Venture Podcast: Interview with Kelly Perdue

welcome to venture podcast presented by VN the world's leading investors Community the place to learn from VCS and capital allocators but the math shows that in order to take advantage of the asset class you need diversification to get to be about 20 to 25 deals um so as an investor what you want to do and what I what I saw and what drove me to keep investing even though it was little bits is look at your total portfolio figure out how much want in this highrisk High reward asset class and if it's 100 Grand you divide that by 20 or 25 and you make four or $5,000 bets 20 to 25 times across Industries across time so that you get diversification where you're going to hit maybe you hit a Google I mean those are rare right it's what got you know our 200 million AUM in place but there are other elements hey guys welcome to V podcast we are here today with Kelly Perdue uh General partner at Buro Capital so nice to meet you Kelly thanks for joining us we would like to um you know learn more about your investment journey and um niik Leon is joining me today to to to have this fruitful conversation nice to meet you please introduce your yourself and share some some of your background well hello Yuri and Nico I really appreciate you having me on um I love I love talking to entrepreneurs and new and experienced investors alike um I hope to help both both those uh categories of people learn from my mistakes so um I I hope I hope that I can do that some today um my background I think I'll start kind of college I'm old it would take a long time to go through all of it um I graduated from West Point and the military academy in the United States uh and went into the you Army as a second Lieutenant um Military Intelligence officer got both airborne and Ranger qualified and then my first Duty station was the seventh Infantry Division light and I stayed active duty for three years learning a lot about leadership leading troops um and then did uh reserve for two more years and started a jdnba program at UCLA so um it was in that program that I got my first taste of the entrepreneurs around the investment all those different things that occur in in and around the business schools and that bug bit me hard um so I started my first startup while I was in that program um I have since been an operator uh in 10 different roles of 10 different businesses um six exits uh two learning experiences right those that you know the the the things you kind of screw up or don't go well um and then two that are still outstanding um the jury's still out but are cash flowing and we'll see what happens and along that path um as I met the other entrepreneurs in the Los Angeles ecosystem I got very energized and you know coming from service coming from the military I looked at and still look at you know entrepreneurism the lifeblood of the US you know heart of the economy and you know helping entrepreneurs succeed really appealed to me and initially you know I only had a couple extra nickels for investing but I also had some time so I started investing both some of my extra dollars as well as my time in advisory roles or board roles mostly in finance and business development where I I had a pretty large Network and enabled me to help them kind of make it to the next level uh evolved My Angel Investing to the point where I was writing you know 20 $25,000 checks $50,000 checks you know to you know and this was a long time ago I started doing that in 2004 so 20 years ago and my mentor had given me um this from an investment standpoint lisis Villa Lobos he was a uh the co-founder of the tech Coast Angels which is a very large Angel group along the west coast of California and the angel Capital Association one of the founding uh board members for the angel and he helped get off the ground DC angels and New York Angel so this guy's a real mench and he had done Monte Carlos simulations a math wizard on all of the early stage investing that was occurring uh Angel Tech and high-tech um highest return of any asset class at the time and he found that you know most Angels stop investing after two or three Investments and it usually works like this you're at a dinner or now you're at a great event you know and two or three you know entrepreneurs pitch so now your entire data set that you're selecting from is three people that you're picking from and one of them is better than the other two so you're like okay I'll write a 20,000 25 $50,000 check you know because you're a dentist or a doctor or whatever you are you made some extra cash flow and you like love watching Tech crunch with these billion dooll companies coming out all the time and you want to get a piece of one of those and you do that two or three times over two or three months of going to a dinner or watching a pitch session and inevitably one of those companies goes out of business and now a significant other or spouse gets involved and goes what have you done you're that's a whole college education because there's like 75 or 100 grand out there and one of them's gone and they stop investing but the math shows that in order to take it advantage of the asset class you need diversification to get to be about 20 to 25 deals um so as an investor what you want to do and what I what I saw and what drove me to keep investing even though it was little bits is look at your total portfolio figure out how much you want in this highrisk High reward asset class and if it's 100 Grand you divide that by 20 or 25 and you make four or 5,000 bets 20 to 25 times across Industries across time so you get diverse ification where you're going to hit maybe you hit a Google I mean those are rare right but you at least start to see the opportunity for things to occur and there are so many deals in the world right now that it's easy to get access the thing that you're going to struggle with as an angel is someone like me running a venture fund you know for our you know fund three now we've seen over 2,000 deals and we funded eight so we have pattern recognition we have expertise in certain areas we know how to you know evaluate the founders and the business models and if you're just starting out it's really hard to be able to do that and you're basically going to get lucky or you're you work in an area that you already know and understand because that's the business that you come from so that's what led me to start doing you know firing I wanted to get 20 to 30 arrows flying to take advantage of that asset class like my now deceased Mentor you know said that was the right way to do it and it's grown to the point now where we moved to syndicates from Angel Investing my my business partner and he's also a West Point grad based out of Austin uh to running a fun that's really interesting and uh looking at your your LinkedIn and a bit of your your background I think I saw over a hundred different experiences it's it's I don't think I've ever seen a LinkedIn with with that many kind of items on it uh but just talking a little bit more about your your Investments I mean you've been investing for I don't know 20 years or so you say uh what have been your your biggest success stories uh is great to know about that so there are a lot of different ways to define success as an investor you're T typically looking at return right um LinkedIn was a very successful early stage investment for me scopely was a very successful early stage investment for me some people might not have heard of scopely Walter driver is the co-founding CEO I met him put money in the seed round acted as advisor for a short while um about a year and a half ago it exited at uh 4.4 billion all cash um as a gaming uh platform company and if you can find those you should definitely invest in them um but we can get into how you make you know decisions on who you want to invest in and why um right now um one of the companies that I feel when when you say most successful in addition to Capital return I also think about the mission of the company and um I invested now 13 years ago and have been on the board for 12 years in a company called ID me and it's an online identity platform run by a military veteran uh founded and run by a military veteran Blake Hall and they've now credentialed over half of the US adult population so 130 million individuals so that people can verify they are who they say they are when they're accessing different types of services um from the consumer side all the way at one end from getting a military discount at Under Armour as as a large retailer all the way to the other end of a doctor who wants to write a script um but needs to verify they are who they say they are so that that script is properly you know qualified and Quantified for the type of drug that they're going to prescribe um up to individual consumers you know citizens of the US logging in to the IRS saying they are who they say they are to pay their taxes so um they have combed an amazing amount of fraud um and that's one of the big missions that Blake has as part of what they're doing as a company to stop um you know China Russia Nigeria major State actors from defrauding the US government and take stealing money yeah so how did you meet with LinkedIn Founders to invest in early stage and you so L LinkedIn was a pretty interesting story I um hasn't come up yet in this conversation but I took a little detour for about 18 to 20 months and uh went on a show called The Apprentice um which was a big reality show in the United States a while ago with now president Donald Trump was the you know the the key the key star in that show um and I won season two and as part of thinking about as we fil we film in the summer before the show actually airs and then they edit the film but the finale is live so I knew I was in the finale but I didn't know if I was going to get hired or fired in front of it turned out 30 million people watched the finale so basically half of a US football Super Bowl and um I thought about well what are the different ways that I might be able to monetize this understanding that at the time I was under an NDA and couldn't describe anything until the show actually launched and people knew I was on it and um about two to three weeks in to the show airing I was getting you know millions of visitors to my Kelly purdue.com website um I as part of the leadup to that I also bought two of the other contestants named URLs and told them the show never ends but here you can have these you should have bought these um so I reached out to LinkedIn because I I was working at an offshore development software capability company based out of India and we were working on things that were similar to LinkedIn different products this was really early right this was 2004 right mid 2000 and so I reached out to the then you know VP of Business Development fa at at LinkedIn and said hey I'm Kelly Purdue from Thursday nights this is like episode two or three right and I'm writing a book on a networking an a critical component to leadership that I'm writing the book on and I'll mention LinkedIn I'll have I'll put LinkedIn above the fold on my website and I'm doing Speak you know hundreds of speaking engagements and I'd like to talk about LinkedIn because I think it's a great tool I would like to participate engage in some way and I was able to negotiate getting involved with LinkedIn as part of using the show celebrity to give me more exposure and um as part of the negotiation it was the VP of Business development was Matt kler who then went to be the VP at Facebook of Business Development and then started Benchmark so he's a partner at Benchmark a large BC fund now um he said well if you're if you're gonna do that when you win I was like whoa whoa whoa I didn't say that I won I you know I can't tell you if I win or lose or get fired or anything else because it's only week two right and you can't let the cat out of the bag and I said um he said okay when you're fired or if you win we can