20VC What Is Wrong With The VC Industry, Why VC Is A Customer Service Game and Why Car Ownership Will Be A Thing Of The Past with Brett DeMarrais, Partner @ Ludlow Ventures

In this episode of the 20 minutes VC, host Harry Stebbings interviews Bret Demaris, partner at Ludlow Ventures, discussing his unconventional path into venture capital after founding the crowdsourced wedding videography company, Weddit. Bret shares his belief in being founder-friendly, emphasizing the importance of supporting entrepreneurs beyond mere business metrics and fostering deep, honest relationships. He also dives into his views on the future of car ownership, predicting a shift towards autonomous vehicle fleets and the potential challenges of consumer trust and liability. Bret highlights the significance of treating founders with dignity as a long-term investment strategy, rather than focusing solely on short-term financial gains. Additionally, he expresses enthusiasm for companies like Gather, which operates in niche markets and has strong customer satisfaction, reflecting his investment philosophy that values both the team and the market potential.

• Host Harry Stebings introduces the podcast "20 minutes VC" and himself.
• Bret Demaris, Jonathan Triest's partner at Ludlow Ventures, is the guest.
• Ludlow Ventures' notable investments include Product Hunt, Sprig, Angel List, and Ubeeam.
• Bret Demaris founded Weddit, a crowdsourced wedding video platform.
• Weddit won awards for customer satisfaction by Bride's choice and best of the knot in its first year.
• Cooley, a law firm specializing in startups and venture capital, is mentioned as a key operational support for VCs.
• Eve mattress, a direct consumer mattress company in the UK, is promoted for its trial and refund policy.

You are listening to the 20 minutes VC with your host Harry Stebings at H. Stebbings on Snapchat.

This quote introduces the podcast and the host, Harry Stebings.

Now, Ludlow themselves have investments in the likes of Product Hunt, Sprig, Angel List and Ubeeam, just to name a few of their fantastic portfolio.

This quote highlights some of the successful investments of Ludlow Ventures.

Bret found founded Weddit, a crowdsourced wedding video platform that reduced the cost of wedding videos and made them social.

This quote introduces Bret Demaris's entrepreneurial background with his company Weddit.

• Bret attributes his venture into VC as luck.
• Graduated from the University of Michigan in 2009 with a Bachelor of General Studies.
• Founded Weddit due to the poor job market and a generalist degree.
• Weddit was the first crowdsourced wedding videography company.
• Burnout led Bret to consider moving to San Francisco.
• Jonathan Triest, a friend and the founder of Ludlow, offered Bret a partnership.
• Bret's decision to join Ludlow was influenced by the founder-friendly approach of the firm.

The one word that would summarize it is luck.

Bret believes luck played a significant role in his transition to venture capital.

I was going to move to San Francisco. And that's when my friend Jonathan Trias, who I got to know working alongside of him, our desks were pretty much next to each other in a co working space in downtown.

This quote explains how Bret's relationship with Jonathan Triest led to an opportunity at Ludlow Ventures.

I would like to think because he saw a spark of something in me that know, potentially good at investing, but I think more so he just didn't want to lose basically his only friend in Michigan.

Bret humorously suggests that his friendship with Jonathan was a key reason for being offered a partnership at Ludlow Ventures.

• Bret was not apprehensive about joining venture capital without a fund in place.
• He was drawn to the founder-friendly approach of Ludlow Ventures.
• Bret's lack of expectations allowed him to be open to learning and adapting.

I wasn't apprehensive at all. I said yes. I think he was shocked at how quickly I said yes because there was no fund for me to really go work at at the time.

Bret's immediate acceptance to join venture capital reflects his readiness for a new challenge.

I saw how Jonathan operated every day and the mentality at Ludlow. And what he really started from the beginning was, we're going to be really founder friendly, really great guys to work with.

This quote highlights the founder-friendly approach of Ludlow Ventures and its influence on Bret's decision to join.

• Bret shares his struggles with underfunding and lack of business knowledge.
• He learned hard lessons, such as wasting money on a poorly designed website.
• Bret emphasizes the importance of customer feedback in product development.
• He acknowledges both successes and failures as part of the entrepreneurial journey.

I cried a lot in secret.

This quote reveals Bret's emotional struggles while managing his startup.

I took $30,000 of about the $75,000 I raised, and I hired someone to design a website for my company... it was not functional.

Bret discusses a significant mistake he made in spending a large portion of his funding on an ineffective website.

Why don't you talk to the people who are actually going to be buying from you and figure out what they want to see and how they want it to look and feel and what is important to them.

Bret learned the importance of customer-centric product development through his mistake with the website design.

• Bret discusses the importance of being a supportive VC during challenging times for founders.
• The approach is based on being good partners and keeping the founder's best interests in mind.

And you said about being founder friendly and the really nice guys to work with when the times that a shit come.

