Episode #97: Phil Nadel, Forefront Venture Partners, “If You Try To Pick Winners, And You Only Invest In A Handful Of Companies, Odds Are You’re Going To Lose Your Money”

Episode #97: Phil Nadel, Forefront Venture Partners, “If You Try To Pick Winners, And You Only Invest In A Handful Of Companies, Odds Are You’re Going To Lose Your Money”

 

Guest: Phil Nadel is a well-respected serial entrepreneur, angel investor, published author and frequent speaker at industry conferences and events. He has started and sold several companies and has invested in more than 75 startups with several exits. Phil co-founded Forefront Venture Partners (formerly Barbara Corcoran Venture Partners) in 2014 and has been its Managing Director ever since. Phil is also one of the investors on Gimlet Media’s The Pitch podcast.

Date Recorded: 2/28/18     |     Run-Time: 1:06:53

Summary: After Phil runs us through his background, Meb asks about Phil’s group, Forefront Venture Partners and its connection to Angel List. Phil gives us the run-through, noting how when Angel List announced its syndicate feature, he felt it was a great way for smaller angels to get involved, so he signed up. Today, he’s one of the largest/most active leads on Angel List.

Meb asks how the syndicate process works. Phil tells us that accredited investors can register and sign up with syndicate leads like Forefront. This enables them to see the deal-flow of the lead, and invest on same terms. There’s no management fee, instead, investors pay a 20% carry on the backend if there’s a profit. You can invest small amounts – sometimes as little as $1K, yet you get all the same due diligence and legal review as a big investor.

Meb notes how syndicates have removed so much of the hassle and made the entire process simpler – which is both good and bad. Next, Meb asks about Phil’s syndicate and the average investor. Phil tells us the average investment in a company is roughly $300K. And they’ve invested in about 44 deals since inception. The average investment per person is around $4-5K. This dovetails into a conversation about how to approach angel investments. Phil tells us a “portfolio” approach is important. He’s against picking only a few companies, as most will go out of business. He tells us “if you try to pick winners, and you only invest in a handful of companies, odds are you’re going to lose your money.” Phil recommends picking companies diversified by industry and stage.

The conversation then drifts into timing. Do you invest all at once, or drip in over time? Phil gives us his thoughts. Then it’s Phil’s rule of thumb about success rates. He tells us that out of 100 investments, 70 will go out of business. About 20-30 will stagnate, or exit as a single to a triple. Maybe one or two will turn out to be home runs. Meb asks how Phil finds his deals. Turns out, lots of referrals. The guys then dive into what Phil looks for in a company – it includes post-revenues and capital efficiency. But he’s industry and geography-agnostic. His sweet spot is a valuation in the $5-12M range.

Next up, the guys discuss KPIs, or “Key Performance Indicators.” Phil discusses burn and runway, then customer acquisition cost and lifetime value. Phil wants to see that the company knows how to acquire and monetize customers in an efficient and scalable way. He then also looks at margins.

There’s plenty more in this angel-themed episode: the extent of Phil’s involvement in a startup after funding… the critical role that updates from founders play in the startup process… some “bad investor behavior” which Phil has seen over the years… what Phil learned from Barbara Corcoran of the show, Sharktank… and of course, Phil’s most memorable trade.

Comments or suggestions? Email us Feedback@TheMebFaberShow.com or call us to leave a voicemail at 323 834 9159

Interested in sponsoring an episode? Email Jeff at jr@cambriainvestments.com

Links from the Episode:

  • 00:50 (First question) – Introduction and Phil’s journey to angel investing
  • 1:21 – Jason Calacanis Podcast episode
  • 3:36 – Adventures in direct mail
  • 5:28 – How Forefront got started
  • 6:35 – Syndicate process in angel investing
  • 9:40 – Specifics of Phil’s syndicate
  • 11:47 – Advice for people who are going to allocate money into angel investing
  • 15:00 – Timeframe for angel investments
  • 17:29 – Ballpark success rates for angel investment companies
  • 22:09 – How Phil gets his deal flow and filters opportunities
  • 25:37 – The market cap range in which they’re willing to invest
  • 26:21 – Three most important KPI’s for evaluating a startup
  • 26:28 – “12 KPIs you must know before pitching your startup” – Nadel
  • 30:13 – Key questions and red flags when talking to a founder
  • 31:10 – How involved Phil in his investments post-funding
  • 35:34 – Importance of getting and sharing company updates
  • 42:37 – What investors should be looking for as they qualify syndicates
  • 47:31 – Bad behavior among syndicate investors
  • 50:09 – Working with Barbara Corcoran from Shark Tank
  • 50:20 – Shark Tank in the news recently
  • 52:03 – What’s more important in venture capital investing, the idea or the founder?
  • 53:39 – Phil’s most memorable investment
  • 1:01:50 – Disastrous investments
  • 1:05:31 – Best way to connect with Phil – Medium, Angel List, Email

Transcript of Episode 97:

Welcome Message: Welcome to the “Meb Faber Show,” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing, and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.

Disclaimer: Meb Faber is the Co-founder and Chief Investment Officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions, and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.

Meb: Welcome podcast listeners, today we have an awesome show for you. Our guest is a serial entrepreneur, angel investor, syndicate lead, author, and a frequent speaker. He’s also the Founder and Managing Director at Forefront Venture Partners, which is one of AngelList’s largest and most successful syndicates. Welcome, Phil Nadel.

Phil: Thanks Meb, great to be here.

Meb: So Phil, listeners, today’s episode is gonna focus a lot on startups, in private investing, this is a topic we’ve touched on briefly in a couple other episodes, we had Jason Calacanis on here. But Phil has been probably my favourite lead in syndicate on investing. And Phil, a little background as listeners have been following my evolution of doing the private investing, and so probably you’ve done 30 to 40 deals since 2014. And I think you’re the number one person that I partner up with an allocating to, so kudos to you and hopefully, we’re gonna learn a lot and talk about some of that today.

But as we get started, let’s start with you and go back in time a little bit, why don’t you walk us forward a little bit, give us a kinda brief overview on your background, how you got to angel investing, and then we can kind of talk a little more about what’s going on today.

Phil: Sure. First I wanna thank you for your commitment to our syndicate, much appreciated. In terms of my background I’ve been an entrepreneur for many years starting right out of college, went to undergrad business school, got out and started my first business, and over the years have been in various industries, starting with Fintech, financial services, and asset-based lending, but also got into online publishing, direct mail and some other areas.

