Ian Rountree | Cantos

0:00Pitch, pitch, pass, iterate it fast. Story beats data when the storyline's vast. Vision's the ignition, but the numbers steer the ride. Conviction and precision, watch investors collide. Hey everybody, welcome to another episode of Fundraising, a podcast where we interview early stage investors and ask them all the questions that you, as a fundraising founder, wants to know about the fundraising process, which as we say, is actually no fun at all. And today I have a very special guest, Ian Roundtree, founder and general partner of Cantos. Just closed your fourth fund. Is that correct? That's right.

0:36Yeah. Congratulations. That is going to be a lot more capital going into some very, very lucky companies. We were just saying before we hit record, we are huge fans of what you are building over there and talking to a lot of the founders. We share a lot of the same portfolio companies, say nothing but great things as well. So thank you for being on. Could we start with a little bit about yourself and Kantos, what you're looking for and investing in, the types of checks that you write, and we'll start from there. Yeah, awesome, Matt. Thanks for having me on. You know, Harpoon and Kantos have been close friends since the early days.

1:08Yeah. We, you know, it's funny to like look at the state of venture today and that everybody is plowing into hardware and think how unpopular it was when I started Kantos initially. I mean, I talked to one of my, Closest mentors, very successful venture capitalists. I told him I was only doing hardware from now on. He looked at me like I had slapped him and was like, that's a terrible idea. And this was back in the AI boom, or not AI boom, software boom. The ML boom was largely machine learning. AI was like, you know, this future state that we hopefully would get to at some point. And it was like always so obvious to me that the other 90 percent of the economy that Silicon Valley was largely turning a blind eye to needed technology too.

1:50And there were obviously big businesses to be built there. And the status quo thinking was that, oh, the venture model just doesn't apply to those industries, which seemed preposterous to me. Not that it wasn't harder in certain ways, more capital intensive in certain ways, but I set out to figure that out. Thinking of myself genuinely as like a true generalist, the quote unquote generalist, there's a software specialist. I'm gonna go try and figure out the rest of the economy. I think there's a lot of opportunity there. Got billed, you know, a hardware investor, deep tech investor, and really went all in on it in 2018.

2:20And had a lot to figure out. Definitely before it was cool. Yeah. Arguably too early, some would say. But it's just crazy and encouraging to me that it's more popular to start things and fund things in the real world because it was weird. Silicon Valley was living in flatland. Like, why focus on two dimensions? We live in three. And so set out to invest more in every industry on the planet. Fast forward to today when we're investing out of our fourth fund,$70 million. We like to be a founding team's first check. Typically, that's$1.5 to$4 million and run a fairly concentrated portfolio. It's myself, my partner Grant, my principal, me, and the three of us are having a blast.

2:59That's awesome. So we have the, I mean, DeepTex, any particular sectors that you are excited about right now? Or is there, it's almost, it's kind of a hard question. I feel like there's so much excitement across the board right now. Yeah, I'm tempted to say everything, which is a bit of a cop out. And it's not a cop out. I think you're exactly right. You know, I will say there's kind of like in the spectrum of you're so smart that you actually have high fidelity on predicting the near and intermediate future and invest along the lines of some thesis that you come up with. There are certain people that are smart enough to pull that off.

3:33I don't know that that's me. We tend to let the entrepreneurs tell us where the future is going. And so we really focus on on individuals, networks and let the smartest builders in the world tell us where to focus. And we might think that some industries are more interesting than others. And as relatively small investors, we have to account somewhat for the direction of the of the capital markets. But we are very much investors in people and ideas and the long term vision rather than pretending. You know, I've made a lot of mistakes looking at a pitch deck and turning my nose up because I didn't like the industry or the supposed business model or go to market motion or something.

4:14And missing the fact that at pre-seed and seed, which is to say largely idea stage, those things are dynamic and might change. And the information that you have to more concrete is who are the entrepreneurs behind this idea and supposed business and underwrite them, not what they think the business looks like today. Yeah. Yeah. We'll definitely get into more on some of those things that you do look for and characteristics for some of those founders. But before we jump into the fundraising process, we have five questions that a lot of founders have nominated of what they would like us to ask the VCs that we talked to.

4:51And the first is, what were you doing before you got into VC? Why did you choose to jump into this crazy world that we call venture capital? So I was early at a couple of startups. When I first moved to Silicon Valley, I joined a fintech startup called SoFi when they were 24, 25 people. Surreal to me that it's, you know, now an NFL stadium. But back then it was like novel to say that software could extend to finance. Again, just like nuts how the world has changed. And then I went on to an automation startup called Invisible Technologies. It's a little bit like think of it as a bootstrap scale AI.

5:25And we pitched, I was the founding chief of staff, the CEO and I pitched 100 some odd VCs and angel investors, got, you know, 99 no's. The one yes was an angel check, basically, like all the VCs told us no. And of those 100 conversations, I enjoyed four or five and found them helpful and friendly, constructive, even if they were no's, ultimately. Still friends with a lot of those five. And I was like, you know what, maybe I've put VCs up on a little bit of a pedestal. well, I feel like I could do this job. I could at least convince founders to take my money alongside some of these folks. And I'd done a little bit of angel investing, just try and learn, you know, five grand here, 10 grand there along the way.

