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Forest is the co-founder of, a platform improving diversity in venture capital. Forest is passionate about making entrepreneurship more accessible and equitable. He loves helping early stage startups strategize, scale, and fundraise. Forest started his career in digital marketing before transitioning into a role overseeing operations. Formerly he was the Director of Ops for Bright Cellars and then was VP of Ops for Moral Code and Milwaukee Boot Company. In addition to , Forest is co-founder of Fresh Coast Labs, an organization that lends guidance and drive results for leaders working to push their organizations to the next level, helping startups overcome their challenges and achieve their next stage of growth bringing innovative thinking and nimble startup principles to solve problems, develop strategic direction, and improve culture with solutions scaled to fit the specific needs. Forest has worked with small businesses and Fortune 500 companies.
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Forest all right welcome to the jc, garcia podcast. You work for a company uh uncrowded, oh when yeah so um is a platform and what we do is we work to connect underrepresented, startup founders, so women, black indigenous people of color, lgbtq plus founders, with venture investors um. Currently, that group represents just ten percent of venture funding. Um most of venture investment is, i kind of a joke.

Is white, do straight white guys on the coast, giving money to other straight white guys on the coasts? Okay, okay, so for those people that are listening to don't know, it's like a venture capitalist people who have money and they want to invest in a company or in a project right and then they find the people that have the the project of the company or The startup or whatever right and then they give them money so you're, saying typically it's it's been kind of like a club right and maybe like there are circles of people that do this and and you guys are trying to yeah yeah yeah yeah. I mean you're right on that. That's basically what it is so venture investing is a form of investing there's a lot of different investing, um and - and this is specifically um - it's high risk um and we can get into how that is also something that keeps a certain demographic out. But um.

It's high risk and theoretically very high reward, that's kind of the goal, but it tends to be a very homogenous group. It is roughly 70 of all venture capital is in um bay area, new york, boston and l.a, those four cities and even that's dominated by bay area in new york. So, geographically it's isolated who's involved in it. It is super disproportionately white male and then the other thing.

That's a little unique is 40 of people who identify as a venture capitalist either went to stanford or harvard. So it is a tight-knit group of people that control a what is a nine figure industry. Maybe a ten figure. Let me see if i'm doing my math right.

No, i think we're talking about twelve figure industry wow, so i didn't know that it was that geographically centered into those areas and from yeah. So it's it is it's literally. It's like a club right, it's like it's a circle of people and they all do that uh and if you just happen to be able to get into that circle, then maybe you'll be able to function. The way that this this whole system yeah - and you know - and i like to at least you know - i don't think all venture capitalists are like jerks or racists or sexist, or anything like that.

I think for the most part, i think a lot of times. It's just operationally easier to look in network so like when we're talking about money and a lot of times. It's personal money, a lot of times. It's large amounts of money.

You want to make smart decisions, and so one thing you can do is you can open yourself up to the general public and say hey come at me with your ideas and i think everyone thinks they have a brilliant idea, but in reality only a small segment Has a brilliant idea and that's one way to go about it and that's certainly more open, but another way to go about. It is look to who you know already and turn to those people and say hey: what are you hearing? Who are you talking to who's? Doing cool stuff - and it's just oftentimes a efficiency of resources, solution to go in network as opposed to out of network. So that's kind of what our goal is with uncrowd is to make it efficient to look out of network, make it efficient to find companies that are not currently finding capital wow, okay, yeah, and so i you know it's like i remember thinking about you know, i'm A big fan of apple right, like oh, my computer's, been apple since it's i, my first computer was pc and then after that has been apple ever since, and i remember looking into well, you know it's uh, the legendary right story of how apple started or whatever Right and - and we all think about this thing - the startup - oh, we think about them, starting in their garage and stuff and then like very quickly. It went into like this thing where you know by the time he was in his 20s.

He was already like a millionaire, you know, and i'm like, how did we? How does it get to that point? I i've started a business before and i couldn't do that like i'm in those metrics, i'm a failure right compared to him and then once you start looking and you're like. Oh venture capitalism, like you know what i mean like someone with a lot of money, came in with a lot of experience and how to run business and stuff and yeah. He was at the right place right. He was in silicon valley, that's where this stuff was happening.

This was virtual. Capital was born, you know, and it started there, yeah and and you're totally right, but you're actually even missing another piece. That's a little bit more systemic and a little bit more insidious is so a lot of times. Venture capital doesn't really start at step.

Zero, um step zero to get from there to a place where venture capital is interested. It's going to require you to figure out some money, and so when we look at this is where venture capital starts to dovetail into just like. Overall, frankly, systemic racism within our country is when you look at like, for example, compare net wealth of a white family versus black family. It's 10 times the difference.

Well that 10 times the difference of net wealth in the family means that ultimately, there's going to be much more disposable income immediately available and more disposable income in the immediate community. So when you're at step, zero and you're trying to get to step one what's gon na happen, there is you're gon na need to look for that and if you don't have it it it, it deflates the startup ecosystem within a given community and so going back To your apple example, apple wasn't going to work. It just so happens that steve jobs had a friend who had a rich dad, who was willing to put some money in when no one else was willing to. So that's the first money into apple is.

