Changes in VC landscape over the past 20 years. By Steve Miller

And today's a guest speaker have Steve Miller founding partner at origin Ventures. He started urging Ventures 22 years ago. So, in this episode will mostly talk about this transition that he saw in DBC fields over these 2002.

Here's where it was in 2000, where it is right? Now, in 2021, so, Steve, let's get off by you giving us some background on yourself and on origin Ventures.

Thanks Constantine, it's great to be here. I appreciate the opportunity to participate with you here on on this great podcast.

So, I actually grew up in.

I grew up in a family business.

My dad and my uncle started a company in 1956.

That was a male loader office supply business.

Where catalogues were printed and mailed out to small and medium sized businesses.

To order office supplies from, and the company grew over 42 years.

To become quite successful, and I was fortunate enough to to grow up.

As the son of an entrepreneur and the nephew of an entrepreneur, and to really deeply understand and appreciate how.

How challenging it is and how wonderful it is and how much hard work.

It takes and all of the pluses and minuses of of being an entrepreneur. I was able to.

To view that and be part of that through my.

My dad's and uncle's family business and I worked there, um, during high school and college, during vacations from those from school and then after I graduated from the University of Illinois in 1987.

I went back to quill full time. Quill was the name of the company. And I worked there for 10 years.
After college a number of operating roles.
I moved to Canada and ran our distribution Toronto.

Came back from there and had P and L responsibility for a 30M dollar product line. And while I was doing that in the mid nineties, the Internet started to bubble up into.

Public consciousness people started to use it for business and I wrote the business plan for quills 1st website.

And 95, and then I managed the team and executed it over the next couple of years, took it to 15M dollars in revenue.

On our website that quill, which was really still only a small percentage of quills overall revenue at the time, which was mostly still being done.

Via the 72M printed catalogs that got sent out, but staples staples came calling and was interested in acquiring quill.

And so our family sold it to them at that time. In 1998.
And that is when I began this journey and Co founded origin dentures.

Nice. So yeah, let's start there. Let's start in 99 needs and then transition straight to 2021 with the major transition in the VC field that you saw. So, what's the major difference being every seat back then and being ABC right now in 2021.

Well, I would, I mean, there's several, I think.
Um, 1st of all, I'm based in Chicago and the startup eco system, entrepreneurial ecosystem and. And the sophistication and quantity of funders in Chicago, and in the Midwest.
Is much different now than it was back then much more of a developed echo system.

There are companies here in Chicago, for instance, grub hub is 1 of them, which, and we happen to I mentioned that on purpose, because we happen to be the 1st investors and grub hub. So that is a Chicago success story.

A company that started in Chicago, got seed funding from us in Chicago continued to grow significantly got growth funding from Benchmark, which is a Silicon Valley venture.

According in Chicago, and had a great exit, and now it was a New York Stock Exchange company still headquartered in Chicago. So that's 1 of many examples of Chicago based companies.

That didn't exist 20 some years ago when we started origin Ventures and.

And that's just 1 example of how, at least in Chicago, how venture capital in the entrepreneurial ecosystem have changed.

Just overall in general, another example of how things have changed is the, the size of funding rounds.

Um, so a series a back then may have been a 1M dollars or a couple 1M bucks. Now it's, it's, you know, 2 times that size and, you know, 1 reason for that is because startups can bootstrap themselves into a.

A much stronger position now than they were able to back. Then back, then you needed to rent office space and why servers? And I'm making a a number of.

Of thing, a number of investments, early on to try and get to revenue.
Uh, where now you're able to grow in a much more.
Significant way with much less capital and on and therefore.
Uh, when you're ready for a series, a, these days, it's a much more significant sized 1.

Sure Trisha very good. Point there. And yes grub hub is a super interesting topic for discussion. So let's talk about it a little bit more. So you were the 1st investor in this union corn company word there's some.

Party killer, you know, green flags that told you this company is gonna be important or was it just, you

know, he liked the team and you were like, okay.

I'm pretty sure these team will create something good. Well, I, it's it's a combination of our number of things. We loved the team.

Matt Maloney, who happens to could still be the CEO of the company even to this day and it's a.

Multi 1B dollar market cap company on the New York Stock Exchange and Co, founder of the business with Mike Evans and the 2 of them were terrific. Founders. Really? Smart folks really interested in.

