Energytech Startups

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Unknown
Transform your startup journey with the energy tech nexus. Connect with fellow founders. Access critical resources and be part of a community shaping the future of energy and carbon tech. Your path to building a Thunder Lizard starts here. Learn more at Energy Tech nexus.com. Welcome back to the show. I'm really excited to be back here with Jason, who's been kind of traveling around the world, but he's back, back here with us.

00:00:24:02 - 00:00:51:07
Unknown
And I'm really excited today to have some very special guests. Today we have some investors in the house. And today I have with me Abhinav Jain and Imran Kissel. Bosch. And, they are both working together in their new investment firm called Titanium Innovation Investment. Welcome to the show. Thank you for having us. Thank you. So before we dive, maybe even into the actually.

00:00:51:08 - 00:01:16:00
Unknown
Yeah, let's start with that. Let's start with your investment thesis and why you decided to start this investment company together. You know, again, thank you for for, having us, it's good to get to reconnect. And, we've been following, energy tech nexus for a while. So great to be on this podcast. I've known Imran for a for for a while now.

00:01:16:02 - 00:01:38:19
Unknown
You know, it goes back to the Schlumberger days. He was a pretty senior executive. I was, one of the thousand field engineers. The first time we met was about 2017. Something like that. Through a mutual acquaintance. And then, Imran, joined, private equity, venture capital firm called CSM Capital Management.

00:01:38:21 - 00:02:06:12
Unknown
I joined in a year later. And both of us, kind of, were involved in the launch of the venture vehicle there. We work together very closely. And then, you know, we felt, we wanted to kind of, you know, spin out, create our own firm focus on early stage industrial tech. So that was the genesis of how this all came about because of our passion in, technology.

00:02:06:14 - 00:02:42:10
Unknown
You know, problem solving and engineering first, you know, first principles. So from your question, that was where are we focused on. So think of us as B2B, firm that invests in young startups, typically at the Seed series, a stage. And our focus is really bringing digitization, automation and decarbonization to the broad industrial sector. And when we use industrial, it's in the broadest sense of the word will go all the way from aviation to oil and gas and artists, as is pretty simplistic.

00:02:42:11 - 00:03:13:12
Unknown
If I look at how my life has changed in the last 15 years with digital technologies and how I do banking, how I travel, my I'm traveling. Social media, entertainment, communication, everything is radically changed. Completely transformed. The kind of businesses I've grown up in the industrial and energy sector for the last three plus decades. Obviously, digital technologies have made an impact, but not at the same velocity or at the same trajectory as a consumer.

00:03:13:14 - 00:03:35:17
Unknown
So our thesis is how do we invest in young startups that will bring that same level of disruption to these enterprises? So that's our thesis. That's our investment thesis. And then our two key stakeholders are obviously our investors and founders. And how can we partner bring those two groups together to create value. So that's what Titanium Innovation Investments is about.

00:03:35:18 - 00:03:58:07
Unknown
And we we we had this thing we always mentioned were neither oil and gas when neither climate tech. We are industrial tech which encompasses everything. Right. And you know, the heavy engineering critical infrastructure and markets that you can think of power, LNG, construction, mining, bringing more digital solutions to critical software for industrial applications, and a very highly.

00:03:58:09 - 00:04:17:16
Unknown
Yeah. And I and I thought it was interesting what you said in Ron about like, how our lives have radically changed on the consumer level. And it's so true. We've been talking about digital transformation for over a decade in the industry, but it's it's been slow. And we really don't see that transformation, especially now with the, with AI.

00:04:17:18 - 00:04:44:04
Unknown
And both of you have a background coming from industry. Talk to us a little bit about what have you seen from your like, practical experience when it comes to the challenges we face, on the industrial domain? I think the in in the industrial domain, the challenge is siloed data sets. It's also the, the risk, when you're making a decision or I'm making a decision as a consumer.

00:04:44:06 - 00:05:06:14
Unknown
I'm the chairman, I'm the CEO, I'm the CFO. And if it's a family unit between your spouse and your other significant other, you can make those decisions. And enterprises, especially large enterprises. The risks are different and the decision making is more complex. So how do you solve for those? Some companies have adopted them much faster. Some industries are slower because the risks are different.

00:05:06:16 - 00:05:36:08
Unknown
And and that's where we with our industry knowledge, our relationships help in shortening or sales cycles with founders and with companies and try and accelerate that and bring that level of disruption in some industries, have done a great job at it. Some of them have been fast follower, some of them have been slower. And so depending on the sector, depending on the disruption and how to sell into those enterprises, and where we try and create some alpha, I'll take a practical example.

00:05:36:10 - 00:06:02:03
Unknown
They're about to invest in a company, that is coming out of the paper sector. You know, it's it is one of the industries that's ripe for disruption. I know when my daughter grows up, she may not. Paper and pulp industry may not be the first choice. She goes and looks at. The point I'm making is, the way these things are currently done is is it's very manual.

00:06:02:05 - 00:06:25:09
Unknown
You know, the chemistry and the chemical dosages being put in the machine, the paper coming out, the optimization set points being done. Yes, there is, there are, you know, control systems and all. But still a lot of human intervention is required. So this company that we are about to invest in has created a closed loop optimization solution without having the need for human intervention to set points.

00:06:25:13 - 00:06:45:00
Unknown
Input variables drive a particular outcome, whether it's chemistry, dosage reduction, improving energy consumption, raw material wastage reduction. So that's just an example of of some of the things inefficiencies we see in heavy industries that we we grew up in. Can I push you for a second? You should bring the mic a little closer. No, bring the mic to you or.

00:06:45:01 - 00:07:01:23
Unknown
Yeah. There you go. Yeah, I'll move forward. So one of the things I was curious about, we actually just had a session with one of our member companies, Uni Pro, come in and talk to us about, you know, I guess, getting people on to, computer systems, as part of mergers and acquisitions.

00:07:01:23 - 00:07:18:06
Unknown
And I was, I was thinking this in our industry and energy industry goes through a lot of M&A, and I think I just read like Exxon is, is looking to divest some, some assets. And what had me thinking in the shower this morning is, man, how do they divest their data assets. Like is that does that come with the sale.

00:07:18:09 - 00:07:39:14
Unknown
Does that is that important for the buyer. Now if you're starting to digitized everything with digital transformation, is that a liability or is that an asset in terms of like figure out who could be your buyer if that makes sense, because, you know, your data has to come with the physical asset. And, and in many ways drives a lot of your ability to extract value, right.

00:07:39:20 - 00:08:04:06
Unknown
Yeah. And I'm curious if that is part of the reason our industry, like these hard tech industries are laggards. Or if, you know, the digital transformation will help accelerate, kind of PE activity. I don't know, that might be a big heady question, you know. So look, first of all, data is an asset. Yeah. And if you look at an oil and gas field, no one's going to buy an oil.

00:08:04:06 - 00:08:25:06
Unknown
And gas field without information. They need that data and information to make the decision making as to what price they're going to pay for that asset, and also to maximize value from that asset. And so the data has to come as part of part and parcel of the transaction. It really depends on how the data resides.

00:08:25:08 - 00:08:46:13
Unknown
Is the data already in a digital format, or is the mixture of everything from paper format to PDF documents to digital format? So it really depends a little bit on the legacy and history. How do you bring all of that information together on one platform? It can be in, like I mentioned, siloed data. So it could be in different data historians.

