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Bela Musits 7:44

Yeah, yeah. So I often think there’s a significant difference between a potential customer being interested and actually writing a check. How do you sort of sort through that when an entrepreneur comes to you and says, Hey, look, I got these 10 people, and they’re all interested.

Pano Anthos 8:05

Yeah. So it’s a great question. There’s actually a great blog post that a guy named Josh Koppelman wrote years ago, at first round, called the first dollar, which is the kind of the challenge of freemium market freemium solutions is, it’s great to have a freemium solution, but no one’s paying by getting that person to pay it right, that first dollar check is a big deal, right? I’m with you. 1,000%. What we ask our startups to do in their interview process is not ask the question, would you pay for this? Or would you pay $5? For this, we would actually ask them to say, how much would you pay for this. And I’ll give you a little story. It’s really kind of indicative, if you don’t mind. We had a company that wanted to build and built a beautiful fixture for drinking water that any retailer could install. And then any consumer could walk up with their water bottle and create a sustainable platform because then no more plastic water bottles. So you make these water, water stations, you know, everywhere. And he spent he raised $2 million on this idea would be hard to do today. But he raised $2 million on this idea, got the unit’s built, and then install a few and saw no traction whatsoever. And he couldn’t understand why. So I said, Well, why don’t you go, I said, Have you done the first order of work that any startup should do? Which is really see if the consumer wants this? He said, how would I do that? I said, Well, what’s a proxy for this beautiful water station? I mean, this water station had like a motor in it, it would turn on it would do all these fancy things. I said, What’s the easiest way to compare? Filtered water which is what you’re selling to non filtered water? Well, he still couldn’t figure it out. But I said, I want you to put two pitchers of water out on a cardboard table in a coffee and the coffee shop was willing happy to do it. And on that one picture, you have filtered water $1. Then you have New York City tap water free. And I said and just stand there for two hours and just watch to see what happens. He came back really dejected. He said, Not only did they no one wanted to pay $1, they kept going to the free one. But they wouldn’t even pay 25 cents for this. I said, so what does that tell you? He said, New York City is not a market for filter water. I said, precisely. I said, Why were you building this without testing this concept first, right? And I said, No. Where do you think this would be a really valuable solution to cities with bad water? I said, Great. Detroit was having their epidemic at the time right outside of Detroit. He says, I have no interest in living in Detroit. And so the place where it was needed most, that would make a huge difference. He had no interest living there. So it’s one of these things where people are projected that, you know, New York City, of course, would prefer filtered water, there are no tap water is perfectly fine. Right? Right. So it’s just missing the mark of what a customer needs versus what you think the consumer needs is really a big issue.

Bela Musits 11:10

Yeah. And I imagine that’s probably one of the more challenging things for entrepreneurs to come to grips with. It is,

Pano Anthos 11:19

I have a another great story. We were the first investor for belly. Belly is the Dollar Shave Club for women, it got sold for hundreds of millions of dollars, after just four years of operation. So it was a great outcome for everyone. And the team showed up at our accelerator with nothing but a PowerPoint. And it wasn’t even a very good one at that, but a great team. And they were trying to decide what kind of razor to produce, what color the razors should be, and what the price point should be. And I said well, he said, Well, you know, how would you go about this? And I said, Well, what we see you should do is prototype this as much as possible. And he said, Well, what do you mean? I said, Well, why don’t you build four different 3D Because Parsons, which were affiliated with had 3D printing machines, go print 3d, different three or four different 3D facsimiles, prototypes of a razor? And ask them which handle did they prefer? And sure enough, there was an incredible unified, you know, vote for this one form factor. I said, Okay, so that’s the first question. Now, the second question, what’s color? I said, do the same thing go out on the street corner, he was literally in Union Square, with a cardboard table, same model, you know, at Parsons, doing the same thing, asking people walking by Which color do you prefer? And people did, and they voted. And he had 150 votes, and that’s statistical significance. And sure enough pink, which was not the color they would have preferred, right? That was not what they would have would have had done was the color that the vast majority of women wanted. So it’s one of those examples where you can be too smart for your own good. You can be building stuff for yourself, which is not really the point. Right? So that, to me is the first article mistake founders make is they don’t really listen to the consumer or ask the consumer, how much would you pay for this? The second thing they don’t do is they don’t acknowledge or really understand who the competition is. You know, you every day, we live in the minds of consumer every day. So consumers making choices, you know, more frequently than artificial intelligence is in many respects, everything you do, what shirt you put on what you wear, what you eat, you’re making decisions every day, all the time. And those decisions really are are binary, meaning I’m gonna do this or I’m gonna do this, right? It’s very rare. Rarely can you compromise on a decision you make one or the other. Again, competitive competition is for my solution versus the other solution that you already got. Right? So you’re wearing a blue shirt right now, if I’m trying to sell you a red shirt, the blue shirts, my competition, in so many words, right? We don’t acknowledge that entrepreneurs don’t think there’s any competition way too often they under date, and and doing nothing is probably the biggest competition of all, because we’re lazy. Human beings are inherently creatures of habit. And so we don’t love change that often. And so, forcing change and changing my behavior is expensive. But that’s often the competition. So those are the two things. We don’t listen to the consumer. And the second thing we often don’t do is we don’t really understand what the competition is.