In growing the business and really they were coachable wanted to learn, but also knew a heck of a lot and wanted to surround themselves with with great people. And they built a great team.

And built a great company, and, you know, listen, everybody, grub hub, delivers food. Everybody eats multiple times a day. So the use case the use cases isn't hard to see in in.

And so obviously the addressable market was very large and very fragmented back then there were there was no dordash. There was no Postmates.

And so it was a green field sort of marketplace.
And when we invested it was 5 employees all in a tiny in Chicago.

The entire, the entire platform of Broadcom had 100 restaurants on it again, all in Chicago and the investment that mean that we made was to take them to allow them to open up their 2nd, geographic market.

And continue, they continue to grow that way, continue to learn from each market. They opened up. And they they grew a tremendous business and.

Made a, a, a very nice exit, very successful exit for us at Orange adventures and for themselves and for their other investors, and for the city of Chicago and.

And it continues to be a great company.

Right. It sounds like a very much win, win, win, win situation where absolutely everyone involved in this venture was in the win position. So that's absolutely tremendous. Absolutely. Love this story.

So, let's talk a little bit more about, you know, creating unicorns and especially now, creating something new something in a field. That was basically entourage, as you said, Greenfield. So, a lot of star founders are asking you. How should I present myself to investors?

When I'm trying to create something you create basically new market, or tried to disrupt an old 1. so, how can they present themselves to be as attractive as grub hub did back in the days?

Well, I think that that 1 thing they can do is to gather as much data as possible.

Be able to the, the more a founder and our team of founders is able to back up their assumptions about the size of their market and about their pro forma financials.

The more than able to back up those assumptions with real data with real experience.

Um, the, the more likely an investor is gonna be able to look at that and say, yes, I want to invest in in this business because the case that you're making based on.

On real data backing up, your assumptions is is a good case.

That's a much more basketball business, a much more fundable team than somebody to just say well, we, we know we know this business is here. We know the addressable market is huge. We don't quite have the data.

We don't know how much it's gonna take to cost to acquire a customer. We don't know what the lifetime value isn't a customer. We just know.

This is a huge market, and if we only get 1% of it will be a big company. That's not that's not really a a fundable situation.

Sure, I've actually seen this so many times when, you know, they just present a huge, huge, total addressable market, and they're like, oh, we're going to acquire point 5% and here is our revenue and, like, come on how exactly. Are you going to acquire that point?

5%, that's the key question. Conferencing.

How are you going to do that? Because chances are there's more than 200 other companies. If it's such a huge market, there's probably more than 200 other companies to address it and they can't all get point 5% of the market.

So, you know, it's a.

During data and understanding and being able to present.

Here's what Here's our assumptions. Here's the data underlying those assumptions.

Uh, Here's how we're going to execute on on that. Here's and here's why we're the team to do it.

Perfect outline. Perfect outline.

So let's talk a little more about the topic that I recently started discussing with my speakers,

which,

as,

you know,

the future post,

covert,

slash,

current specifically investing in the United States,

and being a local versus being all over the United States.

So, you've been investing all over United States even before they hit.

Why is that? Yes, so we define our geographic strategy as between the coasts. We're not the 1st ones to use that term, but it does apply to us.

Uh, occasionally we will make investments in Silicon Valley and in the Boston New York area, but the majority.

Of our origin Ventures funds are deployed in places like Kansas City and Chicago and Salt Lake City and Pittsburgh and D.

C and Minneapolis and we started to make some investments in Toronto and other markets like that.

Um, there are these are underserved, generally underserved by venture capital, but they have great teams really smart people many times.

They're, they're, they're around major universities with great engineering and or business schools. These are teams that are working on solving big problems and and they're in big they're tackling big addressable markets.

And that's a, it's an opportunity for investors like us because many times they're overlooked by by investors in Silicon Valley.

And yet the potential returns on these investments are spectacular. We, in fact, just had an exit.

A few months ago, a company of ours called back lot cars, which is Kansas City based.

That is an online version of a used car. It allows it's wholesale used car buying and selling.

It's not for consumers to go, buy, used car but for dealerships to buy sell and trade their used car inventory.

Uh, that kind of work has been done for a 100 years and in person auctions, the dealers would go to well, coven shut down the in person in options.

