So I had an experience, after we had started DFJ Frontier, where I had the opportunity to co-invest with Intel capital and the partners that, you know, the D the F and the J and frontier, Tim Draper, John Fisher, and Steve Jurvetson all said, don't do it. Like an idiot, I didn't listen to them. And I co-invested with Intel capital because I liked the partner that was on the deal and we wanted to do this deal together.

And it turned out to be a really good experience. and this was in the early 2000’s at that time period where the dominant narrative was strategics can really be bad. That strategic in fact was a dirty word. And I think that, you know, sort of 15 years later, we're all still dealing somewhat with the hangover of this reputation 

The mentality was as traditional venture investors, we have a financial discipline to pursue, and that the only way that everyone involved succeeds, if the startup grows up, goes public or get sold. And that's when the entrepreneur makes money and that's when the investors make money, it's when the employees make money.

And that's the goal of these startups in the venture industry. And so the notion was that corporations have a strategic objective. And that they might pursue that at the exclusion or to the detriment of the financial objectives of everybody else.

But there's, but there's been an evolution. And the evolution is that everyone has learned more about venture capital and how it works, angels corporations, and that in fact, strategic doesn't have to be a dirty word. Strategic can actually be a plus that imagine that if you were being a good financial fiduciary and helping in alignment with everybody else, you know, grow the value of the startup.

And at the same time, a corporation we're adding more strategic value to that startup that in fact, the two should go together that that strategic value could actually improve the financial outcome. 

So one of the good experiences I had was with the person who became my co-founder at Touchdown David Horwitz. David was one of the early team members at Comcast ventures. He was a co-founder there. So I had done a series, a investment, which in today's world would have been a series seed in a startup that wound up in San Francisco.

And David did the next round. And so we served on that board together for six years. And so I had my positive experience with Intel capital and then I had a really positive experience with David at Comcast.  

if I think of who I think has a strong reputation for doing corporate venture capital, it would probably be, I would have named Intel and Comcast.  Um, but, but go ahead. I'd love to know sort of how this evolves into Touchdowns. So

Well, and that, that wasn't always the case for Intel. And if you, if you rewind the clock on the experience with Intel capital, they actually went through, you know, sort of, uh, uh, you know, what do they call it on that chart? It's the trough of disillusionment. And so there was the trough of reputation and there was a time period where Intel specifically ran the risk of interfering with the exit of a startup, which is, and that, that reputation then spread out to all of corporate venture.

They obviously weren't the only ones. But as one of the very early players in corporate venture, they were feeling their way around for, you know, how to practice this business. So when Arvin Sudani took over Intel capital, he had a very deliberate approach, which is to say, we are going to be strong financial investors.

And he went, you know, made the rounds in Silicon Valley and said, we're just like you, we are going to act just like you. We're going to follow the same incentive systems as you. And you can trust us that we're a partner you can count on. And, you know, in my opinion, it probably took half a decade or a decade in order to build that confidence in the traditional VC community.

That in fact, Intel was that type of partner that Intel capital was that type of partner. And so  there was this debate that started emerging, which said you have to choose as a corporation. Should you be strategic or should you be financial. Because they were viewed as polar ends of the spectrum, which really doesn't make sense if you think about it.

But still, today, people ask me all the time, like the conversation is, Oh, are you strategic? Are you financial?

right. that has become, you know, a dominant decision that corporations think they have to make. And to me, the answer is no, that's asking that as an oar is the wrong way to phrase the question. It's how are you strategic and financial. 

That makes sense, but still as a founder. I, but still as a founder, there's still some hesitation, but still as a founder, whether you, whether the corporate is strategic or financial, I still have some hesitation around having a corporate lead my round. I still have some hesitation about having a corporate.

Lead around. I still think there's hesitation around having a corporate lead your round. I still think there's hesitation around having a corporate lead year round. I still think there's some hesitation about having a corporate as your lead.

And you know, me as a founder, I think I would actually feel more confident in a model like Touchdowns, because I still think there's some hesitation around corporate venture. And so this sort of model where they've. Outsourced to you, or you can explain how you talk about it, my, give me additional assurances.

And in fact, 

I think that the corporations sometimes are a little bit nervous about it. You know, we're the big company, how are we going to act with the small startup? And it's really more about the relationship management, just like it would be between any institutional VC and a startup. It's, you know, who's the partner on your board, or if there's a board seat, how are we managing this relationship?

