Aug. 5, 2020

Stewart Bradley — NFL Linebacker turned B2B-Investor Shares Alternatives to Venture Capital

Stewart Bradley — NFL Linebacker turned B2B-Investor Shares Alternatives to Venture Capital

SaaS investor and former NFL linebacker Stewart Bradley joins The Game Plan to share his life journey and evolution from football player to sophisticated tech investor.

Shortly after his seven-year career with the Philadelphia Eagles, Arizona Cardinals, and Denver Broncos came to an end, our guest chose a different path; joining Goldman Sachs as an investment banking analyst in their esteemed technology media and telecom (TMT) group. Stew shares with us his decision process in choosing this path, and why he ultimately opted to go into banking versus pursuing an MBA.

Today, our guest is General Partner and Co-Founder of El Cap holdings where he is carving a unique path in the crowed software investment landscape. Stew shares with us the currency, beyond capital, with which he is building the fund. We also explore his investment thesis and the types of companies he looks to back.

Seasoned investors familiar with enterprise software and the SaaS landscape will especially appreciate what Stewart has to say about investing in "opinionated software products".

We also discuss the power of effort and focus and how these two attributes over the long term have helped lead our guest to success both on and off the football field.

Learn more about Stewart Bradley's investment approach by visiting El Cap Holding's website at https://www.elcapholdings.com/ or emailing info@elcapholdings.com.

Follow The Game Plan on Twitter (@thegameplanshow) and Instagram (@gameplanshow) for show news and updates, to recommend guests, and for bonus content!

You can also follow co-hosts Jay Kapoor (@JayKapoorNYC) and Tim Katt (@Tim_Katt) for all things sports, media, tech, and venture capital.


Transcript

*Please excuse any and all typos, errors and mistakes in the following transcript as an automated service is used to generate this text*

Venture is a great model. It's a tool and it's built a ton of wonderful businesses, but it is because the defacto way that I think any businesses associated with technology are funded and grow. And I think there's other ways to do it. I mean, an extreme scale, you'd say if you wanted to scale a software business in 2005, And, you know, you had your first 10 customers and you want to get to a hundred customers.

You're going to buy a server and you, you maybe be writing seven figure checks to get this stood up. Like it's a big kind of risky underwriting for a business of that scale. now you can kind of pay as you grow. And so like the idea of being a profitable business, but still have massive growth potential is not mutually exclusive anymore. Hey, this is Stu Bradley. Seven-year NFL bet. Current general partner and cofounder of El cap holdings. And this is the game plan. 

We are excited to have Stuart Bradley join us on the game plan Stu. Thanks so much for joining us. Yeah, absolutely. So before we jump into all the amazing things that you're working on now with El cap holdings, We want to talk a little bit about your NFL journey. were drafting the third round of the Oh seven draft by the Philadelphia Eagles.

You played there for four years and you spent some time with the Cardinals and Broncos. At what point during that NFL journey, did you start thinking about what came next for you?

I think  most guys in the NFL, unless you're. Like a household marquee name. I think you have to be thinking about what's next before you even really get drafted. Like you just don't know. There's a lot of unknown aspects in the industry. and injury risk is so high in football that it's kind of this ever-present aspect of your professional journey.

that said, I think there's a lot of guys who probably aren't thinking about it, just because, you know, it's. Getting wrapped up in playing a professional sport is really easy, right. Because you're kind of insulated the city. You're in cares a lot about the team. And I think people can conflate like notoriety in their market with national notoriety.

And, so I think having a dad and a mom that were probably always pushing me to figure out the next step and formed a lot of, kind of how I thought about it, but, I don't think I had any concrete plans until the last year when I was injured in preseason and, and I knew I was ready to be finished.

You know, I was on a new team and had gone through kind of the process of. Of winning the starting job there. And, and, but really wasn't enjoying it anymore. Like I was 30 and had been playing football for a long time. And football is something that kind of happens to you, unlike basketball or tennis, or like a skill sport where you've honed thousands of hours of, of, you know, alone time banging a ball or shooting a ball to build a skillset.

Football's kind of like a genetic lottery. It's like, I mean, I I'm. Probably oversimplifying it. you can't do like, Oh, I'm an AAU football on top of my high school football. And then I have club football. Like, it's just not a thing. Right. And you kind of right. You show up at, you know, your high school gym, and then you kind of do what your coach says and colleges send you letters and then pick a school and you just kind of go to the workouts and.

If it works out then Scouts and agents call you and then someone drafts you. It's like it's very much.

did you have that thought in college where you were like, the NFL is, is where I'm going to go? Or was, was there some doubt in your mind that maybe you were going to go out of college and do something else?

So we had a coaching change at Nebraska. It's funny. I, I. Was it we're getting recruited there when they were in the national championship game. And I think when I got there, it was just like, let's have four, just a treasure as yours, all students here. So maybe it was my fault. but they brought in, bill Callahan to coach and he had been a head coach in the NFL.

And I think it was after my sophomore year when he was asking me about, you know, what I thought about my, you know, my football career and what I wanted to do with it, where I was very much thinking I was just gonna go get a job after. Graduation. He's like, well, why aren't you gonna play in the NFL? And that was kinda like the first, kind of aha moment, like, Oh, I didn't even think that was a thing that I could, you know, it just felt so, before you kind of see behind the curtain, it feels mysterious.

