The Entrepreneur's Dilemma: $150M Venture Capitalist Reveals the Truth of Startups that Fail

Hey, welcome to another episode of Making Billions, I'm your host, Ryan Miller, and today I have my dear friend Pablo Srugo.

Pablo is a successful entrepreneur now one of the partners at Mistral, a $150 million venture capital firm that specializes in seed stage investments in the software sector. Before joining Mistral, Pablo was the founder and COO at Gymtrack, a venture backed startup in the fit tech space.

So what does this mean? Well, this means that Pablo and his team at Mistral understand the risks and rewards investors face in early stage investing of startups, and he's about to teach you, and I am masterclass on this part of venture capital investing.

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• 30:09 (Cont.) The Entrepreneur's Dilemma: $150M Venture Capitalist Reveals the Truth of Startups that Fail

Transcript

Ryan Miller  

My name is Ryan Miller, and for the past 15 years, I've helped hundreds of people to raise millions of dollars for their funds and for their startups. If you're serious about raising money, launching your business or taking your life to the next level, this show will give you the answers so that you too can enjoy your pursuit of Making Billions. Let's get into it. 

Ryan Miller  

If you want to raise money and exit like some of the greatest founders of our time, then you need to know the truth of how they actually did it. Join me in my next guest as we chop it up on how he founded a business failed and then returned bigger and badder than ever in his $150 million venture fund. All this and more coming right now, let's get into it. 

Ryan Miller  

Hey, welcome to another episode of Making Billions, I'm your host, Ryan Miller, and today I have my dear friend Pablo Srugo. Pablo is a successful entrepreneur now one of the partners at Mistral, a $150 million venture capital firm that specializes in seed stage investments in the software sector. Before joining Mistral, Pablo was the founder and COO at Gymtrack, a venture backed startup in the Fit Tech space. So what does this mean? Well, this means that Pablo and his team at Mistral understand the risks and rewards investors face in early stage investing of startups, and he's about to teach you, and I am masterclass on this part of venture capital investing. So Pablo, welcome to the show, man. 

Pablo Srugo  

Ryan, it's great to be here man, huge fan of the show and excited to be on finally.

Ryan Miller  

Yeah, it's great to have you. I know we've been trying to sync up our calendars, and glad you're a fan, like, how crazy is this? I'm a fan of you, too man, so it's good to have you on the show and really bring to light a lot of the concepts, venture capital, some of the things you know very well, both as a founder and now as a funder. So I'm excited to to really bring that in and this is such a wonderful track, folks, of making it into VC is just having a successful company that you're able to launch. So before we jump into all of the cool tactics and strategies, you're going to want to tune in at the end where we really unpack this, maybe you can just help me understand, how did you even get into this sector? 

Pablo Srugo  

Yeah. So I mean, it's pure serendipity, as many things kind of in life end up playing out, I I studied economics, and then after that, started one business, which led to starting another business, and that one was a venture backed startup. And near the end of that like, and I can share kind of a more detailed story about Gymtrack, because I think there's a lot of like lessons that I learned through that that I'm happy to kind of go through. But coming out of there, honestly, I'd been a founder for six, seven years, and I was like, let's do it again. Let's start another one. And through that kind of trying to start another one, and having early conversations, I was introduced to the founders of Mistral. I was in Ottawa at the time, and they're based out of Ottawa, and just had some, like, good conversations with them. They happen to be looking for someone, I wasn't necessarily looking to be in venture, but I was open, certainly, to meeting them, and maybe even to the idea to the idea. And after a few conversations, I got quite excited, and I just thought, like, these are some great people. I have a lot to learn from them. VC,  I think sounds interesting. Let's try it out. And that was, like, over six years ago. Honestly, I haven't looked back. It's been, you know, one of the best decisions of my life, and and I've, I've loved being a VC, and I think it's actually better fit for me personally than being on the founder side.

Ryan Miller  

I love it. Now you have a very interesting subject to cover that I think many entrepreneurs and venture capitalists can relate to, unfortunately, which is you have this thing where you said I was supposed to be a millionaire, and I don't want to steal your thunder, but maybe you can help us unpack that a little bit of what happened, and what does that mean? 

Pablo Srugo  

Well, happy to I mean, I, you know, I've reflected about kind of my Gymtrack story many times. And I was talking to somebody who runs this thing called entrepreneurs handbook on medium, which is, like this page where different people publish different stories around entrepreneurship. And we were chatting about, you know, different things I could write about. And I'm telling him my story of of Gymtrack. And I think I said something just off the cuff, like, you know, basically, I was supposed to be a millionaire, but like, I went bankrupt instead. And he's like, that's it. That's the title, man. So I ended up writing this, this blog post called, I was supposed to be a millionaire at 25 instead I went bankrupt, which is, like, obviously the shorter version, I mean, Gymtrack is a five year story, but this is the short version of the things that matter. So maybe I'll, I'll go and share that, because I think it gives context to what Gymtrack was like, what I went through there, and more than anything, the lessons that I learned from it. 

Pablo Srugo  

Going back, we're talking 2013 or so, and, you know, if you think about it, most startups are supposed to be about this, like, innate drive to change the world. Like, you know, Steve Jobs is like, you do a startup because you want to put a dent in the universe, right? Like, those are the motivator, those are the motivating factors that are supposed to starting something from scratch. But at this point, I'm like, 22, 23 and I couldn't care less about any of that. Like I have one goal, and my only goal is to be insanely rich. And that's truly, like, that was the only thing that was driving me and brought me to the world of startups. And at the time, I was running that other business that I mentioned, company called My Tutor, which is really, like, a tech enabled tutoring service that my co founder, Lee and I started, we knew, like, this was not going to be the thing that was going to make us insanely wealthy. And so we were constantly coming up with what could be much bigger ideas. And this one day, Lee comes back from the gym, and he's like, wouldn't it be cool if, like, when you're working out, there was, like, these QR codes, QR codes were like, a new cool thing back then. This is over 10 years ago, right? And you could scan it and it would tell you, like, how to use the machine. And like, yeah, that's kind of cool. And we kind of kept talking about it, like, it'll be much cooler. Is, like, if you didn't just tell you what to do, but it actually tracked what you did. And then the idea just kind of built on itself, it was like, what if you could just track everything you did in the gym, right? And just to be clear, like, we're 23 years old, we're two business guys. We have no business doing any of this, like, effectively, deep tech hardware startup, but we don't even know anything about hardware, we don't even know anything about apps. Like, we're so naive that that was almost the thing that led us to move in that direction. And we decide to launch this, and we call it Gymtrack. And the idea was to let members automatically track everything they do in the gym. It's the future of fitness, like that was a tagline and obviously, like, super cheesy. It's super cheesy, but it worked. It worked because it just got a lot of people excited about the ideas. Just one of those ideas that's almost so obvious that if you tell people, it immediately resonates. And so we go all in on this Gymtrack idea. 

