Wednesday, January 29, 2020
Brian Garrett, Crosscut Ventures, On Mental Health And Investing In Founders
This week, Los Angeles-based Crosscut Ventures announced a brand new effort to provide health and wellness to the founders of companies it invests in, helping those founders with well being, mental health, stress management, coaching, and leadership development. We spoke with Brian Garrett, Managing Director and Co-founder of the firm, on why the venture investment firm decided to launch the program.
Tell us about this new program?
Brian Garrett: We're launching a founder health and wellness program. You may have heard a couple of firms in the Bay Area talking about the importance of founder well being, mental health, and stress management, but from our perspective, this also includes coaching and leadership development. It's a comprehensive bucket. The logic behind this, is that 80 percent of our bets are founder bets, and we believe we need to use every resource we can to help entrepreneurs be successful in hitting milestones. We have seen a lot of this, coming up in the thread of the the venture ecosystems. We're the first firm in Los Angeles to do anything formal on this, and we hope it will open a dialogue to drive this across the ecosystem, so people are willing to talk a little more about what's happening behind the curtains of these companies. We want to change the culture and framework of the “I'm killing it” culture of early stage entrepreneurship, where you're expected to hold everything inside, even if you're struggling, and where you don't feel like you have an outlet for the feelings you are experience as you build your business. That's the framework we've build with Evolution.
What drove your decision to focus on mental health and this aspect for entrepreneurs?
Brian Garrett: I would say it's a combination of two things. First, I started seeing some of the entrepreneurs in our portfolios struggle through some very profound tragedies, often happening in the middle of important financings. But, they didn't feel comfortable saying that, hold on a second, my world is falling apart. So, they would stay focused on the task at hand, close the round despite suffering in their personal lives. The second thing that drove this, and I have a blog post I'll be posting on this, is my own personal journey as an entrepreneur and also as a founder of Crosscut. It's the framework that you are taught, to put your head down, and keep achieving and grinding. I did that until age 45, and never looked back at my own baggage and issues. For me, I lost my father when I was 13 years old, and I was back to school just four days later, setting goals for my future, and achieving and achieving and achieving. I never stopped and got off the treadmill to look at the damage that loss had on me, both as a child, or as an adult. As I started doing a lot of the work to address that, and saw the benefit of that work, I started to bring in that coaching framework and therapy into the partnership at Crosscut, as a team, and in how we communicate. I can't fathom how impactful that has been at our portfolio company level, which is why it's a big initiative for Crosscut.
Tell me what's new now with Crosscut, it's been a few years and a few funds now, where are things now?
Brian Garrett: Nothing has changed since we launched eleven years ago, except that we're now investing out of our fourth fund, a $125M fund. We've made about 25 or 26 investments out of that fund, and we're wrapping up that fund over the next four to six months. We continue to be focused on early stage, seed round investments in emerging ecosystems. We've been doing that out of LA, which is our bread and butter, because of the great entrepreneurs we have here in our backyard. We have always been kind of under the radar, and haven't had lot of publicity, but we're one of the most active funds in the market.
Any lessons you have learned now that you're now on your fourth fund?
Brian Garrett: The biggest thing that has shocked us, is how broad and diverse LA as an ecosystem has become. If you look back at our history, our first fund was in 2008, and we did nine ad-tech deals and nine e-commerce deals. If you look at fund four, our investments are now in probably ten to fourteen different categories of technology, everything from deep technology like the company we have putting a satellite constellation into space at the end of the year, Umbra Labs out of Santa Barbara, to a fintech company out of LA in financial services for the Hispanic market, to traditional software as a service, to healthtech with our Senior Associate, Maureen. It's developed quite a bit from when we first conceptualized the firm in 2008.
We often hear that people think there's still not enough capital in LA, what are your thoughts on that?
Brian Garrett: There is a lot of money flowing this direction. I think the bulk of the capital is Silicon Valley, Series A money. I can't tell you how many people, on a weekly basis, from those funds are in our offices asking us what we're looking at here. I think there's plenty of money and opportunities for a Series A. What's interesting, is you have four or maybe five, institutionally backed, seed funds in LA, and maybe ten others. But, the overlap between a Fika Ventures, a Bonfire Ventures, Mucker, and Crosscut are very low. So what I'm saying, is there are plenty of opportunities down here, we're seeing more institutional money coming into the system, and that's a benefit to the startup entrepreneurs at the pre-seed and seed round. Obviously, there's also plenty of A round money here, with Upfront, March, Greycroft, and all of Silicon Valley hunting down here.
Is there anything that you wish entrepreneurs you are funding knew today?
Brian Garrett: My advice right now, is we're heading into some uncertain times. From my point of view, I have two pieces of advice. You need to look really deep into what's driving you to do this, and make sure your reasons for building your business are authentic and true. If it's not a concept where you have real passion and fire for, and that's not there, you have to rethink if that's the right thing for you to do as an entrepreneurs. If that aligns perfectly, since we're heading into uncertain times, is you need to overcapitalize the business, relative to the milestone you are trying to achieve. We don't know what is coming, so you need to have enough money on your balance sheet to see your business through difficult times. That seems prudent from me, from our first hand experience. Our first fund was in 2008, and we made five or six initial investments in our portfolio headed straight into the Lehman collapse and our first recession. We saw first hand how difficult it was for our portfolio companies to survive without capital available to them. That's where you need a deep conviction, as a founder, and make sure your idea is worth fighting for as tough as times may get. If you are able to get more capital, I highly suggest you do.
Thanks!