Taylor Sargent | Industrious Ventures

0:00Pitch, pitch, pass, iterate it fast. Story beats data when the storyline's vast. Visions 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 so that you, as a first-time fundraising founder, can get all the tips and tricks directly from the horse's mouth on how to raise a round of capital, which at the end of the day, as we like to say, is actually no fun at all. And today I have a very special guest. I always to call it out, but another Colorado VC.

0:37I always like to say that we're more authentic and give the best advice. So Taylor, you have some high expectations to live up to today. Today, I have Taylor Sargent, partner at Industrious Ventures, a deep tech fund here in Colorado. Taylor, thanks for being on. Thanks for having me. Excited to chat. Hopefully, give that good advice that you just hyped me up to give. You're going to do it. I have no doubt. I have no doubt. We mentioned that before, I always like being able to chat with people that I already know. So I can say definitively, I know this is going to be a good episode. Could you start a little bit with what you guys are investing in, maybe a high level overview of some of the sectors you're interested in, the checks that you write, stages that you're interested in?

1:20Sure. So, yeah, so Industrious Ventures, we're largely based in Colorado. We've got team members in New York and Texas as well. You know, we made it pretty easy with the name of the fund and what we focus on. We focus on the industrial sector. So I think anything across aerospace, national security, manufacturing, energy, and a little bit of agriculture. Generally, when we're writing our first checks, it's in the seed to series A, although sometimes we flex down to seed or up to series B. We have a modestly unique model in that we're very follow on heavy. So we generally start off with tracking checks around, you know, 250K up to 2 million, you know, next round, maybe one to five.

1:56And then we can scale up to 15 to 20 million over time for those follow on rounds in companies that are performing exceptionally well. So we kind of take that that initial follow on equation that I think a lot of funds function with and kind of flip that flip that on a tad a little bit. Yeah. Yeah, I love that. And I think that being able to be a partner over the course of the entire process is a huge advantage. And I think that, you know, some folks might think of a multi-stage fund doing that, but I think you are unique in that you can certainly follow along for that entire journey. And you mentioned even as early as pre-seed, but I think that it's exciting, especially in the deep tech space.

2:37These companies take a long time to build. And sometimes it's not apparent on if the tech's going to work or if the market's going to be there to absorb the technology if it is working. You know, these kind of long, long tail companies, and you see this in the hardware sector that's become a very popular investment space. You know, it's not going to be your two to four year exit timeline. And so we love following the story and getting to know the founder over the course of the entire process. Yeah, that's such a good point. A big difference between what people were investing in, you know, five to 10 years ago with SaaS controlling the market.

3:08You would not necessarily have the exits that were earlier, but you would certainly see the progress earlier. You could be a seed stage investment and then a year later be hyperscaling. Granted, I think a lot of those AI companies are experiencing that today. But in hardware, it might be years before there's even a single product to go to market, let alone a scaled product that's going to market. Yeah. Yeah. And especially when you're building extremely complicated systems like lunar rovers and rockets and satellites and nuclear reactors, it takes a minute and you got to be patient. But we do love following the story.

3:42Yeah, I love that. Let's talk a little bit more about you. So the first questions are ones that founders kind of volunteered. They want to know and get to know the founder, the VCs that we talked to. Let's start with why you chose to be a VC in the first place. What were you doing before Industrious? Yeah, I mean, so the I think kind of a guiding thread for me has always been space. I've loved space since I was little, went to space camps growing up. It's kind of informed everything I've done on the education and career side. I did my undergrad in physics. I went straight into aerospace and defense consulting in the D.C.

4:13area. And while I was there, I was always on client site. I was at NASA Goddard for a little bit working on some ground station and satellite communication and ground station modernization efforts. I spent a little bit of time with Defense Threat Reduction Agency helping mitigate threats from weapons of mass destruction. And then for the last two and a half years, I spent the DARPA headquarters and helped DARPA invest almost$150 million across advanced technologies in aerospace, metamaterials, quantum sensing, and some other really cool technologies. And so my kind of love of space kind of guided that thread.

4:44And then when I got to DARPA, really, my aperture opened quite a bit to kind of see how fascinating a lot of this advanced technology or a lot of these advanced technologies are. So it went from just kind of being focused on aerospace to now being focused on material science and some quantum applications and even some applications in biology as well. So when I left DARPA, I actually I wanted to do something that was most like DARPA, just not government facing. But it was always guided by this advanced technology, deep tech love. And so when I was then kind of interviewing and pursuing VC, I was specifically pursuing VCs that, you know, this is back in 1920, 2020, that were focused in these areas of aerospace and manufacturing and energy and deep tech more broadly.