use your face and likeness is the front of LinkedIn and they used to have you know some somebody on the front like you know some of the people that you've had on the show on the podcast already right like a Tim Draper or whoever it might be that's illustrious person who uses LinkedIn they put their profile up so in addition to being able to engage on the cap table I got to be the face of LinkedIn for about a month after I won the show which helped you know grow my grow my user base amazing so so it's a serend Deus investment in a way yes I mean I I had to do the Outreach and I literally spent probably three weeks in a room by myself with the Whiteboard going should I make a cologne should I have a clothing line should like all the things that you know creators do now how to monetize yeah yeah how do you monetize it right because you get you know shots at Fame very infrequently right and so um I kind of went with the thing that I knew best which is early stage technology and investing in you know knock on wood that one worked out really well and started a good path for for that investment the other the other interesting piece of that um is you know I couldn't talk to anybody so I had to do everything kind of in a vacuum so I had never negotiated an arrangement like that so I had to have an attorney you know under an NDA to help me negotiating a piece of it who didn't really know what was going on or why it happened so and you ended up winning you ended up winning in and um and that means that you end up working with with Trump is that is that is that correct yes I worked uh with uh Donald at the Trump Organization for all of 2005 and a little bit of 2006 I stayed there until um I think it was the end of February beginning of March when my book launched and he was gracious enough to write the forward to my book and uh be a part of the book launch and what was the book about um the book is called take command and it's about applying military leadership principles to business and at the time I'd only really I've done some okay things in business but not like a luminary and I want a reality show so I was like what do I need to do to add some credibility to these these things that I'm pushing is really important you know business principles so I reached out to military veterans that had become successful in business and interviewed them as part of the book and a few of those are like Roger stabach who was Dallas Cowboys uh you know Super Bowl two-time Super Bowl winning Champion Naval Academy served in the Navy right and then built up I don't know what the final sale was for starback properties but he built up a very large real estate firm that was very well recognized and I want to say it was six to 00 million he sold it for I interviewed Ross perau which a lot of people might remember is the independent C first kind of independent candidate that had a shot at running for for things um Bill Coleman is the B from Bea systems which at the time was the first company to a billion in in Revenue um and then Pete Dawkins who was a West Point grad he was then Vice chair or chair uh chairman at City City Bank um and uh had had won the Heisman Trophy while he was a a Cadet at West Point running back at West Point so I I used book as a mechanism also to reach out to some pretty neat people that I got to meet personally in interview and that they would add legitimacy to these these principles do are effective in business and they are honed in the military yeah Nick Nico we should start writing a book it's kind of sounds like we have a coach how to do it right there you go yeah I think I think I think that's a fascinating uh overlap military in business and I think uh there's obviously no more I guess emergency situation than than in the military so I think applying those those kind of principles is very interesting what would you say is the biggest I guess difference that you see leadership in military versus leadership in business what would you say is the biggest difference that that you could kind of point out so so I think there are a lot of um skills leadership skills that are literally millions of dollars is spent training a person in leadership per se like literally in the study of leadership in the military and then not only that but training you how to train leadership and that's very rarely done in the civilian sector there aren't a lot of places there are programs and there are some there's a leadership class here or there but it's not the entire focus of a curriculum for years and millions of dollars is not spent on it so there's an attention to all of the different types of elements of leadership that that exists but the one kind of factor that I think permeates our investment Criterion when we think about and about a third of our AUM 200 million AUM has gone into deals that have military veterans as part of the founding team when soldiers go into combat we're we're effectively trusting our sons and daughters and trusting them to you know officers in the military going off into combat and that is a sacred Duty that is accepted as a responsibility by military veterans in in a very specific way right it's very very serious probably like you said one of the most serious things that you're trusted with like a doctor with a patient on the operating table right you're you're responsible you hold their life in your hands interestingly military veterans treat other people's money similarly very very high bar for responsibility so that they're you know I'm not saying that it doesn't exist in the in the civilian sector I'm just saying we have found that it's a common core tenant that when you give somebody money that's got a military background that same service mentality in their DNA comes through when they're dealing with other people's money we see a lot of investors tend to invest like in super Niche where they Excel it's kind of immigrants for example we have multiple fund managers that prefer to invest in immigrants because they they have the G the of the the grind to succeed you know um so they will uh kind of even we in the hard times they will keep going and and and build successful companies kind of of course there is a lot of failure but there is larger percentage of immigrants succeeding so you identify that you know military grads um veterans can be you know quite successful in terms of building successful startups absolutely I mean the obvious you know attention to detail um there's a there's a higher bar of trust especially you know you know Craig and I can do background checks and talk to former teammates or commanders to say do I want do I want to be in the Foxhole with this person or not because it is a war right running that entrepreneurial Gauntlet it's you know I just mentioned ID me earlier it's been 12 years now right like I don't know you know raise your hand out there if you've been married for 12 years like you know I am very close to Blake the founder there right having been there for 12 years so you really need to you know think about what you want to invest in as an investor and which specific traits are most important to you and you know that military bet gets you a lot get you a lot of the traits that most people say are the most important for running the startup and do you prefer like officers or kind of just the fact that they served in the Army is enough or you prefer those that were kind of managing people uh it depends uh on what the what the target you know product or service is for what they're doing and what their capabilities are but even like the lowest level enlisted person gets significant amount of leadership training while they're in the military right showing up on time shining your shoes you know answering qu questions quickly not lying right yeah in in any selling proposition there's some puffery that goes on especially in an early stage startups trying to sell vaporware to get contracts going like it's a it's a vicious cycle that you got to keep things moving but you know when you're investor and you ask somebody something there's a high level of trust um they understand The Importance of Being Honest like if you give the wrong grid coordinate for where you are because you're behind you can get blown up right it's really important to be honest it's more important than anything else that you're doing so um again if we go back to you know how you Source deals right it's kind of sounds like there are serus encounters how you got into great deals uh some deals you got through advisory like for example Pandora why would they have you as an advisor I was I wasn't a musical genius um but I but I but I did um know the founding CEO very well um we've been friends for a long time and he saw and understood the value that I was providing to these other Founders who were doing things in the LA ecosystem so as an investor if you can add value it's highly differentiated like I know it sounds a little crazy right now but there is so much money available to Founders like compared to 10 years ago or 20 years ago there massive different sources of capital that exist so as an investor especially now as a fund where we're trying to lead seed rounds Craig and I have to show that we're incredibly differentiated on the value ad and from a sourcing standpoint the ones that go right to the front of the pile like I said there's like there's almost like unlimited deals to look at right you you don't have enough time in a day so you need a very sophisticated system for sifting and sorting and managing and trying to understand what the value prop is and what's defensible and why that team is really good at what they're doing but if a Founder that we've worked with before who's out in the ecosystem building recommends another founder to us it goes right to the front of the pile because they've done like both Direction in vetting right they've done oh well this person's going to be able to put up with Kelly right and oh Kelly's really going to like this deal from the signals and the understanding of what we like to look for so we you know we've had we've invested in over 200 plus Founders now in our 115 uh companies that we've invested in and they are a phenomenal source of deal flow again hard to have access to that deal flow unless you're in some ecosystem that allows you that access you're not going to probably find it wandering around alone as an individual angel investor so it's about kind of joining a a community or Syndicate uh Jeffy recommendations on how and where to find these groups it's interesting the um there's a I don't want to say there's a new group every month but there's there's there's so many different ways to engage or get involved I think that it's important for early stage firsttime investors to go after or try to get engaged or involved in in a community where they can add value for what they're doing so they can be differentiated so that Community can be either GE geographically like in Los Angeles there's amplify there's mucker Labs there are a lot that's a big city and so there are a lot of mechanisms by which you can go be a mentor if you have a specific value prop right so but geographically is one separately is in but can overlay with that is in an area where you have expertise right if I can introduce you to three potential distribution Partners I'm much more valuable than my 25,000 bucks or whatever it is you're going to invest as an angel so really understanding where you can add value if you're not that interested in engaging and rolling up your sleeves as an angel and you want to be I don't call it dumb money but dumb money um different um large databases exist where you can stratify and look at exactly what companies are available like angelist comes to mind immediately right they've got an ability for you to put as little as I want to say $1,000 dollar into a deal yeah you can get your diversification across that you can sift and sort and read and see who else is investing in it and kind of follow