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. Joining me today, we have Nick and Shaw from Front Porch. He has either volunteered or gotten forced by the other two partners to be on our illustrious selection committee for Tweener Madness. Nick, and thanks for joining us and thanks for doing this.

00:01:21 - Speaker C
Yeah, thanks for having us, Scott.

00:01:24 - Scot Wingo
Yeah. So you guys have a fun story, so walk us through the origin of Front Porch. Yeah.

00:01:30 - Speaker C
So Front Porch, we started in 2020. Joe, Greg, Joe Mancini, Greg Bortes and I all went to business school. So that's how we all know each other. We grew up in the Southeast. We have been here for many years and been investing kind of angel investing. Having grown up in North Carolina, saw the opportunity to invest in startups, kept on hearing the same thing, There's a lack of capital. And so we saw a unique opportunity in 2018, 2019 to bring a more institutionalized kind of hybrid fund structure to investing in startups and both meeting the needs of investors as well as meeting the needs of startups and entrepreneurs. So Front Porch, we're a hybrid venture fund focused in the Southeast. Hybrid being we invest 50% of our capital into other venture funds across the region. And then the remaining 50% we invest directly into startups in a non lead position. But we always look for a lead investor into those companies. And for us, the southeast is Washington D.C. down to Florida, as west as Texas, not including Texas or anything against Texas, it's just this is the region where we believe there's tons of opportunities for startup innovation as well as for investors to make top quartile returns.

00:02:59 - Scot Wingo
Got it. And you guys are on fund two. So fund one, I imagine, was kind of that 2020 kind of fund, correct?

00:03:06 - Speaker C
Yeah. So fund one, we did a pilot fund of 5 million, set out to raise 3 million, end up raising 5 across 71 investors across the nation through our own network. Greg went in full time into the business in 2021 to close up fund one and to launch fund two, which was a $20 million vehicle. Started to invest, started to raise that in end of 22, and we finished raising that in April 2024. And so we're actively deploying our second fund and we're in current discussions to, you know, go out with potentially our third fund in 25.

00:03:45 - Scot Wingo
Nice congrats on that. People may not realize, but you did fundraising probably during the historically, hopefully in our lifetimes, worst time to raise funding. So if you can do that, you can do anything.

00:03:55 - Speaker C
Folks, folks always ask us, how did we do it? You know, again, it's a blend of. We've built. We're. We're fortunate and grateful to have built many good relationships both in the Triangle in the region, as well as kind of from our broader networks outside of the region over the last 20 years. And then we also put our own capital. Right. And so as starting a new fund, it's a lot of. It's based on investment strategy and trust and we're very grateful for our investors to put that trust in us to support the growth of entrepreneurs and startups across the region.

00:04:33 - Scot Wingo
Yeah, very cool. And then you guys are always very supportive of startups and part of a big part of the ecosystem, which we share a lot of DNA in that regard of. You know, there's always a financial aspect to this, but if you don't kind of support the community, then. Then what's the point?

00:04:47 - Speaker C
No, 100. 100.

00:04:48 - Scot Wingo
Yeah. Which. So you're from. Or you're from the Triangle. I can't remember exactly where you're from.

00:04:54 - Speaker C
Yeah. So I grew up in Cary, North Carolina, in here since the 90s. My family moved down from Connecticut. That's where I was born. But been grew up here in the Triangle. Went to high school here, undergrad here, grad school here. Yeah, yeah.

00:05:09 - Scot Wingo
And you're a dookie, right?

00:05:12 - Speaker C
We. That's where I went to grad school.

00:05:14 - Scot Wingo
Yeah.

00:05:15 - Speaker C
I went to Carolina for undergrad. So bleed Carolina Blue through and through.

00:05:20 - Scot Wingo
Got it.

00:05:21 - Speaker C
This past weekend was a tough game, but yeah.

00:05:23 - Scot Wingo
Yeah. At least one of your Tim teams wins. You probably don't consider it that way, but yeah. And then Joe is From, he's from here too, but Greg is from somewhere else. Is that right?

00:05:34 - Speaker C
Joe grew up in Virginia. Virginia. I think I forget if it's a 8th, 9th or 10th generation Virginian went to UVA for undergrad and then Greg grew up in Kentucky, didn't go to school there, but he's a die hard University of Kentucky basketball fan and went to NYU for undergrad.

00:05:53 - Scot Wingo
Yep. So you guys will understand this whole March Madness theme we're going with for sure. Not, not, do you guess? And the hybrid thing's really interesting. So you know, so for folks that don't realize. So you, you know, half of what you do is you're an investor in other funds. Right. So and they're, they're also in the southeast kind of window. And then the other half is in companies. Sometimes when firms do that, the companies have to be in the portfolio of the LPs they've invested in of the other funds. Do you guys have that rule or you have some independence where you can kind of go and, and invest in the companies individually?