Is somebody was willing to write a check because they were in the right community yeah? So he had the right connections already to begin with to to jumpstart that startup right yeah and of course those days were really early. That's when venture capital was really starting right. He was a monster one of the first ones right so uh. He played a role in kind of inventing the whole thing you know.

Yeah i mean people. Investors have been looking for smart ways to put money forever and, and i think the the that more hand-in-hand with kind of what we picture as the modern-day venture capital was really heavily tied to just the tech boom. The overnight millionaires um guys guys in their garage who are working on computers and one day it was a thing that they were curious about and the next day it's a multi-million dollar industry. And we and we saw that kind of blow up and then out of that and and this speaks to ecosystem growth as well, is just all of a sudden.

All of these millionaires were created right and so all of a sudden, you have all these millionaires in the same same geographic area, with the same types of mindset who then go like well, what else can we do with it? Now we got money. What else can we undo and you start to cultivate a ecosystem where you go from being founder to investor and you invest in cool stuff that you like, and then that brings more people in and then eventually you get to what the bay area is now where It's just kind of a amazing tech ecosystem with dynamic people and a lot of wealth to take advantage of, and try to and try to create new stuff yeah. So your mission is now to try to broaden that scope right to other people to other to other to the general public or maybe to the to the people that are not taking or playing in that in that ecosystem and then exactly that yeah. How are you guys doing that yeah so the the platform i mean? Really, it's not complex, where i don't want to pretend like we're.

You know creating some super innovative new technology, uh, honestly, the easy it's a two-sided platform, similar to how you have uber, where you have people who want to drive and people who are drivers and something in the middle connects those two people. So what we're doing is we are bringing on startup companies that are by underrepresented founders and letting them kind of build profiles out and say this is what we're about this is what we're looking for this is the work we're doing and then we're bringing on investors And we're just trying to make it really easy for investors, so investors can go in there and they can. They can filter by whatever their investment thesis is if they like business-to-business companies, if they like software companies, if they have a geographic thesis, that's a common thing. So if they like to invest in companies in the midwest, they can add that in and then they're going to be exposed to a bunch of companies that statistically they've been overlooking, and so really what we're trying to do is kind of help.

What i consider top of funnel so top of funnel deal flow, we're just trying to get more eyeballs on these companies, that they've been missing and give investors an easier opportunity to discover them and help help work through them, and hopefully they find a gem. Ah, that's cool and so you've been doing this for a while. Now how? How long have you been um passionate about this for a while, i would say doing this for just over a year we are coming up to coming up on a year we launched in march of last year, which is uh a terrible time to launch a new Company right during a pandemic, yeah yeah yeah, it's probably a very unique year, right to start up to start a business or to roll a platform or anything yeah, um yeah, it's been, it's been an interesting one. Interesting.

What are your results? Who are you getting more um response from? Is it from 100 or underrepresented, like businesses or from interested uh? You know venture capitalists. It is almost two to one three to one founders: um. The founders are much more interested in. You know signaling that they're here, hey, i'm, i'm here, i'm available, then it is investors and convincing investors that they should care about.

This has been a bigger hurdle than i expected the data. The data says they should care. The data says that investing in female founders is smart. Female founders have better returns than male founders.

The data says investing in founders of color is smart founders of color have great great results, but there's very small small sample size and so a lot of investors. What we used to hear from investors was something called the pipeline problem and they would basically say: hey i'm happy to invest in whoever i just want to make money. I just don't see enough founders of x, demographic, and i just don't see him, and so that was that honestly, that was originally. What we were trying to solve with on crowd was well great.

We'll solve your pipeline problem um truthfully, since the the murder of george floyd. That tone has shifted. Um there's been a lot of response um in in a lot of you know somewhat more appropriate reactions um, but still, i think that the messaging i've heard from a lot of investors is really around like well, we just don't see the data. The sample size is pretty small.

Where you know, are you sure this is? Are you sure this is right? Are you sure this is a and, and our message is really simple: it's like white people have um monopolized opportunity, not talent, and so so that's what we we really try to share with investors, but so we end up with a lot more. We have more founders than we have investors on the platform i see yeah. So there's a lot of people that are they're looking for money are looking for. What would that the term be like seed capital or see so we we technically are stage agnostic.

So if it can be at any stage that you're looking but majority of the founders on our platform are early stage, so they're looking for seed or precede funding - ah, okay, yeah huh and that's interesting to me because i i i've like i said i've started businesses Before in the past, but i never went traditionally right because i'm an outsider, i'm an outsider in an outside world kind of thing right so uh. You know like one of my key things for me to be able to do anything is to hack into you know. Do it my own way, and one of the things is like well before you even present this to anyone? Well, first of all, that's never really kind of been in. My radar, like you, know, taking money from someone else like.

