The full transcript

Oleg

Hi, everybody! Welcome to Devico Breakfast Bar! Here we speak with different people involved in the business landscape, share their expertise, delve into the latest tech trends, and explore the ins and outs of IT outsourcing. I'm Oleg Sadikov, and today I'm excited to have Brett Martin, entrepreneur, angel investor, pragmatist, and optimist. Having spent most of his career in the startup trenches, he now focuses on supporting other entrepreneurs as managing partner of a small seed stage venture fund, Charge Ventures. Don't forget to subscribe and hit the notification bell. So you don't miss on new episodes. Hi, Brett. To start, could you please tell us a bit about yourself and take us back to your early days in the business world?

Brett

Well, howdy, Oleg, and thank you so much for having me. Great to be here. I think you kind of nailed it. I really wear three hats professionally. I run Charge Ventures, which is a New York-based pre-seed venture capital fund. We just closed our third fund. We've got 70+ portfolio companies. And we like to be kind of the first investor. And, you know, they say, 'Friends, where do you get your first checks?' You get it from friends, family, fools, and Charge Ventures. We're only you know, some of the only institutional capital that's willing to go that early. I also run a Lightspeed-funded series A company in the productivity space called Kumospace, and that's basically an all-in-one communication suite for remote and distributed teams. So, we sell this flagship product called a virtual office, which is, you know, almost like a two-dimensional map where you can kind of see all your people, which is great when you're remote, because, you know, normally you don't see them very often, and easily tap them on the shoulder, get a quick answer to your problem, and, ultimately, have more of a kind of surface area for people to build company culture remotely. And then the third thing is I occasionally moonlight as a professor of data analytics and machine learning at Columbia Business School, alongside Daniel Guetta, who runs the Data Analytics Institute there. So, that's pretty much what's keeping me busy these days.

Oleg

And that's very interesting. What drew you to angel investing? And what do you find the most fulfilling about supporting early-stage entrepreneurs?

Brett

Yeah, I think maybe there's a connection why I like teaching and I like supporting entrepreneurs. The connection is that I love the optimism and the belief that the world can be changed in a better way that I think both entrepreneurs and students possess before you get old and jaded and focus on all the things that can go wrong. You know, entrepreneurs and good venture capitalists are focused on what can go right.

Oleg

Sounds great. Can you share a defining moment or experience that shaped your outlook on entrepreneurship and investing?

Brett

Well, let me think. I mean, probably the earliest my outlook and that sort of optimistic worldview, you know, just shaped by my dad and my family. I think, you know, seeing sort of my dad always starting companies or doing new projects. We're always kind of curious about the way things worked. And then I went to college, and my roommate – a good friend of mine, his name is Jordan Cooper – he now also runs a venture capital fund called Pace Capital here in New York. But he was from New York City. I was from a small town in Maryland, and, you know, the idea of venture capital and startups—I had never even heard of these things. But he came from New York, and he knew that venture capital, knew what it was about. And so, I got my kind of early exposure there. And then we participated in the Tuck Business School as undergrads, we participated in the Tuck Business School entrepreneurship competition. And, you know, we ended up winning, and that led us to take some courses at Tuck. And that sort of got me kind of the academic exposure to it. And, yeah, I guess, my whole life I just had been buffeted – I’m fortunate – buffeted by opportunity. And, you know, if you see an opportunity, it's hard not to reach out and grab it.

Oleg

I heard from many tech entrepreneurs that these days it's pretty challenging to raise investments, and that includes venture capitals that work with pre-seed, seed rounds. How can you comment on that?

Brett

I guess when you're as old as I am at this point, and you've actually seen multiple up and down cycles, it's really more of whether it's hard or easy is really just more a matter of perspective and timing. You know, is it hard now? Or was it just really easy during the zero interest rate period, you know, going from 2015, 2016 to 2021? I think that it's probably more normalized. And now it's sort of how a quote should be or has historically been. And it just was really easy when all this money was pouring into venture capital. I mean, I have seen New York venture capital since I started growing. You know, there's six times as much venture capital deployed in New York as there was 14, 15 years ago. So, when you have such a supply-side change, there's just more money available, and now it's contracting a little bit. So, that's not to say it's always hard. I guess what I'm trying to say – it's always hard to raise, particularly if you're a first-time entrepreneur, it feels very daunting to get even, you know, a million dollars or even half a million dollars. So, that said, I think it's within reach for the people that are willing to do the work.

