Juan Carlos Pacheco | IDEA Fund Partners

Juan Carlos

[00:00:00] 

Welcome to the Amplified CEO with VC and serial entrepreneur, Richard Stroupe. With today's guest, Juan Carlos Pacheco, Attorney, Founder and Managing Partner at Pacheco Law Firm and Senior Associate at Idea Fund Partners.

[00:00:23] Richard: Good morning. 

[00:00:23] Juan Carlos: Good morning, Richard. 

[00:00:24] Richard: Yeah. How are you doing today? 

[00:00:26] Juan Carlos: Good, good to be here. Excited. 

[00:00:27] Richard: Good, good. Thanks for coming in early today, I appreciate it. 

[00:00:29] Juan Carlos: No [00:00:30] problem. 

[00:00:30] Richard: Originally, you're from Georgia, is that right? 

[00:00:32] Juan Carlos: I am, 

yeah. From Atlanta, Georgia. Okay. Um, more, more specifically, Marietta, Georgia. Just like a northeast suburb or northwest suburb of, of Atlanta.

[00:00:40] Richard: Okay. 

[00:00:41] Juan Carlos: Born and raised there. Went in and played soccer for a year, uh, up in Nashville at Lipscomb University. 

[00:00:47] Richard: Okay. 

[00:00:48] Juan Carlos: Uh, and then decided to transfer out and, and join the Catholic Seminary for the Archdiocese of Atlanta for about five years. 

[00:00:54] Richard: Wow. 

[00:00:55] Juan Carlos: Yeah. Um, and, uh, we didn't have a seminary in, in, uh, Georgia. So I got sent [00:01:00] to Louisiana, uh, and spent four years studying philosophy, uh, at St.

Joseph's Seminary College. 

[00:01:06] Richard: Yeah, that's phenomenal. 

[00:01:07] Juan Carlos: Yeah. It was a lot of fun. Yeah. 

[00:01:09] Richard: Have you ever been to the Vatican in Rome? 

[00:01:11] Juan Carlos: I have, yeah. Isn't it beautiful? It is beautiful. Yeah. 

[00:01:14] Richard: Something 

about walking in the Sistine chapel and like looking up and 

[00:01:17] Juan Carlos: Yeah. Your neck starts to hurt a little bit from looking all over.

Yeah. 

[00:01:20] Richard: But just like the, you know, the smells of, of the building itself, it's like, it's, it's very interesting. But yeah. Um, I know I went [00:01:30] 20 plus years ago and, you know, did a tour of, we started in Rome and then went down to, um, Capri Naples. And then came back up into a Lake Como area. That's a good trip.

Yeah, we Did you get a chance 

[00:01:47] Juan Carlos: to go to Pompei? 

[00:01:48] Richard: We did Pompei when we were down in South Italy. Yeah. Very, very interesting. Yeah. Going through the museums and the whole ruins and Yeah, and walking the streets and seeing how they lived and [00:02:00] where the bars were. You know, all the other stuff. All the other stuff.

Yeah. Especially for people who were looking for certain things. Yeah. It's like, oh, okay. To the left. But yeah. Such interesting geography. Yeah, Italy. Italy's a beautiful country. 

[00:02:16] Juan Carlos: It sure is. Yeah, 

[00:02:17] Richard: for sure. So you were in the seminary for a while? I was. And then you eventually moved to Chapel Hill? 

[00:02:23] Juan Carlos: I did. Yeah.

So I, I spent the four years at St. Joe, or we call it St. Ben's 'cause it's in St. Benedict, Louisiana. Mm-hmm. It's run by [00:02:30] Benedictine Monk. So it's kind of our, our nickname for it. Spent four years there, got my philosophy degree, and then went back to Atlanta for, we called it a pastoral year. It's essentially an internship year.

[00:02:39] Richard: Mm-hmm. 

[00:02:39] Juan Carlos: Um, worked in a parish church and, and decided that, uh, the Catholic priesthood was not, uh, my calling at, at that time. Mm-hmm. And, uh, ended up taking a job as a director of the UNC Newman Center. 

[00:02:50] Richard: Okay. 

[00:02:50] Juan Carlos: Up 

in Chapel Hill. 

[00:02:51] Richard: Is that the entrepreneurship center or 

[00:02:53] Juan Carlos: No, 

that's actually, it's the Catholic Center.

[00:02:55] Richard: Okay, got it. 

[00:02:56] Juan Carlos: Yeah, so I was a director there for, for two years while I was trying to figure out what was next, uh, I knew [00:03:00] I wanted to go back to school. Mm-hmm. It's hard to get a job as a philosopher these days. Um, and knew I wanted to go back to school, but I wanted to be an area where innovation was happening.

People were thinking 

[00:03:09] Richard: mm-hmm. 

[00:03:10] Juan Carlos: A lot of universities around. And so I went there. After two years, I applied to the, uh, law school at UNC. 

[00:03:17] Richard: Mm-hmm. 

[00:03:17] Juan Carlos: I got accepted and, uh, originally it was just the law school. Um, and I was, I was blessed to be able to take a, a summer internship, uh, with the Chief Justice of North Carolina.

[00:03:28] Richard: Mm-hmm. 

[00:03:28] Juan Carlos: Uh, chief Justice Newbie, [00:03:30] and ended up extending that for about another seven months afterwards. Uh, and during that time, um, North Carolina is one of, I think eight states now that has a, a business court. Um, so these are business cases between two businesses, uh, with a cause of action anywhere over $500,000.

Uh, they have a direct appeal to the Supreme Court and so I, I kind of grounded myself in those cases, helping out, kind of being the gatekeeper, um, providing writing briefs, uh, for the chief justice. 

[00:03:59] Richard: Mm-hmm. 

[00:03:59] Juan Carlos: And [00:04:00] that really piqued my interest in business. I saw where businesses had gone very wrong and, and did really bad things and were getting held accountable, but also where businesses were very strategic.

 Um, and, and were able to, to do good business, um, and also not be held accountable. Um, sorry. They didn't need to be held accountable 'cause they, they hadn't done anything wrong. Right. And so after that. That first year, uh, I ended up applying to Keenan Flagler Business School as well at UNC for my MBA.

[00:04:26] Richard: So you went back to back? 

[00:04:28] Juan Carlos: I went back to back, yeah. So UNC offers [00:04:30] a, a dual degree program for the JD MBA. It's a Oh, wow. Okay. A four year program. Uh, total four 

[00:04:35] Richard: years 

[00:04:35] Juan Carlos: total. Four years. So instead of two at the business and three at the law, they combine it all together. The first two years are at the law school.

Mm-hmm. The third year is at the business school, and then the fourth year is a hybrid year. So you're bouncing back and forth between the, the two schools. 

[00:04:50] Richard: Wow. That's very interesting. Yeah. Did you have to do any kind of dissertation or thesis as part of your, 

[00:04:55] Juan Carlos: thankfully not. Thankfully not. No. But we, we did have [00:05:00] concentrations.

Right. Um, um, mainly at the business school. At the law school, there's not, you know, concentrations per se, but you can start to pick which school, uh, which classes you want. So I, I started taking a lot of business law classes. Mm-hmm. Negotiation classes. Um, and that the business school, my focus was entrepreneurship, uh, venture capital and investments.

[00:05:19] Richard: Okay. And then having the, the JD Lawyer background kind of helped feed into that? 

[00:05:24] Juan Carlos: It, it did. Yeah. It, the, the business school was a lot more fun. Um, PE people got along. They, they were [00:05:30] collaborative. Um, but also too, I, I always enjoyed the law, um, laws in everything that we do. Mm-hmm. Um, from business to society to family life.

And so being able to approach business, um, through that lens and also law, law school and, and the practice of law also gives you a very structured way of thinking mm-hmm. 

[00:05:50] Speaker 4: Of 

[00:05:50] Juan Carlos: problem solving as well. Um, they, at, at UNC law, they say, you know, we're teaching you how to solve problems. 

[00:05:56] Speaker 4: Mm-hmm. 

[00:05:56] Juan Carlos: Um, and a lot of business, especially in, in entrepreneurship is, [00:06:00] is about solving problems.

[00:06:01] Richard: Right. Now, did your background in the Catholic Church, did that help you in your pursuit of your MBA and your law degree? 

[00:06:10] Juan Carlos: I like to think so. Yeah. Um, because, you know, you're, you're dealing with people mm-hmm. Um, and you're dealing with the deepest aspects of people's lives. Mm-hmm. Um, you're, you're working with people who have a vision for their life.

Um, and you're helping them achieve that vision and a step-by-step process, helping them get, get out of [00:06:30] holes, solve problems. Mm-hmm. Um, encouraging them when they're on a certain path. And that's a lot like law and that's a lot like business as well. Um, and then, so getting to, I, I say it was like a PhD in people.

Right. Um, and that's really what I think business is about. Um, I think the law profession should also be mm-hmm. Might not always, uh, end up being like that, but I do think it should be, uh, about the people. So I, I like to think so. 

[00:06:55] Richard: Yeah. That's wonderful. And your family's background is at Appalachian State 

[00:06:59] Juan Carlos: App [00:07:00] State?

Yeah. Yeah. So both, both my parents, uh, graduated from App State. My, my, one of my younger brothers, Michael just graduated from App State. 

[00:07:08] Richard: Okay. 

[00:07:08] Juan Carlos: Um, mentioned earlier that I got to go to two outta the three national championship games for App State 

[00:07:14] Richard: with, uh, Armani Edwards. Oh, yeah. And quarterback. Great quarterback.

Yeah. Yeah. Yeah. Those were the times. Yeah. Well, really, they, it kind of paved the way for us to move into the, uh, Sunbelt in division one. 

[00:07:25] Juan Carlos: It did. Yeah. Yeah. Um, and then on top of that, beating Michigan on the, on the, uh, [00:07:30] field goal, Corey Lynch and 

[00:07:31] Richard: Michigan, Texas a and m. Yeah. Yeah. It's, it's been crazy ride.

Yeah. There and. You know, we'll see where it goes. Definitely. Yeah. Obviously UNC, you know, I'd, I'd love to have them on the scheduled, especially now. It would be great to bring Belichick. Yeah. You know, up to Boone. Yeah. It's looking like you might have a 

[00:07:48] Juan Carlos: good chance as well. They, they got smoked this past weekend.

They, 

[00:07:51] Richard: they didn't play very well, but it's a new team, you know, new coach brings new recruits and Right. It's kind of, you have to have a couple years of, of building Exactly. Before you get [00:08:00] the process down, but, yep. Does your family get up to Boone a lot to see games now or? Um, uh, 

[00:08:05] Juan Carlos: we were, especially when my brother was there.

Mm-hmm. Um, growing up, uh, we'll see if it, if it continues, uh, being in Wilmington, it's, it's quite the trek. Uh, but it's, it's so beautiful over there too. Yeah. Um, so even turn it into a long weekend, uh, going, going, hanging out in the mountains and then maybe even go for a black Saturday game. Yeah. Um, those are always fun.

I have a lot, I grew up with a lot of guys who went to Georgia Southern. 

[00:08:26] Richard: Oh, right. So that, that's always 

[00:08:28] Juan Carlos: a, a fun rivalry. Yeah. 

[00:08:29] Richard: That's a [00:08:30] great game. Georgia Southern app. You know, last year when the hurricane came through, um, yeah, of course. Nobody expected flooding in the mountains. Right. You know, you know, we iron some property up there too, and we have earthquake insurance.

Wow. You know, like here you have to have flood insurance, you know. Right. Uh, but the mountains are like floods. No. Mm-hmm. You know, maybe, maybe, you know, an earthquake here and there. 'cause you know, there's fault lines up there, but Unbelievable. Yeah. And you're, you're a mountaineer as well. I am. Yep. Yep.