How are we helping you build your business? And what are we getting back out of it in return? And in the case of the corporation, there's should be more to give. And there also, therefore should be more to get it's should be a deeper relationship, but of course you have to look out for the landmines, the gotchas.

And I think that, you know, as you say, I mean, you and I have mutual friends in LA and venture capital, and I remember, you know, sitting down with one of them, you know, socially describing the model for Touchdown. And, you know, that VC said, I specifically was describing a corporation that we were working with, that he also knew.

And the first thing he said was, Oh my gosh, I'm so happy. They have you, because I know, you know what you're doing in venture capital and I'm worried they don't know what they're doing. So I think that's a natural fear. And if you have a, you know, a trusted guide or a Sherpa or a partner to help you through this, then, you know, sort of there's the chances of success go up. And in fact, we've seen that in corporate venture programs, there's this weird stat, that's a little bit scary, which is the average corporate venture capital fund. The CDC gets shut down in four years. And so, you know, we know that a venture deal takes six to seven years on average to return capital. So that math is bad.

Even venture capitalists can do that math and be like, no, you know, six is more than four. What what's going wrong at these programs are being shut down. And so it turns out There's a single stat that is most correlated with the longevity of the program. And it's whether the people involved who are running it inside the corporation have prior venture experience.

Right. But so the, they shut down and I, as an entrepreneur, I'm worried about that. Can you, can we just go a little bit deeper on this, which is, I think the things I worry about are that corporate corporate venture capital, they don't hold reserves, or they might shut down, same sort of issue and that they sort of move slow. Um, and potentially there's some conflict with competitors who might not want to invest. So tell me why I'm wrong. 

No, I actually, I think you're right. I think those are all issues that are, you know, that as an institutional VC, I've had all of them, every single one you just named.  we have to work every day to make sure that those are not problems, that then become a hassle for the entrepreneur or for our co-investors.

And so, you know, there's, I mean, the reality is corporations are big, they're complicated, CEO's turnover, you know, what's the average lifespan of a CEO in a fortune 500 company. I think it's between five and seven years, somewhere in that timeframe. So the odds are good sometime during the life of an investment.

A significant portion of management is going to turn over there. They're going to be reorgs and things like that. Changing priorities, a deal that was strategic might no longer be strategic. And you know, those, the first thing that you mentioned is do you even have reserves? I think this goes back to the point of, are you running your venture capital effort, the way a traditional VC would we, you know, we all set up our funds, we build a portfolio model, we build reserves for each deal.

You're not guaranteed to put that money in when the startup needs new money. You want to look and say, how's it going? You know, is this relationship still good? Is it, you know, headed? Is it going so well that we should actually be selling instead of putting more money in valuation? So high, is it going so poorly that we should actually be shutting it down and not putting it being, you know, on the hook for more capital.

Or the, you know, other 85% of the cases is more like, okay, it's going well, it's not gone straight to the moon. We're not getting out. We're putting more money and we're supporting you, which is what you do most of the time in my experience. And you know, many CDCs just haven't even thought about that. They say, Oh wait, you have to have reserves.

So when we had a Touchdown, you sort of go to work, helping a corporation launch and then, you know, manage their program. It's one of the first conversations is you need to understand what reserves are and that this is a norm in the industry. And the expectation is that unless we very, very clearly say so at the beginning that we're not going to do more, that we will probably be doing more.

And there are firms. I mean, they're institutional firms, you know, the lower case capital, their model was first, you know, first check-in, that's it. And you know, I hope you do well. And of course you can call us, um, and we'll help you however we can, but. You know, we're not going to be putting any more money in, and I think you can do that and you can have a reserves free model, but you better be really crystal clear.

And I think that goes to the other point that you were making about CVCs is that the communication can be bad. And so when, when you say I'm going to do this and you don't, or it turns out that you overrepresented your influence in the organization, and the thing that you said, the support, you going to provide the commercial deal, you're going to help land, you know, any of those things where you over promise and under the lip under deliver, we always know that over promise and under deliver is bad.

And so CVCs, I think, hurt their reputation. So some of that, so we try to do all of this infrastructure building and expectation setting and definitions for what the norms are in the industry. As part of helping a corporation launch the program.

