Brian Garrett of Crosscut Ventures

Welcome to the Puck, Venture Capital and Beyond, a show that explores the evolving landscape of the venture capital world. We'll have candid conversations with today's VCs and entrepreneurs who are shaping those changes. I'm Jim Behr, managing partner at Behr, Negron, and Troff, and president of CMUG Advisors. This podcast brings change makers to the table to discover the inner workings behind the decision making strategies and ultimately to how they got to where they are today. We backed first time founders, we backed technical founders, we backed very salesy oriented founders, but I really love ones that are highly self aware, very in tune with their emotional intelligence, and then finally oriented around the needs of the market.

That type of founder really resonates with me. And the ones that come in knowing they don't have all the answers, because I certainly don't, and I don't want anyone pretending they do. Today, we get a chance to sit down with Brian Garrett, co founder of Crosscut Ventures, a VC firm that has weathered many a storm in the past two decades and continues to lead in the venture capital ecosystem of Southern California. We talk pandemic shifts, personal journeys, and a self realized approach to nurturing the next generation of entrepreneurs. Well, Brian, before we get into kind of the meat, so to speak, can you take a minute and just tell us a little bit about your background and how you ended up becoming a VC?

Sure. I was born and raised in LA and got pretty lucky to end up going to Stanford to play volleyball. Had an older brother that was going to Stanford to play basketball, set my mind to the task of wanting to play volleyball there, and it all came together for me. And I share that piece because, you know, when I was finishing high school, I had no clue what I wanted to do, but I knew that Stanford was a good school. And if I could go there, I should.

When I got there, same thing. I wanted a business degree. Stanford didn't have it. So my friend told me to study industrial engineering, and I did. Got my butt kicked.

But as I sort of tell it, I was a volleyball player until the day I wasn't a volleyball player, and I stumbled into Silicon Valley in 1995. I spent four years working in a strategy consulting firm right at the time where, like, business plan writing and market strategy and pricing studies were kind of the norm. And so I cut my teeth on companies that were big bubble high flyers, Commerce One, Inc. To me, Broadbase. I was doing all of the early strategic work for those because they were clients of this firm that I was working for, and I learned a ton.

It was just trial by fire and all these projects that we're doing. And then I did what a lot of people did back then. It was sort of, I'm tired and I don't know what I wanna be when I grow up, so I'll go get my MBA. And I ended up back at Stanford. When I finished, it was very much a mindset of the bubble had burst.

I was no longer happy being in San Francisco. I had asked my now wife to marry me, and she had finished UCLA undergrad and grad school. And so we had a conversation of, like, where do we wanna be to start our life together? And the answer was Los Angeles. So very easy for us to come back.

I didn't have a job. She didn't have a job. We were just committed for lifestyle reasons. And I went to my professor at Stanford and said, I wanna do venture in LA, and he laughed at me. Said there's no such thing.

And next thing I know, I was getting introduced to three or four funds down here. One of them happened to be Rick at Palomar, and that's where my relationship with Rick Smith started, and this was 2001. Literally, the first week in the office was 09:11. We've been through a lot together. Well and not only did you go through 09:11, then you have the .com burst.

You really did have trial by fire, and you must love being a VC because, again, if there was any reason to rethink your decision after o one, that would have been the time to do it. I tell most people my life story is a story of bad timing. It's all turned out quite well, but it's every single thing that I put my mind to do was, like, just after it was a really good time to do that thing. So do I buy the stock market now or do I sell the stock market now? Just having that conversation minutes ago.

Exactly. So you're back to LA, and now we've got this LA ecosystem. I started being a tech lawyer in '98. I mean, I've been a lawyer before that. You know, I knew Rick at Sun America, and Rick was an early investor in Idealab Capital Partners.

And so I got into tech with Bill Gross and Bill Elkus in '98. I also lived through o one. And I remember when Palomar and Redpoint were the only VCs in LA, and Brad Jones and Jim Gower, you know, were the only VCs. So as far as real traditional VCs in LA, you're one of the few now. Just like I'm one of the few VC lawyers and now restructuring guys.

And one of the reasons we started the puck was because having these discussions with Jim Armstrong and Rick and everything, we really saw LA start with nothing. And now it's turning into something, and it's kinda like we've been riding this wave, and we want people to know about it and help bring it along and turn it into even more. Tell us a little bit from your perspective of where you see the LA ecosystem now and what's unique in the energy and so forth from an entrepreneurial perspective? Yeah. I mean, it's night and day from 2001.