[00:09:00] Graduated in the late nineties. Yeah. Computer information systems. I was a computer science major, but ended up switching. Okay. Yeah. I made it halfway through and I'm like, yeah, this isn't for me. Like, I like coding, but I don't like coding that much. Like I, I, I like to get my hands in the databases and the network, you know, kind of have a well-rounded.

Appreciation of technology, not just freaking coding. Exactly. Yeah. So you kinda see 

[00:09:25] Juan Carlos: the big picture. 

[00:09:26] Richard: Yeah. Rather than being in the weeds. Yeah, yeah, yeah. You know, here's your [00:09:30] specs code, boy, go, go to your desk and don't come back until it's done. You know, it's like, uh, that doesn't sound really appealing to me.

Yeah. You know, like you, I own work with people 

[00:09:40] Juan Carlos: Yeah. 

[00:09:40] Richard: And understand requirements and, and, and then build applications and, you know, it's kind of fun. That's neat how that turned out. And I ended up moving to Northern Virginia. I had a lot of job offers in Charlotte. 

[00:09:52] Juan Carlos: Okay. 

[00:09:53] Richard: Um, and I nearly took one. I I had, um, an offer in Texas.

I thought about moving there [00:10:00] and going to grad school at ut. Um, you know, my, my dad wanted me to stay closer to home. Yeah. And he was pushing me to take a job in Charlotte, but I just, you know, I wanted to go to grad school at the time, and I reached out to UNC NC State Duke. Learned about their MBA programs and you know, every one of 'em said, yo, you gotta have at least two to three years of experience before you can apply.

Ah. And I'm like, well, [00:10:30] my mindset right now, if I don't go back to school and keep my discipline, I'll never get my graduate degree. So I applied to George Washington. Okay. Well, George Mason and George Washington. Nice. When I, you know, interviewed for work up in Northern Virginia. So what, 

[00:10:47] Juan Carlos: what program?

[00:10:48] Richard: Systems engineering was at Mason. Okay. So I started there and I went one semester. And the way their program was designed, 'cause I wanted to get in and out in two years. Mm-hmm. You know, go [00:11:00] part-time, you know, work during the day, take classes at night. Nice. And Mason, for whatever reason, had a problem with the CIS degree at App State because it's housed in the College of Business.

Interesting. So they treated me like a College of Business major. Not a CIS major, 

[00:11:16] Juan Carlos: some would call that innovative. 

[00:11:18] Richard: Right. And they, they required me to take these six, you know, elective classes, you know, prerequisites before I could start the program. And it was like discreet math and [00:11:30] architecture, you know, like just basic stuff.

Uh, and it, I started down the path and I agreed to do it. And then I'm like, you know what, this, this really doesn't make me happy. Like, I don't wanna sit in these classes and waste two a year. Yeah. You know, a year and a half taking prerequisite before I can start the program. Mm. So then I, uh, applied to the systems engineering management program at George Washington, which basically was in the College of Engineering, but it was sort of like the MBAs for engineers.

[00:11:57] Juan Carlos: That's pretty neat. 

[00:11:58] Richard: Yeah. It was a unique [00:12:00] program and they allowed me to take classes off campus, so they were. They were geared for the working professional. So, you know, I took a lot of classes in Alexandria and Fairfax, 

[00:12:11] Juan Carlos: old Town Alexandria is so beautiful. 

[00:12:13] Richard: Yeah. Yeah. It's nice up there. There's there's pockets of, of, of good areas in Northern Virginia.

Oh yeah. Not so good areas. Um, but, uh, but yeah, that's where I decided to go and finish out. 

[00:12:26] Juan Carlos: That's neat. And did the, the Master's program have like a specific, uh, [00:12:30] focus? Um, I chose 

[00:12:31] Richard: systems engineering. Yep. Okay. So it was very similar to my CIS degree. Okay. Where you got to focus on decisions systems and learn, you know, networking and databases.

So I, I kind of like just stayed in my swim lane, I guess you could say. Yeah. And got the, it was no thesis or anything, it was just classes. 

[00:12:53] Juan Carlos: Yeah. That's really fun. Yeah. 

[00:12:54] Richard: But then my doctorate, I later went back and got my doctorate at Purdue. Okay. And that was a full [00:13:00] thesis dissertation? Yeah. It took me a year and a half.

[00:13:03] Juan Carlos: Okay. That's the land of the Zers that bull makers bull make. 

[00:13:07] Richard: Yeah. Buller up. Yeah. Yeah. The, the story there was my son when he was searching for his schools and he finally decided, yep, this is where I want to go. And, um, have you seen the movie Back to School with Rodney Dangerfield? No. All right. You gotta watch it.

It's, it's, it's, it's a classic, but, uh, it's. But he plays this guy Thornton Mellon, who is [00:13:30] this big real estate guy, New York, uh, uneducated, you know, kind of bootstrap, blue collar kind of guy, right? Yeah. So he decides, he goes through a divorce and he decides to go back to school where his son is, and his son's on the swim team, but I think his son's like a junior or something.

And anyway, he starts as a freshman and it's just a whole calamity of things. It's, it's a comedy, it's funny. Yeah. I'm sure his son 

[00:13:55] Juan Carlos: loved it too 

[00:13:57] Richard: for a while. Yeah. So I, [00:14:00] I, I did it as a joke, you know, to him and he wasn't very happy about it, but, you know, eventually he kind of caught onto it and mm-hmm. Uh, I took, it was COVID, it was right when COVID was ever shutting everything down.

Yeah. So I took three classes. Nice. Uh, that fall. And um, then one thing led to another and I just decided to use it as a personal outlet and, you know, just. It's taking two classes a semester, just hammered through all the classes and got to the [00:14:30] prelims and decided to write a, you know, dissertation on some stuff I was working on for my company.

[00:14:36] Juan Carlos: That's neat. What, uh, what was the dissertation on? 

[00:14:39] Richard: It was about air gap cloud network security breaching. Ah, yeah, 

[00:14:44] Juan Carlos: that's, uh, that's way above my head. 

[00:14:46] Richard: Well, not really. It's, it's basically air gap clouds are like, um, you know, think of AWS Okay. Or Azure. Yep. But it's, it's, it's in a air gapped network disconnected from [00:15:00] the internet.

Okay. Yeah. So the work, the work I was doing, you know, for the government was building clouds inside their own networks. Wow. That's neat. You know, so, like, think of an AW WS Yeah. Inside a closed network. And I decided to do research about, you know, quantitative, uh, research analysis on breaching of air gap clouds.

And a lot of research came from Israel of all places in China, and the methods and the techniques that they were using to breach these networks. [00:15:30] It was very interesting. Microwaves and lasers. Microwaves, yeah. It's crazy. 

[00:15:35] Juan Carlos: I don't have a microwave in my house. 

[00:15:37] Richard: You know, when you build these skiffs, you know, these facilities and they, they put up wire mesh and other things in inside the drywall to, because of those things, you know?

Wow. It's just interesting how, how they can kind of really penetrate walls, you know, and, and listen to your conversations and pick up things. And, you know, obviously in the, [00:16:00] in the research, you know, the insider network issue is the biggest problem we have. Um, whether people fall out all of a line of your mission that you're working in or Yeah.

Or you, you're enticed, uh, to give data to somebody else for some other reason. Yeah. Um, yeah, that's a big challenge. So there's, there's the gatekeepers and then there's people watching the people inside the gate, you know, so it's, right. Yeah. That's 

[00:16:24] Juan Carlos: really interesting. 

[00:16:25] Richard: Yeah, it was, it was fun to some degree.[00:16:30] 

It was fun. Well, tell me about your work at, um, at your Idea fund. 

[00:16:34] Juan Carlos: Yeah, so we Idea fund were, uh, one of the early, one of the oldest, uh, early stage technology venture capital funds in the Southeast. Mm-hmm. Uh, we're headquartered in Chapel, North Carolina. Um, we've been around for just under 20 years. Mm-hmm.

Uh, and we invest in, uh, from pre-seed all the way through Series A. 

[00:16:53] Richard: Okay. So you're early stage investment. 

[00:16:55] Juan Carlos: Early stage investment, yeah. Okay. Um, and we, uh, we're general, we're on our fourth fund. [00:17:00] How much capital have you raised so far? In the fourth fund? No. Total. Total. Um, total. That is a great question. So I joined back last October, so I'm still getting my, so 

[00:17:09] Richard: were, was that fund three or?

I joined fund four still. Oh, so you're right in four. Yeah, 

[00:17:14] Juan Carlos: so we're in the 30 year fund four. Uh, we're shooting for about a 40 to $50 million fund. Uh, and, uh, we've actively deploying out of it. So we've deployed into about 15 or 16 companies. Okay. Uh, again, ranging from pre-seed, very, [00:17:30] very early, uh, all the way through series, uh, series A.

Right. And we actually, we actually have one follow on it, uh, from one of our porticos into a series B. Uh, okay. Um, exercise in our rights. 

[00:17:41] Richard: So before you joined idea. So when you finished your work at UNC. Yep. Did, did you start thinking like, I wanna be a venture capitalist and that's kind of where I wanna spend my time and Yeah.

[00:17:52] Juan Carlos: So, so believe it or not, I didn't really know what a venture capitalist was until probably my first or second year of grad school. 

[00:17:59] Richard: [00:18:00] Okay. 

[00:18:00] Juan Carlos: Um, I, uh, and then in the, the third year, um, I actually, uh, go founded my own, uh, startup. Okay. Um, in, in the digital health space, I found a, a brilliant, uh, PhD student at UNC.

And, uh, we, we kicked it off, uh, that, that third year. And, uh, we went out, we raised some capital, uh, graduated from, from both schools. Ended up passing the bar as well. Uh, and I did that for about a year. And, uh, for about nine to 10 months, I tried to raise [00:18:30] capital from Idea Fund. Mm-hmm. And could never get them to, to write me a check, but I, I did get them to, uh, thankfully, gimme a job.

Well, you must have 

[00:18:40] Richard: made a great impression. Yeah, I was, uh, 

[00:18:42] Juan Carlos: I was definitely persistent. 

[00:18:43] Richard: Right, right. We need somebody like this on our team. Yeah. Yeah. So, 

[00:18:47] Juan Carlos: yeah, it was, um, I really enjoyed my, my experience just through those nine, 10 months even interacting with Idea Fund. Mm-hmm. Uh, they have a great reputation.

And then, uh, actually as I was transitioning outta my startup, the, um, [00:19:00] the person who's position I'm in now, he was transitioning out of his position at Idea Fund. 

[00:19:04] Speaker 4: Mm-hmm. 

[00:19:04] Juan Carlos: And so I reached out directly to Lister Delgado, our, our gp, and said, Hey, we'd love to come to the other side of the table. And when within about a month I was, uh, on the other side of the table.

[00:19:16] Richard: Right. There's not many of us that have experience on both sides. 

[00:19:19] Juan Carlos: Yeah. 

[00:19:20] Richard: Yeah. That's very unique. 

[00:19:21] Juan Carlos: So it, it definitely helps. Yeah. And I think. 

[00:19:25] Richard: At least that's what I tell my port toes that I invest in. Like, you're getting a [00:19:30] unicorn investor because nobody understands the way I, we do. Right. Exactly. As an operator.

Exactly. Um, what happened to your startup? So you were raising money for that one year? Yeah, so 

[00:19:41] Juan Carlos: we, we raised a, like a friends and family around. Yeah. Uh, and we, we ended up just running outta money. Yeah. Uh, we, we tried to go back out as a, a very tough, uh, raising environment. Um, had a great team put together, uh, and we just couldn't get the raise and we, we ran outta money.

And What year was this? This was 2020. [00:20:00] End of 2024. 24. Yeah. About September. A little over a year ago. 