So, so great. So I'm an entrepreneur and I'm coming to you when I will ask you about the reserves for, um, for whatever you know, corporation I'm working with. how else, tell me more about, do I need to know all the corporations that you represent? Do I sort of come to you or do you find the entrepreneurs usually?

It varies. So, I mean, we look at about 5,000 deals a year We have a team of, I think. Uh, team member number 45, just, just signed his paperwork last week. And, you know, hopefully that number continues to grow are we should talk about how our model differs from a traditional pooled vehicle in venture capital.

But, every time we add a new corporate partner, we add team members at Touchdown, which is a little bit different. We are hiring. And so I definitely would love to put a plug out there. We have a talent page on our website, and I'm sure a lot of your listeners are interested in jobs in the industry.

And, you know, we're trying to create as many of them as we can at a reasonable pace. and so with that deal flow, we have relationships with about a thousand different venture capital firms, which are a mix of institutional VCs and CVCs angels as well. Um, our corporate partners actually generate some of the deal flow.

So someone in a business unit meeting with a startup and they say, Hey, venture team, We're looking at this deal. Um, we like the conversations that we're having so far, would you take a look at it and help figure out if this should also be an investment? So we, we sourced that way. We teach at universities, we go to conferences, we know databases like everybody else in the industry, our other friends send us deal flow.

 So it could be that, um, you know, the deals are coming to us and so, and it could be coming from anywhere. So it could be coming through the corporation already. In which case that entrepreneur knows that, you know, sort of, if we're running the program together with 20th century Fox or Kellogg's, or, you know, Scott's miracle grow or T-Mobile, or you name the program, that if it came in that way, they know that it's a program  you know, sort of we're running.

If they come in directly to Touchdown or re we're reaching out, it's probably going to be tied to the sector they're in.

Yeah, but it was interesting. I asked Selena, I was like Selena, who works at Touchdown. Um, and I said something like, well, I've got this great deal. Like, how do I know if it's going to be a fit for one of your corporate partners? And she's like, just assume it is like, I'll help you right. Route to the right person.

So on our website, we have a sector theme or focus areas, page that lists all the current mandates and you go through them. It's I mean, it's kind of almost everything that you would, you know, that a venture capitalist might be interested in the one industry sector where we don't have a corporate partner is banking.

And we're currently in discussions with two banks. I don't know if either of them are. Going to wind up as partners that we work with, but sooner or later, I would think that you sort of we'll end up with a part or in banking as well. And so we're in healthcare, we're in media, we're in consumer products or in food and agriculture and, security enterprise software.

And there's, there's really nothing that we don't touch. It doesn't mean that the deal will necessarily be a match because the mandates are actually developed pretty strictly 

So you have a separate team for each one of these corporate partnerships. Does that mean head count wise? Are you one of the largest funds in LA?

Well, not all of our team members are in LA. So we also have an office in San Francisco and we've got, an office on the East coast outside Philadelphia. so I don't think we have the most people in venture capital in LA. Um, but we're definitely in terms of the size of our fund. It's pretty interesting because you know, 40, I think is an inflection point in terms of head count for a startup.

And we think of ourselves that way too. And you know, we, we now have people who, you know, we look back at when they joined Touchdown and it wasn't necessarily right at the beginning, but they're among the first 10 people. And so, you know, they feel like the savvy veterans and people joining now who are going to be in the first 50.

You would say, Oh my gosh, you know, you're so new, but a couple of years from now, I would be surprised if we don't have a hundred people at the firm and probably we've opened up another office somewhere or two. And so we generally three to four new funds every year. It's just that they're not pulled vehicles. Each corporation has its own and sole account. So when we do that, we have to add new team members. So the idea that this is this, you know, growing beast, you know, my co-founders and I joke around and say, yes, we're a corporate venture capital and innovation firm first.

But close second we're recruiting and training firm. And that, if you said what's your greatest, pride weakness. It's probably that we believe that, you know, we could be among the best in the world, if not the best in the world at training the next generation of VCs.

That's the let's stay there for a second. We can come back to corporate innovation, you know, that sort of thing. But talk to me about what did you call it? A growing beast? I think,

Yeah.

tell me about growing this next generation and you know what we can all learn about hiring our own associates and how we can train them.