5:29I even in my interviews, they're like, why VC? And I was like, well, for me, it's actually the advanced technology portion. I would rather go join a startup working on this or go join a larger company that has a deep tech incubator than just do VC for the sake of VC. But I think VC has an interesting position and kind of a nice lever arm to impact where technology is headed. That was really appealing for me. And so that's kind of the why VC specifically. But for me, it was always more of the advanced technology that was more appealing. Yeah. Do you feel like the experience at DARPA has also benefited you as a value add to a lot of the funds or folks that you're investing in because you have that experience almost from the buyer side in a way and can help them navigate that?

6:12It's one of the things at Harpoon we talk about a lot as the government becomes such a big and important customer. Navigating that world becomes more important. Do you feel like that carried over pretty well? I think it carries over well for the companies that are early. um you know i i i joke because i i think i asked like 75 of the same types of questions as i was asking at darpa but then because we're investing and and darpa is not looking for financial return right yeah vcs are and so you know you you layer on the additional 25 kind of business and revenue questions but uh you know i'm still asking mostly about kind of the impacts of the technology that's being built but yeah i mean i i have worked with our portfolio companies on strategies to approach these kind of early funding mechanisms across NASA, NSF, DARPA.

6:58Once you kind of graduate beyond that, right, as these companies scale, DARPA kind of becomes either too small for them or too long time horizons for them because, you know, generally there are four-year programs outside of a few of their shorter, smaller efforts. But, you know, eventually you want to kind of graduate to programs of records where you've got actual kind of line items and just bigger dollar amounts because DARPA does top out in a couple hundred million dollar, bred out generally over four years and across a couple teams. And that's great. But if you're trying to scale a business, that's not exactly what you're looking for.

7:34Yeah, kind of a follow up on that. Have you noticed over the last few years, we've kind of seen it on our side, but with more dollars seemingly becoming available for some of these companies, have you seen it not necessarily get easier, but maybe more of an opportunity for companies that are building and having some of these alternative funding sources, whether it's through DARPA or NASA, like you mentioned? Yeah, absolutely. I mean, even back when I was at DARPA, back in 2017, 2018, there was a recognition inside the agency that, you know, the government doesn't have the best technology anymore.

8:07And, you know, if you were graduating, you know, 20, 30 years ago with a PhD in one of the scientific fields or engineering, and you wanted to work on the most exciting problems, a lot of those most exciting problems were in the government, right? At the government labs or NASA. And so if that was a huge motivator for you, then the government made a lot of sense. But the commercial sector has caught up on the technology and well surpassed what a lot of the different government agencies are working on. And so there was a pretty clear desire, even back in the mid-20-teens, to start engaging industry more.

8:41And that was kind of the early days of it. And I think that over the course of the last 10 years, the government's kind of tried a couple different things. Some of them have worked, some of them haven't worked, but now they're starting to, I think that they're starting to grease the wheels pretty well on how to better engage industry with groups like DIU, with the OSC, you know, Loans Program Office. So these new vehicles and new mechanisms and probably most importantly, the new perception and willingness to take risks on new entrants is certainly there and that didn't exist even just five years ago.

9:13So from that perspective, it's gotten a lot easier, which is really encouraging to see from our side. Yeah. Back to a VC question here. One of the most common questions are ones that we get from founders is, what is your favorite part about the job and being a VC? And then what is your least favorite part about the job? And I think that as a, it's kind of a note on there. This is opening the door for maybe a world that founders don't understand or see. So maybe throwing in something that you feel like if founders better understood, would have more empathy towards what it is to be a VC. yeah yeah so you know my favorite part is just I mean there's just so many smart people building in the sectors that we invest in I mean there's smart people building in in in every industry but the the combination of the things that I personally have you know paid a lot of attention to over the course of my life and now being able to kind of work with these companies and talk to them on a on a you know weekly basis and just hear so many incredible ideas and creative ideas so like interacting with with a lot of the founders that are just world-class in in these technologies and and and again it's like so creative in terms of how they're building solution sets for for industry that's so fun it's really inspiring it's extremely humbling and i felt this way at dark but when we were kind of in or um you're working with with some of the top researchers around the world it's a really humbling experience because you see kind of the long tail of of expertise you see the long tail of intelligence and knowledge in certain categories.

10:48That's got to be one of my favorite parts. One of my least favorite parts is the fact that we have to say no a lot. And that for me personally is really difficult because every founder that we're talking to, they know more about the industry than I know. They know more about the tech than I know, you know, or about the processes than I know. They've taken a huge, you know, personal and career risk to go commit everything that they have to trying to move the needle in a particular sector. And the reality of the situation is that, you know, we invest in single digit percentages of the companies that we talk to over the course of a year.

