How do VCs select startups from a pool of 1000+ applicants?

Episode 98 - Andrew Ackerman Transcript Jason Kirby (02:36.686) Everyone, welcome back to the show today. Today we have Andrew Ackerman on the show. Andrew, I want to just go straight into the topic of why you left building companies as a founder and operator and went into the investor role and leading departments at Dream Adventures. Andrew Ackerman (02:42.598) You got it. Andrew Ackerman (03:05.425) So it's kind of funny, when I was doing my second startup, I used to joke around that like, if I could sit at Starbucks and just meet with startups every day and get paid for it, that'd be awesome. Cause I was doing that anyway. I'd done some angel investments to start with. And then I'd come across the opportunity to take over Dreamit's New York office. I'm like, wait, I can actually do that and get paid for it. In retrospect, it was a little naive. It's a kind of a quantum level different than the angel investing I was doing before. but it was something I always knew I wanted to do. Jason Kirby (03:37.454) So let's talk about that. So me as an angel investor, I found it was a very fast way to lose money. You write these big checks and then they disappear. And then you're like, maybe 10 years later, something works out. But you found the opportunity to kind of turn that passion into a career. Walk us through what that transition's like from angel, kind of doing it on your own, operating solo, to going to a more established firm. Andrew Ackerman (03:42.662) Ha Andrew Ackerman (04:03.964) Sure, sure. So there's a couple of pieces to that. I'll start with the first part, which was pure luck. So I actually had a friend who I'd met in business school who is now the partner, founding partner of Hyde Park Venture Partners. At that point, he'd been doing an angel group. I was at the point where I was like, that's kind of cool. Maybe I want to be on the other side of the table a little bit. And he was just doing pickup games. Like, I have this one startup. What do you think? And he'd brought us a startup that was focused on Alzheimer's. chemical compound that would help you detect whether or not amyloid plaques were building up in your brain, which is correlated to the progression of Alzheimer's. The truth is I had zero reason or I just shouldn't have been in that. I don't know anything about the chemistry. In retrospect, I get a little like, my God, I can't believe that was my first angel investment. You know, not my butt handed to me, but I got lucky. And it's the same thing. If you walk into Atlantic City, You put a hundred bucks down on 17 and the roulette wheel hit 17. You know, there's like zero luck. I mean, it's all luck. There's zero skill involved, but you're hooked anyway. So the first thing is I had an awesome experience. know it was like a first payoff quickly. I'm like, wow, that was good. Uh, and fortunately my, my luck, uh, before my luck ran out, my skill got a little better at it, but I only made about five investments as an angel before the opportunity to join a dream presented itself. And that's. That's part number two. So part number two to your question is, you know, there's a lot of people out there doing angel investments. So how did you end up like actually making the jump or how did I make the jump to something a little bit more structured, more fun slash accelerator like, and that's also a combination of luck and purpose. So I knew I, I knew I kind of wanted to do that. And along the way, I had been friends with lot of people in the ecosystem, including Bonnie Helper, who you may know. She's been in the space since, I don't know, since the first VC backed in abacus, right? And she probably has dirt on those guys. So she had, she was launching Alley Watch, which was an online publication originally centered around the New York ecosystem. And then later in more generally, and when I say, Hey, best of luck, let me know how I can help. She said to me, Andrew. Andrew Ackerman (06:27.698) You will write for alley watch and I said great. I'll write you an article. She says no. No, will write a column And then instead of me being like kind of snarky. I'm like, that's nice Bonnie I have nothing better to do than to write for free for your publication I kind of shut up for a moment and I thought about it and I said, you know what? If I can do this so it's only an hour or two a month I Hit the articles out that might be good. It might build a little bit of the personal brand So I did it. came up with the idea of doing interviews of other angel investors. Angelist wasn't really a thing back then. It was just getting started. So I did that purposefully because I figured, let's try it. And then when the opportunity to join Dream, it came along. Like there were a lot of people out there that had networks with angel investors that had experience with prior startups, you that had done some angel investing on their own. But then I had this other thing. Well, by the way, you know, I've been writing for AlieWatch for a year. I've done 12 interviews, I could point to a visible manifestation of the network and that made the transition easier. It was easier to bet on me in that role. And that's part of the advice I give to anyone who's looking to get into VC. Think about the four or five things you need to do to be a VC and find a way to not only get the skills, but demonstrate that you have them. Jason Kirby (07:50.486) And what ultimately got their attention at Dreaming? Like how, did you get in front of them? How did you build that relationship and trust that you were capable to, to lead, you the ed tech at the, at the start of things and then ultimately prop tech. How did that start? Andrew Ackerman (08:05.234) Yeah, so again, it's a combination of luck and purpose. Everything in life is a combination of luck and purpose, down to my first startup all the way through to every investment I make. So I forget exactly how I'd come onto their radar, but they were looking for someone to take over the role, and I happened to know the guy that was running the office at the time, and not only had I happened to know him, I'd interviewed him for Alley Watch. So the first thing I did, I picked up the phone and said, Mark, this seems really interesting, but is this... good for Mark or just bad for Mark? And his response was, it's f-ing awesome for Mark, right? I was told this was a part-time job and it isn't, but he had also kind of come up as an angel and then all of sudden, why don't you run the accelerator? He's like, okay, I'll give it a shot. And it was much, much, much more work for him than he thought. So he'd sort of given them an ultimatum, which was like, you find someone to run this thing and I'll help out. So once I had that, it was like, oh, this is kind of good news. I kind of threw my hat in the ring. And then it was a combination of like, you know, what skills are you looking for? Well, can you source, right? Can you, you know, find investors for the startups back at demo day, back when we did demo day, right? Can you