Pablo Srugo  

And then I remember one time as we're doing this, like a few months in, there is this, this thing called Startup Fest, we're in Ottawa, right? And Startup Fest is in Montreal, and Startup Fest is like a startup conference, right? And so Lee goes down to Startup Fest. He brings with him this, like what we had back then, just to understand, like the stage of the company was effectively nothing. And so what we had done was, what was the idea? The idea was that we would ultimately, for the weight stack machines, replace the existing pins that you select the weight with with these things called Smart pins. And the smart pins would look like the normal pins, but they would have sensors inside them to understand where they were and what weight was selected. And all that you had to do was just switch those out, kind of retrofit their machines, and then, you know, that would, that would track the exercises. And so we had 3D printed a mock up of this pin, this smart pin, which was obviously a dumb pin because it had no sensors in it, it was literally just a mock up. He takes it, puts in his pocket. That's what he goes with. Anyways, when he's there, I get a call. He's like, Dude, I just met this guy, uh, David McClure, like, I, you know, who's David McClure. I'm like, looking him up and stuff. He's like, dude, Dave McClure, like, runs 500 Startups I'm like, plus 500 Startups. I'm looking at 500 Startups. And this is back then, like, you know, 500 Startups, man, has kind of come down a little bit. But back then, in 2013 it was YC, obviously the number one, accelerating the world. And then it was 500 Startups below it. And Dave McClure was this big guy in the startup ecosystem, and so he's like, Yeah, dude. Like, Dave, really like me, we're gonna go out for drinks tomorrow. I'm like, okay, cool, do it up. He goes for drinks. Whatever happens. He gives me a call on Sunday. He's like, man, we're in, like, we're in what, like, What are you talking about? He's like, Dude, we're in the accelerator. Like, I went to drinks with Dave McClure. McClure loved me. And he was like, dude, I really like you. I really like the idea we have an accelerator starting in SF on Monday. This is, like, literally, the day before. Like, you guys are in. It's $100,000 investment, you know, make it happen. So I'm like, okay, like, let's do it. 

Pablo Srugo  

And so literally, on Wednesday, because obviously, a few days we get there and we get to SF in that room, the first speech given is by this, this founder who's now, like, on the accelerator side, and he's like, every single person in this room, you have to think to yourself that your startup is worth millions of dollars. Your startup is worth 10 million you need to believe that, because if you don't believe that, then you can't go brace for investors, and nobody's gonna believe that they should invest a million, a 10 million post or whatever it is. So you need to, you better go home today, go to your hotel room, look yourself in the mirror and tell yourself that your startup is worth ten million and to me, this is like music to my ears, right? Like, my goal is to get insanely rich. I go back to the hotel. I'm like, man, like, I can't believe what's happening. It's only been, mind you, like, six months since we had the idea in the first place. We're like, 23 years old. People are telling us we're worth 10 million dollars, I'm like, dude, like, This is crazy, like, I'm making it. Like, I'm literally gonna be the next Steve Job. I'm gonna be the next Mark Zuckerberg. That's what's going through my head. And as the you know, the accelerator lasts like three months. We go through it, obviously meet different you know, investors throughout Demo Day happens. We have one of the best demo days, like, we make all the top lists because our story is so obvious and it just resonates in a different way than like a bb saas software does when we tell you, hey, we're gonna track everything you do in the gym. We're gonna gamify the gym experience. We're gonna open up virtual personal training people like, man, that makes a lot of sense. I love that.  I get that. I want that, and it's great PR stuff to write about. So we make all the lists. We end up having conversations with many investors. We simultaneously get a call from an equipment manufacturer. I won't name because there's still an NDA around it. Call them Equipfit, just for the sake of this discussion. So Equipfit calls that guys, we love what you're doing, not just we love what you're doing. The head of M&A calls us, but he says our CEO, the founder and CEO of Equipfit, loves what you guys are doing. He wants to invest. And we're like, wow, this is really interesting, because, you know, we're a hardware company. We're gonna need to manufacture all this stuff, like the distribution and the manufacturing capacity that this could give us is transformational. It's huge. So we start considering it. 

Pablo Srugo  

But you know what happened was, we were already so deep with these VCs. We've gone through due diligence and all this stuff, and we're like, who knows that? This is just somebody telling us they're interested? Like, to go from there to getting cash in the bank. It's a lot of risk. We're already so far along. I don't think we can do it. So we tell them, Listen, so sorry. Like guys, we love you guys are interested, but we can't. We just we're already so deep with these VCs, I think we're just gonna go with them. So they're like, okay, fine. Few days later, we get another call, guys like. The founder, CEO won't let it go. I'm flying, I'm flying over from Europe to Ottawa to meet you guys for lunch. Like, nobody flies to Ottawa, so, like, okay, whatever. This guy comes down to Ottawa, takes us out for lunch, and he sits us down. And this is like, classic it just like, this is like, there's parts of this story that are like classic startup stuff, and there's parts of the story that are like fictional movie stuff, where, if I was a listener, I would be like, I don't think this is real, but I'm telling you, it's real. This guy sits down and he says to us, listen, guys, you know, again, the founder, CEO loves doing he just wants to invest. I've got in my briefcase, I've got two, two term sheets. One of them is the exact same term sheet that your investors, that those VCs want to give you guys, and the other one is the same, except that on top of everything, there's a $250,000 secondary for each of you, we'll buy $250,000 of your shares and your shares. And mind you, like we're 23 years old. We have an idea that's six months old. This guy's offering us what like in the world of startups, $250,000 is chump change, but in the world of like real life, $250,000 is a lot of money. It's what most like. It's what the 90th percentile makes in a year at, you know, 45, 50 years old. We're 23 and he's offering us to us for an idea. And we don't that night, we don't think about it. We're just like, no. Like, that's off the table. Because for us, dude, we're like, we're the next Steve Jobs, man, like, we're the next Mark Zuckerberg. We have a billion dollar idea in our hands. They wouldn't sell a piece of Apple, piece of Facebook for quarter million dollars. Like, why would I? Why would we? So we just say, we say no to that. We ultimately, again, say no to their whole kind of offer, because we're just new with these VCs. We don't want to, we don't want to kind of kill that deal. And so whatever, they leave, we're feeling like we're right on track. We close the round with the VCs. It's been literally 12 months since we started, and we have a two and a half million dollar seed round. We're right on track, like we are, just perfectly, I couldn't have scripted this better. We're just going better. We're just going exactly the way that I thought this would go and should go. 

Pablo Srugo  

And then a month later, we get another call from these guys, and they just won't, they just will not take no for an answer. Like, listen, the founder, CEO, just wants to partner with you guys. He thinks what your building is the future. And if you you know we couldn't do your seed round, we get it. We want to lead your series A and they invite us to fly over this time we go over to Europe, to their headquarters, and meet the founder, CEO, and have a discussion. So we go down, we're like, okay, like, awesome, you know what I mean, like, again, could, couldn't be any better. And we get there in this, like, little, you know, dinky hotel. And I remember the night before, man, the night before was full of just anxiety, right? Like, trying Lee and I sitting there, trying to conceive of every possible way that this conversation could go and how we're going to negotiate this and how we're going to negotiate that. And you know, when you say, like, just, oh, like, you really over prepare, overthink, right? Like, because you're like, okay, what if they come in and they say this number, then what are we going to go with? What do they come in they say that? What do they give this reason we're going to say, like, literally every single tangent you could explore we explore. And what we ultimately came up with was listen, at the end of the day when we go out to raise our series A, our seed round was, was ultimately two and a half million and if I remember correctly, it was, like, at 6 and a half posts, or something like that. Six and a half to eight posts like that was more or less kind of where the seed round was and our thinking was for the series A we want to raise like, eight to 10 million on 25 pre and we want to do it in like, 18 months. But if these guys want to do it now, they should pay that like, why would we take anything less? That was our ultimate conclusion. 