And had several successful exits, and when I did, each time inevitably I would have friends or acquaintances sort of ask me for advice about their startups, which ultimately led to requests for investments in their startups, which I occasionally made. And so for many years I’ve helped people I know with their startups, helped them to get started both in terms of providing guidance and advice, but also some funding. And that worked out well for the most part, and eventually that led to a heightened interest in angel investing, and a desire to do it on a more full-time scalable, sort of professional way and that’s what I did.

So I’m now full-time, I have been for many years, full-time venture investing and haven’t started a company for a while. I’m busy focused on just investing in others and helping them grow their companies.

Meb: So, this is interesting. Before I go on to the next question, it just made me laugh, because you mentioned direct mail, and we experimented…we tried direct mail once. And the theory being that a lot of local investors here in Manhattan Beach in South Bay would love to know that there’s a local investment manager, and to come say hi, and open house or come grab a beer or something. And how many did we send out, Jeff? We must have send out like 1,000. We got one response I think, and it was a…someone mailed the card back to us with highlighted red ink and said, “do not ever mail me again,” and that was it. So we have zero success on that so maybe we’ll download later and you can tell me all the secrets of direct mail, because I don’t know anything about it.

Phil: Well, it sounds funny to even talk about direct mail these days, because, you know, everything is done, or so much of it’s done electronically. But back in the day, you know, we had a large direct mail company, catalogs and direct mail as well, and that was pre-internet so it goes back…well, pre and post internet, but started pre-internet, so it goes back awhile.

Meb: And I’m like on the flip side. It’s probably karma that I get so much direct mail, and I’m religious about…there’s an app which probably doesn’t work whatsoever it’s actually called PaperKarma I think. And I try to unsubscribe from all these and I get all of them, but that’s probably karma for sending one anyway.

But it’s interesting because you say even though it’s outdated in today’s day and age, one of the largest investment advisors in the country, Fisher Investments, has really mastered a lot of the direct mail, and a lot of the psychological cues about it. You know, behaviourally do they open this, the A/B testing. I think it’s fascinating, and they’ve built a $80 billion or $100 billion money manager out of it. So it can still definitely work.

All right, off track already. Talk to me a little bit about Forefront. So you did a lot of this personally, you started investing in deals, you kinda transitioned from an entrepreneur to more of an investor. At what point did you kind of make this official, and when did Forefront get started? And what’s the kind of general overview there?

Phil: Yeah, so I made it sort of official in terms of doing it full-time in a scalable way about eight or nine years ago. And then when AngelList announced their syndicate feature, when they made that new kind of offering available, which was about almost five years ago now, I thought it was very intriguing and made a lot of sense, as a way to enable small or angel investors to participate with us in some of the deals that we were investing in. And so shortly after they announced it and made it available, we signed up, and as you mentioned in the intro, have become one of the largest and most active AngelList syndicates out there.

Meb: And so just give me kind of a broad overview, so you guys…you know, for those who aren’t that familiar, tell us about like, kind of how the whole syndicate process works. You know, and kind of the terms and all that good stuff wrapped in it.

Phil: Yeah, absolutely. So AngelList provides this great platform, where angel investors who are accredited can register and sign up with syndicate leads like Forefront, like us. And by doing so, they get to see the syndicate leads’ deal flow, so every deal we invest in, we share with our syndicate investors. So what that means is they have the opportunity to invest alongside us on the same terms, in every deal that we do, there’s no management fee or anything like that. The only fees that the investors pay are on the backend, if the deal works out and if there’s a profit on the deal, they pay a carry or a carried interest. Which is a total of 20% carry, and a portion of that goes to AngelList and a portion of that goes to us.

And so this gives angel investors the ability to invest as little as $1,000 in a deal, at the same terms as, you know, venture firms like us that are investing half a million or a quarter of a million dollars. So they get the same terms even without having the leverage that we have. They also get all the due diligence that we do, the legal review, all of that is sort of included, so there are real benefits.

And in terms of the structure, AngelList sets up a new entity for each angel investment or each deal. And so all of the syndicate investors are investing in this special-purpose entity, which then invests in the company that we’re investing in. So I hope that’s clear. You’re not…

Meb: Yeah, it’s great.

Phil: You’re not…it’s a real advantage. You’re not investing individually onto the cap table of the company, but instead you’re in an LLC that AngelList establishes for the unique purpose of investing in this company, that’s it’s only purpose. So that that works out very well.

Meb: I think the beauty of the platform, and this actually could be a drawback as well, is that it’s removed a lot of the hassle, and it’s simplified the entire process. So if an investor like myself, I think I participated in about six of Phil’s deals, wants to put $1,000 or $10,000 in, it’s really not more than a few clicks. Now the flip side on that of course is, you know, the doctor in Minnesota who all of a sudden is plunging a bunch of money into this without also doing his own homework, it can be…it removed all the barriers to entry as well.

But in general, you know, we’ve had some guests on in the past that have had, you know, pretty differing views on syndicates in general. You’re clearly in favour of it, I love it. Tell me a little bit about the kind of size of your syndicate, you know, how many people are following it, what’s the average check they’re writing, is it…any kind of metrics you’re willing to share on kinda how it works.

Phil: Yeah, so we have about 700 syndicate investors in our syndicate, which is I think largest or second largest perhaps on AngelList. The average investment collectively that we make in a company is about $300,000, we’ve now syndicated 44 deals since inception. And the average investment per investor is somewhere in the neighbourhood of…depends on the deal, but around $4,000, maybe $5,000. But they can often invest as little as $1,000. Some deals have a $2,500 minimum, some are $1,000, but the average is somewhere around $4,000 or $5,000 per investor.

Meb: Is there a max by the way, you know, because some deals I imagine are oversubscribed, is it something where if some guy comes in and says, “Hey, I want 200 in this,” you say, “Well no, just kidding, we have to prorate you.” How does kinda work if it’s a super hot Bitcoin rocket startup, which I can’t imagine you do, but what happens if it’s oversubscribed?

Phil: Yeah, that happened sometimes when we’re getting in at the tail end up a round and we’re filling out the end of it. And so we’ll get an allocation from the company. It can be 300,000, 400,000, whatever allocation we can get that we feel is reasonable to fill. And if we hit that allocation, we’ll normally ask the company for more, if they say no, which happens, then everyone will get prorated if we’re above that cap.

So if let’s say we get an allocation of $300,000 and there’s more interest from our syndicate backers than $300,000, so everyone will get prorated to bring it down to 300. But a lot of times the companies will increase the allocation a little bit if they have room.

Meb: So talk to me a little bit…we’re gonna get into your framework and process here in a minute. But talk to me a little bit about, you know, so these investors that come in, they’re following you, putting in, you know, a few thousand or whatever it maybe per deal. What’s kind of…you know, you’ve been through 44 already and I imagine even more personally before this. How do you think about this as sort of, you know, advice to the investor on building a portfolio, not just for your syndicate, but also finding others as well? There any kind of generalisations you can make about, you know, how many deals they should make, what percentage of the portfolio, how do they think about this sort of angel investing in general?

