Operating an startup accelerator, a VC fund, & a Venture Studio in tandem - Michael Cardamone, CEO, Forum Ventures
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Andrew is the General Partner of irrvrntVC, a firm focused on early-stage companies in the DTC, AdTech, and NextGen Commerce areas.
He especially loves partnering with first-time founders so they can learn from the mistakes he made as a founder.
Prior to that he co-founded and ran Agency Within, the fastest-growing independent DMA with a focus on direct-response, data-driven marketing. He managed close to $1BB in spend for clients like Nike, Billie, Zola, Outdoor Voices, Goop, and Etsy.
I had a digital marketing agency. Spent about a decade in the digital marketing ecommerce world. Started agency in 2014, co founded that with a partner and grew to be the largest independent digital market agency in the US.
Working with brands. Enterprises like Nike, Intimate, Shake Shacks Banks, Etsy, stores like Goop, Rocky Expenditure, Billy. Zola, Lola, Pet Flow, Trade, Coffee and others. And then had a successful exit from that in 2018.
And then after that, took a little bit of time off, spent with the family, played a lot of golf, tennis. But then when I was trying to figure out what I wanted to do next. I looked back at the agency life and wanted to focus on and what were the things that I really enjoyed. What were the things that I really loved.
And how do I do more of what I love and enjoy and realize that there really was this passion and enthusiasm for working at kind of the early stages. Working at that zero to one. Especially working with founders and founding teams. That really excited me. So I started to get more involved in that space. And then from 2019 to 2021, over a period of about two, two and a half years, made 25 angel investments.
Started to learn more about the space, reading everything, meeting everyone that I could go to, tons of events in New York City, and that was all great and fun. And like I said, made a bunch of investments, got to meet a bunch of real smart founders, a lot of other great investors, and kind of established myself.
Good brand, good reputation in the industry, good track record and performance on those investments. And end of last year talent of 2021 raised the funds. Really focused on kind of continuing to do what I did as an angel investor, but do it just on a larger scale.
Raising a venture fund now would be much harder than it was about a year ago when I started the process. Last summer when I went out to raise money I originally was targeting raising around $5-$7 million. I really wanted to just do kind of a kind of crawl walk run. Crawling with angel investing my own capital, walking with a proof of concept fund and then running after that a larger fund building out a firm, more than just one fund but fortunately along the way was able to connect and meet with people that were honestly had conversations with folks including my holdings that I had anticipated having until later on.
I thought they would want even more of a track record coming later but they really believed in me and wanted to invest early so they're the anchor investors. And then one thing that I did really well, somewhat intentionally, was kind of over those two to two and a half years of angel investing. I really was pretty good and strong about focusing on investments that I would do as if I was a fund.
So really a lot of times I think early on a mistake that some angel investors make that I've seen and also I wasn't immune to it at all. I wasn't immune to it completely. Was focusing on deals that kind of makes sense and pencil out but don't have the potential to be those home runs and those outlier successes. And so I think I did a good job of that which really helped me. I also stayed really true to my own. Focus and niche around ecom, digital marketing, advertising, technology, getting people appreciated and in the hype of everything that was going crazy from the time that I was investing early 2019 to enter 2021 with valuations probably outpacing the value that was being generated by those companies.
It's one thing to pay multiple ARR, to pay 100 times that ARR. I was really focused on early stage and really focused on being priced disciplined. I think there were deals that I missed because of that, but I think having that kind of consistent approach and discipline was really valuable.
When I met with investors end of last year, we were still not in a euphoric phase, but they appreciated that kind of authenticity around my focus and that discipline. And then, obviously, I don't want to diminish the privilege of the rooms that I'm able to get into, do my network and do my background.
I think that definitely put a part of it as well.
I'd say I'm really focused on kind of founder market fit.
When I talk about that, that's kind of three different things. Founder or founders or founding team. Are these founders, founding team, exceptional, remarkable. Do they have the ability to create a really huge company?
I look at their investor updates, I look at obviously their experience and background. Do they understand what greatness is and what greatness looks like? I do think that's really important. Even though it's over index of first time founders.
Market, the market that they're entering doesn't have the capability or ability to lend itself to a large multi billion dollar dollar exit. Because if the outlier success, if a home run for them is they're raising a ten and they get to $100 million exit, everyone's going to be happy with that at the end of the day. But if that's the upper bound of what's possible, that's a 10X. And then after dilusion you're looking at 7X. It's not a great outcome for a fund investing into an early stage company.
