Why shouldn't most companies raise venture capital?

Most companies shouldn't raise venture capital. If you're not raising capital, this is probably the worst book ever to read. There are studios out there that are pumping out as many companies as possible, but we're not. We're trying to have a 100% success rate with the companies coming out. This VC wrote the book on fundraising, literally, and scaled a mission-driven startup ecosystem focused on social change by supporting founders. This is known as Interplay Ventures VC Fund out of New York. Managing Partner Mark Peter Davis understands the long game and what it takes to be in venture after being in it for over 20 years. He backed the likes of Warby Parker, Coinbase, Jackpocket, and yours truly, Thunder. He shares the importance of being venture ready as a founder and as a company, and how relationships are absolutely crucial to being a venture-backed company. What I found frustrating on day one of being a VC was that entrepreneurs came in to pitch and they didn't know how to speak VC. When you start anything in entrepreneurship adventure, it starts out with you believing in a vision and a hypothesis, and then it takes a decade to find out if you're right. We like to invest when the math is visible and quantifiable. Everyone, welcome back to Fundraising Demystified. Today, I have Mark Peter Davis, also known as NPD, managing partner at Interplay. Welcome to the show, Mark. Hey, thanks for having me. Now, I'm excited to finally have you. I've been running this podcast for over a year. You're my business partner and investor in Thunder, and I figured it'd probably be good to actually bring you on the show. You've got an incredible So, here's the awkward thing. I've been LinkedIn liking every post you put. Do I do that on my own episode? You don't comment. You say, "Wow, that guy looks great." Um Well, let let's jump in here for the audience that, you know, isn't familiar with Interplay or your background and the fact that you wrote the book on fundraising. Uh so, we'll go ahead and and just kind of jump in. So, talk to me about Interplay. You invested in companies like Warby Parker, Coinbase, but Interplay is much more than just a typical PC fund. So, what is Interplay and why did you start it? So, at the risk of sounding a little cheesy, I'm going to give the real version of the way we talk about it internally. Um Interplay is a mission-driven for-profit startup ecosystem. And it centers the whole thing centers around a belief uh that entrepreneurs are the primary driver of social change in our world. And we have dedicated to get a dedicated professional careers to helping founders drive change. So, we're not knowing exactly what needs to be changed. We're trying to enable them and unlock them. We've got four dimensions of the business that serve this concept. Okay. The kind of key foundational one is we have a series A venture capital fund. So, we focus primarily on investing in B2B software in North America um at the series A stage. The incubator is where we support seed stage companies typically handful of uh people on the team, raise some capital. And we help them operationally. So, in our incubator program we're trying to help entrepreneurs. We typically work with them for 6 months. And we're trying to help them win. So, the goal is to get a 100% success rate through that funnel. We have a foundry uh which kind of categorizes more in the studio language that's evolved, where we start companies from scratch. So, uh that's accelerated over time. We're starting close to three, five, six companies a year now that are trying to solve fill essentially a void in society where we think there's an economically sustainable for-profit solution. And so, we're we're rolling companies out and that's really at the formation stage, completely de novo. So, if you look at it, you've got investing in series A, incubating, advising, coaching, uh at seed, and then starting de novo out of the foundry. The fourth pillar of this is that, you know, uh when this works, entrepreneurs wake up and they're there to chase a piece of cheese, and that cheese is money. You know, why it matters that they're chasing that cheese is they're spinning the hamster wheel, which improves society. So, that's kind of how the whole machine connects. But, when they get to the end of their journey and they get the cheese, suddenly there's a new set of problems, which is having a bunch of money. Um so, as funny as that is, that is challenging both from a psychological standpoint, but also uh it creates a whole new set of administrative needs. So, we've developed Ascend Interplay, which is a multi-family office. Um the reality is it's very selective about who can slide in, but it manages assets for ultra-high-net-worth families, typically entrepreneurial background, um and helps them manage the entire estate top to bottom. How this kind of dovetails into the mission is that I have a firm belief that the things the opportunities to invest that actually generate the highest yield are usually the opportunities that create the most social value. So, if you create value for society, you make more money. Here's a Here's a bringing that kind of abstract phrase to life concept. If you're investing in a real estate fund that's going to buy a property and pay down debt, you're going to get like a 15% net IRR. If you find the real estate fund that buys the property, increases the standard of living of the tenants by renovating