Bela Musits 14:25

Right? You know, as you’re saying those things Pano, I’m thinking to myself, This is really good advice, not only for startups, but also for existing companies. Right, as you think about your existing product, or the next generation of your existing product. That connection with the customer is so critical. And it’s so often overlooked.

Pano Anthos 14:46

Yeah, we call it the customer contract. So every dollar that I as a consumer give to a producer is a contract. I’m giving you $1 I expect something in return. Now in economics, we learned this whole thing of Got value and exchange. But we don’t think about that the kind of technology level, but it is, it’s a big exchange that we give, and we often don’t give a proper reward to the consumer for the dollar there. And they don’t come back. Right. You know, when they turn out that clearly that dollar you gave, that they gave you wasn’t, you know, valued, you know, by us, and certainly the consumer didn’t think they got value out of it.

Bela Musits 15:21

Right. And we have consumers have so many choices these days. You get one shot? And if and if that doesn’t, you don’t connect, you’re done. It’s over with that particular person. It’s very, almost impossible to win them back. Yeah,

Pano Anthos 15:36

certainly on consumer brands is that way, technology less. So I mean, Twitter could fail 100 billion times. And it did, you know, early days, and people still there was no alternative to Twitter. And it was a cool thing. And we were willing to put up with it. But consumer brands, you know, if a car has a car dies in the middle of the road, you’re not going to like that car very much, or want that car

Bela Musits 15:55

for a long time.

Pano Anthos 15:56

exactly on time. Exactly.

Bela Musits 15:59

So tell me a little bit more about the accelerator. So how does one How does one get in? What sort of services and programs do you offer?

Pano Anthos 16:08

So the accelerator is an application process that’s on the website, it’s open twice a year, we take anywhere between seven and 1012 companies in a cohort, we have certain categories that we look for. So you know, founders are 50% of the weight, you know, what kind of founder Are you. And the expression we like to use is, you have two ears and one mouth for a reason. demonstrate that, right? Show us exam, give us examples of how you’ve listened, changed your behavior and came out the better for it. And if you can’t provide that lifecycle of listen, learn and repeat, then you’re probably not going to be a great founder in this world. So that’s a big, big component of it. The second evaluation criteria we put together is the category that you’re in. And whether there is a whether there’s a headwind or a tailwind behind you. Right. So coming out and saying I’m building mobile application. And that’s so yesterday, that’s just not going to be very interesting today, right? That’s just not that’s table stakes. In 2006. If you were building a mobile app, that was all the cool thing. So headwind tailwind, gets into like the trends, are we going in a positive direction or negative direction? Then we look at micro trends, which is specifically within a category, what’s going on? And then the question is, how many have built the same thing already? You’d be surprised how many people speak and spend time and money to build something that’s already been built. And they’ve never done? The research tool is an amazing tool, folks. Right? Use it. Yeah, scour the web. It’s amazing what you can find. And just to give you some perspective, we work with a number of corporates and helping them acquire brands. We have shown a couple of the beauty companies over 3000 skincare brands in the last two years 3000. So you got to do your homework, right? You got to know who the competition is, because the corporates will or the venture funds will. And the last thing you want to do is show up and say, Oh, I’ve already seen that. It’s just not a pleasant picture. It’s a great waste of everyone’s time. Right, right. And what do we offer? So what do we offer quickly? You know, all the services that you know, around training and helping an entrepreneur be better at what they’re doing. The big thing we’re providing as a gateway to the next round of financing, and what the metrics are that you need to get there. And then the right introductions to help you get there. No guarantees, of course, but Minista ton of mentorship, over 400 mentors, we have probably the best Rolodex in the retail world. We can get you to any retailer at any level that you want to get to but your products gotta be ready. You know, this is also the challenges people want to be introduced the CFO of ABC company, right, their product isn’t ready for ABC, just so usually you got to start a little smaller, you know, they want the big the big kahuna is but the reality is they should probably be dealing with the smaller fish for a while. Yeah, and build up. And if you look at how stripe built their business, they start with a bunch of startups, tiny startups, we always recommend going in the startup world, which we’ve got over 150 startups that we’ve invested in, plus a network of others. So we can be really helpful. But at the end of the day, we see time and time again, that founders make the biggest difference. They’re not it’s not a guarantee, you know, it’s a necessary condition, not sufficient. Yeah. But they can make a huge, huge, huge impact.

