This is episode 3 of The OpenVC Podcast. In this episode, Phil Nadel, managing partner of Forefront Venture Partners, shares his journey from angel investing to running one of the largest rolling funds on AngelList. With over $100M invested into 200+ startups, he discusses the benefits of rolling funds, post-revenue investments, and the importance of adding value to portfolio companies.
Harrison Faull (00:00.75)
Hi Phil, welcome to the Open VC podcast on season one. It's a pleasure to have you here and an honor. We're very excited to get into your experiences in venture capital world and the angel investing world. I know that your entrepreneurial journey started really quite young, straight out of college. Could you share with us what that was and how you found it?
Phil Nadel (00:45.873)
Yeah, I've been an entrepreneur since a very young age, even well before college. And, you know, like a lot of kids started several businesses and saw some early success, which was encouraging. But the real sort of impetus for me to become an entrepreneur and to not really ever entertain other options in my life was my father.
who was the consummate entrepreneur and my mentor and guide. And it was the constant sort of dialogue with him growing up that inspired me to follow a similar route. And so it never, I never, as I said, never even entertained the idea of doing anything other than starting my own business. I've never.
created a resume or applied for a job or worked for anyone else and I like it that way. So yeah, I went to the Wharton Business School and immediately after college started another business and did that for a while until it rolled into something else. So yeah, it's just been, you know.
an evolution of businesses over the years that eventually led me to become a VC investor and put founding companies sort of on the back burner.
Harrison Faull (02:23.696)
How do you feel about the fact that you feel about the fact that I've been quite influenced by my parents, as my father is also an entrepreneur. I think as a kid you might glorify the highs and not be aware of so much of the lows. Because maybe they try and protect you and the family and not bring back those problems. I think the lows for a founder can actually be quite significant.
Phil Nadel (02:49.425)
I agree with you a hundred percent. And I guess I was maybe a little less shielded from that. I definitely saw, my father's ups and downs in his various businesses and he had several, and it was quite a roller coaster ride for him. and, and intentionally or unintentionally, he didn't shield that from me. So I got to experience that with him and then.
We were also business partners together after I went to college. So we went through it together. But you're absolutely right. I mean, in fact, the emotional aspect of it can be quite severe and debilitating for some founders. And it's why you've seen, I think, an emphasis recently on encouraging mental health.
founders and a lot of VCs sort of prioritize making sure that the founders they invest in are taking care of themselves physically mentally so that they can stay fit if you will to to run the company to manage the company.
Harrison Faull (04:07.697)
Yeah, the founders are definitely one of the biggest assets, especially at the seed, pre -seed stage. And if you're not investing in that yourself, then perhaps it's a missed opportunity on how well you could perform and you're not maybe not going to be in the right frame of mind every day for those tough decisions. But actually, so getting into business with your family, how was that dynamic? It was in the publishing world. I could imagine.
Phil Nadel (04:27.633)
Well, initially publishing, yes. And then we were in other businesses together. But yes, we had a publishing company that was, and this is pre -internet days, it was the largest newsletter publisher in the country. So we had about 45 or 50 newsletter titles or publications. These are traditional newsletters that went out in the mail.
We grew the company beyond that to start with catalogs and selling physical items. And so then that really took off. So at the time that we exited, we were at about 130 million in annual revenue. And it was a good exit for us, worked out really well. It was a great experience for me. And then my dad and I, we had a lot of employees at that.
publishing company, I mean, a lot of employees. And that aspect of the business was not our favorite aspect. And so the next company we founded, which was more of a financial services company, Asset Based Lending, we intentionally built the model that was not sort of labor intensive. It was more...
capital -intensive, transactional intensive, but not labor -intensive. And that worked out well.
Harrison Faull (06:01.458)
Wow, I bet that Thanksgiving when you had the exit was quite enjoyable for everyone at the table. What a journey.
Phil Nadel (06:09.009)
You know, I'm happy to say every Thanksgiving with my family is enjoyable. It's my favorite holiday of the year. Food, family, friends, and I love it. So yeah, but that was a particularly good time to have exited and we're very fortunate. Yeah.
Harrison Faull (06:32.371)
So you have quite a lot of operator experience. Were you always angel investing along the way or was that something you did once you had a bit more liquidity after the exit?
Phil Nadel (06:41.137)
Yeah, it didn't start right away, but it started fairly early on when after, I can't remember if it was after the first exit or before, but around that time when friends and family would ask me for advice, input and investment. And so I started doing that for family and friends only and on a small scale. And, and, and in,
In those circumstances, I think my advice, my input was maybe even more valuable to them than the capital because the capital was relatively small at that point. And that evolved and grew as the circle of folks whose companies I invested in grew beyond family and friends to acquaintances and then ultimately to people I don't know.
And then I would say that the balance of value that I provide maybe shifted a little bit, a little more heavily weighted towards the capital as we invested more and still trying to provide a lot of value in terms of advice and guidance, but now also introducing sort of an additional layer, which is the network benefits that we bring. So yeah, a long way of answering your question.
But yes, it started pretty early on, but on a small scale.
Harrison Faull (08:12.468)
No, it's perfect. Thank you. Thanks for going into detail. So it's what people want to hear. So you went from a solo angel, your sphere of influence kept growing and growing as founders would give positive referrals and actually appreciate your advice. And then somehow you end up becoming one of the largest syndicates on AngelList.
