Danielle Strachman: Weirdos worth backing

26:17And he's like, well, we're opening a boba shop. I was like, you're in their like entrepreneurial program here. And he's like, yeah. And I was like, oh, I was like, no. No. I mean, yes, eventually you need to be able to map out the math of your business, but you need to open a boba stand. You need to put a table in the quad and see if people will buy boba. And it was like light shines on yonder windowpane. His eyes got so huge. And like he kept going back to what he was taught, which was like, well, no, but we got to rent this place first. I was like, stop talking about renting a building. You need a table, a tablecloth, some boba in the quad.

26:58And I told him, I said, I will not do another mentoring session with you until you do this. Like, I'm not interested in trying to deprogram you from the bullshit that you're getting from the business school here.

27:12Danielle Strachman:What do you think about entrepreneurial programs? Can I ask? I mean, I think they could be good, but I think most of them are very much like this where it's artificial. and I'm gonna like keep going on this Boba train for a second and tell you what I think would make for a great entrepreneurial program that I've never seen done. So they did the stand and it was amazing. They sent me this incredible photo. It's this like beautiful summer day of them on the quad and there was this zigzag line of like a hundred people waiting to get Boba. And then they had the real entrepreneurial learning happen right then.

27:48they ran out of the tea but they had extra boba so then one young lady who was on the team was had like light bulb goes off and she's like oh let me try to see if i can just sell them a bag of boba and not even the drink and she did she sold the baggies for two bucks each to people in line and they sold all the boba and all the tea now it was funny at the end of that he's like now we got to figure out how to rent a thing and i was like no you just gotta go do it that again and again and again and keep learning from it and what i think would make for a great entrepreneurial program this is really like the project-based learning part of danielle is i would love to see entrepreneurship lab there are these rights of passage companies that everybody not just young people build but a lot a lot of times young people it often looks like a lemonade stand of some sort or like selling your wares somewhere it often looks like a tutoring business i've seen a lot of those that young people start a lot of clothing arbitrage sneakers jackets things like that gosh there's a couple more in the list usually an app of some sort and you see when you talk to entrepreneurs when you ask them what were the first businesses you started you start seeing these patterns of like something that looks like a lemonade stand uh tutoring website dating website an app like these different things and i think it would be so cool if what a program was doing was saying, hey, everybody in this class is going to go through all of these rites of passage companies.

29:19Do it in your own way, but do it together and then compare notes. So like maybe one person's lemonade stand is a boba stand. Maybe somebody else is selling like Arduino parts or something on campus just to see what happens. Then comparing notes about how you do sales. What did the margins look like? I think that would be super interesting. I've never seen anybody do

29:40Danielle Strachman:it is it this isn't what the Medici grants are for though right like what you're explaining now Medici you're about you just explain making stuff building things this is something else do you do you see a lot of people do a lot of people pitch 15 17 like ideas like this what do you do with those people who pitch those ideas or do you just send them off to go and do it well it it sort of depends because some of those things depending on what people are pitching us it could be something that we make an investment in at 15 17 if it's something like more of like a rite of passage company, those tend to be hyper competitive spaces.

30:10We don't think we're very good at picking things out of hyper competitive spaces. So those might be more mentorship conversations that we have with people, keeping in touch with them, having them be part of our community, having them come to our events, having them interact with each other. We have a pretty active discord group. And so like there are those places for people to slot in and then see over time, like, do they start working on things that maybe are a bit more like unique or novel, something that they have a particular insight on, then we would say, hey, yeah, maybe we'll do 100k angel check here, or maybe we'll do potentially up to a million dollars as our pre-seed check to help somebody get started.

30:49Now it is interesting. We've had a number of our grantees. When we started the Medici project, we actually didn't even have a name for it. We just called it like a nudge. We were like, This is a nudge to nudge somebody to get started. 20 % of our Fund One companies start as grantees with us. We forever will think of our grants as a goodwill and rapport builder with makers. We never thought of it as this startup accelerationist. But it's been interesting to see. One of our companies in Fund One is Deepgram, which is really at an AI infrastructure level and is being used in things like Granola now.