Phil: Yeah, I’m really glad you asked that, because we are firm believers in portfolio theory, and strongly against the idea of trying to pick a few winners, right, and having a small, limited portfolio. In angel investing, you know, as you know, it’s very speculative, it’s sort of the type of investment where they’re going to be…most of the companies you invest in will go out of business. There will be a few that will be singles or doubles, and hopefully, you’ll have some that will be home runs. But most will go out of business.

And given those statistics, the only thing that makes sense to get above average returns in the long run is building a diversified large portfolio. That’s how you can really get good returns in angel investing. If you try to pick winners and you only invest in a handful of companies, odds are you’re gonna lose your money. So in building a diversified portfolio, we believe that that should not only be large in terms of number, but diversified across industries, and even to some degree, stage.

So we generally suggest…I mean the larger the portfolio the better, the closer you’ll get to mimicking sort of the industry-wide average returns, which is what you’re hoping to do or to exceed. So the larger the portfolio the better, but I would never suggest that anyone have a portfolio fewer than 10 for example. And I think that the minimum should be…at least my personal feeling is it should be something higher than that, perhaps even 15 or 20, that someone should consider.

So when going into angel investing, I think it’s wise to allocate a certain amount of money depending on, you know, your investable assets, and your risk tolerance, but decide in advance how much you’re going to allocate, and then try to allocate the same amount per investment. So if you decide, you know, that $50,000 out of your entire portfolio of investable assets is what you want to risk in angel investing, maybe you invest $2,500 per company across 20 companies, for example, to build yourself a portfolio. And then as the companies hopefully will exit and you make profits, you can start to recycle that money into other deals. So that’s the way we look at it.

Meb: So I wonder…so you touched on an important point, which is sort of the vintages, and I think a lot people they get all excited about angel investing, and they want to invest their whole portfolio in like the first three months, or say, “I love this deal I’m gonna put all my money into it.” But I think it’s important to the investors listening too is that…and I’ll toss this question to you on kind of what the time frame you think, so, someone starting out today and they have this portfolio, with the knowledge that a lot of these companies may not have a liquidity event for 1, 3, 5 plus years, you know, how many years do you think you need to kind of budget to get the portfolio vintages rolling? Is it like three years worth of allocation, is it five? Any thoughts there on say if someone is gonna say I’m gonna make 10 investments a year for x amount of years, you know, that way before they start to see any liquidity to reinvest the profits.

Phil: Yeah, so there are a few ways to approach that. Some people will invest their full amount more quickly, and then just wait for companies to exit, to have liquidity events. Others will pace themselves over a longer period of time. It sort of comes down to two things. Whether you believe that general market valuation fluctuations are important in terms of timing, cyclical timing investing. So do you wanna invest over a longer period of time so you get a more sort of average industry valuation, or the other way to look at it is I wanna put my money to work sooner, get in so I can recycle the money that much more quickly.

So you know, I can argue both sides. I don’t feel strongly about it, I do feel strongly that you should invest over a large number of companies, and try to keep it roughly the same amount per company. So some people will pace it over time and say, you know, “I’m going to make 20 or 30 investments and I’ll do it over a three year period, because I want to make sure that A, I see a very wide swath of companies, a large number of companies. And I wanna make sure that in case the market is generally frothy at any one particular time that I’ll also have the benefit of investing in trough periods when the valuations are lower.” I don’t think that’s critical in this type of investing but many people do.

Meb: What do you think are sort of the, you know, rule of thumb kind of success rate ballparks for these companies? So, you know, if you were to put 100 investments to work over say a five year period, you know, what’s kind of been your experience, and obviously it’s hugely variable based on time, all the other things. But is there any sort of kind of…you know, is it 20% go out of business, is it 80, you know, what’s your general thoughts on kind of rule of thumb there?

Phil: I’ll tell you the numbers generally and then I’ll tell you a little bit about what we try to do to mitigate the downside a little bit. So generally if you look at a portfolio of 100 companies, something like 70 are going to go out of business, something like 20 to 30, let’s say, are going to either be stagnant or exit with anything from a single to a triple, what I call single to a triple. You know, so it’ll be a good exit or a really good exit but not that home run. And then out of that 100, hopefully one or two are going to be home runs, those are sort of the numbers.

And so what we’re trying to do…it’s really hard to pick home runs right, it’s really hard to pick the ones that are going to return, you know, more than 100x on your investment. So what we’re trying to do is reduce the number of companies that go out of business, reduce the 70 to something lower than that by increasing the number of singles, doubles, and triples. And still trying to get that one or two home runs. But we’re trying to shift the number of companies that go out of business to ones that are returning singles, doubles, and the like to get some positive return.

And by doing that, we feel like we’re going to get above average returns on a portfolio basis, and the way we do that is by investing…well there are a few ways. We try to de-risk the investments by looking only at post-revenue companies, which is very important, right. So we have avoid pre-revenue companies.

We look only for companies that have some early indications of product/market fit, we look at capital-efficient companies only, that have a good amount of runway after they raise the round. And we are very much focused on valuation. So we will not invest in deals that have crazy high valuations where the numbers just don’t justify it. So by doing all of those things we really try to help to reduce the number of companies we invest in that just go out of business, but that gives you a general idea I think.

Meb: I think that’s good advice and it echoes a lot of the stuff that Jason said, and it’s made my life a lot easier, because I think on a lot of the…this is one reason I’m a quant by the way, is a lot of the time spent, you know, analysing a lot of these companies, if you’re an optimist, it’s easy to be pretty…it’s seductive to get…you know, see some of these pitches and be like, “Oh my God, that biotech company sounds amazing.” And, you know, “It could easily be a $100 billion company,” but yeah, they haven’t even entered trials, and it’s just kind of a pipe dream at this point.

So that, to me, is a wonderful filter saying, “All right, do you actually have a product, and does anyone want it?” So are people already paying for, or service, whatever it is. And that seems to me to work as a wonderful filter to echo a lot of the things you’re saying.

Phil: You’re right. I mean, that does act as a really good screen for us, right, there have to be some customers willing to pay money for whatever the product or service is. The company has to be generating revenue already for us to look at it, valuation has to be reasonable. But to your point about, you know, seeing deals that look amazing and you wanna jump in even though maybe it’s pre-revenue, we see so many deals, right. We have such great deal flow that if you do this long enough, you know that the next great deal is just down the road.

