Mat Vogels (00:10)

everybody, welcome to another episode of Fundraising, a podcast where we interview early stage investors so that you, the first-time fundraising founder, can get all the tips, tricks, advice on how to close your fundraising round. And today I have a very special guest, Tim Morrissey, investor at Drive Capital.

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Also a local Colorado investor, which folks listening know I always love talking to Colorado investors because I feel like we have more candid advice than maybe some of the coastal investors, and we kind of tell it like it is, especially because a lot of the founders that are listening are not in those markets. So the feedback advice that we give, I think, is just more aligned with with what they're looking for. But Tim, thank you for being on today. Could you start a little bit with

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your background, drive capital, what you're investing in, what you're looking for, and then we'll go from there.

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Tim (01:04)

For sure, yeah. Thanks so much for having me. so Tim Morsey, investor partner at Drive Capital. my joke is Drive Capital is the biggest venture capital firm you've never heard of. not the best at marketing. Yeah, not the best at marketing, but decent at it. Yeah.

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Mat Vogels (01:13)

So true. But the thing is, is that your branding

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and your presence is is fantastic. So you I agree. It's like

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Tim (01:21)

Yeah yeah yeah.

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Mat Vogels (01:21)

I don't know why more people don't know about Drive. Maybe after this episode they will, because you guys are fantastic.

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Tim (01:26)

We're just

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We're just being heads down and getting it done. we're we're a large multi-stage firm, specifically the largest VC firm not headquartered in the coast. And so we're headquartered in Columbus,

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Mat Vogels (01:38)

Interesting.

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Tim (01:38)

Ohio, of all places. very intentional, center of mass of the Midwest. 'cause about fifteen years ago when we started investing, that was just like a a great place to kind of lay roots and get started. and with that we were really focused early on, it was industries that were like regulatory.

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So like Insure Tech comes out as this big insurance place, FinTech, things like that, health tech as well. Since then, we're now into fund five. and as the funds have kind of matured and grown, we now have about two and a half billion assets in our management. with all that, we now do a few things uniquely where one, we invest truly multi-stage. So I don't know many firms that have two orders of magnitude of check sizes. So small check we write is like 500k.

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So these are like idea stage companies, deck in a dream, you know, you think about doing an accelerator or maybe you just want to partner with us, that type of thing. and then we also do like hundred billion dollar checks into like crazy late stage investments. So if you Google us, obviously that later stage stuff is what gets the headlines. Something that's gonna come up right now is leading a billion dollar round.

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Company called Vast Data at like a $30 billion valuation. and so like that is a huge breadth of check sizes and kind of focus areas, and that that's what makes us very unique. And then continue on that kind of like that wide breadth of mentality. while headquarters across Ohio, there's partners like myself. So the investment team is 12 people deep, total teams like 35 people, but there's there's partners like myself in select other geographies. So I'm in beautiful Boulder, Colorado, and I have partners that have Atlanta.

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Toronto, Chicago, and Austin as well. So literally boots on the ground, kind of meeting founders where they are. We don't have any geographic mandates or anything like that, but it is kind of a bit of our unique edge, our alpha of just kind of meeting people in other

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Just other spots, like not worrying about, I would say just like bucking the norms. Like you don't live in SF, that's fine. Let's build a big company anyways. Like, cool. I don't

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Mat Vogels (03:32)

Yeah.

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Tim (03:32)

either. Let's get to work. and then just for the the sake of the viewer, I've been with Drive for about two and a half years. before this, I built a robotics company. So I'm highly technical in a very specific niche of robotics in actuators and componentry. that's what I got my PhD in, and that's what I started my first startup in. I was co-founder CEO of that company. We did raise venture, we got a lot of government contracts, stuff like that. I did that for five years.

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And then kind of just continue that journey from like scientist to CEO and knowledge investor. It's a lot of fun over on this side of the table, I will tell you that. So I'm having a good time. And yeah, jump into it.

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Mat Vogels (04:04)

I love that. Thank you so much for that background. I love when we have VCs that have that technical background, especially when it feels like today so much of venture is going into deep tech, hard tech, hardware. Having that expertise, I think, is not only valuable from an investment lens, but founders appreciate it because you can speak a little bit of their language as well.

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Tim (04:25)

I'm I try not to just speak the language, but actually understand it. But let me tell you, twenty seventeen, twenty eighteen, when I was raising money, it was not cool to be a hardware startup, alright? So

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Mat Vogels (04:33)

Definitely not.

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Tim (04:35)

I am I'm kind of more jealous and just have a chip on my shoulder than anything else.

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Mat Vogels (04:39)

Yeah. Yep. All right. There's a few questions we break into first before diving into the fundraising process. These are questions that founders kind of nominated for us to ask of the VCs. You mentioned that you were you started a company before this. Why did you choose to jump from that world in the founder world into VC world? What was the that peaking of interest there?

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Tim (05:00)

So I had always thought, or so first off, I don't plan my life. I just like do what's interesting. Like my current catchphrase,

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Mat Vogels (05:06)

Ha ha ha.