Yeah. Look, I think it takes an emphasis and a mindset about being educators and.  I think that there's a lot of hypocrisy in the venture industry, which has mostly been a secretive industry for 60 years. And, you know, thanks to people like Fred Wilson, you know, Mark Schuster who have been prolific in their blog, writing, helping demystify what this business is all about.

More people know about it, but the, the line that people use is, Oh, this is an apprenticeship business. And then you say, how is it possibly an apprenticeship business? Apprenticeship does not mean, Hey kid, I'm throwing you in the pool. And if you can swim, you live. And that's kind of how we do it in venture.

And you know, you you've seen in some of the stuff that I've written, I'm actually a believer that we probably need a little bit more oversight and regulation in this business, which is not a popular thing for a venture capitalist to say where, you know, Capitalist is in the job title and that implies free markets and just, you know, go do whatever.

I don't think entrepreneurs necessarily benefit from that, even though most entrepreneurs probably, you know, if they were being completely honest would say, you know, give me the money and get out of my way. I know what I'm doing. It's why I started a company. I think there's a lot of truth to that.

And as VCs, we need to let our entrepreneurs manage the business, but that as board members, it's our duty to help them, you know, to help them be successful and also to keep them out of trouble and to keep ourselves out of trouble in the process. And I think we need to take that same approach to the young people in our firms, because there is this notion of just write the check and good luck.

And I don't think that's the business. I go back to Azure story, Oh, who, you know, many people think is the father of modern venture capital. And, you know, he has all these experiences and writings. That he put together where he talks about, what's a much more active form of the business where you're really rolling up your sleeves.

You're working hand in hand with these entrepreneurs. And my dad had an analogy. Um, I remember being a little bit rebellious is probably not the right word, cause I don't think I was ever really rebellious, but there were some times as a teenager where I would say, I want to do this. And you know, it's my decision.

And he would say kind of, you know, if I see you walking out in traffic on the freeway and a semi-truck is coming along, I'm going to grab you by the back of the collar. And I'm gonna yank you back out of the way and pull you off that freeway. And that always stuck with me as you know, he said, I'm your dad, it's my prerogative to do that.

It's my job to keep you safe. And I think that that should apply to what our entrepreneurs do with their businesses and our job to protect them as well as their junior people. And this is a business where we're professional fiduciaries. For other people's money. Most of the money that VCs invest is not ours, right?

That's, that's an angel fund and it's an obligation. And it's something that if you didn't raise that money yourself, you may not feel that full sense of obligation to the people who are your limited partners. And, you know, we should feel really lucky to be in the business and to be investing other people's money.

But there's no training. You can't get a degree in venture capital. There's no competency test. There's no continuing education. There's no certification.

You know, we could say, well, is there a role for thinking about what do we do as VCs? And are we helping society or hurting society? Cause I think most VCs that I've met are not just in it just to raise capital. You know, there's a whole television show on HBO, Silicon Valley, making fun of us for saying, you know, we're making the world a better place by doing X.

And I think that what makes that funny is that the intention is probably authentic. And are we diluting ourselves into thinking we're actually making the world a better place? That's the question I think we should be introspective about.

 And so there's no oversight. And I think the model, the default model is, you know, take a, take a kid, let them start writing checks, throw them in.

And if their track record is good, they survive.  we can do better than that at training the next generation of VCs.

okay. So the apprenticeship thing is now that you pointed out, it sounds ridiculous because we all know that we don't actually spend much time training our junior people. Um, that makes total sense to me. I don't know. Um, so with the regulation, so, okay. So if you're an RIA, you get regulated, but I don't know.

I don't have a vision of how you could, is it regulating VCs to make sure that they're helping their businesses grow in sort of it's more like ethics regulation or how do you what's the vision there, Scott?

yeah, we could, we could use up the whole time just talking about, you know, where that could go. I mean, probably. The aspects of being in RIA, and I'm not going to represent myself as an expert on this. Um, really relate more to how you run your business, how you treat your clients, you know, your limited partners, um, and you know, whether you're using deceptive business practices in order to raise your capital.

