Michael Duda (15:44)

Yeah, we probably look at a bit differently. First of all we listen hard to what the founder wants. You know it's like we as VCs like we don't we've operating experience. Sure. But it's like they're the ones trying to educate us into why we should invest in this great opportunity. And so if someone says like I want to be a trillion dollar brand and take down Procter and Gamble well you know it's gonna be a lot of capex and there's gonna be a lot of like money raised to get to that point. And here comes Harry's, here comes Mammoth brands. Looks like that's happening said with a smile. And then there's others that just want to do like want to do that to Your point of earlier, if they say like and we get to this level and after three years we'll sell to General Mills, that means okay, probably not going to have to raise a lot of money and all that. But like when you also like we're going to sell to General Mills in three years, I'm not sure if you're going to really like strike the balance of winning over the consumers that they, that they're going to go for. So but a lot of it we don't, we don't have a Pythagorean theorem or a formula. A lot of that cues like. Cause if you're like a marketplace that's maybe more tech and is gonna need a little bit of infrastructure early on versus okay, we're gonna ship like heavy water across the country and that so different models within B2C will dictate it. But the founder, the founder ambition is a big thing that we look to to drive that. Cause we've seen certain categories where people raise way more money than you would think and then others less. And we've had successes either way. But it's founders tend to like take us on that journey or we tend to look at that as part of the investment process quite heavily.

Mike (17:18)

How do you think about when you're talking to companies? Because of course these are very young companies and sometimes they're pre revenue companies. And how do you think about investing the founder versus the company and as well as what like a pivot and when a pivot actually makes sense or have you ever invested for example in a, in a company or a company where you actually weren't you actually you thought that the founder would would be able to figure it out that you were kind of just much more betting on the founder rather than the actual product that they were actually going to going to market with.

Michael Duda (17:58)

Yeah. When you assess that it is two sides of the same ball, founder and company. And listen over the past bullshit has got an interesting trajectory because in the very beginning it was all pretty much pre seed and some seed. And then in the pandemic era, post pandemic we're able to probably did more seed in series A because consumer wasn't valued. And lately we have more than enough money to deploy in our fund and we'll be raising our next one next year. I think we're going to go back to more pre seed and seed and early stages. So the reason why I say that if you're investing at the pre seed level, expect there to be some level of pivot or understanding because you just don't know enough. You have a thesis, you have a thing. If it's food, it tastes great and consumers love it. I've never heard otherwise. Shockingly right. And so you're going to learn from when you're in the marketplace. If you're already in the marketplace and you have data and you have this, there's probably less surprise parties going on depending on the stage of it. So to us the founder is so much of it. The founder is so, so much of it on there as much as the idea. Partially because it's you know, that's the jockey who based on her or her desires, her whim, her passion. Like she'll figure out but along the way things will get choppy and change and that's why it's so tough. Think about if you're an entrepreneur on one level you're supposed to ab test and fail fast. On the other you have to be stubborn because you're taking on the status quo. So that's why I think the person component of it weighs in quite a quite heavily. Probably more so than the category because we're so open on categories.

Mike (19:32)

How do you think about the overall insight or consumer insights in general? In that I know you obviously have a consumer insights team at bullish and so of course do you feel like you invest more so maybe top down in that you take an insight and then you've had to figure out what type of company would actually would actually fit well or the best company that actually can extrapolate that that insight or do you find that you're a bit more like Bottoms up investing or. Or is it kind of a combination of both? This episode is brought to you by Glimpse. Glimpse is an AI powered end to end deductions management service that's focused on recovering revenue from Kahe, Unfi, Amazon and Target. For consumer brands they centralize deductions with backups. They fully handle disput behalf the brand's behalf and streamline the accounting process. For more information check out try glimpse.com and let them know that Mike sent you.