[00:20:04] Richard: I think a lot of, a lot of startups fall into that category. Mm-hmm. Where it's a really good idea. And, and now they need capital to deploy. And of course they can either choose to use outside capital or their own capital, but at the same time they need income to support their lifestyle, their family, you know, pay the bills, rent, whatever.

Um, it's, it we were talking about yesterday. Uh, do you know Daniel Summers by chance or Daniel Summers? 

[00:20:28] Juan Carlos: Sounds very familiar. 

[00:20:29] Richard: [00:20:30] Yeah, you should meet him. Yeah. Very interesting. Uh, founder lab logs. 

[00:20:35] Juan Carlos: Okay. 

[00:20:35] Richard: Yeah. Yeah, he lives around the corner too. I'll send him an email intro for you too. But, um. But yeah, raising capital is like the Achilles heel.

Yeah. You know, without capital you can't sustain, run a business and reach your milestones and your goals and Right. 

[00:20:50] Juan Carlos: Yeah. And it's, it's very challenging too, right? Um, it's, there's a lot of, I think, unspoken rules or. Just process for how you go about it. 

[00:20:58] Speaker 4: Mm-hmm. 

[00:20:59] Juan Carlos: Um, and [00:21:00] I was just kind of learning on, on the go.

Uh, I, I wish I had the experience I have now as a, uh, on the other side of the table back when I was, uh, trying to raise. 

[00:21:07] Richard: Well, you still, I mean, you're a young man, you, you could always wouldn't be the first to know Exactly. To flip back over as, all right. Now that I understand the game. Right. The, the itch is always 

[00:21:18] Juan Carlos: there.

Yeah. 

[00:21:19] Richard: Right. So you spent a year there and then you switched over to Idea. 

[00:21:23] Juan Carlos: Yep. 

[00:21:23] Richard: Okay. 

[00:21:24] Juan Carlos: Yeah. Yeah. So I've been that idea coming up on a year in, uh, mid-October. Okay. 

[00:21:28] Richard: Now have they always, is [00:21:30] idea always invested in pre-seed? Seed and a, is that kind of where their sweet spot's always been? Yeah, it's always an occasional B or whatever.

Yeah. 

[00:21:37] Juan Carlos: It's always been the sweet spot. And really the sweet spot is Series C. Um, and, and so we'll dip down every once in a while into pre-seed, and then typically a Series A will be a, a follow on check from one of the companies we've already 

[00:21:48] Richard: Okay. 

[00:21:48] Juan Carlos: Invested in. Um, and then. Funds one through three. We were B2B SaaS only, uh, with no geographic focus.

Okay. So we have investments really all over the country. Uh, we have one in [00:22:00] Israel as well. 

[00:22:00] Speaker 4: Okay. 

[00:22:01] Juan Carlos: View in Canada. And then in fund four, we switched that up a little bit. 

[00:22:05] Speaker 4: Mm-hmm. 

[00:22:05] Juan Carlos: Uh, we ended up narrowing down our, our, uh, geographic focus, uh, from the area of Atlanta to Baltimore. 

[00:22:12] Speaker 4: Mm-hmm. 

[00:22:12] Juan Carlos: Uh, and because we narrowed down our geographic focus, we opened up to become general tech.

So we have, of our 16 portfolio companies, we're all over the board. 

[00:22:21] Richard: Okay. 

[00:22:21] Juan Carlos: We have, uh, one of our new investments is a hybrid electric, uh, airline manufacturer based out of Virginia. We have a consumer [00:22:30] mobile company, um, that's set to launch in September. 

[00:22:33] Speaker 4: Mm-hmm. 

[00:22:34] Juan Carlos: We have, uh, our newest and one, probably one of the one I'm most excited about is, is located right here in, in Wilmington, skill Maker.

[00:22:41] Speaker 4: Mm-hmm. 

[00:22:41] Juan Carlos: Uh, learn ops platform. We have FinTech, health tech. So we're, we're all over the board, right, in this fund, but, uh, it's specifically focused on, on this geography. 

[00:22:50] Richard: What are some of the green flags that you find attractive in startups? 'cause typically fund managers, you know, to, to reduce [00:23:00] risk for their LPs and, and to return max capital.

Uh, they focus in certain areas, you know, obviously it's typically the background of the management team or the fund itself, you know, um, but it seems like you're kind of all over, like, what, what exactly, you know? Or those green flags that you look for? 

[00:23:18] Juan Carlos: Yeah, that, that's a great question. I, I think in general, it's, uh, two things.

One is, uh, exceptional founders and that can really, you know, look very different. [00:23:30] Um, whether it's their professional background, they, they really have shown and developed a particular expertise in an industry that's allowed them to come to an, an insight and, and help them start this company. Uh, it could be a, a founder who has, you know, overcome a lot of things, um, throughout their life.

Um, that shows, you know, they have an exceptional character, that they're gonna be able to overcome the hurdles, the challenges of entrepreneurship 'cause it's very difficult. Mm-hmm. Um, or they're exceptionally well at [00:24:00] building a team around them, of, they're extremely self-aware. They know where their, their blind spots are, and so they, they have that ability to reflect on themselves, to know who they wanna surround themselves with.

[00:24:11] Speaker 6: Okay. 

[00:24:11] Juan Carlos: And then the, the second thing is innovative or disruptive ideas. Mm-hmm. Uh, we're looking for ideas that go against the status quo that are going to completely disrupt an industry, the set players, um, and, and really create a new way of doing something. Uh mm-hmm. Doing something [00:24:30] a, a new way of, uh, applying a technology, uh, and even a, a new way of, uh, a particular type of business model.

[00:24:37] Richard: And how do you source your deals? Where, where do you, where do you, I mean, do, do people submit their information to you and their pitch decks and or do you connect with other local groups around, you said between Atlanta and Baltimore? 

[00:24:51] Juan Carlos: Yeah, so, uh, in funds one through three, we were, I would say primarily inbound.

Uh, we've, uh, we've been, uh, pretty blessed to be able to invest with [00:25:00] over 150 different firms, develop a, a good relationships with many of them. And so, and our LPs as well, or our, our own investors will, will send us companies, um, to look at and fund three. We, we kind of switch that, switch that a bit to really focus on our outbound model.

Hmm. Uh, and, and we do that, uh, primarily through our, our venture fellowship. And so we recruit, um, as really as many venture fellows as possible. Think of 'em as like scouts. Mm-hmm. Um, many of them, uh, are MBA [00:25:30] students or industry professionals who are wanting to break into venture capital. And we send them out to find as many companies as possible.

Our, our goal is to know every single company that will ever start in the region that we're, uh, looking at. 

[00:25:43] Speaker 4: Mm-hmm. 

[00:25:44] Juan Carlos: Ideally before they're actually fundraising. 

[00:25:47] Speaker 4: Right. Uh, 

[00:25:47] Juan Carlos: so that we can develop a relationship with them, really get to know them. We don't have to rush through the diligence process. 

[00:25:53] Richard: Right. 

[00:25:53] Juan Carlos: Um, minimize the, the mistakes we're gonna make, uh, in investing.

Uh, and so really that, that outbound process [00:26:00] is something that has really changed in fund four. Mm-hmm. Um, the majority, I'd say at least half of our current investments have been outbound so far, and we're hoping to just see that continue to grow. 

[00:26:10] Richard: Right. Do you have any, um, relationships or, uh, communications with the universities?

'cause I knew like, a lot of them have these internal pitch competitions and they call it like, you know, when I was at Georgetown, you know, they always, every year these classes had their own little competition. Even my class I taught at [00:26:30] George Washington. You know, the, the end result, you know, week 12 was you're gonna pitch your idea, you know, you go through the process of, of creating your business model, and then you go through the process of doing competitive analysis, and then you do your pitch deck, and then you do your proformas, and then you, you, I bring in real VCs at the time, and you pitch them and you get feedback and, and it was a good lesson learned for, for the students.

But do you, do you have that [00:27:00] relationship at the university level? 

[00:27:01] Juan Carlos: We do. So we, you know, there's, especially in the triangle, um, you know, you have incredible university that's there from Duke, UNC, NC State, NCCU, really just great universities. Three out of our, three of our staff members are UNC grads. So we, we love to keep in lean, know that, yeah.

Leaning in that. Um, the other one is from Duke. So we're a, a firm divided, uh, between Duke and UNC. And then there's a, a really great event that started at UNC, but it is all over [00:27:30] the country now. It's called Venture Capital Investment Competition. Mm-hmm. And it's a, it's an opportunity for the, the students in, in the programs to actually play the role of a vc.

They bring in outside, uh, startups that are typically local to each area. 

[00:27:44] Richard: Right. 

[00:27:44] Juan Carlos: They pitch 'em, uh, the, the, the students will decide who they're gonna invest in, at what terms. And so those are great opportunities for us as well. Uh, we also have like Innovate Carolina, uh, which is a, uh, they're essentially a somewhat of an [00:28:00] incubator.

They have launched Chapel Hill attached to them. 

[00:28:01] Speaker 4: Mm-hmm. 

[00:28:02] Juan Carlos: And then, uh, NCID as well, they, they give out different grants to, um, they do the micro grants, which are very, very early companies. Right. They do seed grants, and so we use that as a, uh, pipeline development process. Mm-hmm. Uh, and then because we don't do many investments, if, if any, really actually in the biologic space, um, UNC is very heavy in the life sciences.

Um, that kind of puts a, a, a challenge there. Um, right. But we definitely, definitely like to work with, [00:28:30] um, the, the university students. Um, yeah. I'll, I'll say though that, um, uh, one of the, one of the challenges with many university startups is. Uh, which is a great thing as well, is, is they, they're very focused on getting grants, um, SBIR grants, right?

Mm-hmm. Grants are starting and, uh, we kind of say that becomes a drug. Yeah. Where, where they focus on free money. Yeah. Free money getting grant, which is great. It's non-dilutive. Mm-hmm. Uh, helps you develop your research, helps you get going, but companies can get [00:29:00] dependent on that. Mm-hmm. Uh, university students can get dependent on those grants and they forget that they have to build a revenue generating company.

Right. That that'll self sustain. Oh yeah. That's the reason we're here. Right. Yeah. 

[00:29:11] Richard: Now you mentioned one of the things you look for is founder, sounds like founder grit in determination. The resilience and, and 'cause it, it is, it's very hard to take a business from cradle to grave. Yeah. And, and run through those cycles.

Um, and obviously kids coming outta college have zero experience. Um, [00:29:30] so we tend to kind of look for those grizzled veteran people who maybe have built and sold before or. Maybe been in the military. Um, do you have any founders, you know, we'll talk about skill maker in a second, but I mean that's, that's a good example.

But, um, are most of your founders kind of fit that form where they have that type of resilience and experience 

[00:29:53] Juan Carlos: there? There's definitely some of them. Yeah. I would say the, the younger entrepreneurs, they have a, and I probably did [00:30:00] myself when I was doing my start some, uh, type of a blissful ignorance where they don't know what, what they're getting themselves into.

Yeah. And so they just go steam fool ahead. Um, and they're running, running with the challenges. They're, they're not afraid to stop. They just keep going. Uh, and they're also just brilliant. Um, they're, they're, we're living in this time of. You know, advancing technology that is moving so fast, 

[00:30:23] Richard: right. 

[00:30:24] Juan Carlos: And so they're, they're able to learn and pick it up so fast as well.

Yeah. Uh, but like you said, we, we [00:30:30] do have some, uh, portfolio founders that are repeat founders. Mm-hmm. Um, some that have been, um, previous portfolio companies for us, and they go out and they start a new company. Mm-hmm. Um, and so that for us, it de-risk it a little bit because we, we've seen how they start companies, we see how they recruit teams, how they build their companies and, and ideally how they, they exit those companies as well.

Right? 

[00:30:52] Richard: Yeah, absolutely. I've recently closed my last three investments, minus skill maker. [00:31:00] They were all PhD graduates, so their dissertations was the technology that they used to launch their business, and obviously they didn't have experience in the community, but they did academic research and was able to file a provisional patent on the technology.