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Tim (05:07)

my blog title is optimizing for interesting. So I'm just like, I am happiest when I'm just like engaged, rolled up sleeves, like figuring stuff out. For a long time that was like hardcore research at labs, then it became kind of building companies and now it's investing. I joke that I continue this trajectory of be doing like mega cap kind of PE investments someday or something like that. I hope that's not true. but I I

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I don't claim to have some hierarchy, like h higher level like mm methodical approach to any of this. I'm just kind of like doing what's interesting now. With that, I did have a mentor when I was starting my company that had a successful exit, became an angel investor, then started a small fund. And when I saw that, I like, that looks like an interesting kind of life. Right? I could see how even though I was very happy being CEO, co-founder, I saw the benefit of like

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Getting to be almost like more of a coach in a situation, right? Like out of the game on the sidelines, but coaching the team. you get to see a lot of different stuff. if you I give you the permission to stereotype me as kind of like this male engineer, technical, ADHD, bouncing on the walls, like being I I don't know, what do I have? I probably have like seven meetings today, this being the first one, and they're all gonna be all over the place. Right? And so this is just like very interesting job to be able to like look at this, look at that, look at that.

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and then in terms of how did I make that decision though? So like I said, like maybe I had themes that this would happen, but I wasn't exactly sure. there was some stuff, so my startup is still around. it is still an active research entity and I'm absolutely rooting for them. I wish them all the best. But it just it wasn't working on a few different levels, and so the the body tells you what you need to do and and it was just time for me to do

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Mat Vogels (06:43)

So true.

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Tim (06:44)

something different.

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Mat Vogels (06:45)

I love that. You're exactly right. We have the best job in the world. We get to work with so many incredible founders, and like you mentioned, you have eight meetings today, you'll have another dozen tomorrow. And it's like every single day you are just inundated with all these different incredible ideas.

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Tim (07:00)

Yeah yeah.

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Mat Vogels (07:02)

Similar to that.

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What is your favorite part? Maybe that's it about being a VC. Maybe there's something else. And then what is your least favorite part about the job? Perhaps maybe opening the door a little bit to behind the curtain look at the day in the life of a VC, because I think that as founders listening, it certainly you understand as a founder, I was founder, fundraising. VCs kind of feel like they just got it easy. everything is easy for them, which in some cases is true.

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But what are the hardest parts about being a VC a VC and maybe something that founders wouldn't understand or appreciate otherwise?

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Tim (07:32)

Totally. so the the the best part is extrapolating on what I just said and I I'll I'll I'll solidify it little bit more, which is like your access to information in this position i is unfairly amazing, right? Ideally you're talking to kind of smart, competent people that are probably pretty good communicators, like CEOs need to be pretty good communicators, and they're not only are they communicating about whatever they're interested in, whatever they're interested in ideally should be like the future. Like like where the world is going. And so they're gonna

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To

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take their kind of subject matter expertise of the future of this specific thing and distill it down and transmit it into my skull in 30 minutes. So my worldview is just like unfairly advantaged. And ideally, the information that we're getting access to is like hyper-private, as in like you couldn't learn this on the internet, right? Someone is synthesizing a new worldview and then giving it to you. That's just rad. This is super interesting, super fun. The web of knowledge I like to say is in my head, or hopefully in my mind.

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is pretty exceptional. What's tough about this job?

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I mean VCs are funny, it's very very it attracts a certain breed of people, it attracts big egos, some arrogance, and all that type of stuff. And then they were service providers, my friend. And that is kind of like I work in financial services, and as a PhD educated engineer, I would have thrown up at the thought of that ten years ago. But that is the name of the game

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Mat Vogels (08:52)

Ha ha.

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Tim (08:52)

at the end of the day. And we are here to support the actual builders and

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You know, there's a lot of big internet personalities and stuff like that, but the truth is at the end of the day, the best founders, venture capitalists are a commodity to them.

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think the YC guy says like the the the second best investor is the investor that does nothing the worst investor is like the one that actively tries to help and just gets in the way or something on the lines. and so like I don't know that is that's weird for me as someone that actually like built some stuff and like likes to create it's a weird place to sit. in terms of like the nitty gritty I am currently I have a verbal agreement to get into a round right now. I talked on Friday and they said yeah everything's gonna go forward. We did not talk yesterday so like I don't know if I'm getting in this round and I should be

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Mat Vogels (09:35)

Ha ha ha.

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Tim (09:36)

Like I was told I should be and it's a really exciting round. And like that's the name of the game. so I it's probably

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Mat Vogels (09:39)

Yep. It is.

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Tim (09:41)

all gonna work out, but that the it's the the the in between I've never gotten used to two and half years in of verbally everyone's like yeah let's or maybe even term sheet signed to the money is wired. By goodness is that a funny little dating period.

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Mat Vogels (09:56)

yeah.

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Tim (09:56)

I think I love you, I think I love you too. What do we do now? Do we start dating? Like it's a funny

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Mat Vogels (10:01)

Yeah.

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Tim (10:02)

it's a funny time.

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Mat Vogels (10:04)

It's we always joke internally too that, you know, I have a lot of memes that I post around this, but you know, everything is great until a tier one gets involved too. Like you'll be in love, but then all of a sudden that Andreessen term

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Tim (10:14)

Hundred percent.

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Mat Vogels (10:16)

sheet comes in and it's it can all, you know, shake up. So it is

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Tim (10:20)

Yep.

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Mat Vogels (10:20)

i you're exactly right. Until the money's wired, similar for founders. You never know. You never know where it's gonna go.

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Tim (10:24)

You know. And

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and at drive we thread both lines. Like we like to think our competition is A sixteen Z and and those folks because we're a large fund too. We can do things around evaluation that maybe a a smaller fund can't do. so I mean I honestly I feel like I'm in both of those worlds, at the worst at the worst of both times.

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Mat Vogels (10:40)

Yeah.

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Yep, exactly. what are some of the areas that you're most interested right now? Be it personally, it could be things that you're excited about as a consumer, could be things that you're excited about as an investor and want to see more of to invest in. What's exciting you right now?