31:26and that company is i think it's almost 10 years old at this point and when we met one of the founders noah shutty on the campus of michigan he had some ideas he was tinkering with and we gave him a thousand bucks he wasn't thinking of building a startup he just was interested in working on this algorithm so we gave him a thousand dollars and i think it was three or four months later he was like hey i think i actually have something here and i might want to build a company to to do this and it's actually uh funny in very unlike 1517 terms we knew noah was like a physicist and uh was probably destined to go like get a phd in physics and we're like oh are you sure you want to do the startup thing because like you seem like you should be like discovering the cosmos and doing that years later he wrote us a letter and and we were one of the first backers of the company he said you guys discouraged me in that meeting but what i could feel was that i still really wanted to do it so that's how i knew i had to do the company that's cool and i was like oh my gosh that's so funny and in more recent years we have a young man named human who we gave a grant to who was working on some different environmental work literally in his parents basement at 15 and then a few years later he turned that into a way to think about doing rare earth mineral extraction in the U.S.

32:48for cheaper than anyone else had done it. And we gave him$100 ,000 to get that company started. And the time between the grant and that startup money was a few years because he was so young when he first came to us. But it's interesting to see that$1 ,000 helped him to get thinking about something. And one of our largest companies, Mach Industries, started as a grantee with us as well. Ethan was 17 when my colleague Michael met him, and Michael gave him a grant to start tinkering in his garage. Then less than a year later, we wrote him a$100 ,000 grant to start his defense tech company. And then I think it was less than a year after that, that Sequoia backed him.

33:28And so it's been amazing for us to see. And then what we really thought would happen with these grants was that people might remember us and come back three, four, five, six, seven years later. And that's also happened. It's been really interesting to see. We have a guy that we work with who is working on autonomous rovers. And he came back to us seven years after we gave him a grant in high school. And he was so funny. His name is Scott. And he emailed me. He's like, do you remember me? I was like the Canadian getting kicked out of high school. And I was like, I don't have a good memory i don't remember you but i'm glad you're back yeah he uh he's like i'm still in high school he was also working on autonomous vehicles and in autonomous robots and he's like yeah he's like you gave me that grant i had a terrible idea but you guys let me work on it and i've actually extended on that work and now he's a company called optimotive uh that sends out these autonomous rovers like how to how to put it like harsh environments can i ask like your what do you

34:34Danielle Strachman:look for in young people like what's your kind of thesis on talent you you mentioned weirdness a lot you like weird people and you've said that a few times to me i see it on your website yeah like how do you what are you looking for at that stage at the medici grant stage Sure. Unabashed passion. You know, when someone is unafraid to be super geeky, super dorky about their thing, like whatever that thing may be. And it's just something you can feel in your gut when someone's super passionate about something. I'm always super curious about people. And if someone's passionate about something, even if it's something that is not my jam at all, I could still listen to them all day.

35:17Like, wow. I remember this is so funny. It's funny to put together stories in reverse sometimes and see like, oh, wow, that's interesting. That relates to what I'm doing now. But I remember I went on a date with a guy in my 20s and he was super into beer. I hate beer. I hate it. Not into it at all. But the way this guy talked about it, and he was a super geek. He was like talking about like all these processes. And I was like, I could listen to this guy talk about beer all day and I hate beer. And then I was at my mom's house recently. Both my parents are geeks in their own rights about different areas.

35:50And on her fridge, there's this magnet that says, geeks, welcome here. And I was like, yes, this is in the DNA of this family that we embrace the geeky, the weird, the wily. And yeah, it's just something that I think sometimes when we're growing up, we get steeped in certain things. And somehow I got steeped in that. So I look for that in the young people that we work with. And we encourage it too, of like, yeah, like, tell me more about that. How did you get so interested in that unique area? Or, you know, sometimes I'll ask people about like, yeah, tell me the time you almost set fire to your house, because surely that happened for you at some point, or your parents were at least terrified that you would do that.