You can and dump backlog cars had been in business for a couple of years already building this online marketplace and they became tremendously valuable and were acquired by a, by a New York Stock Exchange company called K.

R for 425M dollars a few months ago. Tremendous exit.
Again, for all involved, and a really great team at at backlog cars in, in Kansas.

Sure, true, true. More and more stars are coming up from Midwest and non coastal cities in general. So that's just very exciting to see how investors are taking this opportunity.

And by the way, for those of you who are in Midwest, trying to figure out how to start their companies, there is in the episodes on fundraising where you coming up with a.

Venture fund called 25, and they invest solely in Midwest so if you're curious about that, definitely stay tuned this episode. It can be super fun. So, next question is about.

I forgot to ask this question in the beginning and that's about, you know, what do you generally invest in as Oregon Ventures? What stage? What fields? And what's the average size?

Sure. Thanks. So I probably should have said that myself, when I made my introductory remarks, we make mistakes thanks for reminding me.

So, orange and Ventures is primarily a series A investor we do, we do some.

Us entry points at seed and Pre revenue, but primarily we're Series A investors. You already know about our geographic focus. We talked about that.

Um, we, we have a couple of investment feces.

Um, 1 of them is around the future of work and the future of the workplace. Uh, and so software that allows enterprises to.

Hire and retain and train and do performance reviews for their workforces. That's a that's a particular area of interest for us. Another area of interest for us is.

The online marketplace, that's something that we've been involved since our 1st fund back in 1999.

Uh, obviously grub hub is an example of of an online marketplace. Backlink cars is also an example of that cameo, which is another portfolio company of ours happens to be Chicago based.

That's very hot right now, which allows people to to buy.
Um, to buy personalized video shoutouts from celebrities and athletes.

Uh, that's an online marketplace and marketplaces happen to have been very useful here in the pandemic.

When people stopped being able to go to physical stores and started to shop online a lot.

Online marketplaces tended to, uh, to do very well and I've had a lot of tail winds here in the pandemic. So that's been.

Been a positive thing for for our portfolio and for online marketplaces and another important thesis for origin Ventures is, is what we referred to as, as, as the digital native in generation.

So folks and millennials and and folks of that ilk and that generation will have grown up.

Never never knowing life without a smart phone without the Internet without constantly being.

Online and so that presents significant opportunities.

For companies to be able to be born to.

Offer ways for that generation to live work and play online. And so that that drives a lot of what we, what we look at.

Right, and that's allowed that is, to be honest.

That's completely right I can not imagine my life without the phone. It's like, you know, I'm looking at my father who consistently loses his phone, and I'm just like, how can you do this?

It's always in your pocket, it's just how it works and apparently not so yeah, very good point. I personally love fat funds that are focused on agencies and millennials, because.

I feel like that's that's the new thing. I mean, those are the people who are going to bring the new big money so good choice there. And now let's talk about now.

Creation of many companies focused on our startup founder listeners. So what's your advice to founders? For licenses? Right now? What should they start doing right now?

Maybe even if they don't have a company, but something that's going to help them 5 years later while they're working on their startup.

Well, I think maybe there's a couple of things that I can think of off the off the top of my head.

And that is stay informed.

Uh, uh, and you know, about the world in general about business about trends about problems that are that are happening in the world.

That they might be able to have ideas that they could solve or prevent, which would be even better.

And, and it's important that, you know, that this information comes from a multiple comes from multiple sources.

Um, I think 1 of the issues we have in our society, is that.

Where our sources of information are siloed.

That many people are getting are getting news and other information.

It from source of minute, because that they tend to agree with.

And I think it's more healthy to become a critical thinker and get information from a, from multiple sources, including ones that.

You know, maybe perhaps you, you wouldn't agree with, uh, in many cases, but I think that's an important thing. And and I think that will help you.

In not just in your business life, but in life in general exposing yourself to points of view that. That perhaps you don't share, but that you can think critically about and.

And argue respectfully with, or perhaps even have your mind changed, which is, which is also really important. And I think it's, I think that's a good quality in a founder, a good quality in anybody.

To be able to be open minded and look at diverging points of view.

I and come up with the best solution and the best ideas for things. So be informed and and constantly look at.

At how the world is, is shaping up and how problems are our.