And like, all these things are magic and they're all like from, you know, everyone came from the sec, like, can you like, alert white kid from Utah, like go play in the NFL. Like probably not. And so. I think when that conversation with bill after my sophomore year was the first time that I kind of thought it might be possible.

but you also just never know if your college coaches blowing smoke because they definitely, he could have said it to every single person, like, well, you should really focus in your career cause you can play in the NFL. and I was just naive enough to, to buy it. I have no idea what, which was the case, but that was kind of the, the, I don't think I, I shifted, Like the preparation, for not making the NFL.

Like, I, didn't not, I didn't stop going to my accounting classes because of what, coach Callahan said, but it, it kind of planted the seed.

Yeah. So we see a lot of athletes when they retire, they go to business school or they'll go right into investing or wanting to start a company. But you started as an analyst at Goldman Sachs and later at steadfast. What was your thought process in taking that path? And, you know, can you talk a little bit about maybe the humility that went into joining that kind of work environment after having played in the NFL?

so some context setting here, after my. Season, normally people sign a rookie contract for years, pretty stock. And the value of those contracts is pretty slated based on your draft order. There's not a lot of wiggle room. And your kind of first payday quote unquote is after your rookie contract, when you enter free agency.

So the year I was NRA for agency was also when the CBA was up for negotiation so that we were in a lockout. There was a lot of uncertainty about when we were going to reignite and, and where are we going to sign a deal? Where are we going to set out the whole year? And during that process, I've actually started talking to some people in my network.

Okay. I don't know if football's going to be a thing or not. I mean, that was maybe an extreme view, but it's like, I should start just getting some balls rolling on, job opportunities. And I actually went through like a closet hiring process at Bernstein. took their IQ tests and did a bunch of personality graphs and, they kind of had something lined up.

And then as I learned more about what the job was, it was kind of a PWM role. And I think that really informed nothing against those jobs, but like, it wasn't really what I wanted to do. And as I unpacked kind of more what the requirements were to like actually being an investor, what if I want to be the decision maker?

That's, that's actually deciding where the capital goes versus, someone more in a sales role. Like what skills would I have to have? And it's like, well, all those guys, like their analysts are like, it's like a really long track and they kind of frame it as this, this thing that you can't do. Right. And that's stuck with me.

So when I was kind of decided I was done, I was in an MBA prep course and, you know, thinking what's going to differentiate kind of my story versus other athletes. And then also, you know, how do I quickly ramp up and build that hard skillset? And Goldman just felt like the right opportunity. I mean, it was definitely brutal at working a hundred hour weeks.

in New York, 

you

You're in that TMT group as well, which is legendary for that. So,

Yeah. I mean, it was, I just don't think you can, you can replicate the kind of learning that that environment gives you because there's no one in their right mind is going to work that much. Right. Who is going to spend a hundred hours in Excel models, you know, working through credit agreements for some financing for, you know, Lex Corp.

It's just not a thing. So. No, I'm happy. I made the decision. and I think that kind of Bernstein experience and just getting a better understanding of kind of what the roles were and, and also kind of how it pigeonholed you to some degree, you know, 10, 15 years down the road, like, is it hard to jump from one to the other and, and them articulating that?

Yes, it is hard to like, to just all of a sudden become an investor. You know, 10 years down the line when you've never done any investing experience or, or, or any financial analysis will, will be a tough transition. so that kind of informed why I opted for the Goldman round versus the MBA.

Yeah, you're touching on an interesting theme there, which is that, like, it comes up with a lot of our guests that when you're making that transition as an athlete into the business world, there's that balance of like being a former NFL player opens a lot of doors for you, creates a great network for you, but then it's like being, it's hard to be taken seriously as an athlete when you're in the business world.

How did you find that for you? And I guess, how does that change now? When you speak about your experience? Either as an NFL player or, you know, coming from sort of the Goldman and financial.

Well, I mean, I think the jury's still out if my approach is the right way to do it. Right. but I was very much, wanting to build that quantitative skillset. Because the underlying assumption was the story of being a professional athlete in the lessons that I've learned. There are not going away.

Like they're somewhat evergreen. The, the relevance of my playing career though, I think is kind of a finite aspect of being an athlete. Like you have that first six months or first year, you still have relationships with the current stars. And you're like, it's kind of interesting. Like, Oh, you were just in the super bowl.

Like that's awesome. But five years down the road, like people are like, you played when and who, like, you just it'd be irrelevant to just kind of the clients. And so. I think your like the springboard and this is different if you're, you know, Michael Jordan or Kevin Duran or Steph Curry, like we're, there's a different level, right?

Peyton manually, if you're that level of superstar, Larry Fitzgerald or something, your ability to leverage your career is, is. Much greater than a random kind of guy who was a linebacker that played on some teams for a couple of years. Right? Like you just it's, you have a different, opportunity set to leverage.

So I think using that springboard while it's still kind of hot to do something. interesting or like to get on a path is kind of like the way I've thought about it. Like, this is not going to be a fallback for me five, 10 years from now. it may be a differentiator if I've built something, but I need to use this platform and this kind of story.