Pablo Srugo  

So that was what we kind of go off with and mind you, that night, all I'm thinking about is it just feel surreal. Like everything doesn't feel real. I'm like, man, what if this actually happens? Like, what are they actually like, like, are we really gonna get like, eight to ten billion you know, like, a month after a seed round, and that kept like, I'm the type of guy I sleep. Like, I sleep well, man, like, I have no problem sleeping. But that night I didn't sleep for one minute. I just could not do it and so that morning comes, and we go over to their offices, we sit down a room, and it's Lee and I, two 23 year olds, and on the other side you got the head of a man, a like, it's a like, it's a big, like, multi 100 million dollar companies, serious guys, right? Head of M&A the CFO and then the founder and CEO walks in, and again, they're not like, they're not like, English speaking as a first language, right? So they're actually talking to each other in different language. And anyways, they come in and I say, like, my, you know, my speech. Listen, guys, like, so excited to work together. We want to, you know, you guys want to lead our A like, we're super excited for that. But just so, you know, our plan is to raise it at 25 pre. So like you guys want to do today. That's awesome. It's gonna be a 25 pre. And, you know, these guys are, like, guys like, you just raised like, last month, like, whatever, 6 pre or 6 post, 8 post, right? Whatever it was some around there. We're not gonna do that. Like, you guys are crazy, like, we'll do it at like, 9 pre. So that's the setup. Like, we're in this room, there's a little town in Europe with these, like, 56 year olds, one of whom is worth, like, hundreds of millions dollars, trying to negotiate our Series A and the bid and ask spread is 25,000,000 and 9.

Pablo Srugo  

The problem here is, if you're talking about a house, let's say, like, then you could start talking about real evidence. You would say, well, dude, listen, there's this house down the street, like, very comparable. It sold for this much last month, car, same thing, even a business that actually has, like, cash flows, you could say, dude, you DCF it. You know, this is more or less what it's worth. You look at multiples in this phase, it's more or less what it's worth. But when you have an idea, literally an idea. How do you do that? Like, how do you go? How do you how do you match that? How do you kind of close that bid, ask, spread. You just do it through a battle of will. Like, that's all there is there, because there is no credible arguments you can make on either side of the table. And this is the part when I said earlier, like, there are parts of this that are truly like a movie. This was one of them, because I've now been, like, having been on the other side, especially part of dozens and dozens of financing, pre seed, seeds, series A and honestly, like, between us, they're not that excited, right? Like, at the end of the day, in most cases, there's, like, one offer, in some cases, two, three offers. But even when there's multiple offs offers, like, and there's a bit of a bidding war happening, it's not movie like, I mean, somebody just says an offer, maybe they go back, like, hey, we have a better one. Like, you want to change it and maybe they change it. And some of these are over a call. Some of these are, you know, headed over email. This was not that. This was in a room, two parties trying to make a deal, and starting at 9, at 25 and they're like, okay, fine. Like, you know what? We can move up to, like, 10.3 making these numbers up. But this really was, and then we're like, no, 10.3 won't work. Like, Fine, 24 right? And it goes on and back. And then they're like, okay, guys, like, let's, let's take a break. 

Pablo Srugo  

So literally, like, we go to a different room, and Lee and I are like, okay, what should we come back with? And like, we're doing, like, fake math, because, like, there's nothing, I mean, there's nothing to do here except just say another number. Do we go back and we say another number? This takes literally hours, man, I'm telling you, it took hours, and I'm running on like, espressos, dude. I'm like, barely, like, barely there. And so at some point, we get to a point where he's like, they're like, okay, they're at 12, and we're at 14, and that's like, now we're like, very close. I remember saying to him, like, Listen, I'll be honest with you. And I wasn't totally lying, but I'm like, I'll be honest with you, our VCs won't let us raise it anything less than 13.3 because our post money. Now remember, our post money was 6.6 5 million post and they won't let us make a deal for anything that's less than 2X our last post money. So 13 point 3 million, dude, let's do it and I literally put my hand out, like we're on an episode of like, Shark Tank, right? I put my hand out, and he looks at me, and he's like, let's do it. So boom, right? We shake hands on it, and we're like, okay, great and I'm elated, man, like, I'm absolutely elated. 

Pablo Srugo  

I'll never forget the moment where, after we close out that meeting Lee and I go to like, a rental car, and we just like, what I mean, like, we're just high fivers. I was like, man, we just closed an $8 million round, 14 posts one month after seed round, you know, 13 months after we started the business with one of the biggest gym equipment manufacturers in the world. We are gonna crush it, dude, we're like, right on track. Everything is perfectly working out. And so anyways, we, you know, we fly back to Ottawa, like, we start kind of negotiating, you know, going through this kind of, like handshake deal to okay, real term sheet. And when we start kind of getting that, we get the first version of the term sheet. This is when some of the problems start to arise, because all of a sudden they're asking for these, like, control related terms. One of the biggest ones was this ROFR right, right of first refusal, that would let them buy the company. You know, if we wanted to sell the company, we'd have to kind of like, offer it to them first. Our VCs had a lot of problem with that, because they're like, you'll never be able to sell the company for, like, an interesting multiple because you'll never get a bidding war, because nobody will buy, nobody will enter into a bidding war, knowing that they can just take it away at any minute, because they have this ROFR, true or false. There was no way to, like, make that deal happen. 

Pablo Srugo  

And we got to a point where our VCs were kind of like, listen, like, if they really want this control, like, then maybe they should just buy the company. And we're like, okay, they're not gonna buy the company. Like, they're not gonna pay $14 million it's one thing to invest in a company for upside. It's nothing to actually, like, pay like, $14 million cash for an idea. They're not gonna do it so, but whatever, like, you know, if we can't do this deal, can't do this deal, what am I gonna do? So we go back to them, and we're like, hey, listen guys, like, our VCs won't let us do this deal. We can't do it. If you guys really want control, you're gonna have to buy the company. And it's, you know, the same price that we just negotiated, $14 million cash. And we assumed that was the end of it. Like, we assumed Ryan, like, at this point it's done, they'll just go away and be like, okay, screw you guys. We fought for this. Enough, like, wasted enough of our time. And two weeks later, we get a call from the head of M&A, and he's like, okay, let's do it. He wants to do it, founder, CEO wants to do it. We'll buy a company for $14 million and that was just wild man, because again, like, you know, year and a half or so after starting our company, our company is like, more in our heads than in reality. I mean, we're talking about an idea, obviously, this point we have engineers that are building the things. But the things are not like they're maybe at an alpha level, like things are working at like, 70% accuracy. Only some exercises are tracked. The stuff is not yet deployed in any gym we're just not there yet. Hadn't been that long and these guys want to buy for $14 million all cash. And so we're like, okay, like, let's go. Let's do it. So we start negotiating. And this stuff takes months, man, it takes months to even get a term sheet, like, fully agree to lawyers, all this stuff. We finally get a term sheet signed. We start working on all the other stuff, right? Because you got to go from term sheet to final docs. We start working on the employment agreements. We negotiate a salary where we're going to make, like, I think it was like 200k US a year, plus, like a bonus, half a million dollar bonus in three years, all this stuff that, again, for us, where we were at the time, was massive and, and yeah, so we get the employment agreements, like, the full kind of purchase agreements, you know, many, many pages long. So all this stuff is getting fully negotiated. And at this point I seem to make like, if I recall correctly, you know, I owned about 20% or so of the business, so I'm making like, I think at closing it was like, you know, a bit over a million dollars. And then I still would own shares in the business. So there was upside the hair, and then there was these other bonuses at the end. So there was like, a couple million dollars worth that I would make from this transaction, plus this incredible salary that, you know, converted, converted to Canadian dollars and at that time was just ridiculous. It's gonna be life changing, like, at this point. And I'm like, young enough that I'm, you know, I'm buying Teslas in my head, man. I'm like, buying condos in my head. I'm like, dude, I've made it. Like, I can't believe it. I freaking made it. And it's only been like, two years. Is like, it's like, too easy, man, this is too easy. And so this feeling of like, too easy is always like, gnawing me. I'm like, man, like, I gotta, I gotta ground myself, right? 