36:34Danielle Strachman:And like, can I ask about the, like, what do you specifically ask them? Is it an application process? Do you have a number of questions? Is it a video? Do you just meet people? Sure. Do they just open pitch you? Sure, sure. How are you drawing out this passion and weirdness from them? Yeah. What I've been saying recently is we have lots of front doors at 1517. So we have like a get in touch contact form on our website that the team actually reads. I find it weird in this day and age of AI to have to say like humans actually read your stuff. We have a program right now we call Flux, which is to unearth sci-fi scientists.

37:10And I've been out there on Twitter saying, by the way, we will actually read your application because you're a human putting the time into this. And, you know, this goes back to my Montessori roots. We need to honor you as a person by actually reading your application. So I feel very strongly about that. And so we have certain front doors like the Flux application, the contact form on our website. Some of our best founders have come through there. Sometimes it's intros from people. Sometimes it's just meeting someone at an event or office hours and just hearing them out. You know, there is no formal application for the Medici project, for the grants.

37:49That's typically it's just talking to people. We really like to give those sort of on the spot in an organic manner. It's just like I'm talking to someone. They're telling me about something they're geeking out on. I'm like, oh, hey, what would you do with a thousand bucks? And they're like, oh, well, you know, I've always wanted to get this resource to help me build in this direction. I'm like, cool. What's your Venmo?

38:08Danielle Strachman:like let's do it right now and we would just Venmo them the money we cannot oh yeah all the time so sadly Venmo kicked us off platform Venmo if you're listening I would really love to use Venmo again to do this because it's way more fun to do that than a boring wire transfer yeah um but yeah no we and actually Michael on our team if he could have it his way and I was like no over my dead body will we hand out cash uh but he used to want to get envelopes of cash of a thousand bucks and just like hand it to a 17 year old. And I was like, they're going to lose that envelope. Like, no, we at least have to electronically send the payment so they don't lose the money.

38:45Danielle Strachman:Sounds like there's a lot of trust in this. Like I'll give you a thousand bucks right now. And do you follow up with them later on or you just wait for them to get back to you? Like, how do you? I always tell them like, we love to hear from them. We'd love to hear from them monthly on like what's going on, but it's not a have to. And I always tell them if things go south, that's fine. This is a learning opportunity. This is not, again, it's not to complete a project. It's not to make a startup. It's to learn something. And I've had grantees come back to me and say, Hey, we used half the grant and we figured out that our thing we were working on, like wasn't going to work or we had a natural stopping point to it.

39:18Like, where do we return the rest of the grant? I'm like, keep it for a rainy day. Like you're going to think of something else that you're going to want to make or build, use it for that. And the nice part is that I think that trust piece also comes from our investors trusting us because we do our grants out of our fund we have the ability to do 200 grants a year out of our actual fund accounts right and so we're not beholden to some like non-profit body that has to like this is this is actually something i'm also really passionate about and i've been really fortunate on is that with my time at the Teal Foundation, what we didn't have was this micromanage.

39:59What's the ROI on every last thing we're doing and nitpicking? Like, well, did the summit you host yield a result, you know, the next day? There's so many things people try to measure that don't make sense in the moment. And it is only over time that you yield the result. And this is true for events. This is for grant programs. This is obviously true as an investor. You don't put money into a startup and be like, where's the markup tomorrow? Now that said, some investors think that way. They're not going to make it. You have to be patient and you have to look back over time. And it's an imperfect process, but we found that it works really, really well for us because we have that trust also of, hey, you know what?

40:44We know these grants end up helping to change people's lives. Even if we never invest in them again, we'll hear from them. Oh, my gosh. Wow. You gave me a grant when I was 15 years old. I applied to all these other grant programs and had no idea that most grant programs take weeks, months, application cycles, all this craziness. Some people tell us they're like, you guys spoiled us. I'm like, sorry, not sorry. I'm like, oops, my bad. And then, you know, for our portfolio, yeah, some of them have like become really, really major companies, which will filter back into everything we do. And I think that trust piece is really big with the young people as well, because most like we don't ask for receipts.