To get on the right path and then show that I can make, make progress through just working out tattooed. And then, you know, eventually I'll be able to have this kind of cool origin story dynamic. but by actively trading, you know, not leveraging the network and working at Goldman as an analyst could not be farther from a sales job.

Right. It's like you are in effectively a cave like building, you know, Doing arithmetic at scale in an Excel file. and then working at a hedge fund, like relationships, aren't really important as you're, you know, it's very quantitative as well. And I think the skills I learned doing that are, have been invaluable to what we're doing now, but I am like slightly stunted on like, okay, now you're like actually engage and, and develop a network.

And so. that's my point on TBD if that was the right trade. But, it felt like the most natural prog progression for me.

Yeah. And then one of the things you did is you went and found a partner to build El cap with. And so I asked our mutual friend and your cofounder and El cap can all tendon, who introduced us, whether he had any questions for you. And his question was, why was it so important for Stu to find a great partner, which is typically self-serving of canal.

but let's, let's ask it a different way, which is when you're starting something new. How do you evaluate what you're looking for in a cofounder or a partner that you're going to be working

Yeah, I think that's a great question. and can always framing is, sounds right on the button. I think it's a, it's a resource challenge, right? that's the way I think I approach finding someone, it was a good fit. I mean, there's obviously core values and you'd be aligned on, you know, integrity and just like the pace and vibe of the person.

Cause you're spending a ton of time with them when you start anything new. So that's, I think the first step, and then beyond that, it was. I have a certain amount of skills that either innate or that I've kind of augmented through my work over the years. And when you're starting something and specifically an investment firm, you know, the breadth and depth of your experience and knowledge is effectively the currency with which you build the fund.

So having. a Venn diagram of skills that have as minimal of a Rob as possible, felt like a good way to approach team building, I guess, assuming that you have the attributes I mentioned earlier, so can all with his operational experience and work in venture and just interfacing with, with private markets and kind of building a network of people that work in different roles through Twitter and the internet, which is very different than what I'd done in kind of traditional high finance and.

Public market investing. And, obviously our networks just being from different places and having different kinds of prior work experience in school experience. if like there was very little overlap. and so, yeah, in being sharp and, and a us, like, I think financial or intellectually stimulating, and then, the kind of.

Interesting a mosaic of skills we could put together. I think all kind of culminated in like, this is a really natural partnership and it's been a pleasure to work with them. I think it's been, I hope that he'd say the same, but there's a lot of, kind of personal growth and just, perspective shifting that I think a good partner can bring for you.

Yeah, I like that idea of the Venn diagram. I think that that's an interesting way to say it. The challenge, I think sometimes becomes when your, your values have to align, even if the skill sets and the Venn diagram don't and sometimes it's hard to find a balance of both, right.

Oh, I think, I mean, I talked to a lot of people, right? It's not finding the right partner is, is, is vital. Right. And maybe even more so than in an investment vehicle where. You're not like scaling a team and you can roll out co-founders and like, it's like a growing business. Is it a little more fungible with like what the team looks like in two years from who founded the business where, you know, one of the most important things I think you're, you're trying to convey and build is stability and trust and.

A partnership for affirm that breaks apart after two years, it's like diametrically opposite ends of that spectrum. So, yeah, it feels like a paramount decision for any successful investment endeavor.

So let's dig in a bit more on El cap holdings. Your website says investing in sustainable growth. And so for our listeners who might not be as familiar with El cap, tell us what it is and what kind of investments you guys look at.

So we're focused on investing in private businesses. we look at B2B only and kind of a heavy lean towards software businesses. We're looking, I think on a, you know, A simple level, just for businesses that are between one and 5 million in ARR. we think it's will be kind of call the white space between, venture and private equity.

I think there's a lot of, venture is a great yeah. Model. It's a tool and it's built a ton of wonderful businesses, but it is because the defacto way that I think any businesses associated with technology are funded and grow. And I think there's other ways to do it. And especially in the B2B space where sales cycles are long.

And even if you have established product market fit, like there is kind of some allergy aspects to where the next step function of growth will come finding a path of sustainability, meaning that you can, you actually can become cashflow positive is. I think an increasingly important step because the underlying cost dynamics of growing businesses has changed with just cloud and micro services.

I mean, we have the company that, is standing up just a simple kind of, you know, API plug into their data streams and standing up into a BI tool. And I talked to someone at businesses that, that built a similar stack five years ago, and they spent, you know, three or $400,000 just on all the services and the work and.

I think there's business. We'll stand it up for 40. Okay. So we're talking like an order of magnitude in like seven years, call it, just with, the underlying cost structure and the amount of services and outsourcing you can do to kind of build the base infrastructure. I mean, an extreme scale, you'd say if you wanted to scale a software business in 2005, And, you know, you had your first 10 customers and you want to get to a hundred customers.

You're going to buy a server and you, you maybe be writing seven figure checks to get this stood up. Like it's a really, it's a big kind of risky underwriting for a business of that scale. And now you can kind of pay as you grow. And so like the idea of being a profitable business, but still have massive growth potential is not, they're not.

they're not mutually exclusive anymore. You know, we look at, we did it, you know, a bunch of kinds of case studies kind of proving the market validity of this. And I think for businesses we found on PitchBook over the past 10 years, that have not the didn't take any financing for 18 to 24 months after incorporating have created over 250 bucks billion dollars of, of cap.