So the market really needs to support 500 million billion dollar, $5 billion exits and then founder market fit. Do these founders have something exceptional, not just in general but specifically about this market? Have they spent time in the market? Do they kind of understand all the pitfalls of the companies that have tried this before? Do they have a differentiated approach in terms of how they put a market in terms of product, in terms of niche and audience? What is it that's going to get them kind of that jump start kickstart to get going and that's kind of the areas that I focus.
I try to keep it to roughly like a month. I definitely try to get quick numbers back to people. Also, I think the standard that I try to hold myself to is for Cold inbound is trying to get back to folks within a week or so.
Whether it's just a quick no. Here's some other resources. Or hey. here's some questions. Or this looks really interesting. We'll talk on a call and then diving in kind of goes from that usually questions to a phone call to more questions to another phone call and then make a decision after about two calls. If they're in New York, try to meet up in person as well, if they're in the area. And then, yeah, that usually takes about less than a month to get to a decision.
I have an executive assistant they don't deal with deal flow but I'm focused on trying to think & figure out a strong process for that. Last week I got about 60 cold emails so it's quite a lot. I think I do a pretty good job again about filtering.
One thing that I've done is I've updated my typeform, my form on my site for close inbounds to really try and be able to, when things are not a fit, filtering them out more quickly depending on stage or geo or sector and things like that and then as well.
I also try to make sure that I filter out transparently. A lot of cold inbound is not good. So I try to filter out a lot of the folks who have not spent a lot of time thinking through their product or their market.
I think Caraway was probably contrarian in some ways. I mean, it was really typical for Jordan, the founder, the raise took a long time. There were a few other consumer kitchenware companies that already started at the time when he was raising in 2018, 2019.
The first raise that he did, he raised from a ridiculous number of people. 5K checks, 10K checks, 15K checks here and there, and at the time contrarian. And that a lot of folks thought, oh, why does the world need another kitchenware brand?
Which is how I went into the meeting as well. After meeting Jordan it became clear that the world needed a kitchenware brand started by Jordan Nathan. Not just another kitchenware brand.
I have to say all of them. Right. They're all my favorite children, but I'll talk about one that I'm 5s excited about in the moment. I was an early investor as well, is a company called Revenue Roll. And so what they do is they kind of.
Let’s take a step back. At the agency, my agency, we work with a lot of enterprise brands charging anywhere from beginning, our minimums were lower, but by the end, you know, minimums of 5,10, 15 gaming just in service fees, which is obviously unattainable and unsustainable for smaller brands who aren't spending a lot of marketing. And so what Revenue Roll does is try to combat that in of three key ways.
One is an analytics platform that includes much better tracking, especially in a post iOS 14 world around performance.
Two is they'll actually manage your ad spend for you if you want, and they'll do it in a way that is really focused on performance and incentivize based on performance increases and improvements. Even if you are a smaller company, you're kind of getting what you pay for in a good way there.
And then three in terms of blending out capital for that growth to companies. So I'm just really excited about what they built around kind of attacking all three of those problems that I see from the SMB site.
So from the funds, I typically do a call with the founders and found a team either every two weeks or every month. It depends really, on what the founders want and also just where they are in the business. Right. So heads down, building out the product and not really focus on going to market at this point. Probably catching up once a month is enough.
Having at least once a month catch up is always great. And a lot of times what we do is we schedule that shortly after their monthly updates. So they'll send their updates on the first 2nd, 5th of the month and then they'll do their monthly call with me and with other investors shortly after those updates come out.
So come prepared for the meeting with understanding where they are, how they're thinking through the business at that point, and then thinking through ways that I can. The number one question I always try to ask is, okay, what's going on is not going well. Where can I help? Where can I add value? Because I'm here, I'm happy to talk through the business updates and get better. Understanding for me is always helpful. But at the end of the day, my goal is the 30 or 60 minutes that we're spending together. Give me two, three, five things that I can do to go out and do over the next week, two weeks to help propel the business forward.
It gets overwhelming, but at the same time there's just ebbs and flows. And I think it also is again, different companies have different seasonality around them, different kind of growth periods, growth times where they need or could use attention more than others.
I think this will be a challenge for me as I continue to grow. As of now, the fund’s made about ten investments so far, we’ll be making between 20 and 24 investments. So a little less than halfway through. So it's definitely something that I'm mindful of.