6:06And so I spent about a year and a half trying to convince people to let me invest some of their money. And that turned into Cantos One. It was four and a half million and had a lot to learn back then. That was 10 years ago. That's crazy. And then you've been off to the races ever since you said right now, oh, yeah, on fund four. That doesn't happen unless you're doing the right things. Another secret that a lot of founders maybe don't realize is how many funds don't make it past fund one. And then every fund after that, it's like this dropped off performance piece. So when you've gone to fund four, that says a lot about what you are doing and that you're going in the right direction.

6:42Another question, what is your favorite part about the job? And what is your least favorite part about the job? And founders like to hear a little, almost a peek behind the curtain a little bit. This is an opportunity for you to maybe showcase some of the things that maybe founders don't know about the day in the life of a VC. Yeah, absolutely. I mean, I hold in tension the end game, which is that, you know, I believe that people can change the world. And that's why I do it. I believe they can do that, though I know that I'm not one of them. The closest I get is writing them a check and supporting them along the way.

7:14And to make a dent in the universe, you have to build a really big company and we produce some returns along the way. But those are sort of an emergent property of a more fundamentally important mission that you're on. And I love talking to entrepreneurs about what drives them and their vision for the future. Like, what do you see in your mind's eye? What can we unlock in terms of creating value for people in the world? And then we'll figure if we're smart enough, we'll figure out some way to capture some of that value along the way. And I love that. That's really the essence of it. And then at the same time, to be able to do that, and as a competitive person, we need to put up above market returns to our limited partners for the type of risks we take, which is a lot.

7:58Not just that the underlying assets are risky, but the fact that we are locking our investors' money up, that it's going to be illiquid for, if we're being realistic, probably 12, 15 years. Some of the assets might go longer than that, even though people talk about funds being 10 years. Realistically, they're probably closer to 15. Especially in hardware. Yeah.

8:46something up and something important in the future is not going to get funded because we're getting drunk on, you know, whatever the current thing is or management fees or whatever. And so we have to do both. And I think they go hand in hand. But along those lines, I love the part of the job that's talking to the entrepreneur about why are they doing what they're doing? Why is this important to spend your limited time on? And on the other hand, I like sending updates and financials to RLPs that have big numbers on them. Yeah, I think that there's this, like, on one hand, you are highly competitive and you're trying to change the world.

9:20On the other hand, you know, there's the heaviest one that wears the crown type of thing. You've kind of signed up for this, but the expectations are just as high. So it's not all easy. I think there's this painting, you know, painting or picture painted of VCs where we vacation a lot and we're on the beach a lot. And for the best funds, at least I don't know those types of funds. Maybe we should be joining them. But at the end of the day, we tend to seek the same type of ambitions that some of our founders do, which is which is awesome. Absolutely. I get so bored with that. Yeah. Yeah, there's no way.

9:52Our last question. Little time for you to shine here. Why should founders pick you and or Cantos to be on their cap table? You know, this is it's always hard to convince someone of this. And the easiest thing to do is just with any VC, not just with us, go talk to entrepreneurs that they've backed before. Both those that are doing well, because everybody tends to be friends when things are going up, and find a company that a VC is invested in that died, that hasn't gone well, and ask them how they were in the hard times, because that's when people's true colors come out. And you will find, I think a lot of Kantos' advantages come down to what the entrepreneurs we've backed, and some who we've come close to backing and ultimately said no to, what they say about us.

10:35And we find that even as a company goes on and raises more money and they raise money from flashier investors and all that, even if we're not on the board, we are oftentimes their first call, even as they grow. Not for all of them, but for a lot of them. And that really is what entrepreneurs want. They're looking for partnership. They're looking for someone who's aligned. One of the reasons I love writing the first check is that compared to the other investors who tag along on the way, we are more aligned to that entrepreneur than than anyone else. Now, we don't take it so far as like, you know, only investing in common stock.

11:07We were typically we typically own preferred stock. But aside from that, we are more aligned than the other investors. And sometimes having someone that you trust who's been there from the early days, but is not on your board is a more real conversation. And it's hard to slide. You know, we do the typical branding and marketing and thought pieces and everything. But that is really what we're about at the end of the day is deep partnership with the entrepreneurs. And there's no way to get that other than talk to somebody we back. Yeah. And like I said, we share a lot of portfolio companies and they would echo some of those same things.

11:38And it's something that you can't fake either. It's something that is a VC. It's rolling up your sleeves and getting in the hard work. So love the answer. It's hard to replicate. And props to you and the team for continuing to do it so well. All right, let's jump into the fundraising process here, we break it up into three different segments. The first is getting in the room. A lot of folks listening have never raised capital before. It's a black box to them. They're unsure about how to even get started. So let's dive in there. What are some of the best ways that maybe from your side, how many deals are sent to you, how they're sent to you?