And so we really try to avoid what’s called FoMO or fear of missing out, right. So we know that there are always more great deals out there, and we can afford to be selective, very selective, because of our deal flow. But those people who have very limited deal flow, and only get to see a good deal once in a blue moon, they jump all over those deals, but we can afford to be more selective because of the deal flow.

Meb: And so let’s talk a little bit about Forefront and your process and framework. So talk to me a little bit about how you get your deal flow. So I know Andreessen famously said, you know, they only look at pitches where it’s a warm intro, so meaning a friend introed them, and anything that’s just kind of over the transom they just, it’s an immediate rejection. And the funny part about that was that he said, “One of the reasons being is that the skill for a CEO to like nuzzle their way into a warm intro, is also a skill that that CEO is gonna need to grow the business,” so that’s almost one of their filters.

Anyway, talk to me about how you get deal flow, and then also how you then start to filter, and what’s the framework on kinda what industries you’re looking for, what other sort of techniques you’re looking for with management, all that good stuff when you’re starting to do your due diligence?

Phil: So deal flow for us comes from a variety of sources. We get a lot of referrals from venture capital firms that are leading or participating in rounds. They’re working to fill out the round, and come to us for that. So those are very good quality deals oftentimes. We get referrals from our syndicate backers, which is wonderful, and we encourage that. We really try to build the community among our syndicate investors. I think we’ve done that, and not only do they refer deals to us, but the companies that they invest in, they are very actively helping those companies to the extent that they’re able or willing to. So we’ve built a nice community and there are a lot of referrals from those folks. And then there are just all kinds of other people we do business with, from lawyers and accountants, to sort of intermediaries who refer deals all the time.

So there are a lot of sources. I don’t believe in the policy that Andreessen espoused, so if someone contacts us with a deal, we can very quickly screen it to see if it meets our initial criteria. So we don’t mind taking cold intros or cold emails deals that come to us, you know, without a warm intro, that’s okay, and we’ve done a few of those over the years. So that’s sort of a little bit about how we generate deal flow.

And in terms of what we’re looking for, I mentioned a few of our criteria in terms of post-revenue being important, capital efficiency is very important for us. We’re not really interested in investing in companies that are burning through a lot of money, and will have to raise again very quickly. That causes us to avoid companies that are very R&D-focused or very, sort of brick-and-mortar focused where that’s gonna take a lot of capital expenditure to scale, we avoid those.

But generally speaking, we are industry agnostic. We look at a variety of industries, almost any industry, as long as the company is capital efficient. And that’s also the case for geography, at least within the U.S. Some of our best deals come from outside of the primary venture capital markets like New York and San Francisco, and we find a lot of good deals in secondary, even tertiary markets. And what we find is in those markets the valuations are much more reasonable in general.

Meb: What’s the sort of market cap range? Is there a hard, you know, low and high that you’re willing to invest in, and what’s the sweet spot?

Phil: Yeah, there’s no hard numbers, but our sweet spot, you know, the low is usually $3 million in terms of valuation, the high is generally about $25 million. So it’s mostly seed and series A rounds, with an occasional very infrequent series B thrown in. And so I would say the real sweet spot, most of our deals are in that like 5 to 10, or 5 to $12 million range. So occasionally we’ll have one that’s 3 or 4, and once in a while there’ll be one that’s, you know, 15 or 20, but those are sort of outliers.

Meb: And by the way, you touched on this, and we’ll start to get into the weeds a little bit, and I’ll maybe let you pick three of your favourites. But you did an article about a year ago talking about some of the “Best KPIs You Must Know Before Pitching Your Startup,” and I’m gonna read them real quick, just to refresh you. But I’ll let you pick, the question I’m gonna pause to is, which do you think are the three most important?

So, listeners, a lot of the finance and investing world gets pretty jargony, but you’ll probably recognise a lot of these. So it’s everything from customer acquisition cost, to customer retention rate, lifetime value, ratio of customer acquisition cost to lifetime value, recovery time, monthly burn, runway, profit margin, conversion rate, gross merchandise volume, and monthly active users. And by the way, KPI stands for key performance indicator. I already skipped over that. All right, what are your favourite ones, and what do you think is most kind of important as you’re reviewing a startup that’s starting to have a little bit of this traction?

Phil: So it’s hard to pick just three because I feel like, you know, we look at everything and they’re all important. But I sort of lump burn and runway together, because there’s so integrally related. So that’s an indication of capital efficiency. So we look at the monthly burn, pre and post fundraising, which is…by burn we mean, you know, cash burn, how much net they’re spending each month, net of any revenues.

And runway is how many months they have until they get to cash zero, until they’re out of money. And we wanna know that…we generally look for at least 18 months of runway post close. Twelve months is the absolute minimum for us, but we like to see at least 18. We don’t want to have founders having to refocus on fundraising three months, four months after they close a round. We want them to focus on building the business, not on fundraising. So that’s why we want to have enough runway.

And then I think that the customer acquisition cost to lifetime value ratio is extremely important. So we want to know that the company is already starting to figure out how to efficiently acquire customers, and how to efficiently monetise customers. So the customer acquisition cost is the first piece of that. Are they able to acquire customers in an efficient and scalable way, so that we can pour some fuel on the fire and help them grow that. We can give them money so that they can grow customer acquisition, but retain close to the same customer acquisition cost.

And then the other side of it is lifetime value. So we wanna make sure that if they’re acquiring customers at an efficient price, they’re able to then monetise them, and earn a good return on the investment in customer acquisition cost over the anticipated lifetime of the customer. So that ratio is very, very important. It doesn’t have to be perfected, most companies at the early stage are obviously still working on improving both of those numbers, decreasing customer acquisition cost, increasing lifetime value. But we wanna see trends going in the right direction, and we wanna see that they’re figuring it out.

And then the third sort of general bucket that’s important that plays into this is margins. We wanna make sure that the companies we’re investing in have reasonable margins and scalable margins, that, you know, given enough money, and enough investment, enough time, they’ll be able to grow and scale into a large enterprise company. So I’d say those are probably among the most important to us.

Meb: And so you guys have had a pretty diverse set of investments, you know, after all these conversations with CEOs and founders, you know, and you’ve done dozens of investments and probably hundreds if not thousands of meetings, and calls, and due diligence. What’s kind of the…are there anything that stands out as both like a key question or a concept to be talking about with the founder, and also on the flip side, like a red flag, to where you’ve done this so many times, to where there’s something that pops up and you’re like, “Oh no, run away,” or “Yeah, this guy’s got it.” Or is it more of kind of a mosaic patchwork of everything fitting together?