it, and they found some arbitrage to actually add social value, and they pay down the debt, you're going to make 22, 23, 24, 25% net IRR. So, I believe there's this relationship between the top performing managers and the impact they have. And so, by channeling capital into those vehicles, you're not you're it's actually one of the few you know, capitalism doesn't always work. This is one of the places where it does, where you're putting money into the hands very capable hands to go improve society um and generate wealth. So, that's the four sides of Sandhill Play managing assets um for individual families. So, but those are the four pieces and they're all kind of in service of helping entrepreneurs uh drive social value. The thing about Interplay that I'd I'd layer on top is because our objective is to build with longevity, we're not trying to um build a firm that either gets retired when I kick it or um you know, fades away and I'm maximizing monetization in the short or medium term. We are very obsessed with quality over quantity universally. So, our venture fund, for example we don't manage the largest funds but we've consistently been a top performing product. Our incubator, we work with very few companies but we're really hands-on and really supportive cuz we're trying in all of these different categories to have a 100% success rate. Same with our foundry. Um there are studios out there that are pumping out as many companies as possible. There's nothing wrong with that strategy if you're trying to maximize how much money you make but we're not. We're trying to have a 100% success rate with the companies coming out. Now, we want to achieve that but we've designed every element of our process to go for that and the net result is we do way fewer companies than we could. But, the the hit rate should be higher. So, everything is kind of tooled towards this quality over quantity or speed uh with the hope that we build something lasting that will continue to support the market. So, I've heard this, you know, story a few times. And it's always refreshing to kind of hear and be reminded of the entire flywheel effect that you know, really from start to finish from, you know, kind of the boundary concept all the way to, you know, raising capital the next round and then ultimately having the the exit and having the resources of the family office. One thing I've noticed about you and the relationships that you build, it's really about making sure there's alignment on the relationship and those relationships are you know, can stand the test of time uh cuz it's no fun being in business with people you don't like. Uh and I think when you talk about quality, that's one thing that you you think of uh and it comes up as a common theme. Uh which, you know, I feel we're aligned and that's why our partnership has been uh pretty successful to this point. Um so, you know, Interplay as a ecosystem, uh it's pretty massive in terms of just the scale of all the employees that kind of come under the umbrella of you all the different entities that you've founded. You've had multiple exits. Uh you kind of talked about where you're digging in, but you didn't really talk much about some of the successes that you've had uh at Interplay and to maybe just educate the the audience. Uh maybe speak to some of the wins that you've had uh that you feel were most notable. You know, it's cool. We're 13 years in the in the building this firm uh and it takes 10 years to have an overnight success in ventures, we all know. So, we've been at it long enough where a cool moment has happened where we've kind of had wins in every element of the business, which took time. And when you start anything in entrepreneurship adventure, it starts out with you believing in a vision and a hypothesis and then it takes a decade to find out if you're right. So, um venture funds a lot of companies that have gone through that have done really well. Um the most notable ones are going to be some of the earlier investments because they've had the most time to mature. So, our kind of angel portfolio before we raised our first outside capital included Warby Parker, Coinbase, Coursera. Um we've since gone on to invest in I want to say a dozen other companies that really look the part of really breakout companies. Um and so and those keep coming. Like we've got uh companies that we just invested in last year that have just hit the inflection point. And we're looking at them and saying, "Okay, it's either going to go public or it's going to be a big big exit." But the um we made probably set something to the tune of 75 investments out of our venture product. We do about 8 to 12 a year. Um and I would say historically the hit rate is one in five, 20% uh of the investments turn out to be breakout companies. So, the list goes on. On the incubator side, uh we've had um we actually did our It's an interesting thing cuz the incubator has not had external capital historically. Uh and so we never really ran the math on the performance of the group until recently we took in some outside capital And uh we ran the numbers and it looks like a top top five 10% performing venture fund. We've had a handful of exits come out of it. Um most notably one was earlier this year. It was one of the first companies we incubated, a company called Jackpocket, which we sold to DraftKings for $750 million. That was a big outcome. Um and the team over there we we deserve none of the credit. The team over there did everything