Right. you're looking at business like Qualtrics and Shopify and Dave actually may take growth financing and may have had venture backers, but it just, it gave us confidence that if you're building a business like last year, that totally didn't take, you know, bootstrap businesses that now are multi multi-billion public companies.

just kind of corroborates the, the view that you don't need to. Know, take a seed round and then grown and get a know or pre seed round in a seed round. And then hold months later, take that any round. And like you like that path is great, but you're also kind of forcing a growth trajectory on a business that is somewhat arbitrary and determined by like a financing model.

Versus is this actually the best thing for the business? Like do, does the customer know and the market and all of those dynamics, which are hyper important in any business, are those factors like. Do they align with like this type of spending on sales and marketing right now? Like, and if they don't then should we be spending it?

And so just asking those questions, I think be super helpful for kind of fledgling businesses and especially in these non winner-take-all markets. So again, to reiterate, not a disparagement on like the venture model and that pathic that's great. And for the right companies and for a lot of companies, that's awesome, but there's, there's a lot of other.

Businesses out there that still are building huge, you know, have huge potential to grow And they can do that without taking the venture path. So, you know, I think that's kind of the underlying, underlying a thesis behind El cap.

Yeah. I mean, look, Jay and I are both venture investors. So to that degree, maybe we're part of the problem that you're describing, or maybe you're not describing a problem. I think the bigger problem is, you know, people it's easy to get caught up on the headlines behind a venture financing and look at like venture financing and milestones with, with fundraising as.

Success, but that's, that's not what success is about. Right? Success is about building a business. And for me, I actually get really excited for entrepreneurs because I think there are more and more alternative ways to build and to fundraise. And El cap holdings seems to be one of those ones, you know, and maybe alternatives the wrong word, but you know, you you're filling a deal different need.

So it seems like maybe, in that sense, your positioning is really resonating out there. Would you

say that? 

Yeah, I think the, if I had to synthesize the pitch to an operator it's that we want to provide optionality for them. Right. I think if. You have the business kind of aligns with there's a massive opportunity and it totally makes sense for us to invest and grow and pursue it. Then we want to facilitate that.

Right. We're happy to have one of our, a company that we've invested in take the venture path, right. If that's the right thing for them, but, making the decision yeah. Through the lens of what's best for the business. First, not what's best for the financing. for our financing partners.

And I know that's that hopefully the alignment you can get aligned and cause aligned incentives are hyper important. Right. but I think it it's a nuanced difference, but I think it's important for an operator because if you can tell, you know, an operator that if your business gets a 10 million ARR and you want it to, you want to just, you know, spit off cash and just take dividends.

Like we're totally fine with that. Right? Like I don't need to Mark my book up. In a year and a half. And so if you haven't taken an incremental capital, like we're structured a private equity firm, like we can do it to recap. We can, we could buy your whole business. We're happy to help facilitate a total sale.

We were happy to, you know, evergreen this position and just take cash out. So I think that's, I think resonating, right, because you're, we're not trying to close the door on venture if that's what's needed. Right. Like if you're. You're going from two or 3 million hour and you're going to 10 and, you know, benchmark calls and they want to help you grow.

And like the, like, you've, that's great. We should do let's do it like we're all on board. No. so I think the optionality is, is important and, and, you know, back to the B2B focus, you know, our view is that you're not really impacting terminal value. that much bye not focusing on growth early on. I think.

B2B businesses and their terminal values are highly dependent on execution. Like, can these guys just chop? What, like, are they, did they have a good, you know, good visibility on their go to market? And there is a product feedback pipeline really tight. And do they market well and are they efficient, and good hires and can do they have the operational attributes to like scale the organization?

Like those are what really determined if a business can go from. Yeah, a hundred million to a billion to 10 billion, being first is still important, but it's just less important. I think in, especially as you extend the time horizon. So.

When you came in and said finding alignment with the company, right? Most seed stage VCs, especially ones that are started by former operators. They pitched the same thing. They say, Oh, we are very much aligned. We are the first check in. We're very much aligned, but then there's the reality of, well, VCs have to raise, do funds.

So they have to show markups and companies, whether or not they need to take additional capital in that moment. Are almost sort of in that mode where they say, look, if I can take the money in today, let me take it. Cause we don't know when there's going to be a lean year like today. Right? If you were a company in Q one of 2020, gearing up for a big fundraise and Q2, God bless you.

Right. Hopefully you had some runway. So I don't think VCs would disagree with you, but I am curious how that messaging maybe changes when you are looking at a company that is considering a VC funded path on one hand. And then maybe going with El cap on the other hand, how does that structurally change for them?

How they take the investment and what they're expected to do with that capital?

Yeah, I think it's about expectations as well. Right. wall I imagine many see investors are, would totally say they're aligned. I think they'd also say like, when, like, what are the metrics that would facilitate you taking your next round of financing? I imagine there's still thinking that, you know, there will be another round and.

You know, we may have a strategy where like, we, you know, we sell like X percentage of our portfolio at the B. Like we, we don't have the fund size to promote all the way up. And so it doesn't really make sense for us. Like if you have that kind of exit dynamic or you have exited before, like it it's whether it's implicit or, or, or not, or, or explicit or implied, it, it's still kind of there, right.