00:06:30 - Speaker C
Yeah, great question. So on the fund side in fund two, it's a portfolio of, you know, 17, 18, up to 20 funds we're going to be investing in. These are kind of in our opinion based on the time frame and the vintage category. Leading funds predominantly in the seed will go up to series A and a little bit of growth equity, but it's across tech, deep tech, healthcare, life sciences. And you are correct. So we're an institutional LP into those funds and our goal and vision is hopefully we can be a major investor and anchor investor into many of these funds kind of in the future. We then leverage those relationships, but then many others we sit in this unique position of both being a GP and an lp and so we harvest those relationships to look at a bunch of our direct deal flow. And so for us in Fund 2, it's probably going to be close to 30 companies on an annual basis. We're looking at thousands of companies and narrowing down and you know, we've been averaging about 10 to 12 investments a month. I mean, sorry, a year to, you know, curate our full portfolio.

00:07:42 - Scot Wingo
That's actually a lot because your typical fund will do, you know, three or four a year. They'll do that in the life of the fund right over like a, you know, a five year invest period. So that's pretty, pretty, you know, we do it in a quarter. But for most, most folks that's like a pretty aggressive cycle that you're on.

00:08:00 - Speaker C
Yeah, 100% and, and what we feel and have found thus far over the last five years is, you know, we're sitting on a pretty curated deal set of deal flow where you know, many venture funds, they're looking at thousands of deals. They're picking one or two of those companies or three companies in a year for front porch. We're seeing that, but across the many funds that we're invested in as well as we're friendly with. And so we're seeing this highly curated set of portfolio. And, and part of it is, look, venture is, is one of those industries you're investing five to 10 years out. You know, there's a lot that can happen having been an operator in my prior life. And, and as you know, as an operator.

00:08:43 - Scot Wingo
Right.

00:08:43 - Speaker C
There's, there's many things that couldn't go wrong, both internally, externally, macroeconomically, et cetera, that you just don't know. And so that's kind of why we believe in, you know, diversification and increasing the number of companies that we have exposure to.

00:08:58 - Scot Wingo
I'm extremely biased, but I think that's a genius move. There's actually an article I need to send you that had did some math on that that you'll enjoy. Yep. The, you're more of a math person than I am. You'll understand it more than I did. It did Monte Carlo, they did Monte Carlo simulations and I tap out at Monte Carlo simulation, simulation. So it feels too NBA for me. So, you know, you guys have only been at it for, for, you know, and the, the sad thing about the weird thing about this venture, I think concept is when you, you know, it takes 10 years to kind of know if you're right. So some of these questions, you know, maybe not be relevant. So sometimes I'll ask like your biggest win and that kind of thing. Have you guys had the opportunity to have any kind of big wins at this point or still a little too early?

00:09:43 - Speaker C
Yeah, I mean, I would say it's still too early. I mean we've seen some positive movement. Many funds, the way they do their valuation, I would say they mark up based on either a third party round or based on revenue growth. Much of our portfolio, we've been, you know, a good number of companies we've invested over years and so we see significant revenue growth in several companies. And then we've had a few exits, both our funds, some of they've had some portfolio companies that have exited and then we've had an exit recently in our fund, one with a local company, Biospatial, you know, it was A good exit. And look, you know, it's each one of these, you, we underwrite these companies to a minimum 10x on the direct side and you hope for the best and you support the entrepreneur, whether it's strategy, whether it's introductions to customers, whether it's finding a good talent. And so again I would say from a big success, it's still too early but there's many companies that we're very excited about.

00:10:51 - Scot Wingo
If I'm a first time founder, help me unpack that. We underwrite to 10x. Like what, what's that mean?

00:10:57 - Speaker C
Yeah, so what we mean is when we invest into a company, we look at the entry valuation, we look at kind of, we hope that by the time we exit the company we will have returned 10 times the amount of money we've invested into that company. We understand ideally in the initial rounds of the company we're going to continue to invest our pro rata share, so our given percentage to maintain the percentage ownership in a company. And we may also invest beyond that if we're very excited about the company and its trajectory. With that said, it's, we have a limited pool of capital and so we're having to make decisions in terms of which company to continue to support. But then we also have the ability to spin up what's called special purpose vehicles, SPVs to go beyond what the fund can invest in. But at the end of the day we're looking at, you know, returning 10 times the amount of money that we invested, recognizing we're not going to rec, we're not going to return, we're not going to receive 10 times the investment across our entire portfolio.

