Why shouldn't most companies raise venture capital?

Jason Kirby (00:19.061) Hey everyone, welcome back to Fundraising Demystified. Today I have Mark Peter Davis, also known as MPD, managing partner at Interplay. Welcome to the show, Mark. Now I'm excited to finally have you. I've been running this podcast for over a year. You're my business partner and investor in Thunder, and I figured it'd probably be good to actually bring you on the show for once. You've got an incredible background. MPD (00:30.58) Hey, thanks for having me. MPD (00:40.62) So here's the awkward thing. I've been LinkedIn liking every post you put. Do I do that on my own episode? Or is that weird? Jason Kirby (00:45.351) as you should. You then comment and say, wow, that guy looks great. Well, let's jump in here for the audience that isn't familiar with Interplay or your background and the fact that you wrote the book on fundraising. So we'll go ahead and just kind of jump in. Talk to me about Interplay. You've invested in companies like Warby Parker, Coinbase, but Interplay is much more than just a typical VC fund. So what is Interplay and why'd you start it? MPD (01:18.988) So at the risk of sounding a little cheesy, I'm going to give the real version, the way we talk about it internally. Interplay is a mission -driven, for -profit startup ecosystem. And the whole thing centers around a belief that entrepreneurs are the primary driver of social change in our world. And we have decided to dedicate our professional careers to helping founders drive change. So we're not. knowing exactly what needs to be changed, we're trying to enable them and unlock them. We've got four dimensions of the business that serve this concept. Okay. The kind of key foundational one is we have a series a venture capital fund. So we focus primarily on investing in B2B software, North America, at the series a stage. The incubator is where we support seed stage companies, typically handful of people on the team, raise some capital, and we help them operationally. So in our incubator program, we're trying to help entrepreneurs. We typically work with them for six months, and we're trying to help them win. So the goal is to get 100 % success rate through that funnel. We have a foundry, which kind of categorizes more in the studio language that's evolved, where we start companies from scratch. So. That's accelerated over time. We're starting close to three, five, six companies a year now that are trying to solve, fill essentially a void in society where we think there's an economically sustainable for -profit solution. And so we're rolling companies out and that's really at the formation stage completely de novo. So if you look at it, you've got investing at series A, incubating, advising, coaching at Seed. and then starting to novo out of the foundry. The fourth pillar of this is that, you know, when this works, entrepreneurs wake up and they're there to chase a piece of cheese and that cheese is money. You know, why it matters that they're chasing that cheese is they're spinning the hamster wheel, which improves society. So that's kind of how the whole machine connects. But when they get to the end of their journey and they get the cheese, suddenly there's a new set of problems, which is having a bunch of money. MPD (03:43.284) So it's funny as that is that is challenging both from a psychological standpoint, but also it creates a whole new set of administrative needs. So we've developed a send interplay, which is a multifamily office. The reality is it's very selective about who gets let in, but it manages assets for ultra high net worth families, typically entrepreneurial background and helps them manage the entire estate top to bottom. how this kind of dovetails into the mission is that I have a firm belief that the opportunities to invest that actually generate the highest yield are usually the opportunities that create the most social value. So if you create value for society, you make more money. Here's a bringing that kind of abstract phrase to life concept. If you're investing in a real estate fund that's gonna buy a property and pay down debt, you're gonna get like a 15 % net IRR. If you find the real estate fund that buys the property, increases the standard of living of the tenants by renovating it. And they found some arbitrage to actually add social value. And they pay down the debt, you're to make 22, 23, 24, 25 % net IRR. So I believe there's this relationship between the top performing managers and the impact they have. And so by channeling capital into those vehicles, you're not on your it's actually one of the few, you know, capitalism doesn't always work. This is one of the places where it does, where you're putting money into the hands, very capable hands to go improve society and generate wealth. So that's the foresight of send interplay, managing assets for individual families. So, but those are the four pieces and they're all kind of in service of helping entrepreneurs drive social value. The thing about interplay that I'd layer on top is because our Objective is to build with longevity. We're