TSP024 | Mike Brown – Transcription

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John Livesay:
Today’s guest on The Successful Pitch podcast is Mike Brown Jr, the Founder of Bowery Capital and also the host of Bowery Capital Startup Sales podcast. Mike had a really interesting beginning to his career where he worked for Virgin and was advising Richard Branson on which startups to invest in and then he was recruited away to do the same thing for AOL and he realized that he had the bug to do his own company and started Bowery Capital a few years ago.

Mike has really identified, what he calls, internet natives, people who have grown up with the internet and are now reaching the CMO-level in companies where they are comfortable and see the value of replacing old ways of doing things with new technology. Mike has incredible insights on how he decides which pitch deck to want to take to the next level and how he and his team make decisions fast. Enjoy the interview.

Hi and welcome to The Successful Pitch podcast. Today’s guest is Mike Brown Jr who is the Founder of Bowery Capital as well as a podcast host himself called Bowery Capital Startup Sales. Mike has a really interesting background that I can’t wait to hear more about including working with Richard Branson at Virgin, AOL ventures with a background at Morgan Stanley before launching his own capital VC firm. Mike, welcome to the show.

Mike:
Thanks, John. I appreciate it.

John:
Mike, can you tell us about how you became a venture capitalist and how you went from working at Morgan Stanley to working with Richard Branson and helping him invest some of his money?

Mike:
Yeah, so the quick background on how I came to be a venture capitalist, which Branson’s work, obviously involved investing in technology companies. I too was a research analyst at Morgan Stanley. I covered a lot of the electronics manufacturing companies as well as the system’s hardware and the PC industry and so my background, pretty much, since the beginning has been in business software, has been in B2B and core structure of technology and in 2006, I got a call from a headhunter who was interested in placing me in the venture fund of Virgin, so Richard Branson had an interest in investing in the US and doing a lot of fun things and so I interviewed and got the job.

It was a really formational experience for me, because I had not been in the venture industry, I had not gotten to see what investing and technology companies was like and so it was excellent experience for me to really, you know, see how to invest in a business, how to help grow it, how to scale it, and I sort of take a lot of those lessons with me today to Bowery.

So, that experience, I did that about three and a half years and ultimate got the opportunity to move into a more senior role at AOL and that was essentially doing the same thing, you know, investing a company’s money in startups or technology and with AOL, there were obviously some nuances and differences. We obviously had just spun out from Time Warner and so there was a huge upgrade cycle. They had a lot of legacy technology and so swapped old for new and a lot of our portfolio companies benefited greatly from that and then basically after about six and a half, seven years, I, well, I’ve been doing this for a multitude of other people for a long time and launch the firm and I was pretty passionate about the emergence of the service and the next generation business software. Marketers thought that this was the place to play.

John:
And how did you come up with the name of your VC, Bowery?

Mike:
Yeah, so there’s two threads to that story. One, we were down, around the Bowery, so we spent a lot of time down there and really enjoyed the neighborhood and the feel and obviously we were very into things like CBGBs, which, you know, the kind of rock and roll and coolness of the name was definitely a piece of it, but I’ll be honest with you, naming a venture capital fund was not the easiest thing in the world and you basically go through this process of thinking in your head you have these great names and they’re all named after, you know, a street or an animal or a lake or some kind of things and essentially what ends up happening is you run cursory Google searches and you try and debate with your lawyer about, well, this is not really a venture capital firm, but it still might correlate to your industry, so you get basically dinged every time by your lawyer. So, in sum, half of it was we really liked the neighborhood and the name, the other half of it was, there were not a lot of options and it was one of the better ones that we had.

John:
You know, that’s really valuable to our listeners, because, you know, a lot of startups spend a lot of time, trying to figure out the right name and the cool name and something that represents the brand and so I think it’s very helpful for them to hear that you also have to deal with the same challenges when you’re launching a venture capitalist firm. Everyone has the same challenges when you’re starting something new and it doesn’t matter that you’re the one with the money to give out, you still have the same path to walk. What I really find fascinating is, you know, so many startups think, you know, I have basically three ways to get money: friends and family, Seed, and then VCs, but with your work experience, there’s a whole division in Richard Branson’s company and AOL company that, would you say they compete with VCs or – but it certainty sounds like another alternative for startups to get money.