signaling from other investors we started our syndicates we did our first couple on Angel list and then we moved off Angel list but we have about a thousand individuals who still participate with us when we run syndicates so we kept we so we went Angel syndicate committed funds and the reason we still have the Syndicate Vehicles twofold it allows us to continue to invest in our fund deals where our LPS want to get additional concentration or you know exposure because those deals are going well and we've reached the capacity of what we can invest from the fund in a single deal and then separately because Craig and I have been around a while and have this network of Founders and other co-investors we do get allocations to some later stage deals black grub Market Robin Hood that are way out Way Beyond you know where we would do out of an early stage fund but I can still raise 2 million 5 million 11 million from a Syndicate where our LPS first get advantage of that and I know um you guys are doing something similar with your group and it's an awesome way for individuals to get Investments and shots on goal going where there's another entity that's able to do a lot of the due diligence provide that for you so you can make an intelligent decision on where you want to and when you're making these decisions about where to deploy Capital are there certain rules of thumb that you follow uh you mentioned you know a high volume of of different Investments but Are there specific things that you look out for are the things that you particular have red flags with or or green flags just be good great to understand a bit more about how you find things to invest in so there's kind of two answers to that right so in our in our first first two chapters of Life first as angels and then as syndicates um there is not really a required thesis needed meaning I don't have to operate in any specific sector I don't have to operate at any prec specific level of a company seed series a where wherever I could get in and have an opportunity to participate we could do that um and help and our people who follow us and invest us like that because they're a thousand of them they have different tastes different times in their lives different amount of capital to deploy um as an angel you know it it's a little different sorry as a fund chapter 3 for us it's a little different right in order for people to give us their money to deploy we have to describe our strategy because they they have a large portfolio they need to understand where what sleeve of their diversification we're covering right so we focus from the fund side on what we call late seed so a company's up to a million in annual recurring Revenue they may or may not have had a small Institutional Investor or preed round um they do have a product they some dogs are eating some of the dog food so there's some data that we can analyze and helps us drisk the deal based on what we're looking at now if it's a you know one in a million founder Andor somebody we previously backed we'll try to get in as early as possible like pre PowerPoint presentation right if we know them and that's you know an example of that is gredle AI right we led the see because we previously backed the founder Greylock followed us in Shar ramaswami came on the board from Greylock he's now the CEO at snowflake um they led the a I'm still on the board there I introduced anos Capital Emily white led the be and they're you know they're blowing the doors off they're doing really great stuff and every cloud provider uses them basically to um allow a synthetic data layer to sit between the company's proprietary data whether that be Hippa issues or pii or whatever it might be and still access LS right so Nvidia loves it all the cloud providers love it because now the customers can access and use gpus right because they've got a protective layer of the synthetic data that exists so really timely but the thing about that company was one I knew the founder from previously working with them but two it was four co-founders all with multiple exits they've SE they've been to and seen the movie before they've exited they're not working desperately at something they're not familiar with they're working at something they want to change the world with right they really are swinging for billion dollar valuation and they know how to get there so if you can if you have the it's very rare for an angel to get an opportunity to invest in that type of a company because the best Founders don't typically go to large Angel groups right they've done it before they know how it works they tell Andre and Horowitz or moonshots Capital they want two to2 to20 million for their seed they know who want they want to be on the cap table they know which board member they want to be on the cap table and they've got the vision and they understand exactly how they're going to finance the company all the way through those companies are typically the ones that are you know 90% of the top 10% and if you don't have access to those it's very difficult to participate now ID me is an example of one where Blake was a hunter killer platoon leader in Iraq the most successful in capturing or killing you know the bad guys on the deck of cards and then went to Harvard Business School but had never run a business in his life and was like Hey I know I want to do something that helps the military and it started off as a company called troop swap that pivoted to troop ID that pivoted to ID me and is now worth you know last round of financing 1.7 billion and I'm expecting that to increase significantly that's an example of finding a military veteran leader who is able to evolve with the company so firsttime founder firsttime technology founder but he had enough of the leadership principles that he exhibited while I was getting to know him and mentoring him that we have invested in every round I've been a board member for 12 years and he's grown that company so much that so it is possible to find those first-time Founders but a lot of the smart money likes to bet on the repeat Founders and obviously you've got had loads of success stories and I guess it's great for our listeners to always hear that you know even the even the successful people fail as well so can you tell us about maybe a miss that you've had uh that you maybe wish you had invested in back in the day you mean you mean a miss that we didn't invest in the company yeah that became successful so there's there's there there's loads of those like every every BC's got those um the one I'll tell you about um is from when I was an angel investor and living in Los Angeles if anybody listening has ever experienced you know traffic in Los Angeles you know the number one time never to go anywhere is Friday from about 3:30 p.m. till 8:00 p.m. and I got a lead on the super hot deal in Orange County and the only time the founder founder had to meet with me and a couple other people was Friday afternoon at like 5:30 p.m. and I was like well I've heard about this deal from a lot of people I should probably go maybe I could figure out a way to go down in the morning and spend the night like just like a lot of stuff happens in Los Angeles revolving around traffic and I ended up not going to meet Palmer lucky Oculus wow and so I didn't even do the math but you know it's it's it's not a great one um the there are all different types of you know not success stories um another another favorite of mine is so and and this this when you get to the point like first world problems when you get to the point where you're having exits um so I was part of selling into the LinkedIn IPO and then I sold as much as I could because I held it for nine years um and I still hadn't had a lot of successes so I had like maso's highy of needs to take care of food shelter and then I could start self-actualizing as an investor and this is this is a um advice I think to a lot of a lot a lot of investors but um and then I had a lock up of six months and like a week after the IPO before you could freely trade all of your You' only sell like 10% into the IPO or something like that and about two and a half minutes into trading at the six month and 7day period of lock up I blew out 100% of my LinkedIn right and I've got like whatever enough money for the kids college and house and what whatever did it all and then literally weekly for the next two years my two brothers would send me like screen grabs of the LinkedIn price that was just skyrocketing the whole time so that I had sold and it's I came remember who said you can't you know go broke making a profit well for our Founders for other investors you know you you have to have a strategy and think about how you exit and what you exit when you have when you have opportunities and I strongly encourage people to take get some returns off the table when you have those opportunities because you do not know what the future holds um but there are also Arguments for long holds especially when you know a lot about the company and understand what they're doing yeah there was this case with Shopify as well right kind of VCS that exit when they could exit you know they they could make another 100x later yeah our our rule of thumb um is when we get to 10x of our original invested Capital we try to sell a third whatever like and also if you're a VC backing a company you also have to be careful about signaling Market but it's not unreasonable to say okay we want to exit about a third of it it returns you know a significant chunk you know you we got a multiple already on it and we let you we're letting the rest ride and obviously you make independent decisions based on the information you have if I'm a board member and know a lot about the company that could change our decision if we don't have as much access it might be different so would you do that through a secondary it's kind of if there are opportunities so there there are yes that is one way to do it um companies run structured secondaries frequently now compared to 10 years ago there's a pretty liquid secondary Market at least for known names so that there's typically opportunities to do it it depends on the company though right a lot of the stock has restrictions where the company has to approve it there's a right of first ref refusal for some other depending on the class of stock um so there are technical elements to be concerned with but yes those are ways to get liquidity um there also I don't know how prevalent they are but during the significant runup of Zer um there were companies that exist that allow employees spe you know especially but the ability to get a loan against the stock where you get some liquidity that allows you to do stuff and you you're not signing personally on on that the company though still it has to be a known name that that the um company has you know been able to evaluate it and underwrite it on their own for what it's worth now you're definitely paying some big with those entities but if you want to buy a first home and you're having a family or you really want to diversify and make sure that you don't have all your eggs in one basket you've been with a company for seven years eight years and you want to get some liquidity those are those are opportunities to do that right and and um can you share some insights into like you started the first fund right kind of how was the transition to from a Syndicate to the first fund was it hard to raise LP Capital it was really easy to raise my first fund that's a complete lie so I I actually blogged about this um so I told you I like went to and completed Rangers school I did four years at West Point um I bed twins it's a lot harder for the wife part of that you know that deal but it was still like a lot of nights up and hardships right by far the hardest thing to do is raise fund one so we we uh we raised the $20 million fund one and you know people who are fundraising for their companies have it very difficult as well like I told you