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- [00:00]
A
Welcome to the AI Chat podcast. Today on the show we have the man, the myth and the legend, Jack Selby. He is an American entrepreneur, venture capitalist, film producer. He had an early role as the senior vice president at PayPal where he oversaw international and corporate operations. After PayPal was acquired by eBay in 2022, he co founded Clarium Capital Management. He did that with Peter Thiel, another legend in the industry. Peter, he is currently serving as the managing director at Teal Capital and beyond that, he has a bunch of cool stuff he's done with different films he's worked on and he is currently the founder and managing partner of AZ VC which is Arizona's largest venture capital firm. So welcome to the podcast today, Jack.
- [00:42]
B
Thanks Jen.
- [00:42]
A
So super stoked to have you. I've been talking to people that keep telling me probably for the last year that I got to get you on the show. So I'm excited to have you on. I think a lot of people know you know you and the people around you, the different projects you guys have been working on, the OG PayPal mafia of the some of the cool things that are happening. Something I'm super curious, I'd love to ask you about is what like in the beginning got you into the tech space, got you into the venture capital space. Was this something like you, you kind of always studied technology, you were interested in this. Was it a friend that brought you in? Like what brought you into PayPal for example?
- [01:17]
B
Yeah, it's a great question. I think the, for me, I just kind of stumbled into it. Okay, so I met Peter through a common friend back in, gosh, kind of mid 2000, excuse me, mid 1998. And so this common friend put us in touch and at the time Peter had this concept that he was tinkering with which in effect was the predecessor to the predecessor of what would evolve into, into PayPal.
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A
Okay.
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B
And, and I was enrolled actually to go to business school at UCLA that, that coming fall and I'll never forget because you know, I paid my non refundable deposit and they sent me, they sent me this box of really dull MBA books that I were required reading, showing up on campus and I was, I was really second guessing my decision and, and Peter said, listen, why don't you come out and maybe try to help us get this company off the ground. So ended up being, I think it was employee number 11 or something like that. And it was very serendipitous because my younger brother who essentially grew up here in Phoenix, was just starting to play football. At Stanford.
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A
Okay.
- [02:19]
B
And so it was a lot easier for me to see his games if I'm living in Palo Alto than not perfect. Yeah. And so, and these were the. You're way too young to know this, but these were like the go go salad days of the dot com boom pre bust. So, you know, a lot easier to watch my brother's games. And you know, and honestly, most importantly, when I met Peter, I realized I'd met just an out of this world, really, really, really intelligent guy. And you know, I kind of vow to hold on for dear life and fast forward 25 plus years later, I'm still holding on by strength.
- [02:52]
A
Okay, so this is something interesting though, because I think a lot of people, especially when you've paid a non refundable deposit or whatever, like just because you like stumble into it like a situation, I think that there's, there's probably more that goes on behind the scenes with that situation. And a lot of people could have perhaps been in your same situation, just been like, oh, look, I paid it. I'm gonna go to school. Like, I can't, you know, take the opportunity, whatever. What was it that you feel like you identified that was like, oh, this project is gonna work. This guy is legit. You know, he's not full of hot air. Like, what were the things that you kind of looked out for and saw?
- [03:23]
B
Yeah, the concept itself, I think admittedly was a bit dubious because the first concept for what was called confinity was essentially establishing an offshore online bank that's kind of free from any sort of sovereign oversight. So it's very similar to the ethos that the crypto world has now filled 25 plus years later. And so I think we as a team, in those very early days, we realized that we were potentially biting off something much more than we could probably chew. And then we pivoted to a company that basically our version of prior pre PayPal that essentially was enabling people to beam money between Palm pilots.
- [04:00]
A
Okay.
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B
And so, and that idea is, is probably as dumb as it sounds. And we quickly realized that there were just a very limited number of Palm pilots in the world. You know, something like 400,000.
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A
Okay.
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B
But we had our first kind of really big breakthrough eureka moment when we realized, you know, if I, if you and I are going out to lunch and I want to pay you back for the lunch that you kindly bought me, but you forgot your Palm Pilot, what I would do is I'd write in jadenmail or whatever it is, and then when you took the Palm Pilot back to your desktop and put it in the cradle to sync. The payment would be generated by email and not by the infrared beam between the Palm Pilots.
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A
Okay.
- [04:34]
B
And we realized, well, there are billions and billions and billions of email addresses, and there's a very limited subset of actual physical Palm Pilots. And so that was kind of the first big break that we had. But going back to your question, I mean, I, you know, so the concept itself was fungible. We finally stumbled upon a version of PayPal that obviously ended up being quite successful. But I think with most startups, it's just the people involved. I mean, it's the jockey, not the horse. And, you know, I met Peter when I was 24, ended up meeting Elon when I was 25. I mean, the probability of meeting two such incredibly iconic people at such an early age in my career, you know, I just had to thank my lucky stars. I'm just incredibly, incredibly fortunate.
- [05:12]
A
That's super cool. Yeah. I mean, but I think still at the same time, there could be a lot of people that theoretically have bumped into, like, a lot of legends and maybe didn't grasp on the opportunity. So, I mean, to your. To your credit, taking. Taking that opportunity is, I think, one of the. One of the biggest things and kind of taking that bet on yourself. Did you have anyone, like, I don't know, like, your parents or anything that were like, oh, you're crazy for, like, you know, dropping the deposit or whatever?