Rick and I were running around town not really pursuing opportunities in LA because there wasn't anything that was enterprise, and we spent all our time on planes. I was in Texas, Colorado, Silicon Valley, honestly, two, three days a week. What we started to see, which was really the genesis of Crosscut, was these first generation Internet businesses in LA start to get to liquidity, and those founders starting to become angel investors, and that repeatable cycle of innovation started to happen. And we were sitting there watching it not really in a position to invest in a Brett Brewer at Intermix or, Jamdat Games or Lower My Bills with Matt Coffin or Cameron Poors and Johnny at Price Grabber. We weren't in a firm that was oriented towards that, but we were watching it happen.

And so our moment was simply believing that the proverbial flywheel that Silicon Valley has benefited from for forty plus years was starting to spin here. And we're now talking 2005, 2006, 2007, where it felt like there was some critical mass. And so that was the idea that sparked Crosscut. Twelve, thirteen years later, as we sit here now, you know, I always tell the story, like, our first fund was all ad tech and ecommerce. You know, we built our brand reputation around backing Brian Lee at ShoeDazzle and backing Marcello at Ipsy and backing Ophir at Gum Gum.

You won't see any of those companies in our portfolio right now. We are doing cloud, DevOps, fintech, AI in all its flavors, verticalized solutions, leveraging deep tech. We're we're putting a satellite up into space in the next thirty days. Those are not things you could have ever heard coming out of our mouths when we started this fund back in 07/2008. And that's what we're probably most proud of, is just looking at the diversity of this ecosystem, looking at what we call the talent migration out of Silicon Valley and out of New York City in a post COVID world where quality of life matters more than ever.

Being able to be a a magnet or a beacon for these entrepreneurs and saying, don't worry about it. Come down here. Build this company. Crosscut's got your back. So do all the other firms in town.

We can do something special here, and it doesn't matter what category of tech you wanna do it in. So in the old days, there really was this thought that if you were an LA based company and you had the ability to go to an Sequoia up north, that the ecosystem up there was such that even if you were trying to be loyal down here, there really was a real advantage to going up north. From your perspective, has that changed? And what does a company get from working with the LA Venture community that it wouldn't have gotten, for instance, several years ago? Well, the first thing that's now available is talent.

We didn't have the talent back at the beginning. We have the talent now. The reason you would leave LA with a term sheet in Silicon Valley is because you were led to believe, and it was true for a long period of time, that the only way you could build a real business of scale was to be up there for that talent pool. I feel like the tides have turned, and now what you get is a cutthroat, dog eat dog ecosystem, both from the venture side, the venture perspectives, the way they treat the founders sometimes. And we're certainly a a slightly more warm and cuddly version of Silicon Valley.

You can see it through the friendships of the funds and how we all work really well together. It's not really a competitive, sharp elbowed environment. And you can also see it through the loyalty you see in the employee base. So when they sign on to something, they stick around a lot longer than they might in Silicon Valley, where the next perk or the next big stock option offer gets them to jump. So I think we have a chance of building a lot of really fantastic, long standing, equity building businesses down here because of the combination of a little softer side, the lifestyle, and this true orientation around, like, we're all in this together.

Let's build something great. If somebody was asking, okay. Look. I can go to Silicon Valley or I can come to Los Angeles, and you're selling them on what's really unique about the LA ecosystem. How would you differentiate ourselves from up north?

At this moment, I would say a more diversified culture framework experience base that I think makes for a less homogeneous culture. I think it's more missionary versus mercenary in the long term view of what these businesses can be, not the short term gain or the quick flip, and I think that it's less competitive. I think up there, it is really hard for good engineers to turn down the types of offers that Google and Facebook are throwing at them. Down here, you've got an entrepreneurial framework. You've got real mission orientation around the businesses, and all of that allows you to maybe feel less pressure about committing to what it is you wanna go do and knowing you've got the support ecosystem around you to do it.