not trying to build a firm that either gets retired when I kick it or, you know, fades away and I'm maximizing monetization in the short or medium term. We are very obsessed with quality over quantity, universally. So our venture fund, for example, we don't manage the largest funds. MPD (06:10.242) but we've consistently been a top performing product. Our incubator, we work with very few companies, but we're really hands -on and really supportive because we're trying in all of these different categories to have 100 % success rate. Same with our foundry. There are studios out there that are pumping out as many companies as possible. There's nothing wrong with that strategy if you're trying to maximize how much money you make, but we're not. We're trying to have 100 % success rate with the companies coming out. Now we won't achieve that. but we've designed every element of our process to go for that. And the net result is we do way fewer companies than we could, but the hit rate should be higher. So everything is kind of tooled towards this quality over quantity or speed with the hope that we build something lasting that will continue to support the market. Jason Kirby (07:05.589) So I've heard this story a few times, and it's always refreshing to kind of hear and be reminded of the entire flywheel effect that really from start to finish, from kind of the Foundry concept all the way to raising capital the next round and then ultimately having the exit and having the resources of the family office. And one thing I've noticed about you and the relationships that you build, it's really about making sure there's alignment on the relationship and those relationships are, you could stand the test of time, because it's no fun being in business with people you don't like. And I think when you talk about quality, that's one thing that you think of. and it comes up as a common theme, which I feel we're aligned, and that's why our partnership has been pretty successful to this point. know, Interplay as an ecosystem, it's pretty massive in terms of just the scale of all the employees that kind of come under the umbrella of all the different entities that you founded. You've had multiple exits. You kind of talked about where you're taking it, but you didn't really talk much about some of the successes you've had at Interplay. And to maybe just educate the audience, maybe speak to some of the wins that you've had that you feel were most notable. MPD (08:17.826) You know, it's cool. We're 13 years into building this firm and it takes 10 years to have an overnight success in venture as well. No. So we've been at it long enough where a cool moment has happened where we've kind of had wins in every element of the business, which took time. And when you start anything in entrepreneurship or venture, it starts out with you believing in a vision and a hypothesis, and then it takes a decade to find out if you were right. So, Venture funds, a lot of companies that have gone through that have done really well. The most notable ones are going to be some of the earlier investments because they've had the most time to mature. our kind of angel portfolio before we raised our first outside capital included Warby Parker, Coinbase, Course Hero. We've since gone on to invest in, I want to say a dozen other companies that really look the part of really breakout companies. and so, those keep coming. Like we've got, companies that we just invested in last year that have just hit the inflection point. And we're looking at them and saying, okay, it's either going to go public or it's going to be a big exit. But the, we made probably set something into the tune of 75 investments out of our venture product. do about eight to 12 a year. and I would say historically the hit rate is one in five, 20%. of the investments turn out to be breakout companies. So the list goes on. On the incubator side, we've had, we actually did our, it's an interesting thing, because the incubator has not had external capital historically, and so we never really ran the math on the performance of the group until recently we took in some outside capital from some friends, and we ran the numbers, and it looks like a top, 5, 10 % performing venture fund. We've had a handful of exits come out of it. Most notably one was earlier this year. It one of the first companies we incubated. A company called Jack Pocket, which we sold to DraftKings for $750 million. That was a big outcome. And the team over there, we deserve none of the credit. The team over there did everything under the leadership of Pete Sullivan, who's a total beast. MPD (10:43.564) But it was a great one of a handful of great wins on the incubator side. And again, when we're taking these incubator companies, these are companies that typically have a product. They're five people. Maybe they've raised half a million bucks. And we like to call ourselves an interim co -founder. We kind of get embedded in the business. We don't want to be in charge. We don't want any governance. We're just trying to de -risk the whole thing. Everything from the accounting's fucked up. to