00:08:46:14 - 00:09:14:23
Unknown
How do you bring all of that information together? So a company that can help in digitizing and bringing all that information together obviously creates value. And it's not just a problem that ExxonMobil would have if they're divesting an asset. It'll be true for a lot of companies, industrial companies, because a lot of industry in oil and gas, obviously you're selling fields and assets, but many other companies, you could be selling divisions, you could be selling plants, you could be selling factories.

00:09:15:01 - 00:09:22:18
Unknown
So it would apply to a range of different businesses. Yeah. And on top of that, I also feel,

00:09:22:19 - 00:09:47:02
Unknown
Change management is a big thing. Risk has a big role to play. It's not that these industries, they're not aware of, the cutting edge technology. You know, it takes a while from from a risk management perspective. I mean, seismic, for example, exploration, one of the at least in the oil and gas is one of the biggest uses of GPUs.

00:09:47:02 - 00:10:23:02
Unknown
You know, the amount of compute power required to all the way from data acquisition, processing, interpretation. It's pretty huge, right? So and these companies have been doing it for a very long time, but it's as Enron mentioned, the rate of adoption is slower. It's not that they're not, aware of the what's out there. Right. And so I talk to us a little bit about your guys's background, and how you started on the investment journey and what about the experience that you have that you bring in to invest as an investor today?

00:10:23:04 - 00:10:55:00
Unknown
Go ahead. So maybe a little bit of of, my background and history and experience. I'm in Pakistan. I came to the United States as a student, as an undergrad. I went to Caltech, got my bachelor's and master's there in mechanical engineering, join an energy services company. Schlumberger spent about 28 years with them. Now the the way Schlumberger develops, develops, its people is you went through all the way from field engineer older all the way to marketing, running panels.

00:10:55:01 - 00:11:14:05
Unknown
And I would say I was in operations for about 20 years more domestically in the U.S. and internationally, Europe, North Africa, middle East, Far East. Then I then last eight years of my career at somebody were in senior finance roles all the way from controller ship to head of M&A treasurer. And then it was managing the corporate venture fund.

00:11:14:05 - 00:11:45:05
Unknown
So given all of that background, when I decided to leave Schlumberger, I knew I wanted to go into the investment world, in the PVC world, leveraging all that knowhow and expertise in managing panels, managing large teams, having worked in M&A and finance, applying that to both the PVC world. So when we partner with entrepreneurs and founders, use all of that historical knowledge and guidance and partnership with future founders and creating Alpha for them.

00:11:45:05 - 00:12:06:21
Unknown
And when I say alpha in terms of shortening sales cycles, helping them on product market fit, helping them on the financing side, and when we create value for the portfolio companies, we create value for our investors because the end of the day, we're using our investors money to invest into those companies. And that's how we create value for our investors.

00:12:06:21 - 00:12:28:18
Unknown
We create value for the companies. And essentially create a much better ecosystem. So that's that's my journey. And that's how we create value for all our stakeholders. Other banks around. So I originally come from India. I consider myself a second generation oilman. My dad used to work for the national, Glenn Gas Company in India.

00:12:28:19 - 00:12:49:15
Unknown
I'm also an engineer by training. Upon graduating, I'd couple of job offers. One was an office job with few trips to the field. And the second one was a field job with field trips to the office. So I chose the latter one and found myself in northern hot sea shooting, seismic, acquiring subsurface geophysical data all over the world Arctic Circle, West Africa, South China, Australia.

00:12:49:17 - 00:13:12:10
Unknown
Excuse me. It's a great opportunity as a 21 year old traveled all over the world. The life took a 180 degree turn, landed in West Texas in the US, and was a field engineer here, in lower 48. I was in Oklahoma. I was in Texas. And, you know, five years into the field, decided to trade off my coverall and hard hat for suit.

00:13:12:10 - 00:13:40:16
Unknown
And I got my MBA, you know, went to UT Austin, did an exchange program at London Business School, and then pivoted to the finance side. Was doing corporate finance, M&A, investment banking for a few years, left hand job in 2018, for a year, I worked as a tech scout to portfolio companies of several funds, before finally an opportunity with CSL Capital Management came about and joined them.

00:13:40:18 - 00:14:02:03
Unknown
Almost six and a half, seven years back, was a managing director, you know, been around me. So I had to kind of spin out, and created our own firm. I'm here in Houston. And, just complement what I'm Ron mentioned is. You know, we really believe, let me take a step back.

00:14:02:05 - 00:14:28:07
Unknown
Apple today is not famous because Sequoia invested in them. Sequoia is famous because they invested in companies like Apple and Google. So we keep that front and center. Right. We feel very fortunate to be in a position where Investors Unlimited partners have entrusted us with their capital to manage and deploy in these growing, budding, industrial tech startups.

00:14:28:09 - 00:14:48:12
Unknown
Equally fortunate are we that young entrepreneurs, entrepreneurs in general, they have decided to team up with us and we are getting a front row seat to a lot of this technological innovation happening in critical infrastructure in markets. So, so that, you know, we it keeps us humble, you know, and we know we're as good as our last investment.

00:14:48:12 - 00:15:04:19
Unknown
So, you know, I'm really curious about something you said in Ron hat. How do you know when a company has product market fit, like, what are you guys looking for? And this is a question I get from entrepreneurs all the time, is they feel they have product market fit, but they don't know how to translate it either to investors or trying to pitch.

00:15:04:19 - 00:15:27:08
Unknown
So I'm curious, what are kind of the telltale signs that you look for, say, now it's time to put on gas. So two aspects. One, when we invest in a company, and especially when you're coming at seed series A stage, it's pretty early in a company's journey and we start talking to companies when they're at the Angel Pre-Seed site, because it's about building relationships, getting to know people.

00:15:27:10 - 00:15:52:19
Unknown
The number one reason we invest in a company is the team. Full stop. You're backing one, two, three, five people. Whatever the number is, and you're taking a bet on them. And how do you quantify the team? And it's not it's a subjective. We quantified. We try and put some logic to it, but it is subjective. And someone that you not, might feel is really good.

00:15:52:19 - 00:16:15:16
Unknown
Walks on water I might feel doesn't walk on water. So it's subjective. No one will get product market fit right the first time, but no one will. Some people will, but generally you have to learn how to pivot. You have to listen to the customers and what their problems are. The second thing we always look at is how big of a problem are this all you could have wonderful product market fit.

00:16:15:18 - 00:16:40:22
Unknown
You might be solving a key problem, but as an investor we cannot make the return we are targeting for our LPs by addressing a smaller niche so that it has to be a big enough problem that they're solving now product market fit. You can have, you can start, you're going to start. You have to have customers, especially enterprise customers that are trusting the startup to solve a problem.

00:16:41:00 - 00:16:58:12
Unknown
And then you have to grow that product market fit over a period of time and you'll have to pivot. So that's why to say Jason will find product market fit, you could find it to begin with, but that has to evolve. I can give you examples of one of our companies that, when we invested, had great product market fit.