um under the leadership of Pete Sullivan who's a total beast. But they it it's a it was a great one of a handful of great wins on the incubator side. And again, when we're taking these incubator companies, these are companies that typically have a product. They're five people. Maybe they've raised half million bucks. And we get we we like to call ourselves a interim co-founder. We kind of get embedded in the business. We don't want to be in charge. We don't want any governance. We're just trying to de-risk the whole thing. Everything from the accounting's up to the strategy's not right to the messaging isn't good. And the goals when they come out of that program, they're set up to succeed at the business level. It's not about fundraising. Fundraising's part of it. Um we're trying to make sure it's an awesome business. Awesome companies raise capital. And so it's going towards the core core fundamentals, the core principles of the company. On the foundry side, um I want to say we're just shy of 20 companies that we've started. Uh the first 11 companies we did were services for startups. And I think we safely built one of the largest platforms to help entrepreneurs operationally. So this included commercial and health insurance, marketing, leadership training, accounting tax CFO, software development design, business process outsourcing, law, and others. Um and obviously notably capital raising with the people over at Thunder who are killing it. Um uh we have sold five of the 11. And a couple of those outcomes were pretty substantial. Uh and what was interesting, so we sold um Founder Shield to Baldwin Risk Partners, a public uh commercial insurance brokerage. And we we sold um DevSpark, which became Spark Digital, to Intive, a private equity roll-up of software development shops. What we think is pretty cool though, is with this batch of companies the way we architected the process was to focus on building companies and funding them through revenue. So, it was exercising a different entrepreneurial muscle. We bootstrapped all all 11. So, we've we've had a we've had goes at starting companies and revenue funding. We've had goes at starting companies getting outside capital square out the gate. Um you know, some of the major venture firms are investors in some of our recent foundry companies. And so, when you go through all that, it's it's for us it's very intellectually interesting. Because when we identify something that needs to be solved, we then reverse engineer to the proper solution and reverse engineer to the proper financing strategy from that. The financing strategy is not a default one-stop shop. You should raise venture, which actually is like a core theme of the book I wrote a million years ago that venture capital's not for everybody. Well, let's talk about that. So, you talked about the bootstrap, talked about fundraising. You know, you've had some great successes, which you know, I'm glad you're able to to kind of speak to those and you know, share some of those names. But, you many years ago wrote a book called The Fundraising uh where you help founders kind of figure out you know, how they should go about fundraising. And a lot of it still applies today despite, you know, technology changing, the market's changing uh you know, a little bit, but you know, can you speak to some of the key principles uh of the book and and kind of the key things that maybe are different, if any? I think the most interesting insight from the entire book is whether or not you should raise capital. There's a diagram I created, a framework, it's a two by two because I'm an ex-nerdy consultant that has is now taught at some business schools as part of their core curriculum for around entrepreneurship adventure that talks about when you should raise capital. And so, if you're interest if you're out raising money and you know, your default knee-jerk reaction was I should go out and raise from VC, stop. Read the first 30 pages and decide whether you should or not because there's a lot of companies that should be bootstrapped. There's companies that should raise from angels only or family offices only. And then there's some companies that should only raise from VCs for subsequent rounds. Maybe you get off the ground with friends and family. And knowing which side of the line you're on, which is objective, it is knowable, uh is really critical because if you get that decision wrong and you should be bootstrapping your company and you raise a VC, it will probably kill the return to you as a founder. It'll eat it up. If you should raise VC and you raise angel or not enough capital, you're not going to win the race. So, knowing which strategy you're supposed to be in is as port is as important as knowing what problem you're solving, what product you're building, and how big the market is. So, this book is designed to help people figure that out through a fairly simple kind of two-by-two diagram and then it runs through a bunch of scenarios. How this goes wrong if you put yourself in the wrong quadrant when you belong in a different quadrant. And I give you some horror stories around how this can screw you up. So, this is I just call this like financial like your capital strategy alignment, right? And so, we talked about those service companies who didn't raise any outside capital. That was the aligned strategy for those companies. And I think every business has a is a bit of a fingerprint. They've got a unique set of characteristics. And you want