- [05:35]
B
Yeah, I mean, it's. It's interesting because you think back about that fork in the road, and we all have these different kind of points in your life, and it definitely would have been the safer move, you know, to go get a MBA from ucla and. But if you think about it, I would have graduated. I would have come out of School in 2001, which was a horrible job market because the economy was in the tank. And so I would have graduated with undoubtedly a very significant amount of student debt. I would have been coming into the job market with just really difficult job prospects, I guess. And so, again, I just. I met a really smart guy in Peter, and then the other guys that he had assembled in those early days were just rock stars. And so I just felt really privileged to be part of the group and kind of the rest. The rest is history.
- [06:19]
A
That's amazing. Okay, I'm going to jump back and forth into a bunch of different things that you've done, so hopefully the timeline's not too all over the place. I feel like, especially like at a young age, you meet some legends they're building really impressive teams. Right. I think teams is kind of what makes these projects ultimately successful. What are some principles you feel like from your career? Maybe from them, from other people, whatever. Throughout your career, what are some lessons you've taken to building successful teams today? Because I know you run some. You're doing some amazing things with, like, film, you're doing some amazing things with AZ vc. You have a whole bunch of projects, you're running different firms and stuff. Like, what do you do today that maybe you learned from the past about building those teams around? Cause obviously you're not the guy that has to do everything you need to build a solid team.
- [07:02]
B
Yeah. I think one of my most valuable takeaways from the PayPal experience, and I learned this from Peter, is that Peter hired a lot of just exceptional people. You know, my joke is that if I ever write a book, you know, the title of the book will be the Dumbest Guy in the Room. And the byline will be the trick is getting in the room. But I literally felt so fortunate to be around so many really smart people. But what I think one of the things that Peter did in additional to being a great hiring manager is that he was very good at delegating. And so I ran the corporate and the international operations. And by corporate operations, basically that was a euphemism for the fundraising.
- [07:37]
A
Mm.
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B
And so Peter basically carved that off his plate because, you know, as a startup person, a full time job, it is an outrageously full time job. It's outrageously important, and if you screw it up, it's an existential threat to your existence.
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A
Yes.
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B
So if you can, because very, very, very infrequently does a world class CEO also have. Have the ability to wear equally as well the hat. That is a very good fundraiser, just for whatever it's worth. And so I think Peter realized that by putting off his plate as much as possible, to me, was a great way to kind of delegate and kind of multiply his time. So this is my answer to your question is how do you figure out how to multiply your time? Because time is our most valuable resource. Nothing profound, but it's true.
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A
Yeah.
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B
And so I see it with my various activities today. So, you know, we run the largest venture capital fund here in Arizona. So how am I able to do that with all the different things I have? I have, literally, my best friend, Jason Pressman helps me run this fund like he's a Sand Hill Road legendary VC guy who was probably going to retire, managed to convince him not to retire and help him hold him back in. Yeah. And then he's helped build out this amazing team. I mean, my joke is that, you know, semi joke is that, you know, I put my own money in the fund, I don't take a salary. And the good news, quote unquote with that is that we get to have a much larger team than we would otherwise. Like, if I was paying myself, you know, half a million bucks a year, team would be a lot smaller. But because we didn't structure it that way, Jason is able to build out this team that I'm still obviously very much a part of, but it's a multiplier of my time now. It's similar thing. You know, you mentioned film. Like I, we have this, you know, relatively small independent film production company called High Frequency Entertainment. And I've known these, my two business partners literally since, since grade school. And so we just wrapped a film last week in Charlotte and my two guys were literally alternating on set, back and forth, back and forth for the better half of the entire six week shoot. You know, and I showed up a couple times just to kind of check in and you know, see how things were going. But they, they're. If you can find people that you trust implicitly that are super competent, hold onto those people for dear life because that will enable you to multiply your time. And again, time is the most valuable resource. So how do you make more of it? Because it's a very scarce resource.
- [09:42]
A
I love that. That is, that is such a profound, profound take when it comes to multiplying your time and when it comes to doing these other projects, I guess what other advice would you give people? Maybe in the nitty gritty beyond like delegation? What are the types of things? I know before the show you were talking about how you fly a lot and you kind of like work in transit. Like what are some of the things that you do to multiply time? I think for a lot of the founders investors listening, this is.
- [10:10]
B
Yeah, So I find myself on an airplane probably not every other day, but probably pretty close. And it's probably just a function of my upbringing. My dad was a Mad Men era advertiser.
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A
Okay.
- [10:22]
B
So the reason why that's relevant to your question is that the way that job worked is you'd, you'd either get fired or promoted every couple years. Okay. My dad got a little bit of both. And we, we moved seven different times during my childhood. And so it was almost like this iterant army brat esque, okay. Upbringing. So I was just Used to not being in one place for a prolonged period of time, which, you know, you meet people that grew up in some little town in Kansas their entire life and, you know, that's where they, they continue the rest of their life. And that's great. That's a model for some people that works. But for me, I was just used to kind of being on the go and on the road, so to speak. So, you know, from managing the international stuff at PayPal, I was on a plane all the time. We had offices all over the world. To fast forward today, I just, I've been very fortunate to have a network of business relationships, personal relationships that are kind of all over the world, and I cherish that. And coming back to your question, in terms of how to kind of most efficiently use your time, you know, if I'm on a 17 hour flight from LA to Dubai, that's like a study hall. I mean, I literally get to do a ton of work, catch up on reading a couple books, maybe read a script, maybe watch one of our films, take a nap and rinse, wash, repeat, and do it all over again. Because 17 hour flight affords that. So, you know, and there are worse things than flying on Emirates, so it's not gonna.