00:16:58:12 - 00:17:28:15
Unknown
They were growing in triple digit year over year growth, but they lost product market fit because the market doesn't say static competition comes in and competition came in and they lost product market fit. So it's an evolving thing. One of the key learnings from our initial first one is getting better resilience and product market fit. And then the other way we work is we really try and be close to industrial customers and energy customers and understand what the problems are.

00:17:28:17 - 00:17:51:10
Unknown
The other advantages of having worked in these industries for many years as an operator, we know some of the challenges, so we really trying to solve that and introduce some of the startups to new customers and see how the pitch to these new clients and be a fly on the war wall and just listen to them and see whether we this is a team that we should back.

00:17:51:12 - 00:18:11:00
Unknown
So that's a little bit of a long winded answer. Yeah, it's a it's a very wise answer. Yeah. It's a really good framing because you don't hear that very often because people are always asking, I have product market fit or how do I get product market fit. But really looking at is, is something that's evolving because you have to continuously keep up with the market, especially right now when people are building a lot of digital AI products.

00:18:11:00 - 00:18:35:08
Unknown
But you know, the next person next to you can also build and code exactly the same thing with a lot of ease. And so really being in tune to what your customers need and what you're seeing in the markets. I can imagine that's what you look at. Then at the founding team, are they able to not that they're able to get product market fit, but are they able to keep on listening to the customers and adapt and grow accordingly?

00:18:35:10 - 00:18:53:13
Unknown
So what I'm hearing is more about does the company have the like muscle memory or the muscle to continuously improve product market fit and to kind of go back to your example with Apple? I think that's why everyone marvels about Apple is it seems like they for a while, they were always hitting product market fit with every new generation of technology because they had that internal capability.

00:18:53:15 - 00:19:24:18
Unknown
And, and I don't know how you spot that. Yeah. And you know, like you use the word resilience, like that's what it is. That's what the end is like. Resilience. Resilience. You're going to be the mark. I mean, as a founder you're going to fall several times. Can you get up and stand up again. Yeah. And I think it's really hard on the industrial front, which is why I think it's it's great to hear about your backgrounds having worked operationally in industry, but then having that like experience in finance, understanding also like how do you actually make the numbers work?

00:19:24:20 - 00:19:51:17
Unknown
How do you because it's often comes down to unit economics, especially when you're building hard tech companies. It's not just about, you know, being able to fix a technological problem, but can you make it into a business model that will be able to scale? So talk to us about what you've learned doing that with your experience. In working with founders in terms of, again, an extension of the product market fit, or how is that replicating into success?

00:19:51:18 - 00:20:16:21
Unknown
Yeah. Finding business, like finding the right business model that that is able to, you know, give you the value for your investors to be able to continue fundraising. Absolutely. So it's I can take a first step up. Sure. You know, it's very important for am running me, that we do what we say we would do and not do what we say we want.

00:20:16:23 - 00:20:53:09
Unknown
So when we look at product market fit, let's stick on that for a second. We're also looking for founder product market fit. Right. I'll give an example of a company we've invested in, my academy, you know, create company and then actually growing the founder comes out of LNG. He used to commission, LNG projects for, you know, big super majors, and he has taken that knowhow productized this into a product called Turbo Mechanic and is now focused on doing diagnostics for critical rotating machines so that these guys.

00:20:53:09 - 00:21:18:11
Unknown
Yeah, you know, and it's such a, you know, really, we find founders, we've got a right balance of, they're not going to say yes to everything the customer asks for. They're very thoughtful at the same time. You know, the hustle is always there, 24 seven, you know, leaning in. They know how to attract talent, to retain and be in the company.

00:21:18:13 - 00:21:49:15
Unknown
And, technical, very technical founder, but can also be very commercially minded. So, you know, when we come in into these companies, when we came in an academy, they had one customer and, you know, almost negligible revenue. Right. But our confidence in the team was very high. Right. In addition to that, recently, in fact, a year back, we started an accelerator program where in companies that may be a stage or two before we invest.

00:21:49:17 - 00:22:12:13
Unknown
Or maybe the timing is not right, because they may not be raising around, it's our way to nurture a relationship before we actually kind of invest in these companies. We work with them. You know, open up our regular next, you know, help them in any form fashion we can. And at the end of the graduation of the accelerator, both the parties have an option to decide if you know they want to partner with each other or not.

00:22:12:13 - 00:22:33:03
Unknown
So that's another mechanism for us to to, kind of feed into our deal flow pipeline, yet at the same time de-risk an investment which and the prima facie may seem very attractive, but as you start working with the entrepreneurs, we may feel we're not the right partners for whatever reason. So that's another way we kind of de-risk some of these things.

00:22:33:05 - 00:22:52:00
Unknown
Yeah, I really actually like that approach because that was going to be like, my next question is, how do you do due diligence and how do you really figure out that resilience within the founder and how they work? And, you know, they can on paper everything can look good, but how does it work in practice? And actually having an accelerator program, you get to see that.

00:22:52:01 - 00:23:17:21
Unknown
So talk to us more about, you know, how many companies are part of that program, how long does it run. And, you know, do you provide them any funding during that time? How does that program actually run go? So, we've had three companies in the accelerator or maybe four companies in the accelerator. One is about to graduate, and successfully graduation as, as we define as we're able to invest.

00:23:17:21 - 00:23:47:22
Unknown
And they also want to partner with us. So and recently we brought another company called Eco Pulse based in, Austin. Does Belfast analysis, now. To answer your question, not, in terms of how it due diligence at these companies. So for us, early stage is the number one thing and everyone says this and to repeat that is the quality of the management team.

00:23:48:00 - 00:24:14:12
Unknown
And that statement has a lot of underlying attributes, everything from relevant background, ability to listen, chemistry, ability to push back, ability to grow, think commercially, recruit. So that's the number one thing that we spend a lot of time. And that's why, you know, our average diligence first meeting to check writing is it's almost a quarter, right.

00:24:14:14 - 00:24:36:00
Unknown
I think the next biggest thing, as Imran has covered is, how big of a time is it? Right. And we like companies that have that are vertical niches. So maybe vertical software, but that has multi industry applications. And so once they've nailed one sector, we like companies that have the ability to expand beyond that one sector.

00:24:36:02 - 00:24:57:00
Unknown
Right. There's a very fine difference between a line between being too broad and being too narrow. We like to see product market fit in one sector and then use that rinse and repeat that success in other markets. Technology more is also very important. Imran and myself, we consider ourselves technical enough to due diligence on these companies, but sometimes we run out of depth.

00:24:57:02 - 00:25:20:21
Unknown
So that's when we lean in, to our advisory board members or, you know, industry colleagues. And last but not least, is the valuation, you know, a business bought well is half well sold, right? So for us being valuation disciplined, not being super crazy, even the mocks are high or down, but and, you know, we've, we've lost deals, because we wanted to stick to our terms of valuation.

00:25:20:21 - 00:25:37:15
Unknown
Right. And wrong decision. Right decision, you know, but, we want to remain consistent, in what we tell what we are doing. So if you I don't know if you want to add anything else on the due diligence portion. No, I just wanted to go back a little bit on your question that on on the commercial model.