Phil Nadel (08:31.889)
Well, as luck would have it, I was introduced to Barbara Corcoran and I was helping her with some of the portfolio companies that she invested in, helping provide them with guidance and advice and strategy and that kind of thing. When, this goes back many years, about, I guess about 12 or 13 years when AngelList, which is the platform that we use,
introduced the idea of syndicates. I was aware, I became aware of that. And I said to Barbara, Hey, this is an opportunity for us. You know, you have great name recognition. I have great deal flow and experience. Why don't we team up and launch a syndicate, which we did. And, it, it took off. I mean, it really did, grew very quickly in terms of the number of LPs.
And we have more than 5 ,000 LPs in the syndicate now. And so it really, I did take off. Now Barbara never really played an active role. She's more of a passive partner with me. And she's not involved at all in sort of the investment decision -making or anything like that. But that's how it got started into building one of the largest syndicates.
and then ultimately launching our own fund in the form of a rolling fund, which we did about three years ago, which is also managed on the Angel list platform.
Harrison Faull (10:12.021)
Excuse the pun, you've always been at the forefront of angel investing. Quick to join the angel list. Awesome. Quick to join angel list, quick, one of the first to do a rolling fund. And so for those in the audience that don't know the difference, would you be able to give us just a quick overview as to what the differences are and what the benefits might be for the limited partners of doing a rolling fund as opposed to a traditional syndicate?
Phil Nadel (10:16.497)
well i think that i certainly like to think so yeah
Phil Nadel (10:41.681)
Sure, there are some fundamental differences between them. For one, with a syndicate, LPs have the opportunity to invest alongside of us in every deal. But there's no obligation, they're not committed. They get to review each deal on a deal by deal basis and decide how much they want to invest and if they want to invest. With a fund like a traditional fund, a rolling fund,
doesn't provide that opportunity. Instead, LPs are committing a certain dollar amount that they determine each quarter. They subscribe in a sense. That's the terminology that's used. They're subscribing to the rolling fund and they can subscribe for as little as one quarter if they like, but they can go for multiple quarters or continue to renew. So they're only committing an amount for one quarter. So unlike a traditional fund,
where you make a big capital commitment upfront and their capital draws. This is only one quarter of the time, but then the fund makes the decisions about the investments. When I say the fund, I'm the GP, so I make the decisions along with our investment committee. But the LPs do not have opportunity to review and advance each opportunity, each investment and decide opt in or opt out. That's not available, but...
In exchange for that, there are a lot of benefits to investing in a rolling fund. Number one is that a lot of companies are, do not want to make deals available or unable to make deals available to syndicates for a number of reasons. Number one, as you can imagine, the amount that we invest is, is uncertain because we never know which LPs will invest, how much they'll invest.
So the total amount of our investment from the syndicate over the years has ranged anywhere from $200 ,000 to a million and a half dollars because we never know. And so that uncertainty precludes some companies from wanting to syndicate with us or with anyone. Secondly, it is that a lot of companies are closing around quickly and a syndicate takes time. It's like sort of herding cats.
Phil Nadel (13:08.721)
Right? It takes several weeks to put all of the LPs together, collect the funds, get their commitments. And a lot of times if there's a week left in the round and they're closing it, final close, we just don't have time. And that would again preclude the syndicate from participating. And finally, I would say that some companies or some founders don't like the idea of broadly sharing.
data about their company to 5 ,000 potential LPs and prefer instead just sharing it with us and letting us make the decision on behalf of our rolling fund LPs. And so again, those deals where we would not be able to syndicate for that reason, we can still invest from the fund. Now from an economics standpoint, rolling funds offer LPs a much better deal.
And I'll tell you why, it's pretty simple. With a syndicate investment, an LP pays us a carry, carried interest, based on each individual investment that they make. And so it's not based on the whole portfolio. If they invest in 10 deals with us, they're going to pay carry on the ones that they make money on, and they're going to pay zero carry on the ones they don't make money on, but there's no offsetting.
But with the rolling fund there is offsetting. So if you make $5 ,000 on one deal and lose $5 ,000 on another deal, you're not paying any carry at all. Whereas with a syndicate, you're paying carry on the $5 ,000 profit and not getting an offset on the $5 ,000 loss. So that's much worse for LPs. Does that make sense?
Harrison Faull (14:58.584)
Yeah, I mean, there's just benefit after benefit. You can really understand why that's been a transition. And I'd be surprised if syndicates continue on into the future in the form that they are and don't turn into more rolling funds. If I could play devil's advocate though, for a second, is that downsides to doing a rolling fund in terms of perhaps getting less engagement from people, members in the syndicate? Cause from the outside looking in perhaps,
having access to all those LPs, they could open some doors and actually use their networking connections. But if they become very passive, they might not be aware of those deals as much as they would if they were picking and choosing.
Phil Nadel (15:39.533)
Yeah, you know, that's a really insightful question. I would say that the LPs that we have in the Rolling Fund, we have many of them, represent the most active and most engaged LPs that we have in the entire syndicate. And so we're getting most of the same benefits. And they know that even though they didn't choose the investment specifically,
They are invested in the company and they want to do everything they can to help that company succeed. So they're opening up their networks to the companies and they get regular updates from us so they know what the company needs and they often are eager to help. So like of the 5000 LPs in our syndicate, most of them are not very active. Maybe they invest in a deal here or there.
And many of them don't have an extensive network, but they're not professional investors. So we're getting in the Rolling Fund, really the most active, most engaged investors who have the broadest networks. And so we're getting most of the same benefits.