00:12:14 - Scot Wingo
Yeah. So, so it's up to the founder to convince you that there's like a 10x opportunity as part of their, their pitch. Right. And, and then you guys go do the work on, you know, the valuation. So if they've, if they've priced it at randomly 100 million and you're like, well there's no way someone's going to buy this for a billion in our time frame. That's, you know, so valuation matters, the size of the market, possible exits are all kind of an important factor as you think about this as well as dilution.

00:12:38 - Speaker C
Right. Assuming we invested million, just using your example, you know, assuming we invest and there's no other money raised ever again in the history of that company, then yes, simple math, returning for them, exiting at a billion, we would essentially be have a 10x return. Yeah. But if there's subsequent rounds of funding and we don't participate, then we assume that that exit needs to be much larger.

00:13:07 - Scot Wingo
Yeah. Okay, cool. And then when you guys do direct, you mentioned deep tech and you know, are there any categories you won't invest in? It seems like you have a pretty broad spectrum when you do.

00:13:18 - Speaker C
Yeah, we have a pretty broad, I mean I would say on the direct side we won't do direct kind of therapeutics or biotech, just the amount of capital that's required. But we do have exposure to biotech through our fund partners. So firms like Hatteras and Fund 1, KDT and Fund 2 are firms that, you know, we, we've continued to support and kind of like the work. So we like the exposure. But given our, given our broad mandate on the direct side, we just cannot create a diversified enough portfolio. And our dollars in fund two, our average initial check is 200,000, whereas a biotech at that stage is raising, you know, three, five, $10 million minimum. And so for us it just didn't, doesn't make sense.

00:14:07 - Scot Wingo
Yeah. With a 200k check, I imagine you're focused on kind of that pre seed seed, kind of pretty early stage pre seed seed.

00:14:14 - Speaker C
We've gone, you know, in healthcare, broadly healthcare, I would say it's, we're finding it hard to invest at the pre seed and seed. There's a lot of stress in the healthcare industry from my background. And so what we're, we're, we're investing in those companies a little bit later. Call it seed plus or early A. Yeah.

00:14:37 - Scot Wingo
So cool. You've probably seen, I don't know how many, but even though you've been at this kind of five years, you've probably seen hundreds if not thousands of pitches. Any tips for some of our first time pitchers? Pictures on, you know, what, what to do and what not to do?

00:14:54 - Speaker C
Yeah, one is, look, it's, it's showtime. And so I would just say have a lot of passion and in your pitch, drink coffee if you need to drink coffee. Dress nicely. And so certainly first impressions matter a lot and be excited about what you're pitching. But beyond that, I would say, I mean, you know, we think about business building as, you know, a company solving a key problem. So make it very clear in terms of what problem are you solving and then make sure you're articulating why is your team the best team to be solving that problem and why is this your life's work? If you can convey those two things, you'll likely get a second meeting.

00:15:44 - Scot Wingo
Cool. Does it work with your firm where you kind of pitch one of you guys and then you guys have kind of a meet the whole team kind of a situation.

00:15:52 - Speaker C
We do. Yeah. So for Front Porch, if it's healthcare, I review all our healthcare deals. If it's tech, traditional tech, or ad tech, or sales and marketing type tech, Joe reviews those. If it's more data analytics or fintech or prop tech, then Greg reviews those. Initially, once you have an initial pitch with one of us, if we like it, we'll typically get we will request access to a data room to be able to dig in deeper. If that initial review seems positive, then we'll invite the founder, the executive team to pitch the remaining partners and then we'll kind of go through additional diligence and then we'll kind of get to a decision. And for us, it's all three of us. Even though we have our specializations for our decisions, all three of us have to say yes.

00:16:50 - Scot Wingo
Got it. And if people want to learn more about Front porch, go to frontporchvp.com also, you guys are pretty active on LinkedIn, so, you know, follow Greg, Nick and Joe Mancini the any last tips or things that you would share with founders that are entering the contest?

00:17:10 - Speaker C
Yeah, no, I mean, again, we appreciate founders. Having been a business owner myself in the past, it is tough. And kudos for taking the plunge to starting something and building something. It can be very rewarding whether it's a success or not. It's just that process of building a team and working towards solving a key problem is always fun. So keep up the good work.

00:17:37 - Scot Wingo
Awesome. Thanks, Nicken, and appreciate you taking time to do not only the interview, but to be one of our selection committee members. It's going to be a fun. Probably a little messy in the studio, but we'll figure it out and it's going to be a fun process.

00:17:49 - Speaker C
Nope, we're excited. Thanks for thanks, Scott and Tweener for hosting this challenge.

00:17:54 - Scot Wingo
Absolutely. We'll see you live in the studio.

00:18:01 - 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.