Why would they want to you know and that just doesn't compute in my in my head right um, but i'm like first like instead of like going uh getting a permit, get you know establishing the llc? You know all this other stuff, i'm like first learn how to make money like give the like start the business. You know just bootleg start the thing get going and then once you see some kind of success, you know and kind of you see the formula, and you see that it's working that it's not you know, then you start getting all this other stuff right in place And i know that's absolutely the wrong way to start business for everyone else. You know there's a lot of people that start with. Well, let's start with a business plan.

Let's start with, you know, then seeking capital. You know to start and it's like. Okay, that's that's! How people do this that are connected, and i never knew that i mean i kind of at one point realized that that was the thing. It's like that's how people who have those means to start a business that way that's how they start a business.

Now i i'm not there so then i got ta figure out some other way. So it's that's very interesting yeah. I was gon na say like i, i i align a lot closer with you too, like i. I think i think there is a segment that wants to make businesses in, like a very traditional, like here's, my business plan, i'm going to take it to this person, i'm going to go through that, like i'm very much like like i'm non-technical, so i don't.

I don't code or anything, but i'm very much like let's just make some stuff. Sorry, i don't know i'm allowed to swear on this podcast um. Let's, let's make some stuff and and let's get it out there and let's see if there's a market for it. Let's see if people are interested in it, let's see what we can do with it.

Let's get people playing with it, and so i really do ascribe to that. But i think your point about making money is dead-on too, like i think, and frankly, we've seen that shift in venture capital as well. There used to be a lot more money for ideas where somebody would come and say, like i have this thing, give me money to build it. A lot of that has been scaled back um.

You still see it in heavy r d fields. So if you're like in biomed or if you're like, if you're, if you're, if you're elon, musk and you're trying to make a rocket ship, you can raise some money based on like technology, but if you're, making things like tangible things, uh most investors at this point Want to know that you can sell it, they want to know that you've been able to sell it yourself. They want to know that you're there and that's going to be more attractive to an investor anyway, but from a mindset perspective you and i are aligned on that. Like i, i i'm totally happy to spin something up.

Let's see if it has some legs, let's see where it goes. If it doesn't, let's kill it. Let's do something else. Yeah um you've said that it's traditionally it's been of high risk uh thing to do right to venture capital, so uh.

What was the statistics on that like out of every 10 ventures? How many of them make it? How many of them lose so many yeah great, there's uh? This is i'm painting with a broad brush, but a lot of venture investors think about like if they're, making 10 investments they're expecting seven of them to fail. They're expecting two of them to do. Okay and then they're hoping one of them will do really well and do well enough that it pays for all the mistakes plus some i see and then traditionally that's about what is what is turning out to be. I mean that's, that's why they have those expectations because that's usually what it their experience.

Yeah shows yep, that's one of the uh. I mean that's one of the things when i'm talking to founders. So if you came to me and we're like hey, i made this thing and i want to try to get an investor in it. Um.

A lot of it is just like. Are you is the thing even built to be venture fundable, so usually you're talking about somewhere, like if an investor is putting in a million dollars into your business they're? Definitely looking for at least a 10 million dollar return and truthfully probably closer to a 100 million dollar return, and so, if you can't explain a pathway to them where that makes sense, you might have a hard time raising some funding. I see yeah, that's interesting, so how do you yeah yeah? What is what is the uh, the metrics, that you would use to convince a thing or what? What are the tools or the pathways that you'd have to set? You know it's like for someone that is out there listening that have an idea and have like a little business. What do they have to do to to even attract some interest right, yeah uh, the i mean the the simple answer to that question is traction.

Traction is what ends up getting you um getting you investors, and so the best kind of traction is revenue. The best kind of traction is sales um, that's the more sales you have, the more interesting you'll be to investors and the least you'll need it. The less you'll need investors as well, so so the the less you need them the more they want you, but traction can be a lot of different things. Traction can be users if you have a product and you have a million users on your website every single day.

Even if you haven't monetized it yet there'll be ways to monetize it, and investors will be interested in that um. Traction can be even hype like like when we talk about like uh twitter followers. Twitter followers can be traction now. Everything i'm talking is starting to get less and less clear in terms of a direct value, so investors will shy away from that, but all of that can be traction, and so basically, what you're trying to convince an investor is that there is a problem.

You have the solution. Not only do you have the solution, you have proven that the solution works and that people will buy it and that's kind of what you're working through. Ah, i see yeah yeah. There are definitely ideas that have a lot of traction on paper.

Like uh, one that comes to mind is uh. Oh man. What was that one? This a couple years ago that came out that it was? It was a paid service where you can uh go watch movies movie, pass yeah, moviepass, yes right. So that was a great idea on paper right i mean it was like they obviously raised a lot of capital uh to get this idea started and then obviously because they could get the right contracts.