That makes a lot of sense. So I know one of your areas of interest or expertise has been been wellness and founder wellness In a world where we talk about balance and we talk about mindfulness and work life balance and so forth, there's a lot of talk, but there's not necessarily a lot of substance to it. From your perspective, how does that work into what you do as a VC and also in as your life in general? Yeah. So I took what I've talked about pretty openly as my own personal journey, and it all goes back to losing my father when I was 13 and putting my head down and grinding my way for the next thirty, forty years, and never taking stock of the impact of what a tragedy like that has on a 13 year old boy and doing the work that I needed to do to change what I've called my grind mindset.

I was, put my head down and blow through whatever came in front of me to achieve the next milestone and then pick another one. And ultimately, I realized that doesn't lead to joy. And so I took those experiences that I had to uncover for myself, and I started talking to my partnership about, well, this entrepreneurial journey that many of the individuals be back is lonely. It's difficult. It requires incredible emotional resilience.

And that's not ever part of our conversation about how our relationship is with them as an investor to an entrepreneur. Why not? If 80% of our bet at the seed stage is a founder bet, then shouldn't every aspect of what we can do to enhance their chances of success be brought to the table and be focused on them being the best leader they can be, the best recruiter, the best salesperson, whatever it is that that is needed for that business to succeed, shouldn't we be supplying that as the venture partner? It has to be more than capital. And so, of course, every firm argues that their quote value add, we chose to make our value add a sincere attempt to build authentic relationships at the inception of our investment, to have the hard conversations that often entrepreneurs are afraid to have with their venture investor.

It's not the most tangible product offering, but if you look at my last five investments and the relationships I have with those entrepreneurs versus the first five I made when I was young and stupid, they're dramatically different in the way I have chosen to establish my relationship. And it's not just board member to entrepreneur, it's friendship. It has to be. I mean, I just finished a two hour walk today with Amir from Welcome Tech. We went hiked up in the canyons, and we talked about all sorts of things beyond a capital raise or the milestones of the business.

That I have realized gives me far more joy in doing what I do daily, and I think it builds a much deeper level of trust with the entrepreneur where they actually feel like they can come to you. Right? And our goal is always to be first call. We wanna be the first call investor when good or bad happens in the business. And if you have that level of trust, that's much more likely to happen.

In terms of the types of investments or opportunities that you're looking for, does the health and wellness does that figure into it as well, or or is that not really an issue? Well, I think our diligence process now is more centered around those types of questions. We're more thoughtful about, are you armed with the right tools to be successful as the entrepreneur that's about to commit the next x years of their life to this endeavor. We've announced some partnerships with Evolution Coaching and others where we are bringing, as part of our investment, coaching services to the table to help, and we're willing to spend the dollars that we just invested on that, which is not a normal thing. There aren't a lot of funds that are doing this openly.

If you think about it, you know, the normal mindset of an entrepreneur is like, well, I'd love to have coaching. I'd love to be the best me I can be, but that's two or three days of burn if I spend those dollars with a coach. And where I've gotten to is I think your chances of success go up dramatically if you have a healthy mind, a healthy body, a good work life balance, good communication frameworks, good self awareness about what your strengths and weaknesses are, and you get away from the chest thumping culture of tech, which is I'm killing it, I'm killing it, I'm killing it even though I'm hurting inside. That's what our quote product is about. It's about bringing that framework to the table at a seed stage investment and trying to make sure that that framework sticks in the culture and the style and the way that the entrepreneur builds their company from that point forward.

I think it's pretty unique. Makes sense. And so in terms of your overall portfolio, you were talking about the diverse ecosystem in LA, but in terms of the type of portfolio mix that you have right now, do you wanna tell us a little bit about your portfolio? Sure. It's as diverse as LA.

It's as diverse as any Silicon Valley Fund, which is amazing. First fund, nine ad tech deals, nine e comm deals. Today, I think we tracked 25 different areas of tech. We've assigned various categories to each partner. We're doing telehealth.

We're doing satellites to space. We're in SpaceTech. We're doing marketplaces. We're doing digital brokerages. We're doing everything.

And our fund, even though we're investing nationally, as a seed stage fund, our funds will be a reflection of Southern California. About two thirds of our portfolio will be local, and it's gonna consistently be a reflection of what LA is at that snapshot in time, that three year period that we're deploying those initial bets into those companies, which is amazing. Absolutely. And I guess when you're looking at how things have changed, satellites and space, as you said, pretty state of the art, just like self driving cars and AI and stuff. Are there any new industries or things that are on the horizon or just starting up right now that you're hearing about or involved in?