12:14What are the best ways for a founder to get their pitch deck either in front of Kantos or just in general and some of the VCs that you've spoken with? Yeah, this is tough because I like as we've honed our craft, I have admittedly gotten a little less democratic about things. And I always sort of turned my nose up a little bit at that. Like, you know, as much respect as I have for Mark Andreeson on this subject, he once said that, like, if you can't find a way to get a warm intro to me, that in and of itself is a signal that I should probably listen to. I wouldn't take it quite that far, but I'm more in that camp than I am I'm going to read every cold and bound and treat it on its perceived merits because we're fortunate enough to have backed a lot of entrepreneurs, a lot of capable people have come through our network.

12:59And a lot of our best investments came through that network. It was an entrepreneur that we backed who used to work with or, you know, is friendly with another entrepreneur and thinks very highly of them. And we know that that entrepreneur's bar is very high. So if they call us up and they say, this person's special, that's a way higher signal than anything you could put on a pitch deck to us. And sometimes it's an entrepreneur that we really like and we didn't invest with, but they're sending someone to us. And so this is selfishly part of the reason why even if we say no, we're going to try and do it as thoughtfully as we can.

13:31And going outside of that second degree network both means a lot more work for us. And it's harder to get signals that matter to us? Because you could have, you know, the most interesting technology and the flashiest pitch deck in the world. And that's still not, it's like pales in comparison to someone that we know and trust. We know how high caliber they are. And they're like, they like rag on most people. And if, you know, this person who built Radiant Nuclear or Solugen or Miros or, you know, was like in charge of standing up the Starlink manufacturing line at SpaceX or something like that, if they're like, hey, you need to talk to this person and they've got a cat litter business.

14:14And I know that sounds weird, but you need to talk to this person. We will take that meeting. And so that's been a little bit of an evolution for us, admittedly, because that wasn't always the case. I think I've only ever invested in one cold inbound and that company's still alive and it's doing well for us, but it's not one of are outliers. And so just the cold, hard facts are I should delete every single cold inbound that I get. And it doesn't always sit well with me, but, you know, I'm a numbers guy at the end of the day. Yeah. And that's a very common answer. We hear that a lot on this show, that a warm introduction is great.

14:50Any advice on how they can do that? Because, you know, I, for example, I was a founder, you know, this was about a decade ago now, too. I still get dozens of emails every month from founders that are reaching out to me to try to gain a warm intro into one of the VCs that backed me when I was raising venture capital. And I talked to even our own founders, and they mentioned this all the time, where they just get inbound and inundated from these people trying to create these fast relationships. Any advice on how they can do that the right way? It's obviously a long game, but what would you recommend founders do to start getting those warm introductions?

15:27I mean, you like go, go like really get to know that person. I always find it weird when like someone that I know and trust and they're like, you know, an entrepreneur in our portfolio, one of our limited partners, and they're like, hey, my friend's kid wants to get a job at one of your portfolio companies. And I'm like, OK, they have a jobs page. Like, well, I never met this person. What am I going to do? Yeah, exactly. Third degree, say, I think they're pretty good. Like, you know, That's not going to fly with them. They're going to say, thanks, Ian. Here's the job link. Have them apply. And so barring a pre-existing relationship with someone or generally investing in your network so that one day you can sort of harvest it.

16:09I think this is where social media and especially in our world is just magical because you can start to build your own credibility and persona. And, you know, there's a lot of people that overdo it and the like vague posts and like hype videos, which, you know, at times we utilize, to be clear, sometimes start running together. But some of the most some of my biggest misses were actually someone that I kind of got to know, at least know of through Twitter. And I could tell they were thinking about an area and they hadn't started a company yet. But you're like, OK, well, you know, this Augustus guy at Rainmaker or whoever it is, is like, you know, clearly getting into weather modification.

16:54like, huh. And then you get a cold DM from and you have this pre-existing context where, you know, I'd never met Augustus before, but he DM'd me on Twitter. And unfortunately, I didn't invest in the company. And that is like, that would work. That's technically cold, but like you've been kind of warming it up because I've been working on your feed for a while. And I think that's really cool. I tell people all the time if they're young and they want to get into venture, they're like, go on Twitter and start following people and engaging in conversations and posting thoughts and writing things, because that's way better than like, hey, Matt, I know we met at this happy hour three years ago.

17:30Could I please get an intro to so-and-so? There's not much to go on there. No. And to that point, doing the in real life ones, too, finding where things are happening in your area. And it's the same as going on X and chiming in on conversations. There's plenty of opportunities to rub shoulders with people in your communities where I always say you shouldn't go out to seek a single introduction. You're just putting yourself in positions to hopefully impress enough people to where you're just going to start getting some of these introductions into VCs or people that matter just by being there. Where it gets hard, and I think where a lot of founders do, is like, oh, I want Ian and Cantos to invest into me.

18:11I'm going to reverse engineer all the people that Ian knows, and I'm going to show up at their house and get to know them over three months. And then when, you know, three months go by and we're going to each other's birthday parties, I'm going to drop that. I really just want an intro to Ian. And it's like, that's not really the right approach. You just kind of have to keep putting yourself in positions to where you're going to meet, maybe not Ian directly, but people that might know an Ian or a similar type of fund. Definitely. I mean, there's like, yeah, we see entrepreneurs do this all the time.