the strategy's not right, to the messaging isn't good. And the goals when they come out of that program, they're set up to succeed at the business level. It's not about fundraising. Fundraising's part of it. We're trying to make sure it's an awesome business. Awesome companies raise capital. And so it's going towards the core fundamentals, the core principles of the company. On the foundry side, I wanna say we're just shy of 20 companies that we've started. The first 11 companies we did were services for startups. And I think we safely built one of the largest platforms to help entrepreneurs operationally. So this included commercial and health insurance, marketing, leadership training, accounting tax, CFO, software development design, business process outsourcing law, and others. And obviously notably capital raising with the people over at Thunder who are killing it. We have sold five of the 11 and a couple of those outcomes were pretty substantial. And what was interesting, so we sold Founders Shield to Baldwin Risk Partners, a public commercial insurance brokerage, and we sold DevSpark, which became Spark Digital, to Intiv, a private equity roll -up of software development shops. What we think is pretty cool though is with this batch of companies, the way we architected the process was to focus on building companies and funding them through revenue. So it was exercising a different entrepreneurial muscle. We bootstrapped all 11. So we've had we've had goes at starting companies and revenue funding. We've had goes at starting companies, getting outside capital, square out the gate. MPD (13:09.91) you know, some of the major venture firms are investors in some of our recent foundry companies. And so when you go through all that, it's, us, it's very intellectually interesting because when we identify something that needs to be solved, we then reverse engineers, the proper solution and reverse engineer to the proper financing strategy from that. The financing strategy is not a default one -stop shop. You should raise venture, which actually is like a core theme of the book. I wrote a million years ago. that venture capital is not for everybody. Jason Kirby (13:42.335) Well, let's talk about that. So you talk about the bootstrap, talk about fundraising. You've had some great successes, which I'm glad you're able to kind of speak to those and share some of those names. But you, many years ago, wrote a book called The Fundraising Rules, where you help founders kind of figure out how they should go about fundraising. And a lot of it still applies today, despite technology changing and the market's changing a little bit. Can you speak to some of the key principles of the book and kind of the key things that maybe are different, if any, now versus when you were on the book? MPD (14:14.786) Yeah. So first of all, if you're not raising capital, this is probably the worst book ever to read. I would argue it's extremely boring. I'm the worst book promoter ever. But if you are raising capital, it's probably pretty useful. So the context on the book is that I started working in VC in 2006 and was learning the ropes and there's no educational program for VC. It's been an apprenticeship business. Jason Kirby (14:26.549) Agreed. MPD (14:44.93) You've got the Kauffman Fellows out there, which is one, but it's hard to get into. Not everyone gets into that. And there's a lot more VCs than go through the Fellows program. And so everyone's learning on the job. And I was too. And I came in kind of with this consulting slash entrepreneurship background and was learning, drinking from a fire hose, learning a ton through the apprenticeship construct. And what I found frustrating on day one of being a VC was that entrepreneurs came in to pitch. and they didn't know how to speak VC. They were speaking entrepreneur. And it's the same concepts framed differently. There's a different lexicon. There's a different way to communicate. The fundraising materials look different from the documents you might make for internal management. And so my objective as I was learning was to write piece by piece what I was learning and make it transparent. And I had the belief that if we illuminated the fundraising process, even from the VC side, it would be better for everybody. Entrepreneurs would put their best foot forward. They'd be presenting their company in the language that VCs are looking for. Some companies were straight up getting dinged just because they framed it improperly. And VCs would see the best version of each company, which should help elevate the best opportunities to the top. So I believed it was a win -win. And so I spent five years, my first five years in venture, three times a week writing a blog post about one piece of the chronological narrative of how to raise capital from beginning to end. And I didn't plan to make it a book. Eventually I was getting, this was all on the web and lot of people I guess like to read paper, and I was getting a lot of requests and I got lectured by a... published author to do it. So I eventually put it together as a document, a single book. And that