41:23We just forward them the money. There's not these have tos. I always tell them we don't own you. We don't own your stuff. I'm not interested in that for a thousand dollar grant.

41:32Danielle Strachman:Obviously, the work you do over your life is clear to me that it's had a really big impact across a lot of people across the world. How do you think about impact and measuring impact and explaining that? Do you feel the need to measure any of the stuff that you do? I mean, we have to measure our investment outcomes because otherwise we don't get to stay in business. Yeah. You know, and so to talk about that a little bit, for example, our fund one has returned 4x in actual money to our investors. Oh, wow. I think our IRR on that fund is something like 38, 39 percent, which puts us in the very top tier of investors from that vintage.

42:11So, yes, we're measuring those numbers because every three years we have to be out there knocking on, you know, investors doors to invest in us for us to do the work that we do. It's funny. One of our investors, Fernando from Invariantes in Guatemala, he's been our biggest supporter since the very beginning. And he's a wonderful human being. He's a brother at this point. I mean, we've literally sat and cried in a car together. That's how deep this friendship goes. We're family. and that's an amazing thing in our work is that you know we get invited to founders weddings and

42:47Danielle Strachman:it's the same for us with some of our lps as well and um he came to an ice cream social we had a few years ago and he really gets what we do and after the ice cream social he's like what do you think the roi will be on the ice cream social and i was like fernando it's like you of all people should get that like one we're not measuring the roi and the ice cream social that we spent five hundred dollars on the next day but what's going to happen over time is i'm going to hear from people oh hey i met my co-founder at this ice cream social oh hey i met someone else who invested in our company this ice cream social or hey i had a conversation with you the first time at the ice cream social and then you guys invested in me a year later two years later three years later it's like the start of something like you don't meet a potential friend and the next day go what's the ir right how did i do right exactly it's like oh my god terrible yeah i'm sure some people think about it that way and to me that's transactional everything we do at 1517 and the way that i have run my entire career is relationally bound when i used to go to events i would often not tell people i worked at the teal foundation because i didn't want people to talk to me because there was you know oh there she's close to Peter Thiel which means I can get money from her somehow or from that organization or from Peter and so I would go to these big tech conferences sometimes and I would tell people oh like if you know you do introductions and I'd say oh yeah I run a grant program for teens and the people who are transactional would look like they smelled a fart and they would walk away from me it was a fabulous filter and the people who would engage and we're like, oh, interesting, grant program for teens.

44:29And they'd inquire and ask questions, and we'd have a really nice back and forth. Eventually, I'd be like, yeah, I am running the Teal Fellowship. I'd be like, oh, wow, that's so cool. And those people would end up being mentors in the program. And yes, maybe we would do some business at some point together. But it started out as being honestly curious and inquisitive about what each other was doing and not like, hey, you scratch my back, I'll scratch yours. And that's just worked really well in my career. So there are things that we have to measure at 15-17. But I always tell people we're playing a very long game.

45:02We're doing things a 15-17 way. Yes, we only get to stay in business if our fund math works and the numbers add up. So we are measuring that. But there's a lot in terms of faith and belief in what we do where I do not feel the need to measure the outcome of every event we have or an ice cream social. or, you know, I don't even measure like, how many people do you talk to per year? I don't care. Like I talk to a ton of people, you know, but I just don't feel the need to like collect numbers on these things.

45:35Danielle Strachman:Can I ask on this, like, you know, giving out money on the spot on like running events and doing a whole bunch of work and just having faith that you'll listen to the signals over time and they'll tell you, the signals will tell you whether or not things are working. That's all well and good when it's like you and Michael, right? But 1517 is growing. What fund are you on now? It's your fourth fund. You've got a team of people. What are your thoughts on like, firstly, hiring people that have taste and judgment straight out of it or building a culture where you sort of teach people the judgment and the taste that 1517 has, the 1517 judgment taste?