Phil: I would say yes, I’ve done this for a long time now, I’ve talked to thousands of companies, so I’ve gotten good at it. So some of the things are just sort of red flags I would say, and others are just like a general feel that you get of piecing together all the different puzzle pieces. So some of the things that are important for us include founders absolutely knowing their numbers cold. So you mentioned KPIs, and the importance we place on those. KPIs are key performance indicators, the metrics of the business, right. What makes that business run? If the founders don’t have a really solid handle on those numbers, we’re generally not going to be interested.

So if we have a phone call and I’m asking them what’s your customer acquisition cost, what’s lifetime value, what are your margins, what’s your burn, all these questions that we were talking about. If they don’t have a good handle on those and they don’t know them, that is a big red flag for us right away.

Companies that are in the midst of a pivot, meaning they’re drastically altering their strategy or their focus, can sometimes be a tough time to invest. So for instance, a company could hit our post revenue requirement, but if they’re pivoting into a new vertical, or new business, where they don’t have any evidence of product/market fit yet, it sounds like they will, it sounds promising, but they don’t have any clients or revenue in that new area, then it may be too early for us in that case.

And, you know, generally speaking, we like to work with founders who are good communicators. That’s very important for all constituents, whether they’re doing sales, whether they’re communicating with employees, vendors, investors, and whatnot, communication skills are really important, and we can learn a lot about those both through phone calls and emails and whatnot. So those are some of the things that kind of jump out. But there are certainly many others that, as you say, go into that mosaic.

Meb: And so, you know, you’ve kind of go through the process, you find some companies you actually like, and maybe you put together kind of the general terms, and do the syndicate. What at this point becomes your involvement? Do you just write a check and move on? What happens next? Because different investors have very different perspectives on, you know, maybe they’re gonna be super involved and their whole network is, and other people say, “You know what, I’m just gonna take a backseat, I made my investment,” and move on. What kind of happens next in your world?

Phil: Yes, so we basically will follow the wishes or the guidance of our portfolio company, so it runs the gamut. We basically say to our portfolio companies, “We are here to help you as much as you would like, and if you don’t want or need our help, then fine, just send us a monthly investor update, and you won’t hear from us.” But most of our portfolio companies do want at least some, and some want a lot, of our assistance.

And by our assistance, I’m referring not just to mine or Forefront, but our whole syndicate. As I mentioned earlier, a lot of our portfolio companies, when they issue their monthly investor reports, they’ll ask for assistance, they’ll say, “Hey, can someone introduce me to someone in the insurance space? Can someone help me find a new developer? Can someone help me find a biz dev person?” whatever the case may be. Our syndicate investors are very responsive to those requests.

So the types of things that we help with, help our portfolio companies with, range from, you know, just sort of general strategic help, negotiating sometimes with new capital sources, new investors, whether it be debt or equity. Helping them identify new capital sources when they’re ready for their next funding round, make introductions to potential customers or business partners, other companies that could partner with them.

We help them sometimes to identify talent to hire, and help connect them with other companies both within our portfolio and outside of it. And occasionally, we’ll also refer them to suppliers or merchants that they need. So we do that, and our syndicate investors help with that as well.

Meb: It makes so much sense to me, because, you know, Cambria, my company, had done two crowdfunding rounds, and half of the entire point was you want some kind of incentivised people that love your product or company, that now have an investment in that company. And so the cool thing to me about the syndicates has always been that these companies are not only getting the money, but also potential people that are gonna spread the word. And, you know, that are incentivised also to make it a success, like the more people in your corner…

But you touched on one thing to me that I found fascinating, because, you know, having done I think 40 of these deals, you’re, I’ll give you a compliment, you’re probably the single best at it, and Jason is good too. A lot of these other syndicate leads and investors and ones off AngelList etc, are horrible at it, which is the updates. And to me, it doesn’t even matter if it’s monthly, quarterly, even yearly, but just the fact…tell me why you think that’s important, and talk a little bit about, you know, why that’s something that, I don’t know if you require it, or if it’s something you just strongly request, but, you know, talk a little bit about the company updates and why you think that might be important?

Phil: For us, it’s critically important. So before we launched Forefront and were investing directly, you know, in companies without the syndicate involved, the thing that used to drive us crazy is companies who will take your investment and then not report to you, not provide you updates. And that would drive us crazy and still does when it happens.

And so what we did when we launched Forefront is we decided that every company we invest in and share with our syndicate, will sign an agreement in advance that they will agree, among other things, to provide regular monthly investor reports. This is unlike what any other syndicate does on AngelList, so I’m glad you brought that up, and I appreciate the compliment. We think it is of paramount importance. I think it’s terrible for companies to take investor money and not report to them.

Now, most of the companies in our portfolio who agree to that, they all have to agree to it, most of them live with it. Occasionally, you know, a company doesn’t, and we put a lot of pressure on them to provide reports. So sometimes there’ll be a compromise where we will allow them to agree to do quarterly reports instead of monthly. And oftentimes when companies are further along and they raise a series B or even a series C round, then their reporting cadence changes, because of requirements of their board or their new investors, and they’ll only do for instance quarterly updates at that point.

So sometimes the monthly updates, you know, will change over time into quarterly. But it’s one of the most important things that we require from companies we invest in, and we make it clear from the get-go that they’re going to have to provide monthly reports. We ask them for a copy of the monthly report that they currently provide to investors, and make sure it’s sufficient. If it’s not sufficient, we make suggestions and ask that they agree to make changes. If they don’t currently report to their investors, we provide them with templates and examples of reports that we want them to use and that they adopt. So it’s a cornerstone of what differentiates Forefront from other syndicates and other early stage investors.

Meb: You know and so for someone like myself, who has been doing this for a number of years, partially as seeing it as tuition, you know, meaning I wanna learn the space and slowly get my feet wet, like to me, it’s a wonderful example. And we’ve actually implemented it in my company, so before we did our fund raises, we didn’t do any sort of formal monthly or quarterly reports, because a lot of it in our world is simply, “What are your assets?” right. So you can pretty much come up with it.

But it actually helps really codify and make structurally, you know, a bigger focus on, “Hey what are our strategic goals? You know, “What are we trying to do this year? What’s growth been like? Why is it changing?” And it’s become now an internal document as well as investor document. And, you know, I think a lot of people it seems like the reason they don’t wanna do it is perhaps they’re scared, or the company’s not doing well, but to me, that’s an even bigger reason to be doing it, because again, you have investors that can help.

And even if you can’t help and the company’s failing and it’s going down in a blaze of glory, at least own it and, you know, learn from your mistakes, and realise it didn’t work, you tried, but be transparent about it. And for me, at this point, you know, it’s been a one-and-done on any other syndicates or investors that don’t provide that sort of transparency, because I just don’t see the point. There are so many good ones like yours and others that do it.