do coaching, all those other things that you expect someone who's running an accelerator to do. And, you know, I had kind of things like writing for Alleywatch as a physical manifestation of the fact that I had those skills. And I knew like the two or three other guys that were in the final rounds for this position. I know that because I applied for the same other jobs they were applying for. And we all ended up in like a seat. was like a nice game of musical chairs that way. But I know for a fact that I got the role of Dreamer because I had these things that I could point to that were quantifiable to demonstrate that I had those skills. And that's what got them comfortable with me. Jason Kirby (09:58.766) And so you get the job, you're working on the accelerator. Accelerators have both very positive perceptions in the market and also very negative. What's your take on what accelerators used to be back in kind of early 2010s and what they are today? Andrew Ackerman (10:10.983) Mm-hmm. Andrew Ackerman (10:17.831) Mm-hmm. Oh, that was a loaded question. You know, that's like, great, please speak ill of 90 % of the accelerators out there. Okay, so let's be like stupid candid here. Most of them are not worth it. So let's take it all the way back to the dawn of time. You know, we're 2006, 2007, 2008. They're basically three accelerators. Y Combinator, Techstars, and Dreamit. That's kind of it then. Those are the first three. Jason Kirby (10:28.343) You Andrew Ackerman (10:49.158) So your first generation of accelerators and same as like your first generation of startup ecosystems were basically emergent. You had a green field opportunity and a marketplace, Startups and investors. So whenever you have a marketplace and you're early to market, you can build a pretty strong position. And it's not because you're necessarily awesome at what you do, though I would argue that the more you do, the better you get, but it's because marketplaces are so strong. So once you've got an established reputation that good startups come to your program and you have good investors who come to your demo day, well, the best startups want to go where the best investors are and the best investors want to go where the best startups are. So that first generation, just by being first and doing it well, even just reasonably well, and learning from that, start to get further and further ahead of the competition. And then you have a second generation that start coming in and they're like, well, I'm going to be the Y Combinator of Pick A City, right? So that's okay, not everyone wants to pick up their life and go to Silicon Valley. So you can be the Y Combinator of Chicago or of Atlanta or whatever the case may be. And you have a bunch of like second tier, sorry, wrong word, second generation. They could be quite good, but they're the second generation where they're doing a geographic focus. And then you have like the third generation, which is okay, like we don't need the Silicon Valley of the Upper West Side, like that's too micro. Jason Kirby (12:03.116) Ha ha. Andrew Ackerman (12:18.916) let's be the Y Combinator 4 pick an industry where it makes sense. And we took Dream to through all of those iterations. Jason Kirby (12:29.91) But where do you see it kind of today? what do you, what's the Andrew Ackerman (12:33.074) So I see today we're still in that third generation to a degree where people are being like, okay, if I'm not Y Combinator, I'll try to be the Y Combinator of FinTech or the Y Combinator of AI. We'll see if that plays out. But I feel like a lot of those spaces are taken, spoken for, or at least contested already. So it's very hard if you're a new accelerator to come in and find green space to play in. So don't, if there's a new accelerator that's come up and I'm a startup, I wouldn't jump to it. In fact, I have a whole chapter in my book, which I promise you we will pitch in more detail later. Sorry about that, had to do it. Where the entrepreneur in the book is thinking about whether he wants to join an accelerator. In his case, the startup in the book is a speech to text focused startup. So he's thinking about whether he wants to join something like that. Jason Kirby (13:18.67) I gotta do it. Andrew Ackerman (13:32.53) And I actually have it set since the book is written like a novel. It's set with him in he's sparring in his dojo and he starts thinking about like, oh, choosing accelerator is like trying to choosing a dojo or a form. Like, are you in it for fitness? Are you in it for self-defense? Are you in it for the social element of it? So when you're thinking about, if you're a startup thinking about accelerator, have to ask yourself, am I in this because I need help fundraising? Am I in this because I need help with customer acquisition? Am I in this because I just need help with the block and tackle of building an accelerator, sorry, a startup? And depending on what you need, an accelerator might be a good fit for you at that stage or it might not be. Jason Kirby (14:16.625) And I guess how does a founder, it's one thing for them to claim, like an accelerator to claim that this is why you come to us. But as far as the impact, what do you ultimately attribute a successful outcome to from an accelerator? So I'm a company, how would I define success coming out of this accelerator that I chose to pursue? Andrew Ackerman (14:24.274) Mm-hmm. Andrew Ackerman (14:38.77) Sure, absolutely great. That's also, again, part of what we talk about in that chapter, how do you quantify these things? So it goes back to what are the things you're looking to get out of that program? So if it's just the basic block and tackle of building businesses, like a startup, you got to talk to all the graduates of the program, which you should do anyway, but in this case, you're asking them, did they get those skills? You really need to understand the content of the program. if it equips them to go on or if they feel like they just fell down flat at the end of that period of time. On the other hand, if it's all about funding for you, it's like, hey, I've done all that other stuff before, I've got good early customers, then you want to find out stats after six months. If it's a of a pre-seed style program, what percentage of the startups have raised? And there's a bit of mix, like did they choose startups well versus did they help startups? That's hard to tease out, but those are the kind of metrics you're looking for. And the hardest is if you're looking there for primarily sales, you want to try to figure out if there's any kind of tracking of, hey, we made these many introductions and they resulted in this many hundreds of thousands of dollars of ARR. That's really, really hard for program to measure. So instead, if you can't get that, at least understand, what are you doing differently? Are you just making introductions to your random network, or is there a process that's deeper or more meaningful? So the same way we talk to our startups as investors and say, show me something that's quantitatively different than your