Podcast Episode 49

The If, When, and How to Of Venture Capital 

In this episode, host Ryan Davies engages in a dynamic discussion with Taylor Schaude, co-founder of Voxly Partners, exploring the nuances of venture capital and entrepreneurship. They delve into topics such as the evolution of venture capital, the balance between rapid growth and sustainability for startups, and the emotional journey of entrepreneurship. Taylor shares valuable insights and advice, emphasizing the importance of understanding long-term commitments, seeking mentorship, and maintaining perspective on the journey’s value beyond financial success. This insightful conversation offers listeners practical guidance and expert insights to navigate the complex landscape of tech innovation and growth.

Taylor Schaude, Co-Founder & Partner @ Voxly Partners

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Ryan Davies: Welcome everyone to the Tech Business Roundtable podcast show. This is a podcast show dedicated to shining a spotlight on tech innovators, entrepreneurs, founders, and the compelling narratives behind the movements they’ve established. I’m your host, Ryan Davies. I’m hosting today’s discussion on the if, when, and how of venture capital with Taylor Schaude. 

Taylor’s Background and Experience

Ryan Davies: Taylor, thank you so, so much for being here. 

Taylor: Thank you, Ryan, for having me. Super excited for the conversation today. 

Ryan Davies: This is going to be a killer conversation because I think a lot of times it’s just maybe one of those. It’s the when or the how, or maybe the if versus bootstrapping or whatever, but being able to kind of understand all of the complexities behind this, the decisions that go into it. 

Ryan Davies: We talked before we started recording here that this on its own could be its whole series and who knows it may be at this point. But for a background for our audience about Taylor, 15 years, over 15 years of management, consulting experience, VC, early stage operations, angel investing, you name it, he’s kind of got the piece of the puzzle that probably people are looking to fit into their puzzle piece here. So beginning at KPMG in Slalom in mergers and acquisitions advisory, transitioned to 500 startups as the chief of staff to the CEO, leading to their capital formation team and has played a pivotal role in investing in over 50 companies and aiding in raising over $150 million in external capital. 

Ryan Davies:  Shifting gears to early stage startups, Taylor joined Neo.Tax as the first business hire, overseeing their go-to-market teams, is now the co-founder and partner at Voxly Partners, which is an early stage venture firm. I think we could just do a podcast on your bio, even if we wanted to. We even talked about that, but I think maybe just to kind of kick it off for our audience here, would love you to sort of introduce yourself a little further and provide a background on your role at Voxly Partners and maybe your experience in this ecosystem.

Taylor: Yeah, absolutely. Well, again, thank you so much for having me. I’m super excited about the conversation.Yeah, my background is quite diverse and it expands a lot of different industries. And I think that unique perspective has allowed me to demystify a lot of the questions, whether it’s early stage founders or operators have, as well as firms that are trying to get out there and raise capital. So just double-clicking a little bit on my background, as you mentioned, I started my career over at KPMG in their audit practice, really got to understand the financials, and understanding the inner workings of some large organizations. GE was one of my largest clients. And that opportunity, while at KPMG, I had the ability to work in their mergers and acquisition advisory practice, starting specifically with people and change and really helping after an acquisition would occur, transitioning the human capital advisory aspects of the business. So I really got to understand that at the end of the day, a company is based on maybe the technology, but predominantly the individuals behind that, right? And you got to see that kind of tying back into the most recent news article about OpenAI. OpenAI was a phenomenal company. And then all of a sudden, when Sam left, all of the individuals within OpenAI were ultimately going to go follow him. And all of a sudden, what was the value of OpenAI, right? And I got to experience that really early on while working with people and change. That moved me. So during that time, I was in Atlanta, and I then moved over to the Bay Area to help kind of build out that M&A practice with KPMG. But instead of flying from Atlanta to New York, I was flying from San Francisco to New York.