Phil: You touched on a lot of good points there. It’s a really good practice for founders to get into for a variety of reasons, right. It helps them monthly sort of get a handle on their strategy, on their growth, or lack of growth, on their KPIs, and also on areas where they should be focusing. So it’s a great practice from that standpoint. It’s really…communication with investors is so important, especially, like you said, when the company’s not doing well. That’s when they need more help from anyone, from investors and everyone else.

And the worst thing they can do is bury their head in the sand and shut everyone out, because number one, they’re not going to get the help they need. And number two, people have long memories, right, and if the founder or founders go out of business and start a new company 6 months, 12 months down the road, people are going to be much less likely to invest when they know that these are not founders who communicate well with their investors, and they run and hide when things get tough. That’s not the kind of person you wanna invest in. So I think you’re spot on in making that an important criterion for you in terms of selecting, you know, who you deal with.

Meb: And I was laughing as you said that because, you know, I’m thinking back I review these, you know, quarterly or whenever to kind of look at some of these companies. And I was laughing because there’s only been I think three exits for me. One was a double, one was like a 20%, and one was a zero, but I think the zero, I don’t even know it went out of business. It went out of business like six months or a year ago, and I was laughing because there was just no notice whatsoever, I hadn’t seen it, it was like there was no update, so I couldn’t have seen the updates. And I didn’t even realise they’ve gone out of business, so I was like, “Oh, that’s what happened that company.” Anyway, so…

Phil: Yeah, how would you know, right?

Meb: So talk to me a little bit about…so say there’s some people…is there any other things other than the monthly updates that investors should be thinking about as they look at these syndicates? Because I think I don’t know how many there are, but there’s probably dozens on AngelList, as well as other sites. You know, two questions, is there anything you think they should be looking at as they kind of try to qualify the actual syndicates to invest in? And then two, do most investors, do you encourage this, or any opinion on, should they be doing any other due diligence once they see the investment?

So Phil sends out an email, “Hey, we’re raising for this company,” what do you kind of suggest they do? Or is it sort of, “Hey you know, the whole point is you just autofill this, you should invest in all of them.” What are kind of your general thoughts on both? How to screen syndicates, and also what you should be doing after you see a deal?

Phil: So in terms of screening syndicates, there are a lot of syndicates, and I think it’s important to look at experience, and track record, as well as communication requirements that they have. Also, I mean, certain syndicates have much, much higher minimum investment, so that can be an important filter as well. But you want someone who has really good deal flow, who has a lot of experience and a long track record of doing these types of investments. Look at their portfolio and see if these are the types of companies that interest you and that you would have invested in.

And I really recommend as I mentioned earlier, finding a syndicate that believes in a diversified portfolio approach. And there are several syndicates that are specialised and pigeonhole into, you know, just specific verticals. You know, we just do enterprise SaaS, or we just do e-commerce, or whatever it may be. And I would say that those are not a good idea for most angel investors, especially those starting out, because they will not be able to build a diversified portfolio if they’re focused on just vertically specific syndicates. So those are some of the things I would look for.

And by the way, I don’t think there’s anything wrong with contacting the syndicate lead and saying, “I’m thinking about signing up for your syndicate. Can we chat? Do you have a few minutes to talk?” And get a sense from them when you talk to them if you feel like their style is a good fit for you, and, you know, spend that time. If they won’t talk to you, if they’re too busy, that’s probably a sign that maybe you don’t wanna deal with them, or if you talk to them and don’t like what they have to say that’s certainly a sign.

When individual investors in our syndicate are looking at deals that we present, a lot of them will ask a lot of questions. So we, in addition to requiring investor reporting from companies we invest in, we also require that they do a webinar just for our syndicate investors during the syndication period. So it’s a one hour webinar, and it’s an open question answer type thing. So the first half is usually, you know, a presentation from the company, second half is open to question and answer. And then if people can’t make the live webinar, we make a recording of it available to everyone.

But in addition to that…so that gives them an opportunity to ask questions and get them answered. In addition to that, we encourage our investors to reach out to either me or to the CEO of the company, to whomever they’re more comfortable. They don’t have to reach out at all, but if they have questions, we encourage them to ask. It’s always better to get the questions answered, there are no dumb questions and, you know, if I don’t know the answer I’ll get the answer for them quickly from the founders of the company.

So some people feel very comfortable with the…we present a lot of information to our backers, some syndicates only present a small amount. We present a lot. I think you could probably attest to that. The write ups that we do are extensive, the webinars, the information that we provide. We make sure that the companies we invest in have extremely thorough profile pages on AngelList. So we make sure they’re completely populated with KPIs, data about the competition, exit opportunities, margins, all of that. We make sure that the data is presented.

But even after reviewing all that, if you have questions, we’re here to answer the questions. We are singularly focused on our syndicate. We don’t make investments outside of the syndicate, we don’t have a fund outside of it. This is what we do, this is our focus. Therefore we are accountable to our syndicate investors, and that’s of paramount importance to us.

Meb: I forgot to mention, two quick…have you ever had to kick off any investors, is there any sort of like bad…I can’t even think of any off the top my head other than…

Phil: I’ll tell you. I’ll tell you bad behaviour. So I’ve only had to do it one time. So let me just say as a preface, most investors are extremely respectful and appreciative for being part of the Forefront syndicate community, so we have a great community of investors. And we do some live events, sometimes we do a backers’ breakfast, we’re gonna one again soon, and they come out and we meet them in person and it’s fantastic.

But one time, we had an investor who would learn about the deals that we were investing in and try to invest directly in the company, going around us. And the problem with that is we don’t earn any management fees, we don’t earn any money on the deal unless there’s a profit, then we get a carried interest as I mentioned. But if they invest directly in the company, go around us, we get nothing. So they’re benefiting from all of our deal sourcing, due diligence, the negotiating that we’ve done, all of that, and they’re not compensating us in any way.

So when this happened I spoke with the backer and I explained, you know, the realities of why it’s important that they go through the syndicate, and if they’re not willing they should just drop out of the syndicate. And he said, “No, no, no, I won’t do that again. I’m sorry, I didn’t understand.” And he stayed a member and I let him stay a member. But then it happened again, and a third time again.

We talked again, and I said, “Look, you know, you’ve done it now three times, gone directly to the companies, the companies don’t want you to do that, they want everyone to come through one entity, so it’s one entity on the cap table. They don’t want to deal with, you know, individual investors on the cap tables, and we don’t want you to, and you gotta stop doing…” He wouldn’t stop, and so ultimately we had to kick him out of the syndicate. Happened one time though, that’s it.