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Tim (10:56)

absolutely. I I I I opened with this. I've got a chip on my shoulder, like hardware is cool again because everyone's like software's gonna commoditize. That's true and it's not true at the same time. but regardless, I'm excited that we're like, you know, creating real value again of like, hey, it turns out that if you take a stack of bits, massage them in a certain way, and then put them out in the world in a different form factor, you generally create kind of pretty hard defendable value in the world.

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And so that's rad that we're like super excited about that. I I'm a real I don't think we're gonna have humanoid robotics in the next few years. My company started as a humanoid robotics company. I might be having the again kind of like, well if I couldn't figure it out, no one can type a mentality. I think I'm smart. I don't think I'm that smart. so I'm willing to be like, yeah, some like new, really smart people are working on it and doing it way better than I ever could. That's probably true to some degree. but I still think it's gonna be a ways until we have any suit.

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Mat Vogels (11:48)

It's so hard. Yeah.

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Tim (11:50)

Yeah, it's a really hard

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The degrees of freedom in the physical world are mind-bodily

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Mat Vogels (11:54)

It's crazy.

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Tim (11:55)

large compared to the software world.

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Mat Vogels (11:57)

Yeah.

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Tim (11:58)

I so I'm in Boulder. Boulder's got a vibrant quantum scene. I am rolling up my sleeves and hanging out in the quantum space. I'm still on the fence if like now's a great time for venture investment. It's a great time for that technology. Like I'm really glad it's kind of doing what it's doing, but but in terms of venture investment to get the returns we need on the on the time scales we need, I've been spending a lot of time doing like deep dives on like the semiconductor and computing industry from like 1940s to like 1980s and trying to like do a similar kind of thing with quantum.

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And be like, where are

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Mat Vogels (12:27)

Yeah.

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Tim (12:28)

we? and the truth is I think we're still pretty early, which which

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Mat Vogels (12:30)

Yeah.

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Tim (12:30)

is a tough adventure investing. and then the last one I'll talk about, I'm just kind of like, the things. But so actually like AI is obviously eaten all the air in the space, and it's like not even we don't even need to say it anymore. I actually think the I think when we look back on this in 10-15 years.

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It will as most technology revolutions do, look like mostly an interface revolution. And I think the interface will likely be voice and speaking.

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I think if there's one thing LLMs are amazing at and don't mess up that much, it's just like transcribing and talking and then acting on some of that too. And so I have a market map around what I call like voice-first technology. as you can tell by just this podcast so far, I have the gist gift of gab. A lot of people do. Actually, it's very easy to get them the mouth working and get the thoughts flowing. And modern AI, as defined by like LLMs and stuff, they're really good technology for that. Is it think

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Reasoning, that's a different conversation. but just like interacting with our technology, things will get think I think we're still like crazy early in that actually. I think like Siri is gonna work really well someday soon, and like we're gonna be like, wow, this is way different and cool. And maybe it ends up like pendants too, like we'll move away from screens, all that could happen. but so things we need over there is what I'm trying to spend a little bit more time. 100%. Yeah.

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Mat Vogels (13:43)

It's gonna all right here. Right right in that little little air pod.

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Tim (13:46)

Smart AirPods, like it's pretty obvious that that's where it all goes. Yeah,

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Mat Vogels (13:48)

Yeah, yeah.

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Tim (13:48)

yeah.

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Mat Vogels (13:49)

Yeah. Yeah.

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Tim (13:49)

And it's and it's gonna be wrapped. I

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think we're gonna like it. I think we're gonna like it a lot. Yeah. It's it's this. You need a screen

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Mat Vogels (13:52)

I think so too. well and watches, like we're all gonna be connected in in all these different ways. Yeah.

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Tim (13:57)

sometimes and then we'll and then probably we'll have the minority report like

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communal screens that are just in spaces that like you grab. Yeah. Yeah. Glasses are

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Mat Vogels (14:01)

Yep. With our glasses, yeah, yeah, yeah.

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Tim (14:06)

hard. I I think glasses are still a ways out. There's some serious physical challenges with the optics.

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Mat Vogels (14:11)

For sure.

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Tim (14:12)

contacts are no, like contacts are sci-fi. Glasses are just hard still. But not impossible, but hard. My opinion.

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Mat Vogels (14:16)

Yeah. Yeah. You

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mentioned on the AI side, I think the thing that I'm coming around to is the fact that like AI software is here to stay in in many ways and it's gonna transform into all these different paths. But the thing that I always get surprised with is how few people are actually using andor paying for AI. It's something like you know, only twenty percent of people in the United States have actually used AI

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AI and I think that number is probably inflated even a little bit with people just doing the Google search AI and those types of things or even Siri using AI but they don't know they're using AI type of thing. So the fact that there's still that many people that haven't even used it is mind-blowing to me. But then I saw a

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Tim (14:55)

Yeah.

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Mat Vogels (14:55)

stat that was something crazy, like only one percent of the population is paying for AI. So that means that

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Tim (15:01)

Yeah, yeah.

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Mat Vogels (15:02)

ninety-nine percent of people, you know, to maybe in our world, it seems like everybody has their pro Claude account or Grockbot account.

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But that's still the vast minority and the majority of people are not paying for any AI services right now and that's where I think there's enormous value, especially in consumer over the next decade or so.

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Tim (15:22)

Yeah, yeah. My reaction two two reactions that one, I I've seen that I've probably seen the same bar chart or whatever.

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Mat Vogels (15:28)

Yeah, yeah.