Bela Musits 19:36

It strikes me that that one of the challenges for any young company, and a growing company is hiring people and finding talent. What are your thoughts about how you can help companies do that? Or you can help startups do that?

Pano Anthos 19:50

Well, the problem is, is it the real problem is I can’t afford to hire the talent that’s available. Up until recently there was an arms race for talent right now. spin these massive layoffs. And so there’s a lot of talent floating around, I find that usually recruiting is a function of sharing your vision, and finding folks who share your vision. That’s that is, what your you being articulate about what you’re trying to go accomplish, usually brings people to the table, who want that same vision and are willing to do almost anything to get there. They really don’t care how much they get paid. They know they’ll get equity, they know the equity will turn into something material. If this is a great idea, and a great team that you’re together with, I find that far more of a challenge. And frankly, a lot of founders don’t do a great job of articulating their vision. Right? Right, right, in a way besides just venture just just recruit recruiting basis. So that’s the that’s the biggest Miss, how can we can be helpful? We spend a lot of time on messaging. It’s ridiculous how much time we spent on it. But the reality is, is I use the analogy of a ballerina, so ballerina gets up and dances and everyone sees the ballerina system. Isn’t that beautiful? And doesn’t that look simple? To the point that a two year old watching that same ballerina will get up and start dancing around as if they can do the same thing? Right? That’s the emulation effect, right? Well, you know that a ballerina to be at that stage of simplicity took 20 years to get there. And we try to tell the startups to say something simply and easily requires a ridiculous amount of practice, and iteration and fine tuning and tooling. You just don’t get up there and just start spouting. But she’d be shocked at how many people think that that’s what they can do. They were they walked in with gobbledygook, you know, three pages of nonsense instead of being able to have a pithy expression that captures the essence of what you’re doing. And five words or less? Yeah. Yeah. You know,

Bela Musits 21:45

I think about startups and companies, young companies, early stage companies, that, that make a product or service of some types, you know, a product that you can put in a box at the end of the day, and UPS will come pick it up and ship it off to your customers. You’re in a business in the private equity business, venture capital business, that’s a little harder to sort of define, right? I mean, yeah, you can measure the performance, right? It’s a return on investment, how much cash did I give you? How much did you give back to me as a limited partner? That’s pretty easy. But that’s, that has a pretty good long time constant, typically associated with that as well. So when you when you think about businesses that are less crisply defined than someone making a widget, what type of advice do you have for those entrepreneurs?

Pano Anthos 22:36

So advice, meaning in terms of how to measure success? Well, number

Bela Musits 22:41

one, painting the vision, right? And how do you tell the story? Because people can’t hold it in their hand, right? They have to imagine the whole darn thing. Right? The whole thing isn’t imagination. Sorry. So how do you tell the story? And then how do you measure your progress along the way?

Pano Anthos 22:59

Yeah, so the good news is there’s actually analogies all over the place. And I would I’m a big lever lever of analogies, human beings. So there’s a there’s a whole science on bias. And there’s 21 different types of bias, that crop up when I speak to you, your brain is processing the information I’m giving you, and you’re running through a bias filter. That’s extraordinary. And there’s some great books out there. It’s fascinating. What goes on in bias, right? There’s all kinds of bias, visual bias or auditory bias. So the first thing I we talk about is analogies are a great way to combat bias. So x for y, we’re building x for y, we’re building in our the Hollywood pitch that man meets, you know, Cat Woman, I don’t know, pick your, but you you reference things that already exist, that people already understand. And you bring them together in a new way of describing them. You don’t ask them educating a market is really expensive. And the last thing you have time to do is educate a consumer. If you say I’m building, you know, pie morphic, three dimensional, you know, gobbledygook, it’s gonna take you 25 minutes to explain what that means. You don’t want to be using language that’s complicated off putting, you know, or requires tons of background and education, you want to keep it as simple to your point that your grandmother would understand what you’re doing. Right. So messaging to your grandmother is really, really valuable image in your mind, just like keep that in your mind, you’ll do a much better job. And that’s the problem is we get we get wrapped up in ourselves. So that’s analogies are really critical. And then there are other forms of bias that you have to be able to counteract, especially when you’re dealing with venture funds. You know, the classic one is women pitching men, right? And men going well, my wife doesn’t use that. Are they using their wife as a proxy for whether this is good business right, the terrible right but that’s done all the time. You know, because the male can’t necessarily associate Well, first thing is you should have female partner number one, and number two show a better approximation for what a woman goes through as an example. That’s just one form of bias.