some of the numbers for our fund three um it is a factor harder to raise capital for a fund because you don't really have a specific product um LPS limited partners the people who invest in funds have a very very very very long list for saying no and only have a few spots like similar to the numbers now that I just described to you from the fund standpoint LPS have the same you know sets of criteria that exist and they use much of their Venture earmarked Capital to follow on invest in that managers that are already in their portfolio coming back around for fund two fund three or fund I don't know what SEO is on 20 30 um so there's an entirely different Dynamic um and I wrote about that humbling experience of raising fun one um in in our in our blog fun two we started raising right when Co started oh also not easy zero emails back and then fun three we started raising right as fun three is probably easier to raise than second because in second you still don't have enough performance to show from the first one right uh well the the third one there is already kind of quite good hopefully good performance on the first one that you can Peach to to potential new LPS I stopped writing how it was to raise each fund because of how depressing it was to write those things so I'll just say um running a fund is not for the faint of heart okay you grit grit comes in super handy for fundraising what advice would you you give yourself if you could go back in time and give yourself some advice before fund one what would you kind of say I I honestly don't know that there's an easy way to do it um it is selling so all of the events the event B you know the activity based I got to do 20 email I got to do 10 phone calls what's my funnel look like what are the Exogen events that I've got to threaten in order to get somebody to tip over like it is it is one is you need a salesperson on your team to structure the activity level and you just grind I mean you have to have a coherent thesis somehow you have to have a track record yeah even though which means which means it makes it a lot easier if you're coming from some other fund where you weren't the person who raised it but you have a track record of investing and you're going to raise your own fund now they're like oh you know how to be a BC because you've done it somewhere else it doesn't make it E it doesn't make it easy but I think it makes it easier Craig and I went from entrepreneurs to angels to syndicates but you you you already had phenomenal kind of track record through your businesses and through your Angel Investing wasn't it enough to convince El pece it's what got you know our 200 million AUM in place but there are other elements timing size right you can't really get an institution to participate unless you're raising at least a $100 million fund so micro funds micr funds are really under 250 but I think there are and I I wrote about this recently also it's you know the power the power law of BC forces some strange Behavior Behavior as your as your funds get larger as least a lot of where we anchor ourselves is around the entrepreneur I mean they are the lifeblood right they're they're really what makes this whole ecosystem work and if you get misaligned with a Founder like think about this um Everybody reads Tech crunch or sees all the headlines that media's value you know open AI X AI like you're just like holy cow this is amazing right everything's you know rainbows and unicorns this is fantastic and that that is like the top 1% of the top 1% of the top 1% literally right of what's actually transpiring here um so so you really have to have a thematic reason believable thematic reason for why somebody should give it's not even their money they're The Gatekeepers on the money right unless you're talking to a family office and you know the gatekeeper on the money has to be like I'm going to get fired if I screw this up right it's not a oh I want to make the most money possible what's the best strategy for like it's like you know I want another sleeve in seoa or you know and that's not all of them like anything else right but it's a lot of them and when you become a billion doll Fund in order to return two billion or three billion you can do pretty easy math on understanding if you own 20-ish per of a company how big it has to be and how many of those you need so if the three of us start a company and we rais I don't know five or 105 million and we're growing it we from scratch right we get people to come work for us for nothing Equity right we convince customers to give us you know to sign invoices on vaporware because we're almost ready to launch it we're going to like we do all the stuff that's really really hard to do and balance all these things and we grow a company to a 100 million value and somebody wants to buy us because we've built a cool part of their strategic plan only in like Silicon Valley land is that somehow a fail a failure like think about that growing something to 100 million valuation from your bra like just a thought and going out and trying to figure but if you're a tier one VC and I spent two years trying to help you grow and you took 10 or 15 million of my dollars and you only give me back 2x I have literally wasted my time and I'm not very happy with you because you had to sign up for the billion dollar exit plus like multi-billion dollar exit so hopefully so but for a micro fund if I get 10% ownership it sells for 100 million on a 20 million dollar fund I just returned half my fund with one deal like Yay like everybody should celebrate it's you know Legacy changing for the founder and you know the initial team lifechanging for the rest of the employees really good for me and my LPS as as a micro fund but it's you know for a for a big fund so where did you find success in meeting the right lpce is was it all in us or you did go to outside of us to to race we're yeah our funds have been primarily us-based for LPS High net worth family offices um a lot yeah a lot of entrepreneurs that had exited and of course with Craigs in my background a lot of people who have some familiarity or understanding with you know vets or the military about half our deal deals now are into um you know D like not DOD specific but dual use is what we call it right there has some application on the government side doesn't have to be DOD like ID me is not specifically focused on DOD but helps Veteran Affairs for veterans who need to access you know all of their benefits um state and federal governments for stopping fraud from the dark web from people stealing people's checks yeah and um yeah so you you moved to Portugal right kind of uh what what was the reason to move like sounds like everything is focused around us and and here you are in Portugal so what what is the reasoning so my in addition to the couple of companies that my wife and I started she's she's built started built and exited five different businesses um we started twins at the same time so we have boy girl twins that are 14 and a half years old and the boy is a very good soccer player it's at at Grant Purdue 10 Grant Purdue 10 on Instagram he's got I don't know like close to 10,000 followers now but um he got uh has been triing and got offers to play and you know please come if you can to German to a couple of Bundesliga clubs in Germany and a couple Portuguese clubs so I took my wife and Grant's twin sister to to Frankfurt Germany uh two thanksgivings ago and it was about 40 degrees dark at 4m. sleeing and my wife and daughter are looking at me like I'm insane and then we came to visit Lisbon uh and it was sunny and we sat and cassad theia on the rocks on the cliffs enjoying you know fresh octopus and it wasn't even it wasn't really a fair comparison um so I was like well Don maybe Grant it's time for him you know you know maybe he it's time for him to fly the coup like go and board and do whatever he needs to do and Don said uh the coupe is going with him so I live in Portugal because of my son and my boss and my my co-founder at moonshots um you know has been super flexible in understanding this is a a life a big life event both for my family it's also been awesome for me to get networked into this community where I met you and and and a lot of the other investors here um we have looked at one deal that's Portugal based that wants to go and launch in the US and that's that's our mindset around where we would be able to add value right truly important as an investor for us to be able to add value so any deal that we did would have to have that as part of what their road map is for us to be able to to want to invest in that now you open to invest even in European startups that expand to to us oh yeah okay yes for sure um um so my my work day um for the US market is you know 2:00 p.m. to midnigh is um here and then um I'm on a I'm on a airplane every four five six weeks or so for for a week for board meetings and meeting new Founders yeah doing strategy work cool in fact um next when's this going to air Sunday Pro probably like this Sunday well NE next Thursday I'm I'm uh I'm interviewing a luminary I can't say who since it's going to air before I do it but next Thursday I'll be in New York interviewing a an icon um on a fireside chat so hopefully I have some information I can feed you guys on that after yeah you you shared the story about your encounter with Elon Musk right so it kind of sounds like you have a amazing Network around the and around us especially right no Yuri I'm just old so I've gotten to meet so many people over time yeah so how do so yeah so this network helps you get the the right deal flow and and also Capital so it's it's amazing yeah absolutely um the network is is is absolutely critical it it helps with deal sourcing so understanding and meeting Founders when they know what we like to look at and see and stay front of mind with them um it helps with helping the companies after we invest you know from introductions for whether it's a distribution partner or Talent sourcing or whatever it might be it's super useful from that standpoint and then frequently during you know liquidation events especially during Acquisitions and and how that process flows having the right relationships to different acquirers to make sure the right introductions are made and the companies uh you know considered as part of that set you know AB absolutely critical um and then you know the founders themselves it's a very lonely job being a founder and because a lot of our LP network is made up of exited Founders um they're willing to talk to our Founders right because if you I mean we hope and we want that the founder would talk to their board member but you know it's just like talking maybe to your spouse also like you don't or even the people on your team like every day is up and down so much like first of all if you shared that with everybody they'd go crazy they might lose confidence they like the stuff that you have to deal with is a very that very lonely role we can introduce other Founders who've been in that seat and that empathy is pretty important and critical for helping them deal with it and and manage their way through is super helpful cool um I think we we are exhausted most of the questions uh for today um yeah n yeah thank you for your time