- [11:37]
A
That's true. Emirates, great airline. Okay, so talk to me about the film side of this. And, and I think this kind of goes to like a broader, like, question or concept of having like a lot of different interests. I mean, I think we see like a lot of, we see a lot of really great minds that, that do tend to get like pulled into a lot of different interests. I mean, you think of Elon with like seven different companies that are all like, all over the place. There's a, there's, you know, there's a lot of players kind of doing this thing. You see it with vc, obviously, because you're looking at a lot of different things. Do you think, for example, having like a venture fund and, you know, working with Peter Thiel on his fund and then doing like film and like having like, I don't know, different things that are kind of in different areas, do you feel like that's like a distraction or do you think that like enhances all, all of them together? Do you know what I mean? But some people say, like, oh, I just focus on one thing and this is just my one thing.
- [12:28]
B
Yeah. I mean, what's the expression? It's jack of too many trades or something akin to that. And so, no pun intended. So I am very wary of being spread too thin and I do feel at times, you know, I'm spinning a lot of plates, but I also try to step back and think about it, you know, making sure I am not being spread too thin. And so with respect to the film activity I really enjoyed, I, you know, I didn't grow up necessarily as a huge film buff. I kind of stumbled into it. I went to a small liberal arts college in upstate New York and ended up overlapping with a guy who ended up, you know, becoming a true legend in the film business. He started Legendary Pictures, so he was the one that kind of got me in to the business. And then I reconnected with these two guys that I literally grew up with in Dallas and I've known literally since grade school. And so again, I. The way I think about it is, you know, film just like any kind of art. Not to be corny about it, but it is art. It's like, it's like exercising a very different muscle in your brain. So like the tech stuff, the finance stuff, that's great, it pays all the bills and then some, but the film stuff is literally like a different muscle in your brain that I find it helps give me balance by just giving me a completely different work set to pursue and different types of people to pursue. You know, you're interacting with directors and actors and these are very different people from startup folks or hedge fund folks, which is, you know, more of kind of my, my, my day job world. So that, that balance that it helps create, I don't know, at least for me, I find it to be enjoyable.
- [13:51]
A
That's cool. And I'm sure it, it, you know, spurs a lot of creativity, which, like you said, is a muscle. So when you're looking at investing, oftentimes the most creative thinker comes up with some solutions that no one else has thought of before, you know, well, it's that.
- [14:04]
B
So it's funny you say that because this is exactly how I describe the job of a venture capitalist. And I think it's a bit of a non traditional answer because I haven't really heard any say this. And again, I don't think it's profound, but I do think it's true. I think when you're a vc, I think you're basically your job is you're a talent scout. So I meet Jaden off the street and do I have to figure out, is what, what's coming out of Jaden's mouth? Is it 5% nonsense, 95 nonsense, somewhere in between? I don't know. But if you do it long enough you kind of get this innate gut sense or skill to be able to identify is Jaden legit or not. And so in, in Hollywood circles, you certainly have to deal with that all day long because you can bump into someone off the street who claims to be a producer. And again, you have no idea which end of that spectrum that person may be. And then as a vc, what you're literally doing is you're trying to identify who is, you know, the rock star entrepreneur jockeying out the horse that wants to run through brick walls. And you can't. That's not a formula. You can't learn that at Stanford or UCLA business school. That's something you just have to kind of learn through repetition of meeting a lot of young entrepreneurs in terms of who seems they may. Who seems like they may be real and who seems maybe not.
- [15:07]
A
Interesting. Yeah, that's, that's such an interesting concept that it plays on venture capital, plays on film. I mean, it's any industry. But the more that you're exercising that muscle, like you mentioned, like, the better you're getting. So if you're doing it here, it's gonna help you on the other side.
- [15:21]
B
It transfers, I think, back and forth between the two different industries.
- [15:25]
A
That's really interesting. I wanna get into some of the more of the film stuff you're doing. Cause that's so fascinating. But one thing that I think a lot of people wonder about you, and maybe it was even controversial at the time or something. You're like, oh, no, what is this? No, it's the fact that you're in Arizona and not in California or something. I, I think I've seen some articles of, you know, Jack Selby moves from California to Arizona and he's going to do this thing. You're from here originally, correct?
- [15:49]
B
Well, it depends on how you define that question. But my dad moved us here as a family in the middle of my senior year of high school. I refused to move because I was, I was done moving so many times. So I stayed with a good friend and his family to get through graduation, but my dad moved down here to take a job. And so my dad still lives here in Greater Phoenix. My younger brother, like I mentioned, ostensibly grew up here. And so when we sold PayPal, I knew I wanted to get out of the. The onerous tax regime of California.
- [16:14]
A
Okay.