competition, that's a quantum level higher and better, you should be asking your accelerator the same thing. Like, what are you doing different from the other 2000 programs out there? Jason Kirby (16:23.982) So when it comes to going back to your experience at Dreamit and looking at your impact there, what you did, so you're working on the accelerator, how did your career evolve and what's some lessons for people out there to kind of be aware of being in your shoes, like making the decision you made, I think 70 over 70 investments. What was kind of that process like from working on the accelerator, making investments and ultimately developing your career there at Dreamit? Andrew Ackerman (16:34.759) Mm-hmm. Andrew Ackerman (16:44.998) Mm-hmm. Andrew Ackerman (16:53.746) Sure, sure. So there were some things that I knew were going to be different. There were some things that I only kind of figured out once I got there. So you do your homework, you talk to as many people who have done that transition before. That's kind of the baseline of what you have to do. So I knew that there was going to be a lot of kind of administrivia around running the program, like finding office space, hiring my program manager, and all that kind of stuff. I kind of knew what I was getting into, and I had a sense of how much time it was. And I'm like, OK. That's kind of the cost of doing business. One of the things that I didn't know, that I didn't appreciate was how much more work it was. It wasn't just, you know, let's just do more of it. It was qualitatively different when you're an angel and you get like one or two or three startups a month coming to you and some of them pretty good. That's a good deal flow and you can invest or not invest totally up to you versus now you've got a program and you're recruiting for say 12 startups and it's all starting at the same time. So you need to get to 12 startups in about six to eight weeks, which means that you need, if you're doing a pre-seed program, 1,000 plus applicants. So going from kind of passively receiving three or four inbound deals to actively going out there and soliciting 1,000 plus applications in the space of two months, that was qualitatively different. And I had to go from just sitting and waiting for stuff to come in. or just kind of opening up the doors, say applications are good, to actually going out there, doing events, doing virtual events as well. Even doing promoted tweets, that kind of stuff, stuff that I'd never had to do before just to fill the top of the funnel. Jason Kirby (18:40.214) And I guess what was kind of the most powerful channel when it came to securing, like getting that deal flow in the door, what channels ultimately delivered that kind of volume? Andrew Ackerman (18:53.65) So it was a mix of stuff. So back in the day, Angelist, if you remember, was a little bit more like a LinkedIn for early stage startups and investors. It's totally different now. But back then you could find any startup that kind of put their site up there and any investors that they had at the earliest stage. It was kind of like what we use Crunchbase and PitchBook for now, but at the like, I'm looking for angels or I just got angel stage. So they didn't really have an API, so we scraped it pretty aggressively. We would look for new stuff that had shown up, or when we were little further along and we were looking for companies that had raised maybe a little bit of cash, but weren't beyond a certain point, we'd look for people that had hit certain strike zones. So we did that pretty hard. We managed to get at least those lists of prospects, and then we would match the companies with email addresses to the best we could with the ever popular info at domain.com if we had no other way to figure out what they were. And just semi-spam, targeted spam. Like, hey, I love what you're working on. I'll insert description here. Seems really interesting. It looks like you're at a stage that could be great time to join a program like Dreamit's. Do you know? We do x, y, and z. The promoted tweets didn't really move the needle that much, but we got some inbound from that. I also used Twitter a little differently back in the day. I would make lists of founders and just add them, and then they would add it back. Then as I would start basically talking about it, I would get inbound a little more organically from Twitter. That worked at that stage. But then we went later stage. About two years in, we switched from being a pre-seed, pre-revenue program, sit your butt in the chair for three months and we'll bring you speakers, pizza, beer, demo day. kind of archetypical, to a later stage like, hey, you got $500,000 ARR, you've already raised your seed, you're getting ready to hit one or two or $3 million ARR and raise your A round. And then it was just the founders come in, or just one of the founders. And it's like 60 % remote and vertically focused. So now we need a totally different approach. Angelist, not the great fit, but then PitchBook, Crunchbase, like those guys became Andrew Ackerman (21:19.602) better for us. Twitter was a little too like, you know, grab bag of early stage and stuff that wasn't in our focus anymore. So we would do a lot more conferences. I go to conferences, see what startups are coming, do the same kind of semi-spam. Hey Jason, I love what you're working on. XYZ is a great fit for, know, Dream Ed Tech or, you know, Dream of Prop Tech. You know, I'm going to be there for, you know, from Tuesday to Thursday. Why don't you book a half hour with me? booking link. We got pretty good at making these semi-mass emails look really personal, but that ended up converting better for us. And then in general, also thought leadership. We put out four to seven minute videos that would be really focused on like, here's how you make a great market slide, or here's what most people screw up about your problem slide. And those actually ended up... getting good uptake and driving some inbound. Jason Kirby (22:23.042) How did you handle favoritism? Like you out, you're meeting people, you're shaking hands, you got to narrow down a thousand to 12. Like walk us through that decision-making process of how you scale back, you know, that kind of list of inbound to just selecting 12. Andrew Ackerman (22:38.631) Mm. Andrew Ackerman (22:43.772) Good question. Okay, so it was less of an issue later stage when we were more focused. I used to joke, how many is the right amount of applications? I'd say, we're looking for six. So six awesome startups would be the best. Like I just look at six, I'm thrilled. Don't look at any more startups, that would be perfect. But that never happens. So in the call it dream at 1.0, when we were looking for like a thousand startups at the top of the funnel to get down to 12, I did the math. It would take me on average a little less than five minutes per application. And that includes the ones you looked at in like 45 seconds, like, my God, that's so bad. And the ones that were like plausible and you had to like dig into. But like, you can