That, that you're a C financing and. You're you're one of the stages I love on pitch book. It's like Siri, you know, seed a B like it's, it's, it's the stage model and it's not a bad model. It's just, I think it's hard for, it would be hard for a VC to go to an operator and be like, we're a seed fund, but like it's okay.

If you never take any other financing. Right. I just think that's, I think that's probably not, I don't know. Maybe, maybe there are shops that are, that are, are saying that, but I think from our experience in talking to operators that have kind of been in around the space, they understand they're like there are expectations that if you take seed financing, that you're going to be taking incremental financing 

at a later 

Yeah. And some of the challenges also, I think you articulated earlier. Curious to dig into this with you, because I think it's a fundamental shift in how businesses are being built today. So you mentioned that it used to be a backend challenge, right? You needed the capital on the backend to just stand up the company.

The backend challenge has been solved thanks to cloud and AWS. But now we have a front end challenge, which is how do you acquire customers and unfortunately, or fortunately, depending on now, how successful the strategy ends up being. Most of these VCs are saying, Hey, the way you solve the customer problem is by taking on additional capital and going out and either building a sales team or acquiring customers digitally.

How does that shift when you sit down with a founder and say, we know you need to acquire customers, but we don't necessarily think you need to go raise a massive amount of capital to do it. Like, how does your approach change? The advice that you're giving, I guess.

I mean it it's, I think it's hard in the. Yeah, abstract because it's, it's it's, I mean, we can give an example, right? there's also somewhat of a model shift happening in SAS. Right? I think you're seeing a lot of interesting companies that are kind of, they're moving away from, I'm going to have a bunch of salespeople and it's more like if I can do something like the land and expand right years, it's like the top down it's bottom up.

I can get, I have a single player mode on my product. I can, I can sell it to a single team. And like the first. The products that have done this well, Slack aside, cause that's kind of a whole organization that, focus, product, but engineering and design kind of low hanging fruit. And if you can get those teams to adopt, and you can target them via Facebook ads or, you know, direct buys or, you know, product hunt or like there's, there's efficient ways to actually to, to kind of target.

Enterprise workers through a consumer lens, right? The same way I'd want to sell. If I'm selling widgets or I'm building a social network, like you don't have like the cat can't be massive, right? Cause you need to reach a huge volume of people. So that is kind of I'm the same way the cloud has kind of changed some of the costs, which I also think business models and then the cost to acquire users.

And like the way you can kind of grow an org is also a little different. Like we're totally happy, still happily looking at. A traditional SAS business. And I think that they're still valid to do that, especially in kind of some of the, some of the enterprise stack. That's still kind of pretty analog like procurement, but for a lot of tools now, you know, you can, you can get 20, 30% teams onboarded without having an enterprise contract.

Like you're pulling a credit card out and they're, Hey, we're going to use this tool because we like it. Right. And that's, I mean, Alaska is a great example of someone who's done that at scale. so. I think there's understanding, what the product is, the market they're selling into what the founder wants to do, and you know, both the economic and financial aspects of the business and making sure they're kind of aligned.

if that's a isn't, isn't a good fit, then we probably aren't the right funding model. Right? Like if, if there's misalignment there, then. That's why we're not saying that venture shouldn't be a thing. We're just saying there's other things in addition to venture venture still great. Like, and for a lot of businesses, it's the right path.

But, it's

It's it's fine. Stew. You don't have to cater to our venture egos over here.

honestly, it may sound like I'm totally trying to cover my ass, but I think. I think there is a real symbiotic aspect to what we're trying to do, because if you think venture is like a highway, right? Maybe we're, you know, we're sitting next to the highway and catching people who either didn't want to take the road or are kind of, they had like a pit stop and they want to get back on, but there's a lot of those businesses.

And so. Facilitating, you know, a kind of a sustainable getting a business to be sustainable and were allowing them to decide they want to grow is kind of the core maybe thing we're trying to solve for. And whether that growth is a growth equity check or selling the business, or, you know, just organic growth with no incremental capital infusions or taking a venture path.

Like that's kind of. I think it should be predicated on the opportunity set and what the operator wants to solve for. and that's like, that's what we're trying to provide to them. Right. That's like the, that's the pitch. So.

Let's talk about that a little bit more. I think it's clear what you guys stand for and what you're seeking out. I'm curious then how you go out and you actually develop your deal flow. And in source companies that fall, you know, not only with inline with, in terms of the types of funding you're trying to do, but obviously in terms of like what your thesis is for SAS business.

most of the conversations we're having are just with people who are kind of in the venture pipeline, right? The same way you build deal flow for, like a series, a shop, or like a, you know, a C shop that doesn't do pre-seed checks, we're kind of approaching it the same way. I think a lot of the, companies we talked to or they can take either, they can kind of go either way.

Right. So it's. That's to the point on finding the alignment. Like there's a lot of companies we talked to where we like a lot of that aspect of the business, but the founder wants to, you know, take a different path. Like that's okay. They should pursue that path. But, evangelizing kind of what we're doing, is like a half of the conversation we maybe have with operators.

The first time we speak to them, unless they're reading our stuff or they've been introduced to us with, you know, many of the seed shops that we do kind of. Talk too often. maybe they have some context, but often we are in those early conversations, just trying to educate about what we're doing and the optionality we're trying to provide.

and yeah, I don't think they do flow kind of generation is really that different, at least at our current size than a traditional kind of venture shop would be.