Michael Duda (20:33)

Sure. So no and thank you for mentioning our consumer insights team and research and we we spend probably more time in the field like doing consumer interviews and ethnographies and that than I think another any other consumer VC firm at our, at our size and aum without a doubt and so when we I said earlier product culture fit is something that we're looking for and those you know, to quote Warren Buffett, buy commodity, sell a brand, you'll make A lot of money. That's we're looking at what's, what has that. And so we study what's going on in culture more than categories. So if it's on our website, like the nine themes we're on now, listen, I have a lot of them heavily concentrated in health and wellness in different ways. And we use that as kind of like a lens of where we're doing outbound of what we're looking for. But it doesn't like say, okay, we're going to definitely invest in a yo yo company to use an example because yo yos are going to be big or anything like that. Going back to what I said earlier, if the entrepreneur is such a big part of it, we still have to weigh that. But in terms of outbound sourcing, we'll look at certain categories to the culture lens about where things are going. And that doesn't mean like oh, let's go outbound protein because protein is hot and soon fiber, but just more like brands or people that have backgrounds that are like a passion for inventing in the space. So it, the cultural part, it weighs in. It also weighs in during the diligence process like will people be up to change behavior or what motivates them? You know, it's, I've said many times, consumers are liars. So we study what they actually do then versus what they say. But we look at it since the entrepreneur is such a big part of it, it helps us with the outbound in sourcing, but it doesn't, you know, it's, it's not an absolute that we're enslaved to either.

Mike (22:16)

If that's the case with the commodities, turning commodities into brands, how do you think about what makes a great product and how important is a great product versus, you know, great marketing, for example,

Michael Duda (22:28)

a great product is more important than great marketing. And I say that as someone with 20 years experience in the, in the marketing industry. And I love marketing what we like and if I were to bend your words is great propositions. So like bandit running is a great product and series of products and the design engineering is great. But they have an uncanny and unbelievable empathy to the running community and serve it, which is what everything says. So it's gotta be a strong proposition if you need marketing. And this is where I think this especially the Silicon Valley investors got drugged in love. Love, consumer forbid, is because this Facebook thing, oh, let's put 40% of our revenue towards marketing and just cack. And then Apple came along and shut that dog off pretty quick. It's like, ooh, this is harder. Let's go somewhere else. We like to see brands have the opportunity that, that grow early stages with spending less money in marketing, that have achieved some level of fandom and have word of mouth and people advocating for it. A lot of repeat purchases. You know, we've identified that, that Insights team that you mentioned identified this, this cohort of we call the pioneers. It's 15% of America. Sounds small. That's 50 million people. And they could be early adopters or slightly later, but they tend to be stickier customers and they tend to evangelize or tell other people like, oh, you should try this. They make a little bit more money. I think the average household income is about $80,000 in this group and that's a lot versus what America is. They index high and living in places like Arizona, Virginia and Texas. And so we really looked at to see is this something that this group would really like, really go for and what else is in their lives. Now you see this, you report on this. We see it too. There's a lot of commodities that you mentioned that are like, okay, I'm going to get a famous creator and do some cool pink packaging and put it out there. Well, that's not necessarily, that might get attention, but that's not necessarily going to work towards commercialization. So listen, we're in a wonderful era. I think that we're going to see a whole host of new entrepreneurs. We're already seeing it. That are going to be attacking everyday problems in such a wonderful way. They're not going to need as much capital. What a time to be alive. So boy, did I cover a lot of ground randomly there.

Mike (24:45)

How do you think about. I'm glad you brought up creators. How do you think about talent led brands or when it actually makes sense when a talent is involved in a brand. Look, I know you just invested in if it's fair to say you invested in one. You can tell me if, if you think it's talent led. But with Cobb foods, how do you think, how do you think overall? When does it actually make sense? Do you find when. When talent and brand actually can come together?

Michael Duda (25:16)