And, um, so there are some things that are related to ethics, but, you know, look at it this way. If someone came to one of your family members to sell her a mutual fund, they're regulated as a financial advisor, and there are certain rules that they need to follow that applies to us too. That does not necessarily mean, you know, that doesn't pertain to things like what happens when the CEO of a portfolio company whose board you're on gets accused of sexual harassment and the board needs to do the right thing.

And those are separate sets of issues that I don't think are covered by RIA rules, but. You know, if you look at how quickly startups can grow these days and what an impact they have on the world. And there's plenty of examples, you know, I don't need to name any of them. You'll know them all off the top of your head of high profile startups that have, you know, created big headlines and grown to multi-billion dollar valuations, but don't always, you know, sort of create positive social impact.

You know, we could say, well, is there a role for thinking about what do we do as VCs? And are we helping society or hurting society? Cause I think most VCs that I've met are not just in it just to raise capital. You know, there's a whole television show on HBO, Silicon Valley, making fun of us for saying, you know, we're making the world a better place by doing X.

And I think that what makes that funny is that the intention is probably authentic. And are we diluting ourselves into thinking we're actually making the world a better place? That's the question I think we should be introspective about.

okay. Noted. Noted. Um, How going back to the apprenticeship, how do you, what have you seen that's really been useful for you? What can I learn when I go and hire my next one person over the next three years?

That's a lot of training systems. you know, as the pandemic ramped up, we said we were going to have to change what we do and how we do it because you can't walk down the hall and talk to people. Um, we used to do something that was probably my favorite two weeks of the year, which were company off-sites in the spring and the fall where we would get given that we're in these different geographies.

We get the whole company together on the East coast and the spring, and then somewhere on the West coast in the fall and know with our model is kind of cool because you'd be meeting people for the first time. Maybe you'd work with them or talk to them on the phone, or, you know, worked on a project, but never met them in person because we're only doing this twice a year.

And we moved that to a virtual model where we'll do training sessions, but we said, this is not going to be enough. And what you might be together for, you know, a full week that would be really fatiguing, but zoom. So he said, every Friday morning, we're going to have a training session. So we started doing more of that and we started building more and more training modules. When we have new people start, we run them through a orientation program. We call Touchdown one Oh one and you know, for, for some of the. You know, recent MBAs that we've hired or, you know, for the analysts who are usually just out of undergrad or a year or two out of undergrad, there's really fundamentals of how to practice venture capital and corporate venture capital.

How is it specifically different in a corporate environment? And this is one of the reasons why I teach. you know, I've been teaching venture capital. I mean, technically I've been teaching venture capital since the early 1990s. Um, when my best friends invited me up to Syracuse to teach a guest lecture, and then I did it for three years, but I, the graduate level, you know, sort of as an instructor or an adjunct professor, I've really been doing it since the early two thousands.

And so 20 years at this point, and that really becomes a laboratory for me to develop curriculum that we can use with our internal training. And especially for recent college grads or recent MBAs there, they still have that. School mindset of what's the combination of practical learning things that you could teach me or put on a whiteboard, or tell me from war stories together with frameworks that I can use to remember, because that's how we teach you in school.

And so I think it's a blend of those two things. Um, and you know, we're friends, so, you know, I'll show you some of our stuff, but

Are there any, are there any particularly, really good ones that, that can be summarized on a podcast? Like a great framework that you think has been really impactful that you've taught or a great war story that you tell every year or something?

yeah. I th I mean, there's one that at a high level, and you know, everyone makes fun of us in the firm because we named the company Touchdown. so, and we love sports analogies, so they're just, you know, we're right with them, but there's a metaphor in baseball. it's the myth of the five tool player.

And the idea is that this is how general managers, selecting baseball players used to, pick their teams. And I don't even remember off the top of my head, what they all were, but it was like hitting, fielding, throwing and running or something like that. And so, you know, I started thinking about that analogy and said, well, there's five tools in venture capital, not counting, raising the fund.

We let's assume that the fund exists and you have it. And that managing your relationships with your limited partners is a separate activity, but to be an investor, to actually to be doing the deals you need to source, you need to diligence. You need to transact, you need to manage the deal and you need to exit the deal. And if you think about it, you can't do a deal that you don't say  you shouldn't do a deal that you haven't validated that at a particular price on particular terms is going to be a winner financially, or at least you have a thesis for why, if you've done that work, you've found the deal and you, and you've done the diligence, You have to be able to get the deal done. Those three are the easy part. So, you know, all of those things combined are less time than now. I'm managing the deal. And in venture capital, there's a wide range of what does it mean to manage?