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B
And so I looked at all the normal places like Inclined Village on the north side of Lake Tahoe and other places that a lot of the, the tech expats flee to. But because I had family Here and spent a lot of time here. Arizona was an easy choice. And then on top of it, you know, I still go back and forth to California all the time. Like I was back for, for Peter's Christmas party this past Saturday. So proximity matters. I mean, I can literally jump in a plane and such a fast flight, be in Burbank in 45 minutes or if I need to go to the Bay Area, it's an hour and 20 minutes.
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A
Yep.
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B
And so the proximity makes a big difference. So I've, I've been in Arizona since 2002 as a full time resident.
- [16:47]
A
Okay, that's. Yeah, that's amazing. So I guess a lot of it was the kind of, the tax idea. I mean, I, I don't blame you. I'm a big fan of it too. People ask us all the time because I'm doing a tech startup and they, they're like, you're like, headquartered in like Arizona. You, like, you don't think you should move to like, I literally had VCs that I talked to when I were fundraising. They were like, yeah, you know, it's just like if you're not in like, you know, Palo Alto, like, we just don't really look at companies. I'm like, come on. Like, it's, you know, the numbers are awesome, but I think so I, I'm curious if you get that same thing because I know VC and startups, very similar, like you, you both have to get money from other places. Do people ever have that, like, kind of the attitude towards you when you were raising for az, VC or anything?
- [17:29]
B
Yeah, I mean, I, I could talk for hours on this topic. I'll try to, I'll try to. I'll try to be precise and concise. Um, listen, I think the, the Arizona tech ecosystem literally has all of the ingredients to be a proper place to be on the same footing, if not better than what goes on in Salt Lake or Denver or Austin or any of these other places that I think, you know, should be. We should be at that echelon, if not higher.
- [17:52]
A
Totally.
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B
Um, you know, one of the things that I think has arguably held us back the most though, is that we just have never been kind of a, a first tier capital markets city. Okay. So for example, like if you are an IPO roadshow, you know, you probably wouldn't go through Phoenix, right? You'd go through, you know, cities that are far, far smaller, like Wichita or Minneapolis or Baltimore. And it's just not one of our strengths and it's no offense to Arizona. It's just the reality of who we have historically been. So how do you solve for that? And so as it relates to, you know, our topic and kind of tech and venture capital, you know, my joke with my local friends here is that if we're, we've all been sitting around and we think that, you know, Benchmark or Sequoia or Founders Fund is magically just one day going to parachute into Phoenix and set up an office, it's probably not going to happen. Or at the very least, it's going to be a long wait. And so, you know, I just turned 50 this past year. Venture capital is definitely a younger person's game. And so I had to just honestly ask myself, like, if I don't do this soon, then I'm probably going to age out of potentially doing this. And so I don't think I'm the perfect person to have set up azvc. I'm probably not the least perfect, somewhere in between. But someone had to go out and raise a proper fund that's based here, that invests here, and we did it. And so I'm really happy about it. You know, we raised the fund almost exclusively from local prospective Arizona investors.
- [19:10]
A
Really?
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B
Yeah. So, I mean, we have, I think, almost 70 individual LPs in the fund and the vast, vast majority are based here in Maricopa county. And almost 30 of them have raised their hand to join our limited partner advisory board meeting, meaning that they want to be mentors or board members or in somehow or another, give back to the local entrepreneurs that we're backing. So that's great because, you know, conversely, I could have gone out and Talked to prospective LPs in Abu Dhabi or Tokyo or any of these other far flung places. Because, you know, the benefit of, with my, my Peter affiliation is that we know most of these people and, you know, they'd love to get in the next Founder's fund or whatever the case may be. And so not only would that obviously be disingenuous, but I wanted to find investors that really cared about Arizona and the fundraising process, as these things always are. I mean, it was an arduous road, but we got through it from start to finish. It was probably depending on how you define when it started, but it was 12 to 18 months from finish to end. But I'm really happy with where we are and we'll probably be done deploying the capital at some point by the end of next year and then we'll be off to the races for, for Vintage two for azbc. So fingers crossed.
- [20:22]
A
Okay, well, I want to talk to you about that. But one thing that I wanted to bring up that I think is really cool that you guys have done, like you mentioned, you have, you know, connections with Peter Thiel and a lot of these other guys. So you could raise a fund from a lot of other places. I love that you raised it from Arizona people. What I think not a lot of people, I guess think about is not just the fact that it's like, you know, people that care about Arizona investing and people that are listening. Right. You could apply this to whatever your local market is. But what's cool is if Arizona People are LPs in this, when distributions come out after the fund is successful, it's people in Arizona that are going to benefit and they're going to reinvest in the ecosystem. So it's, you know, when you have a couple of these home run companies in there that really do some big multiples, it's local Arizona people that are then going to benefit and put back into it versus the funds kind of dispersing out other.
- [21:07]
B
Yeah, and this is, I mean, you literally hit the nail perfectly on the head there because what had happened historically prior to us setting up this fund is that if you got a series A check or series B check from some out of town source and you end up being successful, then those financial proceeds would then get recycled into the local ecosystem from where the check was originally written. So Salt Lake, Denver, Sandhill Road. And so we'd miss out on that flywheel here. And so what we need to happen is we need to have a couple more Carvanas and Godaddies and Lifelocks, have breakout success and then have those financial proceeds be enjoyed by a fund like ours with LPs that are local and just push those chips back in. And that's the snowball effect that we unfortunately have not had enough of. But I'm confident we're going to get there. There's no magic wand to accelerate that. But that's, that's kind of the driving ethos of what we're trying to do with this fund.