11:24And that is an incredibly uncomfortable thing to do, to be like passing judgment on this thing that somebody that knows more about this thing has committed everything that they have to. And the passes can be for so many different reasons. And, you know, sometimes it's just not a fun fit or sometimes I really like the tech. I just don't think that the market's going to be there as they expect it to. Probably my least favorite reason to pass is to say, I love this thing, but I just don't think that there's going to be anybody around to fund it in the levels that is needed for this company to even have a chance of success.

11:53And so that's got to be the part of the job is just having to say no so, so, so much. And it's easy to kind of desensitize to it but i think it's important to not do that but yeah that that's that's that's the by far the the most uncomfortable feeling for for me personally on this side hashtag dream crushers dream makers just make me feel a little worse about yeah yeah uh but we we crush more dreams than we make that's for sure uh which is is indeed the the hardest part uh our last question on this side, your time to shine. Why should founders pick you and or Industrious to be on their cap table?

12:39Yeah. Well, one fun thing about Industrious on why, you know, if we're going to, you know, invest in a way that gets us kind of a board seat is that we don't hold any of our board seats internally at the fund. We have gone and found people from industry that are much better suited to support and advise a company than we feel like anybody at the fund can. And, you know, at the end of the day, we're not trying to sit on boards because we want to sit on boards. We're trying to find the right person to go and sit on the board of these companies. So, you know, from a board position perspective, I think that that's somewhat unique across the industry.

13:19But then if I'm breaking down the question, it does depend a little bit on where you are as a company, right? If you're early stage and you're looking at the DARPAs and the NASAs and you're looking at government funding, that is something that we can help out with because we do have experience internally on kind of what the other side of that table looks like in terms of how they make decisions, how they structure programs. And we can help work with these companies on a strategy for approaching non-dilutive funding. If we are kind of later in the process, you know, I mentioned that sometimes we make initial investments in series Bs or if we're following on more heavily in the kind of series B plus rounds.

13:54Industrious was founded because of the relationships that my colleague Mason had with major industrial companies like Lindy, a global Fortune 500 industrial gases company, GE Vinova and GE Aerospace. So these are some of the companies that we have some pretty deep relationships with. And we have been able to open up kind of relationships and doors between our portfolio and these companies, of course, when the time is right. You don't want to do it too early because then it's very hard to open that door again. But Industrious was founded because of these relationships. It wasn't kind of the other way around of, oh, we want to get into the industrial sector.

14:29Let's see how we can go build out these relationships. That was actually one of the genesis of the founding of Industrious. And so if you're a later stage company looking for funding, that is one of the areas that we can support as well. Yeah, it's incredible. That's an enormous value add. All right, let's go into the fundraising process. We break it up into three different categories. The first is getting in the room, which is one of the harder parts, especially if you're a founder that maybe doesn't have the network. A lot of founders that we talk to here in Colorado or if you're not in the Bay Area or in Austin or in L.A., it's hard to break in and just get your pitch deck in front of the right VC.

15:05So the first question that we have is how would you recommend founders even just build out the list, the CRM? Like how do you even figure out which VCs to reach out to? Do you have any advice on even kind of just building up that first initial outreach? I mean, there's no way around just doing your research and figuring out which funds fall in the right kind of sector stage, check size for the round that you're working on. And so I think that that's obviously an extremely important element of a successful fundraise is does this fund invest in companies like mine? And then the other important thing is go look at their website and see if they've already invested in a company that's like yours, because, you know, you'll very likely be competed out.

15:53a lot of EC funds, probably a majority of them don't don't really invest in competitors. There are definitely exceptions to that, but generally, no. And yeah, I mean, honestly, kind of being on Twitter X, it helps a lot. That's where most of the industry is run through. I think you'll get a lot of good, a lot of good kind of context on who does what, who invests in what and kind of being an observer and interacting with these different groups through through X is is honestly a surprisingly helpful thing. I've made a lot of really good connections, both with investors and entrepreneurs through just reaching out on on x more so far more so than than on linkedin so yeah i just i just don't think that there's any good work around to doing some pretty thorough research in terms of using your bet your or in terms of kind of making you able to use your time more most effectively once you actually do start those reach outs obviously advisors can help and and if you've got any contacts that are other entrepreneurs or obviously in vc then that can help a lot as well but a lot of people don't have those and so it's just a matter kind of immersing yourself in the industry and maybe even go into some of the conferences, you know, like re-industrialize some of these investor summits, some of these kind of industry specific summits that are hosted throughout the year, throughout the country.