It could be okay. I'll pick up the phone when the entrepreneur calls and try to be helpful, or it could be I'm on the board and I'm really working hard, or I'm not on the board, but I'm really working hard trying to help them get an outcome. And you could do all of that. And if there's no positive exit.

You haven't returned capital. And so venture capitalists have a role to play in helping make sure that the exit is a good one. 

Okay. So you're teaching how to be a VC, how to help startups and corporate innovation. Two separate classes.

Yeah. I teach how to be a venture capitalist at USC and corporate innovation at UCLA. Both in the MBA program.

And I think you mentioned to me that there's a hundred new CVCs a year being started, something like that.

Typically every year.

how many get shut down every year? Yeah.

Well, I guess if the, if the math averages are right, it's, you know, probably 25.

so? Yeah, maybe same sort of question, which is what are you teaching in corporate innovation, and sort of, how does corporate innovation and venture capital fit together?

Yeah. So they, they really have to fit together or it's, I think, toxic to the corporate environment and for the entrepreneurs as well. And we've seen this firsthand, so, you know, imagine you're an entrepreneur and someone from a corporation comes to you and says, Hey, we have a corporate venture fund. We might like to invest.

Let's talk. And you are also hearing from someone on the corporate development team who works in M and a Oh, we'd like to buy your company. Let's talk. You're also hearing from someone in a business unit, we'd like to do a commercial deal with your company. Let's talk. Your first reaction is going to be, Oh my God, do these people talk to each other?

no, they don't.

the worst of all of those is, Oh, we're having these one of these three conversations or more. It turns out someone in R and D is working on a competitive product. We just had these conversations and now they're competing with me. They just launched something that there's no way I can work with them and there's no way I can even trust them anymore.

So when, when I first started teaching, I actually started teaching a class on entrepreneurship with a venture capital lens. So there weren't as many jobs being created, adventure venture wasn't as well. Understood. And when I looked, um, in the early two thousands, I started teaching at UC Davis. And at the time I, my evaluation was very few of these people are ever going to work in venture capital.

There just weren't that many jobs, some of them might go work at CalPERS or Calsters the pension funds. And so the opportunity to understand this industry was really important to them. And many of them were going to become entrepreneurs. And so my class was about if you wanted to go be an entrepreneur it would be really helpful to understand what, what is venture capital?

How are VCs motivated? How do they behave? What do we expect from you so that when you get your first term sheet, this is an equal conversation and you're not so intimidated. That's a bad experience. when I moved to LA and I started teaching at USC, I was teaching that same class, helping entrepreneurs understand venture capital at a certain point.

It flipped. And I actually came to the perspective that said many of these people are going to work in venture capital. Maybe they have family offices where they're already doing deals, or they're going to be making angel investments themselves. And just as many of them might wind up as investors as they would be entrepreneurs.

And so I said, well, let me flip the class and actually teach it from the perspective of how to be a venture capitalist. And Selena's teaching that class now One of my proudest accomplishments is she started as my student in that earth class that I described. And now she's teaching without me as, as an adjunct.

And so, which again, I think goes back to that idea of, you know, what do we mean by mentorship and apprenticeship

So, what have you learned teaching this class or, uh, running this fund? What has surprised you about corporate venture?

So, so when we started Touchdown,  fight, I think a little bit naively. That the motivation for most of these corporations was they wanted a corporate venture function because that's what they were telling us.

They were saying, help me start and run my corporate venture fund. But a few years in with that experience, what we realized is that those were the more sophisticated groups and that what was underneath it, that was driving that motivation was that they wanted to access to external innovation and that they recognized many corporations, I think.

And this goes back to why an entrepreneur or a VC should be increasingly comfortable with a corporate partner, is that they now realize most of them that they can't do everything themselves. And the old model was not invented here, crossed arms syndrome. I'm going to build it myself. I don't care what the outside world is doing.

Now that the world of venture capital has created a pool of innovators. And for anyone innovation, maybe it's 25 or 50 or a hundred external innovators who are working on the same problem. The chances that the corporation has the shot at being the best in the world at doing it are going down. So these corporations are saying, I want access to external innovation and venture capital is one of the tools to give it to them, but it's not the only one.