Are coming up and how problems are being solved and what kinds of ideas could you generate from there may be related to this is is reading reading books by successful founders, reading books by.

Venture investors and 1 of the 1 of the books that I read recently that I would.

Uh, that I would recommend is called the innovation stack.

By Jim Academy, who was 1 of the founders of square really, really interesting stuff about how to.

Um, how to build and grow a business and how to kind of build a moat around it and, and also how to survive when you're getting attacked by a huge, huge competitor, potential competitor in their case.

In the case of Square, it was Amazon and and how they were able to withstand that. So, um, uh, you know, books like that. I think I think that is also an important.

Important element for for founders, for all of us to stay educated and informed and. Continue to expand our mind and constantly be a a learning.

A learning person. Perfect. Yes, I love that. And device. I'll definitely make sure to leave a link to that book that you mentioned in the description of this episode for those who cannot wait to look into the description of this episode.

It's called the innovation stack, but it's going to be in the description. So moving on to the next question. Is it going to be another question about the transition, especially of ABC fields and.

Maybe of yourself so this is your on fund number 5 right?

Yes, so from number from phone number 1 to fund number 5, would you feel is the major transition that you personally went through it or that origin Ventures that went through?

Well, 1st, and foremost, it's got to be the team.
That that's the, that, I think trumps everything else. Um, I, that.

Uh, when it was fun 1, and even fun to the entire firm consisted of myself and my Co founding partner. Bruce Baron.

And we could, we certainly couldn't, I couldn't have gotten it off the ground. Either. 1 of us could have gotten it off the ground alone.

And,

you know,

that,

that also gives us a deep appreciation for for founders and for Co,

founders and and how important it is to be able to work together but really the 1st,

several years of origin mentors,

and the 1st,

2 funds or just Bruce and myself.

But now we've got 5 partners, we've got 2 offices, Chicago, Salt Lake City. We've got 9 or 10 folks in the firm all together.

And that's a huge difference between between where we are, where we were then and where we, where we are now.

Obviously, the space has has changed a lot in that time.
And the practice of venture capital has changed a lot during during that time. But what hasn't changed ever is the importance of.
Of building a great team around you of realizing.

What your strengths are, and more importantly realizing where your your skill sets don't aren't as strong and when you need to augment that by bringing in additional people around you and Bruce and I have been very fortunate.

Uh, to be able to add partners to our team as well as a great younger generation of talent to the origin Ventures team that we're really proud of.

That is really cool and that's just perfect that you're bringing on more younger people again. I'm pretty sure you get exposed to those points of views that you're not really sharing with those young people. So that's just awesome. You're following your own advice. Absolutely.

Love it. So.

Speaking of, you know, fully advice, gain advice. Your advisor on multiple startups question is how can a startup get you on board as advisor or mentor, or, you know, just get your feedback on their company.

Is it only happening a fortune Ventures invest in them, or can do do is, you know, individually as just support.

Well, it depends on which 1 of those things that they're asking for you listed a number of things, advisor or mentor board member.

Uh, and and so, you know, each of those categories, it kinda depends on.

Um, it depends on what's being asked, and it depends on on the situation. So, you know, almost all the time, if I'm if I'm on the board of a company.

It's because origin Ventures has invested in in the company. Uh, and so it would be very rare for.

Uh, for me to join the board of of a startup, that urgent metric has not invested. I, you know, we all all of us have a limited amount of time and limited amount of bandwidth.

And so I have a duty to our investors to the limited partners. And origin vendors to to make sure that I'm using my bandwidth to the, to the most benefit for from.

And so when I'm when I'm working on on a startup and helping startups as a board member.

Uh, it it should be, because origin has invested however, we have and our, and our, our investors know this it's very important to our firm to be involved in our community.

Uh, to be helping entrepreneurs, uh, especially under represented entrepreneurs in, in growing their companies and so, uh, all the folks in our firms spend spend a very good amount of time mentoring.

Founders, who have start ups and doing whatever we can to help them move the ball forward even if it's not.

Um, even if not in a space in a sector or to stage that that might fit within orange and ventures focus yet.

Nice got it. So speaking of those initiatives helping other founders, what do you think is the best program where founders can find mentors, or just general support?

