Why are startup exits down if it's not the economy?

EP 125 - Glenn Argenbright - Final Transcript English (US) 00:00:00.067 — 00:00:43.002 · Glenn A I think that the reason exits are down, I don't think it has a damn thing to do with COVID. They're not as worthy of acquisition, to be blunt. I started hearing them tell founders you didn't need a business plan. Dumbest effing thing I've ever heard anybody tell anybody in business. Worst advice ever. I've got two companies right now in my portfolio. One of them's worth $100 million, one of them's worth a billion dollars. The two founders will make the exact exact same amount of money or awful close if they were to exit today. My first exit, the lowest paid employee in our company, made three million dollars. Absolutely transformed her life. I wanna be a deer on the highway in front of the truck. I want 00:00:42.291 — 00:00:42.855 · Jason Kirby Interesting. 00:00:43.002 — 00:00:47.085 · Glenn A the I want them to have to slam on the brakes. They have no choice. 00:00:47.924 — 00:01:15.561 · Jason Kirby Everyone, welcome back to $100 million exits. Today I have Glenn with us. Glenn, you are a 14-time founder, nine-time exited founder, three IPOs, multiple turnarounds, and now you have a fund under Quake Capital that has over 300 million in AUM. You've been through quite a lot over the last 30 years, Glenn, and I'm excited to have you on the show. 00:01:13.167 — 00:01:15.529 · Glenn A Thanks. I'm excited to be here. 00:01:16.463 — 00:01:56.436 · Jason Kirby yeah, you and I have had a couple conversations, but I I think what really stands out, what I want the audience to understand is you built and scaled a company during the dot-com boom, took a public, raised over seven million dollars in an IPO, but you're also deploying capital, actively engaged with companies, potentially taking on a management role, in today's economy and today's market, what have you seen shift in the last thirty years as a founder? what's been changing from the peak IPO, dot com craze to what we're experienced with the AI boom? Loaded question. 00:01:54.236 — 00:04:05.330 · Glenn A Wow. So many things. yeah, honestly, part of the challenge for founders navigating is capital. I don't mean getting capital. capital complicates things. So when I was coming up, my first big IPO, which is a story in and of itself, how we got there. We started as one thing and we became something else entirely. And both of those things were actually quite successful, at one point. but coming up we we that ended up being almost a five billion dollar company. And we raised less than a million dollars to build that company. At a time when equipment, by the way, a server cost a hundred thousand dollars. as opposed to now where it's a few thousand dollars, maybe as much as ten if you got crazy. But you had to put in infrastructure, raised floors and cooling systems and all kinds of stuff. So wholly different world, but w there wasn't access to capital, so you had to find ways to bootstrap stuff. Let me tell you why that was a great benefit though. You didn't have all the same pressures and requirements and and honestly just people pushing you maybe in a certain certain direction that you have now with venture capital, which is what I've been doing the last seven, eight years. and so it's just a very different set of of pressures. And I don't just mean pressures like stress. pressures like pushing you in a certain direction in your business. venture capital does not give you money to sit on it. They give you money to deploy it and use it and grow it. And so you're forced to move at a pace. And don't get me wrong, when I was coming up in Silicon Valley in the nineties, we were moving at a ridiculous pace, but we would we didn't have outside forces to do that. We were doing that because opportunities presented themselves. We needed to get ahead of them. We weren't artificially chasing pace. And that's what a lot of founders are up against now. The other hit thing I see that is just wild to me is there have been a lot of there have been a lot of bad advice. 00:04:05.330 — 00:04:05.602 · Jason Kirby Yeah. 00:04:05.437 — 00:08:39.857 · Glenn A pushed out into the market. And we again we didn't have a lot of that. We didn't have a whole lot of people. There wasn't a whole lot of roadmaps, for one thing. there weren't a whole lot of people who'd built these edgy, small bootstrap businesses. and most of the companies were major engineering undertakings prior to the nineties in Silicon Valley and maybe a little bit into the seventies. But most of it was pretty significant engineering undertakings. This is when you started seeing seeing guys in a garage start to build stuff. And so there wasn't a whole lot of people to go talk to to give you advice in any event. You had to muddle through it. Maybe you'd get lucky, meet a few people. Now there's all kinds of advice. You and I were talking about that in the green room. There's all kinds of stuff going on that people are hearing. But I think w some of it's really, really bad. when I got into Venture Capital, one of the first batches of companies we worked with All these founders were telling me how they'd gone and met with some very big funds. I'm not gonna name names, but I'm just gonna tell you some of the biggest brands in the valley and well, just i really on the planet, but and some of those funds had told our founders that you don't need to come up you don't need a business plan. Because we don't need it for to to make our determination about investing in U.S. Like what in the hell is that venture fund thinking? The the business plan has nothing to do with the venture fund. It's for the founder. that's just horrible advice coming from, the industry. And and the founders, they have great pressure to listen to that industry 'cause they want their capital. And that's just terrible advice. And that's I've seen the evolution of that over the last eight years while I've been at Quake. I've seen the evolution of bad advice. And it's manifesting into some really bad behavior. I think j in general across the old industry. I don't want to throw founders under the bus because I'm I associate with them. I I believe myself to be one, so I don't want to throw But when I was coming up We didn't have near the level of distraction. I don't just mean stuff in your environment. we really weren't being pulled with all the emotional charge that we are now. So when I watch founders, I'll just share with you, Jason, I talk to probably forty founders a week. That's my portfolio of three hundred and thirty-two companies, well over seven hundred founders. So I'm talking to a lot of founders every day. And almost every single conversation now, I what I'm really seeing is how much distraction they have. And they're having a real hard time keeping focused. If I was gonna impart one thing that I learned coming up, through this journey and seeing what I saw, fundamentals of building a business, very limited outside dis l set of outside distractions, and what I see today. Founders generally should have three or four things. I I I don't I don't like generalities, but I'll just say any leader typically has three or four big ticket items that they're working on. They might have a hundred. total but they have three or four that are really on point for the mission. And what I'm seeing now is that they're not staying on those three or four items. What's happening is there's a lot of emotionally charged elements. somebody posts something negative on X, somebody says something at a conference, whatever it might be, the team is elevating these emotionally charged items to the founder or the CEO. The