Pablo Srugo  

So I go to our lawyer, who I is a guy, this guy, Shane, that I really trust, and I'm like, Shane, like, you've been through a lot of these transactions. Like you've seen a lot of companies actually exit. How often does a deal make it this far and then fall through? And he's like, Pablo, 99% of deals that get to this stage close. I'm like, that's awesome. Like, there you go. Like, that's exactly what I needed. I'm good man, but I wasn't good. Like, we were the 1% and, you know, I can explain it a bunch of different ways. I think that there was one moment where things really change. Kind of, looking back, it turns out that one of the things that that founder and CEO who, by the way, controls that company, like it's, it's the sort of company where what he wants to do happens, and so it's really up to him, and he really loved that idea that I mentioned earlier, that smart pin, that's what he that's what fascinated him. It turns out we had moved away from that smart pin, because that smart pin never really worked the accuracy level we needed it to. So we found a different way to track those machines. And I remember when we explained that, because their team flew down to Ottawa do, like, technical diligence, and when we explained that, there was a bit of a pause, right? Like, wait, what? What do you mean? You don't have that smart pin? Okay? Weird, right? I think that's the thing that really changed it, honestly. And, you know, they gave us a bunch of reasons because we negotiated, like, we had a break fee in there. If they, if they didn't go through, they would have to pay us, like, a few $100,000 and there was a bunch of reasons why they could, you know, like, this was part of negotiation. There was, like, a list of reasons as to why they could walk away from the deal, not have to pay us that break fee. So they cited one of those reasons. But it wasn't really that. Anyways, it doesn't matter. Like, at the end of the day, the deal was dead, and it literally took one phone call. Like, before that phone call, I was a multi millionaire, and after that phone call, I was basically bankrupt. I was very close bankrupt, like the company was very close bankrupt. Because what happened in the back, like on the other side, is that we had, at this point, like 30 people, namely engineers, working on this product. We were burning quarter million dollars a month. At this stage. We had only 8 million dollars in the bank. And the only reason that we hadn't made any adjustments was because, first of all, the last thing you want to do in one of these negotiations is, you know, have this kind of event that might alarm the acquire. But the second reason was more fundamental, which was that when they acquired the business, they were going to put money into operations. So to be honest, if they bought the business, they would have funded it. There was no reason to get rid of anybody. All these great people that we'd hired that were making real progress. 

Pablo Srugo  

But when this deal fell through, we're four months away from complete bankruptcy. So we end up having to lay off like two thirds of the staff, which is still the hardest kind of professional day I've ever had in one day. And it's the point where the way we do that, like we did it at least, is we took the people that we weren't going to lay off one by one, and we told them, hey, like we're going to lay off everybody else except you and these other five people. And then we huddled everybody, and we said, guys, if we haven't spoken to you, like, today's your last day. And obviously, you know, we cried. A lot of different people cried, it was just, it was just one of those tough, just one of those really tough kind of moments. And then go back, I remember, literally, like, bawling at home, bawling at home, because obviously the challenge of doing that right, going through that layoff, but if I'm being totally transparent, like a big reason was the same reason that a kid will cry, if you like, pull candy out of his hands. Like, that was really why I was bawling. It was like, I made it, dude, I made it. I was done. I was there, right? Like, exactly what needed to happen had happened, and then it hadn't. 

Pablo Srugo  

So that was, like, you know, Gymtracks didn't end there. For what it's worth. We ended up hiring a new CEO. I worked with the new CEO for a few years after that, he took the company a different direction. But everything post that moment was almost like a different Gymtrack with a different level of ambition with, you know, it was just not the same, like the true the true Gymtrack, 1.0 honestly died that day. So anyways, like that was a while ago, right? We're talking at this point, 2015, 16 type timeframe, about a year ago, so 2023, when I'm, you know, been on the venture side for many years. At that point, I meet the founder and CEO, former founder, CEO, I should say, of a company called Push Strength. And Push is a company that I'd known from the very beginning of gym track, because Push was in a similar space as us. They also were, like, tracking workouts, but they were doing it differently, like the way they played it was, instead of going after gyms and, like mainstream users, unicorn stories, they actually went after professional athletes, college athletes. And instead of tracking reps and weight, they were tracking like force and momentum and these kind of more niche metrics that really matter to athletes. And honestly, like, I always dismiss them, because for me, I'm like, dude, these guys are going after like, this little niche market. Like, who cares? They're never going to be a billion dollar company. So I honestly didn't care. 

Pablo Srugo  

But after talking to him, he explained to me that A, they actually did have a much bigger story about how they're going to go to big like, all users. What they did, though, is they started with niche market, they delivered, like, real value to actual athletes, they got real dollars. They had a real business making millions of dollars in revenue when the market turned because at the beginning, the market was really hot on IOT, quantified self, all this stuff that we were doing, and then, you know, like, it happens in all markets. In venture invention, investor interest kind of changed away, and all of a sudden the market wasn't that hot. And that happened to him too, but the difference is he had a real business, like he was making real money, so he could actually, like, run it profitably, and all these sort of things, navigate that ultimately, he actually got acquired and a real millionaire, not just imaginary one. 

Pablo Srugo  

So all that got me thinking, and I think there were, like, really three kind of lessons that I'll that I'll leave you with, and we can kind of go on tangents after this, but there's really kind of three things that when I really thought and put all these things together, things together, I I felt like I had learned, right? And the first one is, and they might, like, you know, this is, like, very anti venture, like, venture is all about dream big, think big swing for the fences, right? But the reality is, if I was to do this all over again as a first time founder, especially, I would lower my ambitions. I would just try to create a startup with real traction. I wouldn't worry about hype, I wouldn't worry about billion dollar stories or massive Tams. I would just worry about delivering real value to real customers. And ultimately, maybe, like my business caps at a million in revenue, maybe it gets to 10 million, maybe it gets to 100 but at least it'll actually work. At least, at least it'll make, like real cash, not just paper gains and headlines. And for my customers, even at a million revenue, it actually does change their lives. 

Pablo Srugo  

The second thing is, no matter what, and especially now, like, you know, the other thing I do is I run The Product Market Fit Show, which is a podcast where we talk to late stage founders, successful late stage founders, mainly about the early days. And I can tell you, no matter how successful any startup is, and from the outside might look like complete rocket ship that just goes up into the right inside. It's a total roller coaster, like startups are not just hard, they're emotionally taxing, and there's nothing that's getting to prepare you, because you literally are one phone call away from absolute success and absolute failure. And if you just think about it, like you're one employee that comes in and one employee that quits. You're one investor that joins you and one investor that pulls out, one customer that churns one customer you land away from, like, complete success and complete failure on any given day. It's just that fragile. And frankly, the bigger of a story that you're chasing, the more hype you have, the more money you've raised, the more all of that is amplified. 