This quote addresses the significance of VC support during tough times for startups.## Founder First Philosophy

• The term "founder first" has become synonymous with being nice and friendly in the VC community.
• It should represent a deeper commitment to understanding and supporting the emotional journey of entrepreneurs.
• VCs often lose touch with the emotional struggles founders face, such as self-doubt and burnout.
• Founder first means investing in people over business metrics and being honest and supportive even when it's not aligned with the company's immediate interests.
• It's important to have open conversations about struggles and to provide guidance that may include suggesting a founder step away for their own well-being.
• Prioritizing the well-being of founders can ultimately benefit the business in the long run.

"So when we say founder first, we really try to make it about an investment in people."

This quote emphasizes the importance of focusing on the individual needs and well-being of founders, rather than solely on business outcomes.

"You can tell when entrepreneurs are getting burnt out or they're struggling. And sometimes I don't have a problem saying, like, hey, I don't think this is right for you."

The speaker highlights the importance of recognizing when a founder is struggling and having the courage to address their well-being, even if it might mean stepping back from the business.

• Developing a close relationship with founders is seen as beneficial to the business relationship.
• Being a confidant and friend to founders can lead to more open and honest communication about business challenges.
• This closeness allows investors to be the first point of contact in times of crisis and to celebrate successes more genuinely.
• The line between being an investor/advisor and a friend is not problematic if managed correctly.

"I think the closer you can come to developing an actual friendship, the better the business relationship will be."

This quote suggests that a close, friendly relationship between investors and founders can lead to a stronger and more effective business partnership.

• The VC ecosystem often exhibits a superficial level of founder friendliness.
• There should be a greater emphasis on developing deep, genuine relationships with founders.
• VCs should avoid mocking or belittling aspiring entrepreneurs, as it can damage relationships and future opportunities.
• Treating venture capital as a customer service and human relationship business is essential for improving the VC ecosystem.

"It's just a general sense of that people starting businesses are people and they're not an asset class to be invested in."

This quote underscores the need for VCs to see founders as individuals with personal struggles and aspirations, not merely as investment opportunities.

• Balancing fiduciary responsibility to LPs with the well-being of founders can be challenging.
• Long-term thinking is key: treating founders well, even at the expense of short-term gains, can lead to better outcomes for LPs, the VC firm, and the founder.
• A positive experience for a founder can result in future deal flow and a strong reputation for the VC firm.
• The worst-case scenario in an investment is a complete loss, but a founder's potential for future success remains.

"I would trade kind of the short term effect, selling a company for 1015 million and maybe getting one x two x three x my $300,000 seed investment for somebody sending me amazing deal flow, speaking good about me in the community."

This quote explains the speaker's preference for long-term benefits, such as deal flow and reputation, over immediate financial returns.

• Having candid discussions with founders about business failures is painful but necessary.
• Building a friendship with founders can make these tough conversations easier.
• Honesty and coming from a place of best interest for both the founder and the company are crucial.
• It's important to communicate clearly when a business is not working and there won't be any more follow-on funding.

"Honesty is something that we always try to do."

This quote emphasizes the value of being truthful and transparent with founders, especially when delivering difficult news about their business's viability.## Ludlow's Approach to Evaluating Companies

• Ludlow Ventures strives for honesty when passing on investment opportunities.
• They prioritize clear communication with founders, even when delivering negative feedback.
• The goal is to maintain a relationship based on friendship, trust, and transparency.

"I think everyone at Ludlow tries to do their best to be honest with that assessment."

This quote emphasizes Ludlow Ventures' commitment to providing genuine feedback to founders when deciding not to invest in their companies.

• Bret Demaris predicts the end of car ownership due to the rise of autonomous vehicles.
• Autonomous vehicles will lead to a shift from owning cars to using on-demand transportation services.
• This change could transform car design, focusing less on status symbols and more on functionality for different activities.

"I think car ownership is going to be a thing of the past, because when autonomous vehicles come around, there'll be these fleets of vehicles you can just call on one button."

Bret Demaris envisions a future where the convenience and cost-effectiveness of autonomous vehicle fleets make personal car ownership obsolete.

• Car manufacturers may need to reconsider their role in a future dominated by transportation services.
• There is speculation about new car designs catering to specific experiences like sleeping or entertainment during rides.
• Manufacturers will have to decide whether to adapt internally or through mergers and acquisitions (M&A).

"I think our main point of interaction moving forward is going to be companies that provide as a service, transportation and not purchasing cars."

Bret Demaris suggests that car manufacturers will need to pivot towards service-based models rather than selling vehicles to individual consumers.

• The transition to autonomous vehicles may involve both M&A and internal development strategies.
• GM's acquisition of Cruise is cited as an example of a traditional manufacturer investing in autonomous technology.
• The timeline for the adoption of fully autonomous vehicles is uncertain, with Ford's ambitious goals mentioned.

"It's. I think it's going to be like everything. A little bit of both."

Bret Demaris indicates that the approach to developing autonomous vehicle technology will likely be a mix of internal efforts and strategic acquisitions.