Mike:
Yeah, I think today the lines are blurring. They compete, they be-friend, they work together sometimes, other times they don’t, so it’s kind of all over the place these days, but you know, corporate venture really has defined a large portion of my background and it’s where I really got my start, right, I can’t say I worked at another VC fund that was independent, so I think it serves a purpose and I think if people know what they’re getting into, it’s very, very valuable.

Again, a lot of people come and ask me about my experiences in corporate venture capital and how to think about it from the entrepreneur’s standpoint and I sort of just coach people, ask a lot of questions and get a real feel for what their investment process actually is, who is the ultimate decision maker, how the parent company works with the portfolio, the investments that they make, and you’ll get a pretty good feel one way or another whether this is worth your time to go down the path or this is a little bit scary, I’m not so sure I want to embark on that or take someone like that money’s.

John:
One of the things I noticed on your LinkedIn profile is you have such a clear description for startups of who Bowery Capital is, what your sweet spot is, and the thing that really impressed me is how fast your process works, can you speak a little bit to that and is that a huge contrast in the Virgins and AOLs of the world?

Mike:
Well, yeah. It’s definitely, if I can make my own investment decision, it’s definitely a large contrast to a corporation making an investment.

John:
Yeah, the speed alone, right?

Mike:
Yeah, but that’s born out of, I think, really, more born out of the necessity for us to move quickly and our own interested in not wasting an entrepreneur’s time and so I think a part of that comes down, I think everybody talks about not wasting an entrepreneur’s time and oh, we move fast, and oh, we can get things done quickly. I think the thing for us that was most important was the process orientation associated with saying that, so we do things like, we force entrepreneurs to share a deck in advance with us.

A lot of times we will send our own materials through so they have a pretty good idea of exactly what we do well in advance in the meetings, so this way we don’t come to the first meeting just doing the classic, you know, tell me about you, and then tell me about you, and so it sort of gets into a much more, a much more sort of action oriented discussion and you can really dig in on very key topics that you, as the investor, care about, and provided you’ve read through the deck and you’re informed about the business.

It’s a much better way to kick off that first meeting and the on the back-end, we have a process internal to our firm where we have basically an admin who forces the process to only go three weeks, so if we haven’t done our research or we have market sizing questions or an issue about a certain company, we really narrow in on what we need to do to get to a yes and the person who is leading the deal will really be forced to kind of concluded one way or the other before three weeks is up, so this way we really old ourselves accountable to that time frame.

You gotta remember too just as a kind of last point and a more high-level point, most of what we’re investing in business software, we’ve defined a total universe or a market and so we kind of have views or perspectives on where those worlds will go.

So, I would say about 75% of our investing, we’re usually taking meetings with founders where we like their approach and we already have an interest in the opportunity that they are going after. It isn’t sort of something where we need to do a tremendous amount of work upfront to get up the learning curve.

There’s still 25% of the investments that we make where it’s totally new white space areas that didn’t even exist three to five years ago, which we are fine with, but on the balance, our view is really if you can come to that first meeting prepared and ready to dive in on specifics and then if you keep your process to what you say, it is, we think we at least do right be the entrepreneur in that way.

John:
That’s great. Let me ask you about the pitches that you see that determine whether or not you want to have a meeting, the pitch deck themselves. You must have heard so many pitches in person and seen so many pitch decks, do you – and since this is a successful pitch podcast, do you have any real insights as to what makes you think is a good pitch deck and more importantly, what’s a good pitch when you meet the people?