17:03That can actually be a great way to organically meet a lot of investors as well. Yeah, IRL is coming back. In real life, interaction is certainly going to, it always has been, never quite went away necessarily except maybe during COVID, but having those personal relationships whenever you can make them is always a massive advantage. What are some of the ways or best ways that you've seen people just present and hand out their decks or their memos? I mean, you mentioned maybe you and I meet on X and then are you just getting a lot of people that are just passing along their deck directly to you?

17:34Are they emailing it to you? What are some of the best ways that you've seen founders send you their materials to begin with? I mean, there's not a ton of options outside of, you know, sending it online. But the manner in which that outreach is done is extremely important for me. If it's clear that, you know, you can take my name and drop in a different name, take our fund, drop in a different fund, and the email reads the exact same, it's hard for me to respond to that. You know, that's just an email blast, hoping that, you know, that's kind of what the million blooming flowers approach and hoping that something sticks.

18:12But if there is a clear kind of alignment made with the rest of our portfolio or with my background personally, that shows that the person actually put in the effort to say, hey, here's why I'm reaching out to you, Taylor, you, Industria specifically. You know, I've got a technology that could help, you know, X, Y and Z companies within your portfolio. Or, you know, I'm at this stage and I think that, you know, you would actually be able to support in terms of getting that early non-dilutive funding. like I think that things like that really make me a lot more willing to take the call and I actually I actually take a lot of those calls I like my filter for a first call is is not super high but the the filter of saying okay is this a chalk email versus is this one quite specific that actually gets rid of a ton of reach out but if you can show me that you've taken the first step of saying hey here's why I think that we're a fit for you I'm actually pretty happy to to take the call, whether that's a cold inbound or a warm introduction.

19:10I mean, obviously, the warm introductions is extremely helpful, but a well thought out and deliberate cold outreach is perfectly acceptable for me. Would you mind sharing even just like very rough high level? The one thing I always like to try to pull out or articulate is how many inbound pitches are you getting? Do you feel like on a monthly basis versus how many of those inbounds that you actually have that first meeting or call with. And again, very rough, high-level idea. Oh, man, that stuff. So for me personally... Or even just the fund in general. Yeah. Yeah, we're a small team. We're only four, and we've got like a contact email that then the person who manages that kind of sends it to the appropriate person within the fund.

19:58I mean, it's, I don't know, it's probably somewhere 50 to 100 outreaches per month in that range. The number of pitches that we then take, it varies a ton based off of what we have going on that month. Because our structure is so follow-on heavy, if a couple of our portfolio companies are going out to follow-on rounds and due to our limited bandwidth of a four-person team, it can ebb and flow a lot. We're about generally taking 10 pitches a week. It's probably a little bit less than that, but it can ebb and flow and it can be much more than that in some of our quieter months when there's less going on in the portfolio.

20:37Yeah, really, really hard to kind of structure that. And sometimes it's when it rains, it pours, right? And we get a bunch of really good, really thoughtful reach outs and you just want to talk to all of them. And so that'll be a much busier week. Yeah. Yeah. What is that? Is there a slide? Is it a, like what part of the pitch or blurb or whatever it might be, captures your interest. There's always something I feel like that VCs, they have that thing that they look for. A lot of times it's maybe the market pull or it's a problem that they have in the back of their heads. And then when they see it, they're like, oh, yes, this is one I'm interested in.

21:14What is it that pulls you in, makes you lean in to take those intro calls? It could be a slide, like I said, or a stat or something like that. Yeah, I mean, so because we are somewhat of a sector specific fund, there's an element of uniqueness that we look for, right? If there's something that we've not seen before, we pay a lot of attention to that because I think we see a lot within our sectors. And so if it just feels like, you know, this is the nth plus one company or approach, you know, that we've already seen, it's harder to get excited by that because then you start asking questions like, okay, so there's a lot of competition.

21:57What's the right to win here? you know and and even if it is clear that this is a real problem then you know what is the pathway to do kind of going and making that successful when it's it's hard to tell if there's a clear differentiator and differentiation can come in in a lot of different instances it can come through the team it can come through the tech or it can just come through the you know if it's if it's a technology applied to an existing technology stack great but it's in some instances something completely new. So that element of uniqueness is really important. And we invested in a company called Space Kinetic because we had never seen anything like that.

22:34It's a completely new paradigm of how to move around in space. And so we said, hey, it's going to be really hard technology to make work, but if they make it work, it's going to be extremely valuable. There's basically zero market risk here if this technology kind of nets out. Absence of that, looking at the team is extremely important and kind of seeing how much of all of the important things that have to be done are already around the table right do you have the the world-class technology person that's going to be kind of focused on on leading that effort do you have you know a lot of our companies are kind of government focused in the short term and so is there somebody on the team that is pretty likely going to be quite good at kind of breaking into government sales and that knows the the process and knows the game there.