founder or CEO is reacting to those. And then that perpetrates a cultural change. What happens now is much like I'm not gonna say dog training, but basically what happens is your team realizes that if I bring you something exciting and multi and emotionally charged, you will engage with it, meaning you will engage with me. And so my whole demeanor and way of working with you changes. I start to just bring you the new shiny thing. And I focus on it and you focus on it. And so the whole company lurches to each new next item instead of those three or four big mission tickets. And That's a huge change and not a good one, by the way. that's killing business. I actually think Jason sorry to go off on a grant, but this one's personal to me. I think that the reason exits are down, I don't think it has a damn thing to do with COVID. I don't think it has to do with the economy. I think it's frankly because businesses aren't that they're just not as acquirable. They're not as worthy of acquisition, to be blunt. The big if you look in the market at the best companies, they're getting acquired. There are just a lot fewer of I know that's a harsh statement. 00:08:38.814 — 00:08:52.785 · Jason Kirby Well, it's also percentage wise it might be that there's so many companies now that got funded and have expectations of and A, but they're actually not worth what they think they're worth. And it drags down the average quite a bit. 00:08:52.001 — 00:09:17.823 · Glenn A Well, sure. And you've got the added challenge that a lot of those companies again have raised you you mentioned valuation. Well, how much were they there was a moment in time where there was a l free access to capital not that long ago. And so there were there's a big slug of companies that raised ridiculous amounts of money and we see many of those now coming off at l, down rounds or lower valuations because of it. So yeah, there's a lot 00:09:17.227 — 00:09:17.724 · Jason Kirby Look at the air. 00:09:17.823 — 00:09:49.477 · Glenn A you you you can never pick one thing, right? There's never one thing. It causes. But there's definitely some correlation between the caliber of businesses that we're seeing and the and the exit ratios that we're seeing too. And now again, I'm not throwing founders, I'm not I don't mean to throw founders under the bus. I think it's the ecosystem as a whole has created some really strange policies, for lack of better word, that these that it that everybody's operating under. 00:09:49.477 — 00:10:02.021 · Jason Kirby So I want to go back while we're on this topic. You mentioned, I forgot the exact phrase you used, but this artificial momentum or this kind of expectation that they need to I don't know if it's like the fake it make it or the you 00:10:01.499 — 00:10:01.994 · Glenn A Yeah. 00:10:02.021 — 00:10:27.031 · Jason Kirby you're trying to you're trying to make up momentum as opposed to just having a real business that's dragging you forward, and you're barely able to keep up and you have to raise money to keep up, versus projecting that this momentum will come once you give me money. And I'm curious, what examples have you seen of both sides? tell us about your business where you guys were basically needed money to actually keep up with momentum. 00:10:27.781 — 00:16:25.599 · Glenn A I so it there's always there's a joke that one of my favorite advisors to Quake has and he talks about trying not to be the don't be the CEO in the school play, in the high school play, right? Don't play the part. Be the and and you and I were talking about this earlier as well. Be authentic, right? To yourself, to your true self. I think from my perspective, looking at my background, I got very fortunate very early, Jason. I I ended up calling I my first gig, I had never raised a dime. Grew up in an agricultural community, had never been involved with anything like a startup, took over a company that that was originally a sports website. I'll give you a little bit of background. So I took over a company. I was a fifth employee brought in because I'd been an athlete and because I'd done some work in sports marketing. The CEO, founder of a sports website brought me in to restructure the business and take it forward. And that was a really good company. We ended up we were bigger than everybody but ESPN and CBS. We were bigger than Fox, Yahoo, Sporting News, all the other big brands. so we built that pretty successfully and then we figured out how to put an ad on the on the site. And we were one of the very first to ever figure out how to monetize. And we started calling around all our friends in the Bay Area. We knew all the names now. we all came up together. Excuse me, and That became, four and a half, five billion dollar Lehman IPO. The sub story to that is at some point in there, I had to go raise real money. Not not a lot. Again, we didn't raise a lot, but back then a hundred thousand dollars was an incredible amount of money to me back then, right? And I didn't know where to get it. Sand Hill Road didn't exist like it does today. It was there, but you couldn't go raise money like you can now. So I called I reached out, talked to everybody I knew, just like every founder today does. I talked to every founder that I could find. Most of them were much bigger. I'm talking big companies, right? I would go through every person I knew to try and get to a CEO. And somebody gave me the number of a guy in New York City and I called him. And I can't tell you exactly what he said because it was pretty peppery language, but he wasn't really thrilled that I had his cell phone number. But he took I would argue took pity on me. I was I was myself. I didn't try and be somebody else in that conversation. And this guy who ended up being he was the head of Lehman and American Express. So the head of Lehman Brothers basically gave me an opportunity to call a few of his friends and if any of them would take a meeting he would give me a check. So then I turned around and called his friends. And I said I said, Peter Cohen, who's the name of the guy, I said Peter Cohen said if I could get you to take a meeting, he'd give me a check. And so then almost as a joke, they were like, Okay, screw that guy. I'm gonna give you a meeting to make him give you a check. So I ended up getting meetings with every single one of the people he gave me a name to. And I ended up raising that original round. And and it's not like we're incredibly close, but without that initial If he hadn't taken the time and the engagement with me to allow that to happen, I'd have never been anything, Jason. And that all came about because I was who I was, not trying to be anybody else. One of the g I would say one of the superpowers I had coming up was acknowledging when I didn't know something. Doing it in real time. I I don't know, but I'm gonna go get the answer. I'm gonna go find out. That's a very interesting thing. We hadn't considered that. I didn't I don't never tried to be the guy who was like playing off that I knew something I didn't know, or playing off that I understood a concept I I hadn't even thought about before. So I think that was huge for me coming up and And probably is a good example for me at least of raising capital, I went right at it, authentically, in the dirt, doing just there's no I didn't have the I I think most founders, very few of them have a network. They have to build it. And there's no easy way to do it. 00:16:25.599 — 00:17:09.308 · Jason Kirby Well the only way is to start. And I think a lot of people wait for a a hand to be held out for them and that's just they won't succeed if that's their expectation. They have to grind, you have to knock on doors, you have to basically ask uncomfortable questions and open up doors that so many founders that make it did. So, one thing I want to talk about when you went through this kind of origin story, this is how you got your start, this is how you got to basically get a shot at the game. you have a lot of experience in the game, actually building these companies. What were some of the more like life and death choices you had to make? And what were the outcomes of those choices? 