Pablo Srugo  

And then the last piece, and frankly, the most important one for me, is that there's just no substitute for solving real customer problems. There's no smoke and mirrors, no massive round, no PR, no hype that will save you if you're not solving a real customer problem. And so the way I think about it is, at the end of the day that one customer, 10 customers, 10,000 customers. If you go to your customers and you ask them, am I solving a number one or number two priority problem for you, their answer needs to be yes. So that's my story of Gymtrack, of kind of, like the craziness that that was, and of what I've learned, and I've learned probably many other things from there, but like, the main things that I, that I took away, reflecting on, on kind of that, that part of my life.

Ryan Miller  

Man, what a story that is absolutely captivating. So you went broad and big in your vision, which when, if you're an actual visionary, you can't help it, like you're like, world domination, whatever it is, like you think big. And it sounds like, after going through everything that you went through, and then bumping up next to this other person who is really niche. You found that the riches are in the niches, correct? That would be one of those as you're saying, look, maybe throttle that down a little bit and just really make sure that you're solving that problem. That's number two, but both of those kind of say if you can actually go into the niche area of whatever market that you're in and solve those customer problems now you're actually better positioned, rather than the hype cycle that you know a lot of entrepreneurs and even VCs will go through. It's saying, hey, you know what, keep your head down, focus on solving the problem and really make sure that you dominate that niche. Would you say that's a fair summary?

Pablo Srugo  

It's definitely a fair summary and I think that's something that's also that I've learned through The Product Market Fit Show. Because even the companies that are now, like, multi billion dollar companies, almost all of them, not all them. Sometimes I have a founder who said, oh no, I saw this big picture at the beginning, and I knew it was gonna be huge, and all these sort of things. But most of them started with, like, very humble beginnings. Sometimes it's like, I'm going after this, this niche. And sometimes it was just like, I've just got this problem right in front of me, and I just solved it right? Like, everybody knows that the story of Shopify and the snowboard store, like, you know, that's where it started. Airbnb also started small. But you know, of companies that I've met, like, this company called StackAdapt now it does hundreds of millions of dollars in revenue, and they started by solving, like, this little, kind of esoteric, like, ad related problem for one enterprise customer. It was almost like a custom development shop at the beginning. It just so happened, another customer had the same problem and another one, and now it's hundreds of millions of dollars in revenue. Wealthsimple, which is massive in Canada, started off like trying to help people make better trades, and it was like this spreadsheet and stuff like, Mike Katchen and didn't see this idea that he would have, like, at some point, you know, billions and billions and maybe trillion dollar in assets that became clear to him only later. And so my point is, like, I think in most of these what's happened is the the culture's become, like, if you're a pre seed stage startup, and you can't tell somebody how your company's gonna be, one way, one day worth a billion dollars or ten billion like, that's on you. Like, that's your fault and the reality is, if you look at most successes, they couldn't of, they couldn't have done that either. So is that really the thing, or is the thing more? Can you tell me why your product is so important to your customers that they must have it? I think that's so much more important in those early days.

Ryan Miller  

Yeah, in, you stack up those customers, and now we call that a market. So I'd love to talk a little bit about that. I think that's a perfect lead in let's talk about the market, and which is really just an aggregate of customers, whether it's the total market, but we usually call that the economy, or a localized market for a particular startup or investment fund, or whatever it is. I'm curious, because you've been on both sides of the aisle. So what's, what are you seeing out there, as far as what's going on in the startup world? 

Pablo Srugo  

Yeah, great question. I mean, look at a really high level. I think the startup world looks very much like most other markets, in the sense that you know most other like, say, Petrone markets, right, like E-Commerce and things like that. But if you look at, let's say, venture capital funding, and you zoom out, what you will see is a line, a trend that goes up into the right over time at a very consistent pace. The thing you also see is in 20, you know, second half of 2020, and all 2021, maybe first half 2020, it goes berserk, right like it kind of this line goes, kind of up, up, up, and then it just goes really high up, and then, of course, it comes right back down. And then it just keeps following that trend line that's more or less the story. And so I think now we're on the other side of that, certainly of the come up, but also of the come down. I think we've hit kind of at least the data shows that we've hit this new bot that we've now bottomed out, and we're past the bottom and we're back into moving up and up. That doesn't mean you're going to see the crazy valuations and the crazy FOMO that was there in 21 and 22 but that was the exception. Like that can't last. What we're seeing now again, is there is money available for founders, there is competition amongst VCs. And if you have a solid pre seed, or seed or, you know, series, a stage startup, you can raise. The late stage markets, you know, that's not my expertise. I think those contracted a lot more for a lot of different reasons. But at, you know, in the early stages, I think we're kind of back to normal days, normal days for founders, normal days for VCs. And I would argue, like, if you're a founder and you can't raise, you know, you shouldn't, you shouldn't blame the macro. If you're a VC in your portfolios, companies can't raise or aren't growing, you probably shouldn't blame the macro. I don't think that's the primary reason anymore for things that aren't working.

Ryan Miller  

Brilliant, I totally agree. I've been able, I've been fortunate enough to teach, show over 2000 people to launch and scale their own investment fund, which arguably is a startup as well. But one of the areas that we intersect as funders and as founders is, like you said, the ability to raise capital. I've seen so many people launch a fund, air quotes launch and not really get it off the ground. Easy to launch a fund, easy launch a business, right, call your attorney, or have some kind of legal doc, set up a few entities. Congratulations, you're a fund manager, you're an entrepreneur, mom's so proud. But really, once you get all those legal filings, now the real fun, well, I'm air quoting like crazy over here, so now the real fun begins and a lot of that really is raising capital. And I know a lot of we've seen some recalibration, we'll say in late stage startups, I know we've talked a little bit about that late stage was having some I think their feet were starting to come back down to planet earth, and, you know, valuations are starting to make sense, and there's decent deals out there now, and I think there's a little more common sense in the market. But at the end of the day, more whether valuations or not, that's a component of closing a deal, we still need to raise capital. And I know there's about $6 trillion of capital that's out there in the markets right now, of dry powder, and people are trying to unlock a lot of that from a lot of these investors that are out there. If you have a founder that pitches you as as a VC, what do you like to see that in this market now that really helps you cut checks? 