18:41They're like, they put a bead on one investor And they're like, I really want this person to invest. How do I get an intro to them as quickly as possible? Get on their calendar. And I like to always remind people that your life is a multi-round game. Don't optimize for the next round or current round. Keep in mind, like, what can you do in this round that will make your will make next round more optimal? And so in the fundraising vein, if you want, you know, so-and-so at such and such firm at Series A and you're raising your pre-seed now, Go figure out what other companies has a pre-seed fund invested in that that investor did at Series A and for seed or maybe even two degrees.

19:21Like, OK, I really want, you know, let's pick on Thrive. And I've noticed that Thrive's done, you know, a number of deals with the seed fund. And that seed fund seems to be really close to this pre-seed fund. And so if I can do this thing, now maybe that's over-optimizing for one investor. But like, you know, you could go find that those branches work in both directions. And I think there are some pre-seed funds that might not have as big a brand as the quote unquote tier ones, but the tier ones sometimes do look to for deal flow. And so rather than trying to get a big fund to go out of its remit and invest in your pre-seed, you can look to a fund like a Harpoon or Kantos or some of our peers.

20:00Maybe you've invested with those investors and it makes it easier for us to get you into that room when it's relevant rather than trying to go straight there. Yep. Yep. I agree. It's a multi, you mentioned multi-round game. It's a long game. You can't expect to just have these things happen overnight. So put in the work now. You won't regret it over time. It's like going to the gym or being healthy. All these different things take a little bit of time. Now, that isn't to say, like, I kind of like entrepreneurs that make these like brash asks. Like, you know, we have a number of entrepreneurs in the portfolio who are like, you know, they'll send a text to the investor thread and they're like, can anyone get me in front of Pete Hegseth this week?

20:39And we're like, no, I can't introduce you directly to the, you know, maybe some of the investors can, but like, probably not going to happen this week, even if they do have a direct line to Secwar. Yes, exactly. But I kind of love that you asked because it just shows that you're a little crazy. You got to shoot your shot. Totally. Yeah. You mentioned earlier, I mean, obviously, the right team and investing this early, a lot of it is dependent on team. But even if you're receiving a warm intro, is there anything as you're diving into their pitch deck or a memo or a blurb that they're sending you?

21:13What are some of the things that you're gravitating towards? And then on top of that, how can founders make sure that they are hitting those notes that you're looking for well? I find myself increasingly, you know, I love studying the history of venture capital and there's some personalities. And I love this one quote on this topic that Tom Perkins once gave, which was that at Kleiner Perkins, we read pitch decks backwards. We start at the end and if the numbers are really big, then we go see what the business does. there's definitely some of that like i need to know that this could be a generational company and and produce incredible returns but but i find my version of that is more and more i just like tap through the deck and i go to the team page and i want to know what your background is and i'll you know i'll go to your linkedin and i'll like see what you've done and i'll see who we know in common and i might send a send a couple texts to mutual friends and really try and get a feel for the person rather than, again, like the business that you think is going to exist when it's still an idea.

22:13And it really is increasingly about that. Now, there's some areas that we might have more prepared mind for. And we just made an investment in an offensive cyber company as an area we've been looking for an investment in for years. But more more often than not, it's these people are really interesting. I've never thought about this problem that they're purporting exists. But if If they're focused on it, then maybe it is important. Let's go talk to them. And there's a number of entrepreneurs in the portfolio that bring up things we'd never thought before that we're like completely sold on being geopolitically important now.

22:47And so, you know, you can't snap your fingers and have a more interesting resume. But I like I like seeing the team page up front. We typically find that it's in the back. And I think that's a little backwards because at least at Preciseed and Seed, we're investing more in people than we are in your idea, technology, business. Yeah. Yeah. We always like to encourage, I think you still need to say what you're doing and make it very clear. But then you got to go to the team to say why it's important to you. Why are you choosing to go on this? So I agree. And I think we're seeing more and more of that where folks are leading on the team side, which is good.

23:21It makes our lives a little bit easier. This is a question, you know, to tip my hand a little bit, a question we always ask in diligence is, well, presumably you're very capable people and presumably you think that too. So your opportunity cost is high. I mean, you could be doing virtually anything. And if you're committing to a startup, in your mind, if this goes well, like you're thinking this is going to be most of your professional life. So why is this the thing? Why this of all things are you committing your life to for the next potentially decades? Like, why is it that important to you? And I don't.

23:57And the answer there matters so much. Totally matters. Like we we need a strong why. And I think there there are people that are more mercenary that have done very well and put up good returns for their investors. But we're just less interested in that. A lot of times we meet exceedingly capable people and they have an interesting idea. and I ask them that question and the answer is like, sometimes I feel like they've never thought about it before, which is very strange to me. Maybe I'm too introspective, but I always think of like both Mike Moritz and Don Valentine had versions of this question where, you know, Moritz would want to like know what happened to you before he turned 18 that formed your psychology.