Oleg

What are your criteria for an entrepreneur to work with you? How do you select them? Do you select an interpreter, or do you select a product?

Brett

Oh yeah. So, we invest in pre-seed and seed-stage companies, right? So, there's not that much there. Oftentimes, we're investing pre-product. You know, we're definitely even talking to people pre-incorporation, right? So, they're at the earliest stages. Oftentimes, people haven't even left their last job, and we're sort of helping them scope their new idea. So, there's not really a product to evaluate most of the time when we're investing. And so, we are really investing in founders and markets. And so, if you think of your kind of simplest model for venture capital investing as, you know, kind of a founder, market, product, and deal, I would say, we have really indexed on the founder. And in particular, you know, what we've realized is the idea – it’s not a product, it's a real idea. And as long as we don't actively hate the idea, as long as we're neutral or positive on the idea, if we have a great founder, and a great market, and a deal that makes sense for Charge, then we'll invest. So, what we really do is we focus on the founder, and we have certain archetypes for founder success that we like a lot. So, you know, the serial founder guy or gal that has successfully sold a company in the past. That's great. We love that. Obviously, half of our portfolio is probably serial founders. Nothing special about that other than the fact that those folks who have all the choice in the world, you know, let us in. And that's often just a function of hopefully being a good actor in the ecosystem and having, you know, 20 years of reputation.

The second sort of archetype is like deep domain expertise. So, you know, folks that have really devoted their life to learning or understanding a specific domain area and problem. And that often comes from professional experience, but it could also come from just becoming obsessed with a problem. You know, I was actually hanging out with this entrepreneur, Frida Polly, and she's really great. She built and sold HR analytics company before, and now she's like really getting into longevity. And even though it's very different domain, she is just so curious and just diving into this space. She taught me multiple things when we had breakfast recently. So, you know, founders like that who have insights in a particular market. And then the third type is first-time founders. You know, we invest in a lot of first-time founders. It's the other half of our portfolio. But what we're looking for is people that have demonstrated an ability to move the chains – that's an American football expression – but basically, you know, have created some sort of traction, usually, you know, just by hook or by crook. Through some sort of force of will, they have built a product, gotten in market, gotten some early traction against the odds. And when we see folks like that that have already derisked a venture with very little resources, that's impressive. And that's the type of founder we love to get behind.

Oleg

Okay. Thanks for the detailed response. Are there any professionals or leaders in your network who inspire you in your professional journey?

Brett

I mean, so many. I'm just so fortunate to have been surrounded by such an amazing peer group of entrepreneurs and investors. You know, so much of my network is like what we would call like OG New York tech, and that's just the people who were around in 2000 and who didn't churn out. They stuck around somehow. You know, either they had success or they just continued to grind. And, you know, there's something that I think experienced venture capitalists will say, which is that you just have to, you know, stay in the game long enough to be successful. Cause whether you're an entrepreneur or you're a VC, you just need one really great win to make a name for yourself. The thing is that most people churn out before that. They go join big tech, and that's obviously nothing wrong with that and a great way to make money, make a living, and have interesting work, but, you know, if you leave, then you don't have that opportunity. You know, my fiancé I actually met at South by Southwest over a dozen years ago, she works at a big butcher capital fund. And I learned so much from her. Her name's Amy Wu. She works at Menlo Ventures.

Like I said, my roommate, Jordan Cooper, who worked at General Catalyst and Lerer, and it's his own startup. You know, I always have learned from him. My good buddy, Vic Singh, who works at ENIAC, he invested in all my companies. You know, Ed and Elliot from Bold Start. They did the scene investment in Kumospace. And Paul Murphy from Lightspeed, who did our series A. He used to be a founder, he built a company called Dots in New York. So, I think I just feel very fortunate to have such a talented peer group. And I guess one lesson I learned early is that I wish I had an angel invested in all of my peers and my friends. If I had done that, I would have an amazing, even more amazing portfolio. You know, at that time I felt like I didn't have the money, but in retrospect, I think it's like if you're already investing in these people with your time, then you might as well invest with them in your money, right? Because those are the people that you're giving your most valuable to.