00:25:37:15 - 00:26:09:15
Unknown
Right. And unit economics. So I'll, our fund is primarily a digital fund. So I would say if you make 20 investments out of fund to 70 to 75% will be software data science. What we will do, call it 25%, maybe 30% of the portfolio or on molecules. Molecules means hardware, process chemistry, materials science, etc. obviously, when you're dealing with now, when you're dealing with, hardware, material science, chemistry requires a lot of capital.

00:26:09:15 - 00:26:41:14
Unknown
So we are typically a capital light investor, to make return. And the size of our fund, requires us to be disciplined on that approach. So when we are looking at, physical investments, unit economics are important, we have to get an understanding of how the how the how you price the product. And we use our operational sales marketing knowledge to help the entrepreneur price.

00:26:41:16 - 00:27:08:15
Unknown
And coming up, coming up with a pricing strategy. Because when you're going to an enterprise customer, you're a small company with anywhere from 5 to 50 employees. If you're dealing with a large enterprise, you they tend to, especially with terms and conditions and pricing and procurement be, let's say, sharp elbows in terms of the negotiation. So really helping them manage that, navigate that.

00:27:08:17 - 00:27:36:11
Unknown
On the digital side, what we're looking for is really what is the value proposition and how do you price and appropriately price your product in the marketplace. And there's no problem coming to the market and saying, look, I don't know what my value proposition is or I want to get into the door with company X, which is a fortune 500 company, and say, look, I'm going to do an introductory pricing right now, I'm doing the special pricing for you because I'm still trying to figure out the product market fit.

00:27:36:11 - 00:28:00:09
Unknown
I'm still trying to see what value I'm going to create. Once I've understood that value and provided I have a differentiated product, then I'm going to value pricing, and go step by step and not be unfair with the customer. But if you're creating significant value for the customer and the customer doesn't have any other option, then they will agree to share in that pie and be fair about it.

00:28:00:11 - 00:28:23:16
Unknown
I was talking to a large, manufacturing company in Texas yesterday to the CTO and one of the challenges, and one of the things they were trying to wrap their head around is one of our fund one portfolio companies is managing to go not through a child partnership, but managed to go to ENP companies, exploration production companies in oil and gas and out.

00:28:23:16 - 00:28:51:18
Unknown
That was customers generally large oil and gas companies want to work with an established supplier, because if you're working with a startup, you don't know if they're going to be there in two years, or they'll go belly up. So the risk for an enterprise is a little bit different. So they were trying to wrap and I said, look, the reason that these large customers are using this young startup, because the value proposition cannot be provided by any other company.

00:28:51:20 - 00:29:13:19
Unknown
I mean, they're doing it because not because they love the company, because they're solving a big enough problem that they don't have any other solution from whether it's Honeywell, whether it's Emerson, Aspen Tech or whatever. Those other companies cannot provide that answer. So that's why these customers are solving that problem. So there's a going back to the original business model.

00:29:13:19 - 00:29:32:18
Unknown
It's a little bit different for a product business because they're a bit different for a digital business. And then how we engage with them and help them I mean, sometimes do we really we sit down and read the contracts and back to front on terms and conditions and what to look out for and what not to look out?

00:29:32:20 - 00:29:56:05
Unknown
That's very valuable. So, thank you for differentiating that. Actually, that's super important how you think differently about business model with with digital because there's, you know, less of that capital intensity as, as you mentioned, are you ready to lead the decarbonization charge? Energy tech Nexus is your platform for growth, offering unique resources and expertise for energy and carbon tech founders.

00:29:56:05 - 00:30:20:00
Unknown
Join us at Energy Tech nexus.com and start building your thunder. Is it? One of the things I'm curious about is, when you talk about, digital solutions, I'm noticing you're specifically not referencing AI. And is that deliberate, or is that AI is just another a bit of an Amrani? Yeah. Yeah. Well, and probably Asia's everything now, you know.

00:30:20:01 - 00:30:47:02
Unknown
Right. I, I'm curious how you view that. And when people throw the word where they ai around, they mean everything from a chat bot to, you know, real machine learning. So I'm curious. So where are you? If you look at the human mind. Yeah. And or we have a dog. Yeah. Right. And you tell the dog an instruction, and if the dog realizes, like, right now, it's really cold in New York.

00:30:47:06 - 00:31:12:03
Unknown
Yeah. And so we put this warm jacket on. So you know that the moment that jacket comes out, he does a correlation. And it's not like I'm going out for a walk. And that's what machine learning data analytics AI is the most advanced for many eyes since large language models have come out has become a buzzword. But I mean, and neural networks and AI has been around for over two decades.

00:31:12:05 - 00:31:44:00
Unknown
We or at least I avoid using the word AI because right now, every single pitch we see is about either the something as a service, hardware as a service, a software as a service, everything, engineering as a service. When SAS was the thing. Now I think so you just have to be very careful and understand. Is it truly something that's using intelligence in terms of decision making, or is it more correlations, data analytics or machine learning?

00:31:44:02 - 00:32:04:11
Unknown
And there's a spectrum along those lines. So we're just careful. Some of our portfolio companies I think Academy was one that you shared, a few others, one in an accelerator that's going to graduate. This is the one you're referring to that really uses machine learning and AI. But then there's others that nothing wrong with them.

00:32:04:11 - 00:32:27:22
Unknown
They're software companies that use analytics when maybe not to the next level. Yeah. And I think it's important to maybe give you a or we of where we play in the AI space. So we look at the AI as there are five layers, right. And the application layer, the model layer, chip layer infrastructure and energy. We are primarily playing at the application layer right.

00:32:28:00 - 00:32:58:12
Unknown
And Imran Rodham Academy and let's take an example there they are physics guide. They're using physics guided and physics informed models. They've got equations of state thermodynamics modeled on all the critical machines. On top of that they use large language models and they've codified did not know how of working on rotating equipment. Right. If you just use pure AI and say, okay, why does this?

00:32:58:12 - 00:33:22:15
Unknown
Is turbine fail six out of ten times, it makes it okay because of a valve failure, right? There could be other issues. You know, liquid carrier ragazzi up issues and whatever it is. So their domain knowledge codify that with machine learning is what truly separates companies like these. Right. So a lot of you correct, Jason, a lot of companies, we we come across the using AI very, very loosely.

00:33:22:17 - 00:33:51:18
Unknown
And we don't get carried away. But at the same time, we acknowledge that it's something that we need to be really plugged in and see how, you know, entrepreneurs are utilizing the tool, aiding it in solving problems for the customers. And where do you think? I mean, yes, a lot of the AI progress that we see, and like the buzz that's been around, has been around the, language models right in the chat box and, like, making it accessible again to consumers.

00:33:51:20 - 00:34:23:19
Unknown
But, you know, there are a lot of people talking about how, okay, the next phase of AI is really on the physical world. And that's kind of where you guys are mostly focused on. So talk to us about what do you see, what's the outlook for how like our industrial operations will change with, you know, the processing power, and the ability, you know, machine learning, predictive analytics and, and everything that we're seeing coming together and become becoming a lot more easier and accessible to engineers.

00:34:23:21 - 00:34:49:09
Unknown
So if you look at large language models and talk about that, they've obviously been trained on huge volumes of data that's in the public domain. The challenge with industrial energy domains is a lot of that information and data sits not in the public domain, sits behind the firewall. Number two is the data siloed? Is it appropriately labeled?