From our lens on the world, the types of things that we're focusing on as we hit 2021, look, COVID has changed everything. It doesn't take a rocket scientist to say we should be looking at what's called the future of work and the technologies that enable a different kind of work environment. You and I talked the other day about commercial real estate and what is the future of the office look like, and what are the productivity tools and communication tools necessary to facilitate a blended version of work from home and work under one roof. I can see a world where large corporations buy chunks of time at these WeWork style office spaces, or they take their own commitments and they open them up to third parties and allow people in on their corporate real estate. So the amount of square footage that's gonna be needed is gonna drop dramatically.

But what are the technologies that are needed to support that and make it effective? Obviously, more digital health, more telehealth. Nobody wants to go to the hospital. Why should you? When you and I can have an exchange right now and probably get to the heart of any problem that I'm trying to get input on.

And so we've been heavy there. You could talk about the acceleration of tech adoption across all categories. Right? Did you ever think that the restaurants would be so aggressively adopting new ecommerce and delivery protocols and stacks? We look at things that allow you to spin up, test, and deploy code in a much faster way.

So the buzzword around that is no code solutions, things that are in DevOps that allow you to spin up instances faster without heavy DevOp resources. Fintech, everything around the evolution of the bank and banking services, and, you know, probably the most exciting company in our fourth fund is a company called WelcomeTech that's focused on The US Hispanic Latino population and really delivering a full reboot to the immigration experience for this population and giving a much needed financial service accessibility that they've never had before. And so we're excited about things like that. And I remember when Green Dot got started and it was called something before Green Dot, but, again, much larger markets than people realized in trying to figure out how to better service those communities. Yeah.

So Amir at Welcome Tech, you'll hear a lot about that company this year. There's some really interesting things happening right now that we're super excited about, and it's been myself, I've known him for ten. I've been an investor with him for two and a half. And, you know, he's got a mission driven business here in LA that is attracting some of the brightest talent in LA tech because they look at that and they say, I wanna be a part of that. I wanna help this population.

I wanna bring them those much needed products that no one has ever been able to deliver in a non predatory way. I get really excited about stuff like that that we can now do, and I joke, you know, I don't have to invest in Kim Kardashian's pleather shoe of the month company. Right. I can invest in Welcome Tech and really help facilitate a whole next generation of immigrants in, you know, their acculturation journey here in The United States. That's wonderful.

So, Brian, what about when you're screening entrepreneurs, you're obviously getting a million people looking to seek you out and so forth. A lot of people are gonna ask, what do you look for in an entrepreneur? And and that may sound generic, but are there things that stand out to you when you're meeting somebody or you're considering whether or not to invest with them? Yeah. I think if you ask each of the partners at Crosscut, they might have a slightly different answer.

But for me, and this has shifted over thirteen years. Right? I'm always trying to refine my skill set, my tools. I've started to look for this almost like product centric founder orientation where they're not purely technical, they're not purely sales, but they've lived and breathe and that fine space between feedback of the market and what product is needed to solve a problem. This very acute sense of what the customer needs so that you can get to product market fit faster.

I say it that way because, you know, we've backed all types. We've backed first time founders, four time founders. We've backed technical founders. We've backed very salesy oriented founders. But I really love ones that are highly self aware, very in tune with their emotional intelligence, and then finally oriented around the needs of the market.

I find those tend to be the best leaders, the best culture builders, the best company builders. You obviously need to have enough awareness to know where you're weak, where you're strong, and where you need to hire to fill in your gaps. And so that type of founder really resonates with me. And the ones that come in knowing they don't have all the answers, because I certainly don't, and I don't want anyone pretending they do. Makes sense.

I mean, humility, not so easy to have. And as you said, if you don't have the ability to ask questions and you think you have to be a know it all, as soon as you get one speed bump, you're in trouble. Right. If your ego gets in the way with your ability to say, I was wrong or I need help, then we've got big problems because I'm not building this company, the entrepreneurs. So the more that they can come in and say, this is my idea, this is my vision.

Do you wanna take this journey with me, and are you open to the fact that I'm probably gonna be wrong? Sign me up all day. So one of the things I want to also ask you about was, as an entrepreneur, you had this investment with StyleSaint. Yep. Was there a particular lesson or experience that you learned from that opportunity?

