SmartMoney Ventures Podcast
SmartMoney Ventures Podcast
SMV9: Sue Tyler on growing from zero to $300 Million of revenues in 4 years, and why people and culture matter.
In this episode, you will learn:
- What its like to grow from Zero to $300 Million of revenues in 4 years.
- Why surrounding yourself with the right mentors is crucial to success.
- Why most startups are a series of failures until they’re not.
- How the Heartland culture gets s##t done without unrealistic expectations.
- Why people and culture are critical to success in innovation.
This episode of the SmartMoney Ventures Podcast features Sue Tyler who is a C-level executive, board member and investor who has a unique combination of experience with billion-dollar Fortune 500 companies along with hands-on work in the trenches of rapid growth startups.
Sue encountered rapid growth early in her career at Progressive Insurance where she served in Finance and Product Management, introducing new products and technologies and generating significant revenue growth for the company.
She went on to serve as SVP-Marketing & Division President for a startup insurer formerly known as Reliant Insurance that grew from $0 to $300 M in revenues in less than 4 years and was ultimately acquired by Farmers Insurance.
Sue went on to serve in multiple C-level roles at Medical Mutual, a multi-billion-dollar insurance company for 15 years. During her tenure, the company grew and diversified through new product introductions, expansion into new markets and acquisition.
Sue currently serves as a Venture Partner with Caduceus Capital Partners and is a member of North Coast Ventures, investing in early stage digital health companies and software-as-a-service companies. She is a member of the Board of Directors of several digital health & insurtech companies including Beam Benefits, ForMotiv, ScriptDrop and HealthPlan Data Solutions. She is committed to value added board governance, serving as a founding member of the Cleveland chapter of Private Directors Association.
Sue serves on the Cleveland Clinic Innovations External Advisory Council and is an alumni Advisor to the student led venture fund and a venture mentor to the medical school at Case Western Reserve University where she holds both an MBA and an undergraduate degree.
Welcome to the Smart Money Ventures podcast, where we highlight active leaders in the global ecosystem of venture capital, entrepreneurship and innovation. We give you access to insights from successful investors and entrepreneurs that most people just can't get access to, and the only reason they take our calls is because we've been in the trenches with them for decades. My name is JD David and I'm your host for this episode of the Smart Money Ventures podcast, and today we have a very special guest who I have great respect for. Sue Tyler is a C-level executive board member and investor who has a unique combination of experience with billion dollar Fortune 100 companies, along with hands on work in the trenches of rapid growth startups.
Speaker 3:Sue encountered rapid growth early in her career progressive insurance, where she served in finance and product management, introducing new products and generating significant revenue growth for the company. She went on to serve as division president and senior vice president of marketing for Reliant Insurance that grew from zero to 300 million in revenues in less than four years. The company was ultimately acquired by farmers insurance. Sue then went on to serve in multiple C-level roles at Medical Mutual, a multi-billion dollar insurance company, for 15 years, and then she started serving on boards and investing in startups as well. Sue currently serves as a venture partner with Caduceus Capital Partners and is a member of the board of directors of several digital health and insure check companies, including bean benefits, formative script, drop and health plan data solutions. Sue serves on the Cleveland Clinic External Innovation Advisory Group and is an alumni advisor to the student led venture fund and a venture mentor to the medical school at Case Western Reserve University, where she holds both an MBA and an undergraduate degree. Welcome, sue, and thank you for joining us today.
Speaker 2:Thanks, jd.
Speaker 3:So to kick off the program, let's really start with where you first encountered rapid growth at Progressive Insurance.
Speaker 2:So I think I was really lucky to be able to join Progressive at the time that I did, because it was a time of really incredible growth and innovation and it was a pretty big company at that time but it had the culture of a small company and it was taking an innovative new approach to a very mature industry. So I was able to serve in product management and finance roles across three different divisions within the organization. So I got exposed to a lot of really smart people and a culture that was really ahead of its time in terms of, you know, looking at the business as a data business, not a traditional insurance business. It was very much a fail fast environment. You know it was like we're going to measure things, we're going to do experiments, we are going to hold people very accountable, but failure is acceptable. If you learn from your mistakes, move forward.
Speaker 2:So it really was an incredible place to start my professional career and I laugh sometimes when I talk to people and people talk about digital transformation in the insurance industry and I laugh because we did that in the 1990s at Progressive. Like we literally went paperless with our agent voting and application and binding process. So you know it was the early 1990s I was under, you know, desks in agents offices plug in the phone line, you know, into the wall and you know, with the dial of modem connection that we were able to transform what was a, you know, a big paper process into an automated process. And again, to have that experience early in my career was priceless.