And you're from salt Lake. So SAS is the business to be in right.

There are a ton of, of interesting companies out there. That's for sure.

Yeah. So, so I guess let's, let's think a little bit about as a company comes in, what are the things that. You are looking for in that business. And we can go down and sort of a structural level, whether it's like the categories of business, or there are certain themes that, that you look for within a SAS company, what makes it a right check for El cap?

When you look at a SAS business,

Yeah. So, I mean, we're definitely generalists on like, you know, we'll look at any vertical or a product type, but I think the. The things we're really, maybe most excited about are we frame it internally as like we're looking for painkillers, not vitamins, not the vitamins. Can't be great. And they're probably good for your longterm health, but, things that are either, you know, can generate cash savings.

Like after payment of the product in year one are super compelling. Yeah. That's kind of a nuance. I think we've applied post COVID. I we've always had the vitamin painkiller framework. just because I think the, the rip out of those products is so much harder. you just have higher net revenue retention on those businesses than not.

And we're also looking for, like a focus, right? It's products that understand like maybe a good word for it is opinionated, right? It's opinionated software product where it's. It has a view of the world and a view of the pain point and wants to solve. And it's not everything for everybody. And that's okay, because I think there's a credentialization as a product, especially when you're selling the businesses that needs to take place and you need some need people to be evangelists for it.

And if you're just kind of, we're just the general, every business can, every business unit can use our product and we're going to be great. Like that just makes me. Less excited about the go to market. I'd much rather hear, Hey, this is a real problem for user X. And, this is how we solve it. And this is all we're going to solve right now.

And like, and then you can talk about the pipeline and optionality, but I don't think, operators have a good idea of whether they're going to pivot into new additional markets any more than, than you do. So, like the questions are almost not

that fruitful. 

So that's an interesting framing, cause I've never heard of sass products be thought of as opinionated. I think people think of consumer products where you say, Oh, I want your DTC brand to have a point of view and to stand for something. And you know, the, the whole branding speaks to an audience. I haven't heard of SAS products being thought about like that.

Are you borrowing from the consumer world a little bit? When you think about that or is there a specific reason why opinionated is so important to them?

I I've heard this several times talking to developers in diligence for a product we were looking at that was, you know, kind of a, a plugin around, Product management tools and each of the developers independently totally work in different companies. They all frame these PM tools as opinionated.

They're like, well, like clubhouse and base camp and Trello. And, like they, their opinion, like JIRA is not opinionated. It's like the, like the opposite of that. Right. It can do everything for everybody. And that's why. The lasting stock has been amazing. also a company that, you know, didn't take the venture route, but, or at least initially.

So that's kind of where I think we first started hearing the opinionated framework, but it, it, it's a good succinct way to kind of describe like a niche focus, like have an opinion about the market and what you're solving. And. you know, if you scale and you're huge, then you have optionality to solve other problems, but like do one thing really well when you are getting off the ground and you're really trying to, to grow and, and then figure out like the next growth loop.

Yeah, it's a really good way to say that. I think that's the one thing that folks, especially first time founders, miss sometimes, cause they, they want to hit so many targets, right. Especially when you come from an industry, you're like I'm going to solve every problem at this industry that I've worked in has.

And I think that idea of like, Listen, solve one problem really, really well is I think just really, really great advice for any founders, especially first time founders to consider because that in and of itself, as you said, land and expand opens up more things for you to do, but if you don't solve that problem really well in the first place, you're not going to have a company for very long, unfortunately.

I mean, it's going to make the Tam slide in your fundraise deck. Look worse. Bye bye. Having an opinion, but I think the likelihood that you build a real businesses high is higher. So

but it doesn't matter for you. Right? Cause when somebody comes in with a Tam side that isn't a billion dollar Tam, you're like, that's okay. That's still flies for us. Where if he came into a traditional a hundred million dollar venture fund, that better be a billion or, you know, there's

no conversation to be had. 

And then back to the first point, like I think, I think people always underestimate the Tam for these software businesses, right they're much bigger than the tamps slide says, even if you adjust for, for an opinion.

Kind of rehashing some of the experiences you had in college and earlier in your NFL career. Is there anything today that really still sticks with you, whether it's in terms of work ethic or mindset or approach to things, from your playing days that you've brought into your, your journey at El cap and now in the corporate world,

 To my, my, a story about bill Callahan and, and thinking that I couldn't play in the NFL because it was this magical, mysterious thing where, you know, the guys were like unicorns emerging from the sec, and then actually playing and, and, and kind of demystified what was, you know, a very, kind of, almost an impossible.

Thing to achieve for me, you get in, you know, the first day at camp and it's like Brian Dawkins or Brian Westbrook. And like, these are hall in Trello. And so it's like, these guys are insane and then you go out on the field and you play you're at Oh, okay. Okay. It's still running around. Like it can, it kind of, kind of, it, it was a, it was a clear demarcation between the, what I kind of thought was possible.

And, and, before and after just not even getting drafted, but like actually getting on the practice field and, and playing with those guys. And I think the lesson is that, you know, it's all just people and it's, and it's work and, you know, it's focus and yes, attitude and, and that type of thing and opportunities that all come in, there's a lot of luck, but at the end of the day, you can control what you can control and that's like effort and focus and those things don't pay off in the short term.

