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- [00:00]
Mark Phillips
It requires that motivation and it requires that sustainability. But if you're with a messy situation at home, if you're dealing with the health of a loved one struggling, if you're dealing with crippling depression, I'm pretty confident that business isn't going to make it.
- [00:17]
Joel Palo Thinkle
Yeah. Welcome to the Investor, a podcast where I, Joel Palo Thinkle, your host, dives deep into the minds of the world's most influential innovation, institutional investors. In each episode, we sit down with an investor to hear about their journeys and how global markets are driving capital allocation. So join us on this journey as we explore these insights.
- [00:43]
Mark Phillips
Oh, yeah, that's, that's fantastic. That's a great, it's a great leap, Leap springboard, I should say, to get into venture. So I think that's a great spot to be.
- [00:54]
Joel Palo Thinkle
And I'm just going to go live now because we, you know, that's a good tee up to just kind of kick things off. But, but you know, we, you know, so I'll just kick this off. So, you know, Mark, you know, thanks for popping in and, you know, glad we got to do some intros real quick. But you know Mark Phillips from Eleven Tribes Capital. You know, him and I have been, you know, getting to know each other the last couple months and really grateful for all the, you know, just crossover and just cross intros that have been complimentary. So, you know, I think it's really fun to kind of build this community and have you be part of it. And thanks for, you know, your support tonight and just kind of as a whole. But, but, you know, excited to have you here, learn a little more about your background. But, you know, I know you started talking about it, but why don't we double click on that a little bit further to talk about where you grew up. I think you grew up in Chicago. You spent some time there. But, you know, let's talk about where you grew up, your career and how that evolved to where you are now and then we can just kind of take the discussion as we go.
- [01:49]
Mark Phillips
Yeah, it's great. Thanks, Joel. It's really good to be here and really fun getting to know you over the last couple months. Yeah. Chicago born and raised. When the Cubs won the World Series, that was a very emotional day in the Phillips household. Very, very exciting. But yeah, my career was started in Chicago. I graduated from school. I was a mathematics major. Didn't really know where I wanted to land, but knew I didn't want to do the same thing every day. So I inevitably moved into consulting. It was consulting or investment banking, that's what I was told. I'm glad I chose a consulting route and ended up working with Accenture Strategy for about five years. So that was, you know, Monday to Friday on the road, kind of that, that travel, travel, life. And it's really cool when you're 22, but it's amazing how old you feel even when you're 27, when you're traveling 25, you know, 25 days out of the month, I should say. So it gets really, it gets really busy. But that experience was really good. I was focused on mergers and acquisitions in the technology space. So we would help large corporations that were interested in acquiring innovative technologies go through the diligence process, then ultimately help with the post merger integration. And so that was really my first foray into technology, into mergers, into how do large companies look at innovation and technology and what are they looking to acquire. So it was really interesting for me. From there I moved into my mba. I went to the University of Chicago. There's a theme here. Obviously I went to Booth to get my MBA and really moved away from consulting. And that's really when the entrepreneurial bug struck, if you will. So in my first year at Booth, I launched my own startup after taking a couple of entrepreneurial classes. And it was an IoT hardware device for type 1 diabetics to help them measure their A1C levels. And so most type ones, at least a small majority, use what's called a continuous glucose monitor. But many type ones still prefer to use the prick of a finger and an insulin and needle to inject the insulin. Well, we created an IoT hardware device and we were securing funding and we were getting close to going live. And about two weeks before we were supposed to hit manufacturing, a large billion dollar health tech company based out of Chicago actually produced the exact same product.
- [04:07]
Joel Palo Thinkle
Oh, wow.
- [04:07]
Mark Phillips
I mean, to a T, right? And it was one of those things where being a fast follower wasn't going to work in that sort of market. It was very niche and, and they were, they were a year and a half ahead of us. And so the whole.
- [04:19]
Joel Palo Thinkle
While you were in college. So while you were doing your mba.
- [04:22]
Mark Phillips
It was a project while I was doing. Yeah.
- [04:24]
Joel Palo Thinkle
Oh, wow.
- [04:25]
Mark Phillips
Yeah, Booth. You know, shout out to Booth. I loved my time there. They've got a lot of entrepreneurial classes. Their entrepreneurial curriculum is, I'd argue, second to none at this point. And so I built, I started it during a class. Building the new venture was the name of the class with Dr. Lindsay Lyman. And from there really scaled it through my whole first year. But, you know, what I want to share is really the lesson learned there, Joel, because the whole thing crumbled in 36 hours, no joke. And I was left holding the ash and shell of myself. Like, it really. That hurt. It stung really deeply. And I was surprised at how incapacitated I felt, frankly. And so through, you know, on total transparency, through some counseling and some mentorship, like, I moved past that. But what became very apparent to me was I had very easily tied my identity and my value as a person and as an entrepreneur into the performance of that company. Yeah, it's really easy to do. And one of the things I think that is helping, you know, like a Silicon Valley created such a unique ecosystem, because I think folks there became convicted that failure is not fatal. But it's really hard when you're in the moment as an entrepreneur to truly believe that.
- [05:39]
Joel Palo Thinkle
Yeah.
- [05:39]
Mark Phillips
And I didn't have the right voices in my own head and around me to help me sort of think about that, going through the process. So moving. Moving out of that, you know, kind of with. With hindsight being 20 20, I became very passionate about changing sides of the table and saying, shoot, I don't want to see another entrepreneur go through that same experience that I did. And I can't help everyone, but I can help some. So my whole second year of Booth, I worked real hard to get into venture. You know, a lot of the stories that were shared today I echo, you know, going through accelerator programs or working with folks like Joel. It's a great way to break in, and we can talk about that. I ended up getting a job coming out of Booth with a big fund out of Chicago. And I gotta tell you, I was there about a month, and I sat back and I asked myself, from what I've seen, are these folks doing anything that I, as an entrepreneur, really would have wanted help with? And the answer was pretty resounding, like, no. They were deploying capital and they were making introductions, but none of the things that really mattered to me were being talked about. So I stayed there a little while, but ultimately moved on back. I went back into consulting, back into mergers and acquisitions in the technology space with a boutique firm, but with an eye on this crazy idea of man. I felt such a profound pain of being an entrepreneur, and I really want to invest in a way that focuses on that. And that's really when the idea of 11 tribes was. Was nascent and it started to percolate, if you will. That was about five years ago, had Joel, Joel, you can attest to this. Had thousands of conversations. And that's not an exaggeration.
- [07:13]
Joel Palo Thinkle
So what was. So can we, you know, we don't have to go through any specific names or examples, but what, what was it that you know, was missing? Right? So I mean you're a vc, you're deploying capital. I'm a product person. So I, you know, I fill that void by rolling up my sleeves. I'll test the app, you know, I'll give like a 20 page deck with, with markups of like an app, you know, and, and give a lot of feedback. So you can kind of lean into your consulting skill set and be kind of like a consultative vc. Right. But I guess what, what really was still the gap?
- [07:51]
Mark Phillips
What's the missing link?
- [07:52]
Joel Palo Thinkle
Because you left. I mean, you're like, screw this, I don't even know if I want to. You know, you didn't even. The dream job for a lot of people. And I'm not saying it should be the dream job, but a lot of people are really trying to get into vc. You finally got in. So what was, what specifically was missing?
- [08:06]
Mark Phillips
I love that question. I'll get, I'll get really specific.
- [08:10]
Joel Palo Thinkle
Was it that you just couldn't build like you weren't building? Is that what it was or part of that?