And then they get validation either through, like you mentioned, SBI or grants or Yep. Working with the government, nasa, these are all space related technologies, but, um, it's very risky [00:31:30] working with early stage. So typically what I do is I look, I, first thing I ask is, alright, tell me about your background.

You know, what network do you have? Who's on your advisory board? Uh, what's your technology and do you have a patent? It's like, you know, if they don't say yes across the board, I'm like, oh, okay, I'll pass. All right. It's nice to know you. Um, it's, it's, it's very hard to, to find a, a very nichey business model that's sticky that, right.

It's unserved something that you can [00:32:00] innovate like you mentioned, and then create a patent. On top of that to kind of extract even additional unique value. So, right. And 

[00:32:06] Juan Carlos: I do think traditionally the, the traditional PhD path has been to go straight into academia. 

[00:32:12] Speaker 4: Mm-hmm. 

[00:32:13] Juan Carlos: Um, but I'm, I'm seeing a lot of PhD students wanting to now jump over to the commercial side to Right.

Take that and, and actually see their, their years. 'cause these, these PhD students work for years and years. Right. And they want to see it actually affect the, affect the world in a good way. Yeah. [00:32:30] And see it come to life. And I think we're also starting to see, um. States come and, and try and, and invest and, uh, create companies from, from the, 

[00:32:40] Richard: so tell me, I understand the state of North Carolina is an investor with you.

Yep. And you also mentioned Virginia too. That's correct. How does that work? 

[00:32:50] Juan Carlos: Yeah, so there, it's called S-S-B-C-I funding. Um, don't ask me to to say what the, the acronym stands for, but it, it was originally. Uh, funds that came from the [00:33:00] federal government and they passed through the, uh, the states and the state picked, um, I think in North Carolina it was 10 different funds.

Uh, I'm not exactly sure in, in Virginia how many funds. And so we, that capital is matching capital, um, that has to be specifically invested in each state, um, essentially to 

[00:33:17] Richard: and entice companies in that state. Yeah. Companies 

[00:33:21] Juan Carlos: in that state, right? Mm-hmm. So it doesn't have to be university research, right.

But, um, it does have to be, be from that state. And so they track everything from job [00:33:30] creation follow on capital. Mm-hmm. Um, so it's, it's pretty strict guidelines for the, the receiving. 

[00:33:36] Richard: Mm-hmm. 

[00:33:37] Juan Carlos: Uh, capital from, from the state. 

[00:33:39] Richard: And it's 50 cents per dollar, is that right? 

[00:33:41] Juan Carlos: Uh, right now in North Carolina, yeah. Uh, and then in Virginia it's about a dollar for dollar.

[00:33:46] Richard: Okay. And is there a limit on how much they can invest per fund? 

[00:33:50] Juan Carlos: It depends on each fund. Okay. So the, the, depending on how much you raise, and then just depending on, on the fund itself. 

[00:33:56] Richard: Yeah. I think it's phenomenal. Uh, [00:34:00] states, you know, have funding, you know, obviously the federal government and even the state and local governments mm-hmm.

Should, you know, enhance entrepreneurship and startup companies. You know, not only for the tax generation and the tax base, but also just for jobs and job growth. Right. And overall economic development. Um, I talk to economic people here all the time. You know, it's here in Tops, soul Wilmington area. It's very heavily, you know, levered onto the hospitality, you know, the seasonal [00:34:30] vacationers that come in the summer and then the off season.

There's not a whole lot going on, you know, and then you talk to these mom and pop businesses that all feed off of the Yeah. Seasonal vacationers. You know, you got the, the restaurants, you got the breweries, you've got, you know, service providers, you know, like, uh, beach chairs and umbrellas and photography and mm-hmm.

Property management, you know, um, it would be nice to have. Some other industry Yeah. [00:35:00] In this area that can kind of service year round. Yeah. You know, and what I found, like in New York, obviously there's FinTech Yeah. You know, with the, with the markets and, and the financial, you know, uh, business. And in DC it's, it's government, right.

And government contractors. But, you know, North Carolina, especially Eastern North Carolina, has a very heavy military exper, you know, exposure. Um, and I'm talking to some people now about some ideas on how to bring back some of that [00:35:30] startup capital here, you know, like defense tech type businesses. Yeah.

You know, not the black waters of the world who was actually the headquartered in North Carolina. Um, but, uh, you know, like manufacturing Right. You know, like drones and things like that. So it's, it's, it's interesting. Yeah. 

[00:35:47] Juan Carlos: Yeah. And it's a great place to, to live and, and to start a company too. I think so.

Yeah. Yeah. Lower cost of living as well than many of the traditional places like New York, DC Yeah. And you got the beach nice people. 

[00:35:59] Richard: [00:36:00] Right? So why Baltimore through Atlanta? Why didn't you go up to Boston? Because I know Boston has a big hub and, and Columbus, Ohio, I mean, out in Midwest, you know, we're starting to see some traction out there, but why, why just the east coast corridor?

[00:36:12] Juan Carlos: Yeah. So really for, for two reasons. Uh, one, uh, COVID, um, COVID had or led to a, a really big talent migration. Uh, coming from traditional areas of California, New York, down into the Mid-Atlantic Southeast. Mm-hmm. So that area, Baltimore to Atlanta, and it brought with it more [00:36:30] capital, brought with it people who have experience, um, in the startup space.

Uh, people who are high up executives and, and various technology industries. So we saw a lot of talent migration coming down to the area. 

[00:36:42] Richard: Okay. 

[00:36:43] Juan Carlos: And then the second thing, uh, which, uh, I'm most excited about is we ran data on, uh, the ratio between active early stage technology funds and the amount of unicorns.

And when you looked at the traditional areas of Silicon Valley, New York, [00:37:00] Boston, uh, it was about one-to-one. Um, Silicon Valley is actually a little bit less than one-to-one. Obviously there's a ton more startups, but there's a ton more competition as well for mm-hmm. Um, for the investors to, to get access to those deals.

And when we looked at this area, it was actually four to one. 

[00:37:16] Speaker 4: Hmm. 

[00:37:17] Juan Carlos: Forced, uh, unicorn startups to active early stage, uh, venture capital, uh, funds. Uh, and we, we defined active as making two investments per year for the past five years. Right. Um, so [00:37:30] seeing those two, really those two dynamics coming together with really good talent, um, really, uh, one, a lack of access to capital for, for a lot of startups in this area.

And then, um, not much competition as well. Mm-hmm. Um, in the venture side, we think that in, in fund four we can get, hopefully minimum one, but at least two, three, uh, of these unicorns that are coming up in this region. 

[00:37:53] Richard: Mm-hmm. That's great. Yeah. I've had the fortunate [00:38:00] opportunity to have a couple, one played really well, you know, one didn't, so, um, I'm just curious, um.

Which, which areas are you looking for? Unicorns? Like what, what industries? 

[00:38:14] Juan Carlos: Yeah. Um, really all, especially if fund four we're all over the place. 

[00:38:18] Richard: Yeah. 

[00:38:18] Juan Carlos: Uh, like are you, 

[00:38:19] Richard: are you focused on AI right now since that's kind of a hot market or? 

[00:38:23] Juan Carlos: Some ai. Uh, I think every, I would say probably every company we've invested is, is at least they might not be an AI [00:38:30] first company.

Mm. But they're using AI in some way. Right. Um, our, uh, our only company we've invested so far in Virginia is a hybrid electric airline manufacturer. Uh, which is very different than what we've looked at in the past, but. You know, they have a great team. They're actually university students that came outta Georgia Tech, um, who had, um, the different internships and projects with nasa.

They've got a great advisory board and it's dual use tech. So they're, they're, um, have great contract with the DOD. 

[00:38:59] Speaker 4: Mm-hmm. 

[00:38:59] Juan Carlos: Uh, but [00:39:00] also two, they're looking at the regional airline, um, mobility. Um, so anything within 300 to 500 miles that most people are typically driving for right now mm-hmm. Um, they'll be able to provide that access, uh, with a quick, quick flight.

Okay. So they're 

[00:39:15] Richard: actually manufacturing their own airplanes? 

[00:39:17] Juan Carlos: Yeah. They're doing it from, they say they want to be the next Boeing, and so if they, if they hit it out of 

[00:39:21] Richard: the park, 

[00:39:22] Juan Carlos: um, 

[00:39:22] Richard: well, SpaceX said the same thing, and they all laughed at 'em back in the day and now look at 'em. Yeah. It's, it's amazing to see the technology they're doing.

[00:39:29] Juan Carlos: [00:39:30] Exactly. And it's, it's smart, passionate founders, um, and, and they're building a, a really great team around them. Mm-hmm. So we're, we're, we're excited for them. Um, but in terms of ai, like I almost think if you're not using AI in some way today mm-hmm. You're gonna get passed up by someone who is using ai.

[00:39:46] Richard: Well, a lot of people tell me that all the time. Like, oh my God, AI is gonna replace people. Yes. AI is augmenting labor categories today. Right. That are reducing the workload requirements today. Mm-hmm. But the workload [00:40:00] requirements will increase in the future. 'cause that's what they do, you know? Right. They change, they evolve just like we owe.

Right. And, um, and if, if you're an engineer, you need to learn ai. Mm-hmm. You know, and, and, and how AI can help your job and enhance it and make it better, versus just putting the Heisman up and saying, ah, I don't want, I don't wanna talk about ai. You know, I'm a human. I can, I can do my job better than they can.

It's like, well, yeah. You can, but it would be so much better if you had [00:40:30] Right. AI tools with you. 

[00:40:31] Juan Carlos: Yeah. It'll let you focus on the, you know, the things that really need a human 

[00:40:35] Richard: involvement. Yeah. You, I think you're always gonna have a human in the loop. Mm-hmm. To some degree. 'cause you can't trust ai. Right.

'cause even looking at chat, GPT and you know, and Gronk and some of the other, you know, philanthropic, uh, tools that people use to generate code. Even the tool Harvey, have you heard about this? I have not, no. Are you familiar with those show suits? Oh yeah. Okay. Harvey is like one of the main characters [00:41:00] somebody created, um, I guess it's an LLM where they loaded a bunch of, uh, legal documentation and, and just case files and things.

And they call it Harvey from the guy. Mm-hmm. And, um, you can subscribe to Harvey and think of it like he as your little personal lawyer. Ah, and then just go in there and start asking questions and generating documents. Um. I think those type of professions, yes. Mm-hmm. You know, AI is gonna be really great, even government contracting and, and there's a lot of [00:41:30] government contractors now are, are generating proposals.

[00:41:33] Speaker 5: Yeah. 

[00:41:34] Richard: You know, uh, not RFPs, but like, you know, responses to RFPs for contracts using LLMs. You know, they'll stuff all their old, you know, proposals up into this computer system and then start asking questions and then generates, you know, right. Proposal data. It makes a lot easier for sure. 

[00:41:52] Juan Carlos: That's for sure.

[00:41:53] Richard: Yeah. So Skill maker, tell me, tell me about that one. 

[00:41:57] Juan Carlos: Yeah. I'm very, very excited about, I'm an 

[00:41:59] Richard: investor [00:42:00] obviously, so, yeah. Yeah. I did see your term sheet before we signed it. 

[00:42:05] Juan Carlos: Yeah. Hopefully you're happy 

[00:42:06] Richard: with it. It was, it's fine. Yeah. We had a few questions. 

[00:42:10] Juan Carlos: Yeah. No, we're, we're extremely excited about Skill Maker.

Um, I think. Again, we're, we're early stage investors. So we, one of the first things and most important things for us is, is the team. Mm-hmm. And the founder of Skill Maker, Robin Cowie is brilliant. Um, yeah, he's great, isn't he? He's great. Um, for the [00:42:30] listeners, if you've ever seen, uh, the Blair Witch Project is the, one of the producers of that, that movie.