Meb: That’s so weird to me, because like the entire point of this is that you’re leveraging, you know, other people that have all this work and due diligence and everything else, and it’s like to pinch pennies. Because also when you’re thinking about investing in these companies, you know, the goal is to invest in a company at a $5 or $10 million market cap, and, you know, you sell it at $50 or $100 million, or a unicorn at a billion. And to be that sort of crazy about not…you know, anyway, it’s bad behaviour. Shame on you if you’re listening, whoever that person is.

It hadn’t come up at this point but, you know, you’ve worked with Barbara from “Shark Tank” as a partner and, you know, “Shark Tank” was interestingly in the news recently and it’s been an awesome program. Maybe you could talk about anything, you know, because she’s had a lot of experience investing in companies, any sort of things you’ve learned from her in particular, or sort of, you know, approach or analysis that’s, you know, either made you a better or wiser investor?

Phil: Sure, so when we launched Forefront, Barbara and I launched together, we were partners, and what I would say about…Barbara is extremely talented, very smart, she does a great job on “Shark Tank.” And they were just in the news today, “Shark Tank” was, because Amazon acquired a company called Ring, which is that, you know, video doorbell company, and Ring was on “Shark Tank” and that was a big, you know, over a billion dollar acquisition.

So anyway, Barbara does a great job, and one thing I’ve really learned from her is she has this uncanny knack of assessing people very quickly. So she places a great deal of emphasis on the founders and their personalities and their integrity. And I do too. And I’ve learned a lot from her about trying to get a better feel for people in a quick way. So, you know, we don’t have a lot of time generally to make that initial screen of a company, and the quicker that we can sort of do an assessment of founders, and get a sense of if they’re the type of people we wanna work with, the better.

And Barbara is very, very good at that. She just knows people. She knows how to read people very well, and hopefully, some of that has rubbed off on me, and I’ve learned that skill from her over the years.

Meb: And maybe to comment quickly on that, you know, I think I have gravitated over the years to, I mean I think there’s an old Hemingway quote, which is, you know, just only work with people that you love, and it’s obviously hard to know ahead of time. But in general kind of cutting bait pretty quickly with people that are either just a-holes, or questionable morals and ethics etc. But on the whole kind of spectrum of idea versus founder, you know, if you had to sort of say what one is more important, you know, some people have a very strong opinion on this, some don’t. Is there one side that you kind of lean to more than the other?

Phil: Yeah, at this early stage, founders much more important than idea. So a good founder can make lots of different ideas work, can pivot from one idea to another and make a success. A bad founder can take the best idea and fall flat on his face with it. So good founders, quality people, smart, honest, people with integrity, much more important at this early stage than just the idea.

Meb: So this has been awesome. I haven’t even gotten to like another two pages of questions, so we may have to have you back on in like three or six months by the way.

Phil: Part two? Oh, we’re doing part two? I’d love it.

Meb: This is gonna be a weekly series. Well it’s tough, because you can’t really talk that much about companies that are currently raising, right, is that like a little bit limited?

Phil: Yeah, companies that are currently raising we can’t talk about, but we can talk about companies that have closed their rounds already.

Meb: Okay. Well, so let’s talk about two of those, or as many as you want here in a second. You know, I can’t remember which of, one of the platforms said they were gonna block me because I was talking too much about their offerings, I think it was EquityZen, because they do a lot of secondary kind of late-stage private companies like Lyft and Spotify, who’s going public, by the way.

So this is a question that we kind of ask everyone, and for you, since you’ve done so many, we can kinda feel free that this doesn’t have to be one, it could be actually two or three. But we always ask everyone what their most memorable investment is? And I think this might be useful, and for our audience too, there could be one you can talk about, it could be good, it could be bad, it could be a flaming turd, it could be a wonderful unicorn, whatever it may be. But something where, you know, you also maybe walk through briefly kind of the process or the history how it happened, and kind of how it ended. Is anything that comes to mind?

Phil: Did you say flaming turd?

Meb: Flaming turd.

Phil: Okay. Just wanted to clarify that.

Meb: I’ve owned some of those flaming turd stocks, by the way, but anyway.

Phil: Yeah, [inaudible 00:54:45] we all. Do you have kids, Meb?

Meb: I have a 10-month old, who is supposed to be coming into the office as we speak to come, we just ordered some Indian food, which DoorDash cancelled by the way, so we may be skipping lunch at some point. But I got one 10-month old.

Phil: The reason I ask is I have a few kids, and trying to ask me to pick my favourite portfolio company is like asking me to pick my favourite kid, and [inaudible 00:55:13]

Meb: So you’re saying it’s easy because everyone’s got their favourite child.

Phil: No one will admit that though. And for the record, I do not have a favourite kid. Both of my boys are fantastic. But I can highlight a couple of deals for you that some of your listeners may even be familiar with. One of the companies we invested in not so long ago, about a year and a half ago, was called Grove Collaborative. And Grove was referred to us by a venture capital firm called Bullpen Capital, who was leading the round.

And Grove is an e-commerce company that sells healthy products for the home, natural healthy products like, you know, cleaners and detergents and soaps and things like that for your house. And I personally am a big believer in, you know, trying to get rid of a lot of the chemicals from our lives. That includes not just in the foods that we eat, but in the products that we use. And Grove Collaborative has done that very successfully, has built a really big business, and is just doing great. They’re growing very quickly. Just closed a huge round at a very, very high valuation.

So that’s been a great investment. Shout out to Stu Landesberg, who’s the CEO and founder, done a great job. So there’s a company that’s in the e-commerce space, it’s a B2C company that was referred to us, again by Bullpen Capital.

Meb: And kudos to you by the way, because that, I participated in that one as well as another one recently, which just showed up at my house, because it’s an actual product called Meural, which was essentially these artist frame that’s digital that lets you kind of like a Spotify have a playlist of paintings or whatnot. And it’s funny, because it’s currently sitting in my bedroom, my wife didn’t wanna put it in the house at first, because she said it doesn’t fit, this is not where it goes.

But it’s kind of this beautiful offering, to where, listeners, you can kind of flick your hand, and it’ll switch paintings, and you can flick it up and it’ll give you like a little description of the painting almost like a word of the day, but for paintings. So we may end up getting one for the office too, but that was a fairly recent one, right?

Phil: I’m so glad you brought Meural up, because it’s one of my favourite companies and products. In fact, I’m looking at mine right now. I have a Claude Monet on the screen. I have mine set to change every 10 minutes, it puts a new famous painting on the screen for me. I have it in my office and I’m thinking about getting one for the home. But like you, we don’t have a lot of room on the walls anymore, so we have to find a place, and I keep telling my wife to take certain photos or pictures down, and she’s reluctant.