00:17:10.058 — 00:19:55.448 · Glenn A Yeah, so so let's take a step back on that same project for a minute and then we'll just look more broadly. So understand for that first job, I had I'd been married about a year earlier in Los Angeles and the opportunity was in the Bay Area. So I left my wife for six months, my new wife for six months to move to the Bay Area without her. She had a great job. She loved it. to take over a company in a field I didn't even I didn't even understand. Understand in nineteen ninety-five, ninety-six, not many people understood what a website was. And so I went up to the Bay Area to take over a sports website, leaving a job where I was making very well into six figures in the nineties. to take a fifty thousand dollar a year job with equity, which I don't even think most people understood what that was back then, to run a site in a company I couldn't explain at the time very well. That alone is ridiculous. Okay. I can't fully explain that to anybody. I what I would tell you is what I tell most of my founders, you can either be very spiritual about it or logical. Let me give you the logical answer. Because I have both. I I believe I'm a very spiritual person, but I'm also logical. The logical answer is when you're a young founder, you don't have a whole lot of wisdom, experience. you just don't have it. You haven't been able to build it. That's a superpower in and of itself. You don't know the realm of possible, so you'll try anything. you also though have you in order to be anywhere, you have to have great instincts. And you start it when unfortunately, the older you get, the further along you go, the less you listen to them. But when you're really getting started, you don't have a whole lot of other resource to draw on, so you draw heavily on instinct. So my instinct, some way, shape, or form, saw something there, and I took advantage of it. That's number one. When I got There, there was a big bold move, obviously. We took one of the top sports websites, absolutely, number three in the world, possibly would have moved into number two. never would have gotten rid of ESPN, but CBS Sports Line would have been in they weren't sports line, they were just CBS at that point. we would have probably overtaken them. And threw that away, basically, which by the way involved letting go a whole lot of people I really liked, which if you want to talk about the difficult decisions you make and the tough at the goal line terrible things you have to do, laying off people is the worst. And it's an absolute requirement and reality of being a founder. Because you will outgrow people as you grow with pace. You just it just is it is impossible to have the same team the whole way. 00:19:55.448 — 00:20:27.715 · Jason Kirby So I wanna talk about that because I completely agree. And I feel so many founders have this sense of loyalty to their original team and they don't make those hard choices and they wonder why they can't break the ceiling before you know the glass ceiling in front of them. what's what helped you come to the conclusion that you had to, let's just say, upgrade the team, make the hard choice, make the layoffs, upgrade. what what were the decision factors that brought you the clarity? 00:20:28.465 — 00:22:48.969 · Glenn A God, I it's wild, just hearing you even walk through it, it gives me chills and and I that's not hyperbole, it really does, 'cause it's such an emotionally difficult thing, even for me, and I did a ton of turnarounds, which meant I would come into a company that was well established and lay off half the people because I had that was the job. that's there wasn't a budget for it. And even then I felt it. so it's it is the most difficult thing. And by the way, founders should be loyal to their teams, but part of that loyalty goes to being successful in the business. it doesn't do you any good to protect one person to create or the whole company. To answer your question, how do you get there? Wow, I think for me, Jason, I got very and this isn't a particularly helpful answer, but it's the reality. I can't give a better one. I think in my first deal, obviously I had to lay off those people, but the ad tech business was growing so fast. We I think I mentioned to you at one of them one point you and I were talking on another day, and I think I mentioned to you that we about twenty percent of the web traffic online was going through our servers at one point. that's an incredible y you don't really have to know a lot to know that for going from zero to that kind of volume, regardless where the internet was. At that time, our growth rate was just unbelievable. So you you have two scenarios that I think unfold for you that make it obvious. In that case, we had one we had two businesses. You might have two divisions, you might have a product line, you might have you could divide this up however you want. But you have one thing in your business that is going so fast and is so obviously headed towards something special that you have in order to protect that thing, which is just so obvious, you have to make some hard choices somewhere else. That's one. The other one is you're in you're in despair, right? And you have no choice but to protect the organism. I was very lucky. The first deal I had, the first big deal I had, I had one wing of the company doing, going straight up. I didn't I say I laid those people off. What I actually did is I offline loaded that whole division. But in my heart I knew it was gonna probably flounder and fail because we were pulling 00:22:48.187 — 00:22:48.544 · Jason Kirby Mm-hmm. 00:22:48.969 — 00:25:02.913 · Glenn A killing the culture. We were pulling half of the culture away and I knew that that was gonna be detrimental to that entity and I felt like we could maintain with the new one. However, I think if you look at that, if we hadn't made those choices and every other time that I've had to make layoffs, if we hadn't made the choices, every other person that I was also trying to be loyal to would have failed as well. So when you carry somebody forward, you're not doing them it's really di I know it's It's like these are just hollow words, but they really are truthful. If you take somebody who's not in a good place, they can't do the job anymore. They were incredibly loyal to you, really good, there in the beginning, worked their way through, but now the company has evolved to a point to somebody that two things, they can't do the job and you couldn't hire the person three years ago that can now, okay? That you need now, that you can actually attract now. When you run into that scenario, you're not doing the first person, the loyal employee, you're not doing them any favors. You're gonna basically set them up for failure and the business as well, and you're gonna drag down the other two hundred people that are working in the company. You don't really get comfortable with that until you've lived through it, on both sides, winning and losing. and I'll just make a comment here. My first exit, the lowest paid employee in our company, the the smallest amount of equity in our company, made three million dollars. Absolutely transformed her life. Has come up to me many times