Oleg

Agree. With your background in launching startups, like Switch and Sonar, what key lessons have you learned about navigating the challenging period of building successful tech companies from the ground up?

Brett

Well, not to be cliched, but it is all about the people that you pull in. And I think maybe one more challenging lesson is that it's not good enough to have just great people. You actually need great people that get along and complement each other nicely. You know, one of our challenges at Switch is that everyone involved was great, and accomplished, and really lovely people, but we weren't as complementary as we wanted to be. We were on paper, but we weren't in practice. You know, my buddy Jordan, who is CR of Tabula, and we had my friend Yang Mao, who was an engineer – he had worked at Oscar Health and Google, or he had worked at Google, even coming straight from Google – and then myself. We're supposed to do, you know, I think we were going to do kind of sales, engineering, and product, respectively, but then we all ended up wanting to do product. And we had too many cooks in the kitchen, and, you know, even though it was great people and with great resumes, we didn't really jell.

So, you know, maybe one lesson is just getting aligned and making sure that everyone knows what they're responsible for, and everyone else is comfortable letting them be responsible for that, and relying on them, and trusting them to do their side of the work because it's kind of like people describe parenting. I don't have any kids yet, but people always talk about how you have to divide and conquer and be comfortable with that. If you try to do everything together, you'll never get a break and never get any rest. And I think startups are like that too. You truly have to divide and conquer. Rely on and trust your co-founders to take care of their side of the deal. Not that you shouldn't have any oversight. I mean, I do think it's actually important that you stay aware of what your co-founders are doing and what they need to be doing, just because it's not a lack of trust, but it's like you probably can help them. But, you know, you have to trust. So, balancing sort of trust but also mutual oversight is probably a very important thing for founders to keep their minds on.

Oleg

Very interesting! You're investing, teaching, writing, selling. How do you manage to balance?

Brett

Definitely just holding on by the bare my knuckles. But I think maybe my insight here is that you can do anything you want. Not everything. But if all the things that you're doing are pulling you in different directions, you won't get anything done. But if everything that you're doing kind of reinforces the other things that you're doing, then you can do a lot. And so, I think I spent a lot of my time trying to craft my, trying to direct my energy in ways that it reinforces everything else. So, you know, I teach at Columbia, and we teach data analytics and machine learning, try to take those learnings and bring them back into, let's say, my startup Kumospace, and take some of the techniques we've learned and apply them at Kumospace, or hire from the students I've been fortunate to work with at Columbia, or take those students at Columbia and help them get jobs at Charge portfolio companies, or take Charge portfolio companies and bring them into my class and help them get data science projects done. So, you know, if Kumospace, Charge, and Columbia didn't have any overlap, I think it'd be very difficult to do them all, but because there's significant overlap between the three, then I can have my cake and eat it too.

Oleg

Given your involvement in various industries and ventures, how do you stay updated on emerging trends and opportunities in the startup world?

Brett

It's interesting. You know, there's so many different ways of skinning a cat and being successful. You know, some venture capitalists are all about deep research, and reading the latest papers, and really consuming whatever information. Maybe they use Twitter to find interesting insights. Personally, I've always preferred people. You know, I feel like maybe with getting my knowledge just from staying in touch with my network. And I think there's pros and cons. It's harder to get a comprehensive view just by talking to people. But what I find is that they have more proprietary information. And so, you're more likely to find a less broadly distributed fact or insight from a person than, you know, what everyone can consume online. And so, that tends to be just staying in touch with people. That’s where the gold is.

Oleg

Technology, particularly AI, has been disrupting various industries. From your perspective as an investor and entrepreneur, how do you see AI impacting the startup landscape, and what opportunities do you see it presents for entrepreneurs?

Brett

I mean, the whole generative AI thing is probably the most exciting thing in tech. In my entire career, you know, maybe mobile was equally exciting in terms of just like why is a venture capital opportunity a venture capital opportunity? It's because there's an opportunity. The why now is so important for venture, right? Because there's lots of ways of making money, but not all of them can occur in a very compressed timespan. And so, in venture capital, you're looking for massive returns in a very quick period of time. And often the reason why that is available at any given time is because there's been some change, either a technology change, or a regulatory change, or a societal change, that creates an opportunity for compressed value creation. Chris Pike, actually Jordan's partner at Pace Capital, was the first person to kind of articulate that to me. So, you know, you have kind of a tech edge, like mobile, where all of a sudden there's all these new applications, and you can take advantage of them. Or now you have kind of AI, which is like this exciting new surface area for entrepreneurs to build on. And I think there's a lot of older people in the industry who are saying, 'Oh, you know, AI is only going to benefit incumbents because they already have the data, and they already have the distribution.