welcome to venture podcast presented by VN the world&#39;s leading investors Community the place to learn from VCS and capital allocators but the math shows that in order to take advantage of the asset class you need diversification to get to be about 20 to 25 deals um so as an investor what you want to do and what I what I saw and what drove me to keep investing even though it was little bits is look at your total portfolio figure out how much want in this highrisk High reward asset class and if it&#39;s 100 Grand you divide that by 20 or 25 and you make four or $5,000 bets 20 to 25 times across Industries across time so that you get diversification where you&#39;re going to hit maybe you hit a Google I mean those are rare right it&#39;s what got you know our 200 million AUM in place but there are other elements hey guys welcome to V podcast we are here today with Kelly Perdue uh General partner at Buro Capital so nice to meet you Kelly thanks for joining us we would like to um you know learn more about your investment journey and um niik Leon is joining me today to to to have this fruitful conversation nice to meet you please introduce your yourself and share some some of your background well hello Yuri and Nico I really appreciate you having me on um I love I love talking to entrepreneurs and new and experienced investors alike um I hope to help both both those uh categories of people learn from my mistakes so um I I hope I hope that I can do that some today um my background I think I&#39;ll start kind of college I&#39;m old it would take a long time to go through all of it um I graduated from West Point and the military academy in the United States uh and went into the you Army as a second Lieutenant um Military Intelligence officer got both airborne and Ranger qualified and then my first Duty station was the seventh Infantry Division light and I stayed active duty for three years learning a lot about leadership leading troops um and then did uh reserve for two more years and started a jdnba program at UCLA so um it was in that program that I got my first taste of the entrepreneurs around the investment all those different things that occur in in and around the business schools and that bug bit me hard um so I started my first startup while I was in that program um I have since been an operator uh in 10 different roles of 10 different businesses um six exits uh two learning experiences right those that you know the the the things you kind of screw up or don&#39;t go well um and then two that are still outstanding um the jury&#39;s still out but are cash flowing and we&#39;ll see what happens and along that path um as I met the other entrepreneurs in the Los Angeles ecosystem I got very energized and you know coming from service coming from the military I looked at and still look at you know entrepreneurism the lifeblood of the US you know heart of the economy and you know helping entrepreneurs succeed really appealed to me and initially you know I only had a couple extra nickels for investing but I also had some time so I started investing both some of my extra dollars as well as my time in advisory roles or board roles mostly in finance and business development where I I had a pretty large Network and enabled me to help them kind of make it to the next level uh evolved My Angel Investing to the point where I was writing you know 20 $25,000 checks $50,000 checks you know to you know and this was a long time ago I started doing that in 2004 so 20 years ago and my mentor had given me um this from an investment standpoint lisis Villa Lobos he was a uh the co-founder of the tech Coast Angels which is a very large Angel group along the west coast of California and the angel Capital Association one of the founding uh board members for the angel and he helped get off the ground DC angels and New York Angel so this guy&#39;s a real mench and he had done Monte Carlos simulations a math wizard on all of the early stage investing that was occurring uh Angel Tech and high-tech um highest return of any asset class at the time and he found that you know most Angels stop investing after two or three Investments and it usually works like this you&#39;re at a dinner or now you&#39;re at a great event you know and two or three you know entrepreneurs pitch so now your entire data set that you&#39;re selecting from is three people that you&#39;re picking from and one of them is better than the other two so you&#39;re like okay I&#39;ll write a 20,000 25 $50,000 check you know because you&#39;re a dentist or a doctor or whatever you are you made some extra cash flow and you like love watching Tech crunch with these billion dooll companies coming out all the time and you want to get a piece of one of those and you do that two or three times over two or three months of going to a dinner or watching a pitch session and inevitably one of those companies goes out of business and now a significant other or spouse gets involved and goes what have you done you&#39;re that&#39;s a whole college education because there&#39;s like 75 or 100 grand out there and one of them&#39;s gone and they stop investing but the math shows that in order to take it advantage of the asset class you need diversification to get to be about 20 to 25 deals um so as an investor what you want to do and what I what I saw and what drove me to keep investing even though it was little bits is look at your total portfolio figure out how much you want in this highrisk High reward asset class and if it&#39;s 100 Grand you divide that by 20 or 25 and you make four or 5,000 bets 20 to 25 times across Industries across time so you get diverse ification where you&#39;re going to hit maybe you hit a Google I mean those are rare right but you at least start to see the opportunity for things to occur and there are so many deals in the world right now that it&#39;s easy to get access the thing that you&#39;re going to struggle with as an angel is someone like me running a venture fund you know for our you know fund three now we&#39;ve seen over 2,000 deals and we funded eight so we have pattern recognition we have expertise in certain areas we know how to you know evaluate the founders and the business models and if you&#39;re just starting out it&#39;s really hard to be able to do that and you&#39;re basically going to get lucky or you&#39;re you work in an area that you already know and understand because that&#39;s the business that you come from so that&#39;s what led me to start doing you know firing I wanted to get 20 to 30 arrows flying to take advantage of that asset class like my now deceased Mentor you know said that was the right way to do it and it&#39;s grown to the point now where we moved to syndicates from Angel Investing my my business partner and he&#39;s also a West Point grad based out of Austin uh to running a fun that&#39;s really interesting and uh looking at your your LinkedIn and a bit of your your background I think I saw over a hundred different experiences it&#39;s it&#39;s I don&#39;t think I&#39;ve ever seen a LinkedIn with with that many kind of items on it uh but just talking a little bit more about your your Investments I mean you&#39;ve been investing for I don&#39;t know 20 years or so you say uh what have been your your biggest success stories uh is great to know about that so there are a lot of different ways to define success as an investor you&#39;re T typically looking at return right um LinkedIn was a very successful early stage investment for me scopely was a very successful early stage investment for me some people might not have heard of scopely Walter driver is the co-founding CEO I met him put money in the seed round acted as advisor for a short while um about a year and a half ago it exited at uh 4.4 billion all cash um as a gaming uh platform company and if you can find those you should definitely invest in them um but we can get into how you make you know decisions on who you want to invest in and why um right now um one of the companies that I feel when when you say most successful in addition to Capital return I also think about the mission of the company and um I invested now 13 years ago and have been on the board for 12 years in a company called ID me and it&#39;s an online identity platform run by a military veteran uh founded and run by a military veteran Blake Hall and they&#39;ve now credentialed over half of the US adult population so 130 million individuals so that people can verify they are who they say they are when they&#39;re accessing different types of services um from the consumer side all the way at one end from getting a military discount at Under Armour as as a large retailer all the way to the other end of a doctor who wants to write a script um but needs to verify they are who they say they are so that that script is properly you know qualified and Quantified for the type of drug that they&#39;re going to prescribe um up to individual consumers you know citizens of the US logging in to the IRS saying they are who they say they are to pay their taxes so um they have combed an amazing amount of fraud um and that&#39;s one of the big missions that Blake has as part of what they&#39;re doing as a company to stop um you know China Russia Nigeria major State actors from defrauding the US government and take stealing money yeah so how did you meet with LinkedIn Founders to invest in early stage and you so L LinkedIn was a pretty interesting story I um hasn&#39;t come up yet in this conversation but I took a little detour for about 18 to 20 months and uh went on a show called The Apprentice um which was a big reality show in the United States a while ago with now president Donald Trump was the you know the the key the key star in that show um and I won season two and as part of thinking about as we fil we film in the summer before the show actually airs and then they edit the film but the finale is live so I knew I was in the finale but I didn&#39;t know if I was going to get hired or fired in front of it turned out 30 million people watched the finale so basically half of a US football Super Bowl and um I thought about well what are the different ways that I might be able to monetize this understanding that at the time I was under an NDA and couldn&#39;t describe anything until the show actually launched and people knew I was on it and um about two to three weeks in to the show airing I was getting you know millions of visitors to my Kelly purdue.com website um I as part of the leadup to that I also bought two of the other contestants named URLs and told them the show never ends but here you can have these you should have bought these um so I reached out to LinkedIn because I I was working at an offshore development software capability company based out of India and we were working on things that were similar to LinkedIn different products this was really early right this was 2004 right mid 2000 and so I reached out to the then you know VP of Business Development fa at at LinkedIn and said hey I&#39;m Kelly Purdue from Thursday nights this is like episode two or three right and I&#39;m writing a book on a networking an a critical component to leadership that I&#39;m writing the book on and I&#39;ll mention LinkedIn I&#39;ll have I&#39;ll put LinkedIn above the fold on my website and I&#39;m doing Speak you know hundreds of speaking engagements and I&#39;d like to talk about LinkedIn because I think it&#39;s a great tool I would like to participate engage in some way and I was able to negotiate getting involved with LinkedIn as part of using the show celebrity to give me more exposure and um as part of the negotiation it was the VP of Business development was Matt kler who then went to be the VP at Facebook of Business Development and then started Benchmark so he&#39;s a partner at Benchmark a large BC fund now um he said well if you&#39;re if you&#39;re gonna do that when you win I was like whoa whoa whoa I didn&#39;t say that I won I you know I can&#39;t tell you if I win or lose or get fired or anything else because it&#39;s only week two right and you can&#39;t let the cat out of the bag and I said um he said okay when you&#39;re fired or if you win we can use your face and likeness is the front of LinkedIn and they used to have you know some somebody on the front like you know some of the people that you&#39;ve had on the show on the podcast already right like a Tim Draper or whoever it might be that&#39;s illustrious person who uses LinkedIn they put their profile up so in addition to being able to engage on the cap table I got to be the face of LinkedIn for about a month after I won the show which helped you