since and said, This changed the life of me and my kids. My kids went to college. I've had other people who work for me after we did transformations and difficult times that came up to me six months later and said, I I can't believe I was able to buy a house. those are the moments you should live for. It's not about like Stop thinking about how you're gonna get rich. Live for those moments and you'll start to make really good decisions for the people that are around you. And by the way, that will work really, really well for you. If you can keep to it. 00:25:02.913 — 00:26:03.628 · Jason Kirby and th it's those kind of stories that I feel are so important for founders to really I was like digest and take into consideration because it it's so hard to see how these tough choices can make real impact. And the upside of upgrading your team. we have a client that we're working with right now. She's she was at 10 million, hit a wall, and she made the hard choices to basically lay off some of her key people that have been with her since the beginning. And basically because it just didn't have the expertise to go to 30 million. And then she Brought those people in, got to 30 million, and then those people hit a wall. And she brought in a new management team. And now she's gonna hit 100 million this year. And it's just so I just remember these gut-wrenching calls with her. Just like, Jason, what do I do? I I know we have so much more room to grow, but I just feel like I'm pounding a wall every time I'm working with them. And I'm just like, it's it's time to make the upgrade. 00:26:01.799 — 00:27:57.958 · Glenn A Yeah. And and what's crazy? Those people that I I I've kept good relationships with a lot of the people, probably most of the people that I've let go, which is crazy, but I have. certainly the ones that I worked with, not necessarily the ones in turnarounds that I did. But what's fascinating, Jason, and you might have seen this, is So if as those people go, two things happen. One, they develop experience over time, they get better. Okay, so they do evolve, but their networks improve. So this is a fascinating thing that happens. If you have exits, if you have success, you start to operate in different circles. You're invited to different things. You are welcome to talk to different people than you were welcome to talk to before. You can love it, you can hate it, you can think the system's all screwed up, whatever, but that's just the reality of the world we live in. So these people that were let go, if that company succeeds and excels, and their circumstances change, they now have that on their resume. They're now invited to go speak at things, they now have more capital, they run in different networks, everything starts to evolve. And that person when you see them five to ten years later is in a wholly different place. And so it actually works out for everybody if the company does well. It's just hard to see that at the moment. And and obviously it's it it it's not a joke. It's the worst I always tell people the worst day and I already know with every founder I talk to what the worst day in their business is gonna be. And and it really happens with success. It's the day they have to let somebody go that has been incredibly loyal, incredibly good, been there from the beginning or close to it, and it's gonna happen to every single founder who's successful. It won't happen to every founder who's not. Different problems. 00:27:55.903 — 00:28:29.344 · Jason Kirby Different problems. And so when you go through this level of transformation across so many different companies, tell us about a company that You decided that MA was the right side. So let's represent the the sell side. So a transaction that you're basically selling your company. Walk us through what was going on, before and after the decision to go and run a process, and walk us through some of the things that you experienced that, lack of better words, made it a bumpy ride to get a deal done. 00:28:29.344 — 00:28:46.694 · Glenn A Wow. Okay, so I'm probably a little different than some of the folks you might have on and talk to on this. I'm I'm basically an MA expert. I that that's that's a s snotty way of saying it. But I that's I I it's not 00:28:44.500 — 00:28:46.598 · Jason Kirby Okay. You can have an ego. 00:28:46.694 — 00:30:40.752 · Glenn A even that. It's that's my life. my whole life has been focused. Whether I'm any good at it is a is a different question, but I got a reputation for being an and A guy. So I got brought in to be an and A guy. When I would fix a hedge fund's broken toy, it wasn't just random. It was to sell the company many times to sell it to a very specific target. I need you to sell it to these guys because we couldn't get in their round. So we've got this crappy company over here. Can you make this something they'll buy so we can get into their round through the back door? I did that many times. so I'm not just an MA guy, I'm a targeted MA guy. And this W th there was actually an interesting transition. So I worked on MediaPlex early in my career, big Lehman IPO, all of that, fun, great. Made a lot of money. The very next deal I did was a ninety million dollar exit on a sl on a low Earth orbiting satellite telecommunications company. Who gives a crap? But it was it took me seven months. I was brought into the company. I didn't found it. I was brought into the company while I was waiting for things to come to a loc ups to expire and so on on Media Plex. And I wasn't running the company anymore. For I was kinda waiting to see what my next thing was and I came in And took over as a president of and A for this telco company that wanted to exit. It was only about a fifteen million dollar company when I took it on, sold it for actually it was less than that. sold it was under ten million, sold it for ninety and took about six, seven months to do that transaction. Why'd I tell you all that? Because I realized doing that time value of money calculation, right? Six, seven months, ninety million dollars. I was like, wow, that's a pretty good, you didn't have to sit here for three, four years. You could exit this thing. 00:30:39.560 — 00:30:40.558 · Jason Kirby Yeah. 00:30:40.752 — 00:35:55.888 · Glenn A No, it's not a Unicord, it's not a billion-dollar company. But I tell you, the other thing working on the VC side that's fascinating to me, I've got two companies right now in my portfolio. One of them's worth $100 million, one of them's worth a billion dollars. The two founders will make the exact exact same amount of money or awful close if they were to exit today. So I think a lot of times we've gotten into this, and I know this isn't the exact question, but I think founders have to be really careful when they're looking at this stuff. You have to evaluate how much time and energy it's going to take to get to unicorn. You have to evaluate how much dilution and cash is going to be involved to get to unicorn. And you have to really you have to balance those things out. And this goes back to MA. So unicorns. That's that's a whole different animal. For me, when I come into a company as an operator, forget about me as a venture fund, because venture funds are gonna push you to build a unicorn. I'm a little unique, contrarian, I don't do that, but most venture funds, that's definitely their MO, that's really what they want. They're anticipating most of their portfolio or f will fail. They're gonna make all their money on these hundred X, at least 20X yields. we had a very different strategy at Quake, but most venture funds that's where they live. But as a founder, when I would go into a company, Jason, I start this company