So then I joined in another firm called Slalom, which was a market-focused advisory firm. And there I did something very similar. And my main project there was I did the integration between Virgin America and Alaska Airlines. And so a few days after the deal closed, I went and joined as a project manager on the Virgin America side and was in their integration management office, and then ultimately helped merge the two airlines. So I got to experience that from an end-to-end experience, as well as got to really understand a really unique business industry, such as the airlines. Following that, I then joined as the chief of staff to the CEO at 500.Chief of staff is a super unique role and something that I’m really passionate about. It kind of gave me a crash course into being an operator at a high level, but also at the same time, not really having to be in the limelight of the kind of being a CEO. And I had the amazing opportunity to work with Christine Tsai, who is the CEO and one of the founders of 500.

And during that time, I got a crash course at VC. She took me underneath her wing, provided me with kind of like portfolio construction, how to invest in some of the world’s leading companies. 500’s portfolio consists of seed investments into Canva, into some other fantastic companies. I can’t pull off all the names on the top of my head, but really got to understand kind of what was that mentality and focus on that. And during that time, I invested in a bunch of companies. I supported a lot of the operations of the firm.And then one of the last roles was I supported general partners in fundraising for their fund. And during that time, it was during the pandemic, as well as… So that was a unique experience, fundraising remotely. But also, I also got to work with institutional LPs.Those are your endowments, your sovereign wealth. People are managing billions of dollars of capital. And so then I got to understand where does venture sit within the overall ecosystem of capital allocation, and got to really dive deep into that, as well as 500 was able to raise capital from these institutional LPs.So I understood how do you translate early stage venture to people who are managing millions, if not trillions of dollars in assets. Following that, I felt like my career, I’d always been on the outside. There’s this Theodore Roosevelt quote that I was just looking at my wall. It’s called the man in the arena. And it speaks about how it’s really easy for someone outside the arena to tell someone inside the arena what to do. And I felt like that was my entire career as a consultant, and then as well as a VC, telling whether it was a company what to do or the founders what to do. And I felt like I needed to refine my skills and actually be in the arena. And so then I went and joined an early stage startup after they raised their seed round called NeoTax. NeoTax is on a mission to automate small business taxes. We started with the Arnie tax credit, which is a U.S. based tax credit that empowers companies to get money from the U.S. government because of investing in innovative technologies. And we built a product that automated majority of that. And then ultimately was using a lot of that information to build our proprietary AI algorithm. And I can talk a lot about that. So I joined as the first business hire as an early employee. As you mentioned, I built out the go-to-market team that was predominantly based on partnerships, whether it was with financial institutions or accounting partners or technology partners. And through that efforts, we grew revenue roughly around 50X during my tenure. And as well as one of the last roles while at NeoTax is I helped construct a partnership that was more recently announced with Thomson Reuters. So Thomson Reuters is now working with NeoTax and there’s some exciting things on the horizon with them as they go and execute at a much larger scale go-to-market. And then following that, after all of that, I wanted to take some time to decompress and understand what did I enjoy during that time in my career. And that’s where I realized and doubled down is that I had most value and enjoyment when I was helping early stage companies build from the ground up. And there was a lot of experience that I had, whether it was on the VC or operator side, and that’s where Voxly Partners came. And so I was always investing on an angel side in companies that I cared about or that I enjoyed or that I scouted for. And I wanted to more or less operationalize that, and this is where Voxly Partners is. And so apologies for taking a little bit of time, but I just wanted to provide a little bit more context there.

Demystifying Venture Capital and Startup Formation

Ryan Davies:  I think it’s incredible for that context because now people really understand the experience, what it takes, just the different angles and all of the pieces that come into play when we’re talking about the founder and investor relationship and the different cards that are in play with that. You started off by mentioning a word, demystifying. I love that, demystifying the venture-backed businesses, demystifying the ecosystem, if you will. So I’d love to, for the benefit of our listeners, maybe demystify for us a little bit of what it means for a business to be venture-backed and maybe some of the support and investing in those early-stage startups that you’re familiar with from that side.