- [21:59]
A
I love that that's exciting. You know, and another thing I wanted to just touch on that you mentioned about like, you know, aging out of venture capital and that not a lot of people think about again is when you make these investments, they're like 5, 10, 15 years sometimes before for money comes back in from an exit event or something from a company. Right. Let's say 10 years. So, you know, you raise the fund, you deploy the Capital and from the end of the last capital, like you kind of have a cut off. So I think that's cool that you got started when you did and you kind of started deploying when you did. I guess my question is when you think about, you know, vintage two of AZ vc, which I'm sure there's a lot of people kind of like super interested in or whatever, what, you know, I mean, I know you can't probably go too into details on what that looks like and it's a little ways away but like what does that look like as far as what you would do different? Would you do the same? Is it just a bigger fund? Is it going to deploy different? Like what is it? What would a second vintage look like compared to the first?
- [22:55]
B
Yeah, I mean we're, I should disclaim that we're still in the very early innings of trying to figure out totally answers to, to this type of question. But you know, I'll give you kind of how we're thinking about it now. So you know, Last fund was 110, 115 million. You know, naturally you want to have a step up in your asset size with the next fund. So I would guess, you know, maybe shake out between 150 and 200 if we're so lucky to get across the finish line. And I think the other area that will probably change a bit is that we'll definitely still be Arizona headquartered in centric, just like we are now. But I think we may broaden the aperture a little bit geographically to look at more opportunities that are in places like Utah, Colorado, New Mexico, Texas, Nevada and so forth. You know, I, I stole a, a kind of a moniker from another fund that we're very friendly with, but the rodeo states because I think a lot of these places also kind of like Arizona have just been capital markets laggard. And so how can we help match the, the capital with the amount of activity that's going on from an entrepreneurial perspective perspective. So I think that's something that we can do in terms of kind of stepping up. But Arizona will always be home. It'll always be in the main focus as it is now with Azure cvc. But it'll just be kind of a bigger, bolder version potentially with vintage too.
- [24:06]
A
Cool. That's super exciting. What are some of the. Oh, and I guess one other question on that. Would you still primarily target Arizona investors or LPs on that or would you broaden the aperture on that as well?
- [24:18]
B
We'll probably broaden it a bit just Because I've met a lot of institutional family office type friends both here and abroad that, I mean, essentially what we're play is we're an arbitrage, we're non coastal arbitrage. I mean if I had to summarize my business model in one or two sentences is that I get to write term sheets at non coastal prices with amazing young entrepreneurs here locally that we have in Arizona. I get to coach them up hopefully and then I get to. The arbitrage is to go take them to all the friends that I probably know on Sand Hill Road at the equivalent. That's it. And so there's no reason why that should just apply to Arizona. We can do that in Nevada and Colorado and all these other places. And I think our deal flow here is pretty good just because it's, you know, it's still relatively nascent. So we know most of the place, most of the people. But again, we can still apply that to some of these other adjacent states that are maybe still suffering from somewhat of an under capitalization with venture capital money.
- [25:10]
A
Yeah, no, I think that's, I think that's amazing. That's genius. And you, you spend in, you spend your summers because obviously Arizona is a very hot place, which I love Arizona. My wife, all her family's from here. That's where I ended up. I'm originally from Vancouver island in Canada.
- [25:24]
B
There you go.
- [25:25]
A
So she brought me down here. I love it in the summer. We escape for a few, we escape for a few months. It's a little toasty, but the wintertime, best place in the world. You spend your summers, I believe in Wyoming. Yeah.
- [25:38]
B
Yes.
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A
So would that be an area that you'd be focused on? Talk a little bit about Wyoming and why that is.
- [25:44]
B
Yeah, Wyoming. Yeah. I've been going up to Wyoming for the summer for almost the last decade. Love it up there. That's my happy place. And it's kind of a perfect fit because when it starts to warm up here, it finally starts to, to warm up or start. When it finally starts to really warm up here, things are, becomes hospitable up.
- [26:01]
A
And you gotta make the swap.
- [26:02]
B
Yeah, yeah, exactly. So it's, it's kind of a perfect calendar overlap. But yeah, Wyoming would be a great example where, you know, it's a small state by population in the United States, but there's some real activity going on there. And actually a good friend and I, we started a tech event 11 years ago with the governor at the time and you know, we literally had Peter out as our Keynote this past year. Oh really in October, which was really fun. And so then that actually was the inspiration to start the nonprofit Envision AZ that we kicked off here in Arizona seven years ago. So Wyoming was literally the inspiration to kind of get the Arizona activities off the ground. And here we are.
- [26:39]
A
Tell us a little bit about what that nonprofit does.