Speaker 3:That's awesome. It's one thing to go into a company and understand how all of the nuts and bolts work. It's another to say, all right, we're going to press some levers and try to go as fast as we can and really transform the way we do business. That's fascinating.
Speaker 2:Yeah, it was an incredible environment where, you know, there was a belief in hiring a lot of smart people from outside the industry and allowing them to view the industry differently, instead of hiring industry insiders that thought they knew how it should be done, to take that industry knowledge and marry it with people who knew nothing about insurance but were really smart, had some great skills and weren't afraid to try something new.
Speaker 3:I think that's what's exciting about innovation, because the actual definition, if you look it up, says it's bringing new thinking to the equation. And what I like about what's happening in many industries today is that they may or may not necessarily be innovating the product itself, but the way that we're processing customers, delivering it and doing it more efficiently with a better customer experience.
Speaker 2:Absolutely.
Speaker 3:I think progressive was definitely ahead of itself in its time and I think that's exciting that you had that experience. So, from progressive, after going through that experience, then you had an opportunity to join Reliant Insurance. So how did that opportunity come about and how did that story unfold?
Speaker 2:So the success at progressive created that opportunity and actually there was a core group of progressive alum that were the initial leadership team of that organization. And it was really quite incredible because we set out to do a business that we knew we were also in the auto insurance business, but doing it without the resources doing it, I think. So two of us started. We were sitting in a Chichi's restaurant, if you remember those with the cell phone, kind of like, holy crap, we've got to find an office to work out of, we got to hire some employees, we got to get some computers, we got to figure out what our product is. Oh, we probably need a system on the back end to process all these things. I mean just the enormity of all the things that you need to pull together in a very short time to be up and in business. And it's really quite amazing because those Chichi conversations, restaurant conversations, were in February and we were live selling product in July of that year in multiple states.
Speaker 2:So, in the same, you know, a few months later. So it was kind of the original. I laughed about digital transformation experience that progressed the way back when this was kind of the original agile programming experience because literally we had the business owner and the IT person, you know, seeing side by side with a computer in front of them, going what should this be in this data field and let's you know we're building our data dictionary on the fly and what our screens are going to look like and what our customer experience is. It was really the original agile, you know, and we were very much, you know, building the plane while we were flying it.
Speaker 2:I look back and think about we didn't know what we didn't know. We had confidence, we had energy, we had intelligence, we had the right people pulled together. But where were we going? Fast, you know, and that kind of pace? You do have a few things go bump in the night and I'm also very proud of how we recognized when we had those hiccups and what we did about them to resolve them, make it right to anyone who was adversely impacted by it. But yeah, we didn't know what we didn't know and sometimes that's a good thing.
Speaker 3:Right, exactly. Well, I think that's what I want to touch on, because I think a lot of people do romanticize entrepreneurship and venture capital. And, yes, it is exciting, it's a lot of fun, you want to go as fast as you can without the wheels falling off, but, to your point, sometimes the wheels do fall off. So what did you learn along the way? I mean, you learn some valuable lessons when you're going that fast.
Speaker 2:Yeah, I guess.
Speaker 2:So the power, the power of the right people, right, because that was an incredible team that rolled up their sleeves and did what they need to do outside of their functional lines. You just got it done the importance of open communication and I know we'll probably talk about advice to folks, but one of the things is it's easy to communicate when things are going right, but the importance of communicating when things are going wrong Because if there is a problem, sweeping it under the rug or turning up the radio on the car so you don't hear the knocks in the engine, it might feel good momentarily, but if you share your problem and invite other people in to help solve the problem with you, you get to a far, far better outcome. So that was certainly one of the learnings, one of the it just reinforced the importance of the right people and I want to say the integrity to do the right thing when you do hit hiccups is there was that unwavering we're going to do the right thing by all stakeholders was also something that was really positive about that experience.
Speaker 2:But it's stressful and for all the founders. If anybody is listening, the one thing we didn't have is the stress that most founders are just bearing the burden of today, and that was we did not have to raise capital. We had funding from a parent. So we had to set up the company, scale the company, do all the things to build a business, but we did not have to simultaneously be constantly fundraising and I've gotten a real appreciation for what a burden that is on organizations today when you're trying not to be distracted from building the business or running the operation, but you're constantly meeting with past investor, current investors, cultivating future investors. So that was one challenge we did not have. So I have to be honest about that.