to then go match how you build the company, the team strategy, all the pieces, including the financing strategy to match the fingerprint. So first of all, if you're not raising capital, this is probably the worst book ever to read. Um I would argue it's extremely boring. I'm the worst book promoter ever. Uh great, but if if you are raising capital, it's probably pretty useful. So uh the context on the book is that I started working in VC in 2006 and was learning the ropes. And there's no educational program for VC. It's been an apprenticeship business. Uh you've got the Kauffman Fellows out there, which is one, but it's hard to get into. Not everyone gets into that. And there's a lot more VCs than go through the Fellows program. And so everyone's learning on the job. And I was, too. And I came in kind of with this consulting {slash} entrepreneurship background and was learning drinking from a fire hose, learning a ton through the apprenticeship construct. And what I found frustrating on day one of being a VC was that entrepreneurs came in to pitch and they didn't know how to speak VC. They were speaking entrepreneur. And it's the same concepts framed differently. There's a different lexicon. There's a different way to communicate. The fundraising materials look different from the the documents you might make for internal management. And so my objective as I was learning was to write piece by piece what I was learning and make it make it transparent. And I had the belief that if we illuminated the fundraising process even from the VC side, it would be better for everybody. Entrepreneurs would put their best foot forward. They'd be presenting their company in the language that VCs are looking for. Some companies were straight up getting dinged just because they framed it improperly. And VCs would see the best version of each company, which should help elevate the best opportunities to the top. So, I believed it was a win-win. And so, I spent 5 years uh my first 5 years in venture, three times a week, writing a blog post about one piece of the chronological narrative of how to raise capital, from beginning to end. And uh I didn't plan to make it a book. Eventually, uh I was getting This was all on the web, and a lot of people, I guess, like to read paper. And I was getting a lot of requests, and I got lectured by a published author to do it. So, I eventually put it together as a document, a single book. Uh and that, I think, was 2010, 2011, and it's called The Fundraising Rules. Now, it's written kind of the way the Boy Scout Handbook is written. You don't need to read it cover to cover. It's got a painfully detailed um uh table of contents. So, the idea is you can say, "Hey, I'm at this stage." And it's all in chronological order. I'm going into this meeting. What are the do's or don'ts? And you can flip through and read three pages and kind of know the gist of what's going on and how to think about it. And how to specifically answer certain questions. When a VC asks certain question, there's a language they're using, and it's a little coded. And they're looking for a certain answer. And I think a translator is a good thing. Both parties should know what they're saying. So, um that's the basic basis of the book. It's supposed to be this handbook to help people kind of navigate step by step, you know, wherever they are, they flip to that page, read that segment. Quick plug for founders looking for an edge raising capital. Companies on thunder.vc have gone on to raise over a billion dollars since joining our network. It's absolutely free. Just go to join.thunder.vc to get started. And if you leave a comment on this video down below with your company's name and the problem you're trying to solve, you'll be itching to win a free coaching session with me. Okay, that's it. Just comment down below. Now, let's get back to the show. I feel like when you go through these talking points and and having read the book, um it's that piece right there where you talked about the most important part being should you pursue venture. And I often have to stop countless founders from pursuing a a channel that just is not a fit for that. And there's so much you know, and you can speak to that probably this like the early days of your career, you know, early 2000s, you know, we came out of the dot-com boom, but still venture was pretty nascent uh in the grand scheme of things as an asset class and as a point of capital to invest uh to founders, but now it's mainstream. You know, everyone knows about venture capital for the most part. And now it's got sex appeal and you know, it's like a point of validation, so founders feel that rather than chasing customers and revenue for validation, they go and chase venture capital, which often leads them to a pretty, you know, dismal outcome. And uh when they could have been wasting, you know, spending that time towards building as opposed to chasing capital. Uh so, I find, you know, if you haven't or you started raising or you know, to founders that are out there like that's what a good book to start with, but it's a a key thing you need to ask yourself is do you really qualify and do you really want the strings that come with, you know, venture capital. Um Jason, I go far enough to say most companies shouldn't raise venture capital. Most? Most. Yeah. So, if if you haven't thought about the market that way before, if you've put venture capital on a pedestal, which I get, it should be, um because it does correlate