Harrison Faull (16:52.057)
Okay, that makes a lot of sense. And I imagine these people are either high net worth individuals or very hardworking professionals and actually they don't have the capacity to be making these investment decisions quite so frequently as you get the deal flow. So being part...
Phil Nadel (17:09.073)
Well, that, you know, I'm sorry to interrupt you, Harrison, but that's a really good point because what happens is there's so many syndicates now on AngelList and these active investors are getting bombarded with deals to look at. And as a result, let's say they favor investing with us, but they're looking at a deal month from us that gets lost in the clutter of
Harrison Faull (17:12.313)
No, no.
Phil Nadel (17:36.113)
you know, 200 deals a month they're getting from other syndicates. So it's tough to stay up to date and look at every single deal. So they miss some of them. As a result, with the fund, they're not missing any. They're participating in every deal that we do. So I think that's also like a real benefit of the fund for those active, more professional investors who don't want to miss the opportunities, who trust us and with whom we have a...
built a nice relationship and rapport. So yeah, I think that that's a benefit that I wanted to highlight. So I didn't mean to interrupt.
Harrison Faull (18:17.082)
No, no, I completely agree.
Do you have any advice for active angels that are juggling or potentially part of too many syndicates?
Phil Nadel (18:28.753)
I definitely do get rid of some of them. Look, I've written extensively about this. There are only a small number of syndicates who really do this right. And what I mean by that is syndicates who do their due diligence, who don't take a spray and pray approach, who are very, very selective and build long -term relationships with the founders.
Harrison Faull (18:30.394)
Mm -hmm.
Phil Nadel (18:59.633)
Most of the syndicates are sort of high volume, low quality deals. A lot of times, believe it or not, the founders of the companies they invest in do not even know they're syndicating the deal, have never met them. They're getting an allocation from someone else. They're not even getting the allocation directly from the company. So you can imagine if they don't, if they've never even talked to the founders, they've not done any due diligence.
Why should an LP rely on them? Instead, pick only a handful of the very best syndicates where you are confident that the GPs are doing extensive due diligence, are very selective and only sharing a few deals where they have a high, high level of conviction. And so just get rid of the other ones, reduce all the noise.
and focus on the signal.
Harrison Faull (20:01.34)
What a phenomenal answer. And I actually couldn't agree with you more. In the UK, the majority of angel syndicates charge an initial success fee on funds raised. So there's no long -term alignment. And then you would incentivize this spray and pray approach, because all they do is take a cut of everything invested on day one. So a bit of a selfless plug here, but we've actually just launched OVC Ventures, which is an angel syndicate that sits on top of OpenVC's fundraising platform.
Phil Nadel (20:20.369)
Right.
Harrison Faull (20:30.523)
And actually I'm the managing director of that. So I go through a thousand deals a month and try and pick the best one or two and do as much due diligence as I can with those founders. And we only charge a carry, there's no upfront success fee, to really convince LPs that we're in it for the long term and we only make money when they do, which is the right model for this industry because you want to be aligned with the LPs.
Phil Nadel (20:52.337)
That's right. That's right. But again, I want to highlight the difference there is with the spray and pray approach, the GPs don't have to worry about the deals that don't work out because they're getting paid only on the ones that work out, but then there's no offset from the ones that don't work out. So even if they, if one out of 10 or one out of a hundred of their investments work out, they're making money.
even though the investors, the LPs are losing money, that's not an alignment. That's out of alignment. With a rolling fund, there's true alignment because we only earn carry when the LPs make money, net -net, because of that offset I mentioned. And we don't charge any management fees or upfront fees either. It's only the carried interest. So I think that that really aligns the interest as well.
Harrison Faull (21:39.1)
Yeah, we.
Harrison Faull (21:51.005)
I think that's the right structure and that's clearly been one of the factors that have played into your long -term success in this angel investing space. As we move towards this long -term alignment, what kind of things do you do? I know Forefront prides themselves in the amount of due diligence that you guys do on each deal, but can you talk us through some of the processes, some of the systems that you have in place to get down to just the 10 investments that you make each year from the thousands of opportunity in...
all that noise that's going on.
Phil Nadel (22:22.481)
Yeah, I mean, we really do rigorous due diligence. We spend a lot of time getting to know the founders to begin with. We build a relationship with them. We understand the nuances of the business and their challenges that they're facing. And we really try to be value add partners, but we, we're very much focused on the numbers where analytics are driven. So we are not only analyzing historical financials,
but we really break down financial projections. And a lot of people say, you know, why do you do that? Why do you spend a lot of time on projections when they're never accurate, right? But the reason is we're trying to understand how the founders think about the business and the growth levers in the business. What's going to, in their view, enable them to grow the business, scale it up, increase margins, reduce churn.
all of that and by peeking at getting a real deep dive into the financial projections, it gives us that peek into their brains and how they're thinking about it. And a lot of times, frankly, we see projections that are half -baked and the numbers are pulled out of the air, they're not supported in any way, there's no basis for them. I understand they're never going to be correct, but I want to see a logical basis for
for the projections that's either rooted in historical numbers or current experience or industry averages, that kind of thing. And I want the proof of that. And so that's why we really spend a long time on financial projections. And then we do sort of other due diligence like spending time speaking with a lot of their customers, suppliers, co -investors. And we're trying to, again, uncover...
The strengths and weaknesses, right? Every company, especially at an early stage, has got threats and weaknesses. And we invest in those types of companies, but we need to understand and quantify those threats ahead of time. And so that's part of what we do in our due diligence process by spending a long time with the founders and talking with all their connections, their customers, their suppliers, their investors.