Mike:
Yeah, so on the pitch deck, I think really just there’s one or two comments that I’ll make. So first, I think people have a tendency to sort of over text everything. We tend to find a lot of these decks come in, they’re just a massive amount of text on them and for a venture investor, you know, most folks are looking at ten to 15 opportunities a week at this point and so you kind of want to have your pitch and your deck really crafted to mirror what a person like me or another venture investor is going to be interested in it, which is to say, you’re only going to have a few minutes where I’m going to open the attachment and flip through it. So, I tend to tell entrepreneurs before you ever start creating the deck, write down the kind of 10 key sentences that you want to articulate to an investor. Have that flow from the standpoint of like telling a story and then make those ten sentences, basically just be the title components of your individual slides.

John: That’s fantastic information. We’re going to Tweet that out. Ten key sentences that become your ten headlines, right?

Yeah, exactly, because then a venture investor can see – and you’re probably going to say things like, this is the problem or here is my solution, this is the market size, then an investor doesn’t necessarily have to really read the meat and potatoes of the deck, they can literally just look at the top ten, you now, headlines, and see, oh, okay. I understand what this is and they will either be interested in that or not. So, that’s one thing I always say, don’t, you don’t need a lot of bullets and text in all of these documents, because at the end of the day, someone is only going to spend, you know, two or three minutes looking at it before they’re going to reply to you.

And then the second thing is, especially – and this is a little bit more specific to software that we invest in. I really like folks to be able to articulate singulate sales or marketing strategy out of the gate. What are you doing to really build, you know, the first first million dollars of annualized reoccurring revenue and how are you going to approach that, so you usually will see a slide that says, hey, this is a, you know, low price piece of software, so we’re deploying an inbound marketing strategy with these six different channels from the start or on the opposite end of the spectrum, hey, we’re selling very high-priced software for, you know, six-figures plus into a chief technology officer. We’re going to hire two or three sales people and this is sort of how exactly we’re going to go approach and attack the market.

So, those are two I would say pre-talking to me or pre-pitching me face-to-face and then just to kind of close, the one last thing I’ll say on when you are face-to-face with someone like us, I think now especially we’re in a marketing environment where many people are viewing entrepreneurship as sexy and interesting and we’ve seen the volume of pitches and meetings increase substantially, even over the past two or three years.

I would say being able to answer why you are uniquely qualified to solve this problem and then second that you’ve sort of translated your system from being an individual, successful contributor to being the CEO of a company, those are two vastly different things and so, remember, you can’t really become – most people have a system that they work within which is, I know how to do really well myself and they’re obviously rewarded for their successes and they keep that system in place, but that doesn’t scale.

So, when you come into a meeting with a venture investor, being able to articulate, hey, I’ve, you know, learned X, Y, or Z and that’s going to help me translate my own system into being more of a manager or hire a vision person, right, because as a CEO of a company, it’s awesome if you were the, you know, first technology person at X, Y, or Z now large company, but only means that you’re going to be good at being a technology person in that company. If you can’t really translate that into now I’m going to manage people, now I’m going to set vision, now I’m going to actually, you know, make sure the business doesn’t run out of cash, things like that are really, really important in that first meeting with us.

John:
Sounds like you really have to have two great skill sets and sometimes you only have one and not the other. In other words, you have to show why you’re uniquely qualified, as you said, why you are the person to come up with this unique software idea and then the other element of it, why are you qualified to run a company and, as you said, all the things that inspiring people to join your team and managing cash flow and having a vision and keeping ahead of what’s going on that those skills are not necessarily in the same person, so if you’re strong in one, you better develop the other and have some stories to back up before seeing someone like you, is that an accurate recap?

Mike:
Yeah, I think that’s right.

John:
What do you think about when someone says, you know, I’m uniquely qualified to do this, but my co-founder is the one that has the skills to really run the companies. Are you comfortable with that?

Mike:
Yeah, totally and many times that’s the approach that founders will take. One is traditionally sort of business-oriented personality. The other is more technical in scope. So, we have no problem with that structure.

