4 January 2022

Link to Podcast: https://ventureunlocked.substack.com/p/m13s-carter-reum-on-building-an-operational

Link to Transcript: https://docs.google.com/document/d/1QJOHC2RvlY5DD1VOm3CSW13SboGRVIOf

(Venture Unlocked doesn’t publish transcripts; so I got this done via Temi.com with additional reviews by @core_chirag; you are welcome!)

Sajith: Enjoyed this podcast, especially for the ideas around Propulsion Partners. The episode is far more relevant for those of us in venture though.

Carter: And one of the insights we had along the way was, we thought we were better investors because we were operators and we thought we were better operators because we were investors and really, what that distills back to is that we were seeing so many different ways of companies scaling. We are getting access to so much information and it was allowing us to be better at both and then we sold our company in 2015 and said, look, we wanna become full-time investors. We looked around and said, look, the whole world's being evolved and disrupted. We think venture needs to evolve. And what are the trends that lead us to believe a new model is needed?

And we kind of saw two trends that led us to believe the world of venture was shifting specifically in the spaces that we played. One was complete democratization of the ability to launch new companies.

(second trend)……now for the first time, a 1% difference is now a 1000 times better and a stat that I love just ‘cause it's the easiest to quantify this idea of, uh, in D2C, a 1% difference in 40 commerce statistics is a 400% increase in sales, compound that over three years and you're talking about a 5x difference in revenue. The winner goes on to be a unicorn.

Still, the second quartile ends up basically going out of business and so, we basically said, look, there's a fundamental shift happening in the venture, how do we build a firm that's not designed to only pick the winners, which is sourcing, but how do we build a firm that's all around - how do we make winners? And we said, how do we do it in an institutionalized and scalable way that acts as a flywheel where actually the bigger we become, (stronger) the model is.

…when you look at it, all these big private equity firms like Bain capital and others, all have these very large operating groups, ‘cause they realize the way you build better companies is you actually help them kind of execute better and we just think the same fundamental shift is happening in the venture. There are so many great companies, so many great ideas, but so many people going after it and so, we believe fundamentally that we've built a platform around this propulsion platform that helps companies execute better and effectively gives them a better chance at success.

Propulsion Partners

So, we have 10 partners at the firm. Five of those are full-time investing partners, all with operating backgrounds, but five of those are these vertically focused propulsion partners and their job every single day is to wake up and help our portfolio companies execute better and I think you saw some models a few years ago where platforms would try to add platform resources and they do it across maybe one dimension or two dimensions. We fundamentally thought that look, we need to help with all the dimensions and so, you know, our pillars are brand, product, distribution, acquisition, operations, and talent. And we have a partner and a team. Uh, we actually have one and a half people on our propulsion team for every person on our investing team. So, it shows the focus on building a firm around helping companies execute better and the idea for what us is we still back tremendous entrepreneurs, right?

I'll say is the way we think about startups is like shooting a rocket from earth to the moon. If you change the course of the rocket one degree after a mile, you're only 92 feet off course, but by the time you get to the moon, well, you never get to the moon ‘cause you're 4,169 miles off. And so, if we can build a firm, that's just trying to change the trajectories of these rocket ships one or two or three degrees. You can fundamentally change the trajectory of these companies because they get up the J curve faster, and they raise better follow-on capital. They're able to hire better people and kind of the flywheels then kick in.