24:36And he's almost like Freudian about his investing. Yeah. As an investigative journalist turned investor, which is I think interesting. And then Don Valentine, Don Valentine being sort of like more like a raw competitor or not that it wasn't competitive. He liked to really get into your like family background and what's your relationship with your siblings. And he almost kind of liked seeing like sibling rivalry. Orgents calls with your parents. And that kind of thing. I mean, these were the co-heads of, you know, one of the best venture capital firms in the world. And they got, like, really psychological about it.

25:09And so we really get into that. And I can tell when someone's like, oh, well, I just I want to have a company. And we're like, yeah, but why? And they're like, well, because I wanted to have a company. It's just as confusing to us. Yeah, there are very few. I always put, you know, like Travis Kalkanik from like Uber. I think there are people that have this, they can get excited and drive about anything and they just want to win and they have this kind of cutthroat mentality. Very few people, I think, are that and maybe kind of want to be that or think they can be that. So their why has to be there, even if they don't know it yet, because they will need it.

25:43They'll need that why when inevitably in three months, six months, a year, things get very hard. And the why is the only thing that keeps you going. Yeah. All right, this next phase is the meeting phase. It's the first time you're meeting with these founders. It's, you know, the first impression a lot of times. What as a VC are you looking for in that initial conversation? And for you, are they typically 20 minutes? Some VCs do 30, 40, an hour, you know, depends on kind of the process. What is your perfect first call with a founder? And what is it that you're trying to pull out of that? Well, we take a lot of calls with founders, but any try and parse it based on some signal ahead of time.

26:24But to filter for that, we just be totally transparent. We typically typically book 30 minutes with them, but then we'll block like an hour and a half on our calendar and we'll just let it go longer. A lot of VCs do that. If we think it's really interesting. Yeah. You know, founders should just know this. Yeah. And we try and have a very wide ranging conversation on those calls, which for me very much gets into the why. And we actually, because we're so founder focused, we internally will score entrepreneurs on six attributes, which I won't reveal here. But you can probably guess at some of them.

26:57But not that we're quantitative, but just to have a richer discussion about the individuals since we index more on that than on the supposed business. And we don't want to just go on like, well, I think they're really special. And so we want to get at like, you know, what is your vision for the future? How good are you at articulating that up and down the stack, both to someone who's very technical and in the weeds in your field and to someone who's just hearing about it right now? And how compelling is that to talent, to customers, to capital? I almost think in terms of like a theoretical gravity based drive where you're like you project energy density of such intensity in front of you that you create a gravity well in the direction that you want to go.

27:38And it pulls you and everything else toward it. Like if your vision for the future is not so clear and compelling that I feel like I'm almost being physically pulled toward you because you're creating this dent in the universe in like a general relativity kind of way, then you are not going to create a generational company. And you're certainly not going to return multiples of my fund in 10 years. I used to think that 10 years was forever. And the older I get, the less and less time that feels like. I mean, if you want to create a$10 billion company and you want to do that in a decade from scratch, right?

28:16Which is to say, you know, let's not do the compounding math right now because it'll get too complicated for me. But like, you know, a billion dollars a year, okay? Which means every week you need to be creating about$20 million worth of value. My God. Now, that's linear and, of course, compounding works. Of course. Yeah, but still. But like, go do that math and ask yourself, how much value do I need to be creating every week? And like, if I don't get the sense that the world warps around you, you ain't going to do that. That's an exceedingly high bar. Part of the reason I'm an investor, because I know I'm not up to that bar.

28:49And so those are the types of things. We're not looking for just intellectual answers. You have to have those too. Those are table stakes. We want you to know your industry cold had been like completely through the idea maze to the point that my partner Grant likes to say you almost feel like a maze historian. you. Like you've just been spending your life studying this maze. You haven't just been through it. And, you know, on top of all the intellectual answers, you get this like emotional, like after talking to you, I didn't know anything about this problem at the beginning of this call. And at the end of the call, I'm ready to run through a freaking brick wall.

29:21You fired me up so much. Yeah, we're not going to invest. Yeah, I love that. That's a great answer. That's one of my I think my favorite answers on here. And it's not because you said anything necessarily super specific. It's almost kind of palpable. It's like, you know it when you see it, like all, maybe some of those cliche answers, but it's so true. And the founders have to admit that. I love the gravity pull. I think that's a, that's a great kind of way of looking at it there. It's also, I think one of the hardest answers that I tell with founders. And when I work with founders on fundraising is that not that you kind of have it or you don't, but you kind of have it or you don't.

29:55And I meet a lot of people where I'm just like, gosh, I just don't feel that you have that. And it's not something that you can kind of coach into people, or at least I haven't figured out how to do that yet. So it's one of those hard answers where sometimes you just meet people and you're like, you're not going to be the one to do this. And that's such a hard, hard thing to hear. And it's such a hard thing to say as a VC, obviously, but it happens all the time. Totally. And it's kind of sad because most people don't, definitionally, most people don't have it. The vast majority of people don't have it.

30:25You know, yeah. And so you'll just, it's hard to tell someone. We try and get to as close to it as we can. And part of having our attributes that we score is rather than making it feel like an ad hominem assessment of the founder, we can say, hey, look, we think you need this attribute to be successful in this area. And we're not fully convinced of that. But most VCs, they'll give you some intellectual sounding answer about your business or market or their historical experience in that sector when the answer is really being like you enough, which is a tough conversation to have, but that's the nature of the business.

