Triangle Tweener Talks

00:00:04 - Announcer
Welcome to Tweener Madness, the high stakes startup showdown where eight promising companies go head to head for a $25,000 investment prize from the Triangle Tweener Fund. But before the competition kicks off, let's meet the people making the tough calls. The judges. In this special Meet the Judges episode, we're sitting down with the investors and industry leaders who will be asking the hard hitting questions, evaluating the startups and ultimately deciding who moves forward in this bracket sty competition. Each round, three judges will vote on which startups advance leading up to the finals in early April where one company will take home the top prize from the judges. You'll hear about their backgrounds, what they look for in a winning startup, and maybe even get a little inside scoop on their decision making process. So if you're a founder looking for investment, an entrepreneur curious about what investors really want, or just someone who loves a good business battle, you are in the right place. Let's meet the judges. Here's your host, Scott Wingo.

00:01:06 - Scot Wingo
Hey, it is David Gartner, one of our illustrious selection committee members for Tweener Madness. Dave, we appreciate you doing this.

00:01:16 - David Gardner
Happy to be here, Scott.

00:01:18 - Scot Wingo
Yeah, the. I want to get you on the podcast to tell your option real story because you've, you've lived basically, you know, at least two lives I'm aware of. I'm sure there's stuff even before them that's fascinating. Um, but for today, let's talk about kind of putting on your, your investor hat. You know, share for folks a little bit of background of who you are, how you came to the Triangle and then you know, what your investment activities have been as an angel investor and then like an institutional investor.

00:01:48 - David Gardner
Sure, sure. Well, I started off, I grew up in Virginia and did a, my undergraduate was in philosophy. Then I came down to the Triangle to Wake Forest to do a master's of theology and dead languages. So taught dead languages for a while. Then I found my way over to NC State and I almost finished a Master's of information science degree there, but decided that I should make payroll rather than homework a priority and started a software. My first company was really more of a software services company. We wrote custom software and built that up to a couple hundred developers and then started realizing that product is where the magic happens, not services and start spinning out commercial products. Eight companies later, my wife suggested that I shouldn't start another company if I wanted to stay married. And so I became a free coach to startup entrepreneurs, just started helping them out and supporting different entrepreneurial initiatives in the area. And one of the things I quickly learned is they need more than advice. They need capital. And so I started writing checks. I wrote four or five million dollars worth of personal checks. And several of those companies did really well. And I seem to have a nose for picking out good value props and scalable models. And so other people asked to invest with me. And in a matter of a couple of weeks, I had raised my first little $12 million early stage B2B SaaS fund. And that led to a $31 million fund. And now we're into a third fund, which is a $50 million fund and have a full team. And we actually seem like we know what we're doing now.

00:03:39 - Scot Wingo
Yeah. So that fund is called co founders Capital. And your first one was. Let me make sure I get this right. Your first one was 12 million. And then what year was that?

00:03:49 - David Gardner
2018.

00:03:50 - Scot Wingo
2018. Okay. And then this fund two was 31 million. And that was 2021.

00:03:59 - David Gardner
Yeah. Something.

00:04:00 - Scot Wingo
I think so. Yeah.

00:04:01 - David Gardner
Yeah. Actually, I'm sorry, it was 2015, I think.

00:04:05 - Scot Wingo
Yeah. Okay. And then second fund.

00:04:09 - David Gardner
Yeah. About every three or four years, you start a new fund. It takes. You have to deploy the capital from the first fund. You don't have to exit them all, but you do have to have the portfolio, all new investments done out of a fund before you start the next one.

00:04:23 - Scot Wingo
Right. So you guys are on fund three. And you've grown, you know, 4x since you started, which is awesome for folks that don't know co founders. Kind of the today iteration. Fund three. What's the. You said the fund size is 50 million. What's the sweet spot, sir? You guys, what stage of company geography, if that's interesting category. And how much do you guys look to invest?

00:04:50 - David Gardner
Yeah, our thesis hasn't. Well, it's expanded somewhat.

00:04:54 - Scot Wingo
Geography.