know grow my grow my user base amazing so so it&#39;s a serend Deus investment in a way yes I mean I I had to do the Outreach and I literally spent probably three weeks in a room by myself with the Whiteboard going should I make a cologne should I have a clothing line should like all the things that you know creators do now how to monetize yeah yeah how do you monetize it right because you get you know shots at Fame very infrequently right and so um I kind of went with the thing that I knew best which is early stage technology and investing in you know knock on wood that one worked out really well and started a good path for for that investment the other the other interesting piece of that um is you know I couldn&#39;t talk to anybody so I had to do everything kind of in a vacuum so I had never negotiated an arrangement like that so I had to have an attorney you know under an NDA to help me negotiating a piece of it who didn&#39;t really know what was going on or why it happened so and you ended up winning you ended up winning in and um and that means that you end up working with with Trump is that is that is that correct yes I worked uh with uh Donald at the Trump Organization for all of 2005 and a little bit of 2006 I stayed there until um I think it was the end of February beginning of March when my book launched and he was gracious enough to write the forward to my book and uh be a part of the book launch and what was the book about um the book is called take command and it&#39;s about applying military leadership principles to business and at the time I&#39;d only really I&#39;ve done some okay things in business but not like a luminary and I want a reality show so I was like what do I need to do to add some credibility to these these things that I&#39;m pushing is really important you know business principles so I reached out to military veterans that had become successful in business and interviewed them as part of the book and a few of those are like Roger stabach who was Dallas Cowboys uh you know Super Bowl two-time Super Bowl winning Champion Naval Academy served in the Navy right and then built up I don&#39;t know what the final sale was for starback properties but he built up a very large real estate firm that was very well recognized and I want to say it was six to 00 million he sold it for I interviewed Ross perau which a lot of people might remember is the independent C first kind of independent candidate that had a shot at running for for things um Bill Coleman is the B from Bea systems which at the time was the first company to a billion in in Revenue um and then Pete Dawkins who was a West Point grad he was then Vice chair or chair uh chairman at City City Bank um and uh had had won the Heisman Trophy while he was a a Cadet at West Point running back at West Point so I I used book as a mechanism also to reach out to some pretty neat people that I got to meet personally in interview and that they would add legitimacy to these these principles do are effective in business and they are honed in the military yeah Nick Nico we should start writing a book it&#39;s kind of sounds like we have a coach how to do it right there you go yeah I think I think I think that&#39;s a fascinating uh overlap military in business and I think uh there&#39;s obviously no more I guess emergency situation than than in the military so I think applying those those kind of principles is very interesting what would you say is the biggest I guess difference that you see leadership in military versus leadership in business what would you say is the biggest difference that that you could kind of point out so so I think there are a lot of um skills leadership skills that are literally millions of dollars is spent training a person in leadership per se like literally in the study of leadership in the military and then not only that but training you how to train leadership and that&#39;s very rarely done in the civilian sector there aren&#39;t a lot of places there are programs and there are some there&#39;s a leadership class here or there but it&#39;s not the entire focus of a curriculum for years and millions of dollars is not spent on it so there&#39;s an attention to all of the different types of elements of leadership that that exists but the one kind of factor that I think permeates our investment Criterion when we think about and about a third of our AUM 200 million AUM has gone into deals that have military veterans as part of the founding team when soldiers go into combat we&#39;re we&#39;re effectively trusting our sons and daughters and trusting them to you know officers in the military going off into combat and that is a sacred Duty that is accepted as a responsibility by military veterans in in a very specific way right it&#39;s very very serious probably like you said one of the most serious things that you&#39;re trusted with like a doctor with a patient on the operating table right you&#39;re you&#39;re responsible you hold their life in your hands interestingly military veterans treat other people&#39;s money similarly very very high bar for responsibility so that they&#39;re you know I&#39;m not saying that it doesn&#39;t exist in the in the civilian sector I&#39;m just saying we have found that it&#39;s a common core tenant that when you give somebody money that&#39;s got a military background that same service mentality in their DNA comes through when they&#39;re dealing with other people&#39;s money we see a lot of investors tend to invest like in super Niche where they Excel it&#39;s kind of immigrants for example we have multiple fund managers that prefer to invest in immigrants because they they have the G the of the the grind to succeed you know um so they will uh kind of even we in the hard times they will keep going and and and build successful companies kind of of course there is a lot of failure but there is larger percentage of immigrants succeeding so you identify that you know military grads um veterans can be you know quite successful in terms of building successful startups absolutely I mean the obvious you know attention to detail um there&#39;s a there&#39;s a higher bar of trust especially you know you know Craig and I can do background checks and talk to former teammates or commanders to say do I want do I want to be in the Foxhole with this person or not because it is a war right running that entrepreneurial Gauntlet it&#39;s you know I just mentioned ID me earlier it&#39;s been 12 years now right like I don&#39;t know you know raise your hand out there if you&#39;ve been married for 12 years like you know I am very close to Blake the founder there right having been there for 12 years so you really need to you know think about what you want to invest in as an investor and which specific traits are most important to you and you know that military bet gets you a lot get you a lot of the traits that most people say are the most important for running the startup and do you prefer like officers or kind of just the fact that they served in the Army is enough or you prefer those that were kind of managing people uh it depends uh on what the what the target you know product or service is for what they&#39;re doing and what their capabilities are but even like the lowest level enlisted person gets significant amount of leadership training while they&#39;re in the military right showing up on time shining your shoes you know answering qu questions quickly not lying right yeah in in any selling proposition there&#39;s some puffery that goes on especially in an early stage startups trying to sell vaporware to get contracts going like it&#39;s a it&#39;s a vicious cycle that you got to keep things moving but you know when you&#39;re investor and you ask somebody something there&#39;s a high level of trust um they understand The Importance of Being Honest like if you give the wrong grid coordinate for where you are because you&#39;re behind you can get blown up right it&#39;s really important to be honest it&#39;s more important than anything else that you&#39;re doing so um again if we go back to you know how you Source deals right it&#39;s kind of sounds like there are serus encounters how you got into great deals uh some deals you got through advisory like for example Pandora why would they have you as an advisor I was I wasn&#39;t a musical genius um but I but I but I did um know the founding CEO very well um we&#39;ve been friends for a long time and he saw and understood the value that I was providing to these other Founders who were doing things in the LA ecosystem so as an investor if you can add value it&#39;s highly differentiated like I know it sounds a little crazy right now but there is so much money available to Founders like compared to 10 years ago or 20 years ago there massive different sources of capital that exist so as an investor especially now as a fund where we&#39;re trying to lead seed rounds Craig and I have to show that we&#39;re incredibly differentiated on the value ad and from a sourcing standpoint the ones that go right to the front of the pile like I said there&#39;s like there&#39;s almost like unlimited deals to look at right you you don&#39;t have enough time in a day so you need a very sophisticated system for sifting and sorting and managing and trying to understand what the value prop is and what&#39;s defensible and why that team is really good at what they&#39;re doing but if a Founder that we&#39;ve worked with before who&#39;s out in the ecosystem building recommends another founder to us it goes right to the front of the pile because they&#39;ve done like both Direction in vetting right they&#39;ve done oh well this person&#39;s going to be able to put up with Kelly right and oh Kelly&#39;s really going to like this deal from the signals and the understanding of what we like to look for so we you know we&#39;ve had we&#39;ve invested in over 200 plus Founders now in our 115 uh companies that we&#39;ve invested in and they are a phenomenal source of deal flow again hard to have access to that deal flow unless you&#39;re in some ecosystem that allows you that access you&#39;re not going to probably find it wandering around alone as an individual angel investor so it&#39;s about kind of joining a a community or Syndicate uh Jeffy recommendations on how and where to find these groups it&#39;s interesting the um there&#39;s a I don&#39;t want to say there&#39;s a new group every month but there&#39;s there&#39;s there&#39;s so many different ways to engage or get involved I think that it&#39;s important for early stage firsttime investors to go after or try to get engaged or involved in in a community where they can add value for what they&#39;re doing so they can be differentiated so that Community can be either GE geographically like in Los Angeles there&#39;s amplify there&#39;s mucker Labs there are a lot that&#39;s a big city and so there are a lot of mechanisms by which you can go be a mentor if you have a specific value prop right so but geographically is one separately is in but can overlay with that is in an area where you have expertise right if I can introduce you to three potential distribution Partners I&#39;m much more valuable than my 25,000 bucks or whatever it is you&#39;re going to invest as an angel so really understanding where you can add value if you&#39;re not that interested in engaging and rolling up your sleeves as an angel and you want to be I don&#39;t call it dumb money but dumb money um different um large databases exist where you can stratify and look at exactly what companies are available like angelist comes to mind immediately right they&#39;ve got an ability for you to put as little as I want to say $1,000 dollar into a deal yeah you can get your diversification across that you can sift and sort and read and see who else is investing in it and kind of follow signaling from other investors we started our syndicates we did our first couple on Angel list and then