31:00And again, having specific attributes that we look for makes it easier to have that conversation. It's a very, very quick tangent that's relative here to it. The movie that I always think of when I meet with a lot of founders, if you haven't seen it, wasn't, you know, it's not the best movie of all time, but Monsters University, the Pixar movie, has this exact, exact thing built into it where the main character, his whole life, his whole entire life is dedicated to being something that when it comes down to actually being in that field, I won't spoil it for anybody, realizes that he is not at all qualified to do that.

31:37And it's just one of those weird things. We see this all the time with founders, where they may spend their whole life, their whole professional careers, thinking that they are going to be this thing. And then they get into the playing field or the arena. And it's like, they're obviously not meant to do this. And it's hard. Totally. Well, I was sully for Halloween last Halloween, You'll have to go watch it. You do. You'll know exactly when you see it. It's exactly exactly what we're talking about here. All right. Are there any mistakes you see founders make on the calls? Obviously, maybe not hitting the bars that you're talking about or the energy, getting that gravity like you're mentioning.

32:10But any red flags or things that founders can maybe avoid doing on these calls that otherwise kind of shoot themselves in the foot? Yeah, I don't. Well, I mean, this one is it usually comes when we're we've said no. But like occasionally you'll meet someone who you're like, hey, man, I like you. I just don't really love this business, our industry. And they just spent 45 minutes, an hour telling you why it's important. And they're like, OK, well, you know, you know, I've also been thinking about this other idea. And like, what if what if we were working on that instead? And I'm like, like, don't don't do that.

32:45Like, I don't you just like you feels like a like a trinket salesman. Like you got the you got the trench coat and you know, you don't like what's over here. I got something over here, which gets into like the strong why isn't there, you know. But I just find that really off putting. Like it's rare that you you turn the conversation around, but that's certainly not one way to do it. The best way to turn it around is over time, again, thinking about a multi multi round game, like take it graciously and the meeting. because you as a founder, your time is more important than the investors. Don't try and drag it on.

33:19Like if you feel like they're asymptoting to no, just end the call and move on. Go build a really big business and make them regret it and email you next round and try and get in.

33:33I've learned this fundraising. I think it's very helpful that VCs have to go fundraise every few years. It's a humbling experience and a empathy building experience with the founders, you just have to like get to the quick no. And if they're not amped about what you're doing, it's probably going to be a no. You're probably wasting your time. Move on. And the people that are yes are like an immediate, you get an immediate sense that there's a partnership there, even though it's your first call. If you don't, anything short of that is probably going to be a no. And stop like, stop wasting your time.

34:05Optimize for people. Just end the call, have another conversation. Maybe that person's more excited. That's a much better use of time than trying to drag it on. Like in this like gravity, this space-time contorting sense, like I like to get a sense on a call with a founder that I am wasting their time and we need to speed the conversation up. Like if the founder is trying to drag it on, I'm like obviously trying to get off the phone. You're like, you know, trying to drag it on farther. Like that's another anti-save. Your time is precious. Again,$10 billion in 10 years,$20 million a week. Clock's ticking.

34:39Get off the phone. Yep. Yep. That's a great answer. Let's say that they've lined a lot of these up. They've knocked them out of the park. They have some momentum building. We're now in this final phase of the fundraising process, which is typically like herding cats. You're building momentum and trying to add some FOMO. And it's a really hard place for a founder to be. It sounds like it's, you know, where you want to be and it is, but it's actually one of the hardest parts and places to be. Any advice you'd give founders as they're kind of in the thick of it and keeping the relationships warm and building some of that momentum, but not being too pushy or trying to exaggerate the truth, which happens a lot kind of during this phase.

35:17What advice would you give founders there? Well, I would have thought this is obvious, but don't lie. I mean, there's been this thing where like it's just happened occasionally. Now it happens a lot where like someone will say that they're talking to an investor or even that they have a term sheet. from someone who like we know and we'll go text and you know the byzantine general problem notwithstanding like sometimes people are machiavellian enough that like they will tell you the answer is no when it's actually yes but like barring that it's pretty easy to figure out like i i think like we've kind of a lot of founders especially young founders have optimized for this fomo game and they know that most vcs are like looking for signal from other vcs and they'll try and like drum that up and be like, oh, you know, we're talking to so-and-so or whatever.

36:04And like, I've heard stories of like a founder's, like they're hosting VCs in person and they write like a perceived tier one firm's name up on the whiteboard and pretend that they forgot about the last meeting. Like there's things like that that go on that like are easily falsifiable that I just find stupid. Remember that a lot of us are friends and on, you know, text message basis. So it's a small world. Yeah. And then there's a lot that falls short of of deceit that is like, I know that you're like clearly trying to like drive up the FOMO and some people might that might work on some people.