do the math, like 5,000 hours just to get through a first screen is brutal. I know I had less than two months to do it in. And by the way, the last month had to be final round and negotiating and closing the deal. So it's really like a thousand startups in. four weeks at most. Like my eyes started to glaze over. I was not a nice human being. I told people to like apply early before I got bitter. But what I did... Jason Kirby (23:44.717) Yes. Jason Kirby (23:48.696) But like, do people stand out? Like, how do you avoid that fatigue and like make a good decision? Like, how does someone amazing not slip through the cracks? Andrew Ackerman (23:53.658) Okay, so this is what I did. So here's what we did. So we used a couple of approaches. So number one, like actually designing your questions in a way that you can solicit that and like weed out the crap that helps a lot. But the bigger thing that I did was I had this insight, which was I could train people up in a relatively short period of time to weed out the lumps of coal. I wouldn't trust their judgment about what the diamonds were, but I could tell with relatively good consistency if it was just junk and I shouldn't look at So I trained up about 10 volunteers and I gave them our rubric. This is what a five-star team looks like. This is what a five-star market size looks like. This is what a five-star go-to-market looks like. And we had it about, I think, six categories. And I said, go to it. And I had three people looking at every application. And my decision mark was if somebody didn't get above an average of 1.5 stars across all three people, across all five categories, I didn't even look at them. And that weeded out the bottom 25%. Now I went back, you when things were a little calmer and I went through just to make sure there were no diamonds thrown out in the slush pile, no. There were no false negatives. But that took 25 % of the burden off the top. And then I went back and then we would look through the remaining three quarters. It was still a lot of work. And we tried, like maybe we would... prioritized the ones that had higher scores from the pre-screeners and that helped a little bit. So at least I looked at the better ones and the more interesting ones early on. But we tried not to pay that much attention to the upside signal because that one was a little bit kind of wonkier. But you know, if three people thought it was crap, it was crap. Jason Kirby (25:42.478) I guess break that down for the audience. Like what was upside signal? Andrew Ackerman (25:48.582) Sure. Okay, so let's talk from the perspective of Dreamit 1.0 and then I'll tell you from Dreamit 2.0 because they're different signals. So when I'm looking at a vast pool of startups, most of whom are pre-revenue, any revenue is kind of an interesting standout. So we'd start and try to figure that out. There would also be the team, right? Had they had a prior startup in the past. Because the difference between having a team where no one's done a startup and a team where at least one or two people have done a startup, even if the startup didn't succeed, is kind of step level. So that was our, at that stage, and we were generalists, right? So, you know, anything that was at least in an industry we were vaguely interested in, those moved them up a little bit in the pile. When we went to Dreamit 2.0, we were industry focused and we were looking for companies that were past a certain point, and they raised a little bit, they had a certain amount of revenue. Things like where they were at the revenue-wise and how long it had been since they'd raised around and how much they'd raised, that would move them to the top. But it was a little complicated, right? If they'd money and they, and sorry, runway, right? If they'd raised around like two years ago and they were low on runway and we were gonna bring them in, and at that point we weren't giving them extra money. Even if we were at that point, giving them a little bit of cash wasn't going to make the same difference it would. You know, when we were early stage and like 50 grand or a hundred grand made a big difference, we'd say like, listen, we're making these enterprise sales connections for you guys. And it can take you six months to convert that. And you don't have at least six months of runway. I don't know if this is going to help you at all. So for there, like length of runway became much more important. than it did when they were pre-seed and it was less of an issue. So those were the signals where if we saw someone that had three months of runway, we're like, they're gonna be dead before they come into the program. Jason Kirby (27:54.454) No, I think that's valid. And when it comes to kind of the, next phase, so you, did phase one for, for Dreamit version one, early stage and you moved to, to the later stage. What kind of signals did you see once they got into the mix, the later stage that led them to the graduation? Like, what were you guys measuring? What were you guys looking at that quantified that company as success and graduated to the next stage that you're called proud of? that resulted in some kind of outcome. Andrew Ackerman (28:25.168) Well, I'm proud of all the companies that exit or that are getting there. There's an element of teaching to this that I actually surprisingly enjoy. But at the end of the day, I'm not looking to give people a grade. Like I have in my entrepreneurship course, I'm looking to give them the skills and the connections and the introductions they need to make me a lot of money. So ultimately, They go out there in the near term, they're able to raise their next round, which means they got to the right milestone at the right time. And then ultimately they're getting closer and closer to exit. So that's it. That's the goal. As a later stage company, again, we're looking at team, but we're looking at sometimes different things on the team. In addition to have you had a prior startup or ideally an exit before, domain expertise, industry expertise. It's really, really hard. So I ran, first I spanned up the EdTech program, and then I spanned up PropTech and ConstructionTech. And those are three industries where if you don't have a couple of years or more in the trenches before starting your startup, it's really hard to make it go. A, you don't have the credibility with your customers, and B, you don't have the skills and connections. I think I've seen in the course of my career when running those two programs exactly two startups. where the founders didn't have deep expertise in that space and succeeded anyway. So that's what we looked for on the team side that was different. Jason Kirby (29:57.154) So what, at Dreamit, what was in the conversations with the partners that led to that switch from EdTech to PropTech and ConstructionTech? what were the motivations to make that switch? Andrew Ackerman (30:09.906) Sure. To answer that, have to roll it back a little bit to what made us go later stage in the first place. So we had a new CEO come in, Savar, great guy, super talented, hadn't