Taylor:  Yeah. So VC has been around since the whaling days, right? And so Cary, back in the day, was people would give money to whalers to go out on boats, and then they would go catch whales. And then they would put that… If they were able to catch them, they’d need to raise money in order to go out to go catch the whales. And then if they were able to catch the whales, Cary was… Which is what venture firms get for the investment, is kind of where the name came from because how much weight they were carrying, right? So VC has been around for a really long time. From my perspective, it’s really kind of catalyzed into a romanticized, I would say, probably during the internet age of when Google came to be, or Facebook, or you name the companies. And all of a sudden, there was this new wealth creation, as well as kind of dynamic shift in the market of, this is a really unique asset class that is moving the world forward. And then since then, there’s been tons of news articles, really exciting opportunities in the venture community, as well as raising venture-backed money. And one of the things when I talk with entrepreneurs a lot, it’s sometimes they get caught up in that romanticized approach, is that in order for me to build a long tenured business, I need to go out and raise venture capital, right? Or venture-backed money. And when I double-click in that perspective, sometimes what I see is that they don’t necessarily understand what it actually means to be a venture-backed company, as well as what venture-backed scale means, as well as when someone as an institutional or venture capital investor invests into the company, what their expectations are. And all of a sudden, the idea of creating a company because you had a pain point is a piece of that, but it’s now much more about the financial return than it is actually about the ability to change the world at times, right? And so one of the areas that I like to talk with founders a lot is sometimes maybe not raising venture capital is the right way. And maybe it’s using alternative forms of capital, the way small businesses, such as if you want to open up a laundromat, raise capital today. They don’t go up to Silicon Valley or Sand Hill Road to go raise money, right? They go to the bank, they go open lines of credit, they do other things, and they can create phenomenal businesses as a result of that, right? And I think by doing that, you have much more control of your company. And by having much more control of your company, especially in the early days, you’re the one who is able to make the decision on where it goes in the direction it was for. Now, later down the road, you may want to pour fuel on the fire and take venture-backed money, that’s completely fine. But you have the ability to make that determination versus starting a company and then all of a sudden thinking, oh, now I need to go raise venture-backed. And so that’s kind of like my general philosophy around startup formation or startups, right? Startups don’t have to be ventured, right? Startups are startups.  

Ryan Davies:  Exactly. I love that. Little pivot here, not really in our questions, but like I said, I love keeping this really conversational with you. What do you think the reason for that is? Is it been ingrained now that it’s like, this is the startup process, you do this, and then you go and pitch it, and then you make tons of money, or you can’t survive without these deep pockets these days, right? Do you hear that a lot, or is this trying to buck a trend really, or is it just a, maybe it’s just an option that people don’t see so clearly or dismiss too quickly?

Taylor: Yeah, I think, I mean, it’s a great question. I’ve thought a good amount about this. I think from my perspective, you’re inundated by information in news media, right? So when you’re going on, I don’t know, Wall Street Journal, or you’re going on Reddit, or you’re going on Tech Crunch, or you’re going to an event and talking with individuals, they’re receiving a lot of this context from the news media, and the news media is highlighting much more of these more romanticized startups, right? Raised, have no product, raised at a billion-dollar valuation, right? Because that’s what gets the clips, right? And as a result of that, it more or less creates the, I guess, I keep on using the word romanticized, this perspective that I’m one opportunity away, one dollar amount away, or venture. If I just raise this little bit amount of money, I’ll be able to achieve that vision, right? And what it doesn’t talk about is the hustle and grind that a lot of these founders had to do years upon years before ever achieving that, right? Before ever achieving that. And I think that is what is not highlighted as much in news media, or in conversations, or on tech panels, or conference panels, that I think should be, right? And my perspective is by kind of like providing more insights or conversations about that, or at least having the conversations, I think that will start to maybe, hopefully, change that perspective a little bit, and ultimately make a better ecosystem, right? There’s lifestyle businesses, and there’s venture-backed businesses, and they both are fantastic and move society forward. 

Ryan Davies:  So let’s talk a little bit about the construct of backing like that, right? Because you mentioned, you know, you’ve been an angel investor, there’s venture backing, there’s, on top of that, there are different types of venture backing and all of that. Maybe give us a little bit of a flavor of, you know, I’m sure most of our listeners are aware of them, but again, maybe just a snapshot of the, where’s the right fit for you, or have you considered type of an angle on that?

Taylor: Yeah, I guess maybe, could you explain a little bit more into the question, make sure I’m answering it correctly?