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Tim (15:28)

I'm super excited about that because I think people w so they are paying for it. They're paying for it with their attention and mon like external monetization, stuff like that, just like always has been. The fact that people are directly paying for technology again, which record drives paying for it. I it feels like it's not coming directly out of my pocket, so it's a little bit different. But

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I do hope that it gets us back to just like paying with our money rather than paying with our time and attention. I'm actually really I think this might kinda help. Yeah. Yeah, we'll

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Mat Vogels (15:55)

Like instead of ads and these types of things and yeah.

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Tim (15:58)

move away from ads.

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Mat Vogels (15:59)

question before we jump into the fundraising process. You've already hinted at a lot of these things, but why should founders pick you andor drive capital to be on their cap table?

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Tim (16:08)

so the the the most like I said we're service provides. I don't try to I think I am really helpful. I think my founders do like me. Like I can say all those things.

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Mat Vogels (16:15)

Ha ha.

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Tim (16:16)

We are

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I I open with this. The orders of magnitude of check size that we do at Drive Capital is very unique. And if a certain founder knows that they're gonna need round after round of venture capital, which is the type of companies that we're investing in, it's great to have that person. yeah, companies that I've seen I'm seeing it firsthand, you know, have raised hundreds of millions of dollars now, have gone through some dark times where you know i i they needed the money to keep the lights on, more venture capital. It like probably I wasn't in the room, it probably

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Felt like throwing what do they say, good money after bad or whatever, but my god, are they through the promised land now? And it is looking amazing. And that's really cool to see. And that's just the name of venture capital. It's like, what is venture capital at its core? It's like not letting money get in the way of building something, and like, hey, we think it's 10 million. No, it turns out to be 20. Alright, like you messed up bad, you need someone to come back and kind of reinvest in that. But in the grand scheme of things, are you right holistically? Like, this should be made once it's made.

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Will be valuable to the world. Guess what? I was wrong on the time. wait, it took 12 instead of six months. That's actually pretty easy to make that mistake, but you should still be really right of like let's build this thing and like like the world will it'll create value. And so deep pockets is number one reason to get it off with me and drive. and then as you can tell from how I discuss things here, as you can tell by how I keep my kind of online

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presence and you go to my personal website and stuff. I'm pretty approachable. I like to say that I'm doing a good job when I'm the first call with bad news. I founders. Like that's what I'm striving to do. figure it out. Yeah.

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Mat Vogels (17:47)

So important.

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Tim (17:48)

We'll figure it out. Like, okay, things aren't going right. We didn't we didn't invest in this because we knew this was a slam. Like we invested in this because we want it to exist and it'll create value in the world. And there's a bunch of hard things to do between here and there. So bad

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Mat Vogels (18:00)

Yeah.

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Tim (18:01)

news is normal.

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Mat Vogels (18:02)

Yep. Having that VC, the f you know, first call VC is I I would argue the most valuable thing, especially in this first stage that you're in as a founder that you can have on your cap table. You know, good dollars, you know, green evergreen money coming in is great, but having that relationship is you can't beat that.

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Tim (18:20)

Yep.

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And I've seen like the up the updates stop flowing and you know it's bad news on their side. I'm like it's so it's so

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Mat Vogels (18:26)

Absolutely.

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Tim (18:27)

human nature. And I'm guys don't do it, folks don't

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Mat Vogels (18:29)

The biggest tell. Yeah.

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Tim (18:31)

Yep, biggest tell ever. And and I'm just like don't. Like let's let's just commit.

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Mat Vogels (18:33)

I remember going through YC then

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working with we both know like Natty Zola, Tech Stars, when I worked with

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Tim (18:39)

Yeah.

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Mat Vogels (18:39)

him over there for some of those batches, and I remember he'd say that all the time. And there's like, there's no stronger indicator than not getting an update when maybe before there were some updates. Because you've never ever seen a founder where things are going really well skip an update. People think that's the case, where it's like they're probably heads down and they're crushing it.

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Never, especially now with AI, some of our top performing portfolio companies where these founders are working hundred hour weeks, we still get those updates and you can tell that things are going really, really well. so yeah, it's one of the best indicators of things not going well.

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All right, let's jump into the fundraising process. We break it up into a few different pieces. The first, which is really valuable for folks in Colorado or not in some of these big emerging or sorry, big coastal markets here, how do they get in the room? How do they get their pitch deck in front of a VC to even just take a look at them or even before having a meeting? What advice would you give founders?

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that maybe don't have the network, you know, maybe warm introductions are always gonna be king in some cases, but if they don't have that, how can they get some of these warm intros or start making those relationships? And if not, what is the best ways that you've seen people getting their pitch deck or memo in front of the right VC?

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Tim (19:52)

I I think so

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I will almost always take the warm intro, and definitely like the beginning of my investment career, I did. But now I'm I'm I I want to respect everyone's time, and I will pass if it's just not a good fit. So I think the biggest thing is talking about fit. But that's two.

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Mat Vogels (20:07)

Yes.

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Tim (20:08)

But like, what's this person investing in? What type of firm are they at? Like, are they the solo GP? Are they on a partnership with a big, you know, mega fund like I am? What types of things are those folks investing in? But it's tricky because then they'll pattern match.

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Portfolio, and the portfolio is a reflection of five years ago thesis and thought processes and stuff like that, and it's not a great reflection of today's. And that's why, and I don't do a great job, I do a mediocre job of publishing what I'm interested in and broadcasting it out to the world so they can figure it out. And that's when the warm intros shine. Of you and I had a pretty good one even before we sit hit record here.