really ever done anything in the accelerator space before, but was really good at the marketing and positioning and the overall strategy. And I remember very well, we were at our offsite at Candlewood Lake and he says, like, hey guys, I know we're like top five in the space right now. Can we ever be number one doing what we're doing? And we kind of hemmed and hawed a bit, but like that virtuous cycle, that strength of a marketplace is so strong that we just didn't think we could take down my combinator. Even best case scenario, didn't think it was gonna happen. So he says, okay, that's what I thought. In that case, I don't wanna do this anymore. Find me something that we can do where we can be number one. It was an interesting challenge, surprisingly simple. So we sat down, we thought about it for a while, and we actually talked to the market. It's like, what is Dream known for that other accelerators aren't? And by the way, once you get below the top five or six accelerators, it's very hard for startups to articulate what they thought was good about the program, which is kind of a bad sign in general. But for us, we kept hearing, among other things, you're really good at getting us our first customers. Jason Kirby (31:23.778) Yep. Andrew Ackerman (31:32.306) So business development, for lack of a better word. And we thought we were good at it. It was nice to see the market come back to us. So we said, OK, if that's what we're really good at. And we have all these corporates that are coming to us and saying, bring us like cutting edge startups. But then we bring them cutting edge startups and they'd say, really interesting startup, sharp guys, really painful problem, but just too early to work with a Fortune 100 company. And then track them for 12 months. Like morons, we kept doing that. Jason Kirby (31:56.547) Yeah. Andrew Ackerman (32:00.796) And then we're like, wait a second, they don't really want that. They want companies that are one stage later. And we have all these companies that want to come in because of our business development skills. Let's go one stage later where no one's doing it. And then we can bring together. Now we have to change the program and the offer because it wasn't suited to like, you you can't give $50,000 to a company that's just raised 3 million and tell them to sit in a chair for three months. So we had to change all of that. Jason Kirby (32:26.741) You Andrew Ackerman (32:28.978) But that's why we went later stage to begin with. And the reason we went EdTech was simply because one of the founders of Dreamit had a strong connection to Penn State and they wrote us a check for a million bucks. Then Avi looks around the room and says, you haven't started recruiting for, you know, for New York yet and you worked at Kaplan test prep for nine months. You should build this. I'm like, okay. So we built it. It worked really well. And then when I was getting ready to do my second year of it. We've done two cycles, 17 companies, some of which are still doing very well. I just sold another piece of work to ETS, the guys who do the SATs. And I'm all ready to go again. We get connected to a gentleman by the name of Jeff Vinick, who's, you may remember, he ran Magellan, big mutual fund. And he ultimately bought the Tampa Bay Lightning. And since I'm married to a Canadian, that was big. And he moved out to Tampa and we've gotten connected to him, long story how, but he was building a brand new downtown to Tampa. So, and he wanted to bring startups into Tampa, not to like live, but to bring their technology to the big companies in Tampa so they would get access to technology at the same time that their competitors in New York or the Bay or Boston were. So that was actually a really good fit to our model of dealing with later stage startups. You don't have to relocate. We're going to get you customers. And we'd always wanted to do PropTech. So now we had a really good reason not only to do PropTech, we had the general contractors he was working with, the leasing agents he was working with, the architects he was working with. That was a core customer sprint right there. But we also had a good reason if we were doing it to say like, well, this is why we're going to go to Tampa, you know, twice during the program. So it all came together. We were able to do what we wanted to do all along. We had a great partner. The only problem was it was only one of me. So I had to walk away from the EdTech program, shut it down, and then start the Urban Tech program from scratch. Jason Kirby (34:42.85) And in your career, I dream it. was some of the, like the toughest transactions for you guys when it came to either winning them and like getting them to participate and take your money and, or, know, negotiating or what was like a, when your most challenging transactions that you experienced. Andrew Ackerman (34:52.305) Yeah. Andrew Ackerman (35:03.814) Yeah, so there's two ways to answer that, right? So one is like, were the hardest ones to win and why? And the other ones were kind of, where was I most on the fence? And, you know, where did I end up and how did I work? How did that work out for me? So let's start with the first one. The Achilles heel of a lot of accelerator programs are the economics of the program itself. Right? If you dig into it, it's much, much harder to run a much more expensive to run a program than most people think. especially as you start scaling and doing multiple programs and people, managing directors expect to get paid, et cetera, et cetera. So there's a lot of different models you can do. You can take corporate money and that has problems. You can take economic development money and that has implications for the kind of startups you get. We wanted our independence. So the model that we'd put together was kind of an interesting fund accelerator hybrid where the fund would approve bringing a startup in. And then the accelerator would bring them in and the fund would buy the investment rights from the accelerator. And that's how we funded the accelerator. But what that meant was we had very specific guardrails around what that purchase could be. Because if we were to do whatever we wanted, we'd be open to accusations from the limited partners in the fund that we were taking startups willy-nilly not getting the deals that they thought they were going to get. So we had, perversely, a little bit of strength going into negotiations if the startups wanted to just reopen everything. Like, well, we can't. We can't. Our PPM for our fund says it has to be within this buy box. But that also meant that when PropTech was getting really, really hot, there was some startups who like, know, F that. We can do better. So that was the hardest thing, not having that flexibility, especially when Hey, your program's starting in three months. We want the money right now, our round is closing. We had a little bit of flexibility in that, but not enough, and we lost some really good deals on that one. That was the hardest thing for me. Jason Kirby (37:11.234) down a postmortem on