The right deals with all the players they kind of didn't work. Essentially, we all went have to see movies for a whole summer on someone else's dime. The venture capitalists pay for our movies for like a summer, yes, and so that is a really good example of a good well. Theoretically, a good use of investor funds is kind of what i consider a land grab is a good way to think about it and where you go like, i might lose money in the short term, but i'm going to become the thing and and but and i'm Going to use investor money to get really big, really fast and and ultimately, once i have the entire country as my customer, then i'm going to be able to come back around and figure out a way how to make money on it.

And so that's kind of a failed example of that. A successful example of that would be uber. For example, uber has was never profitable, but uber grew super fast and became everywhere, and then now they were able to ipo and now they're, fine and no big deal and all their investors made money. But it's kind of the same thing where you're just seeing like loss after loss after loss, but growth after growth, after growth in terms of users and revenue, and so that's a that would be.

I consider a good use of investor funds would be scaling at a rate that you wouldn't be able to do without an investor, yeah amazon's, probably another another example of a super successful one right didn't. I think they didn't make it yeah. I i, as far as i know, amazon, i could be totally wrong about this, but i don't actually think amazon took on a ton of funding. I think i think that's part of why bezos is so rich is because he owns so much of the company.

Still, ah yeah yeah yeah, and i i heard that uh at one point it had been like something like 30 some quarters where they hadn't make any profit, and it was kind of, i guess it's kind of weird, an initiative for a company to just for so Long exist and absolutely not make any profit right uh because it was growing, so it it's almost counterintuitive. But yes, it's just based on growth! So all the money's being reinvested, you're spending that money, you're you're spending that money on assets; you're you're, that that's that's! When it's going well, when it's going poorly, it's moviepass, where all of a sudden you get your product into a bunch of people's hands but you're bleeding out money and you're bleeding up so much money and you're stuck and then all of a sudden. You just die because that's what happens yeah they couldn't, they can deliver the product right. They could sell it yep, they could take the money in they just can't deliver the movie tickets right.

So that's the problem and i think tesla's going through something similar right now. Right where they are uh, i mean they are profitable. I guess, but they are growing so much that i think it's it's hindering some of the profits uh they're on yeah yeah. I don't i don't know what to make of elon musk.

I i there's, i, i think, he's half part genius, half part like crazy. I don't know he clearly knows his stuff and he is clearly like, like tesla tesla stock has been booming, so they're doing fine, um and but they're in so many interest i mean they are gon na. It sounds like they did, deliver it on cars at least um, so they mostly hit their metrics there, which is great and but he's he specifically is in so many interesting areas in terms of what he's working on and again, big r d lifts, which are like People people who are putting money into it are assuming it's going to pay off at some point, but hopefully it does yeah. Oh yeah yeah that guy's he's growing uh.

What do they call vertical? Is that what it is so there's so many things that he's developing, that is he's gon na, be he's gon na be profitable, he's gon na be okay. I have a ton of friends that are making a ton of money on because they got early on they're. On the stock, i'm the only dumb one that didn't uh, but so so let me ask you this so so you evaluate. Do you play a part in evaluating some of these companies like when they come to end and you're like okay, like you need to work on this? Is that a thing that you guys do you coach them like? Okay, you need to work on this before you.

Could attract some some venture capitalists with uncrowd a little bit and i'll kind of explain so with uncrowd. Specifically, i try not to get our company mixed up in any deal decisions. Essentially, i i try to remain neutral in that, so that if something doesn't work out, i don't want them to say: hey uncrowd said this company's going to be good. Eventually, we hope to get to that point where we can create some kind of validation process.

That says, like hey this company checks x, y and z boxes, and we think they're going to be great and we recommend them. But until that point i don't want i want it. I don't want investors to think that we're necessarily advocating for a company one way or another. We want investors to decide that now.

Oh, i see yeah no, but i was more talking about the the the company side, like the people who are looking for venture. So we do some things um, mostly the stuff we do in that side is more just free resources, so we'll do talks um, we'll do investor conversations. We have um where we talk to investors about how they think and we help founders think about you know what they need to be doing differently. I do a lot of that work on the side independently with with founders i most of my most of my.

My income comes from working directly with founders about what to do. In terms of fundraising, i see yeah. That's that's interesting yeah because i think a lot of first time or startups. A lot of people that are have you know, have a startup venture right.

It's uh, first timers right! So uh you don't know what you're doing you know. That's that's the thing and you sometimes a lot of like me. I remember when i was doing my first thing. It's kind of accidental, i didn't know anyone else that had a business.

You know that was running a business that was remotely similar to what i was doing so i was like. I don't have anyone to ask how this would work. You know what i mean like it was simple things like i didn't know what my margins should be. You know, i don't know if i should be making 10 profit on the on the products that i'm selling or i should have been making 30.

You know it's like, or should i be doubling my money? I absolutely no idea and i've made so many mistakes. That's how you you learn right, but i basically had to basically fail my first business to be able to learn all those uh yeah. It's really hard. I mean it really is, and it takes a certain level of risk and outsiderism to even try it in the first place.