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investors catching up me catching up with other founders and I'm like, hey, I'm thinking through quantum. Like, I don't think it's real. Maybe it is. Can we talk about it, please? Now that other person, whether it's a founder, an investor, or whatever it might be, has that little node of what I'm interested in in their head. And as they go about their day, maybe they can help send someone back towards me. So I do try to leverage, you know, just like blog posts and stuff like that. But then those personal connections of being transparent of like what I'm interested in and and and and things along those lines. Because it's it's hard

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for us like our inboxes are full. I like you can obviously find my email. I can firstname at fun.com is a pretty good guess for almost every venture capitalist out there. So the challenge is not even they dude

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Mat Vogels (21:27)

Yep. 'Cause they wanna be found. They're not trying to hide their emails.

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Tim (21:31)

I want I am so eager to invest this money.

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In the right things. And like,

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Mat Vogels (21:34)

Yes. Yeah.

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Tim (21:36)

unfortunately, this isn't for X, Y, or Z. I think the only thing I'd say is like the deck is so important. The best conversations, we're almost never clicking through decks. We're having a conversation. But the deck always exists because it's a tool to kind of massage or comb the thoughts to have the conversation to properly communicate. I know that I've I've passed on deals that are probably phenomenal.

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investments because I wasn't at the right level to understand the market or the technical problem. But and the founder wasn't getting me there either. That's really their job is to educate me, teach me to get me on the right level. as

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Mat Vogels (22:12)

Yeah.

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Tim (22:13)

in at least in my realm of like the generalist mega fund where I look at like in terms of like what type of com companies, like technology companies. We can invest in almost any technology company. And so

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You know, I might not be super speed on what's going on in in sure tech and mental health, but get me there because like that can fit our our fun for sure.

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Mat Vogels (22:33)

Yeah.

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So speaking kind of of of pitch decks, I agree. I think pitch decks or memos these days I think work well too. Are so important and they deserve attention. They deserve to be done well. What are some of the best pitch decks that you've seen? What are they doing well? Is it just that they're they're translating some of those highly technical things or the industry things? Is it the why? Is it the team? Is it all these things? What makes a good pitch deck in your mind?

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Tim (22:57)

Yeah. Well it's not clawed slop, like with the s with the little green text and like, my God. And I try like

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Mat Vogels (23:01)

Yep. We are seeing so much of that is unbelievable how bad

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Tim (23:07)

obviously I leverage it too, right? I mean like of course, but like

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Mat Vogels (23:09)

Absolutely.

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Tim (23:10)

you we gotta we gotta you gotta you gotta bring it together.

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Mat Vogels (23:14)

Yeah.

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Tim (23:14)

so what it so super strong winehouse. Why does this problem that this company is building need to be solved right now? So probably opening up with that. I'll talk to an investment I'm super excited about.

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Locally called Straddle Payments. They're a fintech platform for account-to-account payments. Keith is an incredibly smart person in the fintech space. I don't know anything about like regulated ACH transfers. He knows everything. And but he was like, yo, the federal government just changed the way we move money around.

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They've been talking about fixing ACH for 30 years. And guess what? The new Rails finally launched a few years ago. No one knows how to use them. This is it's now. Now is the time. And I was like, okay, great. That's like a real reason for it. Because what I tell people all the time, that I think founders fall trapped to, is it's like

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This prop this problem exists. Like you motivate a problem really well. And then also it's like, and this is problem's been a problem for twenty years, and it's gonna be a problem for another twenty years, because the markets have told us it's not worth solving, unfortunately. And it's your problem. the most common one I see, just to just to kind of be concrete about it, is like old people. Old people, it's hard to deal with old people, right? They're they're less that's expensive, they're less capable, and all of a sudden you've got aging parents and you're aware of the problem too. And I was like, man, it's tough and it's expensive.

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And all of those things, but there's no like acute reason to like fix this thing right now. Maybe I invoice technology, but like in general, I'm like, we gotta we gotta

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Mat Vogels (24:43)

I think it's close. Yeah.

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Tim (24:44)

go a layer deeper of like what's going on because a continuation of a problem is a really good sign of the market not adopting a solution, and you're gonna be just kind

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Mat Vogels (24:54)

Yes.

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Tim (24:54)

of run into a wall. So strongline now's and things like that, team's really important. I advisor slides are useless, it's a waste of space. I have no idea who those people are and what they're doing.

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Mat Vogels (25:01)

So true. Yeah.

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Tim (25:03)

And so just like especially so let's we're folks in early stage here. First time founder. yeah, everybody wants the second time founder that sold their first company for five billion bucks and just happen to want you to participate in this next one. That'd great. but a lot of them aren't, but like how Yeah! An email, would you like here's the yeah, the wire instructions. Yeah, exactly.

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Mat Vogels (25:16)

Those are the ones where you don't get as much of a pitch deck. Usually those are just emails to you being like, You in or out? Yeah. Yeah, yeah.

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Tim (25:25)

but like

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We are investing in outliers. And so how are you an outlier? What are you doing uniquely? Did you just get fired from your job and you don't know what else to do? Okay. We could invest in that, but like just be honest with him. Like what's going on? Like what what makes you uniquely special to like solve this this thing right now? Those are the things I think about. Yeah.

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Mat Vogels (25:43)

Yeah. I love that. I love the outlier

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piece. We always we hear this a lot on here of outlier

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being novel, novel ideas. It's funny how a novel idea can can do so much because we see, you know, hundreds, thousands of pitch decks every single month. They all kind of blend together and you start seeing a lot of the same ideas. You meet with a founder and they're like, we're the only ones doing this. And it's like, no you're not. I've seen maybe a

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Tim (26:07)

Yeah.