- [08:14]
Mark Phillips
I think it was the entrepreneurial spirit that I've learned is inherent in who I am, but it's actually more, I'll get even more specific for you. So as we did research for the fund for 11 tribes, and that's really our whole thesis is what we're getting into here. As we did research, we came across a really fascinating study by CB Insights. It was a five year longitudinal study that looked at the failure rates of startups. Why is it, how often does it happen and why is it happening? And what they found is, you know, on average, precedent seed stage startup will fail 80 to 80, 80 to 85% of the time. And when you actually dig into the data over this five year study, what they found was about 65% of the time that failure was completely related and attributable to people. It wasn't product, that's on the list certainly, but that aggregated with all of the other business and product reasons was a smaller subset than the reasons that were like, well, the founder had crippling depression, the founder ended up having a substance abuse issue that killed the business. The co founders no longer saw eye to eye, they could no longer work together. Bad investor on the cap table. How many Times have we heard that story. And I would actually take it one step further, Joel. I would argue that business that's well capitalized and well motivated can solve any of the problems that we talk about. A bad go to market strategy. Well, as long as you have a well motivated team that wants to keep working hard, they're going to push through that bad product. Well, you just keep iterating but it requires that motivation and it requires that sustainability. But if you're with a messy situation at home, if you're dealing with the health of a loved one, struggling, if you're dealing with crippling depression, I'm pretty confident that business isn't going to make it. So that's the thing I didn't see and there are specific stories I can share from my time at the fund where I mean I saw that happening. We knew that a founder was going through a really messy divorce and that's. That, that's neither here nor there. But the thing we had the opportunity to do, Joel, was ask the question, how are you doing? Yeah, it's hard and I understand why my most funds don't want to get into that. Well, that's why we built 11 tribes.
- [10:32]
Joel Palo Thinkle
So I got a story and I'm not going to say any names, but there was a founder that I'm like one of the early investors in this company and I'm probably a smaller investor compared to the lead investors. And this founder actually dealt with some crazy stuff, like personal serious stuff, like medical issues, family problems. But what he was saying, this is probably what you would relate to, is there was a point where they kind of saw him as an asset. So like when he was saying, hey, I'm dealing with some financial, some, some health issues, they were kind of like, well, you know, you're, you know, the way they treated them, they kind of got pissed, you know, and for me, I was kind of a smaller investor. So surprised if he wanted to like, because he actually wanted to talk to me about some feedback on a deck. And I was like, yeah, sure, happy to talk about the feedback.
- [11:25]
Mark Phillips
Yeah.
- [11:26]
Joel Palo Thinkle
And then he's like, hey, I actually don't want to talk about the deck. Can we talk about, can we just talk for a while? Can I vent for a little?
- [11:31]
Mark Phillips
The gates opened, right?
- [11:33]
Joel Palo Thinkle
Yeah. But I felt, but I felt special, I guess flattered that he wanted to open up to me because I'm not, you know, at that time I was like super early. But you know, I guess that's probably somewhat related to maybe what you're feeling at some point, right? When you're deploying capital, it's asset allocation. You're allocating capital to assets. So then what happens is those people, you know, when you're investing in people, you're actually not investing in people. You're an asset allocator, right? So some assets do great, some assets do well, and you got to return capital. If you don't, the LPs aren't going to. The LPs aren't going to re up, Right? So I think that, I don't know if that's kind of close to kind.
- [12:16]
Mark Phillips
Of what you were thinking. I think that story you shared is, is totally spot on. And here's the kicker from our front. So we're in know quick hitter on the fund itself, right? So $10 million fund, we're just nearly closed the whole thing and we're really excited about that. Not, you know, $250,000 on average check size for the seed stage, not the biggest check. Here's the thing, that story you're telling me precisely is exactly why we're getting into some of the best deals, right? That's if you're an allocator, you're an LP, you're asking, well, how does 11 tribes get into a better deal than this person, that person. Entrepreneurs are realizing they have a choice. If you're a founder, there's a new generation, there's this decentralization happening. No one's all cooped up in Silicon Valley anymore. And if you're somewhere in the middle of America, you're realizing, well, I don't have to go with this group. That's just kind of boring dead money. I can find venture funds, VCs that are actually adding meaningful value. So when we get into our pitch, a couple of things. So what do we do to solve this problem? Well, all the things you mentioned, Joe, are critical, right? Well, we help with product development and deck review and all these things, but we also have what we call our 2% commitment. So what does that mean? It means when we allocate $250,000, we take 2% on top of that. So in that situation, it's 5K and we give it directly to the founder for them to put towards their own mental and physical wellbeing. And so that can look like a lot of different things that could look like working with a coach. We've had folks work with therapists to kind of get through some unresolved trauma that they've got. We've had folks go and find a sleep specialist because they hadn't been sleeping well. It could look like a thousand different things.
- [13:52]
Joel Palo Thinkle
So just so I can understand how the deployment process works, so it's 250, but you just deploy 5k extra. Is that coming out of the. Is that coming out of the investable capital or is that just additional off the balance sheet or something from your management fee or something?
- [14:08]
Mark Phillips
Yeah, really important question, because that's really interesting. Yeah, it's different. Uh, it's really different. And I'll tell you what, it's us into deals because when a founder hears that, they're like. And even. I'll tell you what, we've got some bigger funds that have met us and said, wow, if I let you guys top this off, I get a really unique value add. I'll answer your question really directly. We've actually created an expense account within the fund. So let's say we, we commit 250k. We send the whole check. 250k. That's your money. I'm not asking you to touch into that because I know you care about the business. It's your. It's your baby. Like, I'm not going to try to take away from that, but. Oh, by the way, when we did that, we actually put $5,000 over into this expense account. It's sitting there. All you have to do is send me the receipt. Send me the receipt, show me the bill from your coach, show me the bill from your sleeve specialist, and we will pay up to $5,000.
- [14:57]
Joel Palo Thinkle
That holds them accountable to do it as well. And, and for you, I guess, you know, look, I mean, instead of spending $5,000 to go to Opal, you can, you know, use that $5,000 to kind of help a founder. So it's, you know, it's kind of. And you don't have to travel as much now because you're mostly doing remote stuff. So, you know, I mean, it's.
- [15:17]
Mark Phillips
Zoom's been. Zoom's been an amazing differentiator for us. So, yeah, it's, It's. It's neat, Joel. And so. And then the other component. So, you know, when we started, I've.
- [15:26]
Joel Palo Thinkle
Never heard that before. I think that's a bright, really interesting and really brilliant idea because a of lot it's to your point, right? If you can make people feel good and support them and get them on track for the right mission, then they're going to be excited to build whatever they're building. And at the end, the dividends are going to pay out to everybody else.
- [15:45]
Mark Phillips
Yeah, I hope so. Listen, proof's in the pudding, but we're not leveraging the fund. It's not like we're taking. We're talking about maybe at the end of our portfolio. We're talking 250, $300,000 that'll be allocated. Right. So we're talking to 3% of total fund. And so it's not a serious number. Right. It's not enough to like reduce our number of investments by 5, anything like that. So we did the math and we feel really confident about it. I'll be transparent. You know, we've got 14 investments at this point. A number of the invest. The founders we invested into loved the thesis, but you know, you can lead a horse to water. Right. Some of them haven't taken the opportunity. It's okay. Right. And that's the beauty of the way we've structured it is that money will be there when the time is right. But we certainly don't want to force it on anyone. We want it to be something that they know is available to them.
- [16:32]
Joel Palo Thinkle
Yeah, that's great. And what. So the main services that they can get is, is it's a fitness or is it mostly mental? Like.