I think that's something that i see a lot of is especially so i'm in milwaukee and and we just have like a fairly conservative, startup ecosystem. Most of the people that have been you know. We have a lot of people who grew up in blue collar home environments with mom and dad who are working at plants and and want to you do what you do. You do your job, you get your pension, you work and that's what it is and and that's life and that's safe and and we so we just have like uh.

I don't know a a complex about putting ourselves out there uh. It is it's additionally scary. It's it's hard enough to put yourself out there to start a venture, it's harder when grandma is like. Are you sure this is a smart thing like? How are you going to pay your mortgage? What are you going to do here, and so you see kind of those separations between ecosystems that i think are a little bit more developed or a little bit more active, and so like one of the things that i preach locally.

A lot is in san francisco, for example, failures are badges of honor total badges of honor. You you, you got your three failures across your on your lanyard, where you say i started this company. We did this. This is where we went wrong.

We failed. I learned. I started this other company, we did this, we raised a bunch of money, it failed. We did this that's more attractive to an investor and it's riskier to invest in a first-time founder than it is to invest in a third time founder, because that third time founder has been through it.

Just like you said all those things that you did that went wrong in sideways. Well, you don't make those mistakes again, and so we need like a strong ecosystem, has repeat founders. It has founders that have failed and started stuff again yeah i yeah totally. I could totally see that you know looking back you're like yeah, i'm a much better place now, because now i'm making new mistakes, i'm not making the old ones the old ones were really dumb.

Yep i mean i'm making pretty dumb mistakes too right now, but uh hindsight's hindsight's tough. That way, i feel, like nobody, looks back on their stuff and is like i was you just always look back like what was i doing. Oh my gosh yeah yeah yeah. I didn't know, there's so many things that i didn't know uh.

It was so easy. One of my big mistakes was to hire a lot of people right. So so, when we got bombarded by the workload instead of you know streamlining our our or you know whatever processes we were like. Oh just hire another person, you know have two people doing the same thing.

You know very inefficiently. So then, next thing you know, i had a large team of people absolutely know nothing about managing people right, i'm a terrible manager and then uh yeah. You know held on to them too long when business started, dropping and stuff, and then next thing i know i was out of business right. You touch on a couple things there that are interesting from a venture perspective.

So first one is headcount number of employees. That's always a red flag for investors when they see a bunch of employees there they go. Okay, that's a lot of mouths to feed. Is my money going towards feeding mouse or is my money going towards growing your business? Is my money going towards marketing? So that's one and then the second one, there's kind of two big failure, areas and startups.

The first one is really obvious right like it just doesn't work you didn't it. Didn't it didn't get traction. It didn't take off it's very early that failure rate, but the second big failure point is essentially when a startup founder has to go from being kind of founder, innovator to manager executive and it's like a whole different skill, set. It's a completely different skill set from being like i created this thing, and now i have to oversee other people doing this thing and that's the second, that's the second failure point yeah and in fact many right, a large number of founders don't make that transition.

Well, right: oh a ton! Uh we talk about tesla, the guy that started. Tesla did make that transition elon had to step in and then take. You know, control the home, then that's uh and that guy got written off uh. You know steve jobs at one point: it was written yeah yeah.

He was fired from apple, he came back but yeah he was fired, yeah and that's a common thing right. I think uh totally it's because it's a completely different job to to start up a company and then to manage a company. That's a that's a whole different and, frankly, i think some of the best founders i know are aware of where their limits are and - and i would even extend that to executives and extend that to ceos as well. Who just go like like, like i'm somebody who i have? I have thrived in very early stage.

My success has come from like we're at step zero and we're figuring out how to get to the next level that next level, i'm okay there, i'm i'm fine there. I start to sometimes get a little bored in that phase because i like the building - and i like the creating - i i don't like the maintaining as much and then the phase beyond that, like that's just not me, that starts getting way too corporate so, like i Know that about myself - and i know founders that are at different phases, so i know founders that are more at the corporate level or at that point they're basically executives. But i know that, like if a project is reaching that point, i'm like okay, we got ta, find someone who's gon na. Take this to the next thing.

If this thing's gon na keep growing, it needs to be a different person in charge, and we need somebody that has these skill sets as opposed to these skill sets. Yeah there needs to be an app for finding those people. I know that's gon na, be your next venture watch. How did you get into this uh? You obviously had to race, maybe some capital and so ventured for for your yeah.

It's it's. It's a really backwards story. I think it like you being an outsider, really sticks with me because i feel like i'm still a startup and a venture capital outsider um. I my i started in very traditional marketing and operations um.

I was in a little bit early in terms of digital marketing and before things were super super sophisticated and easy to understand. And so i was able to add a little value there with just a little quicker on the statistics side and it gave me an opportunity to kind of quickly grow within the company i started with and and so like seven years out of college. I was in working for the same company had a nice job um and i just was not happy. I just was like this is not the job that i want to be, and this doesn't feel like where i want to be, and i was looking to make a move just for culture reasons um i i literally googled like startups milwaukee, i had no.