Speaker 3:Well, it is nice that you were able to develop your skills and understand how to build that type of culture and team, because the thread throughout that is that the culture and team. To take a rapid growth company and you said it went from zero to 300 million in four years right, the culture that you build for that company is very different than the culture that you have and need for a billion dollar company that's grown three to 5% a year.
Speaker 2:Yeah, and even from even within that period of growth, the skills that you need, the processes you need, the formality, the way that you communicate, you know have to change as business of scales and that's one of the challenges I see, you know, with a lot of the businesses that I work with, that you know styles need to change communication styles, the formality, the process. You know it's different when you're an eight person organization versus when you're a 50 person organization versus 500 person organization. You know the formality around processes and the intentionality of communication has got to be very different.
Speaker 3:Absolutely, absolutely, and I think there needs to be a culture where it's okay to bring that information to the table and figure out together how to solve it. That's very different than sort of I don't know. In my experience in large corporations there's almost this more protectionist thinking.
Speaker 2:Absolutely. You have people that either they don't want to share the problem because either they're confident they're going to fix it you know they want to be able to make it right, get it right, so they don't want to share prematurely because they're so determined that they can do this, they can fix this or it's the fear of, you know, the messenger being shot. You know, like I don't want to go tell somebody about this. Or, worse, you know the toxic culture that actually penalizes someone professing up to a mistake. You know so that culture that allows people to bring honest mistakes or poor judgments. I mean, most businesses are a series of failures until they're not right.
Speaker 3:Right.
Speaker 2:They're just a field experiment. So if you can't make a culture where you can do that experiment in a reasonable experiment within a safe environment, you really are not gonna succeed. So that culture to me again, I'm hearing a pattern in my own words here, but people in culture are critical.
Speaker 3:Absolutely, absolutely. And I heard a message one time about the theology of baseball and the idea is that even baseball players at the top of their game making millions of dollars a year when they get into the batter box, if you're batting 300 or 400, you're a hero, which means that every time you step into the batter's box, you're failing 60 to 70% of the time. The difference is they keep getting in the batter's box, and I think that's the difference for entrepreneurs. Yes, you're gonna fail, yes, it's gonna hurt, and you gotta get back in the batter's box if you wanna continue to do it.
Speaker 2:You know that is so. On point, I saw A-Rod speak recently and he talked about leading the league in strikeouts and having the confidence to get back in after being the strikeout leader. So 100% is how you learn from the mistakes but how you're not crushed by them.
Speaker 3:Exactly exactly. And that brings up the topic of resiliency. I was in the Marine Corps and one of the things that we talk a lot now with veterans about is that before you go into the battlefield, you need to have a certain level of base resiliency and solidify and being comfortable in your own skin right. And when you go into battle and you endure the trauma that you endure and you're come back, they find a direct correlation between the amount of resilience that you go into the battlefield with will have a big impact on your ability to bounce back from those traumatic events.
Speaker 3:And I think that people need to go into entrepreneurship and rapid growth with a mindset that, yes, we're going to fail, but we're gonna keep getting back up and it's okay and that's the resiliency that we have to have. Otherwise, we would just give up and go home. And it's important to interview for that too, and I think for people that are considering entrepreneurship, which is a large part of our audience, it's important to know yourself really, really well which cultures are you going to thrive in and which cultures are not gonna work for you. Can you talk a little bit about the hiring process? When you're hiring for people for the first five to 10 employees of a startup company versus employee number 500 of a company. How do you interview and filter for those qualities?
Speaker 2:I guess people that are comfortable in poorly defined roles and rapidly changing roles because in a small company, the chief HR officer might also be the chief legal officer might also be the chief customer officer in mopping the floor in the evening, right. So part of it is people that are comfortable in those roles, people that are comfortable with change, confident enough to believe this can be done, but coachable. And that's one of the things. Honestly, when, if we talk about when you look to invest in a business and you're looking for that team, you are looking for those team players that are utility players that can do a lot of different things. Obviously you need some core expertise and some core functions, whatever your business is.
Speaker 2:But those utility players that'll say, put me in, coach, and what do you need me to do today, or aren't uncomfortable that what they were working on yesterday just got canceled and something new is in front of them for tomorrow, because there's an awful lot of zigs and zags in the startup.
Speaker 2:It's a roller coaster ride with some very high highs and some very low lows. So, looking for folks that find the traditional corporate functional job sort of stale and boring, that thrive in some uncertainty, that are willing to work with others and seek help, whether that's from their peers in the organization or people outside of it. I do think it takes a very special person to work in that environment and what you unfortunately find is sometimes those people, as the company is successful and gets larger, those aren't the same people that they may not be as satisfied in their role because they're hooked now on the adrenaline of creating and growing and moving quickly that once it becomes more of a maintenance operational, let's just do what we're doing at a slightly larger scale. It doesn't feed the same urges that the folks that thrive in those smaller companies have.