- [16:40]
Mark Phillips
So we actually launched an organization. So we were working through that whole question and I met a woman named Dr. Melissa Melanic and she's a brilliant PhD of clinical psychology, based out of South Carolina, actually. And I was saying, oh, what if I was hypothesizing. Well, what if you came on as sort of like. We've all watched succession. Like our Wendy Rhodes. Right. She came on as our Wendy Rhodes.
- [17:00]
Joel Palo Thinkle
And she was like, no, no, you're thinking of billions. Billions, right, Succession billions. Yeah, they're both, they're both great shows. They're like my two favorite shows.
- [17:07]
Mark Phillips
Everyone's got me covered. Manveer's got me covered. Billions. It's Wendy Rhett's billions.
- [17:11]
Joel Palo Thinkle
It's exactly.
- [17:12]
Mark Phillips
Session's probably a little bit better.
- [17:13]
Joel Palo Thinkle
Gotta love. We all need Wendy.
- [17:14]
Mark Phillips
So that's right. And so we were thinking about that and then she said, well, this idea is bigger than just that, Mark. Like this is. This is something a lot of funds can work with. So Dr. Malanik is actually, with the support of 11 tribes, launched an organization called the Cadence Group. And the Cadence Group is really kind of exist to do two things. One, how do we bring world class wellbeing practitioners? And that's what I call them. Right. It's not just sleep, it's not just fitness, it's mental health. It's coaching, it's Leadership development. We've got about 35 wellbeing practitioners on this platform of this group called Cadence. And so when you're a founder coming from an eleven Tribes portfolio, we actually. So we give you that access to the 2% commitment, and then you get sort of unfettered access to this Cadence Group platform. We also, in the next couple of months, have a vision for saying, hey, if you're a fund in the same space, like, this is not a competitive. Like, we want to be collaborative.
- [18:05]
Joel Palo Thinkle
Yeah.
- [18:05]
Mark Phillips
And so to answer your question, Joel, it spans the gambit, right? I mean, fitness, nutrition, sleep, mental health therapy, leadership development. Like, we're bringing. Like I said, we've got about 35 practitioners on a platform today, and they span all of those different gambits. So I think the truth is, each of us has different strengths, and each of us has different weaknesses. And if we can be honest with ourselves about what those are, those weaknesses are where we need to take the opportunity to build ourselves up.
- [18:35]
Joel Palo Thinkle
Sure. Okay. So you're feeling all these things. Let's just go back to the venture fund, Right? So you're feeling all these things. You're deploying capital, you're feeling a little numb, and. And you're like, what am I doing in my life? I miss building. I miss solving problems. So you went back into consulting, which was kind of entrepreneurial. Right. When you're doing consulting, you're kind of really trying to optimize a problem and solve it, and that's essentially what a business does.
- [19:00]
Mark Phillips
Right.
- [19:00]
Joel Palo Thinkle
So you went back to the consulting firm. And how was that going? And then what happened after that?
- [19:05]
Mark Phillips
Yeah, Joel, the bug had gotten to me. Like, you know, it had burrowed deep, that entrepreneurial bug. And so I was there. It was. It was a good. It was a good opportunity for me to kind of continue to build and iterate on this idea of my own funds, all while, you know, frankly, continuing to learn and grow my network and pay the bills. Yeah, right. But I knew. The truth of it is, I knew pretty early on into that tenor tenure with the consulting firm that I was going to go do my own thing. I just didn't know what it was yet. So, you know, how did you ideate the fund?
- [19:39]
Joel Palo Thinkle
Like, what. What started? You know, I always love to hear these kind of origin, like. Like trigger effects. Right. So it's like, you know, you're working there, you want to do something. Like, what, did somebody inspire you to start a fund? Because now it's different, right? I mean, you. You launched 11 charge, what, three four years ago?
- [19:57]
Mark Phillips
Yeah, I guess three years ago. And quit my job full time on it too. Yeah, two years ago.
- [20:01]
Joel Palo Thinkle
Would you agree that like three, four years ago is completely different than last year? Right. I mean, there's people spinning up funds like out of nowhere, and it's much easier too. But I don't think the, you know, obviously, you know, these, these programs have come out in the last year as well.
- [20:19]
Mark Phillips
Right.
- [20:20]
Joel Palo Thinkle
But I feel like everybody is launching a fund and everybody's an LP these days, especially within the last year. So, like, what resources did you have? I mean, were those resources there at that time and was it like how it is now or.
- [20:35]
Mark Phillips
That's a phenomenal question. I think a lot of what you're alluding to, and I totally agree, is this, this SEC regulation shift from the 506B to the 506C.
- [20:44]
Joel Palo Thinkle
Twitter VCs.
- [20:45]
Mark Phillips
Right. The Twitter fees. I mean, phenomenal, right? It's. It's unbelievable. We didn't go that we're a 506B, we can't raise in public. And that's, that is what it is. We were able to get where we wanted to get, so that's just fine. No, you know, it's an interesting question. Looking back, it was more just out of my own curiosity. You know, I'd had such a passion to break into vc, like I've heard many of the folks on the call saying, and that's, let me be really clear, it's phenomenal. Right. And finding the right firm to work for, it's a very apprentice, apprenticeship based business. Right. So finding the right person, I'm looking at you, Joel. To work for guys is like, it makes all the difference. And so it's. Breaking into VC is a hard thing to do. And once you do it, you know, finding the right place is the huge thing. But knowing that I had sort of done that experience and wasn't satisfied with it, my curiosity just kept feeding. And so what I did, to answer your question, who I talked to, there wasn't one group that sort of was like that, that's my North Star. It was just conversation after conversation and all I would ask, and it was mostly with entrepreneurs. That's really how our fund was developed. Like, what would you as an entrepreneur really want from a true venture investor? And all I kept hearing was all it was all about personal stuff. Very, you know, there would be, hey, I want help on pitch deck. And with fundraising. You know, most people don't really want a venture fund coming in and telling them what to do. With their own product. But the common theme that I could pull on was, man, if a venture fund could support me as a person, that would make all the difference. So I kept hearing that repetitively and then I started shifting my conversations and reaching out to other funds and saying, well, what are you doing? Tell me what you're doing. Like how do you support your portfolio? And I didn't hear about, I didn't hear this from anyone, Not a single person. I'll give some, some shout out to Alexis Ohanian. He runs a firm called 776 Ventures. He and I launched literally within a month of each other. His launch was a lot more impressive than mine. He does the same thing. They invest capital and they give this sort of wellbeing investment that's amazing to their portfolio. And people are just, I mean they just raised I think $700 million for fund too. So it's awesome. And I actually think in five years, give or take, most, if not all funds will have this sort of allocation built into what they're doing. Otherwise I think we'll go looking elsewhere.