Yeah. I mean, that was a really interesting time in Crosscut's history. Right? We were too small. First time fund was $5,000,000, not $50,000,000.

And so I was in this weird position where I needed to have a full time operating job to take care of my family. So these were the, what we call, the dark years of Crosscut. 08/09/1011, when we hadn't really attracted any institutional capital. And so even though StyleSync didn't work, it was a great experience because I had an amazing cofounder, Allison, and she's brilliant in ways that I am not. And we had a really nice relationship and rapport in how we could help each other be good founders.

But, ultimately, the lesson I learned was that if you don't have passion about the idea, it's really hard to give everything you have to something. Allison knows this. She had an unbelievable passion around the brand and the vision of the business, And I unfortunately brought more of a MBA macro thesis that aligned with her actual vision of what StyleSync was supposed to be. And so we thought we were great cofounders together, and we were in many ways. But I think when we really got into it, my heart wasn't there, and I ultimately gave her the CEO title, shifted to the COO, and we raised our series a.

And I focused on what I would call the back end of the business, the pick pack ship operational finance, capital raising side. And I just didn't have the passion behind the brand that she did. We failed for a whole bunch of other reasons, not that dynamic. It was really more about the state of ecomm at that time and how you went d to c, and we ran out of capital and lost our partner at our firm that was backing us, bunch of things. But I learned so much in that process that I think what it did for Crosscut at the same time Brett was operating is it just brought a much deeper empathy to the plight of the entrepreneur into us as we sit down and listen to the stories.

And I remember I was, you know, working my day job, and I would come meet an entrepreneur for coffee to hear their pitch. And I just felt like I could really sit in their seat in a way that I couldn't when I had been a consultant to an MBA to a venture office on the 17th Floor where you just don't really know what these entrepreneurs are going through. And I did, and I still do because I'll never forget that experience. So it sounds like one of the mistakes people can make is they go into something and they wanna be passionate about, but they're not passionate about it. So they're going in more with their head as opposed to their heart.

And I think what you're saying is you really need both. And in terms of other common mistakes or landmines that you would guide people to avoid, are there any other ones that jump out at you that you've seen people make or that if they knew ahead of time, they could avoid? Well, I've seen two things. Right? So I've I've certainly seen a not being driven by the heart, not feeling deep in your bones that this business or this product needs to be exist in the world.

That has to be there. It has to be in the core DNA of the founding team. And what doesn't seem to work is this economic framework of, like, oh, that's a big market, and so therefore, it's gonna happen. But I've also seen people get enamored about ideas that actually don't have the big business model or big market opportunity. They tend to get blinded to that reality too, and they can't see and can't listen to the feedback of the investors that says, okay.

There's a great business here. It's just not a venture backable business. There's plenty of those. I would say 90% of businesses are not venture backable. Doesn't mean they're not great businesses.

Doesn't mean they're not great ideas that an entrepreneur should pursue, but too many entrepreneurs feel like the funding is some major milestone, and it's really not. It means nothing. Certainly, the brand of the firm that you're able to get capital from helps in recruiting and some other things. But I really love entrepreneurs that aren't raising for the ringing of the bell of announcing a big round. They're raising because they actually need the money to go faster to win a market.

Right. A lot of entrepreneurs have gotten caught up in the, quote, game of venture, which is raise as much money as you can as fast as you can at the highest valuation you can. And those usually don't work out very well. So when somebody's got the opportunity to pick among the LA VC community for different people they wanna partner with, are there other things that you and your partners bring that you think uniquely differentiates you from your other VC firms in LA? Sure.

I think experience matters. There are very few firms in LA that have been through three up and down cycles of these markets. Rick and I have been together. Brett joined us after one, but we were close friends and neighbors. So the three of us have a pretty deeply rooted trust and knowledge around what can go well and what cannot go well, and we don't sugarcoat things.

And so if you like that honesty and you want someone that's telling you like it is and not just giving you the fluff that makes you feel like you're killing it, I think we do a pretty good job of that. And then we've blended that with the next generation, Nick and Maureen, and more hires to come at Crosscut that are really rooted in this next generation millennial entrepreneur and the things that they care about and the way they view the problems of the world. And so I think our team right now is putting out a pretty good experience for founders. Super founder friendly, very much acknowledging of the realities of the fight that they're wanting to take on, and trying to just always be a great partner to them. One thing that experience allows you to do is you don't get too high on the highs and you get too down on the down, and that even keel nature serves an entrepreneur well over time.