- [26:41]
B
Yeah, so Envision AZ again started with a good friend, John Reagan here, I think literally seven or eight years ago. The whole purpose was to essentially elevate the local tech ecosystem here in the state. Going back to the idea that I think we have always had most, if not all the right ingredients to have that proper ecosystem. But what, whatever reason, they just weren't coming together in the right way. And so Envision owns a quarter of the carry that will come out of AZ vc. So if we do well with our fund, which knock wood, hopefully we will, that should be millions, if not tens of millions of dollars that will go to this nonprofit, Envision az, that will then, you know, pump that money back in the local ecosystem. So it's again, it's part of the whole idea that it takes a village type of mentality. And so Envision I think is hopefully can be the bedrock for ecosystem here for many, many years going forward. Especially if we can endow it with these proceeds coming out of the for profit AZBC fund.
- [27:36]
A
Very cool. Something that I feel like I've noticed just in talking with you and kind of how you're setting everything up. Obviously you're a business guy, you're a capitalist, you're making money, you're making this successful thing. It's cool to see that. It feels like a lot of this is, you know, like with the nonprofit or other things, like you see like an ecosystem and you also want to kind of help this area grow. Like, talk to me, I guess. What, what's the split on that for you? On just, I guess purely venture capital, multiply money versus I guess this is kind of where you call home. So you want to make it a better place, like.
- [28:07]
B
Yeah, well, I mean, to be absolutely clear, I mean my fiduciary responsibility to my limited partners is to make money.
- [28:13]
A
Yeah.
- [28:13]
B
And so that's, that's the North Star no matter what. And so that, that will be our goal. That will continue to be our goal with the future vintages going forward. But at the same time, you know, it's. I love Arizona. It's been home, you know, for two decades plus. And so, you know, it's a funny state in the sense that, you know, If I asked you to name a Fortune 150 company that's headquartered in Arizona, you would not be able to because there's not one. So there is a lack of corporate headquartered stewardship that goes on here and it cuts both ways. And so, you know, the good news is if you really want to search yourself, you can have a really big impact. Like think about if we were in greater Philadelphia, like, how many Fortune 150 companies are based in Greater Philadelphia? I don't know, 10, 15, 20.
- [28:53]
A
Right.
- [28:54]
B
So if you wanted to search yourself in greater Philadelphia, you would have to cut through, you know, all the different government affairs or otherwise, the morass that those companies may bring to bear. Whereas here, if you really want to search yourself, you can make a big difference. But the converse of that is if you don't raise your hand and get involved, then nothing changes. So I like that. And I think you just have to raise your hand and assert yourself. And if you want to do that here, you can make a really big difference. And so I've tried to embrace the fact that there is this dearth of corporate headquartered companies here. I mean, you think about our fund. Our anchor investor is the publicly traded utility company in Arizona, Pinnacle West.
- [29:29]
A
Yeah.
- [29:30]
B
I mean, who would think that a publicly traded utility company would be the anchor investor in an early stage, admittedly relatively speculative venture capital fund? It's not the most obvious or natural fit, but to Pinnacle West, APS's immense, immense, immense credit. They made a bet on us.
- [29:46]
A
Yeah.
- [29:47]
B
And I think they want to help us, you know, develop the tech ecosystem here, help diversify the economy. So again, I wouldn't be in business with AZ VC if it wasn't for aps. Yeah, truly.
- [29:58]
A
Tell me a little bit about how that relationship got started. Like, they're obviously taking a big bet on you. I think it's going to be a phenomenal return for them. So, I mean, I'm sure they're going to be thrilled. How did you get started in that? Because like you mentioned, that's not an obvious. Most people probably don't think about that.
- [30:13]
B
Yeah, no, it was a really interesting process. One of my partners at the fund, Jessica Pacheco, had been a senior executive at APS for many, many years. So it was really just her genius that helped us get across the finish line. Jeff Goldner, who's the CEO at APS Z become a great, great, great friend. And so we had, you know, numerous conversations over an extended period of time. But Jeff and Jessica were really just instrumental in helping us get across the finish line. And we did it because Again, without that $25 million anchor check from APS, AZ, VC would have definitely never come into existence.
- [30:47]
A
That's amazing. That's so cool. So to your credit, and I also think to your point, we were talking about earlier about team, I think it just goes to show how important that team is. Jessica, I've met her before at some events. Absolutely phenomenal. She's amazing. But you know what I mean? It's like building that, building that team of these really solid people is like you mentioned, like if it wasn't for that investor, the fund wouldn't exist. If it wasn't for Jessica, she put forward a huge effort with the. You know what I mean? So it's, it's all about building that team, which I think is really important.
- [31:16]
B
Yeah. And Jessica was so instrumental, you know, in helping us get off the ground. She's one of our partners to this day. She's, you know, on the board of regents. She's incredibly well connected here in the local Arizona community. So again, I feel so good about the team that we built out and I feel really comfortable about where we are now and where we can take it going forward. Like we Talked about with Vintage 2.
- [31:36]
A
And further out, tell me a little bit about. So we have a lot of kind of tech investors and entrepreneurs that listen to the show. Tell me a little bit about some of the competitive advantages you feel like you have on companies here in Arizona that you invest in that you look at like what is the, what's the big opportunity? What's the secret sauce? What is kind of Arizona have that other places might not?