- [23:03]
Joel Palo Thinkle
I'm thinking three years ago, the main resource, I mean this is what helped me because the founders will tell you all of that stuff, which is really important. But you don't really understand how to build a firm or how to talk to LPs. What are LPs, how do you build a pipeline to think about portfolio? You know, how to put. How to build a pipeline of deal flow, how to think about portfolio construction. So I thought the Business of Venture Capital was a pretty good book. That was a resource that I used. That was probably three years ago. That was a really good resource because they. He goes through the LP side of it and then he actually has a lot of quotes from LPs too. So I thought back then that was probably the best resource to me and then just blogs and stuff. But now I feel that there's such an ecosystem. And what's crazy, I don't know if you listen to Mac the VC's podcast episode with 20 minute VC, but he started going really deep. Yeah, that was a really good episode because he went really deep into the mechanics of how he kind of engineered his own framework to collect capital because he was under 506C. And John, I know you had the question here about 506B versus 506C but you know, the main thing I'll say, and you know, Mark, feel free to chime in, but you know, 560, you can, you can publicly fundraise there's a lot of regulations and rules around, you know, talking about raising a fund publicly with a traditional fund structure. So there's a lot of people that are on Twitter that are sharing a lot of content, giving updates on their fund publicly because they're allowed to. I would say some of the disadvantages for 506 is there's a lot more reporting requirements. So, you know, if you're, if you're, I would say if you're raising capital from single family offices, they don't really want to share all that info. But those are some of the insights I have.
- [24:54]
Mark Phillips
But the only thing I'd add is, you know, reporting is spot on. 506C. You have to independently verify accreditation. So when you've got a 506B, you send them a form through Carta and they check a box. The SEC is comfortable with that. Right. When you do a C, you have to have another C service company that comes in and does that independent verification, which requires bank account statements. And it's, it's pretty unpleasant by all accounts. So. Listen, Joel, the, your, the book you referenced was phenomenal. I read Venture Deals as well.
- [25:25]
Joel Palo Thinkle
That was a good one. That was tougher for me to get through. Yeah, that was a good book. But it was, it was, you know, I felt that the business of venture capital was just much more easier for me to digest. I kind of like, I lost my, I lost attention after a while with Venture Deals because. Started going much more into like the legal frameworks and terms and I kind of tuned out a little bit. So.
- [25:45]
Mark Phillips
Sure. Yeah. So we are a, we are a 506B and yeah, I've got a, I just, I was, A few folks came around what we were doing. You know, I had a, I have a couple partners in the fund as well. They are, they're not full time yet. You know, the economics of a $10 million fund. Struggle to support three full time partners. But the goal is for them to become full time and they opened up their networks. And so, you know, each person has, you have to evaluate for yourself what are your strengths and what are your weaknesses from a business perspective. Right. If you've got a platform and a loudspeaker like Mac 506C is going to be a great way for you to go. But that was not where I came from. Right. I didn't have that same, that same tool in my tool belt. And so I had to ask myself, what do I have? And so between these networks, among the people that I had interacted with and gotten to meet just through random interactions and cold reach outs, we felt like we could raise the fund. And so just to share with the group, we're sitting at nine and a half million dollars of committed capital from 73 investors. So you know, average check size hovers right above $150,000. And yeah, it is a 506B as we alluded to. And so there's a lot less reporting. We've got single family offices, we've got some foundations and institutional investors, but the majority of our investors are what I would describe as high net worth individuals.
- [27:03]
Joel Palo Thinkle
Yeah. And then just kind of going back to you, you were kind of brainstorming a lot on building the firm and then what were some of the first steps to finally starting the firm? I guess you started doing research on the formation and then I guess you started. Any advice that you have for, you know, actually there's a few people in here that have talked about starting their own fund too. So what are some strategies that you would recommend for some people if they want to start? Maybe building an LP pipeline. And then also just thinking through the, the thesis. Right, so tell us about 11 tribes, like how you came about. Like when I think about it, I'm like thinking about a tribe. Right, Like a close knit group of people that you call like your own. But you know, tell me about kind of like how that came about, like the thesis and, and the story behind the branding of the fund.
- [27:59]
Mark Phillips
Yeah, so let me touch on the first piece, which is such a good question. Right. So like what was step one? I'll tell you exactly what it was. I started to, I started to meet folks, you know, you have conversations and you realize this person actually has some interest in allocating to venture. So what can I do? I don't have a fund yet. I'll tell you exactly what you can do. You can start helping them be an angel. And so what I did is I started syndicating deals for a little mini angel network that I had started to build in Chicagoland broadly. And So I had 15 or 20 names on an email distribution list. And as I would come across deals at ecosystem areas like 1871 or other big areas in Chicago where there were a lot of companies. I would meet a founder, I would diligence that founder. I put together a deal memoir, I would do everything we do within the fund, all for free. And I would share that deal memo and the financial model and the opportunity with my angel syndicate. And we ended up making, you know, I think we ended up making three investments, small Money, Right. Really, really small, small, small chips. But like, it doesn't matter. So that's what I want to hear. Everyone here to hear is like, it doesn't matter the size. It just. You gotta get started. You just have to get started. And it feels really hard when you're at square one. But little steps repeatedly done over time end up being something meaningful. And so we ended up syndicating a few deals. And when I was able to point to that track record and say, hey, you know, these companies have continued to evolve. They've got early growth, et cetera, et cetera. There were some really productive conversations with LPs. And again, it doesn't have to be this whole, like, I have to create an angel syndicate and charge people. I didn't charge anyone a dime. I love the work.
- [29:39]
Joel Palo Thinkle
And so do you use, did you use Angellist? Is that how you started?
- [29:43]
Mark Phillips
No.
- [29:43]
Joel Palo Thinkle
Okay.
- [29:44]
Mark Phillips
I just, I just sourced them. Angellist was still, you know, the whole rolling fund thing was still nascent. I mean, this was, this was five years ago, Joel. And you know, it's changed a lot.
- [29:52]
Joel Palo Thinkle
So it's like. Yeah, because some people, I mean, back then, you know, SPVs were really, they were just like LLCs. And then it was like a, you know, combined bank account.
- [30:01]
Mark Phillips
Yeah, exactly, exactly.
- [30:03]
Joel Palo Thinkle
It was like a homemade. Homemade SPV pretty much.
- [30:05]
Mark Phillips
Exactly, exactly. So that gave me, that gave me confidence. It gave me something to stand on. It wasn't much, but.
- [30:12]
Joel Palo Thinkle
And you had a track record already because you, you already invested in a couple companies and you also prove to yourself that you're able to have people back your research and your deal. And that's kind of the beginning findings of private equity and asset management. Right. You're having people kind of, you're managing money at a very small scale.
- [30:33]
Mark Phillips
Yeah. And the question every really good institutional investor will ask is, have you returned capital for an institutional investor? Have you done it? And I am. We're getting close. We've got a couple that are getting real close. But yeah, that's a huge thing that when you want to fund one, you raise five, $10 million, you don't need a big institutional investor. You can do it with high net individuals. But as you talk about Fund 2 and Fund 3, you're going to need those big institutional investors. So the sooner you can start that clock, the better. Right. So don't overthink it. Right. It doesn't have to be perfect, but just get started. So, yeah, that would be my single piece of advice to kind of jumpstart the Process.
- [31:11]
Joel Palo Thinkle
Yeah. You know, we got John Robinson on the call. He's buddies with the Hustle Fund. And what I. I just really love what they've done. I mean, they've got, like, swag, and they've got a massive community, and they've got that whole angel group. And I think that's really cool, too. If you can build kind of a brand around that, that's really amazing as well, you know, I mean, just kind of building the community first. So I love what they're doing as well.
- [31:35]
Mark Phillips
Hey, and John, good to see you. John and I got to talk last week, so.
- [31:38]
Joel Palo Thinkle
Oh, you did, that's right.