23:16And so, you know, those are kind of the, if I'm distilling it, it's, is there an element of uniqueness? And then what does the team look like? And, you know, are there at least the beginnings of a team that can very reasonably be successful here? Yeah, I love that. I think it's a very common response we get in some way, shape or form, where if you are receiving, you know, dozens, hundreds of inbound pitches per month, sometimes just having the one of one or something that seems to be unique or unique approach, Not that that's all it takes, but it's how that is enough to stand out and separate yourself from the hundreds of, you know, we get dozens of drone companies, for example, which is fine.

23:56But maybe that means you need to put why your drone edge is different. So as feedback for founders listening, it's not that your high level idea, like moving things in space isn't a unique concept, but you need to make sure that you highlight why your edge or technology is unique and how it does that. All right. Let's say that they've done everything right. As far as getting your attention, you're hopping into that initial meeting, which is very important. A lot of funds or founders don't realize how big the first impressions are here. So from you, as you're going into these and you're meeting the founder for the first time, what is it that you are trying to pull out of that first meeting?

24:35Is there a deciding factor? Is it you want to dive deeper into the technology or the founder? What are you hoping to accomplish in that initial meeting? Yeah, I'm trying to gauge if the founder had one of the really important pillars of company building, like fully company. And again, that could be the tech, it could be the network, it could be the government sales portion, it could be the industry relationships portion, or even just kind of a comprehensive understanding of the industry that they're trying to build in. right so like is is there something is there some type of like nucleus that can be built around right and and you know maybe the the rest of it already exists on the team or maybe it's pretty clear where the gaps are that needs the the need filling um you know as as early stage investors we're not trying to say you know you don't have everything covered right on the team right away so you know therefore we're not going to invest we just we need to kind of see a credible path to saying, okay, this person is aware of what needs to be done.

25:32And they cover, you know, one, maybe more of the really important pillars that need covering in the business that they're trying to build. But most importantly, they also have that then awareness of the types of gaps they need to close for the company to be successful. Yeah, I like that. How much of the pitch deck is involved with this? A lot of founders ask, I guess the question is more, what materials are you expecting them to bring to the mix? Do you like to see other co-founders on the call? What should founders bring to this meeting to hopefully help them in solving some of those things that you just mentioned?

26:08Yeah, it's so variable because it's really sector dependent for us. There are some sectors within our investment thesis that we just know better. I think probably the space sector is what we know the best at the moment within our portfolio. And so if I'm just having a discussion with an aerospace founder, I don't really need a deck. It's just, you know, let's have a discussion. You know, I'm familiar with probably most of the markets that exist in the space sector. And so it's like, okay, I know what the opportunities look like. I know what the size of the prize is. I know what the process is.

26:38You know, tell me about why this is the right technology to solve this specific thing and how you're looking to scale the company over time. So with that, it's easy to just have a conversation. With some of the things that we don't know as well, you know, like me personally, I don't know the agriculture space as well. You know, it's helpful to have that context. It's helpful to have the pitch deck. And so it's hard to be too prescriptive on how these meetings generally go and what's most helpful for me because sometimes I just need more context on the industry and the problem. And then sometimes I have that context and I need the specifics of why this is the right approach.

27:12I don't really need more than just the fact on the first call. I like talking to the rest of the kind of founding team over the course of a diligence and an investment process. But yeah, those first meetings, just with whoever's the primary decision maker is usually pretty helpful. Are there any common mistakes that you see founders make or things that they stumble into that ended up being kind of red flags on these calls that founders can avoid? One thing that I see a lot is founders that are extremely frustrated with the fundraising process early. And that is valid, right? It can be a really frustrating process to go through.

27:52And every once in a while, I catch a founder kind of venting about the process. And it's like for a seed stage company or even a series A company. And there's a lot of rounds ahead of them. And I am fully sympathetic to the fact that, you know, entrepreneurs are not starting companies in order to talk to investors. That's probably their least favorite part across the board of company building. But it's something that is so important to do and so important to do well, especially for the capital intensive businesses that are being built. And so I think that that's like signs of that early are tough to look past because it's only going to get harder.

28:28And, you know, a lot of times it's not the seed round. That's kind of your survival ground, right? A lot of these companies have like, you know, let's just get through this round and then we can keep going. They've lost momentum for some reason or it's taken longer to build than they were anticipating. And that survival round is really tough. And sometimes there's a couple of them before the product market fit hits or the technology proves itself out. And so there has to be resilience to the fundraising process because a lot of times it doesn't make any sense. You know, I have founders in our portfolio.