00:34:49:09 - 00:35:14:17
Unknown
Is it an appropriate data lake. And how do you consume that data. So a lot of our companies and some of the companies in our fun, one, companies that are in that space are either going through that data, removing the silos, putting it in a unified system, and if it's not appropriately labeled or a period of time labeling the data and then consuming the data.

00:35:14:18 - 00:35:39:12
Unknown
So that takes time. It takes effort, takes a lot of energy. And number two, the enterprise customer has to feel comfortable because a lot of that data. So one of the challenges I'll tell you from a legal perspective comes in, you go to a customer and sell a customer. As you consume more and more data, your product improves.

00:35:39:14 - 00:36:02:23
Unknown
Obviously their data belongs to the customer. Would you allow me to improve my product? Oh no. No, no, not anonymized basis to improve my product. Some customers say yes. Some customers say no. But you can't improve your product. The startup. Unless especially in in the software data business, if unless you have good quality data being consumed.

00:36:03:01 - 00:36:23:14
Unknown
And so that's one of the, the legal challenges we work with on the contracts and say, look, if we're providing if we're training our system on your data customer and that customer be customer and customer data, the product will improve. But you need to give us on an anonymous end of the day data belongs to you. We're going to take all the data labels away.

00:36:23:14 - 00:36:39:07
Unknown
It will take all the field information away, or we will take all the factory information away, but allow us to improve our product so that when we come back to you in a year's time or two years time, the next version of the product is going to be a much better product. So these are some of the real world challenges that you have to negotiate.

00:36:39:07 - 00:37:03:05
Unknown
And some customers say yes, some say no. Yeah. And you know, having worked in like EPC firms, that was like offered the conversation was like, who owns the data? Well, we have access to data, you know, Schlumberger is building its own, digital models and Honeywell to be building their own. And Baker Hughes is building their own.

00:37:03:05 - 00:37:24:21
Unknown
So it's like if that if one supplier owns that product, they're giving data, is that data going to be accessible to their competitor. In kind of benefit that. So I think over the past decade there's been a lot of conversation about, you know, who owns the data. How do we protect the data. What did you see in your operational experience?

00:37:24:23 - 00:37:42:18
Unknown
Have we kind of over overcome that, or are those challenges still relevant? Are we still talking about it or people kind of understand? Have they not figured it out yet? Like, you know, like, does each company still have these open questions because it's been, you know, 10 or 20 years? Yeah, she's ten years. We've been talking about we're still lagging behind I guess is my question.

00:37:42:18 - 00:38:04:10
Unknown
Yeah. Has has that perception changed in industry that, you know, if we don't actually open up our data, start using our data. And there yes, there's a risk that our competitors might get exposure. Other products might get better than our products. In the end, it's beneficial for everybody is, how is that evolved, that thinking in industry? Yeah, I think it's still work in progress.

00:38:04:12 - 00:38:30:00
Unknown
Yeah, I would opinion, the data always belongs to the clients. If I take a practical example, if I take an oil and gas example, if the customer is Chevron, Chevron owns the data. Schlumberger, Baker, Halliburton, whoever is acquiring the data for them, processing the data for them, the data belongs to Chevron or EOG or whoever.

00:38:30:00 - 00:38:57:10
Unknown
Occidental. Now the question is that data is vital to that company's success. If it's an asset and it sits behind the firewall, that is vital to their extraction process. And to go back to your original example, Jason, if Chevron sells analysis and that data will go with that asset. But I think people are still very protective of their data, which I completely understand and empathize with.

00:38:57:12 - 00:39:23:19
Unknown
However, if a startup or a company is going to improve their product, obviously on good quality data, depending on the application layer that the data startup has addressed and it provided, they have the right security protocols, then that product will improve. I don't think it's a but I in the last ten years or 20 years, the problem's been 100% solved.

00:39:23:21 - 00:39:48:00
Unknown
You just have to go step by step and work with the client. Now, when you're creating significant value for the customer, there's a bit more flexibility. When you're a commodity, then it's a more yeah, that's a bigger challenge, let's call it that. It is. When we were talking to one customer about, one of our products and they were lamenting the, the incumbent because they didn't have a way to download their own data.

00:39:48:02 - 00:40:05:07
Unknown
And his kind of line to us was, if we use your product and we can hit a little button to download a CSV, we'll switch tomorrow. It is funny how how important that is. And it's, not something you would put on a whiteboard as like a compelling reason to buy a product. But it's important for these industrial customers.

00:40:05:07 - 00:40:16:20
Unknown
And and that's really why I bring that anecdote forward. Absolutely. Yeah, absolutely. Making it easier for the customer to adopt the technology. You know, and.

00:40:16:22 - 00:40:46:09
Unknown
Listen, I think we see a lot of entrepreneurs also, doing this mistake as not appreciating enough how much the customer has to arrange around, before being ready to use that technology and also, not being realistic of what acute problem they're trying to solve. Right. So, and in fact, in the last few years, we've seen a lot of these corporates becoming more and more open to doing pilots, working closely with entrepreneur.

00:40:46:15 - 00:41:07:14
Unknown
Bruno's, you know, quite a few organizations here in Houston. They didn't become very, very open, but at the same time appreciating how much does it take for the customer to to prepare to get to that, position to be able to adopt the technology? Sometimes the startups, they're not mindful of that. So it does take time.

00:41:07:14 - 00:41:25:11
Unknown
That's why there's a Jacob. The rate of adoption is longer in these end markets. So I think, one of the challenges is like, as consumers of digital products, it is as easy as signing up and like trying something out, playing with it. As a consumer, I'm sure all of us have been on ChatGPT of like, okay, what what does this actually do?

00:41:25:11 - 00:41:44:17
Unknown
And it's free because it's it's free. Yeah. You don't need to sign up while you give your data away. Yeah, but but the moment it becomes, you know, an industrial usage and it's like, okay, well, you know, I am giving away my data. We I think I just saw something on the news on. So some, government official putting in, you know, data in the fridge sometimes it's on prem.

00:41:44:19 - 00:42:09:08
Unknown
You can't even leave the premise. So the startups need to be able to have the on prem capability as well. Right? So it all depends. Right. And where I was going with that. Like we've been kind of, poisoned as consumers because it is so easy, it's easy to lose sight of the fact that the industrial buyer, like, needs to put an engineer on it or needs to put or God forbid, they got to call it and get an IT resource to actually commit to figure out, like, how does this actually plug in?

00:42:09:14 - 00:42:33:23
Unknown
Because, because it's so easy now for us to get get these digital services, it's easy to forget and then to get into an enterprise, it won't let you in unless you're SoC one, SoC two compliant, ISO 27,001 compliant. So you as a startup you if you're going to be around data. Well it's AI whether it's machine learning, any analytics, any software, you need to get those minimums done.

00:42:34:03 - 00:43:00:00
Unknown
Otherwise with enterprise customers. And it's an investment. It takes money, it takes time, takes effort. But no enterprise would allow you to come in, especially with the cyber risks today where it pretty much everyone's been hacked and everyone's data's bit out in the dark. Web is getting control of that situation. And so that those are investments that as an entrepreneur, as a founder, you have to make into your company.