And, and this is where I think Idea Fund, uh, you know, we look at innovative founders. Mm. Robin is not your typical tech startup founder. Right. He's a creative mm-hmm. And he looks at the world, he looks at problems, he looks at technology like a creative, like a completely different way. Well, it's like 

[00:42:54] Richard: a Steve Jobs type person.

Yeah. And yeah. 

[00:42:57] Juan Carlos: And I think traditional venture [00:43:00] capital investors, you know, if they, if they don't appreciate that and they're looking for the typical tech startup founder mm-hmm. They're gonna overlook him. And I think many did. Right. I think they're gonna regret it later on. Uh, but he, he brings a completely different way of, of viewing things, uh, and he's also extremely self-aware.

Mm-hmm. Um, he knows where his, his faults are. He's very hungry to learn and to get better and to receive coaching. And he's built a, a fantastic team around him. Mm-hmm. Uh, and [00:43:30] he's solving a massive problem. 

[00:43:31] Richard: Right. 

[00:43:32] Juan Carlos: Um, my, my, my mom's side of the family, my mom was actually the first and only person in her family to go to college.

Um, and so my, my, she's one of nine, so the rest of them, um, all eight of them are contractors and building houses and, and, um, the trades. 

[00:43:48] Richard: Right. 

[00:43:49] Juan Carlos: And so for me, it, it stuck very, very kind of near to home. It's often an overlooked, um, population that has been, you know, doing things. Mm-hmm. Skill maker for [00:44:00] them.

People, you know, building cars and auto mechanics have been doing this for training for the same way for mm-hmm. Basically forever. Uh, and he's completely disrupting the industry. He's taken it from two years to mm-hmm. I think 26 days now to, um, bring a, an auto mechanic up to competency. 

[00:44:19] Richard: Right. 

[00:44:20] Juan Carlos: And, and then on top of, he has a great, uh, contract with, with Napa, uh, which is some, some nice early validation.

[00:44:26] Richard: Yeah. 

[00:44:26] Juan Carlos: Uh, so we're, we're extremely excited. 

[00:44:28] Richard: I think your, your [00:44:30] comment about how some VCs didn't see the true vision and how he can execute it. It, it's a good example of where I think our operating backgrounds can apply versus a venture capitalist who is not an operator who's just looking at spreadsheets and omas and trying to assume certain things.

Like I remember talking to one group, um, and I specifically asked them, [00:45:00] you know, are you gonna invest in skill maker? 'cause they knew I already did. I was, I was really early, I think. Myself and Leland Winsted were the first two that really jumped in. They told me, yeah, it's, it's a fascinating technology, but it has a really heavy uplift.

And I'm like, tell me about that. Like, like, like educate me, you know, like I'm playing stupid a little bit. Like, oh really? Huh? Tell me about that. They're like, well, you know, it's a [00:45:30] novel idea. It's just, it's, you know, there's a lot of cost in developing that kind of technology and then it can't really scale and, you know, it's very unique and customized to one area, in one region.

And yeah, they're doing work with Napa and they're doing this accelerator and, you know, obviously napa's not gonna let their competitors use it. And I'm like, okay, alright. And no, in the back of my mind I'm like, okay, none of that's true. But like, well, do you understand the coding side and, and how it [00:46:00] works and how we can refactor this?

And, you know. Build a platform and, and, and like, yeah, that's just, you're talking years and years of development. I'm thinking, no man, like maybe eight months. You know? Right. So it's like, I don't see it being that too much of a heavy lift. Um, but I think it just comes from knowing like you've been in the driver's seat, you know how to run a business.

And like you mentioned, if you surround yourself with really good people who've been there, done that, it makes it a whole heck of a lot easier to, to [00:46:30] facilitate, you know, your, your intended objective. So, 

[00:46:33] Juan Carlos: yeah. And so you, you were one, like you said, you were one of the, the first to, to jump in the boat. What, uh, what got you excited about Skill Maker to, to make, 'cause that's, that's pretty scary being the first, first one in.

[00:46:43] Richard: Yeah. Yeah. Well, honestly, talking to Robin, he was very charming. Yeah. Um, I listened to his story. I was very fascinated with his background with Blair Witch and, you know, his industry ties, you know, and [00:47:00] working, um. At Madden football and having that ex experience and exposure. So he's been in film, he's been in gaming, you know, he's, he's been in some really interesting industries and now he's trying to, to kind of compound all that experience into this technology.

And he already had Napa, so he had a tier one customer, and at the time, the parent company was going to make an investment. And now we see it's turning into something a little bit different. But, but at the [00:47:30] time, the way things were laid out, it was very exciting. And I thought it was gonna be, you know, something that's like, oh my God, I better jump on this really quick, you know?

And, uh. It, it, it, it, it didn't turn out, um, as fast as I want, you know, and, and there's still things, there's still a lot of pieces in between. Right. Uh, and, and that's, that's another lesson when you're making investments, is Yeah. You know, you may tell me it could take six months, but it's gonna take 12. You know, people go on vacation, things happen.

Right? You may not get [00:48:00] all the money you need at the time, and there's always delays. Um, but, um, but that's, that's the, the beauty of the model is, is kind of preparing for those adjustments and pivoting and hard. Right? Yeah. So, but no, I, I'm, I'm happy I'm an investor and, you know, uh, cheering for Robin, you know, and his team, and, and I'm on the calls every week and with you.

So it's, we're every other week now, so, yeah. So I mean, I've, it's. I hope, I hope the best for the group, so it's gonna [00:48:30] be good. Yeah, 

[00:48:30] Juan Carlos: it's good. And they oversubscribed by quite a bit. Yeah. Which is nice to see. 

[00:48:33] Richard: Yeah. Now he just has to execute. Yeah, exactly. Now we can sit back and like, okay. I know. Well, any other investments that you've recently closed, you're pretty excited about?

[00:48:46] Juan Carlos: Um, we've, we've closed a few. We've actually, this summer we closed four, four investments and three of them were pre-seed, which I was pretty excited about because we, we hadn't done a pre-seed investment in a while. 

[00:48:58] Speaker 4: Mm-hmm. [00:49:00] 

[00:49:00] Juan Carlos: Two are still in stealth, so I, I can't necessarily talk too much about them. Right.

One one's using AI in the, um, in the human resource side. 

[00:49:09] Speaker 4: Mm-hmm. 

[00:49:10] Juan Carlos: Um, and, and then the other is more in the nonprofit side, um, which is ironic, s venture capital. But yeah. Um. There's definitely money to be made in the nonprofit space. Absolutely. Don, don't let anyone tell you differently. Absolutely. 

[00:49:22] Speaker 4: Yeah. 

[00:49:22] Juan Carlos: Uh, and then the other one is a consumer mobile company.

Mm-hmm. Uh, they're launching September 16th, I believe. Okay. Uh, and, [00:49:30] uh, it's led by a former, um, democratic, uh, candidate for president. Okay. Um, and has a, a very unique twist on, uh, his, his view for, uh, consumer mobile. Um, and, and we're very excited about it. He's gonna get some, some nice press releases coming out.

That's great. Um, similar to like the Mint mobile mm-hmm. But with more of like a FinTech integrated within it. Okay. So we're hoping it goes as well as, uh, mobile as well. That's, that's 

[00:49:56] Richard: wonderful. Yeah. Now, are those North Carolina, Virginia based companies [00:50:00] or 

[00:50:00] Juan Carlos: the, so the consumer mobile's the only one that's actually not, yeah.

And so the other ones are, are all North Carolina. Okay. And then the other, the fourth one is the, um, they're called Title Flight. Mm-hmm. Um, out of Virginia. Mm-hmm. And they we're very excited for them. They're our first one in Virginia. We've got, we're actively sourcing companies right now in Virginia, uh, because they're the only one.

And we, we've got capital mm-hmm. To deploy in Virginia. Uh, and so we're, we're just trying to get, get acquainted with, you know, the entire ecosystem there. [00:50:30] Yeah. There's, there's a lot of different cities. 

[00:50:31] Richard: Oh, yeah. Do you know Matt Gittleman by chance? I don't. Okay. He, he worked with me at Blue Venture Investors, and now he works for a guide by the name of Jim Hunt.

Um, but, um, he runs a group called D VC and DC 

[00:50:48] Juan Carlos: VC and DC 

[00:50:49] Richard: Yeah. And they have meetings once a month, typically in Arlington or, or downtown. Okay. Where all the local family offices and VCs get together. Nice. You know, [00:51:00] drink beer and, and talk about, um. Di flow 

[00:51:03] Juan Carlos: sounds like a good time. Yeah. 

[00:51:04] Richard: I'll connect you with him and maybe we can start having you come up to DC Yeah, that'd be a great time.

Yeah. I've been to one meeting and, and I obviously come down here a lot, so I haven't been to to too many others. And there's, there's several groups that are pretty active in the DC market that are trying to be more proactive on deal flow. Nice. You know, I, I'm a, I'm an [00:51:30] investor in Blue Venture investors, like a limited partner.

Yep. And they meet twice a month and they get a bunch of deal flow and mostly it's, um, cybersecurity. Mm-hmm. You know, 'cause from the government, you know, there's a lot of cyber type stuff. Right. And, you know, we've seen several technologies that pivot out of the government, you know, because typically you build something from the government and it's useful, it's great they're using it, but it'll be so much awesome if.

We could use it in commercial. 

[00:51:54] Speaker 5: Yeah. 

[00:51:54] Richard: And by the time they get approval to do that, you know, there's probably four or five versions of the same thing. [00:52:00] Right. Um, so I've never, I've invested in a few cyber companies and they've done pretty well. Mm-hmm. Uh, but, um, but now we're seeing a lot more than just cyber happening in the DC market.

[00:52:11] Juan Carlos: Interesting. 

[00:52:12] Richard: Yeah. 

[00:52:12] Juan Carlos: What, uh, what are you most excited about that you're seeing 

[00:52:15] Richard: defense tech? Mm. You know, um, I'm really excited about that and, and trying to find, you know, the, the future companies that are going to disrupt the government defense technology market. [00:52:30] Um, you know, like Andrew for example, I wish I could invest in Andrew.

Yeah. You know, I, I was able to get in SpaceX and I would, I would actually trade SpaceX shares for Andrew shares if anybody has any. But, um, Andrew's doing some really cool stuff. And, uh, but there's a lot of companies out there that you'll never hear about that write really cool technology that the government will use or contract or another, you know, contractor like Boeing or Leidos or General Dynamics [00:53:00] will use as a portfolio company and their technology gets interesting through the government.

So it's, it's interesting. 

[00:53:06] Juan Carlos: Is that what exits typically look like for, uh, defense tech companies? Is an acquisition from like a Boeing or 

[00:53:12] Richard: Typically Yeah, yeah. From a product company. I mean, services are different, you know, 'cause I, I created and sold two service companies Okay. Up there. Uh, my first one I launched in 2001 and sold in oh nine.

Then we were doing, um, [00:53:30] started out doing Oracle database development. Okay. And administration. And eventually I pivoted to software development and I got into open source. This is where the government, this was back in, I wanna say 2005 six. And, and the government was still catching up with modern, you know, architecture.

Yeah. And they had a lot of client server, those mainframes when I first started. Then they all went to client server when Java, JavaScript. Mm-hmm. Um, then, you know, obviously we started building our own little clouds with clustering [00:54:00] and, you know, we got really deep into that technology and started to develop open source, um, architecture with Ruby on Rails and s other technologies, and, and it, it just blew their socks off.

Like, oh my God, I can't believe this is so great. You know? So we started to basically, um, take over all these other software shops with this architecture. Yeah. And, you know, between oh five and oh nine, you know, our company doubled in size and, um. [00:54:30] There were some things happening both internal and external that allowed me to seek an exit.