John:
And then when someone is actually pitching you, many investors have told me, you know, we bet on the jockey, not the horse. I don’t know if that’s the case for you, because you’re being so specific that the horse has to be somewhat software-oriented or do you find that sometimes you invest in someone and they pivot?

Mike:
Well, yeah, I mean. They’re all pretty – the horses are at least running the same race for the most part. I think it’s a fair categorization. We’re pretty specific about where we invest, so I don’t think there’s all sorts of different horses, if you will, but yeah, the jockeys are definitely very different and they come from all walks of backgrounds.

Some of them have been in sales, some of them have been in technology, some have been in marketing, some have been former CEOs of companies, so that differs a ton, but then relative to your point about the pivot, I think most of our portfolio today and this is probably historic for me – the pivot in business software that I tend to see is more around product pricing or actual go-to-market, not working in one segment and moving to another, so it’s less around the idea and the, we thought we were going to start a business in, you know, X-space and we moved and pivoted into Y space.

It is more around, hey, we thought this was the price point that we were going to have traction in market with and it turns out that we actually can’t charge this much or we can change this much or here were the five to ten features that we knew were going to work and only three of them worked. So, I see less broad business model changes in B2B and I see more iterations or shifts in strategies within the company.

John:
Ah, got it. That’s helpful. So, sometimes it’s a strategy shifts, not necessarily a product shift?

Mike:
Yeah. I also think, remember, your cap usually, especially at the seed stage, your capital and resource constraints, you just, you don’t have a ton of money and you don’t have a ton of people, so it’s a little bit different than consumer internet or consumer software, because you can launch very quickly figure out over a two to four month period what’s working, what’s not, and can kind of pull back pretty quickly. Again, that’s a very butchered view….

John:
That’s okay.

Mike:
…doesn’t invest at all in consumer internet, so but, yeah, that’s what I would say about it.

John:
Great. The other question I wanted to ask you is, because it seems to me that when someone is deciding whether they want to work with you, that one of the things that you really bring to the table is this sales expertise, because you have to ram up your company and you have such an in depth skill set to help someone find the right sales people, hire them, get case studies, grow and grow and grow, can you speak to what you’re doing beside just investing your money?

Mike:
Yeah, sure. We have, I mean, I have a team here that focuses is largely around sales and marketing related activities. So, what we wanted to do at Bowery was be both very focused about what we invest in and then be very focused about how we help the companies, so essentially the way this manifested itself is three broad buckets.

We are either helping with pre-sales activities, sales activities, or post-sales activities, and we put them in those buckets just for, you know, presentation purposes, it’s not as clean as that as most people will know, but usually companies will come to us having just formed their business and taken in a small amount of paid in capital. Let’s say a million, two million dollars.

They’re usually are not a former head of sales of a company of a first sales hire at a company, so they, I mean, they need help with a lot of things, but one of the things they need help with is the sales component or the revenue generation component of the business and so pre-sales in our world correlates strongly to, okay, let’s get you ready to sell.

So, for folks that deploy and inside sales or outside sales driven model, we’re doing project that specifically focus on things like setting up all their CRM and marketing automation systems, building a lot of the call-scripts, a lot of the qualification frameworks, all the sales pitch decks.

John:
Let’s talk about that, if you don’t mind.

Mike:
Sure.

John:
Can you compare and contrast creating a sales pitch deck as oppose to a pitch deck to get investors? Obviously, I would say there are some similarities. In other words, don’t suddenly put a lot of text on those sales pitch decks either, right?

Mike:
Well, yeah, depends. So, it depends, you know, it depends how your product is sold and it depends how technical, you know, you need to think about the things like the actual IT buyer here and the specificity of the ideal customer profile, but generally speaking, I would say, you really want to deploy a model that mirrors kind of – touching on the why you should care – assuming it’s kind of a first sales pitch, think about it more from the standpoint of talking to an IT buyer versus talking to a venture capitalist and what you tend to find is the largest component of differences, a venture investor will be pretty well up to speed about, you know, where the market is at and what the peer group is doing and the competitors and all these kind of things versus if you’re going in cold and talking to, you know, mid-level IT buyer at a company that isn’t necessarily evaluating, you know, some VNRFP as maybe just trying to find information stuff.