Pablo Srugo  

Well, I'll tell you one other thing, maybe, and that's related, because we're talking about the market high level, which is, you know, I just had again on The Product Market Fit Show, the head of insights at Carta, right? And Carta kind of handles the cap tables of just about, well, not all, but, but let's say a large percentage of, especially US startups. So we went through, you know, very hard data on valuations and money raised and things like that. Then there's something important there that I can highlight, which is, if you look at it, so like, pre seed rounds are done, if I remember correctly, it's like million, million point two is the median round. It's like 14 posts. Seed rounds are bigger, I think the median was like three and a half million dollars raised at 14 pre, you know, 17 and a half 18 post. Then there's a huge jump, because the median series A is $40 million pre, ten million raised. And so that's one of the areas that I've really been thinking about lately. Not exactly answering your question, I'll touch on that, but I think important for founders, because this area of the seed extension, like, seed extension, to me was always almost like a bad word, right? Like, it's got this bad, negative connotation, oh, you're raising a seat extension. Uh, well, what happened? Like, something went wrong. Just tell me what went wrong, right? I'm sure when you raised the seed, you wanted to raise an A next, but you're raising an extension. So, like, what happened? And when I saw this data, I don't know, Ryan, what you think? Actually, I'm curious. But like, if you have to go from 18 post to 40 pre, you have to go from raising 3 million to 10 million, and you've got to do that in 12 to 18 months. Out of 100 startups, how many can really do that? Like, it's probably the top decile 20, and in fact, the other piece of data that's important is if you look at the last two years, and you look at all the seed companies that raised money in the last two years, only about 17% have raised that series A so it's, in fact, the top 15% or so that have been able to make that jump. The rest either went bankrupt or stopped, maybe they got profitable, but many of them have to raise a seed extension. And so that's just an area that I think founders need to think about. And I think about, and I think the industry as a whole needs to almost, like, stop thinking so negatively about it. Because, like, you don't think of a pre seed, or a seed or an A as negative as just part of the game. I think a seed extension is a lot more part of the game than people almost want to admit. Like, I think the reality is, even for a high performing company, going from raising three and a half million to just raising 10 is a huge leap. And by the way, like seed rounds, we're talking about a founder that has a story and some proof points, series A we're talking about proven product market fit, like clear growth, clear pull from the market. It's just a really big leap. And so just something you should think about, that these seed extensions are very much a part of the fundraising landscape. And there's these, like 3, 4r or 5, $6 million rounds that I think are just part of the game and not really like a founder mistake that's leading people to have to raise those.

Ryan Miller  

Yeah? So you asked my opinion, I find that very interesting, so I'm noticing that too, and I don't know if I'm right, but here, here's, here's a theory, a running theory, right? So especially in startups, you have very little data, a lot of theories. But I, It reminds me of an interesting book written by Jeffrey Moore called, Crossing the Chasm, part of the required reading of all entrepreneurs and even funders as well. And it reminds me, and essentially it makes the point to say, hey, it's cool, you're gonna get early adopters. There's different kinds of people who will jump on and you got to sell to all of them as a founder and crossing the chasm is getting from kind of these, these crazy people that will take version 1.0 and will tell you everything that's wrong with it and we love those people because they help create new iterations. But then there comes a point in every business's life, and often that reflects in Series A round, but also when you're trying to climb that commercialization scaling. And so I think there still is a chasm, not only in for founders who are trying to achieve mass market but also the funders as well. Is to say, we will pay a premium, that's why you see that big jump, I believe, is you see that big jump as you're saying, I'm willing to pay a premium to someone who's actually able to, like long, jump over that chasm and make it to the other side. And so that's why I believe that you see a lot of VCs that are cutting large checks, and you see this disproportionate jump in in financing is because you're rewarding VCs, or, excuse me, you're rewarding entrepreneurs who've actually broken into the market beyond their mom and dad, who are maybe paying it and telling them how great they are, but they're they're saying, actually, there's people who have no idea who you are, so they have no allegiance to you, they're not buying it because it's your college roommates, whatever. These are actually people who are buying it because you've created something truly valuable. So I believe that Crossing the Chasm still is very hard to do, not impossible, but that's where that great filtration starts to happen, is a lot of the some founders try to jump over that chasm and fall off the cliff and don't really make it to the other sides, and those who do get a massive spike. So moral the story for a lot of entrepreneurs who are listening to this, we would say, look, Crossing the Chasm. Great book, by the way, but crossing the chasm is important if you want to start getting a lot of those valuations that you crave, and you will be handsomely rewarded by crazy guys like Pablo, and I will say, holy crap, he actually made it to the other side. All right, now we gotta start cutting some real checks, not this 250k rounds and stuff like that. This is 10s of millions of dollars, happy to do it, because, holy smokes, you actually made it to the other side. We know some of us more than we'd prefer to admit, like Pablo, we know firsthand, not easy to make it to the other side of that and so, but we also know you deserve large checks. 

Pablo Srugo  

I think that's totally correct. I think the risk reward at series A is perfect. Might be a strong word, but pretty damn near perfect. Like yes, does it make sense that if a company is 2 million in ARR doubling with core analyzes you can look at with retention that you can look at. With the go to market playbook that you can test that it would be worth 2X a seed stage company that's doing like 400k ARR, you don't really know what churn is truly like. Go to Market is unproven, because it's mainly been the founder selling absolutely like I think it makes total sense. I think the challenge, though, for a founder is, can you on 3,000,000, 3 and a half million dollars. Go from 400k ARR to two, two and a half million, 3 million, ARR, in 12 to 18 months? Yeah, maybe 10% like, maybe 20% of the best companies can but a lot of others like, they'll need more time, and it doesn't mean they won't be big successes. Because again, like on the PMF show, I've seen a lot of different like, I've seen companies that just hit and I've seen companies that take years and years and years to really find product market fit. It doesn't really matter, like, once you find product market fit, if the market's big enough, things ultimately end up working out. So I think, I think you're totally right, Ryan, I think actually, where the risk reward, talking to the head of intechs at Carter, coming to Peter, really struck me was between pre seed and seed, right? Because, like, these pre seed rounds, the post money is like 10 and the seed round pre money is 14. I'm like, Dude, you're getting a 40% lift for taking down, like, for coming in at, like, idea stage, maybe 10k MRR stage, you could just wait until they're like, 40k, 50k MRR. And I'm talking like meeting, you know, terms, but like, you can wait until there's way more points on the board, and all you got to pay is a 40% premium. Like that doesn't seem like, you know, adventure style kind of math. So that's the part of the market that I'm a little bit confused about. Series A, I agree, makes total sense. And I think these seed plus places actually also make a lot of sense for both founders and investors, because you pay a bit of a premium relative to the seed. But instead of like, 2, 3, 400k ARR you might be like 800k ARR maybe in a million ARR, with a lot more points on the board, but just not yet at like, true series A.

Ryan Miller  

Brilliant, I absolutely love that. So this is, this is, you could see we're exciting bunch, we started talking about MRR and a lot of these acronyms, but, you know, the truth is, is that there is a lot going on in the market, but we're not done, right? So it's, it's a challenge, but that's why you get paid, is overcoming those challenges. That's why you get rewarded with high valuations and better checks, and then you don't have to go through that harrowing experience that Pablo went through, where in the early days, where you had to lay people off, and you're just like, oh my gosh, what the heck just happened? So I know that's really, really hard, but we're not done, so a lot of our investors and other partners require us, as I like to say, is to not only look around corners, but look around corners that are about six miles in front of us. So we got to look farther and around blind spots, in other words, where do you see the market going in the future, from today forward, what's Pablo's opinion on where the market's headed? 