with the biggest outcomes in most cases. I get why that's sexy. It doesn't mean it's the best thing for your business. So, the key is to stop and really look in the mirror and be open-minded. Um by the way, one of the scenarios in the two-by-two, one of the quadrants, is shut the company down. Don't build it. So, there's also that getting in touch with reality when it shouldn't start a viable business to begin with. Now, like the the pet dating apps, you know, I mean, cer- certain business models that just, you know, don't need to exist and/or be funded. Uh sorry if you're building a pet dating app. Um Sorry, not sorry. Um you know, so and and that's what I think is is important to kind of touch on and it's just founders um you know, just need that exposure. They need to kind of know what options are really out there for them. And when you look at the stats, I think last I looked at it was like 150,000 companies a year act- actively seek capital. But only about 4,000 receive venture capital. Yeah. So, when you think about the statistics, it's just it's a it's not in your favor. Right. And well, and also, some chunk of those companies shouldn't exist. Yep. Some chunk of chunk of those companies are great businesses that venture capital will hurt and because they don't fit with the model. It's not aligned. And so, it's just about knowing who you are. Um there was a guy who part he was one of the many uh bumps on the journey of kind of seeing this framework. And I remember he was an angel investor and was sitting in a room with VCs and I could feel all the VCs judging this guy for not having a great business and they were thinking less of him. His company was doing $5 million in revenue, which in the VC landscape is tiny. It's basically a failure. You got to keep innovating and trying to figure out a way to grow and he wasn't growing. $5 million in revenue. But here's the thing. He owned the whole business. And they had an 80% EBITDA margin. He drove a Maserati. So, tell me if you want or not. So, you know, it's all about finding alignment. I love how you associated success with a Maserati. I don't know. That's how I got Um Yeah, and that's the thing is it's like, you know, knowing what is actually on the table for you as a founder and you know, pursuing the right options and and not taking necessarily the the external validation. But also look at the stats, like, you know, look at what's going on in the industry you're measuring and just, you know, decide whether or not that's a a path for you. When we talk about kind of your your background, so we're talking about what founders should be doing to raise money, but you also run a fund and you're you're kind of in all the positions. You're advising countless companies on, you know, bootstrapped or you know, raising venture, private equity, uh but also you are raising money for your fund. You know, what do you think are the differences from when it comes to raising capital being a founder versus being a GP? I think it's actually pretty similar. Although, I would say for um venture fundraising, it's a little bit of a longer dating process. You got to you're building longer-term relationships and the relationship on the back end, um I don't know if it's necessarily longer in tenure, but it's expected to be multifaceted, where people will kind of partner up across multiple funds, whereas you're not typically necessarily partnering with an entrepreneur across multiple ventures. So, it's a bigger courtship and a longer marriage in some regards. Um but there's a lot of parallels. It's a lot of parallels about communicating clearly. It's about having a real strategy. Uh Uh, it's about being an honest actor. Right? Um, it's about being realistic. Uh, it's about being transparent. It's all the things people are looking for in partnership. And partnerships are hard dimension of business, maybe one of the hardest. And it takes decades. I feel like I've I've learned a, uh, you know, amazing amount in the last, you know, 20 years of this. And I'm still learning how to partner with different people, with different styles, different expectations, how to get ahead of issues before they exist. How to over-communicate. These are the foundational things of having good and healthy relationships. And relationships are kind of the glue of us building things as people. We do things in groups. So, uh, there's a lot of parallels. Yeah, and I've seen that as well. I do feel that reason for a fund, uh, believe it or not, like it's as a founder, you're, you know, you got that one thing you have to think about and that one thing you do, and you raise for that one thing, but with with venture funds, there's you know, the competition's pretty fierce, in my opinion, in terms of where capital gets allocated. Uh, and that long-term relationship, it can't be like a quick, decisive bet. There's just, you know, you can't grow traction on a venture fund, you know, in a month or two. You don't have month-over-month growth really with a venture fund, so it's hard to really dictate or articulate your performance. Um, so if I'm putting it back, putting on your VC hat, when looking at companies, uh, and particularly for Interplay's, uh, Series A fund, you know, what do you ultimately look for? What what's a standout company that you think will ultimately be, you know, one of five that ultimately break out? Yeah, I mean, we obviously go into every investment thinking it's a breakout company. And we get it right 20% of the