And, I think we bring that. I think that Rick's gray hair and my gray hair and Brett's gray hair is an attribute, but you gotta build a firm that has this really nice cross pollination of different DNA, different points of views. And that's how we've been trying to engineer this firm over the last year is sort of thinking about the firm of the future. How do you put a better product out in the market that allows you to attract the right entrepreneurs with the right ideas? And that's what I lay awake at night thinking about is how do you do that?

How do we build this for the next ten years? Now that we're thirteen years into it, how do we build this thing to continue to be relevant, interesting, innovative, and doing all the things that are gonna help drive returns long term? As you're talking about your next ten years and you're working on that plan, how how has COVID affected that and what innovations have you put into place if you're comfortable sharing them? You've got investor meetings, you've got deal flow, all those other things. How has COVID affected you and how have you reacted to COVID?

Our story Crosscut story of COVID kinda went like this. Honestly, Brett and I were in Australia trying to raise some capital as it hit. Flew home, went into quarantine, and it took us about three to four months to check-in with our portfolio, figure out whether we could help them in their PPP efforts, and take stock of the portfolio and how we could be most helpful. And we were not one of those firms that was like, oh, disruption creates opportunity. Let's start putting money to work.

That was not our mindset. We tend to be fairly conservative in that. I think our LPs will appreciate that over time. And then the shift that came was, okay, now we're starting to see there are actually tailwinds here. So what are those tailwinds?

How do we ride them? How does our portfolio take advantage of them? Who's ready to go to market to raise more money? And then where do we start deploying capital? So that was the tail of the year.

The biggest thing that I think we've done as a firm by being remote is we continue to look at our systems, our processes, our biases, and our communication styles Because ultimately, running a venture firm is about 5,000 decisions you make every day that lead to eight to 10 very critical decisions, which are the eight to 10 investments you make per year. And you've got five or six people all contributing to that decision. So anything you can do to eliminate bias, create healthy dialogues, give everyone a voice to then make better decisions is in service of your LPs and being a steward of your capital. And so that's where we put our time and energy behind over this year is working on that where we're not sitting in the same room. It's a little different.

I can't be like, hey, Jim. I sent some body energy from you that you don't like this deal. It's hard to do over Zoom. Right. And so now we do it through surveys and voting mechanisms and, like, letting people say what they need to say without hearing anyone else's point of view so they don't feel like they have to bite their tongue and wanting to give everyone a voice.

So that's a big thing. Right? Because, you know, we're an equal partnership, but we've got young talented people. I want them to feel like they have as much ownership in this firm as we do, and that their voice matters. And so we try to not have one person dominate the conversation.

We try to facilitate a way for everybody to communicate. And do you think going forward I mean, are there changes that you think will stay institutionalized even after we get COVID, you know, in the rear view mirror, so to speak? I'm having that debate right now, you know, around new hires and whether they actually have to be committed to LA at some point. And I think that's where maybe the old school orientation of a Rick or a Brett or myself would say yes. We would say, we are better at our job when we are all under one roof.

Right. Does that actually prove to be true? I think we, as a firm, would say we've been more productive, better at our job in the last six months when we are just hyper focused getting on these Zoom calls two, three times a week to talk about the pipeline and work things through and make investment decisions. So why do we feel like we have to be under one roof? Time will tell.

You know, I don't know. I still love the camaraderie of being here at Crosscut HQ. It's been a lonely six months for me. I'm the one that comes into the office every day because I have three teenage boys taking over the house. Rick works seven blocks away.

I see him a couple days a week. Nick and Maureen are within a mile of here. Brett's been in Hawaii for the year. We arguably all could be together, but we're not. Do we need to return to that?

Can I make hires that have no intention of moving to LA? Probably the answer is yes, and we're working through that in real time, to be honest, Jim. It's not an easy one. So venture's changing. I think you can be effective in what you do, but I do think there's something to sitting down with an entrepreneur, having a beer with the entrepreneur, taking a walk with the entrepreneur to say, hey.