They're just not short term. Thanks. Right. Thank you. I can focus on. Increasing the amount of content. I read it, every day, but like, it's not going to pay dividends, you know, next week, maybe it is, but it's much more likely to, it'd be something that over time and like  consistency and effort are going to be the difference maker.

And I think that's like a really important lesson that football topics. Yeah. It's just a football careers. You don't go from high school to the NFL. Like there's that big Chuck of college and horrible workouts and, you know, And there's so many metrics around performance and speed. I like that. You really like see the value, that tangible feedback of, of like a longterm approach towards, towards work.

And like, that's something that I think has been, it's just stuck with me as I've approached finance. I think if I didn't have that, like being a 30 year old and not knowing what EBITDA was and then, you know, being able to be where I'm at today, I probably wouldn't have even attempted it. Right. But because I was either.

Global enough. And I even have to think like, Oh, you can totally do this. Like you just got to work my ass off and stick with it. so for better or worse, that's, that's big and, kind of the mindset.

I think that's pretty cool. I think there's, there's something to be said too, you know, to Revere the routine, right. Routines are underrated and your habits are, you know, just that daily focus, like you said, and sports, you get that. Quantitative payoff in wins and losses or contracts and progressing in the sport.

but yeah, I'll just leave with that thought about that. I use a lot, which is review the routine.

So, I guess we'll where we'll close Sue. Cause I know we gotta let you go soon as well. what are you most excited about as you look forward to the next year, years ahead for ELCAP and you know, for you personally,

I think, you know, we're raising our second fund now and it feels like El cap's kinda going to be a thing. Right. Which I, that maybe sounds not. Like an odd thing to be excited about, but you don't know that right. The first 18 months you're like, I think this is right, like, and you're trying to learn and grow.

And, and to your point on, on routine, just, you know, improve every day. And now it feels like there's enough kind of meat on the bone that we're going to exist. And I think the market has kind of validated our approach to some degree, at least at a small scale. And so I'm excited about continuing to just build.

build the business and hire more people and grow the team and just, you know, it feels like you're an operator trying to scale like startup. So it, I'm excited about maybe the traction and, I think the next 12 months are gonna be a wild ride, but I'm excited about it.

that's amazing. Well, so we're so glad that you feel good about El cap existing, because I think Tim and I would agree that there definitely needs to be somebody filling that white space. between venture capital and private equity and, you know, no disrespect to either one, it's still great ways to build businesses, but you guys have clearly found your niche and we're excited that you're seeing the traction and the interest to bear.

So we're so glad that you joined us today on the game plan to share your journey, to share your experience. And we look forward to keeping in touch and seeing how L-CAP grows in the coming years.

Appreciate

Awesome. Thanks to.

All right. That was a great show with former NFL linebacker turned SAS investor, Stuart Bradley, Jay agree, or disagree with what Stewart had to say about choosing a

cofounder. 

So Tim Stewart talked about the idea of your co founder being a Venn diagram with you. So you have these areas of overlap, but then as much of that area outside, the overlap that you can have is really valuable.

You know, I think it's right. It's one of the things that most people have a hard time with when they pick their co-founders, you know, the challenge is. You want to work with people that are a lot like you, but the problem with it is sometimes those people bring the exact same thing to the table that you do.

And to the challenge I have when somebody comes in and they're a subject matter expert, and they're like, this is my best friend and I'm starting a company with them. It's like, well, you guys also have all these other skill sets that you need to have that will make this company. Successful team is such an important thing in the early stage of starting a business.

And, you know, I think Stuart has a good handle on why he picked his co founder to start his fund.

Yeah, well, I think you're missing the key point about what he had to say, which was, there's a huge difference between picking a cofounder for a company than picking a cofounder for a fund. You know, his fund is going to be him and his partner. It's two people, so it's not. But you don't also have to get it right in the situation of a startup.

You do, but you can build and fill other skills and, different perspectives in a startup setting a lot easier than you could when the final team size is only two or three weeks. So I like how he thought about it that way. Look, I agree with that. The Venn diagram idea, but I also think it's really hard to put people in those kinds of boxes.

we could all sit down and write like what we think our best attributes are and what somebody else's are, but it's not really until you get into the weeds with them, that you truly understand how someone works. So in that sense, I think it's good that he formed a working relationship with his partner well in advance to starting this fund so that he could really understand whether or not they were going to be 

a good fit for each other. 

Yeah. 10 that's a really good point. And Stu also said something that I've actually never heard before when he said that he invests in opinionated, SAS products.

So Tim, let me ask you this. Do SAS products need to have an opinion?

Yeah. Well, I think rather than opinionated, I really liked. To think of it more about focus, right? So when we think about a new app or company, like , they really locked in and focused on layout. Whereas Photoshop is the do everything tool. And as a result, they made a lot of progress because there was designers out there that said, I want a better layout tool.

And I think that's how a lot of enterprise SAS solutions. Come to market. And it's in a similar vein of how the growth of consumer has continued, where I literally go and I Google best layout tool or better layout tool. And what pops up is fig mine, people talking about, and then it's easy to use. So I love that as a way in over time.