I'm gonna take over now that I'm going to work on. I'll spend the first two to three months building our diligence packet, building our our our like a a A 90 folder due diligence rule room with subfolders under that. And it's like you and I had a conversation about business plans and how venture capitalists have started telling eight years ago that I started hearing them tell founders you didn't need a business plan. Dumbest effing thing I've ever heard anybody tell anybody in business. Worst advice ever. Don't listen to it. If you're a founder, please hear me. Don't listen to it. It's not for them, it's for you. What's the diligence room for? It's not for your acquirer. It is, they're gonna use it. But it's an exercise you should go through anyway. It organizes all of the things. It shows you where all of the holes are. operations still really matter. They're important. It and and a lot of stuff takes care of itself, I know we're not going into culture or any of that, but There are certain things you do, and if you do those things right, the culture takes care of itself. And there's a lot of other stuff like that. If you take care of the knitting, then the rest of it works itself out. So I go into a business, again, long-winded answer, but I go into a business very fundamentally focused on getting the diligence checklist and the data room built. Way beyond. Let me let me give you another example. Really frustrating example. I won't name names, but I'm re helping a company restructure a loan right now. And and it it's tangentially one of our companies. We have a small investment in it. companies go in to raise let's say you need to raise a loan. How do you do it? It's a good question. You ask most founders, they're just gonna go wherever they go, they're gonna put outreach out there and they're gonna fill out whatever forms somebody gives them. Let's say they go one of the best lenders out there is Silicon Valley Bank. They're gonna go to Silicon Valley Bank, they're gonna talk to a banker, their banker's gonna send them some stuff, they're gonna fill it out, they're gonna answer some questions, and they're gonna think, hey, I did a great job. I'm applying for a loan. That's not how you apply for a loan. That's how you don't get a loan. Or you get a crappy loan, you give up too many points, too many warrants, too many other things. You wanna get a loan? It's a hundred pages of work. It's twenty it's three different documents. It's a data room. the there's there's a packet you build, not their packet. You're you're pitching, you're presenting. And that exercise, by the way, of putting that all together puts you in a position where you can absolutely know where all the flaws are and where all the benefits are and how you're better than the other stuff they've got in their in their loan portfolio. That's how you go about MA. You overwhelm them. You don't you don't answer in reactionary time. You prepare for it and you absolutely blow it out of the water. And that's what I did every single time. And that's why I had so many it's it's not a jerk common, it's just reality. I had a I had unfortunately I always joke I had 14 startups, nine exits, which also means I had five abyss abysmal failures. But the reason I had so many exits, and there's a bunch more I did with with hedge funds, was because I just overwhelmed the the battlescape. And I also, by the way, also knew who I was targeting. I didn't ever leave it to chance. So I would try I always joked with my teams. I wanna be It's a terrible way to put it, but it's the way I always did it. I always said, I wanna be a deer on the highway in front of the truck. I want 00:35:55.177 — 00:35:55.741 · Jason Kirby Interesting. 00:35:55.888 — 00:36:06.807 · Glenn A the I want them to have to slam on the brakes. They have no choice. They're I'm I'm in their way. And that was always who what we tried to do. 00:36:06.807 — 00:36:53.691 · Jason Kirby That is a n not a lovely visual, but I I get the point. for for founders that haven't really run a real process, one of the biggest problems is when you come out let's just say week or just kinda like, let's give it a try. And you come in without you don't really have it all packaged up. They're just like it's so easy to steamroll you and just keep moving as an investor 'cause there's a million opportunities out there. And if it's like, okay, this doesn't look buttoned up, let's move on to the next thing. Unless they had an ultra clear thesis and they were hunting for you, it's hard to get people to stop the other deals they're doing and focus on you. So most people use the girl in the red dress metaphor, but You owe a deer in headlights. 00:36:49.665 — 00:36:56.472 · Glenn A Yeah, yeah. Yeah, yeah. I I I I want something that shocks, I guess. But 00:36:56.321 — 00:36:57.083 · Jason Kirby Yeah. 00:36:57.083 — 00:37:25.447 · Glenn A another comment too, when I was coming up, Jason, it's different now too, in a good way. This is a really big benefit, I think. A little bit challenging to figure out as a founder, but when I was coming up we didn't have the near the number of brokers and placement agents and bankers certainly there were bankers, but they weren't really interested in these earlier stage deals. Anything anything under a billion dollars, by the way, it was n back then was nothing to a banker. Yeah. 00:37:23.225 — 00:37:25.045 · Jason Kirby Yeah, it wouldn't be anywhere near that, yeah. 00:37:25.568 — 00:38:37.336 · Glenn A And now you've got a lot of there's a lot of infrastructure now to find brokers and placement agents and bankers that will help you even at under a hundred million. And s the chal now, so that creates its own challenges. Most of them suck. Okay, so finding good ones Is and and this is again 332 companies. I I see a lot of it. The only advice I can give to founders on this is and the best advice I can give, because I've seen it firsthand, talk to other founders, find out who they've worked with, particularly look for founders that are industry, in the same industry you're in. find out who they've had good success with and just keep networking in that same vertical until you find the bankers that have the good reputation. reputation they that's the only way I've seen that where you get quality there but they will do a lot of what I just described Jason honestly a lot of the stuff that I used to do through heavy lifting bankers will do some of it now not don't leave it all to them it's your company you can never you can never outsource your success you just can't do it 00:38:38.086 — 00:39:43.866 · Jason Kirby Yeah, I feel what you say there is just you have the choice of getting a banker that way in terms of you spend the time and effort trying to narrow it down to find one person out of maybe probably five or ten that would exist and potentially do the deal. But then also or you go and try to do that amongst thirty or forty of your ideal targets. and you try to run the entire process yourself and Both are very much meaning, meaningful ways to get a deal done. But I also feel like when founders have to prioritize the fact that this sh takes a ton of time. running a process is as you were talking about, all the prep work that you've done, that's second nature to you and that is like a a core focus of what you are capable of and you know what good and great looks like. Whereas a lot of founders learning that skill while also maintaining The performance of the business is why you bring in a banker in a lot of these transactions because to run both at the same time and still hit your trajectories 00:39:43.196 — 00:39:43.436 · Glenn A No. 00:39:43.866 — 00:39:52.744 · Jason Kirby as a