Phil Nadel (24:50.033)
We try to get that information and then we expand out to our network, right? And we talk to people that are in our network, our LPs and others who have expertise in the field of that, whatever the company is. So that's a third party that's not affiliated with the company. It's not like a reference that they've given us. It's our own connection that's providing input about
the industry, the sector, and also the company's business model and their success to date. And that really helps us a lot in terms of due diligence as well.
Harrison Faull (25:29.244)
you're really putting in the hard yards that's operationally intensive for a rolling fund for pre -seed seed stage company. How big's the team?
Phil Nadel (25:41.713)
Well, there are four of us who are sort of full -time and then there are a bunch who are part -time and then we have all these ad hoc advisors. So four full -time though.
Harrison Faull (25:56.22)
Okay, And I know you're incredibly disciplined and you focus on the numbers, but have there been any exceptions to the rule or any moments where you've kicked yourself a little bit?
Phil Nadel (26:08.753)
Yeah, yeah, sometimes, you know, you get, you get caught up in the story. I'd say the mistakes that we've made are when we've invested a bit too early, when we love the story, we love the founders, great early success, but not really sort of proven product market fit yet, or too much.
revenue concentration. And that's something that we focus a lot on is revenue concentration. We really try to stay away from companies that have too much revenue concentration. But over the years, once or twice, that's come back to bite us and we've invested in companies that were too reliant on one or two or a small number of customers. And again, investing like a little bit too early in terms of product market fit. But,
We learn from our mistakes. We try to do a post -mortem, if you will, on companies whose investments didn't work out. And we try to learn from that and grow from that. And it's one thing to make a mistake, but we try never to repeat a mistake.
Harrison Faull (27:26.912)
Wow, so new members of the Rolling Fund are getting all of this benefit and having to pay nothing upfront for that. Sounds like a pretty sweet deal.
Phil Nadel (27:34.961)
True.
I, we think so, yeah.
Harrison Faull (27:39.744)
It definitely compounds over time. As the quality of your deal flow improves, as founders recommend you to other founders, I'm sure the investment expertise also compounds as you see similar patterns and avoid making the same mistakes. And I think too few people do that analysis on deals that have failed.
Phil Nadel (27:55.441)
Yeah.
Phil Nadel (28:00.753)
And a lot of the LPs in our rolling fund, you had mentioned sort of professionals and professional investors, and that's a big part of it. But we have a lot of C -suite executives. We have a lot of VCs who invest on their own, who invest with a, who work for a big VC fund, but also invest with us so they can get in at earlier stages. They want that deal flow.
for their fund, but they also want access for themselves individually to invest. So we have a lot of VCs who invest in the fund with us. And then we also, I feel so good about this, we have a lot of founders of our portfolio companies who've had success and are now investing with us. And that's great.
Harrison Faull (28:47.137)
Well, that must be very, very rewarding to have people do the full cycle.
Phil Nadel (28:49.361)
It is, I really love that, it makes me feel really good.
Harrison Faull (28:54.146)
For the founders listening, who are just screaming at the screen thinking, I haven't got any revenue yet, but I'm onto this sweet, hot peach of an idea that's bound to be a unicorn one day. Could you give some explanation from the investor side as to why you think investing post revenue is a very smart decision and why it's important from the investor's perspective, but maybe not aligned with what the founders are feeling?
when they're just trying to get from zero to one.
Phil Nadel (29:26.225)
Sure, sure. And that's really one of our, I would say, guiding principles is to invest only in companies that are generating revenue already and at least 250 ,000 or more. Really, we prefer more, but that's the bare bare minimum. And I'll tell you why. It's about product market fit again, right? And it's about, before you have revenue, everything you tell me,
speculation. Everything a founder tells me is speculative prior to revenue. You can have the greatest, you can tell me you have the greatest product, you have great potential customers, you have great technology, you're the best founders, but until someone's willing to write a check and pay real money, someone who's not your aunt or your mother, pay real money for that product or service, it's all speculation.
And I am not going to invest at that early stage. There's an inflection point that we've noticed early on that happens when a company starts generating revenue. There is a slight increase in their valuation, but there is a massive decrease in the risk that you're taking. And that trade off to me is worth it. I would rather have.
much less risk and pay a slightly higher valuation because I think it improves the odds of success, reduces the number of complete strikeouts. And that's what we're trying to do. This is a numbers game. There are going to be strikeouts, but if we can reduce the number of strikeouts, even if that means having more singles than doubles and, you know, not as many home runs, that's fine because our overall return.
or overall IRR is going to be better. And so that's sort of the rationale that we've taken. We talk to so many companies that are pre -revenue or too early for us, and we try to build relationships with them so that once they are post -revenue and generating enough revenue, then we can invest at that stage. So it's not that we're opposed to talking with or meeting those founders, but we're going to keep the conversations very brief at this stage.
Phil Nadel (31:52.209)
If we have an interest, we'll ask them to add us to their investor update list or stay in touch, keep us posted on their progress, let us know what we can do to help. But we're not going to invest at that stage. We're not going to take a deep dive. We just see too many deals to make that feasible. So that's sort of our like first filter that we use to filter deals out, whether they meet our revenue threshold.
Harrison Faull (32:17.537)
That makes a lot of sense. It's a de -risking strategy helping to increase overall returns for the portfolio of companies that you're investing in.
Phil Nadel (32:25.201)
Well, you said it much better than I did.