Yeah. Excellent and timely topic. I'd say we look at it like, like talent infused or talent wedded. But talent led. I'll be honest with you, it probably scares us more than any because if the talent we're talking about like celebrities out there, celebrities are great shortcuts. Like okay, you can cut off the attention tax and not spend as much money in meta. You can get A lot of organic press on that side of it. But is that celebrity only doing that one thing or doing a few things or is this one of 10 different things that's a deal from their agent? And what happens if you don't have a buzzy launch? What happens then? Or what happens when you do have a buzzy launch, but it only led to like a million foreign sales? What do you do next after you can't get that same story over and over. So celebrities or creators can be absolute different makers if there's some level of, dare I say, authenticity as to why they're doing it and what their involvement is. You know, in the case of Cobb Foods, which we are extremely excited about, Jessica is an amazing founder, turnaround CEO, passionate and paranoid. She created something because her, her two sons had an allergy to corn and so she didn't want them to like suffer on snacking. And so she came up with something, sorghum, which we went down the rabbit hole of sorghum based snacks that actually taste pretty good and they're healthier for you when you look at the nutritional profile she recruited. I said that Novak Djokovic, famous tennis player, well, he's a celebrity. He's listed as a co founder. They're not equal on the cap table. He also put in a sizable sum of his own money on it too. So he is a, I'll say celebrity that's involved with the brand and pretty. But he's also got significant skin in the game. And so that's not the reason why we did it, because we liked the proposition if he was involved or not, because of what we believe in Jessica. But it could be very helpful if used the right way. And you've seen this too. You see too many companies that, look, we have famous person X and we'll go after this business and then they'll cite like Mr. Beast as an example of that. Well, you don't have too many Mr. Beasts, right? So it could be a shortcut, it could be helpful. But at the end of the day, if the consumer is going to part way of their money, maybe they'll try something once. But the product and proposition better be good or else they won't go back.

Mike (27:35)

I appreciate that. Thanks for. No, thanks for.

Michael Duda (27:38)

What do you think? What do you think? Pressure test? Come on, Mike. What in terms of what or challenge that, Perry.

Mike (27:47)

I mean, listen, I agree. I think, I think that, you know, I like your point. I, I like your point that, that the celebrity actually invested, that it's actually their, their own money that they actually put in from, from Novak. And also that this was a passion point. And I mean Novak so, so famous for going gluten free, which was probably very challenging for him because his parents owned a pizza parlor. Um so that was. So I'm sure that was probably pretty, pretty hard to do. Um, I know I don't think I'd be able to do that for sure if my parents owned a pizza parlor. But, but you know, but, but, but the point is that it's pretty organic in terms of, in terms of why like his involvement and passion, you know, for the brand. And I think that that is where it makes, that's where it makes sense. You know. And at the same time too, you know, Novak is not really maybe a young buck anymore. He might have have some time on his hands too to help to actually devote to, to actually growing and being part of the brand. And that's, and that's also, you know, I think it's really hard. I'm kind of curious if you, if a brand, if you have talent and maybe a same format with what Djokovic has done with Cobb in that they invested their own money. They're part of the brand. They're, they're maybe listed as a co founder and they're part of the brand, but they're in the heights of their, of their careers. Right. They're very, very busy in the height of the years. Does that, does that at all, does that make you, that, does that make you nervous at all or, or not really?

Michael Duda (29:37)

You have to weigh that in. And it's a very astute observation because you know, we've, we've seen celebrity athletes. Like there's one in market that is, has an energy drink and this person was one of the fastest people in the world 10 years ago, 15 years ago. It's like, okay, energy drink, great. But when you're retired and not competing, I'm not quite sure how, how awesome that's going to be there. So it's, there's a borrowed equity certainly versus others. Like when you see like Tom Holland with Beero, right? Non alcoholic. I don't think he drinks and everything. There's, there's like. And he's an actor. Is he at the top of the game? He can go on there. But, and listen, Novak is, you know, his best tennis is probably behind him. You know, just, just if you look at the data of like we all age and that's of it. But regards to that, he is like unless he starts slipping off his game and Start eating like Doritos and donuts as part of his regimen. Then. Then I think we're okay on that part of it. And again from the brand and go to market proposition. He's an ally, but it's like it's not the crux where it lives and dies based on. On how well he does in the court or what he does on and off the court too. But it's. That was a lucky strike extra in the case. But it is. You have to factor in. Does this make sense? Like Shakira launches a new hair care line. That kind of makes sense. That's interesting. She's not doing a lot. Then you see others like, it seems like, you know, Dwayne the Rock Johnson has got so many enterprises and businesses. So it's like if he launches the next thing, okay, I can see the story behind it. But is that the reason it's going to succeed is because of him? Maybe. But you know when there's a sincerity of involvement that weighs in heavily versus just the involvement itself.

Mike (31:17)

Yeah. It's almost like are you just licensing out your name or are you actually kind of part of this?

Michael Duda (31:22)

Yeah. Well said.