Pablo Srugo  

I, you know, it's a good question. Like I, you know, for what it's worth, from a philosophical perspective, like, I look at trying to understand, it was Ray Dalio had this really illuminating take for me on this stuff, because he said, you know, like, one of the biggest kind of hedge fund investors of all time, and big quant job, right? Lot of analysts doing a lot of stuff. And he was, like, you know, a lot of people think investing in markets is about, like, seeing where the puck is going. It's about predicting the future. He's like, actually, we don't agree with that. Like, our perspective is betting in markets is about having the best understanding of today. You won't believe how many people don't really understand what's happening right now. And so all of our work is to just get the best understanding of today, of the present, understanding all the levers, all the inputs, all the outputs, and then making bets and investment decisions based on that. Things might go this way, they might go that way. I don't have a crystal ball, but I just want to understand today as best as possible. And, like, that's what I tend to do. And so that's why, like, I don't even in investing in it. And it might seem a little bit paradoxical, and I think a lot of people will do of people will disagree, because a lot of people make these seed investments thinking like, I think the future is going to be like this, so I'll make an investment in that. And that's fine. Money's been made that way. But for me, I just look at the founder I'm talking to, like, do I actually believe they're truly exceptional, which is a really, really hard question to answer, especially when you only get to spend so much time with that person. I look at, do I believe that the value prop that they're delivering is truly a top of mind value prop? Again, hard to answer those early days, because you only have, like, a handful of customers and typically, and then the last piece is maybe, like, do I think that what they're doing has enough kind of built in mode differentiation that there won't be like, 30 other people doing it tomorrow, which is even harder to answer. If I feel good about those things, I tend to move forward. And that's my perspective of the market as well, which is, like, I don't really know, like, where interest rates are going to go. I don't really know what funding is going to be like in two quarters from now or five quarters from now. And I don't really care, I look at today, what the valuations actually look like, what's median, what's best in class, what's worse in class, what's efficient, blah, blah, blah. And then within that, like, do I think I'm paying reasonable prices? Do I think the startup that's pitching me right now is worth what they think they're worth? And I try to make the best decisions, and hopefully we'll see right? Hopefully that leads to good outcomes in the future. But that's my kind of mode of operation. 

Ryan Miller  

Well, you're planted right in $150 million fund so I'd say there's been some good calls that have been made along the way with you and your partner, so it's very impressive work that you've been able to do. So as we wrap things up and we round third base, I'm wondering if you have, like, maybe one or two competitive advantages that you can leave for our listeners if they asked you for your advice. And with all of this experience on both sides of the aisle as a funder and as a founder and as a podcast host of The Product Market Fit Show, go check that out. What would you say to someone who's asking for your best advice? Just to cut through the noise, get right to the signal, what would you say? 

Pablo Srugo  

So, great question. Funny, you brought up The Product Market Fit Show, because it's part, part of the reason why I started that in the first place is around this idea of a competitive edge, because I think that especially look with what I focus exclusively, like on what I do, right? Like my circle of competence, my circle of competence is early stage investing, seed stage investing, predominantly. And when it comes to that, the game is very simple. It's not easy, but it's very simple. You got to see the best deals. You got to pick the best deals, and you got to win them. And if you do that consistently, right, you will do very, very well. And out of those three things at seed, the hardest part is seeing the best deals. Because if you have an amazing founder with a great idea, it's not that hard for them to raise, like, a million or $2 million they don't have to call every single VC and pitch 100 or 200 of them, and most of the time they don't. They'll call a few people they already know. They'll meet a few VCs, they'll ask some people who they should talk to. They'll have those conversations, and they'll raise that money most of the time. Our goal is to make sure we're on the other end of that call as often as humanly possible. And so what's the competitive edge? The Competitive Edge, which is not like a secret, but it still is the reality, which is relationships. How can you have the most high quality relationships possible within the world that you're trying to access as a capital allocator?

Pablo Srugo  

So if we're going after and we focus mainly on Canada and the US, we focus mainly on B&B, but we do some other things as well. There are areas that we don't do much, like crypto and health, we just happen to not do much. So within the things that we do a lot, who are the important people? Who are the nodes in the network, so to speak, because there's hundreds, there's 1000s, I should say, of founders out there, but there are fewer nodes in the network, people who these founders tend to speak with. Maybe they are later stage founders. Maybe they're well known angel investors. Maybe there's other type of ecosystem players. And how do we create relationships with as many of these people? And then, not only that, how do we stay top of mind? So those are the things that we really that's one edge is field relationships with high quality individuals, and make sure that those relationships are it's one thing to know somebody, it's another thing to remember they even exist. So like, how do you stay top of mind for them? And that's where The PMF Show, like, strategically for us, it's mystery. Frankly, I do it. I love it. It's great. I talk to amazing founders. I learn a lot just from talking to them and and a lot of people love listening to it. So like that alone is a huge win. But on top of that, it opens these doors, because all of a sudden, I'm meeting these exceptional founders that otherwise I probably wouldn't meet, and I'm creating content, and that content is shared organically on LinkedIn. You know, people are listening to the show, and it's just that many more touch points with other nodes in the network that remember that we exist. So that when somebody goes to you, Ryan, and says, like, Hey, Ryan, like, you know, I'm raising around, like, who should I talk to? The odds that you'll be like, oh, there's these guys at Mistral. Like, you know, they're solid, you should talk to them. Are just that much higher. So I think that's one of the, frankly, kind of key, key things that I look at. And, you know, yeah, that's probably, that's probably the biggest competitive edge. 

Pablo Srugo  

Because, like, the other way to the other way I think about this is, if you think about the best VCs, this is the other kind of thought experiment went through, right? Like, think about, there's literally 1000s of seed stage VCs in North America, and there's some that do exceptionally well, like the top 10 percentile, and then there's, let's say, the bottom 90th percentile. What do the top 10 percentile VCs have that the bottom 90th percentile don't? Is it a crystal ball? Is it their ability to predict the future? Maybe, I don't think so. Personally, I don't think so. Is it their IQ? Again? I'm sure they're like 120 IQ plus, but I don't think they're the only ones that are that. So I don't think that's the Delta. The difference, honestly, is they see the best deals in the first place, is they have these network effects, these relationships, whatever you want to call them, that brings those deals in in the first place. As an example, people often talk about people that missed on Uber or missed on Airbnb. So there's this, you know, kind of, I think, well known story that, like Mark Cuban as an example, passed on Uber and he could have made, you know, so many millions of dollars if he only invested. And yet, you know, Benchmark picked Uber and like, what did benchmark know that Mark Cuban didn't? But I think that's the wrong question, because you're focusing then on who picked and why did they pick. The interesting part of that story, to me is that Mark Cuban and Benchmark, Bill Gurley were both in that small set of VCs who got to meet Travis at the right time in the first place, because there are 1000s of VCs across North America, and I'm gonna go and say probably only about 10, 20, max 30 VCs. Matt Travis in 2008 and 2009 and had the opportunity to invest or pass. And the VCs that find themselves in that circle have a massive edge, because they probably didn't just meet Travis. They probably also met Brian at Airbnb, and they probably also met the guys at Stripe, and they probably also met all these other startups, and I'm sure they passed out a lot of them, and they got these cool anti portfolios, but all they had to do was say yes to one, and it took care of their whole fund. So how do you strategically position yourself to be as likely as you can be for whatever you're investing in, especially at our stage, in that small set of VCs who get to see the best opportunities and honestly, that's what I think about all day. 

