20VC Why Vulnerability Is A Strength In VC, 3 Core Components That Make The Most Successful VCs & How VCs and Entrepreneurs Can Build Meaningful Relationships PreInvestment with Brian Garrett, Founding Partner @ Crosscut Ventures

In this episode of the 20 minutes VC, host Harry Stebings interviews Brian Garrett, co-founder and managing director at Crosscut Ventures, a prominent venture fund in LA. Garrett shares his journey from Silicon Valley to Southern California, seeking a more balanced lifestyle and the opportunity to work closely with entrepreneurs. He emphasizes the importance of humility, vulnerability, and human connection in venture capital, countering the industry's tendency toward ego and greed. Garrett's approach to VC prioritizes building trust and deep relationships with entrepreneurs, viewing vulnerability as a strength and advocating for servant leadership within company cultures. The conversation also touches on the challenges of fundraising and the significance of maintaining authenticity and alignment with founders throughout the investment process.

• Harry Stebbings hosts the 20 Minute VC podcast.
• He shares insights on his new health and fitness regime.
• Engages with the audience on Snapchat and Instagram.

You are listening to the 20 minutes VC with me, Harry Stebbings for all things on my new health and fitness regime.

This quote introduces Harry Stebbings, the host of the 20 Minute VC podcast, and hints at his personal interest in health and fitness.

• Brian Garrett is the founding partner and managing director at Crosscut Ventures.
• Crosscut Ventures is a leading venture fund in Los Angeles.
• The portfolio includes companies like Superevil Megacorp, the Black Tux, and Mobcrush.
• Brian Garrett has a history of operating roles, including a turnaround at capassa.com and co-founding stylesaint.com.
• Crosscut Ventures has scaled significantly, with its latest fund raised being $125 million in December 2017.

Therefore, I'm thrilled to welcome Brian Garrett, founding partner and managing director at Crosscut Ventures, one of LA's leading venture funds today, with a portfolio including the likes of Superevil, Megacorp, the Black Tux and Mobcrush, just to name a few.

The quote introduces Brian Garrett, highlighting his role at Crosscut Ventures and the success of the venture fund under his leadership.

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• Brian Garrett moved from Silicon Valley to Los Angeles for lifestyle reasons.
• He was interested in the balance of strategy, working with entrepreneurs, and having a portfolio of opportunities.
• His professor introduced him to venture firms in Southern California.
• He joined Palomar as an associate and quickly realized the importance of proprietary deal flow and personal brand in venture capital.

It was very much about where do we want to raise our kids and what do we want to do when we're not working. And I knew that all I really learned in business school was that I was really interested in the balance of strategy and working with entrepreneurs and looking at business models and strategies, but liking the idea of having some upside from a portfolio of opportunities.

Brian Garrett discusses his motivations for moving to LA and his interest in venture capital, emphasizing the importance of lifestyle choices and the allure of working with a diverse portfolio.

• Crosscut was founded in 2008 by Brian Garrett, Bret Brewer, and Rick Smith.
• The decision to start Crosscut stemmed from the desire to have proprietary deal flow in the LA ecosystem.
• The founders saw the potential for a venture fund that was ingrained in the local market, rather than competing in oversaturated markets like Silicon Valley.

And so that was the genesis of our belief in starting crosscut. And so in 2008, we grabbed Bret Brewer, who was my next door neighbor and the co founder of Intermix Media. And Rick and I and Bret decided to start Crosscut.

This quote explains the origins of Crosscut Ventures and the strategic decision to focus on the local LA market to access proprietary deal flow.

• Brian Garrett discusses the one-track mindset of Silicon Valley, which he found limiting.
• He believes that this mindset occurs in cycles, much like the tech industry itself.
• The competitive nature and focus on equity in startups were factors in his decision to leave Silicon Valley.

For me, back in one, it was simply that there was one conversation, it was how much equity you had in startup XYZ. And I just wanted something.

Brian Garrett reflects on the singular focus within Silicon Valley culture, indicating his desire for something more diverse and balanced, which influenced his move to LA.## Human Side of Venture Capital

• Brian Garrett emphasizes the importance of transparency, vulnerability, and humility in venture capital.
• These attributes are often scarce in an industry driven by ego and greed.
• Humility is seen as an acknowledgment of being part of something bigger.
• Success in venture capital is attributed to luck, timing, hard work, pattern recognition, and choosing the right entrepreneur.
• Entrepreneurs are the main contributors to their success story, with VCs playing a minor role.
• Sharing personal stories can build trust and humanize VCs, making relationships with entrepreneurs more enjoyable.

"I think I'm finding that transparency and vulnerability and humility are core components of human connectivity. And these attributes seem to be a bit scarce or they don't seem to be a topic that is put front and center. Industry generally is driven by ego and greed and I think it brings out some of the bad side of humanity."