Mike (31:24)

Cool. Why? Why the shift back to pre seed?

Michael Duda (31:29)

It's not shit. We've always been open for it. We were just seeing less precede over a period of time or less precede that we just loved. And because of the, dare I say, punitive funding environment that I think it was for entrepreneurs, we were seeing things at the seed or series A that were more mature than what they had been. Good sound businesses with strong upside and great economics for us to get involved in around that $20 million valuation. So it's almost like the marketplace like gave us more of an advantage that we could actually study the behavior of good investment opportunities that were still probably priced lower than they would be if this were 2021 or 2022. But to go back to the power law element of it too, it's just we're seeing a crop up of like venture studios and things from scratch. And quite frankly to go to the ultimate power law, the earlier you can get in, the better from evaluation. But it's also if you really love the people and what they're doing behind the proposition, not to say that's the ultimate de risk, but because we're so people and founder driven, it's like that goes a long way. So it's like if someone's attacking a category that just needed there has been that much and I think we have a good track record of Identifying that given we invested in mattresses and razors and chocolate and stay at home fitness well before they became trends. It's just we think that can work well at the precede and seed with so many different advantages. Like years ago when we first started doing this 13, 14 years ago, Techstars was just kind of like coming on the scene a little bit. And why comment? It was a thing. Well now there's so many other elements. Like you have Union Kitchen, Washington D.C. that really helps founders in food. So there's just more. You know the curriculum for entrepreneurship is, is is gone way, way up to help founders. So we're still open for precede and series A wherever. But it's like we are not pre seed is kind of like where our original DNA is. And it just we're seeing more opportunities that we're excited about. You know Cobbs to the point this is that they have zero revenue right now. But it's cobbfoods.com if you haven't heard it, you know, be out there. Pre revenue is the time of this taping. But it's just like Jessica's undeniable. We like the cultural elements of like why she's doing it. And listen, she could one day she could be building the healthy Frito layer and that. That's very enticing.

Mike (33:53)

Yeah, that is. How do you define precede today? I know that you that that in the case of Cobb they were kind of pre revenue. Do you define it just as pre revenue companies? Is there kind of a threshold when it comes to valuation or anything like that?

Michael Duda (34:06)

No, not valuation. Pre revenue. Pre launch.

Mike (34:09)

Pre launch.

Michael Duda (34:10)

Okay, got it.

Mike (34:13)

And, and in terms of like. Well how I would say at the PC level, how far along does a company need to be? I mean obviously the pre launch pre revenue. But from that would you even invest in almost idea phase more like a incubation or not really.

Michael Duda (34:34)

We would love to do more incubations. We would love especially because our marketing practice and creative practice, I think the things we look at if it's preceding just an idea. So the romantic me is yes, we'll do it. But if you're going, I'm just making this up. A new vacuum cleaner. It's an idea. Okay. To make that idea in a reality. And it might take you two or three years to launch. That's kind of tough for a fund to invest money in and have that money sitting knowing it's not going to go anywhere. Maybe more rounds before it can launch. So it's like you plant a tulip bulb in the ground. Like how long would we have to wait for it to come up? So that does factor in and that that's one of the reasons that and the interest rate changes why hardware businesses have just been like tougher to get funding at the earliest stages. So it's like we'll do pre seed but how long does this need to come to market and where are we in our fund cycle? But we're not afraid to back at that stage. It's just like we need to have a realistic timing when that might be. And listen, there was a period of time when Tariff Palooza had started in mid-2025 that were like wait a minute, gross margins in all these businesses might be completely different tomorrow based on the tariff here, tariff there. And so that, that made it more difficult to assess companies for at least two months and you could argue that's still ongoing. Right. But that factors a lot. What is, what is the time needed from this idea that where it is now to actually be able to be out there, to be enjoyed, bought, tried by consumers. That, that that timeline does matter.

Mike (36:04)

That's helpful. That's. That's helpful. Yeah. I mean I remember like and, and it. One of the more interesting propositions I've had on the show is what squared circles, if you know them.

Michael Duda (36:17)

Yes.