Bela Musits 25:08

Yeah. So what what words of advice would you have? For someone who’s contemplating? And we’ve talked about this a little bit. But what words of advice would you have for someone who’s contemplating starting a business?

Pano Anthos 25:23

Yeah. So as we said, You got to ask a lot of people very blunt, and that advice? Meaning, would you pay for this? How much would you pay for this? Yeah. And not? Would you pay $10? Because anyone will say any Oh, he wants to hear $10? I’ll tell him $10. So you don’t say that? The second thing is you build a prototype of something simple a version of it. And you just see if people really liked the idea. Yeah. I just, we go too fast into full production mode. And even Paul Graham, I have a lot of respect for said, build something that doesn’t scale. Try something out, build a prototype, but just show someone something that you’re doing. And I built an entire application back in the 90s, long time ago, in Oracle, I prototyped, an entire solution for Warner Lambert, BASF, and Motorola. And I prototyped it in an application layer that would give people a picture of what I was building. But I didn’t have to build the whole thing. And I raised I don’t know, four or $5 million to do that. So prototype is a great way going.

Bela Musits 26:26

What about what type of advice would you have for an entrepreneur when they think about how to finance their business? Should I go venture capital? Should I go, you know, beg for money from my friends and family? You know, how do you how did how should they think about that? Well,

Pano Anthos 26:43

so the the great example, the great piece of sage advice I was given ask for advice, you get money, ask for money, you get advice. And so if you go to a bunch of finance ears, and you say I really want your advice on this, I have this idea, but I’m not really sure this is financeable, what do you think, very different conversation than give me my right? So I would go and ask for advice from as many people as you can, you know, fit into a couple of weeks of interviews, and ask point blank, what do you think of this idea? You know, I need your perspective, where should I go for money? And if it’s a really good idea, people will come in and say, you know, I actually have this fund over here. Let me tell you about me, and then they start selling themselves to you. So you always ask for advice. You get you not you don’t get the money necessarily, but you almost never get the money by asking for the money.

Bela Musits 27:35

Right. Right. That’s great advice. That’s a great saying, I’m going to keep that one by let’s, you know, as I have said many times in the past, I’ve never had an original idea and my whole life. Everything I have I begged and borrowed and stolen from others. Absolutely. Let’s talk about Demo Day. Again. You brushed you talked about it a little bit. elaborate a little bit more. So people might be interested in going.

Pano Anthos 28:02

Yeah, so it’s a coming out party for startups. And it’s it’s a party for everyone around. I think, I think it’s important for people to realize that it’s not, it’s a pitch, but it’s a pitch to your grandmother. It’s a four minute, tell your story, as a narrative, you know, first person or meet Susie kind of storytelling, super simple, get the message across, get off the stage, and then take the orders. Like the idea is that people will come up to you and say I am really interested in kind of learn more. That’s all this is about and also meeting each other. The ecosystem is quite as getting quite large. And so people love to hang out and see each other. And candidly, you know, we did our last demo day back in April of last year. COVID had just had another question, as well. It’s so hard to believe just a year ago, we were still worrying about COVID. Deep way wondering if we should cancel. So this time around, we’re expecting a great turnout already. It’s at Parsons, that’s a beautiful Tishman center auditorium. There’s extraordinary 13th. And fifth, it starts at three o’clock and ends at six. Come as you can. It’s just and it’s also great, also a great exposure for startups. For an entrepreneur thinking of building something, listen to the stories that are being told, see who succeeds. Do you think they’re going to be successful? It’s amazing that you’re unfiltered is actually pretty good. Right? Oh, I really liked this one. Oh, this is terrible. Right. So a lot of opportunities there for sure.

Bela Musits 29:28

Yeah, there’s a lot that potential entrepreneurs and founders can learn just by sitting in the audience, and watching others sort of do these things and say, Oh, I really liked the way they talked about the market. I really liked the way they, you know, think about their product and stuff. There’s a lot of a lot of good takeaways. So what was the date? Again, I can’t remember if June 13, June 13. And now where the companies that are pitching are they all from the accelerator from your Excel?