- [31:59]
B
So quality of life is high, cost of living is low, Proximity to California is obviously immediate. That's a lot in of itself. Yeah, we have great universities here. ASU is amazing, gcu, U of A, the list goes on and on. What do we not have? And really it goes back to what we talked about earlier is this. We have not had our own kind of larger venture capital source of funding. And that was, in my opinion that literally was the only thing that was, that was holding it back. And you know, and the local entrepreneurs, you know, to I think their credit, they were saying, listen, you know, if we just had the capital, we could change the trajectory of where this ecosystem goes and just make it that much more steep and upward pointing. So now that we have that capital, I feel great about the deal flow that we see here. The vast majority of the investments that we've made are Arizona based companies and you know, we're kind of the only game in town. So it's a really. Because normally a VC has two jobs. They have to source deals and compete with deals.
- [32:52]
A
Right.
- [32:53]
B
All we really have to do is source deals. And so we get to write again term sheets that are at non coastal silly Palo Alto valuations. And if the entrepreneur doesn't like the term sheet, that's absolutely their prerogative. They can go fly to Sand Hill Road and get a term sheet from Sequoia. And if they succeed, then God bless. God bless them.
- [33:11]
A
God bless them. I love that. Okay, tell me a little bit about. So the podcast is about. You know, we talk a lot about what's emerging in tech and things that are happening in tech. Obviously a big theme and element that we've seen in the last couple years has been AI and kind of some of the plays there based off of, I guess, some of the investments you guys are making and the deals that you're looking at. What are some of the areas in AI that you are most excited about or kind of most interested in blowing past the hype that obviously is, you know, plenty of it in the market. But what are, what are some areas that have you excited about AI?
- [33:47]
B
Sure. So I think, I think private, private AI investing is almost non investible. So I think it's better to just go buy stock and Google or Microsoft Alibaba the equivalent because the probability of you finding the next early stage anthropic or open AI, especially coming from Phoenix, is zero. So to put it differently, is the next anthropic or OpenAI going to come out of Maricopa County? No, it's not. And that's with emphasis. It's nothing to be ashamed of. What I think to put a positive spin on it is that I'm pleasantly surprised by how ubiquitous the AI ingredient has already become in the recipes for almost every startup that we look at. Now, if AI is a missing ingredient in a recipe, that's not disqualifying. But the, the onus is on us to very much understand why it's not an ingredient in the recipe. Because one of the worst case scenarios is that you make an investment in a startup that doesn't have AI in the recipe and then two years down the road a competitor comes along and figures out a way to bring that into the recipe. That's a problem and that's somewhat of an unforgivable sin for me and my job from a fiduciary perspective. So I think the AI world in my opinion, is a bifurcated world. And so you have kind of the AI superpowers, so you have the big publicly traded companies, you have the Sam Altman's, the anthropics and so forth and then you basically have everyone else. So, so why is it bifurcated? And I think the main reason it is that doesn't get talked about at least enough is that there's a dearth, there's a scarcity of world class AI researchers, computer scientists, engineers. So as an American, if you exclude China, that number is probably, I don't know, it depends on how you obviously define it. But it's probably in the low thousands. Yeah, so. And there are more of those people that live in Palo Alto than live in the state of Arizona, probably by orders of multitude and there's nothing wrong with that. So just to be clear, but these people, because they're so scarce, they're really, really expensive. And so my startups in Arizona cannot afford these people. Even if they did live here. Who can afford them? Google can afford them, Microsoft can afford them, Palantir can afford them, Alibaba can afford them. But the startup in a non coastal ecosystem is not going to be able to afford them. But it's good in the sense that they will move the needle for all of us in terms of what they develop and then those ingredients will become more, more so in the recipes that we make here in Arizona and other places. So that's the, that's the positive spin on it.
- [36:08]
A
No, I love that. And I mean, I think it's definitely like an issue that relates to Arizona, but I also think it's an issue that relates to almost all local geographies that are not perhaps California. Right.
- [36:18]
B
Like, yeah, there's, there's Boston, there's Palo Alto. I mean these are very select places. And again you think about like, what's the biggest tech outcome from Arizona ever? It's Carvana. What's Carvana? It's a used car marketplace. Yeah, that's great. It's a very, very valuable company that earning in the guys have built. Yeah, so let's build more Carvanas and not try to, you know, pretend like we're going to build the next anthropic, which we absolutely are not going to build.
- [36:41]
A
Yeah, it's, it's, it's definitely. I do like what you said though about making sure we're focusing on having AI or anything really that automates the process. You know, it's orders of magnitude more efficient, cheaper, faster, better, whatever those ingredients are in any industry. And I think you do need to look at AI for like what the big players are building, implement it into your company that you have. That's right. Yeah. That's really interesting. What are some of the most interesting areas that you, azvc is currently kind of looking at investing in? I mean, you have the thesis of like undervalued Arizona companies. Are there any areas in particular that you're excited about that you're interested in?
- [37:23]
B
You know, I think the ecosystem here is still sufficiently nascent that because I get asked the question, you know, what sectors do you all have a lot of exposure to? And the honest answer is, you know, we're sector agnostic and the spread among the various sectors where we have exposure is quite broad. And that's not surprising because I honestly expected that. And so I think when the dust settles and we've fully deployed fund one, we can look back Monday morning quarterback and say, oh, we had five companies in sector A and four companies in sector B and so forth, but we don't have that benefit right now. And so, you know, again, it's kind of a cop out of an answer. But I, I think it's. The honest truth is that I'm just looking for rock star entrepreneurs. And so, and I want them to be able to work their tails off and run through brick walls. And if I can wrap my little liberal arts brain around whatever they're doing, then we'll take a look. And I'm not dogmatic that it needs to be in sector A, B or C. And who knows, maybe when we have fun 2 up and ready or are getting ready to launch, we can say, yeah, this is, these are areas that I think Arizona has a real strength in. But in the meantime, while we're still sufficiently nascent, we're just trying to be as generalist as we possibly can.