Mike (36:18)

Based on Austin and in terms of they're actually like partnered with, with IP holders and actually then, then commercializing ip. So you're actually have sped up that. Wait, you're in market for one or two like, like you're, you're still doing prior development for like one or two years that, that no longer, I mean in theory no longer kind of exists. Which is pretty cool. They're kind of going straight to commercialization. How. What's your view overall on, on AI right now? It seems like if you're investing in technology, it almost seems like it has to be an AI company or rather the valuation, the valuation gaps from AI versus non AI are significance. I know that, I know that you've made a software marketplace investment that, that doesn't actually have any or doesn't seem like it has any kind of AI AI features. At least it's at least on the surface. What's your, what's your overall view in terms of when AI makes sense versus not.

Michael Duda (37:22)

Oh, it's on the last part. I think AI makes sense across the board period. No matter what business you are. If you're Goldman Sachs to Adobe to Pepsi to everything else. It's just as an investor at this stage, it's like, okay, what is the role of AI and as a consumer investor, what does this matter to the consumer that you're going after? So if we see, we've seen a bunch of new AI driven travel agencies, okay, that's great, that cost is there and you got AI in there so your valuations go up. But what is the end benefit to the consumer? And that's really what we care about the most. How is that going to help the end benefit of the consumer more than that? And we've not seen as much as we would have thought by now on that. And maybe we're not sourcing. Right. Shame on me. Or this evolution is going to play out because so much of the AI and the company's getting it, it's really the technology and some of the early day applications of it. The other thing that is fascinating here is to see the adoption of big companies in AI. Like the number one adopter of AI in terms of their operations in the first two quarters of 2025, actually last quarter 2024 were companies of 250 people on up and they were doing things like with warehousing and warehouses and operations, logistics, customer service, but they were doing it and with past technologies it's just usually compliance or legal is scared. Whatever. It's like, no, this, this stuff's going to be adopted. Like I mentioned Adobe earlier, Adobe is using AI in an absolutely astonishing way. It is great since we have creative services on that side, we've used Adobe and they're using AI to make their product proposition and they're stable. Actually more better for us on that. AI is awesome. Now as a consumer investor in B2C we're not going to invest in AI proposition for the sake of it. We have one that was at the pre seed level and it was interesting. We invest along with two very prominent Silicon Valley firms. What is B2C? It'll be coming out in 2026 in a way. And we think this thing could be basically a, you know, a healthcare supplement company that, that. Well we know this. They can bring things to market in 100 to 120 days where the incumbents now takes them up to three years, minimum of two and a half years, but two and a half to three years to come to market. So what we love about that is they're able to listen to what's going on within the consumer, what's what's needed, what's being asked for, what's hot and spin up new products and propositions using AI and still an FTA regulated area and test them in the market to see what works and what doesn't work fairly quickly and try new combinations. There's rapid prototyping, so that's under the engine, so that's kind of B2B. But ultimately the success is going to be based on consumer adoption of the brands we're going to launch. And so that's why it's so exciting. And I'm pro humans. I like us as human beings and all that stuff. But listen, Waymo might be a better proposition than Uber, right? So it's like, you know, it's hard not to talk about AI and keep it so singular, but AI is just so generationally amazing. I think it's going to enable also a lot of companies to grow and scale without SGA. Like we're seeing companies now run by one or two people that are reaching two and a half, $3 million. Not in the fictitious world of ARR, but real revenue. And so that's why as a consumer investor that stays early. We're going to see disruptions come without spending a lot of money. I mean, Bubble Beauty is not an AI case study. Bubble Beauty, like raised $10.3 million. They've been over the 100 million in revenue mark for the past couple of years and profitable. That's proof of concept. You can build consumer propositions without like throwing the coal mine of money at it. Now, shy's an exceptional entrepreneur. I think we're seeing many of those stories equally. We're going to see maybe more Davids out there, right? I mean, here I got a real surprise for you, David. I'm a fan, like where David pulled a little bit out of the playbook of Harry's. It's like, let's buy the plant that does this. Neither one is right, neither one is wrong. So it's just the audacity of what it is versus be able to do a viable company. And that's the thing is we look for absolutes. But AI is going to enable, you know, if the World Wide Web was it brought you information, AI is going to bring you expertise and a certain speed to market. So this is an awesome time. And I say that also try to close my eyes a little bit because the amount of corporate layoffs and jobs are going to be eliminated. It takes a while to repurpose certain things. So it's going to be a really interesting time for the workforce in America. What's going to happen? But it's happening and make no mistake, it's happening. So I think you know, I think we're going to really. You've heard me say this many times. Every category seems to be barbelling. You're either Verizon AT&T or you're like number 10 player. You're either a jet ski or an aircraft carrier. There's not a lot of stuff in between. And you know, with amount of companies that are being created now, you know, in 2023 there were 5.6 million companies that were filed for. That's double what it was in 2016 and the US population only grew 4 or 5%. And there's some side hustle and there's that, but there's people that might get laid off in an Amazon or PepsiCo or Proctor that are going to start their own corporate America and don't necessarily know what venture funding is, whatever, right. But AI can help them with that along with all the other resources. So as an early stage investor, I love AI because it's advantage entrepreneur to embrace this stuff. But as a citizen and someone who cares about the economy, everything, I think there's going to be a lot of good people whose jobs will get eliminated in the quest for efficiency. So yeah.