But I have it in the office. The quality of the image on the Meural frame is unbelievable. It’s like you can see the texture almost, you know, it looks like you can touch it and you’d be able to feel the texture, even though you can’t. And they have a huge library of famous art from around the world to choose from, you can select which artist, which genres, type of art, and it’ll display it and you can, like you said, you can use your gesture controls to change it if you want. They have an app, you can control it that way. You can also upload your own artwork.

So for a while, my wife and my younger son used to be really into photography, and they took some just terrific photos. I can upload those to see those on my Meural. I can also upload your photos or anyone else’s for that matter. So great product, and the company is doing very, very well. They had a breakout year last year, especially during the holiday time. And so far they started 2018 on a tear. So this is a product that is really I think a game changer, and it’s in a relatively new category, and they are just owning it, they’re just doing great. So that’s been really a great investment, and again, I would say shout out to the CEO and founder, Vlad, who’s just done a terrific job and is also great guy.

Meb: You know, the funny thing too, because I had struggled with this one at first because a very simple critic would have said, “Well, what is…they have no moat because you know, any other TV company or someone could build something,” but the same way you could say that Apple had no moat over Nokia, the other phone companies, but then until you see the product and realise that there’s just something a little magical about it.

My favourite playlist is, it’s actually like a GIF or a GIF artist…it was a French dude named Nicolas Monterrat, Monterrey? I don’t know how to pronounce, he’s French. But it has like a slight bit of animation to the photos. If you haven’t downloaded that one, add it to the list.

Phil: Okay, I’ll get that name from you again after, but, you know, in terms of their moat though, what’s interesting is…so they not only have like superior technology, but they have this huge library, so they have licensing deals with all these museums and collections around the world, which is unique. And then they have a fantastic subscription model which they launched recently. And the rate of subscription from people who buy the frame is amazing, it’s off the charts. I’ve never seen numbers like this.

So they are really…once you subscribe to this thing, it’s like Spotify, you know, if you subscribe, you’re not leaving it. You know, you’ve built your playlist, you built your collection, you’re ensconced in it, and you don’t wanna live without it. And so once they built that, people aren’t leaving, and that’s how they built the defensibility in their moat. And they’re doing great with that.

Meb: The funny thing about that, and Jeff has heard this a million times, because it’s like my single favourite thing to…attracts me to invest in is anything that’s subscription related, because I get like 10 subscription boxes to my house, much to my wife’s dismay.

Phil: Oh you’re that guy?

Meb: I’m that guy, I’m absolutely that guy, but I’ve taught our dog to open cardboard boxes, it’s his like favourite thing to do now. But part of it is, you know, I saw that they share in the revenues, because the subscription model with the artists, and I think a lot of people, it’s the same thing as music streaming, is once they realise that, you know, there’s a way to actually pay them and they don’t have to download or just print them out or do whatever, you know, that people will certainly pay for that.

Anyway it’ll be fun to watch. Is there any that stand out as kind of disasters or companies that you just, you know, shake your head, say, “Man, they had a great offering, I just don’t understand why they went out of business.” Or “Man, that was really memorable because, you know, they really messed up that opportunity,” or, “Wow, what a horrible idea. I can’t believe I invested in that.” Any in that category?

Phil: Well I don’t wanna call out too many companies on that front, but I will say there was one company we invested in that was a major disappointment, where I thought I knew the founders pretty well, I thought I had a good handle on them, and I thought they were people of integrity. And what happened was they got the idea that after they raised a round that they could start taking outsized salaries for themselves. And they didn’t raise all that much money, it wasn’t a large round, and they didn’t…you know, their burn wasn’t that much.

But still, once they increased their salaries to, you know, really inflated numbers, they decreased the runway considerably for the company. And I begged with them, I implored them to reconsider, because, I said, “Look, you’re shooting yourselves in the foot. You’re gonna take a big salary for a little while, the company’s gonna run out of money, and the company’s gonna be gone and you’re not gonna have any salary. So why don’t you take a more modest salary and really try to build the business into a big success?” But unfortunately, they were just short term, you know, thinkers, and they were myopic and they ended up…you know, the company just imploded.

And I don’t think it was entirely because of their salaries, but I think that was an indication of their thinking and being short-sighted, and not trying to build a sustainable, scalable, you know, business. And that was a mistake. And that was a shame for that to have happened. And there have been a few businesses, one I guess in particular, where I’ve sort of scratched my head and said, “I can’t believe that didn’t work.” It was a combination of a great idea with a great founder. And you look back and you say, “You know, I just…maybe the market wasn’t ready for it,” I don’t know.

But an example of that is a company called VetPronto, and they would do veterinary services right in your home. So they would have vets come to your home and take care of your pets, so you don’t have to bring your pets to the vet. And Joe Waltman, who started the company, is a super guy, just did everything he could to make this company work, and he did make it last for a while. It had a long life, but it ultimately did not work out. And I thought it was a great idea, I thought he did a good job with execution, maybe the market wasn’t ready for it, I don’t know. His unit economics were good. So that’s a tough one for me to come to grips with, because I thought it was such a good combination.

Meb: That’s a good point too, like so much of, you know, what we do in entrepreneurship and building companies is about timing as well. I mean, I had friends building social networks in the ’90s, you know, that were just a little too early, or wrong, you know, fit. And then all of a sudden you hit the right moment, and all those companies are raising gazillion of dollars of VC capital and growing their audiences, and, you know, it’s hard. We say the biggest compliment, we always tell people, biggest compliment of being an entrepreneur or a writer or really anything is just surviving, is the hardest thing to do.

Phil, this has been a blast. I’ve had so much fun. I have like four more pages of questions, but we can’t keep you all day. Where could people find you, your writings, your syndicate, all the other good stuff? How do they keep up with you?

Phil: Sure, so in terms of writings, I’m on medium.com, they can just go to Medium and search for me, Phil Nadel, N-A-D-E-L. If they’re interested in getting more information about our syndicate, Forefront Venture Partners on AngelList, just go to angellist.co, .co, and do a search for Forefront Venture Partners. And they can reach out to me if they just wanna chat or want more information, they can contact me by email, which is phil@forefrontvp.com, or, you know, via AngelList, either way.

Meb: Awesome. Phil, thanks so much for taking the time out today.

Phil: It’s my pleasure, I really appreciate your inviting me, and do part two with you anytime you want.

Meb: Awesome. Listeners, thanks for listening in today. You can find show notes, we’ll add links to all Phil’s contact information, writing, website, etc., at mebfaber.com/podcast. You can find all the archives, as well as leave us a review on iTunes or follow along at Overcast, Stitcher, Castro, all the other apps. Thanks for listening friends, and good investing.

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