Speaker 3:It's funny that you say that because I just had Chris Hively on the podcast a couple of weeks ago and he was talking about his book Build the Fort, and he's talking about channeling your inner 10-year-old, that everybody loves to build a fort of some kind, whether it's indoors or outdoors. Get some pillows and a blanket, some sheets and some chairs right and make a fort and invite your friends. But to your point, when it becomes a skyscraper, the inner 10-year-old is gonna get bored and say let's go build another fort and see what we can do different this time.
Speaker 2:Exactly.
Speaker 3:So let's pivot a little bit to medical mutual. So after being at Reliant, you joined medical mutual. You were there for a long time, but what intrigued me there was that not only were you the chief financial officer and the chief experience officer, but you did a lot of strategy and acquisitions. So share a little bit with the entrepreneurs what it looks like from that side doing strategy and acquisitions and looking at startups.
Speaker 2:Yeah. So medical mutual is a more traditional, mature organization than anything I had been in at that point and when I got there it was performing well but growth was slow. We really looked to where can we grow and diversify? So we set out on a strategy of there's a couple ways. You either expand you're available market or you try and get a bigger wallet share of the customers that you already have. And we looked to do both. We looked to say in that business it was how do we expand geographically? And then how do we add some products that are natural fits with the core insurance, health insurance product that we had? And we did both through a combination of acquisitions.
Speaker 2:We didn't have the checkbook to be able to do really large ones, so they were by definition smaller acquisitions but we did them in the distribution space, we did them in the ancillary product lines and we did them to get a beach head into some other states and markets. And at the same time we also built some products internally, started marketing to individual customers for the first time, added life and dental and some other products that would complement the core product. So it was a combination of internal development, some smaller acquisitions, but there was absolutely a strategy around. We wanna go out and make some acquisitions and we wanna grow, but we're a health insurance company. What assets do we have? What core capabilities do we have that we can leverage in new areas? We weren't gonna go out and acquire a car wash or make an investment in something else. We really were looking at things that would either give us a competitive advantage in our core business or just expand our available market.
Speaker 3:I think it's really good to have that experience on that side of the equation. I ran mergers and acquisitions for public company as well and I think that greatly informs when we're sitting on boards and helping startups guide them through that process, because very few of them have actually navigated it and it sounds like you've been on both sides of it.
Speaker 2:Yeah, and you start to realize that the actual integration of an acquisition is resource intensive and critically important as the actual transaction. It's not the transaction, it is the whole process that, once you now have this new asset, how do you leverage it? So one plus one equals three, and it's not one plus one equals one or half, because now you got people distracted. I mean there's absolutely some important things to do to make those acquisitions successful. Now, the unfortunate thing for us, as we were going down that road of expanding our products in our markets, is that's when healthcare reform and the Affordable Care Act came hurtling at the industry. It came at light speed and actually proud proud.
Speaker 2:But it was also painful as we strategically had to make the decision to back away from some of what we were doing and expanding in new markets and products, because we had to focus on getting the core business right. You know there was just a lot of changes happening, a lot of things that needed to be implemented. You know very, very short time frame and we needed all hands on deck focusing on the core business. So we actually gained some ground and lost some ground, but it was it was a hundred percent the right decision. Right. You have to do what's right for the business under shifting Market conditions.
Speaker 3:Sure. So rapid growth at progressive rapid growth at reliant and then even more Larger company experience of medical mutual where you're making acquisitions. So then you dropped into Serving and advising earlier-stage companies, drawing on your experience. So you currently sit on the board of script drop for motive and beam benefits. Tell us a little bit about how you first got into mentoring and advising and joining boards of directors. How did those doors open and what about that was exciting to you.
Speaker 2:Yeah. So when I concluded my career at medical mutual, I refused to say retired. I never say retired, I say I graduated from having an everyday job because I, because I wasn't ready to be retired. But I also, you know, as I explored your, people would approach me about other, you know, full-time, traditional jobs. It's just not what I wanted to do.
Speaker 2:I still had that bug or that need to, to build that need to, I don't know, try new things, learn new things. So I got Very quickly Kind of pulled into the, the early-stage business community, some of it formally through no North Coast ventures or caduceus capital, some of it less formally through angel investor groups, and you know, some of it formally as a as a board member with fiduciary responsibility and some, you know, very informal Advisor. Hey, can I call you for some advice? You know conversations with a right wide range of organizations and what I found is it's it's really rewarding, not necessarily financially, because you know my compensation is generally equity and, as you know, while some of the companies, you know everybody shoots for the moon, some of them will hit it, some of them will crash and burn you know, so some.