00:43:00:00 - 00:43:21:10
Unknown
Otherwise you won't be able to deal with that. Customers. So I know we are like in Houston and you guys both have like an energy background. And so a lot of our conversations have been around that. But you guys have also been very intentional about not only focusing on energy, and focusing on industry in general. So talk to us about your portfolio construction.

00:43:21:10 - 00:43:43:11
Unknown
How do you kind of diversify and given like your knowledge is probably most in the energy industry, you know, if you're going into defense or if you're going into, aerospace or aerospace or like other industries, how do you, you know, how are you? Do you find yourself leaning more towards investing in what, you know, more about? And then how are you thinking in terms of risk?

00:43:43:13 - 00:44:23:01
Unknown
And your portfolio, construction and diversification. You want to go first, Sure. So, you know, again, at a very high level, our worldview on, we call it the critical infrastructure is heavy engineering process industries. And what we feel is there's a common underlying theme across these end markets, everything from, Resistance to change, using critical machinery to aid in operational efficiency to, you know, driving a particular throughput.

00:44:23:03 - 00:44:48:23
Unknown
But we have learned this into five, six different categories from an application. So it could be operations management. So, you know, asset performance management, supply chain management could be data acquisition, could be analytics. Could be compliance risk methane and as you would appreciate is a common underlying theme across all these vectors. Right. A manufacturing operation and EPC company.

00:44:48:23 - 00:45:16:07
Unknown
Let's let's take asset performance management. It is as important to an ENP company as it is to, company making those controllers or OEM as it is to a channel partner to a service company. So we wanted to play in, in markets that are big enough. Of course the multiples are better at exit. The customer base is bigger.

00:45:16:09 - 00:45:42:11
Unknown
You're not always susceptible to the, headwinds from an oil and gas commodity perspective. But also be very honest and transparent. In fact, you know, in fund one, we had an investor come in and say, I don't see you guys doing a lot of climate tech. And this is at the peak of it. And, we looked at each other and we were very honest and said, listen, we we are learning about oil and, climate tech just like everyone else is.

00:45:42:12 - 00:46:20:16
Unknown
It doesn't give us confidence to put your dollars into play and claim and give you, you know, false hopes that will create an alpha. We've come a long way. We've learned a lot, but we also know what swim lessons are. So just to round up big enough markets so that the exits, the customer base is bigger but not too broad, that, you know, diluting our brand and we've got the advantage that we've got some corporates as investors in the fund very strongly plugged in in the ecosystem that always try to remain close to the voice of the customers to understand what the top 2 or 3 pain points are.

00:46:20:16 - 00:46:41:04
Unknown
So, you know, we want to say as a performance management, wastewater treatment, you know, those are some of the examples I'm taking, you know, that come up as top 2 or 3 points in a lot of our conversations with customers, and those are the areas we want to hit and find. Companies invest for the betterment of our corporate partners, the ecosystem.

00:46:41:04 - 00:47:11:06
Unknown
And of course, investors. All right. Cool. So going back, okay, if I, if I can just compliment that the your question was on portfolio construct, there's a natural bias given our backgrounds to go to energy. It just natural. So we have to counterbalance that unnaturally by going the other way. Because if we're going to make our target is to do 20 investments plus or minus, we are often to assuming we get to the full fundraise, then a certain percentage would obviously be energy.

00:47:11:08 - 00:47:37:15
Unknown
But if we look at practical examples, if I, I mean, we talked about Academy as one of our portfolio companies. They're rotating equipment, which is the biggest user of rotating. It's up in the air. Boeing. So if you look at Rolls-Royce G United Technologies, all of that make that you can go into defense. Obviously it's an upstream midstream power generation.

00:47:37:17 - 00:48:01:05
Unknown
So you can see the applications go across the full gamut. So yeah, the initial entry point is traditional energy LNG upstream midstream refining. Next step is power. And you're going to go beyond that. And if I look at other industries, if I look at some of our companies that we are looking at that, you know, that are in our hybrid pipeline, you mentioned Eco Pulse.

00:48:01:07 - 00:48:31:10
Unknown
Eco pulse is on fast, be fast is the forever Chemicals business. And again, it's more of an environmental play and safety play and a digital solution that will address manufacturing companies. Now that could apply anything from cosmetics. To any kind of hardware. And where, as you might know, the biggest one or the I mean, the two places where PFAs has been an issue is utensils.

00:48:31:12 - 00:48:57:15
Unknown
Teflon. All of those materials is how fast is it ended up in the water supply? You can go into other industries. If I look at you mentioned, our rated company, which is in pulp and paper and wastewater treatment, obviously not nothing to do with energy at this point. We have a few other companies. We're looking at startups that are looking at decarbonization from semantic perspective.

00:48:57:15 - 00:49:28:08
Unknown
So this is using ACM, which is basically cementitious material to replace cement. Cement produces roughly 8% of the CO2, emissions. Can that replace cement? Again? It's a hardware plant, not a software plant, but that just gives you a sense of. And we've been in discussion with two different cement manufacturers, Holcim and CRH, through relationships in the past, and that's why we know it's an important topic for them now.

00:49:28:08 - 00:49:50:00
Unknown
It has to be cost effective, meaning it has to be less than $100 a tonne kind of cost structure. Otherwise the construction material is not going to change it just do price sensitive. Yeah. And one more thing. So we've spoken about sector diversification but stage diversification as well. Right. So we we do both seed and seed. Right.

00:49:50:02 - 00:50:13:16
Unknown
You know, the objective is to kind of do 1 or 2 investments a quarter for the next four years in this fund for and, that's how we kind of look at the overall portfolio construction. In that kind of things. And I'm curious, when you think about, in Houston, what percent of deal flow is actually coming from Houston or Texas?

00:50:13:18 - 00:50:33:04
Unknown
And I want to say a different way. What percent of deal flow is good. And I think there is that. The reason I ask this question is, we get entrepreneurs a lot asking us, well, who are the investors in Houston? And I don't think it's a it's it's a local market. I'm sure you are sourcing the best companies around the globe that you can find.

00:50:33:06 - 00:50:53:16
Unknown
And and the answer I unfortunately have to give them a lot of times, as you should go where the investors are. That tends to be California because the California market for investors is just a lot larger. And I don't know of any, any investor who only looks in Texas. So I'm curious what your view of the Houston and Texas like supply of good technology companies looks like.

00:50:53:18 - 00:51:18:05
Unknown
So so I think your question I think you're getting at is deal sourcing. And we're a small team. We're in the US. So I would say 90% of our deal flow is domestic US, Canada. We get some internationally. But I would say North American is is where we focus primarily us. We look at a national level now.

00:51:18:05 - 00:51:43:15
Unknown
We're a small team. We also build a relationship with universities. So we've picked a handful of schools my alma mater, Caltech, UT Austin Rice in town, and Columbia University in New York, and we're building and trying to build privileged relationships with those schools. We do the same thing with Angel networks, all the way from Santa Angel in California, all the way to the Renaissance capital in the Midwest to Houston angel networks.

00:51:43:15 - 00:52:16:08
Unknown
So again, those are all people investing upstream, where we typically deploy dollars to get there. So we do the same thing with corporates. So corporate venture groups, we have a great relationship across the energy sector, industrial sector with CVC teams working with them. Incubators like the capitalist program of Chevron, the game changer at shell. So we have those relationships and then we work with folks like Halliburton Labs, we work with, Greentown Labs and built use that ecosystem for deal sourcing.