business becomes it's not impossible, people do it all the time, but just extra hard. yeah. 00:39:49.772 — 00:41:46.342 · Glenn A It's it's insanely hard. it's like I joke and I think you have I talked about this offline, MA is all in all consuming. it's distracting to the entire organization as well, by the way. So your momentum and other things have a tendency to drift while you're doing it. it's hiring. You have to put it off until you're ready to go in on it. there's lots of good reasons to put off hiring. But when you get into it, you go all in. The same as MA. if and that's I think why if you can find a banker that you're comfortable with, that you trust, that other founders have referred, or that other sometimes the capital, I'm a little bit more leery of that to be blunt. I always think you get more honest answers from other founders than you do from capital. And I could go for an hour on that alone, why. But if you've got a good relationship with a banker. Man, I've got a deal right now. I'm working on a pretty big deal, and they've gone through three bankers, and and I can tell you that when you you know it when you see it. They found the right banker, and it everything just popped into place, and you could see it very quickly. I feel it's a lot like hiring. You might disagree because you know a lot more about that world than I do in many ways, but I feel like in the hiring world, you need to hire slow and fire fast, you it really quickly. And it's not just about results, it's about engagement, communication, transparency. those things are not like they don't take six months. very quickly what your relationship is like, and I'm seeing it firsthand right now. I've got a deal that's gonna come off, it's gonna be a great little deal, great, pretty big deal, and it floundered for about a year with the wrong relationships. So so that is another piece of it. You need to assess very quickly and move out of a bad relationship and go find the right one if you have to. 00:41:46.342 — 00:42:58.498 · Jason Kirby Yeah, and I I agree. And also when you think about running a process and who you're running that process with, being able to have someone that is actually in your camp, knows what you're knows what you're going through. Cause it's one thing to go run a process. there's playbooks for that. There's, you gotta run a very tight process, have your process letter, your your guidelines of how you're going to to go to market, who you're gonna go to market to, those are all table stakes, but it's also it's like Are you marketable yet? do you have everything are you even a acquirable? and I I feel like I've met so many bankers that were like, Yeah, I'll take you to my fifteen friends that I know and See what happens. And it's just like, but is the business marketable? once you go to market, you are now, if you're in market too long, people are like, Mmm, why is everyone passing on this? it's just it's it's that for us. People, as much as it's such a vanity in terms of FOMO, and people that fear of missing out, they want to catch the shiny object that's leaving the station, they don't want the one that's kinda like sitting off in the corner over there. And if they are the one that wants the one sitting off in the corner. corner over there, they're they're want a deal. They're not gonna pay 00:42:58.015 — 00:42:58.301 · Glenn A Yeah. 00:42:58.739 — 00:43:26.668 · Jason Kirby the premium. And there's plenty of people that would do those transactions, which is fine. There's totally a market for it. And you might be the person in the corner that, didn't get asked to to dance and someone takes advantage and gets a better deal. But I think for for a lot of founders, being able to think about that perspective and be able to know is their advisors or is their bank are gonna be able to come in and actually underwrite. the opportunity was was critical. But 00:43:26.366 — 00:43:26.606 · Glenn A Your 00:43:26.668 — 00:43:35.890 · Jason Kirby from your perspective, you sound like you did you run every deal yourself for all your deals or the idea. 00:43:34.440 — 00:43:35.570 · Glenn A No, it's funny. 00:43:36.090 — 00:43:36.531 · Jason Kirby But 00:43:36.154 — 00:44:55.416 · Glenn A So the the the early days obviously I didn't run the IPOs. In the early days I did I did run but I almost always brought in a partner banker. Almost always. So I would say I built the data room, I got way ahead of it, much like I approached that loan I was talking about with the bank. I create the packet, but then the banker comes in and refines, like you said, the messaging, the the target list. I might not have had the target list perfect. A lot of times structure. I y I I still Still 30 some odd years in, even to literally last week, I'm working on a deal that I've never done before. And so finding, somebody else who has experience doing that kind of deal is like, okay, well, I hadn't thought of that. And so I think that there's just I never mind that this this is self-serving, I suppose, but I I don't I don't mind paying a fee to succeed. I've never minded that at all. And I I I it's the forest for the trees kind of thing, right? seeing the forest. I've always been focused on the end zone, focused on the goal. And so I've never minded bringing in that partner. I always have done it. I think a hundred there might be I'd have to think really hard on it, Jason. I'm sure there's one or two where a deal just fell in my lap because I've had enough of but I've always intentionally brought in a partner. 00:44:55.881 — 00:45:07.858 · Jason Kirby when you've gone through these transactions, walk us through that moment where you felt the deal was dead and it either died and or you somehow resurrected it. 00:45:07.651 — 00:49:57.592 · Glenn A Yeah. So a few things here. I I every single deal I've ever had that was successful I suppose every deal I've had that was unsuccessful, but every single deal I've had has been on death's doorstep many times. And I've talked to where you've missed payroll, or or come close, certainly. worse. I've talked to Dozens, if not over a hundred founders who've been successful asked them the same question and universally the same answer. So every deal basically every company pivots, number one. there are very rare exceptions, but they're incredibly rare. And a pivot by itself sometimes is because you've figured out a different way to use the product or your customers have, and sometimes because you're just failing miserably. But you will always be in these chaotic it that ki startups are chaos. So you're gonna be chaotically bad and chaotically good at various times. so I would say to you, Jason, every deal I've ever had. Specifics, for me where it's where they've always come off the rails is again, I'm overbuilding the data room and the diligence checklist and the document room just the document collection. So we're always strong there. It's usually some failure in communication if I'm in the middle of a deal, a misunderstanding. The the thing I see most founders do that I didn't do, okay, so I can't this one isn't where we fail, but where I see a lot of deals fail is founders will focus on their value, their intrinsic value, and fail to think about their value in the acquisition. So the buyer doesn't really care how what you are as a standalone company, normally. That's not that's not the most interesting thing. Already have a big sales team, so your technology by itself is interesting, but it's what is your technology in their distribution in their sales team? Will your product allow them to sell more of the existing products they already have? Those are the things where I see founders flub, they fumble the