• Trust and liability are significant challenges for the adoption of self-driving cars.
• The transition period, when both autonomous and human-driven cars share the road, will be critical for building trust.
• Liability issues arise when considering how autonomous vehicles will make decisions in life-threatening situations.

"I also think liability is a huge issue, and it's something I think about a lot."

Bret Demaris expresses concern over how liability will be determined in accidents involving autonomous vehicles and the ethical programming of these vehicles.

• The conversation touches on whether autonomous vehicles will need to possess artificial superintelligence (ASI) to make moral decisions.
• There is a fear of a dystopian future where AI decisions could be influenced by factors like an individual's wealth.
• The hope is that advances in AI will be managed responsibly to avoid negative outcomes.

"I don't know if that's out of our lifetime, but I think that's a question that's going to need to be answered."

Bret Demaris acknowledges the complexity of programming moral decision-making into AI and the long-term implications of such technology.

• Bret Demaris shares his favorite book, "Ready Player One," for its exploration of virtual reality and its nostalgic references.
• He also recommends "The Lord of the Rings" series for fantasy fans, highlighting its impact on his own reading journey.

"Ready Player One is my favorite book I've read in recent memory, just because it kind of delves into what the future is going to be like."

Bret Demaris explains his preference for "Ready Player One," emphasizing its relevance to the future and personal resonance with his interests.## CrossFit and Personal Growth

• Bret Demaris emphasizes the potential for self-improvement and overcoming mental barriers.
• He draws parallels between physical training and startup growth.
• Bret highlights the importance of perseverance through initial failures.

"So the first thing I ever learned at CrossFit was, you can lift more than you think."

This quote underlines the idea that people often underestimate their own capabilities, both physically and in other areas of life.

"The easiest gains are always at the beginning."

Bret compares the rapid improvements during the early stages of CrossFit and startups to the more challenging progress seen later on.

"False starts are not failures. They're just kind of opportunities for you to try again, try again."

This quote reflects Bret's belief that initial setbacks should be viewed as learning opportunities rather than outright failures.

• Bret Demaris believes VR will revolutionize collaboration in the workforce.
• He sees VR as an extension rather than a replacement for traditional entertainment.
• The active nature of VR and the desire of storytellers to control narratives are key points.

"I think it's a game changer for collaboration and workforces. I think it's an extension of entertainment for people."

Bret's view is that VR's potential lies in its ability to enhance collaborative work experiences rather than in transforming the entertainment industry.

"It's way too much of an active experience."

The quote suggests that VR's interactive nature sets it apart from passive forms of entertainment like movies or books.

• Bret Demaris shares his go-to resources for industry insights.
• Mark Suster's blog and Dan Primack's newsletter are highlighted as must-reads.

"Mark Schuster's both sides of the tables. My favorite blog and then newsletters. Dan Primex term sheet."

Bret recommends these specific resources for valuable information and perspectives on the venture capital and startup ecosystem.

• Bret Demaris credits Jonathan Triest with the establishment of Ludlow Ventures.
• Bret discusses his personal challenges with networking due to his introverted nature.
• The supportive nature of the tech and entrepreneurial community is emphasized.

"I take zero credit in establishing Ludlow."

Bret humbly acknowledges Jonathan Triest's pivotal role in founding Ludlow Ventures.

"I am naturally an introvert... It takes me a very long time to establish a relationship with somebody, but when I do, it's very deep and very meaningful."

This quote reflects Bret's personal networking style and the challenge he faces in initiating new professional relationships.

• Bret Demaris explains his investment rationale for the company Gather.
• He appreciates companies outside of traditional tech hubs and those operating in niche markets.
• Customer satisfaction and involvement in product development are seen as positive indicators.

"The company is called gather... They help restaurants and event spaces manage their events better."

Bret describes the business model of Gather, highlighting its role in streamlining event management for restaurants.

"The founders are incredible. They got really far with almost no money."

The quote emphasizes the competence of Gather's founders and their efficient use of resources, which contributed to Bret's decision to invest.

• Bret Demaris values deep, meaningful relationships over a large number of superficial connections.
• He has maintained long-standing friendships and applies a similar approach to professional relationships.

"I've had the same five best friends since I was, like, three years old."

This quote illustrates Bret's preference for enduring relationships, which he extends into his professional life.

• Harry Stebings expresses gratitude to Tim and Jonathan for their contributions to the show.
• He promotes his social media and newsletter for audience engagement.
• Cooley, a law firm specializing in startups and venture capital, is endorsed.
• Eve, a mattress company, is recommended for its direct-to-consumer approach and trial period.

"A big thanks to Jonathan for making the introduction."

Harry thanks Jonathan Triest for his role in facilitating the podcast episode.

"Cooley's form more venture capital funds than any other law firm in the world."

Harry highlights Cooley's expertise and experience in the venture capital sector, suggesting its services to listeners.

"Eve is the UK's number one direct consumer mattress company."

Harry endorses Eve, focusing on the benefits of their business model and the quality of their product.