28:59We have way more revenue than that company and they just raised a huge amount at a mass evaluation of what's going on. And I just don't have answers for them. It's just something that you have to soldier through sometimes. One of the other things is making the assumption that I have all of the context that I need on the industry. And in some cases, fewer than, it's not the majority, but I have the context and I can say, yeah, we can move past that part. But there are a lot of times where it's really important for founders to recognize that they're probably subject matter experts in this thing.

29:32And the vast majority of VCs that they talk to are not going to be. And so getting the appropriate kind of ground truth and context in place before then talking about why the company is important is just an important part of telling the story. And the storytelling portion is one of the most important skills that you have to have in order to fundraise. And so making sure that I'm up to speed on the very important parts that I need to know in order to understand why your approach to the industry is the right one and likely to be successful should the technology be developed is just an important part of the process that I think a lot of founders kind of overlook.

30:12Absolutely. The last phase of the fundraising process is kind of just pushing it over the finish line. It's just closing the round out. It's kind of, it can be the longest it usually is. And it's a lot of herding cats and building momentum and FOMO. But maybe we start really quickly with what your specific diligence process kind of looks like roughly from that initial call to writing that check. And obviously it can vary, but do you have a high level kind of rough idea of what that diligence process looks like for you? You know, we've got, you know, after the first meeting or two, if we think it's interesting, we'll put together a one pager and make sure everybody at the company is aware of it, just so that we have eyeballs on the opportunity.

30:53And then, you know, as we get deeper in the diligence process, you know, our three main advisors, one's the CEO of a hundred billion dollar industrial company, one's a retired three star general of the Space Force, and then one's a former DARPA PM Navy test pilot. And so usually one of them are really helpful in helping us kind of understand the opportunity a little bit better. As I mentioned before, we've got deep relationships with a few industrial companies. And so part of our process is often going to the founder and saying, hey, you know, we have this group at this company that we would love to take a look at.

31:28What are you okay with us sending over to them to kind of get their opinion on it? And sometimes the response is, I'm not comfortable with you sending anything. It's like, OK, great. And then some that's here, you can send this deck or, you know, you can you could send, you know, X, Y and Z material and kind of getting some eyeballs on on the opportunity from, you know, the actual industry perspective is really helpful for us. We don't do it in all instances, but there are a few very specific categories in which we have deep industry connections. And one of the reasons we like to do that is because if it then becomes useful, like let's say we get over the line on the investment, if it then becomes useful for us to kind of make the introduction, and it's jointly beneficial for both the startup and the larger company, it's actually helpful to have early buy-in from those people at the company to say, oh yeah, we're actually really interested in tracking this, or we see this actually fitting in really nicely as a supplier because we've got a bottleneck here.

32:24So actually getting that industry vote is really important for us. But again, a lot of founders are of the mindset, So I don't want them seeing anything that we're working on. And that's totally valid. And so we just kind of move forward with that. And that doesn't prevent us from making an investment or like a yes on an investment decision. But getting that buy-in is also extremely helpful. Yeah. How would you recommend or do you have any advice for founders as they're trying to kind of maintain momentum and build some of that FOMO? Usually investors, they like to see progress or like who's leading and all these kind of different things.

32:58It's a tough place to be in as a founder. Any advice you'd give on how they can do that in a solid way that maybe doesn't feel desperate or pushy? Obviously, it's a very fine line to cross. Yeah, I think that's hard. I mean, a lot of VCs like to consider themselves contrarian investors, but then the first question is who's leading. And it's just, it's, it's so, you know, there's just a big disconnect there. And yeah, I, I don't know. This is, this is why I, I like industry focused, like, like sector focused funds. And yeah, the, the, the reality is that, you know, FOMO and perceived momentum are such powerful tools for startups.

33:44And, you know, we, yeah, I know, I know, I know you see this a lot too. And I, you know, I, I see some fundraisers and I just scratched my head at them. How is that even possible? Because it's a company that I either know a lot about just through investing in the category or I've talked to for several rounds. And I just don't understand it. And I don't think I ever will. And I talk to other people and I just don't understand it either. But they get a couple of big investors around the table or they tell their story really well. and and again there's this is where that it goes back to what i was saying earlier like sometimes there's just no rhyme or reason to it and that's why where you have to keep your head down you know hurting investors is absolutely a skill set and if the ceo isn't isn't good at it then you know the ceo needs to surround themselves with people who can be very good at it and can organize them and can continue to touch base with the investors as they're trying to get around together you know nothing's more powerful than having multiple lead term sheets that's i think more of an exception than anything.