Ryan Miller  

Yeah, I love that. And you know, for those and you know, you follow the show, so I love to echo that, but we always say your reputation, relationships are the two most valuable assets in your position. And you can't underscore bold and enlarge that font enough in VC for sure, and so you either have access to better deals, or you've got some freaking analyst, Jedi in the back office that you keep in the dark and feed M&M's every once in a while. But like these people that just like bust out miracles in their analysis, they could find things that no one else can see. Hard to find someone like that, and the more robust way of making sure that you find the right deals or the right funding is just invest in reputation relationships. And over time, then you build the third R to this trifecta that we call it, which is results. And so it really starts with reputation, relationships and results. And if you can complete that triangle, and now you know why my logo on my fund is a triangle, so the reputation, relationships and results, that Trifecta really helps a lot of money, a lot of deals, a lot of really good things to be attracted to you through that magnet. So why do I tell that? Why do I beat on that drum very often? And I'm not saying, oh, I had a deal that went sideways, so my reputation is ruined for life, no, that's in this stage all kings have scars, ghost go straight in your crown man, you're gonna be fine. But the point is, is saying like no, do good deals, treat people right, whether that's your your portfolio companies and your founders, respect those journeys, but also your LPs, your investors and really just be known for someone who has a good reputation, great relationships, someone that you want, that others want to get to know because you have some value, and then produce results. If you do that, and you focus on those things, you're going to be very, very well. But I don't want to steal the show, because that is phenomenal advice, brother, is there one more piece of advice before we let you go? What else could you tell for our listeners today, as far as a competitive advantage? What would you say?

Pablo Srugo  

Yeah, right. I mean, I think the other one, and this is like pre I think classic advice I was given to me and others, when you first become, especially for those that are like new to being on the side of this side of the of the kind of of the fence where you're a funder, right, and you're investing in startups. And I see this a lot, especially with newly minted angel investors, right? Like you have a big exit event, all of a sudden you have all the capital, and you start getting inundated by deals, and the classic mistake is funding way too many of them, because at the beginning, you don't have, like, a your pattern matching is just not fully developed. You just haven't seen enough stuff and all a lot of these things seem exceptional. And I even spoke to a few people who run Angel networks, and they told me the exact same thing, like, you know what always happens? New angel comes into the network. They do the first 10 deals they see, and then they're out of money. And compare that with this angel investor I know really well who does, who has a lot of money, but does just $25,000 checks. And he's been doing $25,000 checks for the last he did for $25,000 check in us 10 years ago, and he already was doing it, like 5, 10, years before that. So he's been doing for decades, $25,000 checks. He seems to have an, you know, Endless Pool is because, obviously, as he gets exits, he just puts it back. But he's kind of decided, like, this is the quantum. I'm not really going to go above this, maybe in a pro rata, well, maybe exceptionally, but this is what I'm going to do. And I'm going to set a pace and kind of high level, understand, per year I should do X many deals. And if you just kind of take your time at the beginning and understand that, you should probably try to find a way to be in this game for a long time and try to kind of back into okay, how much money should I really do per deal? And how many deals should I do, more or less per year? And there's going to be, like, some ebbs and flows, like, let's say you say five per year, maybe one day you do one year, do seven. Next year, do three, that's okay, but if you say five, you can't do 20, because then you're screwed for the next three years, and you'll miss out on all that other stuff that was probably on the come. And that's the way I think you have to play this game, because you have to find a way to build a portfolio, to diversify, not just in terms of number of companies, but also across time, because hype times will come, trough will comes, and you want to make sure you're in the game for all of that. So I think that's the other kind of competitive age, edges. Find a way understand what you really have to play with and find a way to pace that out and stay in the game for as long as you can. 

Ryan Miller  

Brilliant. So cutting those checks, those large checks, often, this is an issue for funders, so fund managers or angel investors almost reminds you of the early days when the ego starts to creep in and you're like, I'm gonna be the next Steve Jobs, like you already are, right? You've summoned your inner Steve Jobs, or whoever, and you're like, I'm such a big deal and that also is a time where you run the risk of making some mistakes, especially as a funder. And the big one is I remember, when I was a young man, I was able to. Have lunch with Warren Buffett and like this, this is like, meeting Superman when I was still in college, so your finance major, and I was like, Is this really happening? 

Pablo Srugo  

Wow. 

Ryan Miller  

And someone talked about like, hey, what's, what's some of the keys that you found? Like, what are some of the things you actually do? No, no platitudes or nothing like that, he doesn't really do that. But what are some actionable keys that you can give us who are just about to enter in this industry, to make money? And to compliment your point, Pablo, he said, I make money when I buy, not when I sell and we're like, what? What does that mean? Like, we didn't really know we were in business school for five minutes, so, you know, still had a lot to learn. And he said, You know, every time I bought, you want to make sure that you don't overpay, because if you overpay for something, right? He's a value investor, so if you overpay for something, then you're just like hands clasped, praying to God like, oh, please get this valuation, or I'm going to lose my shirt, like the one guy that you talked about earlier, a few minutes ago, as opposed to the guy who cuts $25,000 checks. And so he was like, you never want to be in that position, because hope is a horrible strategy. And he said, look, that really comes down to ego and so Ego is the enemy is often one of those things. And so if you can get a valuation, if you're a founder, or you get the right valuation, if you're a funder or investor, and you all can make money at the start. So focus on we're going to make money at the start of this transaction, not hoping to make money at the end. And the whole main crux of all of that is getting the right valuation, making sure it's a good deal on both sides of the aisle. And if you go in, rather than saying, I want this high valuation right, as you're telling this story, earlier in our time together, I could see why there was a little bit of battle. But if you get that valuation right, and people get a deal, and we get in, and it's this constant invisible hand between suppliers and demanders of product. Now we can be in a position where we're making money all because we got in at the right price, rather than praying to God that we get out at the right price. So I would say just to echo that, as far as doing the deals and cutting those small checks, really focus on the right valuation that makes sense, and don't be in such a rush as a founder to get this hype, this huge valuation, because these late stage guys right now are kind of regretting it, and there's a lot of down rounds that are going through, and people are starting, hoping we'll see if there's any full ratchet things, or starting to get the squeeze on that. But with the valuations that are coming down, this is exactly what we're talking about, is now you're losing money because you got in at the wrong price. And typically, that's a function of ego. So before we wrap things up, is there any closing remarks, ways to get a hold of you, anything at all? 

Pablo Srugo  

Well, Ryan, first of all, thanks for having me. It's been awesome, a great time. And no, I mean high level. I would say, listen, like if you're a founder or interested in early stage venture at all, definitely check out The Product Market Fit Show you can find it, you know, frankly, anywhere, obviously, as any podcast, that's probably the best way to learn more frankly, about like, this industry again, like we really just what we do there is we interview late stage founders, like I said, the founder of Wealthsimple, but lately we had the founder of Rappi, founder of Weka, founder of a bunch of different kind of unicorn level companies, or other founders have sold their businesses for over $100 million all tech startups talk only about those early days, zero to one, which is a space that I really care about and happen to find most interesting. So yeah, if you're, if you're interested in that, definitely, definitely have a look and let me know what you think.

Ryan Miller  

Awesome. All right, so just to summarize everything that we talked about, just focus all of your energy and doing the best deals. And the second one is pace your deals, whether you're a funder or a founder, pace that make sure that you don't let your ego get in the way of overpaying or underpaying either way. You do these things, and you too will be well on your way in your pursuit of Making Billions. 

Ryan Miller  

Wow, what a show, I hope you enjoyed this episode as much as I did. Now, if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes while you get to know our guests even better. And make sure to come back for our next episode where we dive even deeper into the people, the process and the perspectives of both investors and founders. Until then, my friends, stay hungry, focus on your goals and keep grinding towards your dream of Making Billions.