You really want to take the approach of defining why, you know, from the market standpoint this makes sense to have a conversation on, then driving into how that problem or market opportunity relates to their business, that person’s business, and then specifically how you can help solve that problem. So, it’s kind of the three rooms type of concept.

John:
I like that. The three rooms. You know, to me, if you know how to create a pitch deck for investors, you can apply a lot of those same skills, what problem am I solving for you and why me to getting revenue for your company, would you agree?

Mike:
Yeah, sure, and from my end, the best founders that we find, you know, especially are incredibly passionate and pitch their product the best, right, so you can see that come through when they’re talking about the opportunity. They may not be the best sales person out there, but they certainty know the challenge and the problem said and they have a great way of articulating why this matters.

John:
I love that. We’re going to Tweet that out. The best startups are the ones that are most passionate and why this matters, no necessarily the best sales people. That might be a little long for a tweet, but the essence of it is fantastic.

Mike:
Just qualify. In the very, very early days of the business, right, obviously they need to, they then need to hire the best sales people and…

John:
Right and that’s why you have your whole podcast, right, to help them figure out how to do that.

Mike:
Right.

John:
You know, we’re coming to the end already of our time, but before I let you go, I really want to ask about what I see here that’s so insightful. I’ve never seen it anywhere else, which is that this whole shift of internet native entering the C suite is really want driving the growth of what you’re investing it. It’s fascinating to me the people who sort of didn’t grow up with the internet and social media are now in love with technology and seeing that the solution to growing businesses and that’s what’s causing like even sales force you have as being replaced newer technology. Can you speak to that?

Mike:
Yeah, so this is, I mean, it’s the core tenant of what we care about. So, let me give a little bit of background, so when I really joined AOL Ventures, the core folks that I was talking to, not from a entrepreneurs that would come through our door standpoint, but more the friends of AOL and the interested people in technology that where they’re predominantly on the marketing IT side or in core infrastructure like a CTO or a CIO. A lot of what was happening in 2010, 2011, 2012 was particularly exciting to me, because you started to see 20 somethings and 30 somethings either getting enormous amount of budget, leadership, authority, whatever it is in their company and that, to me, was very unique. You had this kind of shift happening.

Most of the time this was driven by a CEO or a group of executives who felt out of touch or not as nimble as some of their peer group, so they would either hire in or promote some of the junior staff in marketing or in technology and so when I started speaking with a lot of those folks, it was very clear that they were really making IT purchasing decisions and that was pretty unique, right, because 10 years ago you really could only go to the top of a company and most of the time a CIO or a CTO and say, you know, here’s my pitch and I want to go through a procurement process and all these sort of things and you had sort of this downward push of PNL, which we had never really seen before.

So, that’s kind of the spark that got me thinking, oh, okay, I wonder if there’s something here and as I sort of gathered more information and research, I realized wow, okay, this is happening at all levels, so not only do we have sort of VPs getting a lot more budget approval and a lot more authority to make purchasing decisions, but we have old generational people essentially retiring out of executive roles or getting pushed out of executive roles to make way for the next generation of IT leaders and then on the complete opposite end of the spectrum, we had individuals at corporations being given the authority to make purchasing decisions.

So, this is the classic, you know, any one can buy Slack, because it’s $9 a month and their manager will not care, because it’s so low of a price point, so you could now build software companies bottoms up, right. You could sell it into individuals or individual within a business unit and then aggregate that demand and move up the ACV, the annual contract value stack to then ultimately go to the C-level person and say, hey listen, we already have 200 people that are using our software, why don’t you just do a master agreement?

John:
Talk about proof of concept, right?