Are we really ready to go do this together? Versus, hey. I wanna give you money over Zoom. I'm excited to back you. It loses some of the effect.

I look forward to a time when we can be back face to face. And so in this COVID environment, in terms of investor presentations and everything else, you're still doing a lot of intake meetings and doing them on Zoom? A ton. We made eight investments last year. Two of them happened before COVID where we had met the entrepreneurs and maybe one we funded right at the beginning of COVID.

So the other six were done remotely, basically. You know, I backed an entrepreneur in Redondo. He has offices in El Segundo. We did all diligence all the way to the finish line over Zoom, and then I went and had coffee with him the day after we closed. And we did an outdoor coffee in Hermosa Beach.

That was weird for me because normally, I would have been down in his office looking at all sorts of stuff. So that was strange for us. We did a deal in Seattle where I still haven't met the entrepreneur, Sergei. We did a deal here locally, but we knew the entrepreneur from years before, so it didn't feel like I needed to be face to face with that one. And I think we're doing fine with it.

I gotta go out and raise the rest of fund five, which got cut off with COVID. One of the qualification questions we have with LPs is, have you made commitments without meeting face to face? Are you comfortable making commitments if we never sit in the same room together? Going to Australia to raise money, going to The Middle East to raise money. I mean, if all of a sudden the world accepts that you can do some fundraising over the Internet, Can you imagine how much time that would free up for you?

I can already tell you I know because I've been back on the road for, like, the little bit of December and now hitting into January. I was cranking up call after call after call. And it used to be I would get on a plane, then Rick would come through a month later, then Brett would come through a month later, and we would slow circle around the East Coast to get in front of the right LPs at the right time. Now we just line up a Zoom call, saving us a ton of time. I mean, if you're trying to raise money and you're trying to coordinate people's schedules and get everybody to meet in New York City or wherever, but instead, you're coordinating everybody on a Zoom call, it's a heck of a lot easier to herd cats for a Zoom call than it is to have a meeting in New York City.

So, Brian, you were talking about having lived through two or three down cycles, and you're also talking about timing. Putting aside all the quantitative easing, do you feel like there's any bubble out there right now, or do you feel like that we are due for any correction, or do you feel like this is gonna be another couple years of smooth sailing? This is what I'm really struggling with. I walk Main Street in Santa Monica every day. What?

60% occupancy of retail shops right now? A ton of businesses that were here pre COVID are gone. The pain across the country in Main Street America is so obvious to me, yet our stock markets are at their all time high. And I can't reconcile the two. So I keep saying it's not a v, it's gotta be a w.

There's gotta be another dip coming. I was literally just talking with my bank, and the bank believes it's a v. It's a v recovery, and here's why. There's so much additional spending and stimulation and all these other categories that it's making up for the downside pain of Main Street. And so I'm trying to reconcile that.

It's really hard for me because I see what I see. Right? And I'm like, this can't be good. This hasn't worked its way through the system yet. But the big banks are calling v, not w, and I'm struggling with it.

So I think for what we do, right, I'm not about to say buy tech stocks at these peaks, but for what Crosscut does, couldn't be better positioned. Right? Because I think there's so much money in the system. These mega funds are there. The stacks are there.

I think the m and a will come from 2021. The liquidity that we all want to happen in our early portfolios will start to show up, which will bring more people to the asset class. We're not really correlated with the public markets. It's a really good time to be in early stage tech. If you look back at what happened, like, 2008, 2009, the money that went into the economy that really did help get us out of the recession and fuel a lot of what's taken place in the last twelve years has really grown that middle class up in the sense that there are these tech hubs all over the country now, and it's amazing the amount of money that's gone into the new economy.

As you say with Main Street, we haven't yet figured out how to distribute these trillions of dollars in a way that brings the other 70% along. That is gonna be a challenge, I think, over the next several years, and I think we all struggle with that. Something is working definitely in the tech space, as you said, in the food delivery space and for Amazon and everything else. It's amazing. But then these restaurants and all these millions of people that aren't working right now, we haven't yet figured that out.

Yeah. And, again, not to take it back to Welcome Tech, but you saw the way the banks responded to their biggest clients to get the first dollars into the hands of those that have access. Well, that's white privilege in its most obvious form right there. Absolutely. And so I look at a company like WelcomeTech where they took a million dollars of foundation money, not government money, and distributed to the migrant farm workers who were not getting those PPP dollars because no one else was thinking about it.