36:39But like, you know, they'll be like, oh, well, like so-and-so just invested on a whatever 30 cap. And like you're telling me you want 20. I'm like, yeah, well, first of all, I know so-and-so writes$50 ,000 checks. So that Yeah, exactly. Does not hold a candle to the kind of check we're writing. And second of all, like, I like them, but I don't really care what they're willing to invest on. This is my offer. And, you know, if an entrepreneur has most of the rounds put them for at a higher cap, of course, like, we're not going to try and, like, get a special deal and whatever. But, like, that's just fair play.

37:09But there's a lot of, like, you're trying to use some weak signal to, like, put leverage on me that I'm just is not going to work. And maybe it works on enough people that it continues to be rational to use, but it depends on the investor you're talking to. I want us to have honest conversation about like, do we want to be in partnership? If so, then what are the mutually agreeable terms? And I don't care that much about what other people are doing. If you're trying to get an investor to move fast, then yeah, like give them a real idea of like how timelines are moving. But really good investors will put the pressure on themselves.

37:44They know if they're really interested in a company, they're going to want to give you a check like tomorrow because they know that other VCs aren't stupid. And if they give you an extra two or three weeks, you're going to go get money from someone else or maybe the valuation goes up or whatever. They'll put the pressure on themselves. So, again, going back to that, like, does this feel like an emerging partnership already? If not, then like trying to put pressure on them to increase FOMO probably isn't going to work anyway. I think for a VC that you would want on your cap table, something like that shouldn't work.

38:15If it is working, I would argue it's not a VC that you actually probably want. Yeah.

38:24I've experienced this on the LP side sometimes. Like if they're mercurial on the way in, they're probably just mercurial. Sometimes if they're moving like so fast that you're like, whoa, hold on. Like what's going on here? Like maybe do a few more references on it. Yes. That was actually going to be my next question in here too. At what point in the fundraising process do you want to start bringing in other founders and helping make this decision? Because I think sometimes founders do it kind of too early. And that goes back to your earlier point of, you know, sometimes you text a founder before you've even met with the fund.

39:00And sometimes that feels a little bit too early. When you're in the process of picking and maybe a fund show an interest and you're in your own diligence phase as a founder, is that okay to start asking for intros to your portfolio company? Or when is that ask appropriate, I guess? You kind of have to feel it out in the context of how quickly things are moving. we are very precious about our entrepreneurs time. And so usually that would be like a, you ask the VC after they've asked to invest, say, Hey, I appreciate that. You know, would love to work together, but just to cross my T's, introduce me to a couple of founders in your portfolio and then go like go off list too.

39:36Don't just talk to the ones that they're introducing you to, because those are probably the ones that they know like them. Yep. Make the suggestion. Again, go find, go find someone whose company failed. A few entrepreneurs have asked me for that. They've said, hey, I want to talk to two of your portfolio founders, one that's going well and one that failed. That's smart. I really like that. Are there any kind of, I guess, as the founders navigating this bit, you've seen a lot of founders go through and make probably great decisions in like cap table building and finding the right investors. Are there any glaring mistakes that you see over and over again as founders kind of pick the investors that are going on their cap table?

40:11So you mentioned, you know, maybe if they're, if the fund is being too pushy or they're being too picky or they're moving too fast. Sometimes there's some red flags and things you have to look out in there. Any other advice you give founders from the mistakes that you've seen? A lot of founders today, they just want like the flashiest firm name on the cap table. And a lot of the perceived best funds got to where they are because they're really good to founders and LBs alike. But it's more about the individual investor at that firm than it is about the firm itself and how aligned are they, how bought in, how much of their time are you going to get.

40:49And then not that everyone has this choice, but I've seen a lot of people regret adding someone to their board, you know, and they had a really maybe a short process with a lot of FOMO and they got multiple offers and they like, you know, basically everybody just takes the highest valuation they can with some exceptions here and there. And they added someone to their board that they did, you know, they got to know over the course of a month. And then and sometimes they're very excited about them. And then six months later, I'll, you know, they'll call me up to vent and, you know, man, I regret adding this person to the board.

41:20And I should have gone with this other firm at a lower valuation that I liked more, but I just wanted a higher valuation. And like, you can say this at the time and basically no entrepreneur is going to listen to you. And it's just one of those things you have to learn the hard way. But like, man, be really careful who you add to your board. do like you know slow the process down for a week or two to reference them more if you have to isn't worth it because you're going to deal with them for if things go well potentially 20 years yeah yep and they're harder to to get rid of then it's easier to get divorced from a partner than it is to get a board member off of your cat table so i agree yeah you need to make those those decisions it's a long-term partnership you know the airport test is a common answer we hear here of can you actually hang out with this person and have an honest conversation with them?

42:06Do you enjoy being in their presence and asking for feedback? All those things I think apply. But it's hard because I think founders are in a position where they don't feel like they have any of the control or leverage. Somebody's offering them money. Sometimes they just say yes and they don't even know what they're getting into. And that's the goal of this show in some cases is to hopefully shed more light on those things. But it is hard. So for the founders out there doing this for the first time, not that it's an easy thing to do, So, but yeah, I get the, you know, have those ears perk up a little bit when things like that happen.

