Episode Transcript

Jon: Today., we’re with Peter Harris for the Venture Capital podcast. The purpose of this podcast is to interview VCs and angel investors. Almost like a matchmaking service is where I'm kind of looking at it. So it would be, Hey, I've got a start up. Would University Growth Fund be a good fit for me? Would Peter Harris be a good fit for me?

 

Jon: That has that premise sound.

 

Peter: Sounds great.

 

Jon: Okay, so first, so Peter Harris, what are probably the most notable deals that University Growth Fund is invested in? Because this is the second VCU that you've been part of.

 

Peter: Look, I think there's two ways to know notable. So one is brands that everybody recognize or you know or investors in the Airbnb BE and Postmates and Pinterest and Lyft. So you.

 

Jon: Get some good names, other big names.

 

Peter: In terms of companies that I'm really excited about, companies like Carter Toast.

 

Jon: Actually, I actually introduced you to prior to.

 

Peter: Right. Did introduce me to Carter. That's right.

 

Jon: It's I got to find the next Carter for you. That's kind of like my personal goal.

 

Peter: That sounds like a great goal for me. Yeah. Yeah. And then we've got some earlier.

 

Peter: Stage companies that I'm.

 

Peter: Super excited about their potential. But, you know, it's a long road still, so.

 

Jon: So what is your your thesis and top thesis for university growth?

 

Peter: Yeah.

 

Peter: So, you know, it's a little nuanced because we're.

 

Peter: A little different than most times, but we're a co-investment firm, so we don't lead rounds. We co-invest alongside other top tier investment firms. So that's a that's a criteria right off the bat. They've got to be raising money from another institutional investor.

 

Peter: And then just, you know, being true to our name, it's a university growth fund. So we're looking.

 

Peter: To invest in companies that are growing.

 

Peter: Where every dollar we put in will ultimately lead.

 

Peter: To growth in revenue. Right. Or other important metrics.

 

Peter: What that means.

 

Peter: Is we don't invest in seed stage companies because typically they're like still in the desert trying to find their path.

 

Jon: What would you define and see.

 

Peter: Anybody doing seven $1 million in revenue?

 

Jon: Okay.

 

Peter: We don't look at companies in.

 

Peter: The pharma or med device space. It's very binary, right? You're putting money into R&D not to grow.

 

Peter: Not that those can't be amazing investments.

 

Peter: This just not where we focus or just like very, very heavy technology. Like we looked at this company a number of years ago that could shrink our systems from like this big down to a pack of cards not related, although super interesting tech.

 

Jon: Okay. Got as far as deals that you like. If you could pick the next three type of profiles for deals that you would like to invest in, do you have an idea of what those would look like?

 

Peter: The types of deals I would love to do, like a series, a deal led by a top tier firm solving a pain point that's that's unique but also big.

 

Peter: So, for example, we're looking at a company right now that helps.

 

Peter: People pronounce names correctly. Okay. So first blush, you're like.

 

Jon: I use that in India. It's like.

 

Peter: Really? Yeah. All right.

 

Peter: So you're like, really? Is that really that big? But then you start thinking.

 

Peter: About right, like call centers, universities, sales organizations, right?

 

Peter: Like nothing. Nobody wants to hear anything.

 

Peter: More than, like, their name pronounced correctly, especially if it's hard to pronounce.

 

Peter: Name. And as our our world becomes more and.

 

Peter: More like globalized and interconnected. Right, it just becomes more and more of a pain point. So like, things like that where it's like.

 

Peter: Yeah, you're actually solving like this really interesting pain point. And the more you delve into.

 

Peter: Technology, they actually have something like really compelling and unique, differentiates them. Like something like that's really exciting.

 

Jon: So for the most part, the way I look at is you're looking to because you guys don't lead rounds or at least early rounds yet, and then you're looking for more to syndicate with top firms like Sequoia as your primary decision maker.

 

Peter: Well, it's not so much that they're the primary.

 

Peter: Decision maker for us as much as.

 

Peter: Like they're doing the deal. And we you know, we make our.

 

Peter: Own decision of whether or not to do the deal. And oftentimes we pass more often than we do the deal. Right.

 

Peter: But like, we're also.

 

Peter: Kind of able to leverage their expertise. I wonder underwriting the deal.

 

Peter: And we're not on the hook to write a.