Mike (42:55)

This episode is brought to you by glimpse. GLIMPSE is an AI powered end to end deductions management service that's focused on recovering revenue from Cahi, unfi, Amazon and Target for consumer brands. They centralize deductions with backups. They fully handle disputing on your behalf, the brand's behalf behalf and streamline the accounting process. For more information, check out try glimpse.com and let them know that Mike sent you. How do you think then at the same time about, and maybe this is too deep of a question, but maybe the future in terms of like the consumers that we're actually selling to, right? Because you might actually have a lot of people that are great people, had great jobs, were layoffs, maybe actually weren't able to because of AI, maybe are going to have a lot of hard time in terms of finding their next role or, or, or anything like that because what they did was maybe eliminated essentially by, by AI. Does this change at all in terms of how you think in terms of maybe products or even just from a disposable income level, for example, that people are having in terms of what, what types of products and services would actually make the most sense for them?

Michael Duda (44:12)

This, this scenario where I think about a lot and maybe as a father or a person more than an investor, but the investor side is this doesn't go away in 1985, 1990, 62% of households were middle class. Today it's 51%. The middle class is literally shrinking. More people are falling into both buckets and more people falling in the lower bucket of like the lower income tier. When you look at who's spending now, like I'm very proudly say America's a $20 trillion TAM and growing in consumer. I think the wealthiest 10% of households in this country is powering 48% of the spend and you have the bottom 22 to 25% powering 20%. And so when you look like who you're serving, you know, very few things are up for grab for the 340 million people out there. It's like what kind of what, what you're going after and who you're trying to serve. There is going to be a need for better solutions and value things at a lower level, which is hard to get when you're starting out because usually scale gets that. But that, that's why we're more, that's why we're more attuned to like founders are taking us through like the consumer that they're trying to serve. And if we hear an 18 to 49 year old and we've never met an 18, 49 year old but very specific in need, state based, whether it's a toothpaste, where it's a, you know, marketplace, whatever. But America is absolutely becoming have and have nots and it's hard to look at just consumer. We never think we're the consumer. That's why we love businesses that aren't on the lovely coast that you and I are in right now, but real America. But that, that is factoring a lot in terms of what's going on in general and some of the cultural stuff we are avidly studying. That's why we've really glommed onto this pioneer base because it's not the richest people out there, but there's some of the most influential and they can't be bought. But that as a society, you're right. With all the people going away by AI. I don't know how much of a data center going up in a 2,500 person town in Texas. Is that going to kill urban nature? I don't think so, but that factors in. So a lot of stuff's going on in society right now and there's no reason to think it's going to slow down. But it's, you know, they have and have nots, it's just widening and that's just, that's Been settling in many ways.

Mike (46:32)

Yes, I agree. Very, very upsetting. I also think about it quite, quite a bit. I guess back to investing with the kind of the company.

Michael Duda (46:43)

Let's lighten up a little bit. And I just got well tuned out.

Mike (46:48)

Well actually, yeah, I was still going to say. I was, I'm actually still going to say down in the dumps. But because America is like, because as you've described it, it's becoming more the land of the haves and have nots. Does that change at all in terms of products or services? In terms of that you find interesting that you would invest in today versus maybe previously?