- [31:39]
Mark Phillips
Yeah, yeah, we had a blast. We had a total blast on the thesis and the brand. You nailed it. Right. I mean, the ethos that we really want to start to represent. I think Hustle Fund has done. You know, we're still early. We're going. But it's really all about what I would describe as entrepreneurship being about something bigger than yourself. Right. Like, people use the term vocation. Right. Or vocational calling. I'm so convicted that the work of an entrepreneur. You don't do this because you want to get rich, Right? If you wanted to get rich, there's a lot. I promise you, there's a lot easier ways to do this. But if you do this because you think that the world should be better or different or improved from the way that it is today, then what you're doing is so much more than a 9 to 5. Right. And so it's this idea of how do we come together as a community and say, hey, you're building this thing because you're deeply passionate about this problem that exists, and how do we support you in a way that honors that, that respects that, but also helps you do that in a really excellent way? And you can hear those things in our thesis, right, Joel? I mean, it's this idea of investing into the person and bringing an ecosystem of support around our entrepreneurs. So we want to make work. We want to make work. Fantastic. Right? People are so disillusioned with day jobs. And I think if you move into entrepreneurship and you're truly passionate and can accept that risk, you will totally change the way that you observe work, and it won't actually feel like you're working a day in your life. And I hope and wish that for everyone on this call and really everyone listening to this recording.
- [33:11]
Joel Palo Thinkle
Yeah. And I. You know, I don't know how the climate is now, but I know probably around the summertime, I mean, there was the whole Great resignation. I don't really know how it is. I got to get a pulse from other people. But, you know, there was at a point, you know, especially I think this summer and probably early, you know, late spring, you know, people, a lot of people just leaving their jobs because they're like, you know what? It's. I can probably find some other way to replace my income. I mean, there's a lot of people, you know, building different brands. I'm a big follower of the, I'm a big follower of my first million with I forgot his name, Sam Parr. But there was an episode recently and you see this trend. I mean, if you're Kylie Jenner, you could either get a couple million dollars to tweet about l' Oreal or you can just build l' Oreal and build that, pretty much compete with l' Oreal because you have that reach already, right? So people are paying you for your reach, so you might as well just use your own reach. And the way that you create that generational wealth is through that brand. So that's just been really. So I've been recently just getting really excited about the stories that they've been covering on my first million because it's just so many people just. There's a guy that was a Enterprise Sales, B2B Enterprise Salesperson. I don't know if you saw that episode, but he had, he had these vending machines and he started buying some of them. But he was such a good hustler in sales that he would convince venues to not even chart, to not even take a royalty because a lot of times the deal is like, hey, can I put my vending machine in your gas station? And then, and then the sell is the gas station get some revenue share. But she was able to sell like these older underdeveloped motels and you know, retirement centers that like that, hey, we're improving the experience for your customers. He was so good at sales that he was able, but he was able to generate almost around $15,000 in passive income from the vending machines. And he was like, I'm actually really.
- [35:13]
Mark Phillips
Good at this year.
- [35:15]
Joel Palo Thinkle
All machines that he had at the time recurring monthly. So 15, 15,000 monthly recurring revenue off of vending machines. If you think any. What he was saying is, you know, these vending machines that are at these older kind of low income motels, people, people are staying. You know, some of them, I think some of them are long term stay hotels, but these people are buying like 5 to 6, like Mountain Dews day. You Know, it's like there's repeat customers, you know, just kind of going through, going through those drinks. I mean, in America, people, people live on. People live on Mountain Dew and the Big Gulf, right?
- [35:55]
Mark Phillips
So that is the truth. Yeah.
- [35:58]
Joel Palo Thinkle
So this guy quit. This guy quit his enterprise sales gig because he was like, you know, I'm making much more money doing this and I get to be more entrepreneurial. So why, why exchange my time for money, right. When I can kind of build some type of, you know, some type of business that can kind of, you know, give me some freedom?
- [36:15]
Mark Phillips
Well, I think you touch on a really important point. And Joel, I was speaking with our mutual friend Vishal last night and you know, he's got this amazing business he's building.
- [36:25]
Joel Palo Thinkle
Yeah.
- [36:25]
Mark Phillips
And what struck me about the inspiration for it is it wasn't all that exciting. You know, it was this experience he had in his own personal life. Someone needed him, put some money to buy a product that they could then sell for a markup. He said, well, why don't I do that at scale? Right. I mean, I think the same thing about what we're doing for this font to kind of go all the way back to the start of the conversation. I had a really poignant experience as an early stage founder building a product, an IoT hardware device business. And that experience, I saw a need. And so you asked about sort of the inspiration. I mean, the inspiration for me was just looking at my own personal life and saying, what would I have wanted? And as it turns out, what I had wanted in that moment is what I think a lot of entrepreneurs are looking for today, which is that support which Joel, as you experience, was someone to talk to. It's not profound. It's not. It's actually really simple. Sometimes the simplest things can have the greatest reach.
- [37:23]
Joel Palo Thinkle
Yeah, no, I agree. Let's go a little into some of the tactical skills for becoming a vc. So I guess one thing that would be interesting to the group is what, what do you think you did to outperform in the interview to get that VC job at the top fund? And then how, how have you kind of evolved that to now your own strategy to number one source deals and then also to look for like, you know, obviously you're pretty early, but at some point, you know, as you scale, you're going to look for an analyst. Right. So what, what do you think helped you outperform to get that job offer? And then kind of what are the critical skills for like analyst or associate?
- [38:01]
Mark Phillips
Great questions. Phenomenal. I will give an answer that I already sort of gave, but I'll shift it. As you're trying to break into a big fund, I think there's a really, really simple, tactful little thing you can do to separate yourself because everyone's going to understand sort of the, you know, have all the good questions. Right? It's an incredibly, it's an incredibly competitive space. Here's what I started doing. And this goes back to the Angel Syndicate. What I started doing was putting together a pipeline report for every venture fund that I was interviewing with. So what I would do is I'd go to their page. So I was at University of Chicago. I had access to PitchBook, that is a unique differentiator. You can still do it with Crunchbase and Angellist and the like, but here's a really easy thing you can do. Put together a three to five company report for each venture fund that you're interviewing with. Do research on their portfolio. What are they interested in? Is it fintech, Is it health care? Is it education? And what I had is like a database of 15 companies on sort of a rolling basis. And when I figured out what the thesis of the fund was, what they were focused on investing into, I would narrow that down to three to five companies, have a little bit of analysis and report out on what those companies were doing, what the opportunity for investment was, and send that to the interviewing. Managing partners of the fund did that a whole bunch of times and I got a whole bunch of no, still. So don't, don't hear me as this is a silver bullet. But in the interview that actually ended up becoming a job offer, we talked about that more than anything else, Right? And so what they saw me doing, this is really the meat and potatoes of it. What they saw me doing was I was doing the job before I had the job.
- [39:36]
Joel Palo Thinkle
Yeah, I agree.
- [39:38]
Mark Phillips
I'm sure you feel the same way, right? If you can see some interviewing is so hard, we're all biased, right? We all have these blind spots we don't even know. And so when you can observe someone doing the job before you actually have to hire them to do the job, boy level conviction, you have skyrockets. So that was the thing I did pre interview that I found to be really effective. The other two things that. Well, the other. Well, I'll say two. The other two big things that I've developed from a skill set perspective is I'm, you know, not to toot my own horn, I'm extremely capable in Excel and that came through consulting and then into Booth. And then even during booth, I took classes and, you know, Wall Street Oasis and all these programs of available online to get really, really capable. Because, you know, there is early stage venture math is a little bit squishy, but it still exists. Right. And you still have to be able to work through those models. And then the third thing that I'll say, and then we can kind of talk about it, is this has been more on the fund as a fund manager, Joel, as opposed to an associate within a fund building slides matters. Slides matters. You know, I am. I. We are our own little startup. And when I. When I reach an lp, they say, well, send me your pitch deck for the fun. I built that. I built our pitch deck from the ground up. Right. And so you have to be able to communicate ideas through slides, just like any entrepreneur is doing with their own pitch deck. So those are really the three biggest skills that I've observed in my experience of being effective.