This quote highlights Brian Garrett's view that the venture capital industry lacks focus on essential human qualities such as transparency, vulnerability, and humility, which he believes are crucial for genuine human connections.

• Humility in venture capital is about recognizing the collective factors contributing to success.
• VCs are a minor piece in the story of successful entrepreneurs.
• Humility resonates with entrepreneurs, as the path of entrepreneurship is also humbling.
• Sharing humble beginnings and struggles can foster stronger connections with entrepreneurs.

"The entrepreneurs deserve all the credit. We are a very minor piece of their story arc."

Brian Garrett stresses the importance of humility by acknowledging that entrepreneurs are the primary drivers of their success, while VCs play a supporting role.

• There is a criticism that the venture capital industry lacks transparency and responsiveness.
• Top-tier VCs may create a perception of exclusivity that can be both alluring and intimidating to entrepreneurs.
• There is a need for the industry to improve its level of transparency and responsiveness to entrepreneurs.

"I think that criticism is a fair one, that it's not really a transparent industry."

Brian Garrett agrees with the criticism that venture capital can be opaque and unresponsive, suggesting that there is room for improvement in how VCs engage with entrepreneurs.

• The traditional image of a dominant, Steve Jobs-like entrepreneur may be changing.
• Great company cultures are believed to be built around servant leadership, hiring talented individuals, and fostering collaboration.
• The journey to success is as important as the success itself.
• There is a growing focus on company culture and empowerment in recruitment and entrepreneurial discussions.
• Confidence is essential, but it must be paired with self-awareness to avoid arrogance.

"I think the joy in getting to the success will be as important as the success."

Brian Garrett advocates for a shift in entrepreneurial focus towards building a positive company culture and enjoying the process of achieving success, not just the outcomes.

• Vulnerability is viewed as a sign of strength and a key component of intimacy and deep human connections.
• Leaders who embrace their flaws can engage in real dialogue and show authenticity.
• Entrepreneurs who can openly acknowledge their weaknesses resonate more with Brian Garrett.
• Vulnerability allows leaders to connect on a deeper level with others, including potential investors.

"Vulnerability is the ultimate sign of strength."

Brian Garrett quotes Dr. Brene Brown, emphasizing that showing vulnerability is a powerful and confident act because it reveals one's true self and fosters genuine connections.

• The culture of always appearing to be "crushing it" is prevalent due to the fear of negative perceptions affecting fundraising opportunities.
• There is a dilemma in balancing transparency and vulnerability with the need to maintain a strong public image.
• Leadership sets the tone for company culture, and a culture of trust and empowerment can mitigate these challenges.

"I don't have a great answer for that one. I honestly believe that the leadership sets the tone, and if they build a tone of trust with their employees and they build a culture of empowerment and servant l."

Brian Garrett acknowledges the difficulty in maintaining transparency without jeopardizing a startup's image but believes that the solution lies in leadership fostering a culture of trust and empowerment.## Leadership and Team Dynamics

• Positive treatment of team members leads to less negative leakage.
• Team members who feel connected to both the good and bad are more invested in success.
• Being part of the solution to problems creates a sense of indebtedness and joy upon success.

And they probably have more faith in you knowing the true facts. Absolutely right. So think about it. Don't you feel more invested in the success of something when you feel honestly connected to the good and the bad that's taking place?

The quote emphasizes the importance of transparency and connection to both positive and negative aspects within a team, which fosters greater investment and trust in leadership.

• The relationship between VCs and founders is built on trust.
• Founders should see VCs as supportive allies in both success and adversity.
• Personal agendas should be set aside to align with the objectives and challenges of the venture.
• Successful relationships are established before investment and require time to develop.

Ultimately, that relationship is about trust. Does the founder believe that you are aligned and supportive of all the ups and downs that will surely come along?

This quote underlines the necessity of trust in VC-founder relationships, where founders must believe in the VC's commitment through all phases of the venture.

• Personal connections are prioritized in VC deals to ensure alignment and commitment.
• Understanding the entrepreneur's motivations is crucial.
• Relationships should not be rushed, even in competitive environments.
• Southern California's VC ecosystem allows for more time to build relationships.

It's the beauty of Southern California right now. We don't have that speed and urgency.

The quote highlights the slower pace of VC deals in Southern California, which allows for more thorough relationship-building between VCs and founders.

• Brian Garrett's approach to VC relationships has evolved over time.
• Understanding personal values and seeking compatibility with entrepreneurs is key.
• Enjoyment of the process and success of companies are linked to this relational approach.

Absolutely changed over time. I came into the industry knowing nothing.