kind of what those deals would have been had you had the flexibility. Have you followed some of those companies and kind of bit your tongue a little bit? Andrew Ackerman (37:18.834) Yeah, some of them. I try to follow both. mean, most people follow the start of the investments they make and then they know if they made the wrong decision and they fail. That's a type one error to look at the anti portfolio and look for your type two errors. Like you said no, or you couldn't say yes to them. And then they did awesome. Very few people do that. I try to do it. It's hard to do that consistently. So I haven't done it like forever, but for about good five or so companies. Um, you know, two of them are doing, one of them is still doing quite well. And I think we'll go the distance. The second one was doing really, really well for a while. Um, I think it hit some headwinds with when PropTech slowed down a bit, but I think it's still going reasonably strong. Um, and then there are a couple more that, you they kind of fell down, but since most of the startups will fall down anyway, you know, it's kind of hard to say like, you know, was my batting average. Would my batting average have been better with it? I will say, sorry, I will say there have been up rounds where I fought to participate in more fully, but we didn't, where they would have made the fund. There were a couple, at least three that I can think of where we either didn't exercise our right to invest at all, or we didn't exercise all or some of our pro rata into their next round. which was a horrible mistake on the fun side, to be honest. Those are very painful. Jason Kirby (38:57.174) of the companies that you've invested in the 70 plus deals, what's the one that you're most proud of that kind of or I should say like made you the most money or is likely to make you the most money? Andrew Ackerman (39:07.25) You know, I love all my children, right? The one that's probably Yeah, some of them get more and more allowance than others, you know Apologies to the other 69 plus startups the one that's probably got the most press and it probably Most press and probably furthest along in a lot of ways Well, there's a couple but let's just stick with the one that's in New York because I am it's a company called cherry Jason Kirby (39:09.742) Some children perform better than others. Andrew Ackerman (39:36.058) They aggregate real estate data across thousands of data sources. They dedupe it, they scrub it, fits right into your workflows. The kind of thing that large underwriters or large developers will pay data scientists a couple hundred thousand bucks a year to do. And they do it manually and slowly. This all happens in real time. So they went from when I was introduced to LD, they were doing just over a million dollars ARRR. and I can't say where they are now, but they've grown significantly and I think they're very close to exiting if they want to. Jason Kirby (40:17.358) I've been following them as well. You know, when I've dug into the prop tech world and they're synonymous, like my wife works in, you know, the large, you know, JLL, one the largest real estate ones. It's a common name brought up all the time. So they're definitely a market leader in their category. How'd you say, how'd you win that deal? How'd you get them? Andrew Ackerman (40:28.422) Mm-hmm. Andrew Ackerman (40:35.516) So it's very funny, right? So ironically, the better entrepreneurs see the value in the deal we were offering, and it's the less sophisticated entrepreneurs who sometimes struggled with it. taking a bunch of the nuance out, at the time, the way it worked was, hey, startup, you join the program. We're not giving you any cash upfront. We're not taking any equity upfront. We get a little bit of advisor equity, but we're doing it for the right to invest in your next round. That's how we did it. We basically brought the super pro rata up to $500,000 into the next round. LD, the founder of Cherry, he kind of looked at it and he's like, oh, the value of this angel or the visor equity is roughly 50 grand. He was doing, even at that point, he was doing six figure SaaS sales. He's like, I get one customer out of your customer sprints, pays for itself, I'm it. He got it right away. The kind of less skilled founders would often like kind of try to dicker about it. It's like, well, I don't know, is it worth the point or the quarter point or whatever it turned out to be? Should we do it? Should we not do it? So it was almost in a weird sort of way, a bit of an intelligence test, right? The kind of founders that were going to work best with us and get the most out of the program got the deal right away. Jason Kirby (41:56.494) So that's a, that's a lesson I want to focus on right now. think that is such a good point for founders to recognize around the real value of things. So they look at it like $50,000, like, Oh my God, like I haven't even paid myself that much money, you know, or like, I could hire like an entry level person and you're giving me like part time advice. It's just like, but the value that's created both an enterprise value and you know, potential revenue of that. You know, one connection, you know, most likely you're going for more. You're going to provide a lot more value. And it's, it's a, it's kind of an arbitrage play. Like, okay, if you can get an advisor in that provide that level of value, that can bring in the revenue, like your valuation goes up. You know, you're, if you're on a revenue multiple and you bring in a hundred K deal and you're on a five X revenue multiple, that's $500,000 in enterprise value added to your company from one connection. Andrew Ackerman (42:29.244) Mm-hmm. Andrew Ackerman (42:45.2) Mm-hmm. Andrew Ackerman (42:52.53) Well, and I'll take that one step further, right? To take that one step further, we weren't even asking for cash, right? We were asking for it in the form of a safe. And we actually, the safe had a nominal value of $150,000, but no money changed hands. There was no cap, no discount. So we only got that equity when you raised a price round later. And depending on how much progress you made, the higher the valuation in your next round, the less equity we got, which was a little bit weird because we were shooting ourselves in the foot a bit, but that's fine. But the idea was like, it was essentially performance based. So I would be a little bit wary as a founder because there's so many people out there that are like, know, give me X dollars retainer and I'll provide Y and you don't know if they're any good or not. But if you do have somebody who's really good at say biz dev that $5,000 a month retainer and 20 % rev share, like That can be one of the best investments you make. The tricky part is, are they good at it? Are they really worth it? Jason Kirby (43:56.654) that comes down to reference tags, talking to people, you know, seeing their background, what they've done. But it's one of those things where founders, I feel don't ask for that kind of help as much as they should. And the ones that do benefit