46:14Yeah, absolutely. So yeah, this used to keep me up at night a lot when we first started the fund because I would think, where are we going to find other people who are going to be respectful of young people, treat them correctly, even certain verbiage. Like I don't use the word kids. A lot of people who are young people are like, oh, yeah, these kids. Kids to me is like it's one thing to call your own children your kids. Like it's a cute term of endearment. It's also what you call a baby goat. Like so I'm just not into it. So I'm very particular about the language we use, the way we treat people, and it would keep me up at night a lot.

46:51And the beautiful thing was everybody that we've worked with at 1517 has been someone we've worked with before in the past who has had similar experiences, like being someone who maybe has been overlooked for a particular reason or have been actual people we invested in at 1517. So some examples, Nick Arnett on our team, he was an applicant to the Teal Fellowship. He always jokes that we didn't take him as a Teal Fellow, but we hired him, which we did. And he ran our community at the Teal Fellowship. And then when we started 1517, originally he was running a lunar exploration nonprofit. He's our resident space geek.

47:36Sometimes I call him our resident space cadet. But after a while, he was ready to do something else. And I said, hey, do you want to come check this out? And he's matriculated into being a partner at 1517. He has no college degree. He's from Fort Wayne, Indiana. Very different story than most investors. I think about someone like Haley on our team, who originally we were thinking about expanding our team during Fund 3. We were thinking about opening up some form of maybe chief of staff role that would eventually matriculate into an operating partner role. We didn't even have a job description.

48:07We were just starting to tinker with this idea. And a friend of mine posted about that her nanny was looking for her first professional gig. And I've known this family for a very long time, almost 20 years. And I knew that these are high maintenance people. They're amazing people, but they're very high maintenance people. And they're very dynamic. And there's a lot going on there. And I thought, if this young woman can work with that family, she can do anything. And I interviewed her. I just had like a casual conversation with her. And I noticed in this conversation that I had with her, she had a history of taking on more responsibility than would typically be normal for her age.

48:50whether doing translation on the phone as a five-year-old for her grandmother who's Croatian or doing things like being a 16-year-old working at Target but having to tell the truth about a colleague who is stealing you know from Target to her manager and I was like wow that's incredible so we hired her and she matriculated into the operations partner role that we have and now we have this program that we launched during our third fund called our advisors and residents giving some air to what we do. And those are founders who worked with us in funds one or fund two, you know, who either had an exit or close their company and had some part time capacity who now work with our fund three and fund four portfolio companies.

49:35And they have literally grown up in the 1517 way. So I don't even need to say anything to them about like, we don't use the word kids. We talk respectfully, we're inquisitive. And we ask people about their ideas because, you know we don't just cut them down like oh that's terrible idea like why would you want to work on that and they know because it was by osmosis that we were working together and there are times when people come to us like um where our heirs will sometimes have a little bit of a hard time because they've worked also with other investors and they're also used to other people's styles they're like i want to understand better how do you all think about this so that like how do you keep that open mind even when there's some part of you that's like well this sounds crazy or nuts or bad.

50:19And so we do have lots of discussions at the team of like, well, yeah, you can totally think that something is crazy in a bad way, you know, but let's be inquisitive about it. Like, let's have Socratic dialogue about that and not just kill it with fire.

50:35Danielle Strachman:How do you make investment decisions? I'm curious, like you make grant decisions quite quickly. You can do those on the spot. How do you, and I'm also interested in your relationship with your co-founder Michael. Yeah. So first question is like, how do you make investment decisions? What does it look like when you're around the table? Can one person make a decision or do you all need to agree? Like, how does it work? So we run a pretty tight process at 15, 17. All of us are taking individual meetings with people all the time. What I always tell founders is, hey, every Tuesday morning, our team gets together and we talk about who are all the cool people we talked to last week and which ones do we want to pull into a pitch meeting.