42:37Definitely. All right, let's say they've closed the round. They celebrate, you know, for five minutes. And then to your point, they got to get back to the 20 million a week run rate that they got to start building up in here. What is some of the advice you give founders that just closed? What should they do to kind of focus right back into founder mode? I find that there's a switch that has to flip. They've been fundraising. Fundraising mode is very different than founder mode. what advice would you give founders to kind of snap back into it? What do you see good founders do the three to six months maybe after they close their round?

43:07Well, the best founders just, just that they know what to do. It's usually right after you close money, the focus is on hiring. And as you're, you know, as you're, after you sign the term sheet, basically you start, you know, finding what recruiting firms you want to work with, thinking about key roles, using the fundraise to, you know, hook somebody. And in some cases, there's like one tactic that you should use sparingly, which is if there's a really key hire, when you sign the term sheet, the strike price on their stock options is gonna go up. So you might wanna tell the investor, hey, look, let me take this unsigned term sheet.

43:46I'm not shopping it around. I just wanna close this person. And let me get them to sign so that they get the old strike price. And it's a way to kind of like bump their equity a little bit. But don't do that with everybody. That's only like really, really key hires. Know that it's not when the round closes, it's once you sign the term sheet that that's going to get factored into the 409A valuation. That was a pro move, yep. And so the, yeah, it's mostly just like after the round closes, we roll up our sleeves. We're like, all right, here's like the five recruiting firms we work with and what their specialties are.

44:16We're on a tech thread trying to hire people. That's the big thing. Because like, it's not just the founders. It's the rest of the team that makes the company and all the progress. Yes. And it's one of the more important things, especially in that first phase that you can do. And then also one of the hardest things to get right, because when it doesn't go right, it can be a death sentence in a lot of ways to your startup. Another thing that I really love, and, you know, I'll take some of the ownership here. We should be better about doing this. But like after you, we'll jump straight into the text thread and like, all right, let's start working together asynchronously.

44:48Recently, we finished, we invested in a company and they were like, OK, let's do our onboarding session. Right. what? And we like really walked through like, okay, before we were pitching you and not that we weren't totally honest about everything, but there, of course, you know, we didn't share all the little details. So let's sit down and let's go through all the little details. Let's, let's talk about how we think you can help us and let's, let's put you to work. And like, we did this onboarding session with this, with these two founders. It was just awesome. And I'm like, okay, that's a playbook.

45:15I'm going to, that's a page I'm going to add to our playbook. Like, don't just kind of, you know, close the docks, like ghost them and get back to work. Like put them to work too. Yeah. Yeah. Was it, was that one in person too? Is it like a, let's go and like do a workshop for a day type of thing? Two of us were in person. I phoned in. That's so cool. That's awesome. That's a really cool way to kick things off. Our last bit here, it's kind of like your time to give that halftime speech for the founder that's halfway through a fundraising process or it's not going well. They need that motivation to keep going a little bit.

45:48What motivational advice or feedback would you give a founder that's in the thick of it in that fundraising process right now? It's largely a numbers game. You know, I was like complaining about our fundraise at one point because, you know, we were a little spoiled and I was feeling sorry for myself that I had to talk to like 100 LPs. And I was complaining and an entrepreneur that I was speaking with who'd been like doing something very non-consensus that all of a sudden got consensus years later. And he was like, oh, I'm sorry, man. But how many how many people have you pitched? And I was like, I don't know, like over 100 at this point.

46:21And he like guffawed and clapped me on the back. And he was like, oh, my man, you're just getting warmed up. Yeah, it is a numbers game. Just a numbers game. Don't let the incremental no get you down. That's inevitable. Like just, you know, move on. Throw more names in the top of the funnel. Optimize for people that get excited from the first call. And the other thing, too, is I wish that founders knew how much of the people that they look up to was also a numbers game. I think on social media and all these things, you see these big names that have raised capital and you see like, you know, a big logo, like an Andreessen or somebody on there.

46:54And they assume that it was like, oh, they must have just like sent an email to to to mark himself. And he said yes, and then wrote the check and then everything went well. And it's like not at all the case. So it was a numbers game for every single company that totally with a few exceptions, but they're very rare. A few exceptions. Certainly not the rule. Yeah. Ian, thank you so much for being on. There was a lot of information packed into here. I really, really appreciate the time. Where can folks continue to follow along with you, your team, Kantos as a whole, and follow along on the journey?

47:29Kantos.vc. That'll link to our X and LinkedIn profiles. I'm at Ian Roundtree on X. You can find me there. I read my DMs and yeah, you'll see us around. Hopefully we're not going anywhere. I love that. And where are you guys based out of? Do you mind sharing? Between San Francisco and Los Angeles. Perfect. That's the best place to be. And I will also say that the new website, also beautiful. Fantastic job. The brand is great. Website's great. Congrats again on Closing Fund 4. And for all the founders listening out there, I can echo a lot of the things that Ian was saying. Be lucky to have them on the cap table and hopefully you can make it happen someday.

48:05I appreciate it, Matt. I hope this was helpful for the founders listening. You guys are the real heroes. Yes. Founders have by far the hardest job. That is for sure. All right, Ian, thank you again. Let's chat again soon. Appreciate you being on. Thanks for having me. Later, Matt.