time. Uh, but we do have a really uniquely high success rate within the portfolios. So, that's one of the things that's been a little bit of a key our success as on the venture investing platform is our portfolio construction has a higher concentration of outcomes than um is common where it's just all dependent on the power law. And I think the reason why that happens is because we tend to invest in companies that have real fundamentals. They have an economic engine in place at the time of investment. So when we write that check the companies have strong revenue revenue growth healthy gross margins um a real LTV CAC ratio, good unit economics top to bottom. They're typically default alive. Uh large quantifiable adjustable market, tier one team, tier one co-investors. We're kind of looking for the whole economic engine. And so by the time we write that check you know, we've underwritten it to a 10x, but if we get it wrong, it's not as though the wheels are going to fall off the car the next day. It just means we usually were wrong that the growth trajectory wasn't 10% a month, it was 3% a month or 5% a month on average in hindsight. And so we still tend to get outcomes within that group. So what a couple ways to frame what I'm saying we invest in companies with real economic engines, you know, so it's generally B2B. If you square the companies up next to each other, I like to say one would look like an ice cream truck, one a big rig uh one a golf cart. If you pop the hoods, they all have the same engine uh beneath. And so another way to frame this is we invest in math. We actually look at the fundamentals and we're looking for math in addition to the great ideas and great founders. Um but the math is a meaningful way to find signal in early stage. And it's not always available in early stage. Sometimes the math isn't ready yet. It's still in production. So uh that that's a little bit of our nuance is we like to invest where the math is visible and quantifiable. When a founder comes to you, how do how do founders ultimately break through to your team? So, you have you obviously you're on the I see the investment committee, but you have Mike Rogers running a lot of the the data shows partner there. But, how how do you founders break through? How do they get your attention? And what's that relationship life cycle like? Are you quick to act and you meet them for a month and you're in or you build a relationship over years? Like what what's that typical process? So, this this answer is really different across venture firms. I'll answer for us, but I just want to flag that it really varies a lot and there's not a right or wrong. Uh for us, we will invest in new relationships in a pretty agile way. We really know what heuristics we're looking for and when we see them, we're on it. So, we certainly love to have longer-term relationships, but it's not a requirement. So, someone could show up in our inbox uh typically through um they can come in and literally just hit enterplay.vc/engage. We have an online application we make everyone fill out even if we already know them. And the reason we have them fill out that document is it helps make sure we get the full data set to run an initial evaluation and we're not missing anything because when we were there were some efficiency gains to to hit there. We used to just have people send us a couple of bits of information, we'd meet them, then we'd ask oh yeah, we forgot to ask you about X, Y, and Z, and then we'd find out it's not going to be a a fit and they wasted time and we wasted time. So, just get everything up front. We look all at all of it thoroughly. Um and the entrepreneurs you know, that we end up investing in, they tend to come in literally through the website, they tend to come in through other entrepreneurs or VCs that we're friendly with. They tend to already have a term sheet from other VCs. Um and then they reach out to us. And you know, one of the things that we do is we don't lead deals. So, when an entrepreneur is putting a kind of a syndicate together, the team that's going to invest in their company in this round, they're taking five to 10 people into the round. Usually there's two leads. We tend to sit behind the lead and write a larger follower check and be a uniquely valuable partner to the entrepreneur who doesn't lead the deal. So, don't sit on the boards. We're like the private consigliere where the entrepreneur can call up. We're all entrepreneurs by training. Um we've got this uniquely large support platform for entrepreneurs uh in general, but particularly uniquely large for support position in the cap table. Um and it just ends up being, I think, a pretty attractive narrative for founders. So, they'll get the term sheet from lead, and they'll very often reach out and try to get us into the deal. Or we'll see it first. And we can typically get through diligence more rapidly than a traditional venture fund. I think in large part by the uh by virtue of the fact that we don't take board seats. Board seats just take up a lot of time. So, when you're not spending 45 hours a week in board meetings, and you see a company you love, you start diligence the next day. And you know, diligence, it's 10, 20, 30 hours of work for uh people sitting who are, you know, really busy with other boards, that might take six to eight weeks to get done, maybe 12 weeks. We can get that done in a week or two or three. So, we run through it. So, I I think very often we'll end up committing