34:49But a lot of times these rounds, you just have to soldier through. Yeah, I really don't have a good answer to that question. Yeah, there's no good answer. I think it's like there's so many different ways of doing it. But you did touch on something that I think is becoming even more important. And it's unfortunate because founders, especially hard tech or deep tech founders, aren't historically good at this, but it's the ability to raise capital and to communicate. And it's the balance of charisma without being too sale. It's such a hard thing to be. And I find that it's even harder for someone who's starting a very highly technical company because they're typically not from a background where they've had to do that.

35:30But it is continuing to be one of the more important things that I see with these companies that are raising capital. And you mentioned it too, like we may know behind the scenes. I'm like, that does not make sense. But then you meet the CEO and you're like, now it does make sense. And I think there's an advantage to having that as a superpower. And a lot of the companies that we invest in, not that we need that. I do believe that at the end of the day, the best product can often win. But I think that it's not always the best product that can fundraise. And fundraising is indeed one of the more important pillars in creating a business in this space.

36:07Because as you mentioned earlier, it could take a decade. It's going to take a lot of capital. And if you don't have that capital, it's going to be harder for you to execute. Yeah, yeah. I see this with, again, some of our founders coming to me going, how did this person raise that? And I'm just like, they are extremely well-connected. They're very outgoing. And what I see with a lot of our founders too is that, as you mentioned, not all of our founders, but a lot of our founders are very technical. And a lot of our founders are of the mindset of under-promise and over-deliver. And as perverse as it is, that's a tough mentality to have when you're trying to raise a lot of money.

36:47And who is famous for being like the opposite of that? And it's like Elon Musk, people don't forget, but a lot of people forget, like how often he would overpromise and underdeliver. But that worked for Tesla for years. He gets there eventually. And it's kind of working for SpaceX right now. Yeah. Yeah. Yeah. And, you know, he's got the track record to raise off of those incredible claims. Right. And it generally takes longer than he's anticipating. But he kind of gets to where he wants to get eventually. Right. And so it's like, OK, you know, he built a built a one and a half, two trillion dollar business.

37:25It took him 20 years to do it. You know, nobody was underwriting that outcome. And, you know, we'll see where Starship lands. I do actually like following what he says compared to where he is, but it does seem like he eventually gets there if not on the timeline. But yeah, that's just not in the nature of a lot of these technical founders. And I actually kind of prefer that, but it does make the fun raising hard. But you want to be a little bit more so. Just flirt a little bit with that line and it can do some good things. It can also get you in a lot of trouble, though, too, because if you're not an Elon, we also meet people that are very much like we're going to follow that model and over promise, under deliver.

38:05And then eventually the under delivery catches up. And by that, I mean, it catches up quickly, like within 18 months before you're raising your next round. Eventually, that pixie dust kind of falls away. Yeah, I mean, especially because a lot of these rounds, they price in growth. Right. And especially I mean, I know you've seen it over the course of the last five years in hardware. I mean, four years ago, three years ago, I think the hardest part of my job personally was syndicating around for hardware companies. Now the hardest part of the job is getting allocation in great companies, right?

38:38And in the hardware sector. And I wouldn't have believed that we're sitting here today talking about how much capital is available on the hardware side. So the pricing in of the growth is being done a lot right now because of the ability of capital. and if you are pricing in this kind of over promise yeah yeah that's gonna be a tough a tough road ahead and and as you mentioned it might not be immediate but you know there will probably be a correction at some point when the the pricing for growth and the pricing for all those promises was done in the last round of the last two rounds and now it's pretty clear that the business is not there and has a ways to go before it gets there.

39:21Yeah. You mentioned one thing on here, you know, if you're lucky to have multiple term sheets or you're in a benefit to choose, is there any advice you give to founders that can choose any advice on maybe the type of fund or what type of partner that you're looking for, anything like that you'd give for founders that are in that position? Yeah. I mean, I, yeah, and this isn't anything novel, but, you know, It's kind of trying to gauge how important you'll be to that fund. If it's a fund with a ton of investments and there's just no way that the partners can support you because you're going to be a tiny check for them and it's kind of meaningless at the end of the day, that's important to note.

40:04And I think that some of the other things that are important are where is the fund in its deployment lifecycle? A lot of these funds have 10-ish year funds. They've got some option years. You know, I'm seeing some funds have longer time horizons as kind of the migration into hardware is coming in. But, you know, where are they in the deployment? What's their promised return to their LPs look like? How much do they reserve for follow on? You know, when I was talking those kind of rounds that you have to just survive, one of the most important things that you can have in the survival round is participation from existing investors.