we moved off Angel list but we have about a thousand individuals who still participate with us when we run syndicates so we kept we so we went Angel syndicate committed funds and the reason we still have the Syndicate Vehicles twofold it allows us to continue to invest in our fund deals where our LPS want to get additional concentration or you know exposure because those deals are going well and we&#39;ve reached the capacity of what we can invest from the fund in a single deal and then separately because Craig and I have been around a while and have this network of Founders and other co-investors we do get allocations to some later stage deals black grub Market Robin Hood that are way out Way Beyond you know where we would do out of an early stage fund but I can still raise 2 million 5 million 11 million from a Syndicate where our LPS first get advantage of that and I know um you guys are doing something similar with your group and it&#39;s an awesome way for individuals to get Investments and shots on goal going where there&#39;s another entity that&#39;s able to do a lot of the due diligence provide that for you so you can make an intelligent decision on where you want to and when you&#39;re making these decisions about where to deploy Capital are there certain rules of thumb that you follow uh you mentioned you know a high volume of of different Investments but Are there specific things that you look out for are the things that you particular have red flags with or or green flags just be good great to understand a bit more about how you find things to invest in so there&#39;s kind of two answers to that right so in our in our first first two chapters of Life first as angels and then as syndicates um there is not really a required thesis needed meaning I don&#39;t have to operate in any specific sector I don&#39;t have to operate at any prec specific level of a company seed series a where wherever I could get in and have an opportunity to participate we could do that um and help and our people who follow us and invest us like that because they&#39;re a thousand of them they have different tastes different times in their lives different amount of capital to deploy um as an angel you know it it&#39;s a little different sorry as a fund chapter 3 for us it&#39;s a little different right in order for people to give us their money to deploy we have to describe our strategy because they they have a large portfolio they need to understand where what sleeve of their diversification we&#39;re covering right so we focus from the fund side on what we call late seed so a company&#39;s up to a million in annual recurring Revenue they may or may not have had a small Institutional Investor or preed round um they do have a product they some dogs are eating some of the dog food so there&#39;s some data that we can analyze and helps us drisk the deal based on what we&#39;re looking at now if it&#39;s a you know one in a million founder Andor somebody we previously backed we&#39;ll try to get in as early as possible like pre PowerPoint presentation right if we know them and that&#39;s you know an example of that is gredle AI right we led the see because we previously backed the founder Greylock followed us in Shar ramaswami came on the board from Greylock he&#39;s now the CEO at snowflake um they led the a I&#39;m still on the board there I introduced anos Capital Emily white led the be and they&#39;re you know they&#39;re blowing the doors off they&#39;re doing really great stuff and every cloud provider uses them basically to um allow a synthetic data layer to sit between the company&#39;s proprietary data whether that be Hippa issues or pii or whatever it might be and still access LS right so Nvidia loves it all the cloud providers love it because now the customers can access and use gpus right because they&#39;ve got a protective layer of the synthetic data that exists so really timely but the thing about that company was one I knew the founder from previously working with them but two it was four co-founders all with multiple exits they&#39;ve SE they&#39;ve been to and seen the movie before they&#39;ve exited they&#39;re not working desperately at something they&#39;re not familiar with they&#39;re working at something they want to change the world with right they really are swinging for billion dollar valuation and they know how to get there so if you can if you have the it&#39;s very rare for an angel to get an opportunity to invest in that type of a company because the best Founders don&#39;t typically go to large Angel groups right they&#39;ve done it before they know how it works they tell Andre and Horowitz or moonshots Capital they want two to2 to20 million for their seed they know who want they want to be on the cap table they know which board member they want to be on the cap table and they&#39;ve got the vision and they understand exactly how they&#39;re going to finance the company all the way through those companies are typically the ones that are you know 90% of the top 10% and if you don&#39;t have access to those it&#39;s very difficult to participate now ID me is an example of one where Blake was a hunter killer platoon leader in Iraq the most successful in capturing or killing you know the bad guys on the deck of cards and then went to Harvard Business School but had never run a business in his life and was like Hey I know I want to do something that helps the military and it started off as a company called troop swap that pivoted to troop ID that pivoted to ID me and is now worth you know last round of financing 1.7 billion and I&#39;m expecting that to increase significantly that&#39;s an example of finding a military veteran leader who is able to evolve with the company so firsttime founder firsttime technology founder but he had enough of the leadership principles that he exhibited while I was getting to know him and mentoring him that we have invested in every round I&#39;ve been a board member for 12 years and he&#39;s grown that company so much that so it is possible to find those first-time Founders but a lot of the smart money likes to bet on the repeat Founders and obviously you&#39;ve got had loads of success stories and I guess it&#39;s great for our listeners to always hear that you know even the even the successful people fail as well so can you tell us about maybe a miss that you&#39;ve had uh that you maybe wish you had invested in back in the day you mean you mean a miss that we didn&#39;t invest in the company yeah that became successful so there&#39;s there&#39;s there there&#39;s loads of those like every every BC&#39;s got those um the one I&#39;ll tell you about um is from when I was an angel investor and living in Los Angeles if anybody listening has ever experienced you know traffic in Los Angeles you know the number one time never to go anywhere is Friday from about 3:30 p.m. till 8:00 p.m. and I got a lead on the super hot deal in Orange County and the only time the founder founder had to meet with me and a couple other people was Friday afternoon at like 5:30 p.m. and I was like well I&#39;ve heard about this deal from a lot of people I should probably go maybe I could figure out a way to go down in the morning and spend the night like just like a lot of stuff happens in Los Angeles revolving around traffic and I ended up not going to meet Palmer lucky Oculus wow and so I didn&#39;t even do the math but you know it&#39;s it&#39;s it&#39;s not a great one um the there are all different types of you know not success stories um another another favorite of mine is so and and this this when you get to the point like first world problems when you get to the point where you&#39;re having exits um so I was part of selling into the LinkedIn IPO and then I sold as much as I could because I held it for nine years um and I still hadn&#39;t had a lot of successes so I had like maso&#39;s highy of needs to take care of food shelter and then I could start self-actualizing as an investor and this is this is a um advice I think to a lot of a lot a lot of investors but um and then I had a lock up of six months and like a week after the IPO before you could freely trade all of your You&#39; only sell like 10% into the IPO or something like that and about two and a half minutes into trading at the six month and 7day period of lock up I blew out 100% of my LinkedIn right and I&#39;ve got like whatever enough money for the kids college and house and what whatever did it all and then literally weekly for the next two years my two brothers would send me like screen grabs of the LinkedIn price that was just skyrocketing the whole time so that I had sold and it&#39;s I came remember who said you can&#39;t you know go broke making a profit well for our Founders for other investors you know you you have to have a strategy and think about how you exit and what you exit when you have when you have opportunities and I strongly encourage people to take get some returns off the table when you have those opportunities because you do not know what the future holds um but there are also Arguments for long holds especially when you know a lot about the company and understand what they&#39;re doing yeah there was this case with Shopify as well right kind of VCS that exit when they could exit you know they they could make another 100x later yeah our our rule of thumb um is when we get to 10x of our original invested Capital we try to sell a third whatever like and also if you&#39;re a VC backing a company you also have to be careful about signaling Market but it&#39;s not unreasonable to say okay we want to exit about a third of it it returns you know a significant chunk you know you we got a multiple already on it and we let you we&#39;re letting the rest ride and obviously you make independent decisions based on the information you have if I&#39;m a board member and know a lot about the company that could change our decision if we don&#39;t have as much access it might be different so would you do that through a secondary it&#39;s kind of if there are opportunities so there there are yes that is one way to do it um companies run structured secondaries frequently now compared to 10 years ago there&#39;s a pretty liquid secondary Market at least for known names so that there&#39;s typically opportunities to do it it depends on the company though right a lot of the stock has restrictions where the company has to approve it there&#39;s a right of first ref refusal for some other depending on the class of stock um so there are technical elements to be concerned with but yes those are ways to get liquidity um there also I don&#39;t know how prevalent they are but during the significant runup of Zer um there were companies that exist that allow employees spe you know especially but the ability to get a loan against the stock where you get some liquidity that allows you to do stuff and you you&#39;re not signing personally on on that the company though still it has to be a known name that that the um company has you know been able to evaluate it and underwrite it on their own for what it&#39;s worth now you&#39;re definitely paying some big with those entities but if you want to buy a first home and you&#39;re having a family or you really want to diversify and make sure that you don&#39;t have all your eggs in one basket you&#39;ve been with a company for seven years eight years and you want to get some liquidity those are those are opportunities to do that right and and um can you share some insights into like you started the first fund right kind of how was the transition to from a Syndicate to the first fund was it hard to raise LP Capital it was really easy to raise my first fund that&#39;s a complete lie so I I actually blogged about this um so I told you I like went to and completed Rangers school I did four years at West Point um I bed twins it&#39;s a lot harder for the wife part of that you know that deal but it was still like a lot of