Brian Garrett reflects on how his approach to building relationships with entrepreneurs has evolved, emphasizing the importance of personal growth and alignment with entrepreneurs' values.

• Ego and alternative agendas can negatively impact VC-founder relationships.
• Young VCs may feel pressured to speak, leading to reactive rather than thoughtful contributions.
• The best VCs remain calm and patient, recognizing that not all deals will succeed.

With this relationship, most of the time it's about ego getting in the way or an alternative agenda that's driving their behavior.

The quote identifies ego and hidden agendas as common problems in VC-founder relationships, which can lead to ineffective communication and decision-making.

• Founders appreciate VCs who acknowledge the collaborative nature of problem-solving.
• VCs should challenge founders constructively without causing embarrassment.
• Empowering founders to lead with confidence is preferable to undermining their authority.

Yes. I think entrepreneurs are resonating with this concept of I don't have all the answers, you don't have all the answers. Let's go figure it out together.

The quote captures the essence of a collaborative relationship between VCs and founders, where both parties work together to find solutions without claiming to have all the answers.## Favorite Book and Its Influence

• Brian Garrett's favorite book is "The Alchemist" by Paulo Coelho.
• The book influenced his path on spirituality and embodies his core life philosophies.
• Philosophies include living in the moment, perseverance, truly experiencing life, and having confidence in one's journey.
• Brian revisits the book every few years to reflect on his path and appreciate milestones.

"So, my favorite book is the Alchemist by Paulo Cuelo. It was sort of one of the first books I read back in college that started my path on spirituality. And for me, it embodies many of my core life philosophies, like living in the now, perseverance, truly experiencing life, and having confidence in your journey."

This quote explains why "The Alchemist" is Brian's favorite book and how it aligns with his personal beliefs and philosophies, which are integral to his life and work.

• Brian believes in the concept of radical candor.
• He feels this approach can lead to authentic and honest conversations without the influence of ego or self-doubt.
• Brian wishes for a level of trust where people can debate without being offended by differing viewpoints.
• He observes that society often fears judgment, which prevents open communication.

"I guess I believe in this concept of radical candor, and it gets me in trouble sometimes. But I truly believe that. I wish we, as an industry, or at least everyone that I interact with, could get to a place where the ego is removed, low self esteem and doubt are not a factor, and all conversations can be truly authentic and honest."

This quote highlights Brian's belief in radical candor and his desire for more genuine communication in professional settings, despite societal challenges.

• The most challenging fundraise for Brian was the first $30 million for Crosscut 3.
• The fundraising took place in late 2014 when Southern California was not yet seen as a "real market" by LPs.
• Brian faced personal health challenges while traveling to secure funding.
• The situation improved in early 2015 when institutional money from US sources showed interest.

"And it was late in 2014 and not so clear that Southern California was a, quote, real market to lps yet. [...] And combined that with I had a heart ablation to stop an arrhythmia and it didn't go so well. So I ended up with a paralyzed stomach, couldn't get food down, lost 20 pounds, and I was literally on planes following leads to family offices throughout Europe trying to find the next chunk of capital."

Brian shares the difficulties faced during the Crosscut 3 fundraise, highlighting the skepticism about the Southern California market and his personal health struggles at the time.

• Brian often reverts to the advice "Let the game come to you."
• He believes that things will happen when they are meant to and that every experience is part of one's journey.
• This advice was given to him by Teresa from Excel and has had a lasting impact.

"Let the game come to you. Can't force things. Everything that is supposed to happen will happen when the time is right and every experience is part of that journey."

Brian reflects on advice that has guided him, emphasizing patience and trust in the natural progression of events.

• Brian's most memorable LP meeting was in Majorca, pitching to a family office.
• The meeting included a 747 flight simulator experience, which ended with Brian crashing.
• Despite the memorable encounter, he did not secure an investment from the meeting.

"Yeah, so while chasing those breadcrumbs, I ended up in Majorca pitching a family office that owned one of the largest airlines in Spain and ended up in a 747 flight simulator. Needless to say, I crashed and burned."

Brian recounts a unique LP meeting that was notable not for its success in securing funds, but for the distinctive experience of crashing in a flight simulator.

• The most recent announced investment is in Fuzzy Pet Health.
• The company offers advanced personalized pet care delivered to the home.
• The investment decision was driven by the founding team, their affordable care offering, and the potential to transform pet healthcare.
• Feedback from pet owners indicated dissatisfaction with current vet experiences, suggesting a market need.

"We've already made about five investments with our new $125,000,000 fund, but the only announced deal is fuzzy pet health. [...] So this is trying to really transform the way pet health care is delivered to the pets and the pet owners."

Brian details the rationale behind Crosscut's investment in Fuzzy Pet Health, highlighting the company's innovative approach to pet healthcare and the market opportunity it addresses.