I wasn't plugged in anywhere. I had no connections i just wanted. I was like there has to be a place here that i can. I can do some interesting things and i really lucked out.

I got connected with a startup that had just finished their seed round. Um, so they just got some seed money and they were looking to kind of bring on their first real hires, instead of just like the the early early people, and so i was at the time it felt like a huge risk. Knowing what i know now, it was about as safe a move as i could make. I was one of the first adult hires.

I think i was 28 or 29 and i was the second oldest employee and and we did a ton of growth it was great and - and that was at a point in my life, where i was really considering going for an mba, because i just didn't know What i wanted to do, i knew i wasn't happy and i consider that time there as like way better than any mba could have got. I got to see how a startup scales i got to. We were basically fundraising the entire time i was there, so we were so. I got to see what it's like to pitch, what what what is pitching when it's done well, what's pitching done poorly got to talk to a bunch of investors and then for me, what really brought me into what i'm doing now is.

I just saw the inefficiency in fundraising. I couldn't believe how, in a world where so much like the example i like to give is so, if you're looking for a job, if you came to me like forrest, i'm trying to find a job. My first reaction would just be hey, make sure your linkedin's up to date, like we just have that nomenclature of like there's a thing that exists that doesn't exist at all. For fundraising, it is all network based still so when i was when i was fundraising and we needed to look outside of our immediate network again.

I was literally googling like venture capital boston, because we had some loose connections in boston and then it was like. Okay. Well, i found some venture capitalists, let's see who they know. Let's see if i have someone that can make me an intro and i thought i was doing stuff wrong.

I was like this can't be the way this is done is i have to be begging, people for an intro just to get in front of these people, and so i kind of went on a deep dive of research on my own to just be like what Can we do better to fundraise and the and it's kind of just the way it is, and it's still to this day the way it is and that's when i learned about you know well what could we do to make fundraising better and then in my research Is when i learned who gets fund who gets funded - and i was like well wait. A second there's a big disconnect here, because it's not just about equity in the space. It's not about just giving money to people that don't have it for the sake of doing it. It's about an inefficiency, we're talking about an industry where these investors are looking for the slightest edge to find the new technology and we're talking about all of a sudden.

An entire segment of innovators and founders is just completely overlooked. The the example i like to give to kind of help resonate is if there was a a black woman from montana and she invented the next next uber, statistically speaking, it's very unlikely. She would find an investor, it is exceedingly unlikely and that's just money on the table. That's literal money on the table for an investor if they were actually looking for it, yeah you're, you're right.

I i there's a thing that i always think about all these ideas. Right uh, i always feel i almost feel like ideas are easy to come with. Good ideas are easy to come by. Yes, the execution really is it's key in a lot of these uh ideas and a lot of adventures right um like, for example, these scooters.

These little scooters that uber and okay, they seem like a good idea. I mean they they're great, you get on it, you know people they don't have to travel. You know the last mile travel thing perfect and then they went and spent a lot of money. There's quite a bit of investment in that thing right, but yet they they fail.

They're. All failing and the reason i know, they're failing is because i'm getting them, i'm buying them all and i'm reselling them like i'm making a ton of money on the failures of sure, uber and bird and all those companies right, lime, lime, all those companies. I know that covet uh had a an impact in those because people weren't out there for right large portions. Nobody was psyched to grab a grab, a scooter that somebody else.

No stranger was just touching yes, but i think those i think, even without that. I think that idea was about to fail. Somehow i don't know why i don't know the intricacies, but i'm like, i think it was the execution right. I think they just didn't execute right.

I think they didn't think about the lifespan of these. These little scooters they didn't last. You know i read some articles. Where say they didn't they didn't last.

They didn't even recoup their investment, sure, most of them right or a large portion of them. Uh there's like high incidence of vandalism. There was all kinds of stuff, and i thought, like it's a great idea: uh just the execution wasn't there. I think - and i think i and i that's not what i think, because i have nothing else to based on what other than the pandemic.

The pandemic played a role, definitely yeah. So it's a combination of those of those things. How does every invest? Uh, not invest investor yeah so does every venture capitalist have to do their homework and do all the research on the company that are interested in doing that. Like that's, that's yeah, the diligence portion, the diligence portion is extensive, um and and a lot of times, expensive, um this.

This is a consideration in terms of what i was talking about for just why a lot of times they look in network is they're. Putting a lot of money into this, so they want to do their research, and so they can find someone or a founder or a company that someone they know can vouch for and say: hey i've already worked with these guys for a while they're, pretty good or Hey, i know this founder. He did something else here versus somebody who's, just a cold relationship. Well, that's getting you a few steps ahead in your diligence, which means you're saving a few bucks and, and so a lot of investors are doing a ton.

Some investors, when you get to a certain size, you have what you would call proprietary deal flow, and so you are essentially your process for finding companies becomes a selling point a little bit of a black box, but it becomes a selling point for other people to Invest in you is, you say: hey i have x tool. I have whatever algorithm that i'm using that's. No one else has except our front and that's how we're finding our deals, and so that's kind of how how they sell those things, but ultimately again kind of speaking of what works in a strong ecosystem versus a weaker ecosystem. Strong ecosystems have a lot more collaboration at the investor level.