nights up and hardships right by far the hardest thing to do is raise fund one so we we uh we raised the $20 million fund one and you know people who are fundraising for their companies have it very difficult as well like I told you some of the numbers for our fund three um it is a factor harder to raise capital for a fund because you don&#39;t really have a specific product um LPS limited partners the people who invest in funds have a very very very very long list for saying no and only have a few spots like similar to the numbers now that I just described to you from the fund standpoint LPS have the same you know sets of criteria that exist and they use much of their Venture earmarked Capital to follow on invest in that managers that are already in their portfolio coming back around for fund two fund three or fund I don&#39;t know what SEO is on 20 30 um so there&#39;s an entirely different Dynamic um and I wrote about that humbling experience of raising fun one um in in our in our blog fun two we started raising right when Co started oh also not easy zero emails back and then fun three we started raising right as fun three is probably easier to raise than second because in second you still don&#39;t have enough performance to show from the first one right uh well the the third one there is already kind of quite good hopefully good performance on the first one that you can Peach to to potential new LPS I stopped writing how it was to raise each fund because of how depressing it was to write those things so I&#39;ll just say um running a fund is not for the faint of heart okay you grit grit comes in super handy for fundraising what advice would you you give yourself if you could go back in time and give yourself some advice before fund one what would you kind of say I I honestly don&#39;t know that there&#39;s an easy way to do it um it is selling so all of the events the event B you know the activity based I got to do 20 email I got to do 10 phone calls what&#39;s my funnel look like what are the Exogen events that I&#39;ve got to threaten in order to get somebody to tip over like it is it is one is you need a salesperson on your team to structure the activity level and you just grind I mean you have to have a coherent thesis somehow you have to have a track record yeah even though which means which means it makes it a lot easier if you&#39;re coming from some other fund where you weren&#39;t the person who raised it but you have a track record of investing and you&#39;re going to raise your own fund now they&#39;re like oh you know how to be a BC because you&#39;ve done it somewhere else it doesn&#39;t make it E it doesn&#39;t make it easy but I think it makes it easier Craig and I went from entrepreneurs to angels to syndicates but you you you already had phenomenal kind of track record through your businesses and through your Angel Investing wasn&#39;t it enough to convince El pece it&#39;s what got you know our 200 million AUM in place but there are other elements timing size right you can&#39;t really get an institution to participate unless you&#39;re raising at least a $100 million fund so micro funds micr funds are really under 250 but I think there are and I I wrote about this recently also it&#39;s you know the power the power law of BC forces some strange Behavior Behavior as your as your funds get larger as least a lot of where we anchor ourselves is around the entrepreneur I mean they are the lifeblood right they&#39;re they&#39;re really what makes this whole ecosystem work and if you get misaligned with a Founder like think about this um Everybody reads Tech crunch or sees all the headlines that media&#39;s value you know open AI X AI like you&#39;re just like holy cow this is amazing right everything&#39;s you know rainbows and unicorns this is fantastic and that that is like the top 1% of the top 1% of the top 1% literally right of what&#39;s actually transpiring here um so so you really have to have a thematic reason believable thematic reason for why somebody should give it&#39;s not even their money they&#39;re The Gatekeepers on the money right unless you&#39;re talking to a family office and you know the gatekeeper on the money has to be like I&#39;m going to get fired if I screw this up right it&#39;s not a oh I want to make the most money possible what&#39;s the best strategy for like it&#39;s like you know I want another sleeve in seoa or you know and that&#39;s not all of them like anything else right but it&#39;s a lot of them and when you become a billion doll Fund in order to return two billion or three billion you can do pretty easy math on understanding if you own 20-ish per of a company how big it has to be and how many of those you need so if the three of us start a company and we rais I don&#39;t know five or 105 million and we&#39;re growing it we from scratch right we get people to come work for us for nothing Equity right we convince customers to give us you know to sign invoices on vaporware because we&#39;re almost ready to launch it we&#39;re going to like we do all the stuff that&#39;s really really hard to do and balance all these things and we grow a company to a 100 million value and somebody wants to buy us because we&#39;ve built a cool part of their strategic plan only in like Silicon Valley land is that somehow a fail a failure like think about that growing something to 100 million valuation from your bra like just a thought and going out and trying to figure but if you&#39;re a tier one VC and I spent two years trying to help you grow and you took 10 or 15 million of my dollars and you only give me back 2x I have literally wasted my time and I&#39;m not very happy with you because you had to sign up for the billion dollar exit plus like multi-billion dollar exit so hopefully so but for a micro fund if I get 10% ownership it sells for 100 million on a 20 million dollar fund I just returned half my fund with one deal like Yay like everybody should celebrate it&#39;s you know Legacy changing for the founder and you know the initial team lifechanging for the rest of the employees really good for me and my LPS as as a micro fund but it&#39;s you know for a for a big fund so where did you find success in meeting the right lpce is was it all in us or you did go to outside of us to to race we&#39;re yeah our funds have been primarily us-based for LPS High net worth family offices um a lot yeah a lot of entrepreneurs that had exited and of course with Craigs in my background a lot of people who have some familiarity or understanding with you know vets or the military about half our deal deals now are into um you know D like not DOD specific but dual use is what we call it right there has some application on the government side doesn&#39;t have to be DOD like ID me is not specifically focused on DOD but helps Veteran Affairs for veterans who need to access you know all of their benefits um state and federal governments for stopping fraud from the dark web from people stealing people&#39;s checks yeah and um yeah so you you moved to Portugal right kind of uh what what was the reason to move like sounds like everything is focused around us and and here you are in Portugal so what what is the reasoning so my in addition to the couple of companies that my wife and I started she&#39;s she&#39;s built started built and exited five different businesses um we started twins at the same time so we have boy girl twins that are 14 and a half years old and the boy is a very good soccer player it&#39;s at at Grant Purdue 10 Grant Purdue 10 on Instagram he&#39;s got I don&#39;t know like close to 10,000 followers now but um he got uh has been triing and got offers to play and you know please come if you can to German to a couple of Bundesliga clubs in Germany and a couple Portuguese clubs so I took my wife and Grant&#39;s twin sister to to Frankfurt Germany uh two thanksgivings ago and it was about 40 degrees dark at 4m. sleeing and my wife and daughter are looking at me like I&#39;m insane and then we came to visit Lisbon uh and it was sunny and we sat and cassad theia on the rocks on the cliffs enjoying you know fresh octopus and it wasn&#39;t even it wasn&#39;t really a fair comparison um so I was like well Don maybe Grant it&#39;s time for him you know you know maybe he it&#39;s time for him to fly the coup like go and board and do whatever he needs to do and Don said uh the coupe is going with him so I live in Portugal because of my son and my boss and my my co-founder at moonshots um you know has been super flexible in understanding this is a a life a big life event both for my family it&#39;s also been awesome for me to get networked into this community where I met you and and and a lot of the other investors here um we have looked at one deal that&#39;s Portugal based that wants to go and launch in the US and that&#39;s that&#39;s our mindset around where we would be able to add value right truly important as an investor for us to be able to add value so any deal that we did would have to have that as part of what their road map is for us to be able to to want to invest in that now you open to invest even in European startups that expand to to us oh yeah okay yes for sure um um so my my work day um for the US market is you know 2:00 p.m. to midnigh is um here and then um I&#39;m on a I&#39;m on a airplane every four five six weeks or so for for a week for board meetings and meeting new Founders yeah doing strategy work cool in fact um next when&#39;s this going to air Sunday Pro probably like this Sunday well NE next Thursday I&#39;m I&#39;m uh I&#39;m interviewing a luminary I can&#39;t say who since it&#39;s going to air before I do it but next Thursday I&#39;ll be in New York interviewing a an icon um on a fireside chat so hopefully I have some information I can feed you guys on that after yeah you you shared the story about your encounter with Elon Musk right so it kind of sounds like you have a amazing Network around the and around us especially right no Yuri I&#39;m just old so I&#39;ve gotten to meet so many people over time yeah so how do so yeah so this network helps you get the the right deal flow and and also Capital so it&#39;s it&#39;s amazing yeah absolutely um the network is is is absolutely critical it it helps with deal sourcing so understanding and meeting Founders when they know what we like to look at and see and stay front of mind with them um it helps with helping the companies after we invest you know from introductions for whether it&#39;s a distribution partner or Talent sourcing or whatever it might be it&#39;s super useful from that standpoint and then frequently during you know liquidation events especially during Acquisitions and and how that process flows having the right relationships to different acquirers to make sure the right introductions are made and the companies uh you know considered as part of that set you know AB absolutely critical um and then you know the founders themselves it&#39;s a very lonely job being a founder and because a lot of our LP network is made up of exited Founders um they&#39;re willing to talk to our Founders right because if you I mean we hope and we want that the founder would talk to their board member but you know it&#39;s just like talking maybe to your spouse also like you don&#39;t or even the people on your team like every day is up and down so much like first of all if you shared that with everybody they&#39;d go crazy they might lose confidence they like the stuff that you have to deal with is a very that very lonely role we can introduce other Founders who&#39;ve been in that seat and that empathy is pretty important and critical for helping them deal with it and and manage their way through is super helpful cool um I think we we are exhausted most of the questions uh for today um yeah n yeah thank you for your time

Transcript for:Venture Podcast: Interview with Kelly Perdue

Transcript for:
Venture Podcast: Interview with Kelly Perdue