So, for example, I know there are a few Super Angels, like Jack reco with Buffalo Ventures, who are doing this program where they, every single week, they find some person to basically volunteer their time to help other founders.

Would you recommend any.

Such programs or groups, or what was the place where founder should go to find this help.

Well, that's a good question. I think it, it differs.

Uh, it, it differs by geography, it differs by sector.

Um, uh, i1, 1 place. That's interesting that I can that I can at least give a kind of an overall generic answer to.

Many universities have have some.

Resources available, some of them are much more developed than others, but I've, that's been something that's changed over the last several years for the better.

Uh, many universities are providing a significant amount of support to entrepreneurs to start ups.

And so, if you have an affiliation, if you're a student at a university, or if you're in a long of a of a university that has a source like that, I would encourage connecting with them.

1 of 1 of the benefits is that there are generally alumni.

Uh, of that of the school, who can also be supportive, not just financially, but through advice and counsel and connections to potential team members.

Um, there's a lot of ways that are alumni network can be.
Kate can be helpful and also potential investors.
As well, so that's that's kind of a again an overall generic answer realizing that.
That your listeners are are in many different places physically geographically and and so. Um, that's how that's how I respond to that.

For response, and he has alumni network is 1 of the top 5 reasons. Why I'm actually going to college. So do not under estimate its importance and value that. It provides so great advice on this good advice.

Let's move on to the last question for these episodes. And this question is a call to action. So, Steve, what do you want to do? Right after this episode is over.

What do I want the listener to do? Right after this episode is over.

Well, after they pick their their jaw up off the floor, because of how amazed they are by the content of this episode. Oh, I'm I'm kidding.

I, I, you know, I, I think that.

That there are that I touched on a little bit before.

And that is that they, if they are already on a path of lifelong learning.

They should continue that. Okay. I'm a read, read a new book. Um, uh, get it taken online. Course uh, that that.

Would expand your perspective and expand your, uh, your mind and your horizon and and perhaps expose you to an idea that might turn into your next company or help you with it.

And so, you know, I really think that that's that's the most important call to action. I think that perhaps something specific.

Uh, to to a business and a lot of cases.
I have seen very early stage founders who have a who have a startup.

That's still at a very young age that sometimes it's the founder and the startup that are both young and many times it is.

Um, the 1 of the things that I think is important for them to do is get. Gathering as much data as possible, even from the very beginning.

Get gather data about your customers about your prospects and what's working what's not working? Count everything.

All right and and do cohort analysis look.
We've got customers that came in 6 months ago versus customers that came in.

This month, how do they behave differently? How did they or how did you get them? Why do they why did they come on board now versus back? Then? How much did it cost? What source did you use to get them? I mean, all of this data, all of these data.

Are gonna be useful as you continue to grow your business and can and make the use case, make the case for.

Uh, for potentially funding it, if it's appropriate and listen, not every business is appropriate for. For funding, and that's fine.

There are many, many millions of businesses out there that are started by great entrepreneurs that have wonderful success over many years, and provide nice lifestyles for for their founders and families and in place, but they're not venture firms.

And that's but for those that are that, you know, potentially would seek venture funding that think that that, that they are in an opportunity that that could be attractive.

To professional venture funding,

the more data that you have kind of going by marketing back to our earlier part of our conversation the more data you have that you're able to to backup your assumptions with when you present pro forma financials that are a

hockey stick that goes through the roof to a 1B dollars,
you know,
the more data you have to back that up the better chance you have.
Of attracting somebody's interest as an investor. So so perhaps call to action in that case is.
Start counting everything gather data, start, counting everything, gather data. I absolutely love.
It probably should be the title of the episode actually, but, yeah, I'm definitely definitely on board with

pretty much all the advice that you said, especially the 1 where the listener has to pick up the job from how cool this episode was.

And also about the books books are definitely.
Absolutely. Great option. Especially if you feel like no, you're.

And kind of somewhere around Dean, you Ryan, you out of ideas of how to expand your business pick up a book. It's.

Like, 95% sure is going to give you some ideas and speaking of which I'm going to make sure to leave all the links and descriptions this episode that were mentioned in this episode.

So, if you want to read something, you, if you want to explore stuff, if you want to follow the journey, all fortune Ventures is going to be all in the description of this episode. So do that. And as you usually have a good day.