00:52:16:08 - 00:52:37:22
Unknown
So that's where it comes from. So some of it is Texas, some of it is north east, some of it is the West coast. But we're agnostic. We're trying to get the best teams. Now, the reality is there's a natural tendency to look at Houston, to look at Texas and other places where we have deep relationships. That's just a natural bias that happens.

00:52:38:00 - 00:52:58:17
Unknown
And it's normal. To go back to your question, Jason, it really depends on the type of company. If you're an industrial company, a lot of I mean, the two largest pools of capital, obviously West Coast, the Bay area number two is New York. Then you can go into Boston and a few old places in industrial technologies.

00:52:58:20 - 00:53:41:17
Unknown
Do those investors understand it and are they comfortable in investing it? And I'm not sure some Californian investors or funds would be. But a lot of them are uncomfortable for two reasons. One is the sales cycle is much longer and complex, which is a fact of life we're selling into. Number two is conviction and understanding of the product market fit in the pinpoint and selling into those so so those are some hurdles that if you're a founder that's focused on these businesses and these industries, it's not obvious that you will get that capital flow from those, let's say, the larger pools of capital.

00:53:41:19 - 00:54:07:15
Unknown
Yeah. I guess my I'm gonna I'm going to push you on this because I care about Houston. Right. Sure. And we were at a group meeting. It was like, six months ago. And they're they're starting up a program to try and engage more, more, capital deployment locally. And I think that the idea is we want to be an innovation leader, and we have we have programs here, we have startups coming up, but we still haven't seen the number of investments in local companies, especially on the tech and energy tech side of things.

00:54:07:17 - 00:54:30:07
Unknown
And so the, the, the assumption is we need more investors. And, and that's kind of what's the discussion going on at a city level. And, and my, concern is just because you have more investors doesn't mean you have better deals in Houston. Right. And and just because you have more investors chasing, you know, ostensibly not the best deals, that doesn't mean better outcomes for the city or the innovation community.

00:54:30:09 - 00:54:54:01
Unknown
And so I'm not investing. I'm not looking at the deals. I'm curious if from your perspective, if Houston does have the good deal flow to compete nationally compared to other, other sources of innovation? And so my curiosity is, are we performing on par? Should we be performing better as a, as a source of good technology companies? Absolutely. That's kind of the question.

00:54:54:03 - 00:55:21:05
Unknown
You know, good and bad time will tell how the investment pans out. You know, one of our companies based in, Houston, called price easy. All right. And they do dynamic pricing and location intelligence for retail stations. They've really gone off of this market and are really scaling very nicely. They've got marquee customers. They have, you know, close to ten, 15,000 gas stations on their platform.

00:55:21:07 - 00:55:44:16
Unknown
The point I'm making is, again, going back, the sales cycles are longer. There are the advantage that Texas Houston has is we've got a lot of great, schools from an academia perspective in our backyard on the front row, we've got for a lot of fortune 500, fortune 1000, fortune 100 companies, and then energy tech Nexus.

00:55:44:18 - 00:56:13:15
Unknown
You know, there are a lot of other Greentown Labs, ion Rice alliance. They've done a fantastic job in pulling talent, to come in, nurture, curate them. So it's going to take some time. But I feel you know, we've come a long way. You know, if you look at all the services. Right? Everyone from an oxy, to Aramco, Chevron, Exxon, shell, they've also done a very good job in being out there supporting the ecosystem right.

00:56:13:15 - 00:56:37:21
Unknown
So, it's going to take some time, but I think every year we feel, we're making progress. Now, will that percolate down to good investments? I think maybe if I could reframe your question for us to get good deal flow, we should also ask ourselves, when was the last time Houston had an amazing exit? You know, Gangbuster exit for the entrepreneur investor, the whole ecosystem, right?

00:56:37:22 - 00:57:00:02
Unknown
Yeah. Because that's when it will start attracting because you have to solve the whole thing, right? It's not just doing good deals, but also being able to make maximizing the returns and, you know, solving real problems for the customers. Right. So, I think we are related to be, earlier in our journey, I, you know, a lot of people have been doing it much longer than Enron in, in the Houston ecosystem.

00:57:00:02 - 00:57:14:23
Unknown
But even that is literally a very small pocket of people as compared to if you go West Coast on the East Coast. Yeah. And I think your point, I think the challenge is a lot of the good exits have not been technology back startups. There's been a lot of roll ups unfortunately like oil businesses are good exits as well.

00:57:14:23 - 00:57:34:09
Unknown
If you you time it right. And and in some ways that's what the investment community here is. I'm talking about IP. That's what they're more used to engaging with. We we are a very good industrial you know, roll up kind of town. And I don't want to say it, it sucks a lot of the oxygen out of the room.

00:57:34:09 - 00:57:56:21
Unknown
I think for where the attention is, locally, when once you get beyond that first, like, stage of VC. And that's my opinion. No. You know, I think they also say, like, talent attracts talent. So California has traditionally had that entrepreneurial talent. And when you're around that ecosystem, it just builds other companies like it just becomes fertile ground.

00:57:56:21 - 00:58:14:16
Unknown
And then New York has done the same in New York. Did this afterwards. You know, in the past like 2 or 3 decades. It really and it was a conscious effort from the city to build that entrepreneurial ecosystem. And I think Houston, like you said, I mean, I've is like on that journey, we're just early because, you know, before Covid, everything tomorrow.

00:58:14:16 - 00:58:33:23
Unknown
Yeah. But before Covid, like we didn't have the eye on we didn't have Greentown Labs until you brought it here. Like there's just so many things that weren't there. You know, when I used to live here 15 years ago and that are here today, that's kind of create creating hopefully this path towards us becoming that entrepreneurial city. So yeah, let's be be patient.

00:58:34:01 - 00:58:53:13
Unknown
And I think you also have to have flavor. So if you went and looked at Boston right now Boston is the place to be in pharma. And obviously they've got a great academic institutions run around the Boston area. If you went to New York, a lot around crypto, fintech, and that ecosystem. Right, if you go into the West Coast.

00:58:53:13 - 00:59:17:04
Unknown
So if you look at the places we plan now, then Titanium Innovation Investments, we're in industrial tech. So where is the industrial belt? Obviously Houston is a big component of it, but there's many other cities in the United States that are big components of it can go to Detroit if you go to many other places. So the question is when we invest, we look at it nationally.

00:59:17:06 - 00:59:46:01
Unknown
But the reality is we are a small team and we where we leverage the deal flow is through our networks and relationships. And I would say the vast majority of our deal flows or investments. You make our off market meaning it's not someone who's going and talking to 50 other people. A lot of our deal flow is we build that relationship at the pre-seed seed stage, either through the accelerator or directly get to know people.

00:59:46:01 - 01:00:09:21
Unknown
They get to know us. And end of the day, if both sides think it's a good deal, that makes sense of what side do they and we invest and we move on. So so I'm very curious in that. So there's the off market nature different because is that because the industrial startup market is just different. Or is that a, a vestige of where you look?