We preloaded it on a debit card. We handed it out to x thousands of individuals and gave them the dollars that they should have had access to. But because they don't have a bank that says, hey. How do I help you get this loan? They didn't get it.

Right? And so fixing those problems are things that I love seeing solutions to. We, as a country, need to be more thoughtful about that, and we need to come up with ways to bring a greater equality across that stack. You're right. It didn't happen in phase one of PPP.

It was the people with the best access got the dollars early, and, hopefully, they're finding ways to level the playing field. It's amazing in all the companies that I talked to with PPP money. I mean, there were two things. One, if you had a relationship with a bank and they liked you as a customer. And then also, you know, if you talk to the lawyers in town that were putting these things together, if you're not a sophisticated entrepreneur and you're having to deal with all these forms, for a lawyer, it's not a nightmare, but it can be very intimidating.

Yeah. You know, who knows what's ahead, honestly, Jim? But I do believe there is still tailwinds to the tech ecosystem. What I love most about down cycles or events like this is only the hardcore show up to try to start a new business when things go shit. Right.

Right? And so that's why what you see in a downturn is the best businesses rise above because those entrepreneurs are doing it for the right reasons. It's no longer in vogue to be a startup. You're there because you have something that the world desperately needs. In the world of VR, for instance, I've been talking to people.

One of my friends and business guys said, hey. You gotta try this. One of the things he's looking at and we were talking about is you can go to these conferences and they're doing it with basketball games now where you can literally pick whatever seat you wanna sit in. And in the same way we're doing these Zoom meetings and so forth, I'm wondering if VR will ever play a role in any of this post COVID world from that perspective. I'd certainly say there's more tailwinds to VR than there was.

There weren't a lot of tailwinds before COVID. I hear more now about training with VR and other things, but I still think you suffer from headset penetration. It's just not there. It's not an obvious thing. It's not a a must have tool in your living room.

And so I don't feel like it's a market that we're terribly enthusiastic about, but you're right. There's more tailwinds now around that. And, certainly, as you look at the way entertainment is changing, a shift back to gaming systems for the kids in their rooms because, well, first, they don't wanna go to Laker games, but nobody can right now. So there's massive implications of this long term that, you know, I don't think there's any going back. Like, we might say, oh, we're gonna go back to a normal work environment at Crosscut and everything will be normal.

But there are some things that aren't gonna go back to normal post COVID. And that's our job is to figure out which ones have that kind of paradigm shift and what the new business opportunities that emerge from that are. I definitely personally think that I will use Zoom or the next variation of Zoom for calls with friends and with clients in a way that I never would have done before. I mean, I know there was FaceTime, but there's something about sending somebody email for instead of a call to get on Zoom. Yeah.

It's not the same thing as having lunch or as you said, taking a walk on the fire road. I agree, but I think I'm at my saturation point where I joke. I'm like, I would rather have a phone call now so I can walk out on my deck. By the end of the day, my hip flexors are on fire. And I, you know, I've just been sitting, staring at the screen for hours.

I'm losing my mind. So I like a good old phone call every now and then. Right. It's all finding that work life balance. Yeah.

Well and I think people's awareness to an acceptance of, hey. It's okay. Like, work life balance matters. We made the comment, like, there are people living in Park City and various ski towns. Well, they're not there to sit and stare at the snow from eight to five.

They're probably shifting their schedules a bit where they can get some early tracks. They start at ten, they go to seven. Everybody's adjusting when and how. And as we all know, all that matters is output. It doesn't matter how many hours you put into something.

It's how efficient you are in what you're trying to achieve. Getting away from that framework of, like, it's about hours clocked is really the new paradigm. Right? And then how do you measure that? How do you measure efficacy in a work environment where people are sitting in Park City and you don't wanna be that person going, are they out on the slope four hours a day?

All that matters is work product. Well, Brian, this was great. And speaking of letting you get away from staring at your computer, it is that time. So Cool. This was fun.

Thanks for asking me. I I love doing these things. I love talking about our history. Everyone thinks it's pretty glamorous. It wasn't all that glamorous for a long period of time.

So All of that's good for Crosscutter. I appreciate you giving us a chance to tell the story. I really appreciate your time today.