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Mat Vogels (26:08)

hundred of these in the last you know quarter. And

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Tim (26:10)

Yeah.

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Mat Vogels (26:10)

you need to do a good job of saying the why now, why us. It has to have that novel piece to it and and build around that if you can.

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Tim (26:18)

And be strongly opinionated. Here's the six other people you probably think are solving it. Those three are solving a different problem. And let me tell you so I said this and they're saying that, okay. And these two are idiots because of this. And I think I'm the smartest person to ever solve this I to what I need to know. Like, cause I'm

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Mat Vogels (26:34)

Yeah.

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Tim (26:34)

yeah.

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Mat Vogels (26:35)

Yep. All right, let's say they've done these things, they've excited you enough, you're leaning in, you're going into the first meeting with these founders. What is it that you're trying to pull out of that first meeting with the founders? How can founders go into these with a little bit more of an advantage?

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Tim (26:50)

I'm trying it really so because the deck had a lot of the table setting I just said. So obviously hearing it from them again to just kind of hear how they tell that story, because one of the downfalls of what I've mentioned earlier of me publishing the things I'm interested in and stuff like that is people just show up and tell me those things. And I'm like a so so focus on what they do, not what they say, but I gotta go have this meeting to hear what they say and then pattern matching against that too is super important.

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because it's it's if you're lying to yourself about what you're building to because you think it's gonna like pull a check out of my pocket, this isn't gonna end well for anybody. Don't do that. Like just be like brutally honest about where everything is and and like the right things will come together. and so focus on that. The biggest amount. Like are they expert in whatever.

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personality. and there's a million everyone thinks there's like this stereotypical like VC outlier founder. And there is a stereotypical VC outlier founder, but that's not the only type of outlier there are. And like we can put that to the side, but just be like ruthlessly yourself and let's see where that ends up on a few different kind of axes there. If you think about people that are changing things. And then I think too what we're doing in that first meeting is then gonna clarify

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Where your I think it'd go back to like that positioning stuff I just talked about. I ideally, I don't always do this. Ideally I come somewhat read up on what's going on. Ideally I read the deck. I probably Googled around a little bit, chatted with AI a little bit. if it's really good, I've I've had 50 conversations in this space previously, like I have in voice technology, right? And I can get really aggressive. not aggressive is the wrong term, but just get pointed, I'll like jump in and be like, I don't need to know that your name's Tim. I got it. Like

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Good. Like, what are we doing here? Like here's what I and I'll be a lot of times I'll start by taking one or two minutes and explaining my understanding of the situation and just say, hey, let me let me show you my where I'm at, take you as far as I can, correct anything I said along the way, and then now we have our jumping point to like actually move the needle on the conversation.

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Mat Vogels (28:50)

Yeah, yep. Are there any red flags or things that founders do? Maybe it's a common one that you've seen here. Could be the opposite of those things that you just said, but maybe something different that they should not do on these calls. It's a red flag and it'll send founder or sorry, VCs running for the hills.

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Tim (29:07)

Well, I can only speak to what sends me running to the hill. There's a dumb VC for everybody. There won't in 10 more years. This industry is changing, but there is right now. I

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Mat Vogels (29:14)

Ha ha ha.

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Tim (29:15)

hate the VC hype stuff of we gotta call with A16Z, you better and like

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Mat Vogels (29:19)

Yeah.

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Tim (29:20)

I I do like the transparency of where you are in your process. And I'll even ask, hey, where are you? Are you in second calls, partnership meetings? Like, where are you? Let's all be transparent because if you're somewhere, I don't want to just be like drag it, I don't want to lose this deal just because I didn't get a meeting scheduled quick enough. Like that's annoying. So, like, let's just be transparent

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Mat Vogels (29:33)

Yeah. Yeah.

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Tim (29:35)

there. But there's this hype.

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type of thing, like all these other people are in. And then it turns out they're actually not in and they're actually trying to get a term sheet from you that they can shop around. Like any of that stuff. As soon as we get a whiff of that we go, guess we're not a good figure. Like love the business, but I guess we're we're not great partners. We have a different different approach to how we do things.

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Mat Vogels (29:53)

And is that common? I

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feel like that's more common than than founders maybe realize. Because they think maybe they're being unique or sneaky or trying to do it, but it's

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Tim (30:00)

And they should optimize for their

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outcomes, but like it it can't, I've had it, so we do these things where we'll do safes like really fast. Like it's meet, two GPs, we meet, worked, I mean, we've met these people for a total of an hour and a half, maybe two hours, and we're like, here's a term sheet, you can have money in your bank account tomorrow. And it's like, and for that, like it's very quick, it's a standard, like kind of pretty much a YC safe looking thing. And and then all of a sudden they'll try to like shop that around. Like, no, we're taking this huge risk here. We're the only investor.

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investors and we're gonna like

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Mat Vogels (30:29)

Exactly.

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Tim (30:30)

make sure you pay your mortgage next month. and so if you want to go raise on top of that, go for it. But they'll they'll be like, well other people are thinking about doing it, but they're not in yet. And I was like, well then that's not in. We literally gave you one. You will literally have money tomorrow. We have conviction to do this right now based on the best information we have. And the other people are doing something else. So so by all means

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You know, play the game on the field, shop it around, but just be transparent about when you actually have like term sheets ready to go versus you have interest and soft circles. and then

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Mat Vogels (30:59)

Yeah.

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Tim (31:00)

the other thing too is I actually just had this last week, and founders are always right. Like, being a founder is one of the hardest things you can do. Like, I really try to empower it. But they had like shared some like press about how impressive they were in high school, and I like was on the website, I was like, this looks and it was like a total like paid for press thing or something like that. And I'm like, this isn't interesting to any.