- [41:06]
Joel Palo Thinkle
Yeah, there's. Have you heard of Ms. Excel?
- [41:09]
Mark Phillips
Yeah, she's. I'm not. I don't use TikTok, but I've seen her videos, so she's pretty phenomenal.
- [41:14]
Joel Palo Thinkle
She's been. I think she's got, like, sponsorships with. With Microsoft as well, so it's.
- [41:19]
Mark Phillips
She's killing it. She's bringing down like 150k through her TikTok videos. It's.
- [41:24]
Joel Palo Thinkle
I just. I just posted the video. So for those of you that don't know, I mean, there's a woman, I think she worked in consulting, but she was really good at Excel, so she started doing all these fun videos with like, music in the background, like showing hacks on Excel, and she was able to kind of really scale her brand. And. And I think she sells like little. I think she sells like, little tips or little tutorials. And yeah, she's crushing. She's making like 100.
- [41:49]
Mark Phillips
Totally crushing it.
- [41:50]
Joel Palo Thinkle
And then getting sponsorship.
- [41:51]
Mark Phillips
Insanity, man. It's. So. It's. What a crazy time we live in. I want to add one more thing, which is on Excel. It's so important. There's. And listen, getting good at Excel is not hard. It just takes time. Okay? Yep. But here's the other thing I'll tell you. Diligence process. Now, as a fund manager, decks are great. I like Dex. You know, you get the idea where I really can tell an entrepreneur that knows their stuff is in the financial model. I mean, when you go into a financial model and you can make your way through it and you understand how they're formatting what they're pulling from. And then this also comes into, like, understanding, you know, financial statements, frankly. But once you can work through those, you can really find an entrepreneur who understands the levers of their business versus someone who kind of just threw something together. And again, this isn't like our only decision point, but it is another influential data point to help us understand is this entrepreneur well prepared to run this business. So Excel will never be a skill that goes out of style. I promise you that.
- [42:50]
Joel Palo Thinkle
Yeah, no, I totally agree. And I think, and I tell people this all the time, some of the people even in this, in this call, it's like, you know, you don't necessarily, my point is like, you don't necessarily have to always be the person that builds the model completely from scratch. If you, and you talked about this earlier, you got to know what you're good at, right? So if you're more of a relationships person and you're focused on closing capital, you're focused on building the brand, you're the visionary, you're just not that. You're just not the person that wants to sit down for three hours and build a model. But you're a leader, so you can find somebody that can, but you still have to understand it and speak to it and know every component of it. So that's why they have outsourced CFOs, right? So I have an outsourced CFO that helps me. So I think, you know, I, I've seen amazing, you know, Excels and some of the CEOs, like, yeah, we have a great partner. You know, there are, there are cfo. So it's also nice to have a second set of eyes. But they need to speak to it. They need to understand, you know, what, you know, what the, what the, what, you know, how the cogs came about, how, how does that feed into your operational expenses and then, you know, the, you know, all of the other expenses and how they break out. And I think just understanding those levers and then I think really understanding the dynamics of how revenue translates to the valuation. Right. So is there a multiple in revenue that justifies a certain valuation at a certain period of time? I think that's also interesting to see how they're thinking through that. Yeah, Important point.
- [44:21]
Mark Phillips
Yeah.
- [44:22]
Joel Palo Thinkle
We got a couple more minutes. I mean, this, you know, this is just so much fun. It flew by. A couple more questions I have is, you know, what advice would you have to new VCs for sourcing and screening? So, like, what are some tips? I mean, tips I've given is obviously go to, go to demo days, go to startup events, you know, message other VCs, you know, share deal flow. But you know, I've also another interesting hack that I've seen is just really the power of LinkedIn. So if you actually just search on LinkedIn building something new under people, like there's actually some interesting like people that have sold their company that are actually building like a new company and stealth.
- [45:05]
Mark Phillips
Fascinating. Yeah, we've gotten some. Literally in the last month we've had 5, 10 companies reach out on LinkedIn because they've started to hear about what we're doing.
- [45:17]
Joel Palo Thinkle
And yeah, that's great.
- [45:17]
Mark Phillips
That's why they're so helpful because people see this and they say that's a good, interesting thesis. I want to talk to that person. Yeah, it's an excellent question. And my answer that I always share is deal flow is about relationships. It absolutely is about relationships. And at the stage we're investing, if I read about a company on the Internet, I'm way too late, right. If they've already gotten an article about them, their valuations way beyond where we want to be putting money to work, and it's waste. So what that means is we had to build relational connections between the right deal flow sources. Demo days is fantastic. We've got a partnership with an accelerator actually and so we worked out that we can get proprietary, it's called Ocean Accelerator, based out of southwest Ohio, Cincinnati specifically. They're very excited about the Bengals. So they have a great once a year accelerator program that they do and they get about a couple hundred applications a year and we get proprietary access to the companies on the other end of the accelerator program. So that gives us really great deal flow that's truly proprietary. And as a fun one, that's been phenomenal.
- [46:23]
Joel Palo Thinkle
Especially if you can get it before. Especially if you can get them when they start the cohort. If you can maybe work something out where like you can give them some extra feedback that gets you access before it gets like too oversubscribed at the demo day.
- [46:36]
Mark Phillips
Right. Yeah. You gotta find ways to kind of break out of the noise. Right. Non consensus is an overused term, but it's a little bit. Right. The other thing we really have flown through here, the other thing I didn't get the chance to talk about is what we call our venture partners program. So when we were building this fund and we were kind of focused on this sort of thesis around the founder wellbeing, I got some very real and harsh feedback. Helpful. Harsh isn't A bad thing of, hey, if you can't help a founder build a business as well, you're not going to be that helpful to them. Right. And so what we did is we built the venture partners program. This is the simple way to put it is these are ex founders. These are people who've had successful exits and are at a point where they really want to move into helping influence the next generation. And so what we have done is we've actually incentivized them through a portion of our carried interest in the fund to bring us deals and then to work with those companies as the venture partner on the deal. And so what does that have? It's been phenomenal in helping the businesses grow. But the other thing we didn't expect, Joel, was they've been phenomenal sources of deal flow because we have incentivized them to bring us the best companies that they see in their own ecosystem. So they're in Boston and Washington D.C. and Austin, Texas, Denver and Nashville, et cetera. The list goes on. So what I would say is, you know, be creative. Yeah, we've tried really hard to do with our fund is let's not just do what everyone else has done, right? Change the structure, figure out how you're going to put money to work in different ways. You know, it's not about just holding onto as much money as you possibly can. If you do well, you know, even if you give some of that away to others who are supporting you, you're still going to be really happy financially. But you have to create avenues and pipelines that are unique and creative. So that venture partner deal flow source for us has been through the roof. Absolutely through the roof. So be creative with it.
- [48:29]
Joel Palo Thinkle
Yeah, no, it's really helpful. We got a couple quick questions. You got maybe a couple seconds, Mark, for one or two questions.
- [48:34]
Mark Phillips
Hi.