Certainly you need to expand a bit more to capture a bigger market, but you're only going to be successful if you find that 

product market fit early on 

Yeah, I think it's so important today for SAS products to have that opinion, because the barrier to entry to create a SAS product is so low.

So if you try to be the, do everything for everybody, you're going to fail at all of it. Right. But if you come in with a real focus and an opinion of like, look, we've all been doing it one way for a while. Here's why we're different. You stick out in the mind of the consumer first and foremost, right?

Allows you to get some sales or you stick out in the mind of investors, which I think is really critical. Because again, they're seeing so many pitches from products that look very identical. You have to stand out in some way, and then most importantly, you're able to focus your team. You're like, look, this is the lane that we own.

And then to your point of land and expand, we've seen it work often where, you know, whether it's, it's something like. A Slack or Lassie or whoever you start with a very focused product that has an opinion about the way the world should be. And then you can start to serve a larger customer. The problem I think, focus, creates for you is that investors sit there and say, well, your Tam isn't large enough.

You know, we don't think you're a big enough product because you're so focused on this one thing. I personally think that's shortsighted

So Stuart's fund El cap. Holdings is interesting in that they are targeting VC assets, but very much not taking a traditional VC approach. Do you think venture capital is 

piqued as an asset class?

No, you know, it's funny. I don't think it's actually peaked the challenge we're having in this venture world right now is there is so much money in the private markets. And I think what you're seeing is actually this. Really interesting barbell effect in traditional venture capital. So on one end you have, you know what I'll say, like the multistage big boy funds, you know, Sequoia and Andreeson and they're raising money, billion dollar funds, and they're multistage multifocal, and they kind of do everything.

On the other hand, you have various specialized funds typically started by former operators that are saying I was an operator. In biotech, I'm going to start a, a very focused biotech fund. Cause I know that I can help these folks. there's not a lot of room in the middle, but no, I don't think it's peaked.

I think it's just getting pushed out to the edges.

Yeah, I think the way you describe it is get more defined. And I'd love to say that I had this grand vision when I started TAC ventures and the end of 2015 about how being specialized in coming in as an operator was going to be a huge advantage. And that's where the whole world of. Early stage venture was going, but I was just more focused on my situation and how I could differentiate in the market and what value I could provide to founders.

It became clear to me that capital wasn't the X factor anymore. It was, what else can you do? And so I looked at my skills, my background in sports and media and entertainment and consumer and decided that's what I really wanted to focus on. I felt like there was going to be growth in those sectors, which is how I was able to raise capital.

To go out and start tech ventures and so

far so good. 

Okay. 

So speaking of so far so good, it is so good to finally have sports back in our lives. I mean, the NBA came back MLB as well. And then last week with the NHL all back in our lives, except some leagues are having a little bit of a harder time than others. 

Why do you think that is. 

well, yeah, I'm not so sure it is so far so good for everyone. yes, the NBA has done a great job. We can talk about that. They've had zero cases, but I am really worried about MLB. They've had outbreaks both. In Philadelphia and Florida, and that doesn't seem like it's going to end. And then also the NFL, they haven't put any clear plan in place.

And in a lot of ways, it's like, let's have the States make their own rules. Well, the virus doesn't care. Which team locker room it is, or, you know, it's not going to divide itself during the game, like on the field of play. And I look at like what the Detroit lions done, for example, they posted the other day and you could see how they had social distancing within their locker room shields up.

But like there's 53 men sharing a locker room and showers and everything. There's just no way that if somebody in that locker room contracts, the virus that it's not going to spread. So I like what the NBA has done because they've taken it on the league. To figure it out and they say, okay, but the teams, you can still figure out everything in terms of like your Encore performance, but we're going to handle everything as it relates to the virus.

I think there's two things that makes the MBA's job a little bit easier. One is that footprint, which is that there's just less players on the roster, which means that there's less sort of peripheral folks around the team that have to also be managed within the bubble. So that's, that's just a little bit.

One factor, but the second is what they have actually done, which is over communicated over communicated internally to players and over communicated to the public about what are the expectations? How are they keeping everybody safe? You're just not seeing that with the other leagues, especially with the NFL where you're actively seeing players speaking on Twitter about the fact that.

Training camp is supposed to come back, but they don't know what protocols are in place to protect them. When you're in a time of crisis like this, especially in a very, very public setting, you have to overcommunicate. And I just feel like some of the leagues just, aren't doing a really good job with that until that plan is in place.

Well, first of all, your hands aren't going to be in there, but players, aren't going to feel safe coming back, which is why you're here. Starting to see 

NFL players start to opt out of the 20, 20 season. 

that's a great call out, Jay. Thanks for joining me on this week's partner rundown. A pleasure as always.

 

So that's it for this week's episode of the game plan with Jacob Horn and Tim cot as always. Thanks so much for listening. Big, thanks to Stu Bradley for joining us on the game plan today. Make sure you check them out on Twitter and Instagram and keep in touch with him on El cap holdings@elcapholdings.com.

Our thanks to canal tendon for making the intro to stoop as well as to our producer will Richardson for editing this episode. Hey, if you made it this far, you're accolations you must really like what we have to say. Make sure you follow us on Twitter at the game plan show and leave us a five star review on iTunes.

We'll see you next week on the game plan.