Um, that's one thing so: founders and investors are both helped. If investors will collaborate on that due down that diligence. So what happens if, if i am pitching a product and investor, a looks into a couple things, and maybe they are nervous about it and they decide to walk away. I lose that investor investor b comes and decides to look at me and they look at a couple different things and they don't really like it.

They decide to walk away, but if investor a and investor b talk to each other and investor, a wasn't concerned about the things that investor b was and can talk them into. Why they weren't concerned and investor b, wasn't concerned about what investor a was concerned. Then they go. Oh wait, maybe there's something here and then on top of it, they both don't have to put in all the capital.

Then they go well. How about we split this, we'll work on this deal together, and so, when you find collaboration at the investor level, a lot more things positive things can happen for an ecosystem faster. I see and that's why they tend to work in the same circles, because then it becomes a group of guys or becomes a group of people that are investing in you know, say same companies or the same ventures and then and again i i think i'm always Cautious because i think so much of it is human nature, if you and i go in on a project together and we both go 50 50 on the capitol and it succeeds. And then you come back to me two years later and you're like forrest, hey, i got another project.

Well, of course, i'm going to treat that with a different level of reverence than i would from just a stranger on the street right, but the pro, and so that's why we have to be pretty intentional about kind of how we're approaching this yeah yeah yeah, because You're trying to bring underrepresented, uh people right into this into the system, uh yeah, what are so it it's you. You obviously have now some data right, analytics, uh and some experience. What are the kind of businesses or the kind yeah the kind of business startups that are typically not good for fundraising for for adventure yeah well, specifically for venture funding. The the easy answer is what we consider main street businesses.

So your your bakeries, your um, your laundromats, those are totally viable businesses. I i have nothing. I have personally have nothing against them. I don't think, there's anything wrong with them.

If that's the world, you want to go into great, but the reason that they're not venture investable is because the returns on them are a lot lower over time. So they're going to have their slim profit margin, so they might have a three to five percent profit margin and they just exist for a really long time. That is not what somebody gets into venture for somebody gets into venture to get in for three to seven years and then get out with an exit, and so i say, exit and exit is a really important thing. If you're pitching to venture investors, you the more that you can help them see that exit the better and so an exit usually is an acquisition.

So if you're working on a product, for example - and you know that i i don't know i'll - throw out what somebody - let's say - you're working on i'll use an example for you - you're working on a cool electric car concept - that's truly truly innovative. No one else is out there well, an exit for you might be like bmw wants to buy the ip, and they want to turn that into into a car that they can sell. So that would be an example of like that's an exit. A bmw is paying for the company they're paying for all the rights.

The investors in there would then get their capital um and so acquisitions are the most common exit. You do see, ipos ipos are public offerings and that's when something gets really really big. So that's when investors are very happy. If you get an ipo, i i don't that that would be a a giant win, but for the most part it's somebody else is buying you eating you up and you're getting some returns out of that i see and then everybody well the investors at that point.

Can walk away the the founders and the people managers those that they have to still stay in the company and a lot of times? That depends on kind of what's negotiated in the acquisition so and and depending on kind of what the acquisition took place for so sometimes, especially if an acquisition took place for ip. So it's just for intellectual property uh. Then it's like yeah whatever, like we'll take this we'll take the tech. Our guys will run with it from here.

You guys are good, have a nice day, um other times it's like hey. We don't really know how to run this, but we know that it's important for us. So can you guys stay on and keep running this for a while? Oh i see so it's depending on the on the deal. Um yeah, you said something like going ipo.

Is that i i just found a a stock a couple days ago that was shooting through the roof and it doubled overnight or something right now: okay, oh my god. Let me put some money in there, so i just threw some money in there right, yeah and then after i'm like. Why did it go? Let me go look it up and it's some company a biotech company in texas and it's got nine employees sure - and i was like oh, i was like this - is a public company with nine employees. I thought that's kind of weird.

Isn't it? Is that weird or not, really well, you're, starting to get into an area that i i don't claim to be an expert in, but a lot of times, ways that you? There are creative ways around that, so, if they without knowing who they are knowing their background, they may have truly ipo'd and they might have just been small and unlocked something that was super valuable techno. Technologically super valuable from a medical perspective totally can uh it's a drug that has the first drug ever that has some good effect or uh regenerative uh fixes on alzheimer's sure right, and so they just announced the results of like some six-month-old like tests that they've been Doing on sharp or something - and so then that's why this the stock shut through the roof, but i'm like. Oh, this is a small, tiny little group of engineers. You know bioengineers, i don't know scientists, doctors, i don't know who they are right.