Ryan Davies: Yeah, no, you know, just, I guess, from your perspective, right, primary reasons why early stage founders might choose to seek either a venture capital, what different types of venture capital to seek, you know, what advantages different, if it’s an angel investor, bootstrapping can bring to the table for them, because I know there’s just different, there’s different variety, like you said, even within the VC ecosystem, there’s all sorts of different areas that are there. So does that kind of help a little bit drive that question?

Taylor:  Yeah, absolutely. Perfect, excellent. So I think one of the ways that it helps, like when I think about this in general, is that for venture is a power law game. And what that means is that if you have a, let’s just say a portfolio of 10 companies, you need one or two of those companies to become a billion plus dollar back company in order for the amount of ownership that you have to actually return the fund, that’s up. And that’s really where you’re getting majority of your returns from. And so as a result of that, there’s gonna be eight companies in this example that aren’t achieving the power law. Therefore, as a capital allocator, you’re coveting those two companies versus those other eight companies, right? And so then the question is, how do you become one of those two power law companies? And those are companies that swing for the absolute fences, right? And what I mean by that is, I’ll give an example like Airbnb, right? Airbnb created its own marketplace. And then as a result of what it was able to do, created a marketplace outside of that. And now there’s people making millions of dollars based on this small idea that, hey, I can round out an unused area of my house, right? And so that in itself, they created a brand new market and more or less kind of changed the perception of how the world views kind of like hotel stays or stays in general, right? And that was an absolute, I wouldn’t say it’s a moonshot idea. I mean, it was a moonshot idea at the time, but those are those types of venture-backed ideas that are more or less transformational into how individuals think about every day-to-day business, right? So on the vice versa, if you’re drop shipping a sneaker, or if you’re making a minor modification to e-commerce marketing, the product, sure you could raise capital, but is that really going to be a market dynamic and market shift company? Maybe, maybe not. So it’s really, I would say how I think about this is, what is the vision of the company today? And what is the vision of the company tomorrow? And what is the founder’s and company’s perspective of how the world is going to change because of their product, right? And if it is, if the world is subsequently going to change on how people operate their day-to-day lives or a segment of a group operate their day-to-day lives, then maybe it is worth chasing the venture dollars. 

Ryan Davies:  And again, I think just putting numbers like that into perspective, right, in terms of just like the success rates and what you need, what bar you need to hit to really hit probably what people’s goals are, you know, really helps from that early stage founder perspective of, you know, is this the right path? And am I doing the right thing by doing this? Maybe, you know, I’d love to know how you advise founders on, you know, whether or not it’s the right path for their business and the guidance that you kind of provide on that standpoint. You know, some of those key considerations of, you know, when I should do it, if I should do it, and if this is a, you know, the guidance in terms of making that informed decision. 

Taylor:  Yeah, absolutely. So in general, my recommendation for most companies, which is kind of a little bit against the norm, I would say, is to bootstrap your company as best as you possibly can, right? And what I mean by that is try to find alternative ways to grow a business without having to go look for external or outside capital, such as venture backed. I think venture backed capital should be used when you’re starting to show early signs of part of market fit, that you have this revolutionary idea how the world is going to change. And now you need individuals to help pour gasoline on the fire, whether it’s through capital and through a support network. Like don’t look at venture or VC funds as just capital or as like piggy bank, look at them as advisors and supporters of how your business is going to transform the world. So what I usually go and talk with founders is, once they distill the idea of how they’re going to transform the world, what are the early ways that we can start to kind of actually show that this is a viable idea, that this is the ability to achieve that? And then if there’s capital required or needed, is there alternative sources that we can access in order for us to have control when we go out and raise or when the company goes out and raises? The best companies that need to go out and raise capital, they are getting more introductions from the investors. They’re not going out to the investors. And there’s a reason, there’s a number of reasons that that occurs. One is maybe it’s a seer entrepreneur. The other one is because they create a phenomenal product that people are now telling the investors about, that they have to speak with this company, right? That is a huge, that is a great telltale sign that you’re onto something and that you have the opportunity to raise money when you have inbound from it versus doing cold output. So I think that’s a general perspective is like have as much control and build as much as you possibly can until you know when the time is right to go out and start engaging with those investors. With that being said, one of the devices that I always also give to early stage founders is it’s important to always be fundraising or ultimately building those relationships and that network with investors or VCs. If you do believe and you do want to go down the venture route, it’s important to create those warm relationships early on before you even need the capital. I personally haven’t invested in a company via cold outreach or a cold message. I’ve engaged with the company and I’ve spoken with that founder for months after that and then I invested. But it wasn’t the company is like, hey, here’s my pitch deck and I need $500,000, a million dollars. Here’s the wire details, please invest. I’m like, that’s not going to happen. And that’s my personal perspective. And however, if that founder reached out to me months before, kept me on the investor update, provided me or asked for my advice and so forth, I’m now building that relationship because this is a long-term relationship that I’m working with the founder in order to invest. 