greatly and those that don't that kind of keep it to themselves, like, don't want to give up equity. And, know, those, those tend to struggle a lot more as you kind of say, like the more experienced founders recognize the value because they've been there, they've done that. They know the arbitrage that could be played there versus ones that, you know, try to. Andrew Ackerman (43:59.996) Mm-hmm. Jason Kirby (44:26.584) do it all themselves and it's just a lot harder to scale a very big company by yourself. I think it's more or less. Andrew Ackerman (44:31.216) Yeah. And that goes back to one of the other questions, like the reason a lot of VCs don't back solo founders comes back to that point or those two points. If they don't have to say it out loud across the table to someone who's their peer, who can say like, man, Jason, that doesn't make sense. You didn't think that through, right? There's no check up here. Everything sounds perfect. Right. When you say it out loud, like, you know, that's when you actually stress test your ideas. And then also It's just too much work for one person. need someone else or two other people who are so invested in it that like, if something's not working at two o'clock in the morning, they get out of bed in a cold sweat and get to work just like you do. So I won't say I've never backed the solo founder. It's happened once or twice, but it's a lot harder to convince me that that's a good bet to make. Jason Kirby (45:23.084) No, I'm in a similar camp. It's feasible, but I often find that the qualified, capable founder that has a track record and a solo, slightly different story than I'm a first time founder doing this all by myself. just, becomes, the burden becomes too great unless you've already surrounded yourself by some amazing people. So I want to take this moment to transition to the book. Andrew Ackerman (45:37.127) Mm-hmm. Jason Kirby (45:47.68) speaking about this over coffee, you know, maybe about a month ago, you had kind of shared kind of the premise behind it being this narrative, this novel, the storytelling as opposed to, know, here's my biography and here's why I'm awesome. Here's why you should do everything I did. But more so like, you know, here's nuggets of value in these narratives that you can, you know, kind of pull out. So it'd be great for you to maybe give an example of one of those narratives. You mentioned a little bit earlier, but I think if you can kind of expand on one of the narratives from the book to kind of give people an idea of what to expect. Andrew Ackerman (46:24.242) Perfect, perfect. Prefers this by saying, the world doesn't need yet another business book. And I'm horrible that way. I find most business books deathly boring. It's the same anecdote, anecdote, anecdote, name drop, name drop, name drop, one page summary at the end of the chapter. You rip out those one page summaries at the end, you staple them together, you got 20 pages of good content. Yeah, oh yeah, true. So. Jason Kirby (46:42.71) Yeah, Or just ask ChatGPT. Summarize this book. Andrew Ackerman (46:50.098) Even the good ones are hard for me to read because of that and they seem to all have the same ghostwriter and this like boring bland style So my thinking behind it and you know can go into more detail where I got the idea was I was gonna write it as a story In part like I found that when I was giving advice to startups I would tell them the story about a different startup and what worked for them and that always stuck better So my number one goal when I wrote this was to write it as a story and along the way embed within it like the nuggets that they needed. So in the book, the entrepreneur Marcus is actually on the subway with his son, and his son makes a casual comment like, man, if I owned the subway, I'd be rich. So they start talking about it. It's like, what do you mean? It's like, wow, everyone takes the subway. I'll make tons of money. So the dad thinking he's going to be kind of cool. was like, well, isn't it kind of cool that the same $2.95 that we're taking four stops to your school, we could take all the way to Coney Island? And his son's like, you F that dad, like we should pay by the spot, by the stop, right? On my subway, you pay by distance. And that evolves into, well, especially like, you know, language, but it evolves into a discussion between them about different revenue models. Like, do you go per use? Do you go all you can eat? Do you do a freemium model, say for like, you students get two rides free, or do you even do a share of savings, right? Sell your car, give me half of the proceeds from the car, right? So it actually gets pretty sophisticated a conversation, certainly for an 11-year-old, fictional 11-year-old kid in the book, about different ways you can charge for your product. But it's embedded within that story rather than like you and me sitting down at a WeWork coffee table looking at your pitch deck. Jason Kirby (48:35.214) I that. One, I hope to have those conversations when my daughter turns 11 or daughters turn 11 about business models because I'm good to bring my work talk to home talk. I find that to be a unique way to deliver things. It's disarming. And I find that when delivering feedback to founders, they're so defensive and protective of their baby. And it's hard to state for an outsider the obvious. Andrew Ackerman (48:56.977) Hmm. Jason Kirby (49:03.384) sometimes which can be perceived as offensive to like, you didn't think I consider that. But when you tell it in a story or it's like, well, another founder went through this or someone else went through this experience, this is what they experience and what the result was. Or brainstorming in your case, business models and revenue models, it allows that subliminal seed planting into their head of like, I never really thought about doing spot pricing. Andrew Ackerman (49:11.73) Mm-hmm. Andrew Ackerman (49:30.95) Yeah. Jason Kirby (49:31.146) It's like, AWS, GCP, they all do spot pricing. How does that work? How should I try to maybe think about that? it unravels into this potential for their business. And I think that is something for founders to kind of take away from your book is just the seed planting of like, know, this kind of easy to read narrative that can be like, I haven't thought about that. Like, that's an interesting approach. Or you're like, wow, I would into that way. Andrew Ackerman (49:58.021) Yeah. By the way, humor works too. I've got a couple of jokes that I tell which are kind of gentle ways of getting them to see that they're focusing on the wrong things. But you're absolutely right. I wish I could remember who taught me this early in my career because it's a mantra that I use a lot. I'm looking for founders who have well-reasoned but loosely held opinions. I want the ones that it's like, ask them, hey, Jason, why are you doing this? And they have a good answer. Then I said, but Jason, that's based on this data, and I'm seeing this other data. And they'll be like, I didn't see that before. Give me a couple of days. I'm