So I sold it in oh nine and it was great timing. Um, and then that's where I worked for the acquirer for a couple years, and then joined Blue Venture. Okay. And started working at Georgetown and George Washington Universities, um, and getting really connected to the MBA students and the startup community and learning, you know, the different models and the other side of the [00:55:00] table as you mentioned.

So, uh, but then I started my second company in 12 and it was focused on, um, Amazon and Air Gap clouds. 

[00:55:08] Juan Carlos: That guy. Neat. Yeah. Can you go for round three? 

[00:55:10] Richard: I don't think round three is in the cards. Yeah. I I, I wouldn't mind it, you know, but it, it'd have to be something unique and different. Yeah. I think I've, I've, I've now had a time on the, the investor side.

And, and I think it's, it, it's a lot of fun. It is. And you're [00:55:30] not tied to one customer base, one organization, one culture. You know, I've, I've got, you know, a portfolio now of five companies under Cape Fear Ventures. Yeah. And even before Cape Fear, I had, I don't know, maybe 12. And it's just great that you can pop in at any time and spend a week or two immersed in their technology and what they're doing and you try to help them and then you bounce to somebody else.

And I think it keeps you [00:56:00] fresh and exciting and your mind engaged and learning about new technology and 

[00:56:04] Juan Carlos: Yeah. 

[00:56:05] Richard: And then it's like, oh, maybe you can talk to this guy, you know, and try to connect the dots and try to create value through mutual introductions. 

[00:56:12] Juan Carlos: Yeah. And so when did you start Cape Fear Ventures?

[00:56:15] Richard: I've been investing in technology since 2010. Okay. My first investment was a company called Troop Swap Troops Swap. Eventually they pivoted into id me, um, it was Groupon for the military. [00:56:30] 

[00:56:30] Juan Carlos: Okay. 

[00:56:31] Richard: And you mentioned one of the green flags was founders. Well, this guy, I mean, I was at Blue Venture maybe three months, and this guy, Blake Hall comes in and he pitches Blue Venture, him and his partner Matt, at the time.

And, um, I was blown away, you know, not, not just the, the technology, it's like, oh, it's just Groupon for the military. Right. And, and, and this is a great example of how some of these investors think, but I was, I was really taken away with, um, [00:57:00] with Blake's leadership capability. Mm-hmm. The, his military background, the fact that he led some patrols in, in Iraq and some of the experiences that he had and how he overcome adversity and, um, you know, really navigated some dangerous situations in a very effective and beautiful way.

And, um, I'm like, I'm in. This is my first investment I'm in. Yeah. You know, and some of the older guys were like, oh, Groupon. Oh, it's just coupons. I don't understand, you know? I said, but for the [00:57:30] military, like he's, he's focused on just the military, active in reserve and, and, and veterans. I think it's a good idea.

We should give these guys some breaks. Let's give 'em some coupons. Ah, Groupon. You know, so they, they just get the bias in their mind. Right? Yeah. And, and, and eventually it was a deal, but like the way that Blue Venture worked was we had 15 partners at the time. Mm-hmm. And we had to have 10 to commit capital to make it work.

Yeah. And it, it is like super angels. Yeah. You know, you could throw in 10 [00:58:00] K or you can throw in 5K, you know, to become a, an investor. But it all gets pulled up into one LLC and, um. My first investment with, with Blake at the time was 70 5K. And I'm like, you know what? I'm gonna do this. Like, I really believe in him.

I believe in Matt. I think this is a great idea. Mm-hmm. And if it doesn't work out, I'm sure he'll figure something out. Like that's just what he does, you know? Yeah. And I was the lead investor. Uh, I think we put in a total of like, no, I'm sorry. It was 125. 

[00:58:28] Speaker 5: Okay. 

[00:58:29] Richard: So our [00:58:30] total investment was like 400 and something of that round, which just Blue Venture.

And obviously I was more than 25% of the first one. And then within 12 months they came back and said, oh, we needed a bridge to, to the a, it was all precede stuff. Mm-hmm. And the valuation was 7.5 million. So I put in another 70 5K as a pro rata. And um, so my total investment was like over 200 k At the time, it was like 2 25.

And um, at [00:59:00] that point it just started taking off, you know, and then they ended up pivoting into authentication. They had, they were able to get access into the database systems, the DOD, they were the only company. 

[00:59:12] Juan Carlos: That's nice. 

[00:59:13] Richard: And then eventually they pivoted into IDME authentication, and now they're working with IRS.

They're working with all these contracts and they're doing fraud protection and they're still doing, you know, deals for military. And if you're an active military person, if you go to id, me, you can get an account and you [00:59:30] can get some really good deals. No, it's great. And now they're a unicorn. 

[00:59:33] Juan Carlos: That's pretty exciting.

[00:59:34] Richard: Yeah. So they, their last round, they closed at 1.5 or 1.8 billion. Wow. Yeah. And I'm sure they're gonna go IPO you know, in the next couple years they're, they're, they're making their rounds, but I'm so happy for that team. Yeah. I mean, 'cause that's a true grassroots effort that pivoted mm-hmm. Changed their business model.

Still use the same. The underlying, you know, grit and termination and then [01:00:00] ended up taking their technology go a different route and just exploding it. Right. And it's just been wonderful. Yeah. That's where you 

[01:00:06] Juan Carlos: see too the importance of grit to be able to Right. Have the courage to pivot. 

[01:00:10] Richard: Yeah. 

[01:00:11] Juan Carlos: And go and start it.

Almost start over. 

[01:00:14] Richard: Yeah. And it's unfortunate 'cause that was my first one. Yeah. You know, and now everything that comes after that is either gonna be major disappointment, so I've had to lower my expectations, like, oh my God, is all of them like [01:00:30] this, this is great. Um, but I've had to learn. I've, I've lost deals, you know, honestly, you know, but I try to, I try to use those green flags mm-hmm.

Those markers for success. And when I'm talking to founders or looking at their technology or looking at their industries, try to apply those, you know, metrics to figure it out. So go back to your question, Cape Fear. I started the Cape Fear Brand, I believe it was in 22. 

[01:00:58] Speaker 4: Okay. 

[01:00:59] Richard: [01:01:00] And, um, using it as a moniker for future.

'cause I think my, my plan is to raise a fund. Okay. At some point, maybe next year or year after, I just have to have to figure out some personal things on my side in order to, to really give it my 110%. Yeah. I've been doing a lot of, uh, real estate development. Okay. And now I'm starting to unwind some of that and putting it in different modes where I was an operator and now maybe sell at a [01:01:30] seller financing.

And now I'm a financer still attracting cash flow. Yeah. But I use the cash flow from the real estate to help propel the, the venture capital side. So, so I run it kinda like as a family office where, you know, just. Take different pockets of money and put it to work. That's 

[01:01:47] Juan Carlos: neat. And will it be focused, I know you said you, you haven't launched it yet.

Um, they're the fund. Would you like it to focus on North Carolina or, um, particular type of industry? 

[01:01:56] Richard: Well, my original plan was to move here full [01:02:00] time. That's why I was able to jump on Cape Fear Ventures and I'm like, oh my God, I can't believe it's available. Yeah. Like, you know, the LLC, it's a great name.

Yeah. It's like, you know, and it gets a lot of attention. Yeah. Um, but, um, I don't know what, what the future holds for me, you know, uh, I've put a lot of capital to work here. You know, I've invested in Hfi, which is, you know, we talked about the, the, the, the backend workflow automation system sit on Salesforce doing a lot of AI analytics.[01:02:30] 

They're doing extremely well. They're based here in Wilmington, learning about, you know, skill Maker, which is based here in North Carolina. Um, I'm every space company. I like space. My son turned me onto space a long time ago, so being on the cap table for SpaceX has allowed me to have conversations I probably shouldn't have with people around the world, you know, in space agencies in Europe.

I had a guy fly from Germany who was developing some innovative technology [01:03:00] for reentry, you know, for, for cargo deployments, which I just kind of wrote, wrote about on LinkedIn. But, so every country has their own objectives on how they're gonna utilize space, outer space for logistics, human transport and security.

And, um, I've been really focused in that area. And, um, I just was in Colorado a couple weeks ago meeting with one of my companies who, who, who moved to [01:03:30] Denver, who moved his headquarters there. I'm like, why not North Carolina? You know? Like, come on. You know, it's really cool, you know, access to talent. You have, you know, really cool schools there and, and it's, the climate's great.

And he says, well, I just had this conversation with, with another investor. He says, when you're working in space, there's only three areas you can move to. Right now it's either Colorado, Texas, or California. Yeah, 

[01:03:57] Juan Carlos: maybe Alabama now. 

[01:03:58] Richard: Maybe Alabama after [01:04:00] yesterday for sure. Um, but um, that's a good point.

That's a good point. Maybe we should start traveling to Huntsville. Um, but um, but that's where all the concentration is, you know, as far as the investment capital and the customer base, you know, and, and a lot of the investors want their companies to be in their backyard. Yeah. For control. Um, I lost one. I sold out of one that moved to Ohio.

Okay. They were, [01:04:30] we were pre-seed. Um, they got an a round from Drive Capital, which was based outta Columbus. Mm-hmm. And they ended up moving from Maryland to Columbus and we sold out. Wow. Just because, you know, it's a good, wants to go to Ohio. Yeah. People sleep in Ohio. No, nothing, nothing wrong with Ohio. I make fun of them, but, um, but no, it's, it's, you know, just risk, risk, risk awareness.

Yeah. You know, and, and trying to main [01:05:00] maintain your, your reach to the company and 

[01:05:02] Juan Carlos: I see. And so when you invest, do you, you take a pretty active role in the companies? 

[01:05:06] Richard: Yeah, I don't do a spray and pray model. Mm-hmm. You know, typically my check size ranges from 50 K to 500 K. And like, if I really, really, really love the technology, I'll, I'll go deep early.

Um, but typically I'll either ask for a board seat or board advisor. Yep. And, and, and, and really it, it kind of matches [01:05:30] with the. Personality with the founder? Yeah. Like are they coachable? Can I get along with them? You know, and, and do our backgrounds align and can I actually be helpful? Yeah. Like I, I'll know, like we, I've had some really good meetings with bioscience companies, really cool technology about healthcare and automating healthcare and doing AI in healthcare.

Healthcare scares the heck outta me. Like, I don't understand it and I just stay away from it. Like, I can't be [01:06:00] effective for you. Like, I don't know, people in that industry, I can't open doors or make connections if I feel confident that I can actually not only be an investor, but be like smart, active money.

Yeah. Where I can actually help the company grow, then I'm all in. That's great. And I went big with oh five because I understood the mo the model very well. I understood their background, um, and their sector and, and was able to kind of deliver value. From day one. So 

[01:06:29] Juan Carlos: that's great for your founders. Really [01:06:30] appreciate you.

[01:06:31] Richard: I hope they do. At least they tell me they do. Yeah. Um, but that, that's really what I think the difference is when you're an operator, investor, you bring your experience and, and almost advisory. Yeah. You know, council and, and to me that's more than capital, you know, that, that's friendship. That's, you know, when you're having somebody as a copilot, like, no, no, no, this is your company.

It's your baby. I understand. I'm just here to help you and [01:07:00] guide and let you know what I think and what you should do. If I had one of those people, like helping me grow my business, I probably would've been, you know, 500 million billion dollar revenue company. Yeah. But at the time, getting, just getting past that $10 million mark was a struggle.

But if you had, and I think a lot of people, and they see these startup companies raising money and. Starting at 7 million, 10 million, a hundred million valuation. It's like, how in the heck did they get a hundred million valuation? [01:07:30] Like, because their investors make it happen. 

[01:07:32] Speaker 5: Yeah. 