I think was 2010, 2011, and it's called the fundraising roles. Now it's written kind of the way the Boy Scout handbook is written. You don't need to read it cover to cover. It's got a painfully detailed table of contents. So the idea is you can say, hey, I'm at this stage and it's all in chronological order. I'm going into this meeting. What are the do's or don'ts? MPD (17:08.358) And can flip through and read three pages and kind of know the gist of what's going on and how to think about it. And how to specifically answer certain questions. When a VC asks a certain question, there's a language they're using and it's a little coded and they're looking for a certain answer. And I think a translator is a good thing. Both parties should know what they're saying. So that's the basis of the book. It's supposed to be this handbook to help people kind of navigate step by step, you know. wherever they are, they flip to that page, read that segment. Now, before the fundraising journey starts, I do talk a lot about the types of materials needed. And even before that, I think the most interesting insight from the entire book is whether or not you should raise capital. There's a diagram I created, a framework, it's a two by two, because I'm an ex nerdy consultant, that is now taught at some business schools. as part of their core curriculum for around entrepreneurship adventure that talks about when you should raise capital. And so if you're raising money and your default knee -jerk reaction was, should go out and raise from VC, stop. read the first 30 pages and decide whether you should or not. Because there's a lot of companies that should be bootstrapped. There's companies that should raise from angels only or family offices only. And then there's some companies that should only raise from VCs for subsequent rounds, maybe get off the ground with friends and family. And knowing which side of the line you're on, which is objective, it is knowable, is really critical. Because if you get that decision wrong and you should be bootstrapping your company and you raise VC, it will probably kill the return to you as a founder. You'll eat it up. If you should raise VC and you raise angel or not enough capital, you're not going to win the race. So knowing which strategy you're supposed to be in is as as knowing what MPD (19:23.042) problem you're solving, what product you're building, and how big the market is. So this book is designed to help people figure that out through a fairly simple kind of two by two diagram. And then it runs through a bunch of scenarios, how this goes wrong. If you put yourself in the wrong quadrant, when you belong in a different quadrant, and I give you some horror stories around how this can screw you up. So this is I just call this like financial, like your capital strategy or alignment. Right. And so we talked about those service companies who didn't raise any outside capital. That was the aligned strategy for those companies. And I think every business has a, is a bit of a fingerprint. They've got a unique set of characteristics and you want to then go match how you build the company, the team strategy, all the pieces, including the financing strategy to match the fingerprint. Jason Kirby (20:17.599) So I feel like when you go through these talking points and having read the book, it's that piece right there we talked about the most important part being should you pursue venture? And I often have to stop countless founders from pursuing a channel that just is not a fit for them. And there's so much You can speak to probably this, like the early days of your career, early 2000s, we came out of the dot -com boom, but still venture was pretty nascent in the grand scheme of things as an asset class. as a point of capital to invest to founders. But now it's mainstream. Everyone knows about venture capital for the most part. And now it's got sex appeal. And it's like a point of validation. So founders feel that rather than chasing customers and revenue for validation, they go and chase venture capital, which often leads them to a pretty dismal outcome. And when they could have been wasting spending that time towards building as opposed to chasing capital. So I find, you if you haven't already started raising or, know, to founders that are out there, like that's a good book to start with, but it's a key thing you need to ask yourself is do you really qualify and do you really want the strings that come with, you know, venture capital? MPD (21:41.292) Jason, I go far enough to say most companies shouldn't raise venture capital. Most. So if you haven't thought about the market that way before, if you've put venture capital on a pedestal, which I get it should be, because it does correlate with the biggest outcomes. In most cases, I get why that's sexy. It doesn't mean it's the best thing for your business. So the key is to stop and really look in the mirror and be open -minded. Jason Kirby (21:46.697) They should have. Yeah. MPD (22:11.606) By the way, one of the scenarios in the two by two, one of the quadrants, is shut the company down. Don't build it. So