51:14The ones we pull into a pitch meeting that's a 45 minute meeting with our entire team. So we do not do the success of you have to talk to a partner and then another partner and then another partner. We always say that two heads is better than one. And so the founder will get on a call with us. We'll all listen to the pitch. And then the founder drops off the call. And of course, we're asking questions and engaging there, answering questions for founders as well, introducing ourselves to the team. Sometimes we, you know, talk about intros like, hey, what's your favorite ice cream flavor? Like, you know, trying to set a calm tone or a fun tone for people so they work off those nerves of like, oh, I'm doing a pitch meeting right now, which is really fun.

51:52And then our team stays on and debriefs 15 minutes afterwards to get that guttural reaction of like, what are we thinking here? Are we write the check now? Or we don't write the check right now and here's why we're hesitant? Or three, which is the most common, here's where we have more questions. Ideally, the whole team has high conviction on like, yeah, let's go. We do have something we call the golden buzzer moment, where someone maybe is interacted with a founder a lot more than anybody else on the team and is like, I know you all think I'm crazy, but this is my person. Like, I'm going all in.

52:26And like, there's sort of this understanding. We don't have a set number of golden buzzers that you get. But like, it's clear, if you're pushing the golden buzzer, it means something. I have a founder named Bob from a company called Pantheon. He's my golden buzzer guy. You know, team's like, oh, 3D printing. I don't know. I don't know. I'm like, Bob is my guy. Like, we have to invest in Bob. And yeah, the golden buzzer moments are really fun. But it's also really fun when the whole team is like, yeah. Like, this person has those 15, 17 characteristics. They feel like a 15, 17. Or sometimes, like, the shorthand for this is, you know, in the past would we have made this person a teal fellow and do we think this has a snowball's

53:08Danielle Strachman:chance in hell of becoming a venture scalable opportunity okay cool cool three minutes okay we'll wrap up man we can keep going i feel like this can be like hours and hours and hours but what's something that you feel differently now or believe now that you did not believe or that you changed your mind about from when you first started uh in education with schools Oh, gosh. Wow. I guess one very visceral thing that I learned running the charter school is I think I went into it thinking the school district is evil and bad. And I kind of still think that's true. I'm not a fan of how most public education in the U.S.

53:49is run. But what I would say changed my mind was when I was interacting with district officials. every individual human I interacted with I think had a good heart and had really good intentions but I think sometimes when a school district the districts are typically removed from the schools themselves and so they're not boots on the ground right there and so they don't know exactly like what's going on but I remember having to change my view of like okay these are not bad people I think over time we all tend to start seeing the shades of gray I definitely was like a pretty black and white thinker when I was younger.

54:28And then over time, it's like, oh, there's nuance. Okay. So I think being able to see that within systems in general, even if I don't like the system, the people who are there maybe working for the system, I think often have really good intent and often even want the same goals I do, but have a very different way of going about it. It doesn't mean I think it's going to work or that it's right, but I can at least resonate with the intent somebody has. So that's probably where I have opened my eyes more.

54:59Danielle Strachman:It's also tough sometimes to see the system when you're inside it, right? And to see the structure of it. So yeah. Okay, man, I didn't, I wanted to go, your ideas on your theory on fellowships, your obsession with the Renaissance, you're like, there was so much we didn't get to do, but thank you so much for coming to Australia all the way to Australia. Oh, it's been fun. Spending time with us here at Wild Hearts and yeah, hopefully a part two. Sometimes we cover all of the things we didn't get to. Yeah. Thank you so much for having me, Joel. Thank you so much for joining us for another episode of Wild Hearts.

55:36If you want to learn more from other ambitious people building, designing and creating the world that we all want to live in, then please hit the subscribe and follow button. This podcast is produced by Camilla Herring from Blackbird. Our marketing genius is Laura Cofford and our editor is Andy Jones from Colour and Sound Creative. Thank you all so much for listening and I'll talk to you next week.