Speaker 2:Sometimes it's not necessarily going to be financially rewarding, but it is so strategic, it is so fast-moving. I'm learning so much Because most my companies are in, are in the technology space. I'm working with really cool people, you know, so I I really enjoy it, but it is it's stressful by proxy, you know, especially with how the capital markets are today. You know you think back to the weekend that Silicon Valley Bank imploded, you know, and and other other other things that have happened, you know, at at the companies. And again, the roller coaster has very high highs and very low lows, and None of the companies that I work with are consistently on top or on the bottom, you know, like even the ones that Are really really doing well. You know it takes some dips too.
Speaker 2:So Absolutely it's, it's great. Yeah, no, it's, it's, it's been, it's been a very fun ride.
Speaker 3:It's the most rewarding thing I've ever done is to help young entrepreneurs and particularly to help them avoid some of the Blind corners and blind spots that they're not aware of because they to your point until you actually dive in and an Experience that you don't actually know what's coming around the corner. Talk a little bit about how you advise CEOs and teams as they're going through that, especially when it relates to the roller coaster and I mean I found for me personally sometimes it's that call at 2am that sounds more like therapy than business coaching.
Speaker 2:Yes, it's so true. You know, while I'm often recruited to a board for either Industry expertise, functional expertise or contacts, where I sometimes feel like I'm adding the most value is just drawing on the various business and life experiences that an old person has. You know, I've got a lot of different career experiences through the years and and as well as life experiences, so Sometimes I think it's it's most impactful. One of the things I lived through at Medical Mutual was the sudden passing of a CEO.
Speaker 2:You know, and all the things that that happened with that. So you know, one of my Companies had the unfortunate loss of a young employee, a sudden death over a weekend, and you know, sunday night was spent with the CEO around what. What does Monday morning look like? Talking about the need for grief counseling, because the the loss, whether people were close to that individual or not may trigger Things of their own mortality or things in their own life, you know. So, the need to make resources available, you know, talk about like, what do I do at this desk, you know, and it was like, well, let's not build a shrine and let's not have it emptied in the morning, you know, and let's look for ways to allow employees to Feel like they're doing something, whether it's, you know, setting up a fund or volunteering and and making sure people have an opportunity to attend the service.
Speaker 2:It was, it was things that really you don't think of in a in a company context.
Speaker 2:They were.
Speaker 2:They were probably a little combination of professional experience and life experience, but sometimes those conversations or the conversations around when a reduction in force needs to happen, or a specific Person that did a good job getting the company to a certain level, but isn't the talent that is needed at the next level of how to Deal with that with with dignity and in the right way for the business, for the shareholders and for the individual involved, as well as for the other employees who are gonna, you know, have emotions and feelings about that.
Speaker 2:So sometimes I think I spend as much time on those kind of things as I do on specific business issues. Or or it may be things like I got a new pitch deck for this group of customers. Can I run it by you? And it's like, yeah, you know, let's friendly fire is is good. You know, like let's allow it to be pressure tested by someone internally before before you you take your shot At an audience where you might have one shot on goal. So I think there's a lot of those ways that you find yourself getting a valve that aren't exactly what you expected.
Speaker 2:When you say I'm gonna take this board seat or this advisory seat, but it's been very rewarding to me to be able to mentor in in those ways.
Speaker 3:Is it fair to say that a startup team, particularly in the early days, it's more like a. It's very much like a family, because you spend so much time together and you go through some things in business In a startup that are not the norm in a workplace.
Speaker 2:I think You're you're right on. I mean, part of it is that there are not clear functional lines, there aren't clear lanes that people are working in. The dependency on one another Is huge. So I 100% and I think that's you know that that family environment of those Organizations are some of the most incredible people, but part of it yeah, they were incredible people, but it was also this circumstances under which we were brought together in the way we needed to interact and work that really did make it a family. That's why, you know, when there's things that disrupt the family Whether it's an illness, of death or a reduction in force or loss of a key employee it is so much more acute in these small Organizations you feel it more.
Speaker 2:Mm-hmm yeah absolutely.
Speaker 3:Well, let's talk a little bit about sort of the wave of innovation, both geographically and industry wise. It used to be that innovation was concentrated on the coasts and was focused on a few specific industries but the Ohio, the Heartland region, industries that traditionally used to be not very innovative. Talk a little bit about both of those trends as you've seen them unfold over the last five or so years.