 

Peter: Really big check for a relatively small fund compared to this.

 

Jon: What are the last few deals that a top tier VC fund invested in that you looked at that passed or like it is like generally, why did you pass?

 

Peter: Yeah, so we passed for a number of reasons.

 

Peter: One, we passed because the valuation was just too high. Okay? So we were like, great company, amazing company, great syndicate of investors, but the valuation is so high that we're not convinced that we can generate a meaningful return there. Okay, so that's one.

 

Peter: Another is, you know, the company might have.

 

Peter: A high valuation, but more important than that, they're still figuring out their business model and they haven't really been able to demonstrate that they can get to a profitable business model.

Peter: And so we've said.

 

Peter: this is really interesting, but like, and yeah, you're further along, but you still haven't figured.

 

Peter: Out some of these core things yet. And so the risk of this company actually just flat out going out of business is still really high. We're going to pass. Okay.

 

Peter: Versus like, you could.

 

Peter: Have a series, a company that's generating a million or two in revenue, and the business model is working and they actually have something.

 

Peter: Unique. That company could very.

 

Peter: Likely be acquired by another business, even if they don't end up becoming really successful. And so in that case, maybe they get acquired for ten, $20 million, but you still get your money back and maybe even a little bit of a return. Okay. So that's really what we're looking for is like, yeah, you're generating revenue.

 

Peter: The business model really works.

 

Peter: You've got a great team. We give.

 

Peter: You a dollar.

 

Peter: You take that dollar, you turn it into five. That's great. That's that's the type of stuff we wanna invest in.

 

Jon: Okay. When you're looking at C 100 deals, how many of those deals are venture funds that are partnering with A You already have an existing partnership, whether they're reaching out to you and how many of them is someone's coming off the street and saying, look at this deal.

 

Peter: Yeah. So we pretty much never do that comes to us direct. Okay, look, we know who we are. We know who we are. Not we're not Sequoia, right?

 

Peter: We would rather do the deal.

 

Peter: Where the entrepreneur doesn't come to us, but goes to Sequoia and we convince the entrepreneur to let us in alongside then the company that comes to us and can't get funded basically. Right. Okay, That's just our strategy. That's different. Other funds would much rather compete head to head with Sequoia and get access to that same entrepreneur and deal.

 

Peter: Right.

 

Peter: So the real question, though, is how many deals do.

 

Peter: We go out and source for deal directly with and build a relationship with the entrepreneur versus ones where other funds bring us into the deal? Okay, that's about 5050.

 

Jon: Okay.

 

Peter: So we we have a broad.

 

Peter: Network of venture funds that we work with. And oftentimes.

 

Peter: We're bringing them deals and they're bringing us.

 

Peter: Deals. We're helping them with due diligence, really building a relationship with them. And finding deals to do together.

 

Peter: And then other cases.

 

Peter: We find out about a company that we.

 

Peter: Think is super interesting and we.

 

Peter: Go and chase down the entrepreneur and and sell them on why we would be a great partner.

 

Jon: Yeah. Let me ask you, what do think about the information technology space in general? Is that a space.

 

Peter: Regrets is.

 

Jon: Too.

 

Peter: Big? I don't know what to tell you.

 

Jon: What to think about cryptocurrency. Is cryptocurrency a space that you guys would invest.

 

Peter: In potentially at some point, but not today.

 

Jon: Okay. Agriculture.

 

Peter: We've actually looked at several agriculture yields and if you count Gram Mark as an agriculture deal, it's actually done on Oak Entertainment. We're an investor in domains which I would argue is a type of entertainment and we are an investor in Spotify.

 

Jon: Okay. What about energy?

 

Peter: We're investing in a company called Carbon Lighthouse.

 

Peter: That does energy management for commercial buildings.

 

Jon: Okay. What about clean.

 

Peter: Tech? I would also carbon my house as a clean tech deal, but we probably wouldn't invest in solar panels.

 

Jon: Okay. What about sports?

 

Peter: We're an investment. A company called or Stream Sports was they aggregate high school sports scores?

 

Jon: There's a few those that have popped up lately. I think I've seen my field.

 

Peter: Yeah, They have partnerships with large data providers like the schools of the. The data.

 

Jon: Okay. What about the travel space.

 

Peter: Or investor in Airbnb?

 

Jon: Okay. What about a travel deal coming in 2020?