there's also that getting in touch with reality when it's not a viable business to begin with. Jason Kirby (22:25.449) Now, like the pet dating apps. Certain business models that just don't need to exist and or be funded. Sorry if you're building a pet dating app. Sorry, not sorry. And that's what I think is important to kind of touch on is just founders. You just need that exposure. need to kind of know what options are really out there for them. And when you look at the stats, think last I looked at it was like 150 ,000 companies a year actively seek capital, but only about 4 ,000 receive venture capital. So when you think about the statistics, it's just, it's not in your favor. MPD (23:07.936) Right, and also some chunk of those companies shouldn't exist. Some chunk of those companies are great businesses that venture capital will hurt because they don't fit with the model, it's not aligned. And so it's just about knowing who you are. There was a guy who, he was one of the many, bumps on the journey of kind of seeing this framework. And I remember he was an angel investor and was sitting in a room with VCs and I could fill all the VCs judging this guy for not having a great business. And they were thinking less of him. His company was doing $5 million in revenue, which in the VC landscape is tiny. It's basically a failure. You got to keep innovating and trying to figure out a way to grow. And he wasn't growing five million bucks in revenue. But here's the thing. He owned the whole business and they had an 80 % EBITDA margin. He drove a Maserati. So tell me if you want or not. So, you know, it's all about finding alignment. Jason Kirby (24:17.631) I love how you associated success with a Maserati. That's like the last thing. Yeah. And that's the thing is it's like, you know, knowing what is actually on the table for you as a founder and, you know, pursuing the right options and not seeking necessarily the external validation, but also looking at the stats, like, you know, look at what's going on in the industry and venture and just decide whether or not that's a path for you. When we talk about MPD (24:20.354) I don't know. That sounded good. Jason Kirby (24:45.321) kind of your background. we're talking about what founders should be doing to raise money, but you also run a fund and you're kind of in all the positions. You're advising countless companies on bootstrapped or raising venture, private equity, but also you are raising money for your fund. What do you think are the differences from when it comes to raising capital, being a founder versus being a GP, a general partner in a fund? MPD (25:11.532) I think it's actually pretty similar, although I would say for venture fundraising, it's a little bit of a longer dating process. You're building longer term relationships and the relationship on the back end, I don't know if it's necessarily longer in tenure, but it's expected to be multifaceted, where people will kind of partner up across multiple funds, whereas you're not typically necessarily partnering with an entrepreneur across multiple ventures. So it's a bigger courtship and a longer marriage in some regards. But there's a lot of parallels. It's a lot of parallels about communicating clearly. It's about having a real strategy. It's about being an honest actor, right? It's about being realistic. It's about being transparent. It's all the things people are looking for in partnership. And partnerships, a hard dimension of business, maybe one of the hardest. And it takes decades. I feel like I've learned an amazing amount in the last 20 years of this. And I'm still learning how to partner with different people with different styles, different expectations, how to get ahead of issues before they exist, how to over communicate. These are the foundational things of having good, healthy relationships. And relationships are kind of the glue of us building things as people. We do things in groups. So there's a lot of parallels. Jason Kirby (26:47.646) I've seen that as well. I do feel that. Raising for a fund, believe it or not, as a founder, you got that one thing you have to think about and that one thing you do and you raise for that one thing. with the venture funds, the competition is pretty fierce, in my opinion, in terms of where capital gets allocated. And that long -term relationship, can't be like a quick, decisive bet. You can't grow traction on a venture fund in a month or two. You don't have month over month growth, really, on the venture fund. So it's hard to really dictate and articulate your performance. So flipping it back, putting on your VC hat, when looking at companies, and particularly for Interplay's Series A fund, what do you ultimately look for? What's a standout company that you think will ultimately be one of five that will ultimately break out? MPD (27:40.29) Yeah, I we obviously go into every investment thinking it's the breakout company and we get it right 20 % of the time. But we do have a really uniquely high success rate within the portfolio. So that's one of the things that's been a little bit of a key to our success as on