Speaker 2:Yeah, I think what's really great Maybe under the radar is is the number of incredible businesses being birthed in Ohio. You know, I'm up in Northeast Ohio but I actually several of my companies are in the Columbus area, so I'm pretty familiar with with these organizations. Because of my background, I tend to get more involved in healthcare tech, digital health, insure tech businesses and, you know, because this is such a huge healthcare Is such a huge industry in Ohio and we have so many industry leaders nationwide, worldwide leaders in healthcare, it's a natural for us. Insurance, you know, is also a huge industry within, within the state and you know there's a lot of things that especially I'm not. I'm not a clinical person, so I tend to get involved on the software side of things or the patient or Provider experience or the administrative side. There are things that aren't terribly sexy Sometimes, but man, there's a lot there. There's a lot of value to be created, there's a lot of opportunity to bring new technologies to old problems and Really really do some incredible things. And I think you know the folks here know how to put their head down, get the, get shit done and they don't have unrealistic expectations or well, maybe some do right, but but you know the, the evaluation, expectations or the personal rewards and the work ethic. I mean it's incredible. So I think we have a real opportunity here.
Speaker 2:I think what we don't have, what the coast have, that we don't have, is, you know, a whole infrastructure of people that have done this before, because you know success, beget success. You know it was somebody. Somebody does well once and they got the bug. They want to do it again. So you have you have people that are, you know they're fourth, fifth, sixth business. You have people that have made some incredible money and had some incredible exits, that are willing to reinvest.
Speaker 2:And there's, there's money in Ohio, but a lot of it was built in other businesses Then the ones that the startups are in today. So there might not be as much comfort investing. You know, if I, if I made my money in manufacturing Not that there's not innovation opportunities at manufacturing or, you know, at startups but am I, am I as likely to invest in, you know, a tech company that I don't maybe Understand, that serves a totally different industry. So I think we have a few things that I put as advantages over the coast, but we but we do lack that. You know, robust ecosystem around our founders. So we're getting there.
Speaker 3:Yeah, no, I agree it's. It's a really good point because it touches on how important I think it is that young entrepreneurs Understand that they need advisors and experienced people around the table. Can you talk a little bit about you know? How early should startup entrepreneurs begin asking for advice and starting to Think about who the advisors are that they want to surround themselves with and how should they go about doing that?
Speaker 2:Boy as early as possible, but also be careful who the people around the table are. It's one of those. It's a really tough balance of. You do want to surround yourself with the right people, whether it's formal in in a board or in an investor, or informal in just sort of a mentor or a peer group. But I know you know when you're desperate for money you want to take any money. But there's different quality of investors that you can bring to your organization. Some can bring customers and contacts and board members and other money and Will work hard on your behalf after they put the money in. Others it's just money that they put in and it's just gonna sit there and its value is money, which sometimes is a good thing.
Speaker 2:Because there's another group of investors that you know can come with some strings attached or some, or be royal pains in the asses. You know that, like you look back with retrospecting things, do you really need that money? That bad that you brought that person in right? You know because they're disruptive to the business or they or they or they have an agenda, you know Around an exit or something else. So it's surrounding yourself with the right people is critically important as early as possible.
Speaker 2:You know, knowing who the right people is. Maybe it's always obvious, but you do have to look for folks that you know are putting the needs of the business and the founders and the shareholders first, that have skills and expertise and, honestly, that play nice. Yeah, you know there's not a lot of room in the startup board meetings. You want people that can contribute to the success of the organization. There's not a lot of room for egos and people that want to put Pontificate in the board meeting and then leave and do nothing. Right there there's. It's just not productive. So you start lining those people up as early as you possibly can and you know that networking is critical and the who do. You know that can help me and you know.
Speaker 3:I completely agree. I always I always tell entrepreneurs that if you want to go to the Super Bowl, you have to surround yourselves with people that have been to the Super Bowl before, because, to your point, not all advice is created equally. There's plenty of people with business experience in Ohio that could give business advice, but there's a limited number that have rapid growth, hyper growth experience and venture capital experience, and so you have to look at the background from which it's coming and consider, you know, the source of the experience. Not that it's bad advice, it's just is it relevant or not?
Speaker 2:Mm-hmm and it is. It's something that's an appropriate for a company that's, you know, ten years more mature and has a Legal department, a compliance department, and of this and of that and of that you know it's. You need folks that understand what's going to be needed at the, at the company, down the road as they approach an exit or an IPO, or they public prepared, but also understand that you don't have the luxury of being able to do all those things. You know, when you're a 10-person or a 15-person or a 50-person organization is people that understand the different needs at the different stages and sizes.