Pano Anthos 29:54

Yes, yes. We’re also going to have a couple of alumni companies coming back and talking about their experiences and the later stages of life. But yes, there will be all presenting. Yeah. So

Bela Musits 30:06

in starting the venture firm, private equity space here, what were some of the lessons that you’ve learned? You know, if there’s other if there’s other people listening to this going, gee, I’m going to I’m going to start a venture capital firm. What were the lessons you learned?

Pano Anthos 30:21

So, you know, timing is everything. This is not the time to start a fund. Today, right? It’s the worst fundraising environment in 15 years since Oh, wait, the crash. So timing is really important, too, by the way, so startups, you can be too early, and you can be too late. The startup world, and too early is as bad as too late. You have more pride in Oh, I was the first but who cares, right, you’re out of business. So timing is really everything. The second thing is, again, interview a lot of people and ask for advice. How did you get started? How did you get started? What did you do? The key thing today is investors are not excited by private equity in and of itself. They want to know, what are you going to do differently? What is your spin? What is your angle? What’s your point of differentiation? What’s your asymmetric advantage? Using all these kind of technical terms? What’s your you know, what’s your way of winning that other people can’t simply just pile it out when on you, and you watch some of the funds like Andreessen just throw money everywhere, they’re putting money in every possible kind of quadrant, which is kind of weird, cuz that’s more likely when an accelerator does, you know, accelerator puts a lot of money, a lot of companies, Andreessen is just throwing money everywhere, trying to figure out what sticks. So, and they have the advantage that they’ve got a name, and somewhat of a track record, but like a lot of the funds right now that those those funds aren’t doing that well, right all across the board, not just Andreessen but just in general. So I’d say that you really have to also have a point of differentiation and prove it even in small doses. So we have created a new structure for consumer brands that we don’t really talk about much. But the fund, we kept super small just to prove the model, before going out and raising a much larger fund. And if you watch most of the Great Adventure funds, they start out super small, but 5 million. Kirsten is Ed for runners, a great example Christian green, sheet, $5 million fund, then she wants to 20 or 25, and she went the 50. So they just incrementally go, they don’t go from five to 500 million overnight. That’s a rare situation. And pattern yourself after that and realize it’s going to take time, the other thing you should be able to do is survive without the fun, meaning if you have to have the fees and the fund to stay alive, that’s a catch 22. Right? Think about it, you know, you got it, you have to give yourself two years to raise enough capital to keep yourself alive. So that means you have to have two years of capital to not need in order to kind of stay alive. So it’s the chicken and egg problem that if you need the money, and you have to raise it at the same time. Very, very difficult

to do. Yeah. So give yourself plenty of time.

Bela Musits 33:05

Great advice. Great advice. So where can listeners learn more about the venture firm? And you? Yes, so

Pano Anthos 33:12

we’re at And they can always reach me at I try to respond to every email sometimes the answer is sorry, not our sector, or often it’s not our sector, but

I try to be helpful where I can. Yeah. Is there anything

Bela Musits 33:32

that I have not asked you that you’d like to share with our listeners?

Pano Anthos 33:35

Sure, truth and a dare to truth? And that just kidding. No, no, I don’t think so. I think you’ve done a phenomenal job. You know, I think the thing that that people sometimes need to remember is we’re not we’re not a ubiquitous fund, like Y Combinator, which will do anything in the world. We’re very focused on consumer brands in one category, retail or technology that the consumer is somehow affecting or touching supply chain e commerce. But we don’t do like industrial like machinery or robotics of crazy natures. So yeah, so those those things are very applicable. And I would really suggest strongly that founders look at what’s gone on before them. Like if you’re in the FMB, space, food and beverage, and you’re trying to build a new food brand. Really take a strong look at what has is out there today. And whether it’s successful, you can get on CrunchBase you can look at the list of all the f&b companies as an example and ask yourself the question, Do I have a reason to exist? And then go ask a bunch of people should I exist? Then think about building the product? Do not do it the other way around. Too many people build a product and then try to sell anyway. That’d be my last piece of coaching advice. And yeah, we’d love to help any way we can. That’s great.

Bela Musits 34:52

Hey Pano, thank you so much for being a guest on the podcast. I really enjoyed our conversation.

Pano Anthos 34:57

I ended it as well. Thank you so much.

Outro 34:59

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