Ryan Davies: Perfect. Yeah, I think that’s a great, again, just so much here to absorb and these essential guidance that’s there to help grow a business, help know the timing and all of that. One of the things, again, you touched on there is when we often associate with venture backing, it’s the time to say, okay, we’re striking that balance between growth and sustainability, but this is really where rapid growth, like I’m ready. It’s time to accelerate building on your experience. How do you advise founders on striking that balance between rapid growth and the importance of building a sustainable business and how to kind of weigh those two out? 

Taylor:  Yeah. I mean, I think, so there’s no right answer.

Ryan Davies:  Yeah. It’s a loaded question. I’m tearing you up with a lot of loaded. And again, that’s why I said on your experience, I think our listeners are going to say like, we just value his opinion so much. Give me some thought. It’s really that kind of thought leadership, right?

Taylor:   Yeah. Yeah. I mean, I think, so the way I, at the end of the day, building a business becomes like an external piece of who you become or who you are as a human, right? As I think of it as, right? I think it’s more of the emotional side, right? To when I strike the balance between sustainability versus I’m going all in, right? And I think what I’ve seen is startups are an absolute rollercoaster. And most of the time they’re going straight down, right? And then all of a sudden you get a bump up and you get that high and then it goes straight back down, right? And so when is the right time to strike the balance between investing your livelihood or the time that you have, right? It’s really the only thing that you really have control of is your time is the most valuable thing that you should control over, right? Is when to like turn that notch, I think is more of an emotional decision that you need to make personally within yourself, as well as with those people around you, whether it’s family, friends, and founders, right? And I think if all of those people around your ecosystem are saying, hey, this is the opportunity to hit that gas, like absolutely hit that gas and go forward, shoot for the fences. And we’re here to support you, then that’s the time to do it versus like, hey, our CAC is super low and our CAC to LTV ratios are like, you’re sure those are great, but those change, right? Those change due to market dynamics and everything like that. And at the end of the day, it’s that emotional support behind you. And I think that’s more important to be attuned to versus like, is there a specific ratio or growth metric that I personally look for? And so that’s what I usually talk with founders. The other thing, or the last thing I would say on this point is that being around the number of founders who have done well, as well as those who’ve had to sell off their business and not do well, but to be honest, if you start a company, you are in the top 1%. So you’re achieving what most people don’t achieve. And so therefore, there is no such thing as failure. Most of the founders, when they have exited the company, they get much more, I wouldn’t say the word is depressed, but much more sad, right? Because what they’ve realized is that the enjoyment that they had was the journey that they were experiencing, not the destination, right? And so in the enjoyment and that experience, a lot of it is working with people that they loved and enjoyed in the ideation and vision, not necessarily that they got $20 million in their bank account. That amount of money is not worth that or is not even comparable to that journey that they experienced, right? So as a founder, just continue to remind yourself that even though you may feel like you’re going through hell right now, that journey is at the end of the day, the most important valuable thing that you’re experiencing. 

Advice and Closing

Ryan Davies:  Incredible. I think I would almost say that’s where I want to wrap it up, but I’ve got to leave it open for one more based on your expertise before we close this chapter of the podcast down. Because again, I think there’s so much more than we can uncover and our listeners would just absolutely be so beneficial to keep hearing from you. I guess that advice, maybe it’s to early stage founders, but maybe not just to early stage who are really at that stage of their entrepreneurial journey where they’re considering venture backing. What would you, if you’ve got that, hey, look, sit down and touch them on the shoulder and go, look, I got to tell you something. What would that kind of be for them? 