Michael Duda (47:11)

No, I mean I think we're aware of that. And again we're studying the cultural trends. Not to beat that one to death, but it's really the founders that bring it to us. I will say the founders have changed a lot. If I were to stereotype the founders we see mostly now versus before we're operating of our 2023 fund. The average entrepreneur in our current fund is just about six and a half years older than the average age of the entrepreneur from our 2017 fund. So we're seeing older, more experienced founders launch companies and maybe just I freaked out all the 24 year olds. I don't know. We do have a couple of those in there. But we're seeing a different entrepreneur now. We're seeing a lot of people that were in corporate America that want to do their own startup. We're seeing people and I say normal areas. I mean this fund, our first fund was all New York, New York, New York, New York, San Francisco, la, this fund has Scottsdale, Arizona, this fund has Houston, Minneapolis. So it's really interesting, I think, you know, Shark Tank becoming America's game show has probably helped with that and why not me? But and with all the access between what Google and Amazon will do to give you free stuff. And listen, if you have strong WI fi, you can start a business from almost anywhere and then gets into Cobman and packaging and all those things. So I'd say it's just America which has got entrepreneurial DNA and it's very fiber is unleashing that right now. So it's not so much like what we look for in categories are different. Like we weren't all hot on cannabis five or six years ago. Now cannabis funds seem to be dead. I will say things are trending a lot towards health and wellness just across the board. Better for you. Food that actually tastes good. As we've talked about women's health, we're seeing really passionate, very impressive founders attacking women's health, whether it's menopause or postpartum and those things. And we didn't have those founders before or we didn't see them as much. So for all the blah, blah, blah talk about the shrinking middle class, there's a lot more founders that are hell bent and passionate about solving real problems that can make investors like us a lot of money. And yet we don't take ourselves too seriously. That could be a chocolate bar, that could be a bike, that could be something there. But we're seeing more and more normal people that aren't worshiping the venture capital world, the venture capital process. And that's a good thing to a large degree. Trying to figure out how they can help build a viable company that just becomes the new status quo.

Mike (49:41)

How do you think about what's. Sorry, go for it.

Michael Duda (49:43)

Nope.

Mike (49:44)

I say something, they interrupt you.

Michael Duda (49:46)

No, no, you cut me off. I've been media trained, but I stopped the short pithy answers like a while ago. I apologize to you and your editors. So.

Mike (49:53)

No, keep going, keep going.

Michael Duda (49:54)

Good. What else?

Mike (49:55)

Are you good? Are you sure? Yeah, sorry. Sorry that I cut you off.

Michael Duda (49:59)

No, I was at the end.

Mike (50:01)

Okay. So you mentioned how there's, you're seeing companies that are, that are getting to, you know, 2, 3 million, for example, and only have one employee or two employees from. Or just one, nine employees. One or two people. What. When do you think, do you think it's harder now to determine what's actually venture backable versus what's not venture backable?

Michael Duda (50:24)

That's a great question. In some ways yes. But in some ways, no. But part of it going back to. It's hard to be a bit of a drum, but try to be simple and focused every now and then. What's the founder ambition and what kind of company does she want to build? First and foremost, the thing I hate and I would love you or anyone out there listening, I hate calling a business a lifestyle business. Oh, that's a nice lifestyle business. Well, if it's only going to be five, six or seven millionaires, not going to grow, it's like that's a viable business. Founders work their asses off to build strong businesses and to make their means and everything. So to call something lifestyle business, I hate, but some businesses aren't built for that. And I do try to, you know, tell some entrepreneurs and I could be way wrong and nothing would make me happier is like, that's a nice business. But like that business model doesn't fit my business model and even though we're we're long patient capital it's like I got to return a fund in eight to 10 years. So something is growing nicely. Like we saw a carpet business and I really like this founder and it's been out for a few years and it is growing. It's whatever. It's never going to be an escalade business. I don't think so. And things could always change and she's done a really good business and I think it's a good business if you're an angel investor or just believe in it. But like I also have to look into the power law as we mentioned earlier because that we need some 10xs to pay for zeros and so that's where I go. I don't think it's venture backable for us but it's certainly investable. So I'm playing a little bit with worlds like there's some really good companies that oh they'll make money and I believe in within that person but I don't think it's the upside isn't there and there's still more downside. So it's that's why you see some of like investment on a state level and different groups going like there's different forms of capital. I think VC funds less than 0.4% of all businesses that start scaling. So there's opportunity out there but that doesn't make it a bad business.