- [48:38]
C
Hi Mark. Thanks for sharing. I mean this, this was amazing to hear your story of going from literally 0 to 10, you know, and the syndicates, I'm kind of similar. I have a consulting background and it's been on my back burner for a while and I, you know, this is something, it was so inspiring to hear you. My question there was, I looked and I also love this venture partner idea. I think I might steal that. I saw your team and your team is full of wonderful people. I mean, I haven't gone into their backgrounds but amazing, amazing. On the venture partners, I think that's a great way to kind of spread your network. My question is, your portfolio is very diverse. So what is your Connecting thread or what is kind of the. How do you unify that portfolio?
- [49:24]
Mark Phillips
Yeah, wonderful question. And this is going to come back to our venture partners. Please do steal the idea. I think it's, I think it's phenomenal. I can't believe everyone does. Yeah, so the threads are staged. So we're really intentional about where we want to invest and targeting a specific, a specific ownership percentage. So we really like to hit about 5% at a seed stage. And so with a $250,000 check, that means we don't want to go much over $505 million pre money valuation. So we're really intentional about the stage. We're very intentional about the geography. Listen, I think there's a huge decentralization happening right now. I think the number I saw was five years ago, Silicon Valley represented north of 80% of capital deployed. That number is down below 35% today. Right. So you can go look for a deal in Silicon Valley and you might believe that's where you're going to find the next unicorn. You probably will. But you're going to pay probably 5x what you're going to pay here.
- [50:16]
C
Right? You pay premium. Right. From, from, you know, the precede and seed people talk in two digits and they're like back of the napkin. And I'm like, I'm not sure I see the value.
- [50:27]
Mark Phillips
Pre revenue, $25 million pre money. Pre seed.
- [50:32]
C
Yes.
- [50:32]
Mark Phillips
I couldn't believe it. I mean, I could not believe it. And so, wonderful business, wonderful founder. It's just not a match for us. So geographically, that's the other component. But here's the kicker, right again. How do you support an ecosystem? We, we want to be very agnostic and very diverse. We want to provide our LPs an extremely diverse allocation to a number of different industries. So we don't say no to any companies coming in. But what we do is we use our venture partners. So if you don't know the venture partners as well as I do, but they span different industries, agriculture, health care, education, financial services, the list goes on. And so we've specifically curated this list of venture partners to help us as a diligence component. So when we look at a company that's in the financial services industry, we've got a guy named Myers Dupuis who has founded two and successfully exited two financial services companies. So we'll bring business to him and say, Myers, does this make sense? Here's our diligence, here's our memo, here's our financial analysis. What are we missing? And so it allows us to be experts anew in a way that we don't have to know the industry really intimately because we can partners to be that industry expert for us.
- [51:43]
C
Right, I can see that. I can see that you've been a consultant. That's totally the consulting mindset. You know, I used to be with EY, actually. I mean, you always bring in the SME, right? And that, that's what you're doing.
- [51:54]
Mark Phillips
So you got it. You got it. She got me, Joel. She. Rock on, Mark. Thanks, Anu, that's great. Appreciate the question.
- [52:02]
Joel Palo Thinkle
Mark, you got a second for one more question from John?
- [52:05]
Mark Phillips
Absolutely, absolutely. I got plenty of time.
- [52:07]
D
All right, John, thank you for your time in advance. Right, so as I mentioned, I'm looking into deep tech and specifically on the space industry by chance recently, I'm getting involved in a very organic way of communication and engagement with very senior folks who are working on very big deals.
- [52:29]
Joel Palo Thinkle
Okay.
- [52:32]
D
They're serial entrepreneurs. They have broad companies to the public, you know, 15 or 16 companies to the public. People that have discussions with Elon Musk and the likes of him. Right. How do I reach? So there's a challenge here. I don't have much experience on the VC ecosystem. I'm learning because of Joel's program. How do I reach VCs, venture capitalists, or family offices that have deep pockets and they can write substantial checks. Right. I don't know if I can reach Tiger Global, I don't know if I can reach Sequoia, but I'm getting involved with some senior people and I have to be very careful because every step that I take has to be credible and reputable and I cannot make mistakes. Right. I cannot. I have to show that I'm knowledgeable and I have to educate myself as much as I can so I can provide added value. They're trusting me now because it's done through reference and they like my personality and how I speak to them and how I engage them. But then again, in order for me to add value, I have to showcase, you know, what I can do for them. Right. So how would you approach that? Or if you ever come across a.
- [53:55]
Joel Palo Thinkle
Big deal like stressed out mark and.
- [53:56]
D
Handle within your portfolio and you reached out somewhere else.
- [54:01]
Mark Phillips
Yeah, man. Wow. It's just. It's a phenomenal question, I would contend. It's the question that really every investor is trying to answer for themselves. Right. I mean, Joe, I saw you nodding along, right? It's like, I would love to be doing deals with some of the largest funds in the world. Right. So, John, I don't have. I'm not the sort of person who pretends to have an answer to every question. I don't have the answer. I'm working on it each and every day. I. A couple things I want to echo that. You said that I deeply resonate with taking each step and doing it in an excellent way. That is the single one thing you can control, John. Doing every. Every action you're taking, doing it in a way that's honest and forthright and excellent. And if you continue to do that, it sounds like you're already catching the attention of some really serious players. Yes, those serious players.
- [54:51]
D
And by chance, it's not really. I don't have that experience, but it's just by chance, my personality.
- [54:57]
Mark Phillips
Well, but just don't, you know, I.
- [54:59]
D
Don'T know what to call them. But yeah, by chance.
- [55:01]
Mark Phillips
I don't really. I don't really believe in coincidence all that much. I think it's just, John, you're putting yourself in a position where you're saying it's by chance, but it's because you put yourself in that position. It's because you've done xyz. I don't know your whole story, but you've put yourself in that position to be successful. So keep taking those steps forward. We just had. Listen, I would love to do a deal with Andreessen Horowitz. Three years ago, I had no idea. I don't know how to get a hold of them. One of our portfolio companies we just invested into a year ago, one of our very first investments, just got contacted by Andreessen Horowitz. And so now they're going to raise a Series A and we're going to participate in that, hopefully. And he's going to make room for us because he loves us as an investor, and Andreessen's going to do it. So I've now got a direct line of communication into a really big venture capital fund. Right. That was nothing that I did. But we just continued to do the thing that we know we can do, which is invest in entrepreneurs in a really great way. So there's no silver bullet here. And I think that's a message to everyone, right? Like, none of these things happen overnight. It's just continuing to do the little things really, really well. And then as those culminate, they turn into really exciting things. So, I'm sorry, that's not a great answer, but it's kind of the best thing that I got.
- [56:18]
D
So what would be a persuasive tactic to reach out to Horowitz or I don't know if I'm even pronouncing it correctly, or to Sequoia or Tiger Global. What would be a persuasive tactic to reach out?
- [56:33]
Mark Phillips
Joel? I'll let you answer. I'll go first. A few. Phenomenal investment opportunity.
- [56:38]
Joel Palo Thinkle
Yeah.
- [56:39]
D
Okay.