going to go dig into it. And they'll come back later with, OK, that data was not right because, or no, that data is right. We're changing what we're doing. So that's what I look for. Jason Kirby (50:42.958) That's one of my favorite things to see. It's honestly a criteria I require with any, any founder that I work with is that I can look at things first principle, challenge them and either I'd be proven wrong by their justifications or they acknowledge that there's another way or there's another approach they haven't considered. And, you know, begin to go down the rabbit hole of that. Uh, and I feel like that's a high quality attribute of most leaders and most founders that. deliver successful outcomes in their businesses. Andrew Ackerman (51:15.218) Yeah. And ideally then you come up with a very quick test. That's like, okay, we have two theses right now. What can I do for like a hundred bucks or less or free to test whether we should do X or Y? Those are great founders. Jason Kirby (51:33.726) And when it comes to the, well, sorry, we'll cut that part right there. was gonna go on a whole other, like open up another like 45 minute conversation. So for founders that are interested in exploring this book and learning more about it, what's the best way for them to learn more? Andrew Ackerman (51:57.594) I mean, obviously the best way to do it is to read the book and the best way to read the book is to buy the book. So it's available on Amazon. It's also available on Routledge Press, the publisher site. It's called the Entrepreneurs Odyssey because I'm big into puns, right? You know, there's a guy with a chainsaw hacking his way through the maze. If you look really closely, it's a novel approach because again, puns. Jason Kirby (52:18.51) Yeah, you're amplifying your dad joke. I was going to ask you about the VC jokes or the dad jokes. Andrew Ackerman (52:22.448) Yeah. There's a little bit of moth because the angel investor to kind of take some under his wings is kind of a little old school. Little borscht belt, little dad jokes, and also VC jokes. Jason Kirby (52:36.222) As a dad, can't resist, I'm sure some younger founders might have a roll the eyes, but they'll get around to it at some point. It's like this weird thing, the moment you have a child, that joke's... Andrew Ackerman (52:43.046) So it's funny, my oldest daughter just finished her freshman year of college. So a lot of her friends, a of her peers are kind of at that age where they're looking at entrepreneurship either in high school programs or in college. And a couple of them have read it and they actually liked it. They told her when I wasn't around that they enjoyed it. it couldn't have been, the dad jokes couldn't have been that bad. Jason Kirby (53:08.334) As long as you get like a subtle smirk, feel like it's success. Andrew Ackerman (53:11.74) A good dad joke, they should laugh and die a little inside. Jason Kirby (53:15.854) Yeah, exactly. As a reminder, it's a dad joke that shouldn't be acceptable, but they still acknowledged it. but Andrew, I really appreciate you being on the show, sharing your anecdotes on your experience. There's actually a lot more that we can cover as you're transitioned to second century ventures. And there's so much knowledge for us to extract. I'd love to have you on another time on the show. Um, but for the audience that obviously wants to more about the book, the Entrepreneur's Odyssey. get on Amazon, but if they want to reach out to you or follow your journey, what's the best way for them to do so? Andrew Ackerman (53:48.754) Sure, absolutely, no problem. they want, I have a personal website. It's as always a work in progress. It's andrewbyasandboyackerman.com. And if they want to reach out to me directly, what the heck, I'll give them my Gmail address. It's andrewbyackerman.com. Just if you do that, anyone who's listening, put in the subject line, know, fundraising demystified, I saw you on fundraising demystified, something like that so I know it's not just. the general run of spam that I get in a given day. Jason Kirby (54:19.886) You actually listen to you for an hour and have a cup. Andrew Ackerman (54:22.758) Yeah, like telegraph to me that like you're not just trying to pitch me on some like fractional real estate startup or like some e-sports deal. Tell me that like you've actually listened and you have a kind of specific question or relevant reason to reach out. Jason Kirby (54:40.782) I think that should be a qualifying criteria for anyone reaching out to anyone is to have some insightful comment or question to ask. Andrew Ackerman (54:47.184) Yeah. Like I said, if we wanted to, we could probably spend another hour talking about what people do wrong in fundraising with the cold outreach, but I don't think we do. So we'll save it for a different podcast. Jason Kirby (55:00.172) Yeah, well, I think it'll be a perfect reason to have you back for the do's and don'ts of cold outreach. I think that would be pretty good. Andrew Ackerman (55:06.97) or they just read the last five chapters of the book. Jason Kirby (55:10.442) there you go. if you don't want to wait for us to record another episode, just buy the book. about that? awesome. Andrew, thank you so much for coming on. I really appreciate it. Andrew Ackerman (55:11.622) There we go. Andrew Ackerman (55:15.537) Works for me. Andrew Ackerman (55:19.74) Thanks, Jason, I really enjoyed it. Jason Kirby (55:22.07) So I'm going to stop here, but I don't know. My controls have all been kind of wonky this whole time. Are you getting like a trying to reconnect at the top? Andrew Ackerman (55:31.634) I didn't notice that. Where it would be would be under the... It would have showed up by where the record button or the record icon is. I don't remember seeing that. Jason Kirby (55:34.861) It's there. Jason Kirby (55:43.256) So you're seeing try to reconnect at the top of the screen right now. Okay. So I think you're good, but I think something's wrong with think with their, their cloud provider or something. Cause it's like, me issues. says everything's uploaded and everything's fine. I'm going to end this session and hope everything's okay. Andrew Ackerman (55:58.93) Yeah, mine says 99, so I'll stay on until it says you're good. If there's a problem, we'll, I don't know, we'll re-record it. It'll be okay. Jason Kirby (56:08.238) So last note, I think I sent you my calendar to book another time for the follow-up chat about the partner. Well, worst case, this is my signature. You can just find a 30-minute slot and we'll catch up. I gotta jump to our team meeting right now. Andrew Ackerman (56:15.442) I don't remember, let me take a quick look. Andrew Ackerman (56:20.666) OK, I got it. OK, awesome. By the way, I really enjoyed meeting Ryan and Ritu and Oliver on Zoom, so we can talk all about that. Jump to your team meeting. I'll make sure we have a time on the calendar. If I can't find the time, I'll email you. OK, awesome. Thanks again. Bye. Jason Kirby (56:30.222) Awesome. Fantastic. Jason Kirby (56:38.85) That's good. Thanks, Andrew.