If I have angel investments that I've made, which obviously I probably have long standing relationships with founders that still want help and advice every now and then. Still have 20 companies and doing even a call every single month with every single one of them is 20 calls. That's 10, 12, 15 hours a month. On top of, updates on top of they're going out to raise and need help with the deck and they're going through the opposite may be slower growth and they need help thinking through restructuring and planning.
So there's always one big thing that I try to do is to not ever over-promise. I'm a solo GP, you get access to me and not a team, which is good and bad, right? So areas that I can help, I try to talk through pretty clearly. And then in terms of time, resource bandwidth, it hasn't been an issue yet.
I was always relatively priced in, as I alluded to earlier. I always focused on the early stage, I think, to not take too long on this point, but on the background. But you have some what I call good healthy increases in valuations at the seed and preceding stage over the past few years, where 5,10 years ago and again, this is from reading and learning from mentors and advisors, more so than actually having been in the industry.
5,10 years ago, you had companies raising a million bucks at 3 million, 4 million free money. And that's because they needed to set up their own servers, to set up their own tired engineers, to build out and even just get to beyond a slide presentation. But beyond just a deck. Now, even before, sometimes even before a company goes out to raise, they'll have built like an MVP or even a little bit beyond an MVP, right? Because A, there's just a lot more resources available. Exited founders, founders who have been at large companies and had exits from being at those companies early. There's folks who have proliferation of talent and information through YC, through Twitter, through podcasts, through articles.
You have low and no code stuff going on where now it's not even necessary to have a technical founder, technical co founder or CTO at the early stages. You have, obviously. AWS and Google Cloud and Azure and everything else. Now that pressure where it took instead of a million bucks, three, 4 million pre to now go out and raise one and a half, two, three. Some of that probably makes sense. Because they are getting that much farther and they have proved and derisk a little bit more then you have obviously a combination of the crazy valuations due to zero interest rate environment.
Due to larger exits and stock market performance and seeing larger assets. Larger for the funds and kind of all that was cyclical and one built off the other. And so you had probably, again, like we mentioned, people funding off 100 times and things of that nature that was probably unhealthy, has corrected maybe too much now.
So when I look at that and think through that, the goal is still to just be take the approach of being disciplined, of being thoughtful, of really focusing on again, are these founders phenomenal? Is the market large enough for an exit?
I'd say the area that I probably take about more now than I did five, six months ago is are they raising enough cash to prove something, to de risk X, Y and Z to prove out this or that hypothesis up? And is that enough to then go out and raise the next township capital?
Right. And so that's something that I think you have to think about always. But before it was, okay, they're raising a million bucks. They'll figure it out. And even if they don't, they'll be someone who's willing to continue and just kind of write that next check, because they'll have gotten at least that far. Now it's like, okay, if they actually let's pretend they say, hey, we're raising $2 million and we're providing that X, Y and Z. We're now here in nine months from now, twelve months from now, and they have three months of runway left and they're going to have to raise money.
Like, is there going to be a buyer for that equity? I think that's something that I continue to focus on.
I was looking for names that started with IRR. IRR stands for Internal Rate of Return. It's how venture funds get measured. They get measured on a lot of different metrics, you know, at the end of the day, how much money they return back to their investors or what time period. And so I was focused on that and then came kind of cross the word reverence is thinking through. And it just really struck a chord with me.
I think one of the reasons that the agency that I founded was so successful is because we brought that no agency experience, that lack of agency experience to the market. We built an agency that we would have wanted. We've been looking for an agency. So I try to do the same thing here. I don't have positive learnings of some other venture capital, but I also don't have the negative learnings. And so, good and bad. I try to bring that a reverence to the fold every day.
I think building companies and employing folks is powerful, important work building and ideas that better the world are great. But I want to have fun while I'm doing it because I spend a lot of time doing it. And I think it's important to just bring that attitude, that positive kind of a reverence in a good way to what we're doing.
Yes. So, as mentioned, very open to cold inbound. So if you are a founder, focus on the US market and you're building a business and direct consumer ad tech, Nextgencommerce, anything in and around ecommerce, infrastructure, marketplaces, feel free to go to irrvrnt.com. There's a pitch form right there. I review every submission personally, get back to everyone within about a week to ten days.
You can also follow me on Twitter at @irrvrntvc and yeah, I'm excited to see all the submissions and get to know folks that are interested in this world.
IrrvrntVC website: https://www.irrvrnt.com/
Portfolio companies mentioned in the episode:
RevenueRoll - http://revenueroll.com/
Carawayhome - http://carawayhome.com/
Hosted by: Prashant Choubey
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