Speaker 3:You brought up a really good point there that it's really important for us to coach the entrepreneurs to stretch their thinking to what is the organization and board need to look like three or four years from now, because sometimes they'll get in particular, scientific or life science leaders. Well gosh, why do we need a board of directors? We're just a little startup company and it's like, okay, well, fair enough for today, right, but we're building for you know, six to nine months from now, we're going to start a series A round and they're going to look at who our advisors are. Right To your point. Some of it is networking and identifying who your candidates would be, long before you're actually ready to extend an invitation to join your advisory board. I think it's really important for us to stretch entrepreneurs' thinking on what that structure of the board and the advisors around them needs to look like a few years from now and begin building toward.
Speaker 2:It's like you're always recruiting, right 100% and it's, you know, in the big public companies they do. You know the formal skills matrix that you see in the proxy that you know I want to have somebody that has financial expertise, that has industry expertise, compliance, governance. Well, it's really the same thing on a small scale, except you aren't going to have as big of a board, you aren't going to have that many people. So how many of those skills can you get wrapped up in one right?
Speaker 3:Exactly, and I think it's also important to have entrepreneurs understand there is a big difference between a voting board member and an advisory board. You can have a pretty good sized advisory board without giving up any control or power, even necessarily equity.
Speaker 2:Yeah, and understanding the roles of the board. You know, I think sometimes it's a wake up to founders when they accept their first institutional money and they need a more formal board process and accountability at the board level. I mean it brings some very important discipline to the organization and with that fiduciary responsibility of making sure there's, you know, appropriate funding and big decisions are appropriately vetted. You know it brings a lot of important positives to the business, but it may not feel great to somebody that's used to making all the decisions on their own and having free reign over the business and not having someone looking over their shoulder. It's definitely a transition when you go from being you know, I've maybe got a little bit of friends and family money and a family friend is my other, my only board member. That doesn't work here. Versus when you have, you know, institutional investment, you have an investor rep, you maybe have an independent board member. It just it just looks and feels different.
Speaker 3:Absolutely so. Let's talk a little bit about the current fundraising environment. Obviously, there's some serious headwinds and we've seen some some hiccups and a lot of down rounds for some later stage companies in this environment. Tell us a little bit about your view of what the landscape looks like today for early stage fundraising, as well as how you think it's going to evolve in the next 18 months.
Speaker 2:I don't have a lot of crystal ball on the go forward. I will say you know, today versus two years ago, it's a more sober environment, you know, the valuations are more reasonable.
Speaker 2:There is a focus on path profitability instead of just top line growth that there wasn't a couple of years back. There's still money out there and great businesses are getting funded, but it is. It's tough and the venture debt terms are tougher than they've been in the past. You know a lot of investors are having to fund their current portfolio companies beyond where they may be expected to originally because of the environment. So it's definitely a tougher environment than it was two years ago.
Speaker 2:I don't think it's impossible and I actually think reasonable valuations actually help in a lot of ways. When you had some of these really inflated valuations and then you're stuck with a down round or an organization that got more money in a round than they can, and then you're able to productively deploy, you know things got a little sloppy. So I actually the discipline in today's market is kind of good, but it's tough and it's hard to see founders that you'd like to see them focusing on building the business. It's hard to see how much time and effort and emotion gets wrapped up into, you know, seeking capital and that's quite the roller coaster too, where they think they've got money locked in from a source, they're sure of it, and then the check doesn't get written, for whatever reason. You know it's very emotionally challenging, especially for folks that aren't accustomed to that rejection or take it as a rejection of their business or them personally instead of just move on. You know.
Speaker 3:Yep, yeah, I completely agree. It really is just business, and I think I often tell entrepreneurs that it's not so much. Is this a good deal or not, or is this a good company or not? The relevant question is compared to what? Because what entrepreneurs often don't understand is what are the other 12 deals sitting on that person's desk that they're thinking about doing, and how does my deal stack up relative to those? And so I think that helps a lot for people to understand that that there's a finite amount of money that's going around. People have to make money management decisions and allocation of capital based on a risk profile of typically a bunch of deals that the entrepreneur doesn't have any information about.