So the notion is if you're an MBA maybe you're going to be an entrepreneur. Maybe you're going to be a venture capitalist. Maybe you're going to go work in corporate, R and D. Maybe you're going to go work in M and a, maybe you're going to work in business development, which of, all of them is probably the most likely, you know, sort of that's the role in innovation that a lot of MBAs wind up in. So the class is, how do you think about all these things holistically? What are each of these? What are they good at? When should you use them? And in fact, if you're going to be in a corporation, or if you're an entrepreneur interacting with these different groups, How should you think about which is the right one to use?

And if you work in M and a, how should you coordinate with your colleagues in venture or in business development or in R and D or in strategy? 

Are there any misconceptions that you think a lot of your students have about any of those roles?

it's funny, I think every year the students get more sophisticated and smarter. which is fun because it keeps us on our toes as professors to keep the material fresh and to, you know, keep advancing the state of the dialogue. when I first started coming to LA, when I was living in Sacramento and David Kremlin and I were running the FJ frontier together, I remember there was an event, for an organization you probably know called lava.

  And just to get a sense for the audience. I asked, you know, how many people here know what stock options are. This was probably in 2003 or 2004, something like that. I don't know. Maybe, you know, less than half the room raised their hand.

If you asked that question today, there's no chance that anyone would be like, no, I don't know what stock options are.  And so the state of sophistication keeps increasing. So I think that probably to me, one of the biggest myths that are still sitting out there is this idea that you have to choose between being strategic and being financial.

And I would say it's like a false Sophie's choice. You should not pick one or the other. You should figure out how to maximize both. 

Wow. 2003 does not seem that long ago to me, but I think I'm just getting older. Um, legitimate question. Funny advice for VCs who are working with corporates.

Yeah. I mean, I think one of the other things that you mentioned is the recognition that corporations are big and they can be slow. And so, there's a, I think it's become a little bit overused, but I really like, um, you know, the Chinese proverb, uh, that the best time to plant a tree was a hundred years ago and the second best time is today.

And so to me, what that means is start early. If you know that these are organizations that have more coordination to accomplish, and that the deal will be better. If you validated it with someone in a business unit or who is running a P and L. Don't wait to do that. Don't show up and say, I've got this deal.

You've got a week to decide. And I think that, you know, that this applies for entrepreneurs as well, which is the entrepreneurs have been conditioned by the venture capital system to put pressure on all of us as investors. And so, you know, sort of force us to operate by fear of loss. I got my term sheet, you know, are you in, or are you out?

You have a couple of days to decide. And that's, that's what we've trained entrepreneurs to do to us. But if you do that to a corporation, you're probably going to get a bad result because option one is the corporation responds to that pressure, which it shouldn't. And then they do a deal that they shouldn't, and it turns out it's not strategic for you or for them.

And it's a bad relationship or they say no, and now you've sort of blown your credibility. And what you should do is what I think that. You know, most of us like to do in venture capital, which is get to know the teams, get to know each other, develop a relationship. I love the idea of build the relationship when you're not raising capital and allow it to progress naturally, so that, you know, we're seeing the trend line develop.

We're making up our mind about the investment while we're also validating any potential commercial relationships that could also make sense.

yeah. Um, let's stay on sort of that evolving nature of, you know, everyone knows what stock options are. so you had this multi-decade couple decade. I want to say, like multi-decade couple decades

That's okay.

in venture capital. so do you have frontier, were there things that you, you know, what were some of your lessons learned there?

What were the things you're like? I want to replicate that I don't want to replicate that.

Yeah. And I'm still active in DFA, friends care, by the way. I mean, most of my time is spent on Touchdown. But, um, David Kremin and Frank Foster, and I still run the FJ frontier funds one and two together. I love those guys. It's a great partnership. And we still have some really interesting companies in the portfolio.

I definitely, there were some lessons, our strategy for that first fund, where a lot of tech transfer deals out of university that were seed stage investments in California, outside Silicon Valley. They took a long time. And so we did a lot of hard science deals that I personally enjoyed that I bet you would like, you know, knowing your background and, you know, those deals take a while.