to maybe half the companies we invest in, we'll end up committing before anyone else has committed to the deal. And we'll commit saying, "Hey, pending the lead and the terms, we're going to participate." And they can walk that entrepreneur then walks into a bunch of VC meetings saying, "Hey, Interplay has finished their underwriting. They did full diligence. They spoke to customers. They did the whole thing. Uh they're in if the terms look good and they like the lead investor, do you want to take the meeting?" And we'll introduce that entrepreneur to a bunch of other uh well-known leads that we invest with, which usually gets them right into the meeting because, you know, we have a friendly who knows we've done the work on it. So, that's kind of our approach to it. Uh and um the speed is a little quicker than average. And uh but we still do we're we're putting companies through the paces, unfortunately, for the entrepreneurs. I mean, entrepreneurs will say they love that because it'll make sure they have everything tidied up, but we've been on both sides of that. I've been through diligence. It's stressful. It does make you stronger, but it sucks. But we need to do it, so. what I want to unpack a little bit. Like, you know, what's kind of some of your secret sauce uh or not secret or secret uh with diligence. Like, what are some of the things that that you look at that ultimately influence your decision? So, we're looking across the entire stack of qualitative and quantitative considerations. This list usually for in 80% of the things that need to be evaluated, they're identical across companies. There are always nuance dimensions to each company that are more bespoke. I have a background in diligence. It's actually what I did before business school. I did um diligence on M&A transactions, did about 60 deals where uh I would represent IBM and private equity firms. And I was on a team that would parachute in and try to turn every rock over of the target company that was being acquired. Couple things I took from that that have been invaluable. One, the diligence set of things that matter usually comes down to three things. Doesn't have to be three, it could be two or five, it doesn't matter. But of the 50 things you need to check, you check all of them, but there's two or three things that usually are likely to kill the opportunity. And if you focus on those first, you can save a lot of time. So we try to identify up front the reasons why we're not going to invest in this particular thing that we're excited about. Why won't we invest? Well, what if A's not true or B's not true? And we'll go deep on those first. Um the second thing I thought was really unique is when I was at a consulting firm, we had to prove the value we were creating. So we're charging big fees to our clients. And so uh my boss would say, "Hey, call 100 customers and here's the questionnaire." And the reality is I'd literally sit in a room for four days cold calling 100 customers and it was mind-numbing. Asking the same damn questions. But something magical happened with one, two, three out of those 100 that we'd call. 97% of the time, they'd hang up on me or say yes or no and they'd give you stock answers or they wouldn't give you any insight. Every now and then, you bumped into somebody who was living the experience that we were trying to understand. They knew this product set in and out. They'd been using these products every day for the last 20 years and they could just talk the talk. And when they'd open up, you could see into the business opportunity in a way that was unique. So when you get an expert on the call who's so deep in in space and willing to share, something someone is close to it, whether it's farming equipment. You and I can read about that all day. There's someone who's been living farming equipment for 20 years, and they're going to know what's up. And so getting those conversations is invaluable. So, that's kind of the X factor in addition to identifying the things we need to target, it's finding people who are living it. And that is a niche. Um and that requires us to have a huge network, which we've been developing and we have. But to really do the work of scrubbing the network and making the calls until we get someone on the phone and you know the difference between someone answering the questions and someone explaining the market to you. It's a good way to look at it. And so the validation that you get from actually talking to someone versus what a founder says their market is or their TAM SAM SOM, which helps, gives some indication, but to kind of really understand the customer buy-in, uh that's that extra step that you're going in your diligence, which can help validate your decision to move forward. And I feel it's it's funny that so many people are afraid to do that. Whether it's reference checks on hiring or reference checks on founders or reference checks, just generally it's reference checks and putting yourself out there and picking up the phone and trying to get someone on uh to tell you kind of the real truth. Um and so from an LP perspective, it's great to hear that you're actually doing that homework, but from a, you know, founder perspective, it shows you're actually you know, committed to you know, learning and making sure you're making the right decision and not just taking their word for it. I From a founder perspective, I'd be like, "Oh, yeah. Call Yeah, here's all the names And you learn stuff, by the way, that actually