ball a little bit because they get hung up on their business, and really what you're selling is not your business, even though that seems like what you're selling, you're selling a derivative of their business, like you're you're selling. the potential in their business. And so I see a lot of times where companies fail in the messaging, the a lot of times you'll have an evangelist within the company that'll understand your business really well on the buyer side. But when it moves up, and it has to move up, unless that evangelist is a CEO, when it moves up, that translation gets lost. And so I think a lot of times founders take for granted that as the deal moves through the chain on the other side, that it will continue to have the same enthusiasm that it had with the middle manager, which is where where most deals originate. Most deals originate honestly with a partner you have or with a counterpart you have within another organization, even if the banker brings it to you. The banker has identified that there's somebody inside that company. Now sometimes they'll go straight to the CEO, but a lot of times it starts below that and That evangelist isn't going to make the final call. They're going to influence the outcome. So I see deals come apart because it hands off inside the buying act organization and the messaging wasn't strong enough to survive and did not understand that there was going to be need to continually reinforce that message as you went forward. so I think that's one. The other thing I'd mention real quick, this isn't a deals failing, but I get really frustrated. I've never, I don't know about you, Jason. I've never had a deal in my whole life that failed because I couldn't get back to somebody in two or three hours. honestly, even in a day, I don't know. And we live in a society now where everybody thinks they have to be like the the message came in and I have to respond in two minutes. And that's not necessarily wise in MA. everything is strategic, everything needs to be thought through, every word needs to be scrutinized, every decision is it's it's it's a process. And this again is why you want advisors or bankers who've been down this road before. Because you want other people you can bounce this off of don't don't ever get something, react to it and just send it back. Work with your advisors, work with your board, work with your banker, work with your broker, whoever it is, and s and every single communication is strategic and purposeful and intentional. And it's like that's where I see these deals fall apart, is a lot of times people just being reactionary too. And it all goes back to that messaging. 00:49:58.342 — 00:50:19.535 · Jason Kirby No, I I think that is something that often founders they expect to like I gotta this is my highest product to sell it's like one that's also shows maybe too much eagerness to get a deal done and then then they start asking it's like, are we the only player in town? Yeah. 00:50:17.009 — 00:50:19.757 · Glenn A We're not there's no FOMO. 00:50:20.582 — 00:51:20.673 · Jason Kirby it's it's it's so lame to bring it's like the, don't text the girl back right away, dating advice that, I don't know if that's still a thing, but it's like let them sit for a bit, make sure you say the right thing when you get back versus just a a quick response. it's crazy 'cause we're talking sometimes tens of millions, hundreds of millions of dollars that could be exchanging hands that could blow up over a misinterpreted, text message. And send someone down a wild goose chase. so as we shift Yeah, towards the end of the episode here, when you look back and your experience and the founders that you have 300 plus, founders that you've backed, what have been some of the traits that you've identified amongst those founders that have what it takes to ultimately drive an MA, deal like get a deal done effectively, whether that's substantial growth capital or selling the business or even IPO? what are the attributes of founders that stand out to you? 00:51:21.423 — 00:51:53.425 · Glenn A So you heard me say previously, don't be Don't play the CEO in the high school play. Be yourself. Don't try and play a part. Be authentic. Always be authentic. Be present. Put your frickin' phone down. Be present in every meeting. If it's important. If you've got your phone with you, it's in like you can have your phone with you, but if you're on it, it's not important. And the people around it's not important. So message that it's important, but also be engaged in it. So that's huge. So I put or don't go. Yeah. Mm-hmm. Yep. 00:51:48.002 — 00:51:53.463 · Jason Kirby Or don't go to the meeting. it's like don't waste your time. Don't waste their time. Don't waste your time. 00:51:53.711 — 00:54:08.903 · Glenn A A hundred percent. So I've learned, engagement, authenticity huge for me. Communication huge for me. I can draw a direct correlation between the companies that share updates and the companies that don't in terms of success. Again, the update's not for me, folks. I write as a as a GP in a venture fund, most GPs put out, two to five page investor updates. I put out twenty page investor updates. Not for them. They enjoy some of some of don't. But it it's for me. So communication, transparency, updates, those are those are for you more than even the people who gave you capital, to be honest with you. consistency, hugely important. you're y people knowing what to expect from you and of you and of them. that's the biggest step towards accountability, but your consistency is hugely important. So I put a big measure on that one. I mentioned earlier being willing to show your vulnerability. I think is hugely important. notice none of this. I'm not talking about brilliance. By the way, I don't even hardly I could har th I'm so unusual this way. I don't hardly put any weight on technology or product when I look at a company. First of all, it's not your business. It has nothing to do with almost nothing to do with your business. It's a it's an interesting aspect of your business. But mostly when I talk to founders, they'll pitch their product. And I'm going, that's cool. That's great. Thanks. Can you tell me about your business? Because you're not sell like at the end of the day for an acquisition, they're not a customer. They're not buying your product. They're they're really buy that can happen, but it's not usually the scenario. They're buying your company. And there's a lot more to it. So I tend to d really deprioritize not that I don't want domain knowledge, but I deprioritize product and and technology. I expect the founders a lot of times I look at traction because that tells me a lot about what the technology looks like and whether the founders know how to run their shop. But those are the things probably when I look at founders that I I highly prioritize. Obviously honesty. There's a lot but that's a charged word. You mentioned it earlier, Jason. There's a lot of fake it till you make it. That's a real 00:54:08.509 — 00:54:08.772 · Jason Kirby Mm-hmm. 00:54:08.903 — 00:55:30.004 · Glenn A thing. it's not just nonsense. I hate to I don't want to lean into that and have founders again, I just talked about being authentic. But there is an element of you talked about FOMO. That's a bit of fake it till you make it, You're basic creating a hype around things. Everything you do around marketing there is spin, but the one thing I would say is you you should always be pitching, you should always be spinning, but never to yourself. you need to be brutally honest at the end of every day with yourself. And by the way, with your close core team. You can even spend to some degree your s your bulk