the venture investing platform is our portfolio construction has a higher concentration of outcomes than is common where it's just all dependent on the power law. And I think the reason why that happens is because we tend to invest in companies that have real fundamentals. They have an economic engine in place at the time of investment. So when we write that check, the companies have strong revenue, revenue growth, healthy gross margins, a real LTV CAC ratio, good unit economics top to bottom. They're typically default to live, large quantifiable addressable market, tier one team, tier one co -investors. We're kind of looking for the whole economic engine. And so by the time we write that check, you know, we've underwritten it to a 10 X, but if we get it wrong, it's not as though the wheels are going to fall off the car the next day. It just means we usually were wrong that the growth trajectory. Wasn't 10 % a month. was 3 % a month or 5 % a month on average in hindsight. And so we still tend to get outcomes within that group. So what a couple of ways to frame what I'm saying. We invest in companies with real economic engines, you know, so It's generally B2B. If you square the companies up next to each other, I like to say one would look like an ice cream truck, one a big rig, one a golf cart. If you pop the hoods, they all have the same engine beneath. And so another way to frame this is we invest in math. We actually look at the fundamentals and we're looking for math in addition to the great ideas and great founders. But the math is a meaningful way to find signal in early stage. And it's not always available in early stage. Sometimes the math isn't ready yet. It's still in production. So that's a little bit of our nuance is we like to invest where the math is visible and quantifiable. Jason Kirby (29:57.621) When a founder comes to you, how do founders ultimately break through to your team? So, you know, have, you're obviously you're on the ice of the investment community, but you have Mike Rogers running a lot of the data shows partner there. But how do founders break through? How do they get your attention? And what's that relationship life cycle? Like, are you quick to act and you meet them for a month and you're in, or you build a relationship over years? Like what's that typical process? MPD (30:25.58) So this answer is really different across venture firms. I'll answer it for us, but I just want to flag that it really varies a lot and there's not a right or wrong. For us, we will invest in new relationships in a pretty agile way. We really know what heuristics we're looking for and when we see them, we're on it. So we certainly love to have longer term relationships, but it's not a requirement. So someone could show up in our inbox, typically through, they can come in and literally just hit interplay .vc slash engage. We have an online application, we make everyone fill out even if we already know them. And the reason we have them fill out that document is it helps make sure we get the full data set to run an initial evaluation. And we're not missing anything because when we were, there was some efficiency gains to hit there. We used to just have people, send us a couple of bits of information. We'd meet them, then we'd ask, yeah, we forgot to ask you about X, Y, and Z. And then we'd find out it's not gonna be a fit. And they wasted time and we wasted time. So we just get everything upfront. We look at all of it thoroughly. And the entrepreneurs that we end up investing in, they tend to come in literally through the website. They tend to come in through other entrepreneurs or VCs that we're friendly with. They tend to already have a term sheet from other VCs. and then they reach out to us and, know, one of the things that we do is we don't lead deals. So when an entrepreneur is putting a kind of a syndicate together, the team that's going to invest in their company in this round, they're taken five to 10 people into the round. Usually there's two leads. We tend to sit behind the lead and write a larger follower check and be a uniquely value add partner. to the entrepreneur who doesn't lead the deal. So we don't sit on the boards. We're like the private consignly area where the entrepreneur can call up. We're all entrepreneurs by training. We've got this uniquely large support platform for entrepreneurs in general, but particularly uniquely large for support position in the cap table. And it just ends up being, I think, a pretty attractive narrative for founders. they'll get the term sheet from a lead, and they'll very often reach out and try to get us into the deal. MPD (32:50.434) Or we'll see it first. And we can typically get through diligence more rapidly than a traditional venture fund. I think in large part by virtue of the fact that we don't take board seats. Board seats just take up a lot of time. So when you're not spending 45 hours a week in board meetings and you see a company you love, you start diligence the next day. diligence, it's 10, 20, 30 hours of work for... people sitting who are, you know, really busy with other boards, that