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Like I almost wanted to like let them know like this is a really bad look for you. Just be 19 years old and trying to figure it out. You don't need to like stuff. Forge 30 under 30 is almost a home run for being a proper, but it's neither here nor there. and so just like just be honest about who you are and what we've done. And the world will sort the rest out. That's what I just try to tell people so many times.

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Mat Vogels (31:41)

Yeah, be authentic. Yeah, don't try to to to lie or stretch the truth. It's a small world, all VCs, we all talk to each other.

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Tim (31:47)

Super small.

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Mat Vogels (31:48)

We know those things quickly. To add on to a point you said earlier, what I see happen all the time is that a founder will have an investor, they have a term sheet, but then they do try to shop it around. The other investor gets wind of that, pulls it, and then they've lost

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their entire leverage. So then when they go back to these other VCs and the VCs like, what happened to that, you drive capital check? Did they did they close yet or whatnot? And they're like, they actually pulled it. So the whole thing they were using as leverage was pulled out away from them. It's a horrible look. It's just it's not a good look.

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All right, let's go into the final phase of the fundraising process, which is kind of like herding cats. It's really hard for founders to do this well. it's hard for VCs to manage it as they're kind of going in on the opposite side. What advice would you give founders as they're trying to close out around? They're trying to build FOMO, they want to keep people interested, but they don't want to be desperate. Like we just said, you don't want to lie or say that, you know, you have term sheets coming in when you really don't.

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What advice would you give for founders in just closing out the round and keeping that momentum high?

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Tim (32:50)

I think just

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Hard time stops are really healthy for all parties, honestly. Hey, you know, we we actually we we really do have a t a term sheet for the league. We can close this thing at anywhere between two and a half and three and a half million dollars. And we are gonna have final allocations by Friday, right? It's Monday and it's by Friday. So just I need real ins or outs as soon as possible. Right? And so just like that's not pressure, that's not solid circles or not, that's like real, like just like this is the process with factual time stamping. Like that's really healthy for for everybody.

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Like I just said, I gave like I would hate to lose a deal that was like earnestly interesting because someone had some weird travel and we didn't react properly that I need you to find a phone booth to make sure we get on this call. Like we want to do that. Like that is part of the game, and we know that there's a lot of time things happening. So just like good c good table manners around that. and then I mean the the best founders will end the conversation.

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with me, I'll be like, hey, so and I remember this from raising my money from my venture capitalist too. And he was like, I'm honestly interested in this, like, let's keep going here. And that's when I was like, okay. And then that person did invest in me. and then so similarly they'll just be like, hey, so where are we right now? We just talked for 25 minutes, where are we?

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And that gives me opportunity to just pass in real life, which is, you know, I'm very good at it, very mature, and I'm happy to do that. And that way we can all get on with our lives. And that's, you know, the case 98% of the time. Or be like, hey, here's what I'm gonna do. I don't know this is super this super well, but my partner has has made seven investments over here. can I go talk to them and I'm I'm gonna go talk them today because of your timeline, or I'm gonna talk to them at partnership meeting on Monday, because it sounds like that works for your timeline. Does that work?

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Yeah, yeah, yeah, because I'm gonna make decisions the following. But great, all right, let's go from there. So just like setting expectations.

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Mat Vogels (34:37)

Yeah, and take, you know, control and ownership of your fundraising process whenever you can and you can do it in ways that are respectful and responsible. It doesn't have to feel pushy at all. Yeah.

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Tim (34:45)

Professional, just like professional.

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Like just like got it. Yeah.

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Mat Vogels (34:49)

Yep. In a a perfect world, some founders might have a selection that they can make. They can pick and choose, you know, a lead. Maybe they have three leads that they're picking from. Maybe they have a hundred K check that's left over. What advice would you give founders on maybe making the selection and maybe what mistakes you commonly see in some of the selections that they pick? A very common one that we hear is that they always just go with the highest amount of money or the best valuation or something like that.

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Any other feedback in in picking the right VCs, especially in this first stage?

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Tim (35:23)

Well there's there's two parts there because there there might be like competing term sheets and stuff like that and like highest valuation, that's one part. But then also like I've been in situations where they're like, no, no, it's set, there's a lead that's taking 70% of the round, and then I've got two million of allocation for a million. And so like you're all coming in the same terms. It's literally just who

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Mat Vogels (35:40)

Yeah.

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Tim (35:41)

am I gonna allow you to wire?

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A lot of times with that, I'm like, just take all of it. Like, like run the dilution calculations and like just take all of it if you got it. And and like obviously it's a little more dilutive, but like a little more people around the table is good. I would say with that, i everything what's the only thing we know about venture capital? the revenue projections are rosy and the timelines are you know promising, right? And so everything takes longer than you want it to, everything's harder than you want it to be.

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Mat Vogels (36:08)

Especially

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in hardware, yeah.

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Tim (36:09)

And so

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especially in hardware. And so getting more investors around the table that like earlier is often not a bad thing at all from my perspective.

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There's there's good reasons to have just one and that's it, and that you don't have to worry about anybody else. But like at these early scene rounds and stuff, no one's taking a board sheet. No one has any proper veto powers or anything like that. And so all you have is a bunch of other people that have just hooked their wagon to your horse, whatever, and like they're on the line, and they really want to see this win too. Like we're all in this ship together, and we gotta see it through. And at the earliest stages, it's all gonna be kind of relatively similar amounts. Like later stages, you see that all the time, where it's like, hey.