Taylor: Yeah. I think the advice that I would give is to one, understand what you’re signing yourself up for and that this is for the next 10 plus years and hopefully much longer. Hopefully this is your long vision of what you’re going to achieve. But as a result that you are now, if you were looking at a pie, which was 100% of your time, you’re allocating 90 plus percent of that. As a result, what are you giving up because of that? If you have a family, bring your family into the conversation and have those conversations with your family. And I think that’s, that’s number one is what I would say. Number two is what I would also talk about is, is to speak with individuals that have had this experience, whether it’s raised capital, maybe two or three kind of bumps from where you would like to be, be at, and reach out to them. I would say most people in the starter community are very receptive to this, because they did that very same thing four or five years ago, and someone took the call with them, right? So reach out to them, be open, be vulnerable, explain why you’re reaching out, ask for a 10 minute conversation for them. Because again, if you think of the pie, they’re doing a lot of other things. And get an outside perspective of what that next life looks like. And then once you come to a conclusion, if everything is pointing to their north start, then actually go for it, right? As I mentioned, the idea of starting the company, from my perspective, obviously super passionate about this, but like, by you taking that leap and getting onto the ride, you’ve already achieved what 99.9% of people in life have, haven’t been willing to take that, right? And so it’s always, it’s circling back about the journey, just understand that this is the most exhilarating, fun filled, like hellish ride you’ll ever be on. But like that journey is so much worth it. Because you can ultimately or potentially change the world. And if you don’t achieve your perceived vision, the learnings that you’re going to have from that are going to be more valuable than you actually understand it.

Ryan Davies:  Incredible. I mean, Taylor, I think we have a huge, huge thank you going out to you for all of this. I know you can’t respond to everybody that’s going to reach out that our listeners group here, but I’d love, you know, it’s Voxlypartners.com. If people are looking to get ahold of you, if people are looking for that next little piece of advice, somebody, a way to connect you, is there a way to learn more from you, a way to connect with you that you would recommend?

Taylor: Yeah, absolutely. So as I mentioned, I want to drink the coolie that I give out. So I open up my calendar to anyone for 15 minutes. You can either go on my LinkedIn page, you can go on Voxlypartners and find it there. But the calendar link is cow.com slash my slash my last name shoddy slash intro. And there, there’s free range of my calendar and happy to chat with anyone and provide hopefully some encouragement to continue on the journey.

Ryan Davies: That is absolutely incredible. You know, Taylor, as we as we talked about before, right, that’s exactly what this community is for the podcast is meant for is for people who, again, you’re an angel investor angels, like you come along who say, here’s my time, the most valuable resource, take it, you can learn. Listeners, I know, I’m sure you’re gonna you’re gonna look at this and go, wow, that is there’s a lot of people that now are listening and took that to heart, because it is just so hard to find people like you that are willing to dedicate time and help people grow and get them through these, like you said, when they’re on those free falls, and just need somebody to go, hang on, I’ll at least slow your descent, right? At least I can give you or or show you the direction back towards moving up again, right and have that. So we greatly appreciate I greatly appreciate your time today. And our listeners, I know, are thrilled to, to have heard from you today. So Taylor, thank you again for for this amazing podcast. 

Taylor: Yeah, thank you, Ryan. And thank you for your time. Appreciate it.

Ryan Davies: Wonderful. So again, a final minute to thank Taylor Schaude for this amazing podcast, the if, when and how a venture capital and I want to thank our listeners, as always, we can’t do what we do without you. So until we meet again with another amazing TBR episode. I’m your host, Ryan Davies. Thanks, everybody. And take care.

About Our Host and Guest

Director of Marketing – Ekwa.Tech & Ekwa Marketing
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Co-Founder & Partner @ Voxly Partners
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” Try to find alternative ways to grow a business without having to look for external or outside capital, such as venture-backed capital “

– Taylor Schaude –