- [56:39]
Joel Palo Thinkle
I mean, so you get judged on. You get judged on your deal flow, right? And I think two things that have helped me is, you know, maybe not focus on Tiger Global right now. Focus on, you know, investors that, you know, you know, and people that you have good relationship with. Good relationships with. Because those people that, you know, probably also done the same thing. They've also just try to build a lot of goodwill. And two things that will work for me is try to figure out what somebody needs, right? So, yeah, maybe, maybe somebody that knows Tiger Global, you know, four intros away, like, you know, maybe four degrees farther away, you know, they need help with something, right? And then you can identify what they need help with. Maybe they're. Maybe they're looking for some type of interesting deal and, you know, have that subject matter expertise, and you've been able to kind of attract that type of deal. So when you identify what somebody needs, if you can provide that solution, that's a first step of building goodwill. And then I think if you can do that with enough people, you've built some friendships, and then I think what you can do. And I've done this with, you know, Mark as an example. Right. Like, I try to just connect people, and I think that is a huge undervalued currency because then when you can connect to people that really, really get a lot of value from meeting each other, those people feel that they want to connect you with someone else. And recently there's been a very, very high profile investor that I got introduced to and I met them. We had a good, you know, good call. But I knew somebody that really, really could add value to that investor. So I just put those two people together and I didn't really, you know, expect anything or get anything out of it, but I was just happy that, like, those people got to talk because then there is a lot of electricity there. So I think two things is, you know, understanding what problems people have and, like, what they need help with. And then if you can connect them with someone, even if it's not yourself, that will build a lot of goodwill and it just takes time. But I wouldn't focus on Tiger Global, like trying to. Trying to, you know, get on the Call with Tiger. Because if you don't have a really hot deal, then it wouldn't matter, but you can, you can work towards that through just the, the, the relationships compounding over time.
- [58:56]
D
But let's say if you do have a hot deal and you don't have the experience, you need a support system or a syndicate of people that can actually push forward that deal, because obviously they're not going to take my word for it, but they're going to be actually. We can actually leverage our network or the people that we know and we trust to push it forward. Is that really the best approach? Because that coincides with your. The ability to build the relationships and connect the right people together and kind of push things through.
- [59:30]
Joel Palo Thinkle
Yeah.
- [59:30]
D
Is that what you mean, Joel? I think that's, that's what you were, you know, you were intending to say, right?
- [59:37]
Joel Palo Thinkle
Yeah. I think Mark had a really good example when he was starting out, you know, when he had a couple small syndicates and built a small, small community, you know, maybe do a couple small deals and build a little bit of a track record. And I think that's a good way to kind of have that slowly compound over time. So I think, yeah, if you have an interesting deal, even if you don't invest or if it's not a huge investment, you know, maybe you write a memo together with a few friends and you, you know, you guys all chip in together and do a deal together. So I think that can kind of slowly build the track record because maybe word will get around at some point to a more seasoned investor that, oh, wow, you know, that was you, John. Like, you did that deal. That's, that's actually a pretty good deal, you know, and then that's kind of how you can open up those discussions. So it goes back again to the deals, right? They're like, what did you invest in? Okay.
- [60:21]
Mark Phillips
And I would echo what Joel said, which is, you know, John, I get a sense that you, you know, you've got some big names on your mind, and that's awesome, but you can't go outside of what your current network has. Right. And so I wouldn't be so hyper focused on. I have to get to xyz. I'd be focused on what you have and Joel. I'm going to just, I got to give Joel just huge props right now. I have never met another investor that is more generous with their network and relationship than Joel and what it does to create network effect and goodwill and frankly, more benefit. Because people know Joel and they're like, Well, I want to introduce people to him because he does the same thing. So. So don't hold. I try to operate in the same way and use Joel as aspiration here. But, John, don't hold your networks tightly. Right. Use them broadly and generously. And what I think you'll start to see is those networks, those introductions to bigger firms that you want to get a hold of, those will start coming back to you many times over. So be generous with that.
- [61:23]
D
No, I can see that Joel has been extremely generous, and that's why he has such a, you know, such a success bringing in the right people into the cohort and teaching us, you know, what. What, you know, all their, you know, how they, they move from one place to the other and how they became very successful as venture capitalists. So I think that he's been doing a great job on this. One last question that I have, and it's a yes or a no. Do you have. And it resonates what Joel was mentioning before. Before, it was like he was doing my pitch. I was pitching an MPP company and I was explaining exactly the VC method of valuing a company. Right. And it required a PE ratio, and it also required the EBITDA and all that stuff. So is there something that you have been leveraging in the past that has been extremely successful in order to. For you to value a company? Because we gain so many pitch decks and everybody has a crazy valuations. So how can we narrow it down? We have to do our work on our own and figure out does this valuation make sense. And there's a formula for that. Do you leverage a formula like that or you lie?
- [62:36]
Mark Phillips
This is a yes, no question. But I don't think a yes or no.
- [62:40]
D
Do you have an Excel spreadsheet that does that? Yes or no?
- [62:43]
Mark Phillips
Yes. Okay, end of the conversation. All right. I love this topic because I was, like I said early on, I was a math major. I'm a finance guy, kind of at my core. Yeah. So this is really what I focused on in my second year at Booth. I took some of the most comprehensive entrepreneurial finance classes in the world. I use a financial model. I'm happy to share it with you, actually.
- [63:06]
D
Please.
- [63:07]
Mark Phillips
I don't want to share it too broadly, but this group, I think is. We're fast friends now. It's a probability adjusted present value calculation. Excellent. You can probably parse through what that means. But when you get the EBITDA projections over a five, seven year period, obviously each of those cash flows are worth something today. But the Probability adjusted component says, well, what's my probability of success or my chances of failure? And so even if I did a present value calculation to present day for those cash flows, I still have to give that an adjustment based on the chances of success.
- [63:39]
D
Correct.
- [63:39]
Mark Phillips
And so what we do is it's very comprehensive and I'm right there with you. We do our own assessment of every company we invest into and if they're raising on a, you know, a $20 million pre money series A or seed, for example, and we really value them at 8 million, we're not going to invest in that company. And we've had a number of examples where we share this information with our potential investments and they adjust their investment vehicle accordingly. There's a lot of made up numbers going on out there. So the more we can use actual formulas and actual math, I think the better. So I'll get your email from Joel and I'll send it over to you. And happy to jump on a call to walk through it as well. I think. I think you'd find it interesting.
- [64:22]
D
Oh, that will be perfect. Thank you so much, Mark. I really appreciate it. I'm looking for something like that so I can assess very quickly whether the ask makes sense and, you know, based on the valuation that they're coming up with. Right. So. And then I can actually decision, no, this doesn't make sense. You want to work those numbers better so we can come back to the table and discuss it further? Yeah, let's do that.
- [64:43]
Joel Palo Thinkle
Yeah.
- [64:44]
D
So this way I have some kind of justification, you know, as to why I'm pushing back and saying, okay, this valuation does not make sense.
- [64:50]
Joel Palo Thinkle
Cool. All right, great.
- [64:53]
C
Would you share, would you share your spreadsheet with me too? I'll send my email to Joel.
- [64:58]
Mark Phillips
Yeah, Joel, give me Joel. If you can tell me who I should send it to, I will send it. Probably will need a call to go through a team, so.
- [65:07]
C
And we'd love to have you back so you can walk us through it. It'd be awesome if you would come back.
- [65:12]
Mark Phillips
Oh, man.
- [65:13]
Joel Palo Thinkle
If we didn't drive you crazy yet, you know, we would love to have.
- [65:17]
D
You know, I'm saying we very much appreciate your time very, very much. We know that you're taking a lot of time out of your work day and it's very busy and we really, really appreciate it. Thank you so much, Mark.
- [65:28]
Mark Phillips
That's great. That's great. All right. I love it, Joel.
- [65:32]
Joel Palo Thinkle
Time for, time for, time to go to bed, guys. But hey, Mark, thank you so much, man. Really appreciate it. Sorry for holding you up late, but we'll catch up soon. Hey, I'll see you. I'll see you. A lot of you, actually, in the next few weeks, too.
- [65:44]
Mark Phillips
Great to see you. Wonderful to meet the team. It sounds like we're going to talk again soon, Sam.