Jonathon Triest of Ludlow Ventures: “VC Done Right” (and in Detroit)

triest hulk
You meet interesting people backstage at conferences and in 2013 that included Jonathon Triest who started Detroit-based Ludlow Ventures. Despite the seemingly not so humble tagline (“VC Done Right”), I found him to be a ‘grow the pie’ guy who excitedly looks for opportunities to help entrepreneurs and collaborate at the seed stage. In that spirit, asked him to share some background and perspectives.
Hunter: We met last year and i’ve been impressed by your eye for interesting companies but I’ve got no idea how Ludlow Ventures got started. What’s the origin story?
Jonathon: Oh man. I’m a fortunate guy. This is not your typical VC origin story. I was not an early employee of Google, nor did I exit a company for 6 zillion dollars. Let’s back up. I was the furthest thing from a good student. By some miracle I got into the University of Michigan, and soon started passing classes by developing strong relationships with my professors rather than living in the library. Although never medically confirmed, I’ve always been convinced that I have numerous learning disabilities, so I’ve never been able to sit and focus for long stretches. On a positive note, my inability to sit forced me to learn about people and building relationships. Josh Howie (@joshxhowie) just tweeted “It was only after Attention Deficit Hyperactivity Disorder was shortened to ADHD that its sufferers were able to focus on their condition.” That pretty much sums me up 🙂
I’ve always had a passion for photography, so while at U of M I joined the Michigan Daily (the campus student publication) as a photographer. I’m dating myself here, but this was during the transition to digital. In fact, most of my early work there was done by pushing and developing film manually. I fell in love with the post production work I was doing and my interest in photography started to subside. I taught myself the Adobe suite, and one thing led to another. I found myself doing a lot of design work. There was really a need for designers at the time, so I figured “hey, I’m ok at this. It holds my attention, and I can charge a boatload for a silly logo (long gone are those days.) I opened Triest Group a small design boutique and moved to NYC.
It was there that I started doing strange things to get in front of people I wanted to meet. My first client was a company that made really cool headwear for men. They ignored my emails, so I found out the CEO was leaving town to attend some fashion conference in Brazil. When I knew she was out of town I went to her offices as if I had a meeting planned. Chutzpah. After her assistant was done apologizing for the “miscommunication” I told her I’d leave my mockups in the CEO’s office. The CEO returned to my vision of her brand plastered to every wall in her office. I could have gotten a nastygram, but instead got hired… client numero uno was in the books. I continued to do more branding and design work for clients and over time found myself working for mostly cool tech startups. I was smitten. No turning back. Moved to Jerusalem, Israel, then Atlanta where my wife was in medical school, and finally moved back home to Detroit when we started having children, all the while building up a good book of design business for tech companies.
As the years progressed I found myself less interested in design and more interested in the business side of the startups I was working for. I made the decision that someone with the attention span of a gnat would do better on the investing side of the table rather than operations and began pitching friends and family on the idea of starting a small fund. It remained just that, an idea. No one had much faith that I could effectively invest their hard-earned capital (and rightfully so, I had no formal training, a pathetically small network, and half-baked strategy.) So then I did what any self-respecting, eager beaver would do… beg. I basically made myself so annoying that in an attempt to get me to leave them alone a few family members dedicated a modest amount of capital to help me get the first “fund” (no outside LP’s) running. I crowdsourced a logo, named the firm Ludlow after the street I grew up on as a kid, and made myself some business cards. Game on.
I went out west and started knocking down the doors of the most reputable investors that I had been reading about. Most of those doors were reinforced with steel and never budged, but a few opened. Brad Feld (Foundry Group) and Naval Ravikant (AngelList) were (semi) receptive to the idea of mentoring me, and I’ve made them regret that every day since.
There’s more… but that’s probably way more than you were interested in.
HW: You’re in a wide range of interesting companies – how do companies usually hit your radar?
JT: We seek out incredible people bringing BIG ideas into fruition. Our ears are always to the ground, and the second we hear of an impressive personality, we do everything in our power to meet with them. Hunt them. Make is so they have trouble going to sleep at night without taking our money. Sounds kind of creepy. But hey… we’re kind of creepy.
Our inbound deal flow looks like this in order of priority:
1) Companies we read/hear about and hunt down.
2) Warm intro’s from entrepreneurs we’ve previously funded.
3) Warm intro’s from VC friends (that’s you Hunter!)
4) Angel List (an awesome place to discover startups.)
5) Cold emails (should be noted that we’ve never invested in a cold intro… not to say it will never happen, but it hasn’t happened yet.
HW: Sooooo Detroit VC scene. What’s that like?
JT: It’s Growing. We moved our offices to Downtown Detroit nearly three years ago and the transformation has been spectacular. There’s LOTS of growth still needed to make it sustainable, but if the trends of the last three years are indicative of the future, we’re in a good spot.
It’s a small scene. Everyone knows everyone. More importantly, like true midwesterners, people are always willing to help each other. When a Michigan company wins, we all truly feel like winners. That’s not something I’ve seen outside of Detroit.
HW: Is it getting more competitive for early stage VCs like yourself? Are you finding sharp elbows working with larger VCs? Get screwed out of pro rata recently?
JT: No comment.
Screw that. Ya, we’ve gotten screwed out of some later rounds by larger VC’s. But, to be fair, of the 20+ companies we’ve funded that have gone on to raise larger rounds, it’s happened twice. While not the norm, it still stings. We made a bet on these teams when the fancy-pants VC’s weren’t ready to back them. Then they prove themselves and we get diluted. Still figuring out how to send them flaming bags of poop.
HW: What’s something you believe that might be contrarian or a less frequently held belief among other investors?
JT: That the most important qualities in a founder (or founding team) are not technical skills or business expertise, rather the ability to communicate clearly, passionately, and effectively. If someone can explain what they do clearly in the first 30 seconds, there’s a good bet I want to learn more. Most people are boring. It sounds rude to say, but it’s true. At Ludlow, we are always looking for the unique individuals that captivate and motivate those around them.
(thanks to TechCrunch from who I stole the Green Jonathon graphic)