Um, we had patient capital in the form of institutional investors, but still there's a limit to patients. I think there's a fair limit to patients. And so, you know, I might've thought about that strategy a little bit differently today, um, than I

would you still want to invest in hard science? Let's say, would you come in a little later rather than sort of spinning out of university?

I mean, I still think that there's a role for tech transfer type deals. And, you know, the question is what is available to help accelerate the growth of that startup? Once the commercial potential has been identified, which is one of, you know, half a dozen things that has pushed my career in the direction of corporate venture, because we, you know, on behalf of many of the corporations that we work with, we do hard science deals.

We work with Avery Dennison, you know, which is a material science company. We, we do hard science deals. but Avery Dennison through its operating units has the ability to help accelerate the growth of those growth of those startups. 

Hmm. Um, anything else sort of related either to DFJ frontier, or just generally how things have evolved and how you see it evolving?

Yeah. Well, you asked the question. What, what else would I do the same? And I think that for me, part of the attraction of DFJ fronts here was the vision of the DFJ network. And so, Tim Draper and his dad and grandfather, you know, I had an opportunity to work with bill Draper on a company.

That's one of the biggest, um, in one of those frontier portfolios and, you know, there legends in the business for good reason, bill and his father worked two of the first venture capitalists on the West coast, in the 1960s. And the very first ever use a limited partnership as the vehicle. If you open up a textbook on VC, you probably see their names on the first couple of pages of the book.

And Tim, you know, also is very innovative. And really came up with this idea of, we used to joke around and say, you know, he wanted a venture capital fund on every corner. It was like if there was a minor or major league baseball team in that town, um, probably it needed a venture capital fund. What was interesting about that was not the idea that we should proliferate VC, but that by having a network, we can help each other and that we can help the entrepreneurs better.

And the whole thing ultimately went into another direction and still to this day, Tim runs it as something called the Draper network. But I think that that concept of how can the network be valuable to help your portfolio company succeed really stuck with me.

And at the very beginning of my career, my first job in venture was with a fund called geo capital partners. But we co office and we're partnered with a firm called Broadview associates, which in the nineties was deleting M and a advisory for the tech industry. Broadview ultimately was acquired by Geoffrey securities, but we had this big brother and it gave us an edge.

And so when I started frontier with Tim and David Kremin, the idea was that the DFJ network was going to be our big brother and provide an advantage that would accrue to our portfolio companies. And so I've never really let go of that notion that if you can build that network to create more value, then you can potentially have an advantage as an investor.

I think you could look at firms today, like Andreessen Horowitz, which has clearly been innovative in hiring all of those operating partners to say, you're going to work on building value in the portfolio. And I think that for us at a Touchdown, we think similarly, we work with, I think today, the number's probably something like 17 or 18 different corporations.

And if you, if you say the team of people who work at Touchdown is, you know, 40 investors plus, and we've started to hire our own operating team because we have to, to, you know, manage the growth of the business. The number of people that we work with directly inside our corporate partners is probably another 400 or so people that we're regularly interacting with.

I liked that concept. We should all be building that network here in LA. Any other thoughts on where you think growth will or won't be in the industry?

we have a whole generation of venture capitalists. Who've never really been through a downturn. So, you know, it'll be interesting to see what happens when it hits, I don't imagine that the dollars at work in the business are going to decline where they go so far backwards that this business shrinks.

I don't imagine that the dollars at work in the business are going to decline where they go so far backwards that this business shrinks.

So the question is how much more can it grow? How much capital is there on the planet for this, who are those limited partners and the institutional, you know, limited partners, the pension funds and the endowments are only going to put so much money in the business. We have, you know, sort of the sovereigns that have jumped into the business.

You know, they're only going to do so much at a certain point. Wealth creation can only increase at a certain rate. So you say, well, as it matures? How does it consolidate? How does it reshape, there's no Goldman Sachs of venture capital and most of the firms, most of the truly excellent firms in the business.

I think if you looked at it, you would say these are very successful, large boutiques. They're not corporate entities themselves. So that could happen.

Interesting.

Yeah, well, you've clearly found a model that seems to be working extremely well and.   I look forward to following along with the continued growth as you get to a hundred beat ball at Touchdown.

Same here. I look forward to doing some co-investments together and, hopefully helping some startup  

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