And now you can deploy a chatbot if you have data into any, you know, text box.' And sure that that's true. And incumbents are certainly going to benefit from this also because incumbents, like hyperscalers control the compute, which is absolutely necessary. But, you know, I think that's like first order of thinking. I don't think that's actually second, third thinking it's that, ‘Okay, well, what happens next?’ You know, what are the completely novel applications that people didn't even see coming from computers that can read, and write, and speak, and listen. And, if I were to draw an analogy to the last big tech shift, you know, which was mobile, I think everyone thought the next big thing with mobile was going to be a mobile social network. Well, it turns out that now Facebook and kind of owned, continued to own social networking. When in reality, you know, the big unforeseen winners mobile are, you know, the companies like Uber, right? And the transportation companies, or, you know, Tinder, which was the dating app. And so, I think similarly, you're going to see massive new gen, you know, companies being born out of artificial intelligence. And they're going to look nothing like the last generation of companies. So, pretty excited about what's to come there.

Oleg

There is a growing debate about the potential of either augment or replace human jobs. How do you think startups should approach integrating AI into their products or services while considering the impact of employment and society?

Brett

Well, so this is the fun part. I think that, you know, how do startups compete? Well, startups get to compete by just really speed. Speed is the only thing that matters for being a startup because you're always out resource, you're always out gun. And so, how do you move faster? Well, that's where, you know, like gen-AI is creating a lot of opportunities for new companies, and new products, and services, but bringing it internally and bringing all those new tools into your startup and using them effectively is your actually the best way to get edge over incumbents, right? Like an incumbent can't even use gen-AI. Incumbents can't, you know, just start using open AI and putting their work in there. Their companies are afraid of. They're blocking it. They're afraid of data safety or whatever. But you don't have that. There's problems as a startup, right? So, you have to use all the new tools as quickly as possible. And so, what does that mean for hiring? It means that I'm absolutely looking for teammates that are using all the latest tools, that are experimenting, that can show me new tricks and new ways of doing things, right? I feel like if you're still doing things the way that you were doing them 5, 10 years ago, you're basically lost. So, I think the new 10x engineer is an engineer that knows how to use AI really effectively, right? Your 10x ops person is using AI really effectively. Same for, you know, every function.

Oleg

Okay. Many entrepreneurs still might feel overwhelmed by the idea of incorporating advanced technologies like AI into their businesses. What practical advice would you give to someone who is considering tipping their toes into this tech-driven realm?

Brett

Just start using it for your personal, you know, projects. Just download it. Like, pay your 20 a month tax to open AI. You know, I don't think there will be a better 240-dollar investment other than just practicing, and playing with it, and using it, tinkering with it, and trying to use it to solve your own problems. That's an investment anyone can make.

Oleg

Startups often face a balancing act between staying competitive through tech adoption and avoiding unnecessary complexity. How do you advise founders to find the sweet spot and make tech decisions that align with their overall business strategy?

Brett

You know, interestingly, resource constraint helps a lot here, right? I think that people tend to overbuild and increase complexity when they have more money than they need. So, maybe a really practical thing for venture-backed startups is take your runway, and cut it in half, and then act as if you had half as much runway. And then, what would you do? I think that's a good kind of rule of thumb for operating. And that will simplify your thinking, help you prioritize.

Oleg

Outsourcing has become incredibly common, especially in tech startups. What are your thoughts about outsourcing certain aspects of startup operations? And how do you advise founders to navigate the decision of whether to outsource or keep tasks in-house?