So sometimes that comes from just spinning off old companies, and so like there's a if you don't want to in like if you want to bypass us, the entire ipo process, or things like that like there are just old companies that at one point were ipo'd and Are now kind of defunct or or not particularly active, where you could just kind of acquire them and then let that be the brand and you're already publicly available? There are tricks around that, not necessarily my area of expertise, though oh i see yeah. I just thought that was kind of weird, but that is interesting because so going public, it's a big. It's a big deal right. It's not like yeah! It's a really big deal.

Still do it and uh there's quite a bit of requirements that needs to be done. Yeah that gets that starts getting to some pretty heavy lifting. That's where you get. You know very expensive lawyers and very expensive investment bankers involved in in helping you prepare for that.

I think the the one that is probably the biggest in the news right now is robin hood is gearing up for an ipo and in light of everything, that's happened over the last week with game stock game. Stop, i think i think they're gon na. I think that ipo might be a little troublesome and they're gon na have some trouble. I would wait yeah i would wait.

They have a one one point, one uh rating on google right. They got, they got crushed yeah, but on the flip side i don't know if you saw they raised three billion dollars in a day, so so there's some people that believe in them. They are i it's such a weird thing because look i i i trade with them right, i'm one of those i'm one of their customs or their product. I guess, and i don't know how i feel about about them right now.

I'm, like you know, i don't seem like they're convincing any anybody like. I realized that there might be some legitimate reasons why they did what they did right yeah, but it doesn't seem like their customers. Their customer base is like people like me who are not in the industry. We don't understand.

We have a very like basic understanding of how this stuff works, and i think i looked more into it, because i was a bit obsessed into this story uh, but i think the vast majority of people they don't. They just know that they sided with the with the big, the rich people and they kind of threw us under the bus, and so i don't think they're convincing anybody and i think i think it's not going to go well. I think, although i think their numbers are way up right now, i think a lot of people signed up in the last few days, more so than maybe like transfer their money out of there. I don't know, i know they acquired a ton of users, um heading into all of this and like and the hype got them.

I i don't know i i don't know enough about the technical side to know whether they were right or wrong wrong. What i do know is from a brand side. They were definitely in the wrong yeah if your brand, if your brand is basically saying like we're the literally they call themselves robinhood right, like they're, giving taking money from the rich and giving it to the poor. If that's your position and then your outward messaging is the way they've handled it uh it's it's just a brand, it's at least a brand issue.

Well, i think the the ceo was just the worst person to go on cnn and try to explain the situation. He totally lied. I mean he totally lied. He said, there's no cash flow problems.

When there was right, they didn't have the three billion dollars that they were being asked. I mean that's part of the problem. Is the message changed? I think two or three different times, and so it's like the cover-up is worse than the crime right like. If you just come out and you're honest and you're like hey, they want more money, they want three billion dollars, we don't have them.

So, let's yeah. Let me come up with the three billion then we'll turn the stock back on. I think we've all been like. Oh that guy's fighting for us yeah.

I mean like it's such an easy thing to understand too, to just be like hey. We never projected this like. We never in a million years, thought all of a sudden. We were going to get all these new users and all these people were going to care about one single stock.

We just never saw it coming and so we're blindsided by it and we're sorry that you're, you know feeling like it it's bad but we're just stuck. We can't we can't do it like if they would have said something like that right away and just had like a human message. I think they would have. They would have at least been in a much better place than they are now yeah.

I think that was a crash course for a lot of us right for a lot of people. I think yeah that are retail investors right, um or just you know we dabble in stuff. So i think now that we know much more now. We know that they are young, a young company, and so maybe maybe it's not the most secure way to invest.

So i'm, like, i think, i'm going to move my money to the well-established yeah. I was already ready. I was already on td ameritrade and i'm i'm happy. I mean i mean the biggest thing robin hood did is convince all those other companies that they need to get rid of fees, which is great.

So so it's like so when robin hood launched and it was like, hey free. This is all free, it's the great um and but then everyone else was like okay. I guess we can be free too, and so so i was already with tda and it's it's. The same you know it's there's no fees for trading yeah yeah! That's the thing that got us uh, because we're like, like i'm like i'm, going to make a bunch of mistakes, i'm going to want to buy a thing and then sell it.

You know, but i don't want to be having to pay all these fees because they add up right, yeah, um little did know that you know. Most of us are going to be just investors more so than traders. You know. Yes, i know right, and most of us don't even understand the difference between that.

So that's sometimes sometimes i look at that stuff, like especially like. I know this one world of investing really well and then the stock market, the wall street world of investing like i just know so little that i'm just like, am i just gambling like? Am i just throwing darts right now, like that's how i feel sometimes yeah? Well it and to tell you the truth: it it was in my eyes was just gambling which was uh. You know i in my eyes kind of degenerate, like yeah yeah. You know uh activity right, but then once tesla came around right tesla and we believed in that mission - and we believed in that company and we believe in elon, then we're like well we're gon na enter this thing that i didn't feel like.


6 thoughts on “Forest Richter co-founder of – JGP#41”
  1. Avataaar/Circle Created with python_avatars BEDINSSGUKRAINE says:

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