Harrison Faull (32:28.129)
Well, that's the easy job. You've said all the, you've said the answers, I just get to summarize. In terms of, so say I'm a founder, I've got this 250 ,000, was that annual revenue that you're looking for? Could you give me some examples of how Forefront has gone above and beyond to help portfolio companies? What do you do once the money is in? Have you got any good stories or examples of value adding activities after the fundraise?
Phil Nadel (32:32.593)
Well done.
Phil Nadel (32:40.785)
Yes.
Phil Nadel (32:50.321)
sure.
Phil Nadel (32:55.345)
absolutely. Yeah, absolutely. I mean, we, I think we really go above and beyond by introducing potential customers to our, to the founders of our portfolio companies by introducing a talent to them when they're recruiting, by helping them make strategic connections, whether that's a reseller or technology partner, that kind of thing.
And then also providing guidance and strategic advice. And that's when I say we, it's not just me and the forefront team. It is our broader network of LPs. So the LPs are helping with guidance and advice and connections and input and all of that. And look, some of our portfolio companies want and need more assistance than others. And we're there for that.
We're there to help as much as they want or as little as they want. If they don't want as much help, like the ones that are further along, that, you know, maybe a public company, for example, by now, they don't need as much help from us. And that's just fine. We're there to provide whatever amount of help they need or want.
Harrison Faull (34:10.913)
When I was doing my research on Forefront and yourself, one of the things that stood out was actually the amount of contact that you demand from your portfolio companies. It's a non -negotiable item that you put in the term sheet that the portfolio companies that you invested in at Forefront Ventures, they must give monthly updates. Could you give us a bit of an insight as to why that's so important and why you've chosen that frequency?
Phil Nadel (34:39.505)
Yeah, happy to end. And just to clarify, it's mostly monthly, but some companies that are further along, will allow to do quarterly updates because they're on that kind of a cadence. But to answer your question, when I started out angel investing, to me, the most frustrating thing was writing a check to invest in a company and never hearing from them. I have no idea how they're doing. I have no idea.
what I can help with, how I can help, what their challenges are. Don't know if they're raising more money or they need assistance or they're looking to recruit talent. And to me that was incredibly frustrating. And I know that most investors feel the same way and have had similar experiences. And so when we started Forefront, we said, we're not going to allow for that.
We're going to require the companies we invest in to provide regular updates, monthly or quarterly updates that are detailed and provide KPIs and provide a request for assistance and give us thorough detailed information. Now, the truth of the matter is that although most of them comply with that, there are a few that don't and we have limited control over that.
But we do require them to sign in writing an agreement saying they will provide that. And fortunately, you know, 90 plus percentages, percentage of them do. And so we're able to share with our OPs all of that current information about each company. And it's one of the hallmarks that sort of, I think, differentiate us from a lot of other early stage investors and especially other syndicates.
Harrison Faull (36:35.009)
It might be a pride thing as a past founder, you don't want to give investors bad news. You know, they've given you hard earned dollars and giving them some sort of disappointing news might disincentivize them to participate in the next round. But actually you're also limiting how much help they can be. So being vulnerable and sharing those problems is probably the smarter move than hiding them away.
Phil Nadel (36:58.385)
I could not agree more and I would say also that the folks who are investing in these companies understand very well that there will be challenges along the way, there will be speed bumps and hurdles that need to be overcome. And if you don't communicate with them, they can't help you. So they understand that those hurdles are out there.
By hiding them, you're not making them go away. You're just not getting the help that you need. So reach out, be forthcoming, and then also when you do go to raise future rounds, these investors know that you are being candid and forthcoming with information and are much more likely to want to invest in future rounds. Otherwise, they feel like they're in the dark and they don't want to put more money in.
Harrison Faull (37:52.193)
extremely valuable advice and I hope the founders listening do pay attention because it is very true. So during your time as being an angel investor, as being a syndicate lead, as being a rolling fund lead, have you got any notable standout investments and memories, maybe Grove collaboration or OpenReal or some others that you'd like to share?
Phil Nadel (38:22.129)
Sure, we're so lucky and thankful that we've had so many great portfolio companies. Grove Collaborative is one that you mentioned. They're a public company now trading on the New York Stock Exchange. We got involved at the very early stage, their seed round. Love the founders, love their mission and their product, and it's been a great success.
Another public company that we invested in very early on is called Zoom Car. It's sort of like car sharing in India. It's a car sharing model, very large company. They've done extremely well. Founded by a couple of Americans, but based in India. We invested in the meditation app, Calm, which I could use more of. I should be more of a user than I am.
But that's been a huge success. Grin is another company that's been a great success. Peerspot, which is based in Israel, has also done very, very well. So there are so many that I'm proud of, some of which we've exited, some that we're still holding. And...
It's just that we're fortunate. I'd name some, but there are so many more.
Harrison Faull (39:48.968)
Being in a position where there are too many publicly listed investments that you've made early on is quite an achievement. I'd definitely like to strive to achieve to be in that position one day. That's testament to your ability and the time that you've put into this.
Phil Nadel (40:08.337)
Yeah, thank you.
Harrison Faull (40:08.904)
In terms of disasters, without naming any names, have there been any memorable founder blow -ups or moments that are stuck in your mind as, I can't believe that that just happened?
Phil Nadel (40:25.809)
Well, yeah, I mean, I wouldn't say blow ups. There have been, like I alluded to earlier, there have been failures, no doubt. There have been companies that just didn't make it. There was a lack of product market fit or an inability to raise additional capital, burn was too high, too much revenue concentrations, they lost a big customer and that upended them. So there are all kinds of reasons.
that companies have failed and we've had our share. Fortunately, it hasn't been too many, but, and again, we try to learn from them, but sure, we've had some and I don't, like you said, I don't wanna name names, but there've been a variety of reasons why those companies have failed and we try to learn from that.