Speaker 2:Yeah, plus funds have investment focus areas for a reason, and sometimes I feel like people think that, oh, you're just blowing them off and you're saying you know, I'm really sorry, I like the business, but it's outside the sweet spot. But there's a reason that you have an investment focus area and part of it's your ability to evaluate the company. But another big part of it is what can you do for them after they are in your portfolio? Do you have the contacts and the expertise and the skills to help grow this business? And if you don't, you know they should go get their money elsewhere. So saying sorry, it doesn't match our criteria or our portfolio shouldn't be viewed as a no, I don't like your business. It really genuinely in most cases is a lot of cases is I really do like the business, but I'm not sure I'm the right person to help you, so I'd rather you've got your you know funding elsewhere.
Speaker 3:I completely agree because that alignment between the entrepreneur and the investor group is really critical. Because if it's misaligned I've been in those board meetings and it's not fun and you can't just unplug it. It's easy to. It's difficult to unwind those things. But back to your point about culture. At the beginning, right when you take a check from a largest investor leading your round, that's just like interviewing an employee. That's going to have a big impact on your culture. So I also encourage entrepreneurs to interview investors with that same lens of culture and alignment as they would any employee.
Speaker 2:That's great advice.
Speaker 3:Yeah, I think that's really true. Well, you know, on the positive side, we met at the VC Fest up in Cleveland not long ago and one of the things that we touched on there was getting that alignment between investor and entrepreneur. And I understand that there were over 1200 speed dating meetings that took place up there between investors and entrepreneurs and I think that's a fantastic number one, not just great volume, but also excellent practice for everybody to get to know one another and to really open up those conversations and dialogues to identify that that culture fit, that alignment. And you talk a little bit about your experience with those speed dating sessions in the VC Fest.
Speaker 2:So I hate to say, but I actually did not participate in those. But I do go to a number of networking events in industry events there's an insure tech group in Ohio and other other organizations and I actually think they're incredibly valuable to your point of you know, practicing your pitch and maybe there'll be a relationship that comes out of it. But also the peer to peer networking I mean, being a CEO of an early stage company is lonely and heavy and to have somebody else that has walked in your shoes and if it's moral support, advice, connections, I think those networking events are something I would encourage them to attend for just any number of reasons.
Speaker 3:Absolutely, it's important to be plugged into the to the ecosystem and because you just you never know where the right introduction is going to come from.
Speaker 2:Exactly.
Speaker 3:Well, Sue, as we approach the end of our time together today, we also like to share a couple of takeaways that are helpful for our audience of people that are either entrepreneurs or aspiring entrepreneurs, particularly first and second time CEOs that are relatively new to early stage. What are a couple of pieces of parting wisdom that you might share with that group of people?
Speaker 2:You know, I think it's the things that it's funny how the conversation keeps coming back to the right things, I think. Surround yourself with the right people, be coachable. You know, have that resilience, know that you are going to fail, right Like it's certain elements that the business doesn't need to fail, but certain elements and be able to take those learnings, move forward, whether it's from a customer, whether it's from the marketplace, you know, listen to what the market is telling you and adapt. And the other thing that may seem in conflict with that is, you know, focus. It's really hard sometimes to decide when you're not sure what, which product is going to be the winner, which customer base, which market segment. Sometimes it's really hard and you're working on 10 things at once and doing none of them. Well is, you know, get some focus, pick a path and commit to it until you decide to change your path, because you will, right, but but you can't, you can't be going.
Speaker 2:I had a rowing coach that when he was trying to teach his skills development, he'd say pick your rabbit. And he was talking about that, the, the, the fox that sees a field full of rabbits and doesn't focus in on one and goes home hungry. So he'd say pick your rabbit, you know, go after it because you can. You can get one. Yeah, can't get all of them, you know. So that figuring out what's most critically important to the business right now, what the most likely to succeed product or market is, and and going after it until you find out that it's not, and then quickly pivoting right because, because you know most companies, their ultimate product isn't the one they started in, or the market they were pursuing isn't necessarily the one they end up being the most profitable and successful in.
Speaker 3:So Excellent, that's great advice. I love the pick your rapid analogy that's awesome. Well, this has been great, so I really appreciate you taking the time today. I know our audience is going to enjoy this episode and I hope people learn and become better equipped to harness the opportunities that exist in our ecosystem as a result. Thank you for joining us.
Speaker 2:Thank you and appreciate you're all you're doing to build up the ecosystem to support success in this region.
Speaker 3:Excellent. Well, that's it for this episode of the smart money ventures podcast. Thank you for joining us. Our guest today has been Sue Tyler, venture partner at Caduceus Capital Partners and a board member of beam benefits for motive, script drop and health plan data set. Thank you for joining us and we hope to see you again on the next episode of the smart money ventures podcast.