helps us help the founders later. The stuff that usually always checks out is the academic view of the market. Yeah. This is better than this. This is a better price than this. But there's the human dimension that you can't get from the academic studies. I'd rather play golf than upgrade my software. That's a That's a market killer. That happened to me. I'm one deal. So, you have to understand the illogical behavior. So, as we you wrap up here, what would be your parting advice for founders that are actively raising venture capital? Um there's a lot of content on this. So, people ping me and just drop the email saying, "Hey, what should I do?" Um I've packaged up most of my content, so I'll give you a couple of pieces. But, um the book uh is candidly super useful. It's on Amazon. It's the fundraising rules. I should probably change I think it's $10 or something. I should just change the price to a dollar. I just haven't logged in in 10 years to deal with it. Um the uh I also made a video, which I think is a nice supplement, which you can find on mpd.me, which is my blog under talks. And there's a talk I used to give right after I produced the book, where I was doing a speaking circuit around the universities. And it was kind of the supplement to the book. If the book is how to play chess, like what the rules are, how the pieces move, this talk is kind of how to get to checkmate quickly. So, worth checking that out. An hour, 45 minutes. Listen to it on 2x, whatever. But, it's going to give you the human dimension of how to create FOMO, how to create dynamic, how to signal in a subtle way that is in VC speak, that will get VCs to move more aggressively. So, I think that video is gold. Um worth checking out. Uh but I would say the the fundraising advice I'm going to give everyone is not about fundraising. Build a great company. Build a great company, a business with good fundamentals. Find the fundraising strategy that matches to the nature of that company. And then go do the dance. And the dance is a series of tactics that are learnable. Right? It's The dance is knowledge. Right? It's There's a hundred little things you got to do and you got to do them well and you're going to get to the outcome you should get to. But the outcome you're going to get to that you should get to is a function of how great the company is. So, focus on that. A lot of people skip that. They skip right to how do I get capital cuz I think capital raising capital is a measure of success. It's not. It's just an ingredient. You got to make a cake. Congratulations, you bought some flour. You got to make a cake. Uh I think that's well said and I think that's one of the things that, you know, it's goes back to the first conversation we were having earlier about, you know, whether you're bootstrapping or if you're truly venture backable. Focus on building a great company. You'll have the the staying power to either attract the capital or to, you know, be profitable and just grow the business in and of itself. Um Mark, it's been great to finally have you on the podcast. Uh you know, I've been I think it's uh we're about a year and a half into the podcast and just occurred to me. I was like, "Yeah, I should probably have Mark on. It's been a while." Yes. Uh but it's great to to have you on share your insights. We'll make sure to link to the the book you wrote about marketing and uh and the link to the presentation you just mentioned. You know, down in the show notes for anyone that might be interested in picking up some advice from you. And uh yeah, if if people want to reach out to you or connect with you, what would be the best way for them to do so? Just uh you can get me on Twitter. You can get me on LinkedIn. We check all of it. Um but the great thing about Interplay is it's kind of an open door. You can go to interplay.vc. There's a big red engage button. You click on that, you submit stuff, and you're going to end up connecting with the right people in our organization and having a conversation. So, that is um that is not a dead end. That is an open door. Yeah. No, it's a it's a great system in terms of how founders can get in. So, it's literally just fill out you fill out a form and it navigates you to the appropriate questions to get the appropriate help and the response from the overall Interplay team. So, it's well-designed. I don't see that very often. Um well, awesome, Mark. It's been great having you on. Appreciate the time and uh look forward to getting this out to our audience. Thanks, Jason. Thank you for watching today's episode. As a reminder, I'm your host Jason Kirby. I have built and sold multiple companies with over 135 million in transactions as either a founder, operator, or investor across multiple industries. I'm currently the managing director and founder of thunder.vc, where we help companies and founders at all stages navigate what capital to raise and who to raise it from, and help improve companies' odds of raising capital. If you need help, reach out to us at help.thunder.vc. If you liked today's show, please share with your friends, give us a like, or a comment down below. As a reminder, this show is published weekly. To get notified of new episodes and our newsletter, be sure to go to our website at join.thunder.vc. And if you sign up today, I'll send you a few freebies on how to negotiate a term sheet, how to get a free list of relevant VCs, and much more. That's it. No more shameless plugs. Thank you, and see you next week.