Harrison Faull (41:22.986)
Okay, that makes sense. Thank you. Moving on a little bit, you caught the entrepreneurial bug from your dad, it seems, and then at least one of your sons has caught the entrepreneurial bug from you, and he's the co -founder of a company called Assure Health. Could you give us just a bit of an overview as to what that is and what it's like seeing him thrive as a founder himself?
Phil Nadel (41:49.873)
Yeah, it feels really good to know that the entrepreneurial genes have been passed down another generation. And to my son, I have two sons and I'm equally proud of both of them. The one you're referring to is Jeff Nadel and my son Jeff is the entrepreneur, but both of them are entrepreneurial and I'll explain in a moment.
But Jeff has founded several companies and has had several exits already. The company you mentioned, Assure Health, he just recently exited. They were very, very successful and sold the company and he's still involved, but he's moved on to his next venture. But Assure Health, the company you mentioned,
was an innovator in remote patient monitoring. Jeff's investments always start from a passionate mission, which we look for in all founders. He always starts with a mission. In the healthcare space, it's about empowering and informing consumers, patients. And Assure Health did that. It gave patients,
unprecedented visibility into their medical conditions, their health conditions, and gave them unprecedented access to medical professionals literally on a day -by -day basis or when numbers, when the patient's indicators changed, they could be immediately contacted. This was
completely innovative. And there have been some copycats since then who try to do something similar. And I hope there are more copycats because it's a valuable, it's a very valuable service for patients. So that company did quite well. And I think they had about a 120 or so employees when they sold the company. So it was rather large and his new company called Public Interest, which I'll just.
Phil Nadel (44:15.473)
you know, shout out, is again in the healthcare space, but through his experience with the sure health, he saw some of the, what he refers to as shenanigans that are occurring in healthcare, especially around wasted money, waste expenses and insurers not paying their fair share and what they're contracted.
to do to pay for. As a result, healthcare costs are dramatically higher for consumers than they should be. And Public Interest, Jeff's new company, is aiming to tackle that. And I can't say too much because it's still pretty early on. But the mission is fantastic. The opportunity is huge. I'm super excited for him and the team there. Just to...
take a moment and focus on my other son, Matt. He is a an unbelievably resourceful documentary filmmaker. So usually when you talk about creative folks, artists and the like, the idea of resourceful and financially judicious, don't go along with that. Matt is an anomaly in that way.
I mean, he has been incredibly resourceful in financing films, documentary films that he has made, which he makes just for the societal benefits. He's not making them necessarily for commercial reasons. His films point out injustices in our society, in the justice system.
in issues around LGBTQ, all kinds of issues that he's pointing out through his documentaries, through his films. They're incredibly well researched and well done. And he's been able to finance those by himself, raising all kinds of funding, getting grants, getting partners and supporters. It's been fantastic. And so he's got a lot of those same entrepreneurial instincts and just applying them in...
Phil Nadel (46:40.273)
that creative sphere.
Harrison Faull (46:43.725)
very much like a proud father which is great to hear.
Phil Nadel (46:45.617)
I am. I'm sorry to go on about it, but I'm so proud of both my kids.
Harrison Faull (46:50.829)
Jeff, I don't know, he's got a knack for naming things. For Assure Health and then Public Interest. They're cracking names given the missions of those companies.
Phil Nadel (46:57.937)
He is good at that. He is good at that. Yeah.
Harrison Faull (47:02.253)
And then here's the big question, was Forefront able to get allocation into any of those ventures?
Phil Nadel (47:08.145)
Unfortunately, not. No allocation. And there's a reason behind that, as you can imagine. We try to maintain a Chinese wall between us. It would look like a conflict of interest, even though I'm a huge believer in everything he does, right? I can't invest in good conscience from our fund or syndicate because it looks like a conflict of interest when we invest in
my son's business. And so we try to avoid that as much as it pains me.
Harrison Faull (47:43.374)
No, that makes sense, that makes sense. So I'm sure, as any good parent does.
Phil Nadel (47:46.705)
But I try to help them as much as I can.
Phil Nadel (47:51.697)
But he's at the age and he has the experience where he doesn't need much of my help anymore.
Harrison Faull (47:56.27)
I'm sure that's not true. Outside of angel investing and everything else you've got going on business -wise, I think I heard that you are an avid Peloton user.
Phil Nadel (48:10.929)
yes, I certainly am. User isn't even the word. I would say addict. Yeah, daily.
Harrison Faull (48:12.91)
Hehe.
Harrison Faull (48:17.326)
Okay. Have you seen many changes since the takeover? I personally haven't used it frequently at all, but I'm just wondering from the outside.
Phil Nadel (48:27.473)
Well, there have been changes. I'm one of their beta testers actually. So I have access to like a lot of the new features and they're constantly innovating with the platform and introducing new features, but they're having a really tough time from a business standpoint. And frankly, selfishly, I'm worried. I don't want them to go out of business. I want them to maintain. I love what they do. I love the content. The instructors are fantastic. The content is fantastic.
And a lot of the new features that they've introduced on the platform are also great. They had, as you know, such a huge COVID spike in their business, right? And so that's a really tough situation where you build up all this inventory and all this momentum and you expand and you're scaling. And then all of a sudden everyone's going back to the gym and they don't want to work out from home anymore and sales dry up. So.