- [38:25]
A
What are some, if you can talk about them, what are some investments, some plays, some entrepreneurs that you have met in the ecosystem here that you're particularly excited about that are crushing it or that are doing well.
- [38:37]
B
So of course I love all of my children equally. Yeah, they're all amazing children. So I don't want to select one or another as being the special boy or girl of the bunch. That being said, I have one CEO who is just a stud. Like, I love investing or finding entrepreneurs that are former college athletes. Okay, as an example, and especially that played a sport that was not particularly revenue orientated. So no offense to football and basketball, but basically anything other than those two sports. So one of our CEOs played high level division one water polo.
- [39:10]
A
Okay.
- [39:11]
B
At a California school. And so, you know, he's doing. He's in the pool every morning while he was in college, you know, in the pool for three or four hours every day. He's not doing it because he wants to date a cheerleader or, you know, get an lii, nl, nil, you know, stipend or whatever it's called. He's just doing it because he wants to be. He's competitive to the core. And so, you know, my brother wrestled at Stanford, and so, you know, I'd hire every Stanford wrestler I could find because it means that, you know, the kid's probably pretty smart. And it also means that the kid probably has an amazing, just relentless work ethic. So those are the types of folks I've been looking for, and we've been fortunate to find a handful. If I did have to signal out one company, again, love all our children. But one of the companies that I like to, you know, often acknowledge is a company called Blue Tail here, which is in the aviation tech space, if that's even a thing.
- [39:58]
A
Yeah.
- [39:58]
B
And essentially what they do, and I could literally explain it to you as if you were a second grader, but they take private aviation maintenance records, which have traditionally been handled by paper and pencil, they digitize them, and they put them in the cloud.
- [40:10]
A
Okay?
- [40:11]
B
That's it.
- [40:12]
A
Simple.
- [40:12]
B
And these two guys that found the company are the proper adults. They're a little bit older than me. They worked for Steve Jobs at Apple back in the day in Santa Clara. So they're proper people. They've been in Arizona now for a while, and they have this company that is just crushing it, and they want to have one big outcome for themselves before they retire and sail off from the sunset. And yeah, in this, this concept, which is so basic that I literally just explained to you in two sentences or less, this is not going to be something that the Stanford GSP GSB kid is going to be falling over himself trying to find on Sandhill Road. This is the polar opposite AI type of du jour type company, which as far as I'm concerned, is perfect.
- [40:49]
A
That's. That's super, super cool. I love it. Amazing, amazing. Call up. You know, as we're wrapping up the podcast today, last thing I'd love to ask you about is, as you know, people that are listening perhaps interested in investing at or in looking at companies out there. What are some things that you think are important? You mentioned just the jockey, finding an entrepreneur that's solid. What do you think the key things to kind of determine because you're kind of looking at a glass ball, some would say like you kind of have to make some predictions what are the key things you're looking at to, to predict success in a company.
- [41:26]
B
So I'll come back to the college athlete example. So, so I have a, I wouldn't, I don't know if I'd say a strong. But I have an aversion towards first time entrepreneurs. Not that you know, everyone has to start somewhere totally, but when you, when you back a first time entrepreneur, you just don't know what you're getting when the bullets start to fly. Because some people, when the bullets start to fly, panic and walk off the battlefield with the white flag held high. And that's, you just can't have that as a, as a VC back in a young entrepreneur. So what can you do to try to identify as a proxy for someone who doesn't have a track record as an entrepreneur that could be a proxy for what that metal may be. And that's why, you know, the example of a, you know, Division 1 collegiate water polo player, that guy, you know, had been playing water polo all his life just because he wants to win. And so if you're a first time entre entrepreneur, you don't have a track record. What can you put forth to your prospective investor that will show that you do have the mettle, that you do have the intestinal fortitude to be a rock star entrepreneur, given that you don't have a track record and think that through. And if you can come up with an answer that'll make your pitch that much more compelling, I love it.
- [42:33]
A
Jack, thank you so much for coming on the show, sharing your insights. This has been awesome hearing from you. Really excited to hear about Vintage 2 when it comes, when it's, when it's coming out. We'll get you back on the show to talk about exciting stuff when it comes out. And also big congratulations on the new film. Wrapped up filming on it. A bunch of the other ones have been getting some great, great feedback. So it's exciting stuff. Excited to see where those goes. But thanks so much for coming on the show today.
- [42:59]
B
Thank you for having me.
- [43:00]
A
And to the listener, thanks so much for tuning into the podcast today. If you're interested, I'll leave a link in the description to Jack. Make sure to go follow him on LinkedIn. He posts some absolutely amazing stuff. Been following him for quite a while. And yeah, thanks so much for tuning in the show. Make sure to leave us a review of your podcast and hope you all have a great rest of your day. And we're out.