I Don’t Want to Meet Your Company at Demo Day

As a new seed fund you might imagine Homebrew hustles to incubator demo days, taking notes and then chasing down founders to make an in-person connection. Nope. If you see me at a demo day, it’s likely to show support for the incubator itself, not to discover the Next Big Thing. Why? Because if I’m meeting a founding team for the first time on demo day I messed up. Given Homebrew’s commitment to go “all in” for our founders (leading financing rounds, operational guidance) and our fund’s thematic focus (the Bottom Up Economy), if I’m doing my job we’ll have found one another earlier, even if fundraising activity hasn’t begun.

It’s not because I want a sneak peek, or to try and pressure you into taking money before you have the chance to make a market. Rather I’m hoping we can see how each other work, maybe even work together by hopping off a whiteboard to talk through a design issue, product strategy or distribution hack you’ve been struggling to solve. I’m more interested in the way you think, communicate and lead, than your Keynote pitch skills. A termsheet should be just another milestone within a long relationship. When you talk with Homebrew, we don’t act one way before we wire you money and different afterwards.

Some founders (or incubator founders) will read this and raise an eyebrow, assuming there’s a hidden agenda on our part, or that there’s signaling risk in talking with investors in a staggered fashion. Maybe insisting that the unveiling of a company and subsequent funding auction yields the highest valuation. I realize that in aggregate some of these statements may be true (well, not the hidden agenda part). Thankfully we don’t want to invest in the aggregate company. And we have no problem being part of competitive/collaborative fundraising efforts. You want to kick off your raise on demo day and close quickly to create urgency? No problem, we’re excited to support that but the probability of our participation increases dramatically if we’ve had the chance to see you develop as a company and know that you too have had the opportunity to get to know us.

Making 10 or fewer investments each year gives us the ability to look for opportunities where there’s great culture fit between Homebrew and founders. Deal terms matter but people matter even more. We want to work furiously to help mission-driven founders build the companies they imagine. Ones that last a long time.

Aside from our model and ambitions, I’d suggest that if you’re in an incubator, early on identify a handful of funds that you want to get to know better. Funds that are likely to lead or otherwise participate in your seed round. Express that interest and spend some time together before you hit the stage with your ‘up and to the right’ graph. At the end of the day do this not because it’s what investors may want but because it will help inform your decisions.

So see you at demo day, but it’ll be sitting in the first few rows giving you a thumbs up for the progress you’ve made, not leaning over to the person next to us asking “what was that company’s name again?”

For an Operator, Becoming a VC Isn’t the “Best of Both Worlds”

“Wow, that’s like best of both worlds for you. Investing other people’s money and getting to work on a bunch of cool products.” I heard this pretty often as I started to tell friends and former co-workers about Homebrew, our seed stage venture fund. While our experience and passion around product design will hopefully be a major reason entrepreneurs want to work with us, “best of both worlds” isn’t just the wrong way to look at becoming a VC, it’s actually harmful for both the investor and entrepreneur. The entrepreneur should be building the company they want to see exist and the investor should be assessing the entrepreneur’s capability to do so.

My first year of angel investing I fell into classic “operator turned investor” traps. During pitches I’d get excited about a company because I could imagine how I’d go about solving the problem identified or the product described. Instead I should have focused on the founder’s understanding of the problem and how they were going to solve it. Many times when working with a team my advice would often sound like “well here’s how I would do it…” That’s fine but only a B+ answer. What’s way more valuable is to understand the capabilities of the team, help them establish the framework within which to make a decision and then guide them towards execution. As I spent several more years investing and advising I was able to self-correct these tendencies and become more valuable to companies.

With Homebrew I knew I was making a distinct choice to become a product-centric investor, not a player-coach. My goal is to invest in strong exceptional teams who have the ability to succeed on their own, and help them increase the probability, scale and velocity of that success. And we intend to do that via our own time, a strong group of entrepreneur advisors, the right co-investors, the broader Homebrew community and a set of other ideas we’re still, uh, brewing.

I’m a tremendous believer in the value of operators turned professional investors (duh) but it’s perfectly legit for a founder to ask these investors “I respect what you were able to build but help me understand how you intend to translate that experience into helping me build the company, the product, the team and the culture that I want to build.” The best answers will be centered on growing your capabilities, not touting theirs.

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