Brett

Yeah, I mean, I think outsourcing is the future. I think the world is increasingly flat. Obviously, Kumospace, you know, we believe in remote work and the benefits come from it. And the primary benefits are people love the flexibility of remote work. They have the work and their lives, and they don't have to put their lives on hold just to get work done. The other, you know, big benefit for employers is that they get access to the global talent pool. And, you know, turns out that the best people also like that flexibility. And so, by providing people opportunities to work remotely, you get access to the best talent, and increasingly, that best talent is not down the street from you, but might be across the globe. And so, you know, you can hire people trained by big multinational corporations as a startup. And as they pull everyone back into the office, you, as a startup, have the opportunity to offer them a remote job, wherever they want to raise their families and get the benefit from all that training that big companies have put in. So, I'm a huge fan. Our team at Kumospace is fully distributed all over the globe. And we have amazing talent, and we get to pay them higher than they would get paid in their local economy. And we get, you know, top A+ workers.

Oleg

Startups often face the dilemma of outsourcing core functions versus maintaining control over key aspects of the business. How do you advise founders to strike the right balance between outsourcing and keeping core competitions?

Brett

I think your core goal at a startup is actually to learn, right? Like, actually, a startup is a learning machine, right? And to quote, Steve Blank: it's, you know, a temporary organization formed in search of a business model. And I think that your core competency is not any sort of function. It's actually learning. And so, we often view outsourcing or consultants as a way of getting up to speed really quickly. And so, we will outsource something and try to learn from the people that were outsourcing to as quickly as possible, with the ultimate goal of, you know, if it's an important function, bring it in-house. So, we love to work with consultants to basically learn new skills quickly and then bring them in-house. You know, I'm not a big fan of, unless it's a truly ancillary or back office function where you're literally just trying to minimize any time spent on it, I would permanently outsource that, but everything else, you know, start and then bring core functions in-house.

Oleg

How do you assess the risks and benefits associated with outsourcing, particularly in terms of maintaining control over sincerity of product data information?

Brett

Yeah, I mean, customer data obviously is sacrosanct, and you have to keep that on lockdown and try to minimize exposure. I mean, that's just good security practices. But kind of what I said, I think in general, you can get great talent across the world. And maybe that starts as outsourcing as you're bringing in a new role, but then eventually you kind of bring it in-house if it's valuable. And if it's not core to your business, then you should obviously let someone else, for whom it is core, handle it.

Oleg

In your portfolio of companies, is it common to outsource?

Brett

You know, outsource also can mean a lot of different things, but I think particularly in this era of capital efficiency, people are realizing what is core to their business and what they actually absolutely have to be great at versus what's not as important for them. And so, I think people are looking around particularly now and saying, 'Oh, maybe we could hire people in India, or in the Philippines, or in South America – you know, we do a lot of hiring in South America – and get it done maybe even better and for cheaper.'

Oleg

In the beginning of the video podcast, you mentioned that it became normal – not easy, but normal – to raise money for founders and entrepreneurs since we are living in expensive money period. But do you think those rates are normal? 5%? I think it's too much, no? And for me, it seems like it became harder than normal. What will be when the rates will drop to, I don't know, 3%? Do you think it will be easier?

Brett

I used to be an equity research analyst and cover publicly traded stocks. I don't do that anymore. So, I'm no longer, I think, particularly qualified to give you kind of macroeconomic advice, but I guess there was like, during 2022 and, you know, first three months or first three quarters of 2023, the market definitely pulled back and kind of seized up, I think, because there was uncertainty and how long things are going to last. Then, certainly, not a lot of deals, particularly in the growth stage markets, you know, we're kind of frozen. But I think now they're starting to thaw. The way I frame the market is like when you put something from the freezer in the microwave, you know, you pull it out, and one bite is scalding hot, and the other bites – freezing cold. That's kind of how the market is right now. There's very hot sectors like anything AI or AI infra, and then there's freezing cold sectors like, let's say, CPG, or consumer packaged goods, or, you know, physical consumer. But I do think that it's evening out, and there's folks that are looking for good, you know, price. It's sort of what's going to make those markets converge. And there's good deals out there if you're willing to be a little contrarian, and we're certainly willing to Charge to, you know, look at something, at a really great price that other people aren't investing in right now.

Oleg

Brett, thanks for your time. Thanks for your answers. I'm sure that our auditory will find your answers very valuable for them. Thanks for joining me today. I also found a few interesting things, and there are quite a few advices that I will use in my entrepreneurship and in my career.

Brett

The pleasure was mine. You asked great questions, and I really appreciate the thinking behind them. And, yeah, I looking forward to finding some business to do together.

Oleg

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