of your staff because you're trying to keep them pumped and motivated and you wanna obviously have them have the messaging to go out and sell, so you're giving them that as well. But your core team and yourself, you should be brutally honest. And the other thing I was just talking to a new founder the other day that just I was just helping. They're not in my portfolio, I was just advising. And I was telling her how important it is to go and tell your story. no matter how uncomfortable you are learning to pitch and you know this. It's like you I I hate to say it, but it's incredibly hard. nobody would know this talking to me, but I'm absolutely before I started doing this was an introvert. it is incredibly 00:55:29.185 — 00:55:29.461 · Jason Kirby Huh. 00:55:30.004 — 00:56:03.880 · Glenn A hard to succeed doing this if you can't get out there and tell your story. So you need to go to all these events you can start and I'm not a huge fan of going to conferences and things like that. I think it's a big time suck. But anytime you can go pitch your deal, anytime, certainly in the beginning as you're getting comfortable and learn the mechanisms of selling and telling over and over again, that will serve you on that deal and every subsequent deal after that. So those are just some of the things, I suppose. 00:56:03.880 — 00:56:46.572 · Jason Kirby And for my last question, this is something that I think you have a unique perspective on given the size and scale of your portfolio. What do you do as a VC who has operating experience, unlike most VCs, with the middle of your portfolio? The ones can't return the fund. They're not the hundred Xer, they're they're not the anthropics you know of the world, the lovables that have these zero to hundred million dollars. high growth things, but they're meaningful revenue, have growth, but they aren't the shiny object anymore. What do you do as an investor and someone on those cap tables with those types of companies when they hit that situation? 00:56:45.826 — 00:59:44.711 · Glenn A That's a it's a great question. So Quake is unique for a couple of reasons. One, we kinda came at it different, so we didn't hunt unicorns. My thesis was I couldn't tell when I was gonna have a unicorn being in the driver's seat. So how am I gonna tell as a V C? I just think it's a fool's errand. So we took this strategy that we were gonna stay in the pitch count, we were gonna get more singles, doubles, we were gonna we're basically get more hits. And it's worked. We got about eight years in we got about eighty percent survival across our fund, which is and most of those deals are cash flow even or close. So We we have a slightly different perspective, I guess. Even saying that though, you still have a bottom third, middle third, top third. It's just a reality. Coming into being a V C I didn't know all that, Jason. I thought, I think of every industry, I'm just gonna disrupt it and do it any damn way I want and I'm gonna try and take what works and keep it and take what I think could be imp improved and improve it. But like every other business I've been in, I get slapped in the face here and there too. So what I've learned is y and this a reality for founders to understand, the bot top third of the portfolio is going to make the fund. That it at whate we've got eight funds. The top third in each one of those is gonna make the fund. Actually it's like the top ten, twelve percent are gonna make the fund. And the other stuff is really nice around the edges. Most most VCs we still get unicorns, but most VCs don't really have the middle tier that you're talking about that we have is pretty solid. But even with that in mind, with three hundred and thirty two companies, I've come to realize And I still talk to If a founder throws themselves on my calendar, I talk to every like I have an open calendar for my founder founders. They can always schedule. But what I've figured out is that if I that basically I will talk to all my founders and try and help them, but there's zero doubt that I know in my mind that many of those teams will probably become lifestyle companies or will struggle. they'll be they'll make a generally nice revenue for the founder, but probably not become a big meaningful life event for them or their team. probably won't do it for us either. So I try and help guide them, Jason, but a lot of those companies, honestly, some of the it if we're being honest, one of the things a founder never wants to hear is that they should stop. And there's a lot of teams that should stop. they would be better off for their team, for themselves. They could go start something new, but There are a lot of teams that slug around at year five and they should already be gone. And I try and give Tough Love where I can and I try and take those teams that maybe can pivot out of that and move forward. but understand when you're working with your VCs, and again, we work in the middle more, but the the cutthroat ones, you need to be at the top of the portfolio for them to stay engaged with you. And you need to have that as a mission. 00:59:43.135 — 00:59:48.810 · Jason Kirby Give you five just to respond your text or emails, you need to be in the top. they'll stop they'll just straight up ghost. 00:59:49.033 — 01:01:05.654 · Glenn A Yeah, yeah. That's it and I understand. it's it's they put their energy there because that's gonna return to their and that's where they're getting most of these funds make nothing on anything else. So again, we're a little bit different, but even with us, it's definitely more energy put on the top of the portfolio. You have to and and but and in fairness, one quick comment on that. They need more. The t companies that are absolutely skyrocketing, and this again, some of the world that you play in on the side here, the well, it's not really on the side, but some of the world that you've long time played in, that the companies that are absolutely taken off have more need for help. Like they That just is what it is. So yeah, we spend a lot of energy. I just think that founders need to understand the game before they get in it. And you w you if you wanna win it, get at the top. you need to be you need to have early momentum in your relationship with the VC. And this goes against what I said earlier too. I hate it. I hate the VCs give you money and that that forces you then to deploy and to grow, to force growth. But unfortunately if you want to work with them, that's how it works. 01:01:06.404 — 01:01:16.713 · Jason Kirby Well well said, Glenn, what would be the best way for people listening to this show to get in touch with you or learn more about you and Quake? 01:01:16.713 — 01:01:42.809 · Glenn A Sure. they can just email me. It's pretty straightforward. It's Glenn with two N's at Quake dot Vc. I don't hide. Our job is to find teams and founders. So, email me. Mention you saw me here, that's great. and I will set up a time to talk if it makes sense, or I'll ping you back and forth. We'll we'll we'll set up communication. Once they talk to me, my mobile's in my email. I don't hide from anybody. 01:01:42.809 — 01:02:03.288 · Jason Kirby No, I appreciate that. we'll make sure to include those in the in the show notes for anyone that might be interested in reaching out. And Glenn, thank you so much for sharing your insights. Your experience is, I'd say greater than most that have had the shot to build, companies and and reach the level of success that you have and appreciate you being candid and and authentic with your responses. 01:02:03.288 — 01:02:06.459 · Glenn A Thank you, man. It was great fun. Have a good afternoon. 01:02:06.459 — 01:02:07.195 · Jason Kirby You do.