00:04:54 - David Gardner
It was just the triangle with the first fund. Then we realized that as your fund gets bigger, you need a little larger geography. So it became more of all of Carolinas. And we had a few investments outside of the Carolinas, but then it's the entire southeast for our third fund. So our geography is southeast. Very early stage B2B SAS software. We do pre revenue investments, which is unusual. One of the few people around that will. That will write checks at that stage. Our first checks, about a million one to 1.5 million. And then we generally reserve one and a half to two and a half million for the company, depending on the model.

00:05:35 - Scot Wingo
Got it. And so no consumer.

00:05:39 - David Gardner
No, We've done some B2B to C, but you know, all of my startups were B2B and I really respect people who can do B2C but you know, we're into demonstrable value props. You know, something you can give a C suite executive, they look at it, they get it, they're going to pay us 100 grand a year and save 5 million. Something else goes on in the consumer space. It's got to be cool and trendy. And I've never been any of those things, guy.

00:06:13 - Scot Wingo
Yeah, I'm sure your kids would agree with that as they. The kids are savage. How about. So within the realm of B2B, are there any categories you won't do? Like, will you guys do devices or drugs or anything like that? Or on the other side, maybe there's certain categories like a lot of people are kind of negative on. Maybe ad tech and Martech, sales tech. Anything directionally like that you can share.

00:06:44 - David Gardner
We're in ad tech companies. You know, the great thing about software is it puts you in every industry if you want to be. But we tend to gravitate towards things where one of me or my partners, my partners and I are all entrepreneurs. And so if you think about Toby, you know, he did shoebox and I've done edtech, I've done manufacturing tech. Toby and I have both done fintech. We have did a lot. One of my startups, ProviderLink, was in healthcare tech. So those are the industries where we kind of understand the continuum. Some things we wouldn't do. I wouldn't do crypto, I wouldn't do security. We see a lot of great Internet security plays, but it's just not a technology or an industry that I understand very well. So we tend to stick with things that we. That one of us has started a company in that space and so we.

00:07:51 - Scot Wingo
Kind of know it kind of the hot thing right now is AI. Any. Any interest in those or just kind of keeping an eye on it for now?

00:08:00 - David Gardner
Well, everything is AI, you know, I mean, we don't really see a plan. It's no longer a differentiator. It's the price of admission. If you're not using AI, your software just isn't cutting edge in the B2B space at least.

00:08:14 - Scot Wingo
Yeah, cool. And you guys, for those that have been reading the Tweener times, you guys have had just like a, you know, a lot of exits here lately. So congratulations on that. And I'm a full disclosure, I'm an LP in fund one and two. The what's been your most successful exit? And this can go back to you Know, when Dave Gardner was just writing checks as well. Like what, when you think about, you know, the most successful, what are, what are like two or three, just give people a flavor for, for what that looks like.

00:08:42 - David Gardner
Well, you know, I mean, I made more money as an angel investor personally. This is a labor of love, Scott. It's getting people. If people get involved in investing in startups and they make money, entrepreneurs win, investors win and everybody wins but the government, because our Companies are typically 1202 and so we don't pay taxes, you know, which is another incentive, you know, for early stage investing. But I had, I made, tend to make more money, I mean back all the way back. One of the first deals I did was Filter Easy, which you probably know, Thad and Kevin, but I put a couple hundred K in that company and made over 5 million and, and still have like 10% of my equity there. So in the fund I'm maybe, you know, I was 10% of the first fund and maybe half of that in the second fund as an LP personally. So instead of getting 100% of the return, like when I was an angel investor, Now I'm getting 5% or 10% personally of the return, you know, so it was more lucrative for me to do my own thing, but it wasn't very scalable. I could only do one or two companies a year and really be hands on involved in that company. So what I do now, I make less money, but I do a lot more deals and involves a lot more people. And it's really nice to have partners that carry a lot of the load and they've been great. I'm blessed with, really with partners who are way smarter than me, which is always a good thing.

00:10:18 - Scot Wingo
Yeah. Okay, so we've got Filter Easy and then you guys, I think element 451 would probably be on up there in the. Mount Rushmore. Mount Rushmore of CO founders.

00:10:30 - David Gardner
Yeah, it was good.

00:10:31 - Scot Wingo
Yeah, that was a good one. It was good.