New sales have been a challenge for them. Their retention on existing customers has still been very, very high. So customers like the content. They like what they're getting, even though it's not a cheap service. They like it. And so I keep using it. I enjoy it. I ride every day and I use some of the other content. And I just hope that they can right the ship, if you will. And
and continue doing what they're doing. But definitely shout out to them for great user experience.
Harrison Faull (50:00.335)
I think every founder wants to hear users.
selling their products like that. That was good to hear. They're done.
Phil Nadel (50:06.865)
Yeah, I'm not involved with the company at all, I'm not getting paid by them, but I'll endorse them wholeheartedly as an avid user.
Harrison Faull (50:15.919)
Perfect. Well, in terms of questions, we can kind of like snap out of the podcast format now because I can edit things. Is there anything that you think you'd like to talk about that I maybe haven't asked?
Phil Nadel (50:31.121)
You've been very thorough, I have to say. I mean, we covered a lot. I'm trying to think if there's anything else.
Harrison Faull (50:33.584)
Sorry.
Phil Nadel (50:41.393)
I don't think so. I mean, I could shout out one of our other portfolio companies that in contrast to Peloton did very well coming out of COVID.
Harrison Faull (50:41.84)
I know we had to shoot.
Harrison Faull (50:52.752)
Okay. So I'll lead into a question with that then. So Peloton's had a really tough time during COVID. I'm sure quite a few of your portfolio companies saw the reverse. And actually, are there any examples of people, it's the other way around, isn't it? Peloton had a good time during COVID and the one you want to talk about.
Phil Nadel (51:10.449)
Well, yeah, they suffer. Well, we have portfolio companies who have suffered, who suffered dramatically during COVID or should have suffered based on their business model and their industry, but managed to find a way not only to survive, but thrive.
Harrison Faull (51:29.456)
Okay, so.
So COVID was pretty transformational for all businesses. It took everyone by surprise. Are there any interesting examples of your portfolio companies that really adapted to that situation and actually turned it into a strategic advantage?
Phil Nadel (51:47.505)
Yes, yes. Because we invest in great founders, so many of them did well, even though the odds would have said that COVID would have shut down their businesses. So I'm talking about specifically companies in the travel and hospitality sector, in the...
sort of any business that required customers who travel, not just travel related businesses, but businesses that required travel, if you know what I mean. And so I'll give you a few examples of companies we invested in prior to COVID that by all accounts should have been decimated by COVID, but were not. One is a company based in Chicago called Party Slate. Party Slate,
helps with event planning. Okay. They work with event planners, venues, and all kinds of, party, and event, companies, companies that provide, you know, supplies and services for events. Well, events were shut down a hundred percent just about during COVID, right? And all of these companies had no business, all of their customers. So.
The parties say because they were so in tune with their customers, intimately understood what their needs were and instead of becoming or maintaining a vendor relationship exclusively, became more of a partner with them in trying to help them stay afloat and stay ahead of the business so that when COVID ended, they would be ahead of the game. And so if they...
we're doing is they help these companies build more of a digital presence and become a lot more.
Phil Nadel (53:52.144)
a lot more present online, a photographic portfolio of their venues or their services, like a florist, for example, whereas they were traditionally mostly focused offline in terms of their presence and relying on local word of mouth and that kind of thing. But PartySlate, because they understood the pain points that their customers were facing and because they morphed their product and
and evolved so quickly in reaction and response to COVID. They were able to actually grow during COVID, which is remarkable. And then they were in a great position post -COVID because their product that they offer became much more of a full -fledged, built -out, valuable product. So that was one company that really stands out to me.
Open Reel is another that took advantage of COVID and in terms of their business because they provide a remote video solution. So companies who, for instance, film customer testimonials or tutorials where they send a video crew out to a location.
Well, it could be just a product video. They'll send a video crew out to a location. Well, no video crews were going out to locations. No customers were welcoming video crews into their houses anymore. So OpenREAL enables the same high quality of video, but they do it in a remote way. So the companies, their customers can just send, if the customer doesn't have a camera, they send them a video camera, and then they use OpenREAL software.
and they can do everything that you could do in person, but they do it remotely. It's fantastic software. So it played perfectly into COVID and it really got kickstarted the business. And so many of those customers, after realizing the savings that they were getting, stayed with OpenRail even after COVID was behind us, because they don't have to pay the money to send a video crew out anymore and do all of that. They could do it remotely.
Phil Nadel (56:14.289)
So they said, wow, we could send a video crew out, but why would we? We're getting the same quality at a much lower cost. So we'll keep doing it with OpenVille. So that worked out great. And I guess one other company I would point out that just off the top of my head that was impacted by COVID was a company called BluffWorks, which is an apparel company that makes travel related apparel gear. And you'd say, okay, well, no one's traveling during COVID. So what happened to them?
Again, they change their messaging a little bit and their branding to focus more on comfort and style and ease of use for the products. By that I mean they don't wrinkle, they're easy to wash, and so they don't have to just be used for travel. They can be used for all kinds of things and they're fashionable use outside of travel. And by switching that
that messaging and evolving in their branding during COVID, they were able to continue to succeed and thrive and then post -COVID just sort of pick up where they left off and continue to grow ever since.
Harrison Faull (57:30.773)
No, those are really, really good stories and founders are the gems of the industry. As much as people like to look at sales and numbers, the humans are the founders and those are the ones having sleepless nights and actually innovating when the end of the world is literally tomorrow and trying to find a solution.