40:38And if investors are tapped out or too late in their fund to participate, that's just going to make that round even harder. And so kind of understanding these dynamics is important. And then, you know, understanding how that person, if you're going to accept a lead from, you know, Investor X and you want to understand how they operate on boards, I think that's a very reasonable ask. if you have multiple term sheets to say, hey, can I talk to other entrepreneurs that you work closely with? Can I talk to other entrepreneurs where you sit on their board? Because, you know, you want to make the best decision and you have a decision to make now and you're in a very fortunate position there.

41:16And so you want to make the right one. I think that those are all very fair things to dig into. Yeah, I agree. Let's say that they've closed out their round, celebrate for a little bit. What are some of the mistakes or feedback you give to founders? What should they do right after they close? I think a lot of times it's this race to this finish line and it feels like that's the win. And it's usually not. It's like you kind of the minimum piece and now the work actually starts. What advice would you give founders? What common mistakes do you see in those first months after closing their round? Yeah, I, if not already get an investor update going, whether it's, you know, a monthly cadence or a quarterly cadence, you know, investors want to feel engaged.

41:58And, you know, especially for us with our follow-on heavy model. There are times when we invest in a company and then we never hear from them again until their next round. And then it's hard for us because the way that we make those bigger investments is because we followed the story, we've gotten to know the founder, we've gotten to see the kind of the date, I mean, not the day-to-day, but how they're managing the ups and downs. And if we don't see any of that through to the next round, it's really hard for us to get over the line on a big follow-on investment. And so I think one of the mistakes that's made is not keeping, like not just the lead investor, but all of the investors kind of aware and up to speed.

42:34Because at the end of the day, if you go to raise another round and you're trying to raise from investors who, by the way, largely know each other. One of the first things that I'm going to do is call up one of your previous investors and say, hey, how's this company doing? And if their response is, I haven't heard from them in six months, it's going to be really hard to get over to get over the line there you know celebrate the fundraise you know awesome to be able to get to focus back on company building but part of company building is also fundraising and so keeping those stakeholders as up to date as any customers that you're trying to get is is pretty important that i think a lot of founders kind of kind of forget about always be raising and that's it never ends, unfortunately, for founders.

43:21So get locked in and ready to go. Last piece here, we like to end on a positive note. Any, you know, I call it like the halftime locker room speech that you would give to founders that are in the thick of it right now in that fundraising mode. What advice or motivational thing would you say to them right now? Yeah, I mean, it just takes one, right? It takes one lead term sheet. So true. Yeah. So, you know, we've had companies talk to hundreds of investors before they get to a lead term sheet. That's a pretty common experience. And so, you know, it takes one. And, you know, if you're in the position where one is what you get, take it, run with it.

44:02And if you've got a lot of conviction in what you're building and this is that round that you need to survive, then, you know, get through it and keep marching on. And, you know, there's a quote in that, you know, that BBC Sherlock is like the one with Benedict Cumberbatch. And I think it's in the last season where him and Watson are going through a tough time and Sherlock just could, we have to be soldiers. You know, we have to be soldiers here. And sometimes you just have to think about that, right? If the fundraising process is hard, if there's a technical issue that's really hard to get around, if there's a customer that you've been trying to get through for a long, long time and it's starting to get a little disheartening, You just have to be soldiers and keep pushing through it if it's something that you are continuing to believe in.

44:47So that's kind of my rallying cry. And I don't think that any real company kind of gets through with no bad years. And oftentimes it's more bad than good. Definitely. Yeah. Yeah. Yeah. And as long as that good kind of outweighs all the bad, then you're marching in the right direction. But yeah, we know it's a grind. We know it's a hard process. And, you know, we can we can help where we can. But that's why, again, going back and why saying no is so hard, because, you know, you might be their hundredth no and just another reason to for them to be discouraged. And that's that's just not a fun position to be in.

45:25But it just takes one. Soldier on takes one. I love it. Taylor, thank you so much for being on today. You lived up to the hype. That was some great advice. Where can folks continue to follow along with you and Industrious and follow that journey? Yeah, I mean, LinkedIn and X, I'm way more active on X than I am on LinkedIn. But yeah, shoot me a note there. And again, if it's a well thought out, reach out. I'm almost always happy to take the call. So yeah, love to chat with anybody building in these spaces. And yeah, Matt, thanks for having me on today. It's been a lot of fun. Absolutely. Absolutely.

46:00All right. We'll talk again soon.

46:09the ride conviction and precision watch investors collide