Mike (52:23)

That makes sense. That makes a lot of sense. How Gosh, I had something else but this has been. Oh, my final question for you. What's one thing that you've. What do you think that since you've been in venture what's one thing that you've changed your mind about the most?

Michael Duda (52:47)

What a great question, boy. I should ask for questions in advance.

Mike (52:52)

No, I should just give you the question in advance. My apologies.

Michael Duda (52:54)

I didn't study them anyway. I say that that's a COPPA what changed my mind the most. It's a COPPA one but when we first got I first got inventure I was trying to so hard to be a venture capital investor and thank you First Round Capital. It's been said over and over like First Round Capital was so patient with me and mentored me from as I starting up this thing and whatever. And yet I was realizing I was seeing the world a bit differently than they were. And so I think what changed my world is FOMO can be real, but less so. It's just like I don't Lose sleep at night. As long as we see a deal and pass, it's the deals that we don't see. And I think the biggest thing I learned is not to think like everyone else, not for the sake of it, but just being comfortable with what we know and feel good about versus what we not. And I tried so hard to study the things and all that stuff. And we are demand side of a marketing background. And I thought I was playing from behind, but realized, wait a minute, what we don't know is an asset, it's naivete on it. And what we do know is like consumer adoption and all these other things. We think about it differently, which is weird, but that's how you're programmed in the marketing world is to figure out who your best consumers and customers are, how they think, what they really do, and then build appropriately around them. And you know, we've taken that. So by the way, I'm not saying every VC sucks and we're great. No, not at all. It's just I've become okay with like if so and so doesn't think so that's all right. And, and we don't. We rarely. It's harder to touch teach like younger investors because it's a form of validation. But if like clown capital does a deal, oh, it's clown capital, that could help with investors and LPs why you did it. But I feel great enough about our people, our processes, how we see things that you know, in a business that we can. We are paid to be wrong more than right. 68% of venture businesses fail. I just really need to be right 10 to 20% of the time to make good returns. So it's the conviction of being not necessarily contrarian, but to have the point of view that makes sense where you feel good about. So I'd say that's the biggest thing that's changed.

Mike (55:04)

Love that, love that, love that. That's great. That's great. That's great. Mike, thanks so much for your time. I really appreciate it. This has been so much fun.

Michael Duda (55:12)

And Mike, to kind of pile on an answer, it's like one of the great things that's been shifting over the course of the doing this for 13 or 14 years is you existed. But consumer VC didn't exist five years ago, it barely did. And so as much as you talk about Shark Tank being America's game show, what you're doing here is giving access point to a lot of entrepreneurs who can empathize with the way you do it than someone who's just talking venture, venture, venture and markups and everything. It's like you're doing stuff that is talking about building real businesses. And so when you listen to get access to podcasts like the Ithaca Hummus founder who is sensational and he hates venture capitalists was awesome and motivating to me and I'm a venture capitalist. So you know, you have, you've, I really think you've done this is you're you're going to help usher in some smarter entrepreneurship and capitalism because there is a big gulf between zero and appearing on how I built this. And I think consumer BC is really doing this and I've seen it in Austin. I've been a passionate listener of your show and that's what makes consumer investing great. But also you're helping out and that's a big change. I think it's a big change. So you, you've added to the change more than, than you realize.

Mike (56:29)

Well, that's very kind. Thank you. Thank you so much for being an early supporter early supporter of consumer vc. Mike, thanks so much for coming on the show. I really appreciate it.

Michael Duda (56:37)

Thank you.

Mike (56:38)

And there you have it. Thanks so much for listening. Thank you, Mike, so much for coming on the show. Thank you Glimpse, so much for sponsoring again, if you need a management deduction service, if you're a brand that's in retail, check out try glimpse.com thanks for listening. Let me know what you think and of course subscribe to the newsletter@theconsumerbc.com thank you.