[01:07:33] Richard: You know? And it's really all about the right investor that you choose.

[01:07:37] Speaker 5: Yeah. 

[01:07:37] Richard: So I don't waste a lot of time early. Like, I'll meet with them, I'll learn about their background, their technology, and I, I mean, you know, within the first 30 minutes, an hour Right. Like if you can be helpful or not. 

[01:07:47] Speaker 5: Mm-hmm. 

[01:07:49] Richard: But it's been interesting. But I, I hope, I hope to bring more companies into North Carolina.

I hope that we can create more economic development here. 

[01:07:58] Speaker 5: Yeah. [01:08:00] 

[01:08:00] Richard: With defense tech, with aerospace, um, you know, other technologies. I know FinTech with, um, live Oak Right. And Encino, uh, here in Wilmington has been a huge anchor for the companies like phi. Mm-hmm. And now skill Maker who's bringing its own unique experience, there's a lot of great people that live in this area.

Yeah. 

[01:08:22] Juan Carlos: There Sure are. 

[01:08:22] Richard: You know, and, and a lot of them, like Scott Moody, for example, he lives in Wrightsville Beach. Yep. And he sold his business [01:08:30] to Apple. Great experience. Yeah. You know, you have some really good people. It's just, they, they may have reached a point in their life where, you know what, I'm done.

It's like, I don't wanna, yeah. I don't wanna mess anybody hang out on the beach, but I know if they're like us, they have that little scratch in the back of their mind thinking, oh man, I can sit here all day, but I really wanna be active and Right. Help others and, and just, you know, be part of the win.

'cause it's, it's really fun. Yeah. And I think it 

[01:08:57] Juan Carlos: actually takes people like that. To give [01:09:00] back to, to companies that, and bring that experience of, of scaling to massive, massive levels. Mm-hmm. Because those, those experience are far and few between. 

[01:09:10] Richard: Right. 

[01:09:11] Juan Carlos: Uh, and to, to be able to have, you know, people like yourself, people like Scott in this area, to mentor companies to, to grow.

[01:09:18] Richard: Right. 

[01:09:19] Juan Carlos: Um, really, I mean, I think can really make a huge, huge difference. 

[01:09:22] Richard: Yeah. 'cause I mean, like you mentioned, the, the quality of life here is really good. 

[01:09:27] Juan Carlos: Yeah. It's fantastic. 

[01:09:28] Richard: I mean, obviously [01:09:30] I've lived in Atlanta for a while. It's commuting in and out of Atlanta every day is not for the faint of heart.

Um, in DC the traffic and now the data centers, I mean, it's disruptive and, and here, you know, you've got the, the, the beach and the coastal environment and the people are great and the traffic's not very bad. And I mean, it's got, its, you know, ebbs and flows like every other spot, especially in the summertime, but.

Um, and you got access to talent. Like there's some really cool people [01:10:00] here. There are, uh, a lot of smart folks at UNC Wilmington and obviously NC State and East Carolina, duke App State, I mean here just in North Carolina. But then you've got remote capabilities where people can live here and work wherever they want.

Right. You know, so I think it opens the door and hopefully we can motivate young entrepreneurs to kind of think that way. To set up shop here. And especially from a VC point of [01:10:30] view, if you're looking for burn, burn, you know, burn optimization, I'd rather put money to work here. Right. Because the cost of living is much cheaper.

[01:10:39] Juan Carlos: Yeah. It's a lot of the coast here's a lot cheaper than the coast on the west side. Yeah. 

[01:10:43] Richard: Yeah. Otherwise you're just funding payroll. Yeah. Uh, and I've been in several situations where they'll do rounds just to fund payroll and I'm like, I'm out. Yeah. You know, like, I'm not funding payroll, I fund growth.

Yeah. It's like, if you're not converting growth, then I don't wanna be an [01:11:00] investor. Right. So what other exciting adventures are you working on these days? 

[01:11:04] Juan Carlos: Uh, yeah, so that's, that's a great question. Uh, we're, we're closing our, our fundraising at the end of this year. Mm-hmm. Uh, for Idea Fund. Uh, which I think everyone at the fund is excited to no longer have to worry about fundraising, at least for this fund.

Yeah. Um, and, and just starting to work with, uh, some of the early stage companies we've invested in this summer. I'm excited to, again, go back to Skill Maker, um, see their growth, see their launch early, early, [01:11:30] late next spring. Mm. Uh, and continue to look for companies. Uh, we're shooting for a portfolio for fund four of about 20 to 30.

So we've got about 10 to 15 companies left to find. Mm-hmm. Uh, which is, that's my favorite part is, is meeting and sourcing and Right. Um, getting to learn about brilliant founders. And very exciting tech. 

[01:11:49] Richard: Yeah. We talked about the green flags. Yep. And what you look for. What are the red flags that kind of turn you off and say, you know what, this isn't for us.

[01:11:57] Juan Carlos: Yeah. If you're a jerk that that's [01:12:00] a, that's a very quick red flag. Like if you're just not a kind person, arrogant. For me, that's, uh, 'cause it's a partnership when you invest. 

[01:12:08] Richard: Mm-hmm. 

[01:12:09] Juan Carlos: Um, and so that, that is one that I think gets crossed off. So 

[01:12:13] Richard: even if the technology is super great and, and it's awesome and innovative and, but that founder is just not Yeah.

For me, the 

[01:12:20] Juan Carlos: juice just isn't worth the squeeze. Okay. Um, yeah. And then I think if a founder doesn't know their numbers, um, even if they, you know, especially early stage, we know [01:12:30] numbers change. Um, projections definitely change. But if you're not able to at least speak with some intelligence on the numbers, you have revenue burn rate.

Mm-hmm. 

[01:12:40] Speaker 4: Um, 

[01:12:40] Juan Carlos: how you're gonna use the capital. You arrived at your valuation, uh, you mentioned like a hundred million dollar valuations. There's some that come in with a hundred million dollar valuation with no investors. Yeah. And with really no thought process behind it. Um, so that, that's a huge flag is, uh, just not knowing your numbers.

'cause if, if you don't have [01:13:00] responsibility with your numbers before we invest, chances are after we invest, you also, you know, won't have the responsibility with your numbers. Right. Um, and then you have our money. And so it's, uh, a bit of a concern there. 

[01:13:12] Richard: So, out of, you know, let's hypothetical, let's say out of every 10 pitches you see how many of those have red flags?

[01:13:19] Juan Carlos: I would say most of them. Um, and, and I wouldn't say that a red flag is a, you know. We completely throw them away mm-hmm. And disregard them. Uh, 'cause especially in the early stages, [01:13:30] there's, you're still figuring it out. So there might, there's definitely risk, but it's how are you mitigating those red flags?

Right. Right. Um, and, and I think self-awareness, knowing what your red flags are, knowing where your, your gaps are is ex is probably just as important as Right. Your, your green flags. Yeah. Um, so that, that's, that's very important. Um, and then whenever we ask a company about their competition and they say, we have no competition, right.

That's definitely a red flag, because [01:14:00] competition is typically a good thing. Mm-hmm. Um, it shows that there's market there. Uh, how are you learning from your customer, from your competition? Uh, what do you do better? What are they doing better so that you can compete better? Mm-hmm. Um, I always, I, I'm a athlete, so I, I like to think about sports, right.

So if, if you're going up. And a tournament against some, uh, few teams. And, you know, you go out and you scout those teams and you say, these, they're strong in X, Y, Z, we have X, Y, Z, and this, you know, challenge. So we're gonna [01:14:30] adapt a little bit to to, to beat them. Mm-hmm. Um, because it's a competition. Um, there are winners and they're losers in business.

Mm-hmm. And, and our hope is that you're gonna be a winner. And, and you have to know where your red flags are and, uh, where your competition is as well. 

[01:14:45] Richard: Do you typically lead on investments or do you kind of come in behind a lead? 'cause I know some fun shops when they're doing their due diligence, especially not just for the technology and business, but like you said, the personnel and the founder, they lean on other groups to kind of [01:15:00] do some of that as well and say, oh, what'd you think about him?

Oh my God, you know, did you talk about this boy? Whatever? He goes, oh, yeah. What do you think? You know, um, do you talk to other funds and do you all kind of work together on trying to tackle the same thing together, or? 

[01:15:12] Juan Carlos: Yeah, we definitely talk to, to different funds, uh, with a caution of group think. Mm-hmm.

Because there's sometimes when everyone's saying no, and so you're, you get scared and you might not invest when you really should. Right. And vice versa, everyone's going in to invest and maybe you shouldn't. Mm-hmm. [01:15:30] And, and you, you invest and you end up losing your capital. Um, so yeah, we, we talk with other funds, uh, but we also have a, a pretty deep diligence process that we do.

Mm-hmm. Uh, we, we do lead, we do follow on as well. Our, our typical first check size is between 250 and $500,000. Okay. And then the way we're building this fund is, um, based on performance, uh, about a third of the companies that we invest in with the first check, they'll get a secondary check of about a million dollars, and [01:16:00] then about a third of that third we'll get a secondary follow on check of about one and a half to $2 million.

[01:16:06] Richard: Mm-hmm. Yeah. That's considerable science capital, especially for young companies. 

[01:16:11] Juan Carlos: Yeah. Yeah. Um, those typically come at like the series A, 

[01:16:14] Richard: right. Um, 

[01:16:15] Juan Carlos: later on, 

[01:16:15] Richard: do you try to take a certain percentage of the company when you're making investments? Because I know some funds look at percent ownership Yeah. When they're making investments.

Not really. Yeah. 

[01:16:25] Juan Carlos: Um, it's more so about the money we're putting in. Um, the only [01:16:30] time that I guess really matters is pro rata rights. Mm-hmm. So that we can continue investing and, um. 

[01:16:37] Richard: Yeah. 

[01:16:37] Juan Carlos: Maximize our, our own investment. 

[01:16:39] Richard: So what, what advice would you give to founders and entrepreneurs that are looking for capital, but not sure if they should bring in outside capital, you know, and, and trying to work that next step of expansion and growth?

[01:16:54] Juan Carlos: Yeah, I think, uh, one is develop relationships before you need [01:17:00] money. Mm-hmm. Um, reach out if, when you're first starting or if you're not raising, reach out to the, and research the investors as well. Mm-hmm. Um, create your, your top list of the investors that you would love to have as partners. And then get to know them, reach out, introduce yourself.

Say, Hey, I'm not funding, but I, I would love to talk with you about my company. Um, give them KPIs for the quarter. And I'm, my goal for this quarter is to hit a hundred thousand in revenue [01:17:30] and to get two new customers. Then check back in after that quarter, follow up and say, Hey, we went out to, we shot for a hundred K, we hit 90 K, but we learned this and we're gonna do this in quarter two.

Mm-hmm. So you show how you're, you know, being diligent, how you're working on a company, how, how they can start to really build that trust, um, so that they can see this person is very intentional. Mm-hmm. Uh, I think as well, um, you know, becoming self-aware, I think as a founder, [01:18:00] uh, one, it can be extremely lonely, but you can also get blinders on.

Um, because you're so focused on what you're doing and, and working on becoming self-aware, um, allows you to see the red flags that you have. Everyone has red flags. Mm-hmm. Every company has red flags, uh, allows you to see the green flags you have and, and more importantly allows you to see the needs that you have.

[01:18:20] Speaker 4: Mm-hmm. So 

[01:18:21] Juan Carlos: that when you go, when you're building that list of, of venture capitalists or angel investors, uh, you know, you can look for not just their capital, but [01:18:30] what doors can they open, what. What investment can they make that's not capital. Mm-hmm. Because like you said earlier, oftentimes that is a lot more valuable Oh, yeah.

Than capital that, that is invested in your company. 

[01:18:41] Richard: Right. 