00:10:33 - David Gardner
We put I think total of a couple of million, maybe two, two and a half million into that company. And so that was, you know, many, many multiples. You know, on our money we made, I can't remember exactly right offhand because we left some money in the company but the highest multiple we've done was the Biospatial exit last month. That was, I just could not believe the, the multiples on that. Yeah, but they had proprietary data which is, which really is a game changer if you look at your typical growth rate versus, you know, recurring revenue. If you've got proprietary data and you throw that in, it just, it's like putting yet another multiplier on all those numbers.

00:11:21 - Scot Wingo
Yeah. In the AI world, the proprietary data is the, it's the gold dust. Right. So it's the, it's the new network effect that we used to talk about 10, 15 years ago. Cool. Any. So a lot of people keep an anti portfolio. So the things they said no to any. Anything on the Dave Gardner anti portfolio?

00:11:41 - David Gardner
Well, we say no. We get, you know, I get a dozen plans a day, so I'm saying no to almost all of them every day. If I get two a week that I want to do a deep dive on, that's a good week. But we always try to help, I always say find a sophisticated investor who tells you no and tells you why that's the best thing that could happen for your business because you keep going back and iterating on that until eventually. And some of our best deals were entrepreneurs that I said no to for a year. Then they came back and I couldn't say no anymore because they had overcome all of the objections. And so it's, you know, we, we say no a lot. But no can be a good thing. Yeah.

00:12:27 - Scot Wingo
Yeah. How about, you know, some people keep a list of the ones they missed that did really well that they should have said yes to. How about. So, for example, did you get a shot at Pindo? I think you guys started post Pindo.

00:12:38 - David Gardner
So maybe we were about six months. I started my fund about six months after Pindo. So they were too far along by the time I got, by the time I got in there. But I got. I think you're going to see big exits from companies like Valytic, you know, which is. I was one of their very first investors. I was number one. Mark Cuban was number two investors in that. And I think that's going to be a really nice exit here in the triangle. I have no inside information. I'm not on the board anymore. But I'm looking at the people around the table and how long they've been in and I'm imagining that there could be an exit in our near future.

00:13:18 - Scot Wingo
Yeah. Cool. So I don't know how many pitches you've seen, but it's a lot, certainly high hundreds, if not into the thousands. So for the folks that are considering entering this contest, what pitch advice would you give to early stage entrepreneur?

00:13:34 - David Gardner
Yeah, well, I mean I've written articles on this. Your pitch deck. Start off with what it is and why you should care. You know, we build this which solves this problem. And these are the value talk. In terms of value props. No one really wants your technology. It's about the value props that that technology provides and then just cover all your bases. You know, what's, what's your secret sauce? What makes you different from other people trying to solve this problem, you know, and what about your team and what's your exit strategy? And those are just their components that need to be in every pitch deck. But in a short term format, you really got to hit those quick and concisely. When I work with a company on their decks, they usually start you've got 40 slides. By the time we're done, they have like 12 or 13. But they become very concise, very articulate in how they express things. I always say the more you say, the less valuable everything you say is. So don't devalue the good stuff with a lot of yeah, yeah.

00:14:44 - Scot Wingo
Get to the meat and potatoes of the whole matter.

00:14:46 - David Gardner
Yeah.

00:14:47 - Scot Wingo
Awesome. Well, we appreciate you doing this and look forward to seeing how you the questions you ask some of our contestants and how you think about judging them as we get into it. Thanks for doing this and look forward to seeing you.

00:15:00 - David Gardner
Great talking to you, Scott. Anytime.

00:15:07 - Announcer
That's a wrap on this Meet the Judges episode. Now you know the minds behind the decisions, the investors and industry leaders who will be putting these startups to the test as Tweener Madness kicks off. They'll be asking the tough questions, making the tough calls, and deciding who advances in the bracket, all leading up to the finals in early April. Make sure you're subscribed so you don't miss a single matchup. And if you want to follow along with all things Tweener Madness and the triangle startup scene, head on over to tweenertimes.com also, if you're thinking about launching your own podcast or want to bring professional production to your brand, check out earfluence.com the competition is about to begin and we'll see you soon in the next episode.