might take six to eight weeks to get done, maybe 12 weeks. We can get that done in a week or two or three. So we run through it. So I think very often we'll end up committing to maybe half the companies we invested will end up committing before anyone else is committed to the deal. And we'll commit saying, hey, pending the lead in the terms, we're going to participate. And they can walk that entrepreneur then walks into a bunch of VC meetings saying, Hey, interplays finished their underwriting. They did full diligence. They spoke to customers into the whole thing. they're in, if the terms look good and they like the lead investor, do you want to take the meeting? And we'll introduce that entrepreneur to a bunch of other, well -known leads that we invest with, which usually gets them right into the meeting because you know, we have a friendly who knows we've done the work on it. So That's kind of our approach to it. And the speed is a little quicker than average. we still do, we're putting companies through the paces, unfortunately, for the entrepreneurs. mean, entrepreneurs will say they love that because it'll make sure they have everything tidied up. But we've been on both sides of that. I've been through diligence. It's stressful. It does make you stronger, but it sucks. But we need to do it, so. Jason Kirby (34:25.347) What? Jason Kirby (34:40.851) Yeah, so that's what I want to back a little bit. What's some of your secret sauce, or not secret or secret, with diligence? What are some of the things that you look at that ultimately influence your decision? MPD (34:56.866) So we're looking across the entire stack of qualitative and quantitative considerations. This list, usually, for 80 or 90 % of the things that need to be evaluated, they're identical across companies. There are always nuanced dimensions to each company that are more bespoke. I have a background in diligence. It's actually what I did before business school. did... Diligence on &A transactions, did about 60 deals where I would represent IBM or private equity firms and I was on a team that would parachute in and try to turn every rock over of the target company that was being acquired. A couple things I took from that that had been invaluable. One, the diligence set of things that matter usually comes down to three things. It doesn't have to be three, it could be two or five, it doesn't matter. But of the 50 things you need to check, You check all of them, but there's two or three things that usually are likely to kill the opportunity. And if you focus on those first, you can save a lot of time. So we try to identify upfront the reasons why we're not going to invest in this particular thing that we're excited about. Why won't we invest? Well, what if A's not true or B's not true? And we'll go deep on those first. The second thing I thought was really unique. is when I was at a consulting firm, we had to prove the value we were creating. So we were charging big fees to our clients. And so my boss would say, hey, call a hundred customers and here's the questionnaire. And the reality is I'd literally sit in a room for four days, cold calling a hundred customers. And it was mind numbing, asking the same damn questions. But something magical happened with one, two, three out of those hundred that we'd call. 97 % of the time they'd hang up on me or say yes or no, and they'd give you stock answers or they wouldn't give you any insight. Every now and then you bumped into somebody who was living the experience that we were trying to understand. They knew this product set in and out. They had been using these products every day for the last 20 years and they could just talk the talk. And when they'd open up, MPD (37:18.178) you could see into the business opportunity in a way that was unique. So when you get an expert on the call who's so deep in this space and willing to share, someone who's close to it, whether it's farming equipment, you and I can read about that all day. There's someone who's been living farming equipment for 20 years, and they're gonna know what's up. And so getting those conversations is invaluable. So. That's kind of the X factor in addition to identifying the things we need to target. It's finding people who are living it. And that is a niche. And that requires us to have a huge network, which we've been developing and we have, but to really do the work of scrubbing the network and making the calls until we get someone on the phone and you know the difference between someone answering the questions and someone explaining the market to you. Jason Kirby (38:17.333) way to look at it is that the validation that you get from actually talking to someone versus what a founder says their market is or the Tam Sam song, which helps get some indication, but to kind of really understand the customer buy -in, that's that extra step that you're going in your diligence, which can help validate your decision to move forward. And I feel it's funny that So many people are afraid to do that, whether it's reference checks on hiring or reference checks on founders or reference checks. Just generally, it's