[01:18:42] Juan Carlos: Um, so I think, I think really those two things, and then revenue, um, nothing speaks to traction, uh, more than revenue. Right. And, and that allows you as well to approach the venture capital table mm-hmm. With some leverage. Um, and say, Hey, you know, there's nothing more attractive, I think, [01:19:00] to an investor than to say, we don't need your money, but we're looking for an investor to be strategic and to help us scale.

[01:19:06] Richard: Right. 

[01:19:07] Juan Carlos: Uh, but we, you know, we're cashflow positive. 

[01:19:09] Richard: Right. 

[01:19:10] Juan Carlos: And, and we can keep building, it's gonna be maybe a little slower, um, but we're looking for your capital to accelerate. 

[01:19:16] Richard: Mm-hmm. 

[01:19:17] Juan Carlos: Uh, rather than pay for payroll. 

[01:19:19] Richard: Exactly. Exactly. Yeah. Cover your costs. And know your numbers, right? Yeah. Yeah. Have you seen that, that, uh, HBO show called, uh, Silicon Valley?

I have, [01:19:30] there's, there's one scene where one of their early angel investors, they were talking about doing some advertising to start making money to become cashflow positive. He's like, no, no, no, no, no. It's, it's like we don't make money, we don't make trying to raise more money in the future at a higher valuation.

It does seem that when you get sucked into this industry, depending upon who you partner with. One investor will invest a certain valuation and then they'll [01:20:00] talk to their buddy and like, oh my God, you should get into this company and, you know, we're doing this and I helped 'em get this far now. And then the valuation will pop up and then they'll start taking something off the table.

And then it's sort of like passing the hot potato. 

[01:20:10] Juan Carlos: Yeah. 

[01:20:10] Richard: And the valuation just gets tossed up and up, you know, not, not because the company's doing great, or it's just the investors are looking to exit. Right. Like, you do this for me, I'll do it for you in the future. Um, uh, I'm not saying that happens, but it sure seems that way.

[01:20:30] Um, so what about those looking into break into the venture capital world? 

[01:20:34] Juan Carlos: Honestly, I, I don't, I think I got lucky. Um, it's right place, right time. I, I'm a very non-traditional path into venture capital. I was in Catholic seminary and then law school, business school startup, and then it was timing for me as well.

Um, I think getting exper, um, a lot of venture firms have these scout programs mm-hmm. Where you can build a relationship with them, show them that you're bringing good [01:21:00] deals to the table, and maybe get on, on board with them. That way you can do a startup and Right. And there's, there's nothing, uh, there's no better experience, uh, or, or way to learn than to just do it and then maybe jump forward.

Um, but yeah, it's, it's a weird industry and how to break in because there's not very many. Right. And I think in the last two years, 3000 firms across the country have shut [01:21:30] down. Shut down. Yeah. And so it's getting smaller and tighter and harder to break into. Right. Um, I'm very persistent and so I would say just continue being persistent.

[01:21:42] Richard: Yeah. 

[01:21:42] Juan Carlos: Um, and, and find a niche as well. That, whether it's an expertise in a particular type of technology that you're looking to mm-hmm. I lean heavily on my being an attorney as well. I can help on the legal aspects. Right. Without having to That's a good partner to have outside counsel. 

[01:21:59] Richard: Yeah. Uh, [01:22:00] and you look at this agreement, lemme know what you think.

Yeah. Um, 

[01:22:04] Juan Carlos: and so finding that niche for yourself. Mm. 

[01:22:06] Richard: Um, 

[01:22:06] Juan Carlos: and, and your, it's your passion as well. Right. Uh, you wanna do something that you love. Um, I, I, this has been one of the favorite things I've ever done. Yeah. 

[01:22:15] Richard: Um, 

[01:22:15] Juan Carlos: is, is be in this space and work with founders. Um, 

[01:22:18] Richard: yeah. That's great. Sometimes I'll get emails asking to be like a, an admin or an intern.

Yep. No, not paid. Just learning, you know? Right. Just kinda break in. I know Blue Venture does that [01:22:30] with Georgetown students. Mm-hmm. They'll bring in three or four every year. Um, but I also tell folks to start investing yourself. Yeah. As an angel investor, you know, whether it be 5,000, 10,000, but join a local angel investing group.

Local, go to meetups like Jim Roberts group here in Wilmington's. Awesome. Right. You can learn how to do pitching, you can learn who the founders are, what capital they're looking for, and who the capital providers are and how to do business and kinda just work yourself in Yeah. From that angle. So [01:23:00] build your own 

[01:23:00] Juan Carlos: little portfolio.

[01:23:01] Richard: Yeah. Small but steady. Yep. Yeah, that's great. So, so looking ahead, um, what's the future for IDF Fund, do you believe? More funds, hopefully lots of big exit box. Six, seven. 

[01:23:14] Juan Carlos: Have you had any access? We have, yeah. We've had, uh. Say May 15, uh, exits over the four funds. What's 

[01:23:21] Richard: your largest on a multiple? 

[01:23:23] Juan Carlos: That's a a great question.

We're waiting in for Pendo right now to IPO. Right. They're in fund three, [01:23:30] and I, I think about every firm, firm in, uh, North Carolina, North Carolina is waiting for Pendo. Um, they'll be a, they'll return the fund and more. 

[01:23:38] Richard: Yeah. 

[01:23:38] Juan Carlos: Uh, which we're excited about. 

[01:23:40] Richard: I, I did write the CEO one time. Yeah. He never wrote me back.

He's started thinking, who the hell is this guy? 

[01:23:47] Juan Carlos: Well, well hopefully big exits. Um, yeah, I, I'm excited about a lot of the porticos and they're very promising, uh, especially in fund four. That's the one I'm most involved in and, and I 

[01:23:58] Richard: most likely another [01:24:00] fund. Are there. Do you see any challenges with returning capital?

'cause I know as a limited partner 

[01:24:05] Juan Carlos: Yeah. 

[01:24:05] Richard: There, you know, a lot of the expectations sometimes is like three to five years, you know, typically is to get your returning capital in something so that way you can reinvest it in something else and compound that. What is your typical timeframe on returning capital?

[01:24:22] Juan Carlos: Yeah, so we, we try and approach it conservatively with our LPs. We say the first five years of our fund cycle is [01:24:30] typically for us, 10, 10 maybe, hopefully not, but typ sometimes 12 years. Yeah. But the first five years we're deploying capital. Uh, we're currently in fund three, still deploying, and then from year six to 10 mm-hmm.

We start harvesting that capital. Okay. Um, if we have an exit before that time, what we typically do is, um, recycle it. Yeah. Um, to increase the size of the fund and, and get into another company. Mm-hmm. Um, but it's typically that's six to 10 year window. Six 

[01:24:58] Richard: to 10. Mm-hmm. Yeah. [01:25:00] Your LPs, that's kinda the expectation they have is six to 10.

[01:25:03] Juan Carlos: Yeah. Closer to the 10. 

[01:25:05] Richard: Got it. Especially right now. Yeah. It's hard. I mean, I'm involved in a few funds and a lot of the LPs are screaming because they're like, I need a return to capital, you know? Yeah. So it's, it's because you, you get locked up right's. Not like, it's not like putting your money in Google or Microsoft where you can just go to the market and sell if you need to buy a car or buy a house or whatever.

You know, you, when you have expenses, you, you look at certain private equity, real [01:25:30] estate, public markets, and that money's locked up, you know? Yeah. And 

[01:25:34] Juan Carlos: it's kind of rocking a hard place for the venture capitalists as well, because you try, you wanna raise another fund as well. 

[01:25:40] Richard: Yeah. 

[01:25:40] Juan Carlos: But if you're not giving your capital back to your LPs 

[01:25:43] Richard: Yeah.

[01:25:43] Juan Carlos: Then you have to find new ones and it just get, it's a challenging, yeah. Challenging place to be. 

[01:25:47] Richard: Can, can you mention your, your fee schedule? Are you two and 22 and 22 and 20? Mm-hmm. And that's, that's another problem is that sometimes the LPs, 'cause you're, you're, you're taking 2%. 

[01:25:58] Juan Carlos: Right. 

[01:25:58] Richard: You know, so the, the [01:26:00] longer and duration of your return on capital, your lower your IRR marks.

[01:26:05] Juan Carlos: Right. 

[01:26:06] Richard: So that way when you do run a, raise a fund in the future, they look at the industry standards like, why did you only return 25% IRR, you know, well, it took us 12 years. Yeah. But you know, if you sold in six years, it'd been like 45 or 60% ir like Yeah. But, you know, it just didn't work out that way. Yep.

So that, I think there's a dichotomy there also, for sure. And try to be creative [01:26:30] and looking at, at raising a fund for Cape Fear, um, I'm looking at different models where we have no fees, like a shared fee model. Um, you know, blue Venture has something very similar where you put your money in, but there's a required minimum we have to deploy per year.

Um, you know, some, it's like, for example, you, you either. You can raise capital, committed capital, and then whatever the fund invests, they'll do capital calls. Right. And you're, you're married [01:27:00] to their investment strategy. Whereas some, you can kind of have a hand and say, okay, we have this company skill maker.

Yep. You know, we're gonna put, you know, 200 k of the fund and we're gonna do a 500 K sidecar. Right. And if you want to, you know, and, and I've had one lav Rock ventures out of Virginia, which you, you'd love Steve Smoot, you know, and another guy I introduced to, but they do sidecars and, and like. Every deal.

They have a sidecar, [01:27:30] I double down. Mm-hmm. You know, so then there's an exit, but then it's like you get 

[01:27:33] Juan Carlos: Right. 

[01:27:34] Richard: You know, and by the, by the first exit, I already paid myself back for what I had in the fund beginning. Yeah. You know, it's like, oh, this is great. Yeah. So 

[01:27:41] Juan Carlos: it's like, and that, that's similar to, to idea fund.

So we, when we invest, at least in North Carolina and Virginia, we typically invest outta three, three vehicles. Right. Yeah. The, the state vehicle where they're essentially the only lp 

[01:27:53] Richard: Yeah. 

[01:27:53] Juan Carlos: Our general fund and then our, we call it a co-investment fund. Yeah. Um, so these are LPs that can [01:28:00] double down on their investment or they, or non LPs that pay annual, like membership fee.

[01:28:05] Richard: Yeah. 

[01:28:06] Juan Carlos: Um, and they typically end up about doubling the size of our investment. 

[01:28:09] Richard: Yeah. 

[01:28:10] Juan Carlos: Um, which is really nice. 

[01:28:11] Richard: Yeah. 'cause it gives you, it gives you a bigger foothold into the company, which more powder, more chances of success. 

[01:28:18] Juan Carlos: Exactly. Mm-hmm. 

[01:28:20] Richard: That's awesome. Well, this has been great. I appreciate it. So for founders looking for your information, how can they submit their information to you?

[01:28:28] Juan Carlos: Yeah, they can email me, uh, [01:28:30] Juancarlos@ideafundpartners.com. Uh, also connecting on LinkedIn as well, um, works, um, Juan Carlos Pacheco, um, Idea Fund Partners 

[01:28:40] Richard: and we'll have your information in the podcast. Perfect. Uh, info so people can hit it as well. But no, this has been awesome, man. Yeah, this has been great, Richard.

Thanks for having me on. I really appreciate your time. Absolutely. And you can know you better. 

[01:28:50] Juan Carlos: Yeah. Excited for the, uh, skill Maker run together. 

[01:28:53] Richard: Let's do it. I'm excited. Alright. Thank you. Thank 

[01:28:56] Juan Carlos: you.

[01:28:59] Christa: [01:29:00] Amplified. CEO is produced by Topsail Insider, edited by Jim Mendes-Pouget, and sponsored by Cape Fear Ventures. For more information about Amplified CEO Richard Stroupe or Cape Fear Ventures, please contact Christa at (910) 800-0111 or christa@topsailinsider.com.