 

Peter: That we're looking at? You know, we've looked at a lot of travel deals.

 

Peter: I think travel is is tricky because you have some very large incumbents. There's certainly a lot that needs to be done there to be fixed, but it can be a little bit tricky to figure out who the winner is. We've looked at a lot of deals and there are some some great companies out there fashion.

 

Jon: I don't see you doing a fashion deal.

 

Peter: We did Privé.

 

Peter: Revo. What's that? Sunglasses.

 

Jon: Sunglasses?

 

Peter: The idea behind Privé.

 

Peter: Bravo is. I'll go buy a pair.

 

Jon: Okay.

 

Peter: Is they are celebrity driven?

 

Peter: Yeah. So Jamie Fox is one of the founders. And the genesis there was he went to a red carpet event and on his way there he forgot his sunglasses. And when you go to these events, right, there's lots of flashes and so you need sunglasses. So he had his his people drop stop by a gas station. He went and try it on a few kept one did the red carpet, threw it away right after.

 

Peter: And then all the blocks were like.

 

Peter: Where did those sunglasses come from? They looked so good. I want to buy a pair.

 

Peter: So then he was like, I'm going to start a brand.

 

Peter: So all of the.

 

Peter: Sunglasses are $30. Well, actually, they now have some slightly higher priced ones, but 30 to $60. Very fashionable.

 

Jon: Okay. Automotive.

 

Peter: We've done a ton.

 

Peter: Of automotive tech. Really? Yeah. We're investors and Hawk, which does roadside assistance. Yeah, we're investors in fair which does used car leasing.

 

Jon: What about life sciences or biotech? I feel like with a lot of investors, you're either you touch it or you don't.

 

Peter: So that's one we typically don't touch.

 

Peter: Although we are an investor in 23.

 

Jon: Y 23 to me.

 

Peter: So 23 in me, the idea.

 

Peter: Was at the time they were really consumer products business because they were selling these DNA tests. But what they the long term vision was we're going to aggregate all of this, this DNA data. We're going to use that to create pharmaceutical drugs.

 

Jon: Yeah. What about health and wellness?

 

Peter: We were an investor in a company called, well, I guess two. So one is called release three. So one is called capsule. Okay. You on demand delivery of pharmaceuticals. We're an investor in visit that does telemedicine, telehealth services. And then we were an investor in a company that was acquired by Nestlé called Fly in the name Persona, which does customized vitamins.

 

Peter: So you felt like 10 minutes survey and they tell you exactly like what vitamins you need.

 

Jon: What are the things that I'm looking for now? Because I go to India a lot. It's humid there and I like to have my multivitamins and my hair loss medications. It'd be nice if everything was in one bag so humidity couldn't get it, so I just opened it.

 

Peter: That's the thing.

 

Jon: Because I go on a trip to India and after two months it's just the tablets just disintegrate real estate.

 

Peter: Why are you like an Airbnb is.

 

Peter: Kind of like a real estate, but also that house is.

 

Jon: Outside of that realty is usually typically more of a PE deal as you're looking for like it.

 

Peter: Could be like real estate.

 

Peter: Tech know, like.

 

Jon: I mean, who.

 

Peter: Looked at.

 

Peter: It, right? Yeah. Really? Yeah. How many would be real estate tech? We looked at another real estate tech company that basically.

 

Peter: Enabled.

 

Peter: Accredited investors to pool their money together to develop properties.

 

Jon: What about art? Do you think I can just do the deal with that? So they sell. They're selling art futures, I think is what they're doing.

 

Peter: Yeah, yeah, yeah. I'm familiar with that deal.

 

Peter: You know, potentially that one's.

 

Peter: That's probably a little bit further out there.

 

Jon: Okay. So going back to crypto, did you ever see Coinbase come across your desk?

 

Peter: I did not see Coinbase.

 

Jon: Did you see Peloton come across your desk?

 

Peter: I did not.

 

Jon: See that all the time. What are the ones that you wished you would have seen come across your desk?

 

Peter: I wish I would have seen those too.

 

Jon: Okay. Well, cool. Well, I think those are my questions. If you have any questions for Peter, just let us know. As part of the Venture Capital podcast game, we'll be interviewing venture capitalist angel investors. Peter's got to run, but thanks for watching and tune in next time.

 

Peter: Thanks for having me, John.