Mike:
Yeah, right, exactly, and so all of these changes and the nature of the IT buyer to me were incredibly, you know, exciting. Look, I still think – so I’m extraordinary bullish and I think we’re in a great time to be a software entrepreneur and the one thing I’ll say, if there’s one thing that I, if I look back over the past two years that I thought would happen faster, the rate of change in this, you know, grouping of internet natives coming into the C suite and the VP suite, I mean, it’s taking a fair amount of time, there’s a lot of friction, there’s a fair amount of inertia.

Companies just don’t move that quickly. You have a ton of people who appear to be very smart IT purchasers. They’re on the conference circuit, they speak a lot, they’re very outward with their content marketing, but they actually don’t really buy that much IT, so there’s a bunch of things happening where I think we still have a fairly long way to go, but by enlarge, there’s been some incredible new hires and promotions in fortune 500 all the way down to kind of middle market companies and then even small businesses starting to take an interest in IT purchasing and sort of either swamping old for new or literally buying brand new software that never existed in our company five to ten years ago.

So, that’s kind of the what Bowery is all about. We’re trying to do – my ultimate hope is that we invest in some of of these companies, obviously, and they sort of change the way business operates. They kind of change the way business, you know, business is done and that’s kind of the dream, I guess.

John:
It’s a great dream. I mean, it’s basically just the phrase, internet natives, I think is fantastic. Internet natives are changing the way business is down. I mean, that’s the takeaway tweet for me. Mike, how can people stay in touch with you? Obviously, we want to promote that you have this amazing podcast that you really go deep on how to hire the right people, especially for this market. Like, if someone is an engineer, they may or may not have the personality to be a sales person. So, tell us about your podcast and stay in touch with you.

Mike:
Yeah, to stay in touch with us, you can just go to BoweryCap.com/blog and you can read all of our content and look at our podcast and things like that and I would say the easiest way to get in touch with me is through a referral or, you know, one of my colleagues here at Bowery and the sales podcast, I mean, it was really driven largely by our own internal portfolio’s interest in having, you know, leaders or contributors in the sales continuity really talk about very current and tactical issues as it relates to challenges they face and so we’re about 30ish episodes in now and we’ve had some heads of sales or people in various software organizations that really kind of give a good point of view on very, very specific topics.

John: Fantastic and is there one book that you really like or you would recommend for startups to read either about life or the business?

Mike:
That is a very loaded question. You know, one book I would recommend that all entrepreneurs read, or actually, I’ll give two books that I really recommend to folks. So, there’s a chief revenue officer by the name of Mark Roberge. Folks who are listening will probably know Mark. He’s really one of the only individual sales contributor, so he started as the first sales hire at HubSpot and he worked his way all the way to basically run the revenue organization, he’s the chief revenue officer and manage a team of 200+ people. He’s a very difficult thing to do given the organization tends to really need more leaders to come in above the prior leader, especially as you prep for sort of going public and things like that.

You know, many of these chief revenue officers get slotted out of those roles, so Mark has got this amazing trajectory going, taking HubSpot from zero to 100 million in sales and he wrote this book called The Sales Acceleration Formula, where he covers very, very, very specific topics. How he hired his sales people. How he did the actual selling, how his customer success team helped manage the sale. It’s an extremely tactical book that’s very, very helpful for anyone that’s going to start a SaaS organization.

John:
Well, it’s got a great title. Sales Acceleration Formula. I love it.

Mike:
Yeah and then the second I would say is a man by the name of Gabe Weinberg. So, Gabe founded a business called DuckDuckGo, which is in the search business and, again, Gabe comes at it a bit different, but wrote a book called Traction and as you think about sort of a SaaS business and really kind of deploying a marketing agenda or getting customers online, if you really want to be good at growth, this is a great, great read for anyone. So, I really recommend those two.

John:
Those are great recommendations. We’ll be sure to put those in the show notes as well as the link to your podcast.

Mike:
Oh, cool.

John:
Thanks again, Mike. It’s been a great, informative show about how to really target your pitch and a deck and how to grow your business fast. Thanks again.

Mike:
Thanks for having me.