reference checks and putting yourself out there and picking up the phone and trying to get someone to tell you kind of the real truth. And so from an LP perspective, it's great to hear that you're actually doing that homework. But from a founder perspective, it shows you're actually committed to learning and making sure making the right decision and not just taking their word for it. From a founder perspective, it would be like, yeah, call them. Here's all the names, numbers. MPD (39:11.478) And you learn stuff, by the way, that actually helps us help the founders later. The stuff that usually always checks out is the academic view of the market. This is better than this. This is a better price than this. But there's the human dimension that you can't get from the academic studies. I'd rather play golf than upgrade my software. That's a market killer. That happened to me on one deal. Jason Kirby (39:33.087) you MPD (39:40.096) you have to understand the illogical behavior. Jason Kirby (39:46.783) So as we wrap up here, what would be your parting advice for founders that are actively raising venture capital? MPD (39:58.982) There's a lot of content on this so people ping me and just drop the email saying hey, what should I do? I've packaged up most of my content, so I'll give you a couple of pieces but The book is candidly super useful. It's on Amazon. It's the fundraising roles. I Should probably change. I think it's $10 or something. I should just change the price to a dollar I just haven't logged in in 10 years to deal with it Jason Kirby (40:08.969) Pick your brain. MPD (40:27.644) the, I also made a video, which I think is a nice supplement, which you can find on MPD .me, which is my blog under talks. And there's a talk I used to give right after I produced the book where I was doing a speaking circuit around the universities. And it was kind of the supplement to the book. If the book is how to play chess, like what the rules are, how the pieces move. This talk is kind of how to get to checkmate quickly. So worth checking that out, an hour, 45 minutes, listen to it on 2X, whatever, but it's gonna give you the human dimension of how to create FOMO, how to create dynamic, how to signal in a subtle way that is in VC speak that will get VCs to move more aggressively. So I think that video is gold, worth checking out. But I would say the fundraising advice I'm gonna give everyone is not about fundraising. Build a great company. build a great company, a business with good fundamentals. Find the fundraising strategy that matches to the nature of that company, and then go do the dance. And the dance is a series of tactics that are learnable, right? The dance is knowledge, right? There's a hundred little things you gotta do, and you gotta do them well, and you're gonna get to the outcome you should get to. But the outcome you're gonna get to, that you should get to, is a function of how great the company is. So focus on that. A lot of people skip that. They skip right to, how do I get capital? Because I think raising capital is a measure of success. It's not. It's just an ingredient. You gotta make a cake. Congratulations, you bought some flour. You gotta make a cake. Jason Kirby (42:19.679) think that's well said. And I think that's one of the things that, you know, it's goes back to the first conversation we were having earlier about, you know, whether you're bootstrapping or if you're truly venture packable, you focus on building a great company. You know, you'll have the staying power to either attract the capital or to, you know, be profitable and just grow the business in and of itself. Mark. It's been great to finally have you on the podcast. think we're about a year and a half into the podcast and it just occurred to me, like, yeah, I should probably have Mark on. It's been a while. MPD (42:50.274) You Jason Kirby (42:53.439) It's great to have you on, share your insights. We'll make sure to link to the book, Your Terrible at Marketing, and the link to the presentation you just mentioned down in the show notes for anyone that might be interested in picking up some advice from you. if people want to reach out to you or connect with you, what would be the best way for them to do so? MPD (43:11.66) Just, you can get me on Twitter, you can get me on LinkedIn, we check all of it. But the great thing about Interplay is it's kind of an open door. You can go to interplay .vc, there's a big red engage button, you click on that, you submit stuff, and you're gonna end up connecting with the right people in our organization and having a conversation. So that is not a dead end, that is an open door. Jason Kirby (43:41.638) Yeah, it's a great system in terms of how founders can get in. So it's literally just fill out a form and it navigates you to the appropriate questions to get the appropriate help and response from the overall interplay team. It's well designed. I don't see that very often from other firms. Well, awesome, Mark. It's been great having you on. Appreciate the time and look forward to getting this out to our audience. MPD (44:03.906) Thanks, Jason.