Phil Nadel (57:42.417)
100%.
Phil Nadel (57:51.697)
Couldn't agree more with you Harrison.
Harrison Faull (57:55.061)
I thought I had a follow -on.
Harrison Faull (58:01.845)
There's been some analysis on the cohort of startups and people investing during times of economic recessions. And actually the caliber of some of the companies that are started during the tougher financial times when capital is harder to access has been higher than ones that have easy access to capital that might get a bit wasteful or can afford to make a few mistakes.
Have you seen that to be a trend and is that happening now? Because it is actually really quite self -profound as fundraising still.
Phil Nadel (58:34.257)
It is. You know, so we've always been focused on investing in capital efficient companies. Companies that are not burning a lot of capital and don't necessarily require a lot more capital in the future. That's been our focus since day one. But the industry has not always focused on that. They, a lot of times, will prioritize growth over reaching cash flow.
breakeven or profitability and being lean and resourceful and conserving cash in an appropriate way, balancing that with growth, of course. And now, like you said, with capital more difficult to access, investors are finally coming around to our perspective of focusing more on capital efficiency. And that has required founders to take a leaner approach.
and really drill down on their burn and try to reduce it as much as possible. And so that's, we have seen that trend and I'm very thankful for it because the more companies that have become capital efficient, the larger our top of funnel, if you will, in our, on our deal funnel. So yes, we've seen that and I'm glad everyone's coming around to where we've been for years on that.
Harrison Faull (59:59.862)
rational behavior. It's actually one of my beliefs that the new AI boom and all these LLMs that people can use in their day -to -day lives, I think it's going to really reduce the cost of building these startups, especially the MVPs and getting to that sign of commercial traction, getting to that 250k annual revenue, the cost of getting there could be 10 times less, maybe even 100 times less than it was five years ago. So the abundance of ideas.
Phil Nadel (01:00:11.345)
yeah.
Phil Nadel (01:00:21.297)
Absolutely right. It's so much less expensive now to both start a company and grow a company than it was even five or 10 years ago, but especially compared to when I started my first company. So it's much, much less expensive and easier to get to that stage. So you're absolutely right.
Harrison Faull (01:00:44.312)
We haven't seen in the data yet though, like the average valuations of seed rounds have kept pretty chunky. In fact, they're the most insulated I think of all the rounds, the first initial angel checks and sort of stayed pretty resilient even throughout the COVID dip. But I expect that to change over time and actually valuations to come down as the cost to actually get to those milestones decreases.
Phil Nadel (01:01:10.193)
I think you're right. I think that will happen.
Harrison Faull (01:01:13.592)
Okay, so Phil, for the, I'll start that again. So for the founders looking to get funding from Four Front Ventures, where can they find you and what are the three things that they should know before they apply?
Phil Nadel (01:01:26.513)
Sure, I mean you can go to forefrontvp.com, that's our website, forefrontvp.com. I'm very present on LinkedIn, so Phil Nadel, you can go to my profile on LinkedIn and connect with me there. Or feel free to just send an email through our website, contact us on the website and we'll respond. We respond to all emails. And so we don't mind cold outreach. So that's the best way. In terms of what...
you know, you need to do to prepare. Don't necessarily apply if you're not, if you don't meet our criteria. Our criteria are laid out on our website. As I said earlier, we're happy to have an introduction or an initial pitch deck from a company that may be too early so that we at least meet them and establish a relationship. But we're not going to spend a lot of time if they don't meet our criteria.
Once we get on a call with a founder, it's critically important that they know their numbers, know their KPIs, right? Understand those intimately so that we can understand them intimately. I would say that's really, really important. Understand the competitive differentiation and be clear in how you explain that to us. So we understand, yes, there's a lot of competition, but here's why we're 10X better.
Here's why, you know, our solution demands an investment over those other companies. So those things are, are really important. And then, you know, I need to see that the companies are solving a significant problem or challenge for the customers in a large addressable market, and they're doing it in a unique or significantly better way. So those kinds of pieces that I just mentioned.
are really important to us.
Harrison Faull (01:03:26.905)
I think there's a lot of value in there and I do hope all founders as a basic courtesy do actually look at your basic investment criteria and only apply if they are understood. And then for the limited partners, the ones out there that hear about this rolling fund, want all of those advantages, want to benefit from your compound learning and the position that you're currently in and all the network effects that have come with that, what can they do to find you?
Phil Nadel (01:03:35.025)
Yeah, it's surprising how many don't. Surprising.
Phil Nadel (01:03:53.809)
They can look on AngelList for either the Rolling Fund or the Syndicate, but they can also go to Forefront VP and the link is on there. It's easy enough to find us on AngelList if they're on there. Otherwise, again, they can go to our website, ForefrontVP.com or contact me on LinkedIn and I'll send them a link and they can learn more about it. And we still have some room for new LPs in the Rolling Fund. The SEC caps the number of LPs, so we still have some room in...
love to welcome some new LPs into the fund.
Harrison Faull (01:04:26.777)
Perfect. I'll put all the links that you mentioned in the description below so they're easily accessed. And I think that's it. I just want to say thank you very much for coming on the episode. Thank you very much for the time. It's been really informative. I've learned a lot. Thank you.
Phil Nadel (01:04:30.769)
Thank you.
Phil Nadel (01:04:36.561)
My pleasure.
You did a great job, Harrison. You asked great questions and it's been a pleasure.
Harrison Faull (01:04:44.249)
Thanks Phil.