01:00:09:23 - 01:00:33:13
Unknown
I think it's a function of a few different things. I think it's a function of engaging at an earlier stage. So not only I mean, I was talking to a farmer, actually in the UK recently doing a teams call and they're just closed around. And it was in our space. So I said, look, I reached out on, on, on the website and said, look, let's have a call.

01:00:33:15 - 01:00:52:00
Unknown
And the founder was, well, I've just closed the seed round. I said, can you share some details? No, I don't want to share details. I said, look, my $0.02 on it. For what it's worth, the best time to look for an investor is not when you're looking for cash. Build a relationship when you don't need to.

01:00:52:02 - 01:01:10:13
Unknown
And so if I look at this material materials of business coming out of Columbia University, I've been talking to the founders since 18 months. He's now doing a pre-seed round. And I said, look, we see it as a little bit early for us, but let's talk. Maybe it makes sense. Doesn't make sense. And we might invest. We might not invest.

01:01:10:15 - 01:01:31:03
Unknown
But I've been talking to this founder for 18 months. Same thing I've been I've been on from Plug and Play, came across a few companies earlier than where we invest. We start speaking to people and say, look, and the reason we do it because we love meeting interesting people. We're nerds, we love technology. And what? And we don't claim to know everything.

01:01:31:03 - 01:01:56:07
Unknown
Let's learn about it. And and we, we like them, you know, a couple of other things. In addition to what Imran mentioned, a lot of the groups, VC have moved a little bit, late stage, maybe rightfully so. Maybe you are the stupid one still, you know, hanging around here. The other pieces.

01:01:56:09 - 01:02:20:20
Unknown
And when I say stupid, it was me and not you. And. I don't want them to beat me up once we once we leave, the second pieces, you know, again, you know, when a company comes with one customer and 204 hundred K of error, there isn't anything. So how can you develop conviction around that. Requires first principles thinking.

01:02:20:22 - 01:02:40:17
Unknown
You need to start you know we need to align need to come from the backgrounds. Be comfortable and taking this to the ecosystem to do it right. Being able to I mean one thing is entry point valuations have been pretty, pretty low. I mean, fund one, most of the companies we were between 3 and $12 million pre money valuation.

01:02:40:17 - 01:03:01:04
Unknown
Right. So you know it does. It's a culmination of a lot of things when it comes to being able to underwrite these, these investments. Right. So yeah, I gotta remind you, fund one was ten years ago. Six and a half. Six and a half. I was, I was I was literally talking to 20, 19, 20 okay.

01:03:01:04 - 01:03:17:10
Unknown
2019, which is okay. It's a little later than that, that, that was, under the CSL, banner in the, the last time I, raised capital was 2015, and I was talking to, over here and, we were talking about, like, minimum check size things like minimum check size dates. It's like in the 50 K range.

01:03:17:10 - 01:03:36:03
Unknown
And I was thinking, and it's been ten years, that's, you know, I used to ask for a minimum check size of $10,000, but it's just inflation. And so when you're talking about valuations from pre-COVID, I feel like there's been so much inflation, not just in like real dollars of industrial goods, but, there's so much more capital coming in now.

01:03:36:05 - 01:03:57:21
Unknown
Pre-seed value, you know, first, first round valuations have gone up. I remember when I raised money in 2012, I think the average pre money valuation in Houston was like $2 million. When you look at like data coming out of Houston Angel network and stuff like that. So it's, I always have to remind myself there's, there's also valuation inflation everywhere.

01:03:57:23 - 01:04:18:00
Unknown
Anyways, true. Silly. I don't absolutely. Yeah. Yeah. I mean, we could go on forever. Like I said, look at the clock. But this is very interesting. So I guess one maybe last question is if you could, give one resource that could be helpful for founders. You know, I did that could be a book or a podcast.

01:04:18:02 - 01:04:46:10
Unknown
Do you have any recommendations that would be helpful for them in their fundraising journey? I think understanding what each investor is looking for, I think we shared with you all these, as I'm not saying, every investor's thesis is the same, but they have to. I mean, when we ask, we're a startup, by the way, 19 American businesses, two of us, and we're going to our investors asking for money.

01:04:46:12 - 01:05:09:09
Unknown
As investors, they're taking a bet on us. We are emerging managers. We have some track record. And thanks to CSL on the fund, one, that's Titanium fund two, that's our track record. But we don't have DPI as an exit or exit and return the whole fund. And we don't have a ten year track record. So people are taking a bet on us.

01:05:09:09 - 01:05:33:13
Unknown
So when we ask investors for their money, we take it with a lot of how should I put responsibility? Because this is people's savings, whether it's a pension plan, whether it's endowment, I mean, so we take huge responsibility and integrity and trust is super important to us. So it's the same way when a founder is coming in asking for money.

01:05:33:15 - 01:05:57:12
Unknown
They have to take the same level of conviction. And when we're had, they have to understand end of the day and especially at early stage, you they don't have $15 million of revenue. So they what we are really looking for him are those very few data points for us to have that conviction that the this individual or these individuals are the people we want to back?

01:05:57:14 - 01:06:19:14
Unknown
And it's a partnership. It's a two way street because we're going to be with them. And that investment, we tell our investors 5 to 7 years, it might be eight years, it might be three years. Really depends. So it's a long term relationship. And there's always a bit of give and take. And you only find out the reality of that partnership when you hit speed bumps, when everything's going well, everything is wonderful.

01:06:19:14 - 01:06:39:04
Unknown
It's when you hit the wall and to see us around. And one of the things, I mean, I'm going to court, I've been off here. My partner, he says, if you call us on Sunday morning at three in the morning or whatever, six in the morning, we'll be there picking up the phone. I said, yeah, please, God, I love me because that's a partnership, right?

01:06:39:04 - 01:07:10:10
Unknown
When you've lost your customer, your key customer, or your product failed, or you had a major incident dealing with it and having a partner or sounding board to counsel or give advice, that's what partnerships about. Yeah, I've been out for two, you know. Absolutely. Just to complement that, a book that I'm sure a lot of people may have already read, but I go to this very regularly is, Sebastian Mallaby is the parallel.

01:07:10:12 - 01:07:42:09
Unknown
I think it's a fantastic book. So I think. By the way, we can be reached at Michael Bosch at Titanium ii.com and again at titanium ii.com, and we'll send the information. But, you know, one advice or suggestion to entrepreneurs would be, they can really create the company, build the product without raising a single dollar. Right.

01:07:42:11 - 01:08:14:12
Unknown
Prioritizing customers over investors is very important, controlling their own destiny. Speaking to a lot of investors, if they want to go instead of just focusing on few because it just takes one. And for someone to entrepreneurs and startups don't run out of cash. They run out of trust, right? When people stop investing. So focusing on the product, focusing on the customer, prioritizing them or investors is the only thing I'll say.

01:08:14:13 - 01:08:37:10
Unknown
Investors absolutely are important. You know, our our pitch to the entrepreneurs is we define success as if an entrepreneur is starting an industrial tech company and they want to x they know they'll get to where they want to. But if they want to accelerate that journey, we want them to think of titanium in that regard. And we're not saying we will solve every problem that they, they'll have.

01:08:37:12 - 01:08:49:21
Unknown
But, prioritizing customers, or anything is, is what will is that was okay. All right. Very good words of wisdom. Anyway, thank you so much. Thank you for coming on the pod. Thank you for having us.