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That investor's got 20% of this company that it has to work or I know for a fact their marks are gonna be bad versus the one that took a small bite and they're like not even showing up to meetings anymore. but at the earliest stages, like kind of ever even if someone led or whatever, like we're all pretty similar then.

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I see, I do see founders making a mistake where they'll, you know, maybe they're still their old job and they're thinking about starting this whatever, and they'll build relationships, just have conversations for a good six, twelve months while they figure out what's going on. And an investor that looked really promising early on is like, hey, I'll write this check. As soon as you're ready, you let me know. Like as soon as you quit, like I got your first check, so everything's gonna be good. And then just like kind of the company matures or goes in a different direction. And these founders will have you know, they'll be like, Well, like that person like started the conversation. And I was like, that's okay. Like

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They don't even then so I've seen them kind of give out like pity allocations to those people. I was like, maybe they don't need any. Like it's okay. And like they'll go deploy their capital somewhere else. and so just I the time, like when it's time to actually put the money in and get the job done, kind of who's all there at that point in time and makes the most sense for what you're building. And don't worry too much about the kind of journey that got you there.

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Mat Vogels (37:57)

Yep, I agree. Let's say they've closed out the round. The sad part

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Tim (38:01)

Yeah.

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Mat Vogels (38:01)

is is the fundraising process never ends. You're gonna continue to fundraise

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Tim (38:04)

Yeah.

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Mat Vogels (38:04)

and and go on this train. what advice would you give founders for the first three to six months, maybe after they close that first round? What should they be thinking about? What are common mistakes maybe that you've seen, and then how do they keep those investor relationships after they've closed the round too?

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Tim (38:20)

definitely the updates, you know, every every month, every two weeks at the earliest stages. Those are formal, those are like formulaic. They have got they've got more numbers in them than they do words. It's like these are the six things I'm focused on, this way they were last month, this way they are this month. And a lot it's not revenue yet, right? So what are those other metrics? It's talking to these types of people. You don't want vanity metrics, but you want something. the a mistake they make is like, great, introduce me to customers now. It's like

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Mat Vogels (38:46)

I know, yeah.

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Tim (38:47)

I'll do what

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I can. Like, but like honestly, like if I went huck in all my portfolios with everyone I know at big big co one, like it's not gonna go well for anybody. and it's like your responsibility to do that. Is like I wanna be as helpful as I can obviously and when it's like perfect I slot it in. But I have gotten just like a list of essentially the fortune 500 and like I'm trying to get introductions to these people. C-suite at these organizations. Like, guys, like that's not the game we're playing here. so those updates and those asking

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for for real help, like asking for real help. And I love it too. Like I like one once one of my companies I'm just thinking of now they're hiring, like everyone's hiring immediately 'cause you have money you need people.

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And I send over a couple of profiles. And they're like, not these. And I was like, okay, great. Like now I know that's not this. What are you looking for? And then they send me a profile. This is someone I really liked. I couldn't get them because that's great. Now so like push back. Don't don't go meet with everybody. I said, I don't, you know, I thought about your company for an hour today. You thought about it f for fifteen. Like you definitely know better fit. So just let me know what you need and I'll go find it or or help.

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Mat Vogels (39:49)

Yeah, yep. Take advantage of those relationships. Take advantage is the wrong word. Work with your investors. They're here for you. You're now on the same team. so definitely

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Tim (39:56)

Yeah.

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Mat Vogels (39:56)

don't be afraid of of getting feedback from them and asking them for help. That's what we're we're all there for. Last little bit, what this is I kind of call this the halftime speech, but there's a lot of founders out there that are struggling to raise capital. Even the best companies struggle to raise capital. I think people don't don't realize that. It's not just the overnight success.

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lot of no's to get to a single yes even for the best companies. Do you have some sort of a last bit of advice to the founders to to keep moving on? They're in the middle of that fundraising process. This is their motivational speech from you to keep going.

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Tim (40:31)

The the point is to not get everyone to like you. The point's to get the right person to like you. So just keep like authentically being yourself, saying exactly what you're gonna do and why it's the right thing to do. And if you talk to enough about a hundred will say it's maybe that's right, maybe it's not. But if every single one says no, maybe you've got a really bad idea and you shouldn't do this. Because like wisdom in numbers there. Or if you talk to a hundred and you were like right the whole time, if you find the right investor, like

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They're gonna be like, my god, this is the company I've been looking for and I don't wanna talk to any of this. So just like just do not lie to yourself and say what you think they want you to say. Say what you think is right, and that way you'll kinda go down. Cause because the the don't go building a company that shouldn't be built. Like that's the worst. Like go building something like if you do that lying thing where you just try to get money and you focus too much on the near term, it's a it's pretty easy to slip into that. Like

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Near term meta success, but not long term proper success.

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Mat Vogels (41:29)

Tim, that was awesome. Thank you so much for for being on today. There's lot of information packed into here. Where can folks continue to follow along with you and drive capital?

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Tim (41:39)

Tim at drivecapital.com. The email is always open. And my personal website is tgmorsey.com. And people can find out all about me there.

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Mat Vogels (41:48)

Awesome. Tim, thanks again. Hopefully we can see each other in person here sometime soon. We do have Denver Startup Week coming up here soon. I know you did a big thing for Boulder Startup

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Tim (41:55)

Yeah, I'll see you there.

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Mat Vogels (41:58)

Week. We have a lot of cool stuff going on. So hopefully yeah, I'll see you in person here soon.

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Tim (42:02)

Thanks for having me. We'll talk again.

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Mat Vogels (42:04)

Absolutely. Have a good one.

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