Rick Zullo talks about bridging the digital divide in legacy industries by supporting founders with experience. Authentic relationships with industry experts is important, not just a rolodex of CXOs.
Rick Zullo talks about bridging the digital divide in legacy industries by supporting founders with experience. Authentic relationships with industry experts is important, not just a rolodex of CXOs.
Highlights:
More details at https://podcast.sure.ventures
Rick Zullo: [00:00:00] A lens around what is the right founder for this industry? You know, that goes above and beyond the resume and more to the intangibles of their relationships, their integrity, their management style, and ultimately, you know, their passion for the market, which I would say the folks who demonstrate and live and eat the industries that they work in, you know, those are the folks that we want to.
Gopi Rangan: You are listening to the shore shot. Entrepreneur
cast four founders with ambitious ideas, venture capital investors and other early believers tell you relatable, insightful, and authentic stories to help you realize your vision. Hello, and welcome to another episode of the short shot entrepreneur. I'm your host Gopi Rangan. My guest today is Rick Zillow, Rick and [00:01:00] I will discuss his investment philosophies and how it's different from other venture capital investors.
You will learn about under-penetrated industry opportunities in various segments that Rick focuses. You will also learn about how he invests in seed stage startups. What kind of characteristics, what kind of strengths he looks for in entrepreneurs before we go into more detail, let me first introduce Rick to you.
Rick Zillow is the co-founder and general partner at equal ventures. Equal ventures was founded by Rick and his co-founder Richard Kirby. And the farm is based in New York and typically the farm invests in seed stage startups. Welcome, Rick, tell us about yourself. Let's start with the different things that you did before you came into the venture capital industry and how you decided to start equal ventures.
Rick Zullo: Yeah. So I'm one of the [00:02:00] two managing partners of a firm called equal ventures. We're a $56 million seed stage fund focused on bridging the digital divide, uh, based in New York city. Now for us, that really means how do we transform legacy sectors of the economy. And insurance supply chain, retail, infrastructure care economy, you know, assemble a couple of the things that are nearest and dearest to the way that we work and live.
But, you know, my career really stands, you know, going through a couple of different phases. I had worked primarily in energy and sustainability for a couple of years, both in college and in shortly after college and ended up, uh, doing a lot of work. The department of energy and government agencies and utility clients, like while I was working at Deloitte consulting for about five years in the strategy and strategy and operations consulting team there, uh, got the chance to see my first bubble really blow up there shortly after the credit crisis, which, you know, seeing those two things happening, you know, On the onset of my career, you know, a large credit [00:03:00] financial crisis, as well as, you know, clean tech bubble, really pop, you know, certainly informed a lot of the way that we invest today, but ended up being one of the things that really forced me into technology.
Know, understanding other high-growth sectors of the economy outside of clean deck. And, uh, you know, it was fortunate to get the opportunity to join a firm called light bank run by two of the best entrepreneurs, arguably on the planet and Brad Q Eleanor club costume. You know, founders of Groupon, inner workings, echo global
So a couple IPO's and a close to billion dollar accident to this, uh, you know, got the chance to join them just as they are, you know, we're starting a company in the industrial IOT space area that we're passionate about. Um, and then ultimately, you know, through the course of the four years that I worked there.
Got the chance to work with a handful of great companies, either as a board member or companies like Snapchat event prep, or as an investor company like Excel, a battery catalytic, you know, risk manager or as a [00:04:00] angel investor in companies like RigUp to really hone, improve that thesis and ultimately bring that to you or where it got the chance to be an investor for a white bank and starting it in New York office.
Before starting what is now equal ventures, which has just been, you know, a phenomenal experience to really take that next step as an investor and be a founder myself, uh, and building a organization that I think is the truest form of investing for me as well.
Gopi Rangan: This is very interesting. You've given a very colorful description of your career.
And I see that with your experience at consulting and working at other farms and making very sound investments, you've built up a broad array of experiences. I'm really curious. At equal ventures. What's your investment philosophy and how is that different from
Rick Zullo: other firms? You know, I think, uh, our firm, one of the things that I really like to think, uh, that, that we pride ourselves on is, is being a student of, uh, not [00:05:00] just, you know, the broader economy, but of other investment.
So, you know, we look at a lot of those firms that are investing in and mobile apps or, or our product experts or inner technology experts. And we think that there's been a robust ecosystem of investors, founders, and kind of service providers. As we look at what we think is a new innovation thing is really focused on not technology development, uh, by technology deployment.
You know, we think it's actually a really fundamentally different exercise. You know, if you're going to try to figure out how you modernize and transform the oil and gas buying chain, or if you're looking at insurance, you know, what are the solutions that really are needed to modernize a lot of that infrastructure and elevate that industry or for looking at something.
You know, senior care and childcare and some of those care dynamics that we discussed earlier, uh, one of the solutions that that market needs. And we think that really requires more nuanced knowledge of those industries because it's so incredibly complex. Um, so as we look at [00:06:00] those industries, we feel like we need to not just be technologists and not just kind of have, uh, the best practices of Silicon valley.
Well, we need to borrow from other investment philosophies because we're not just focused on creating kind of, you know, technology, you know, evaluating defensibility, but it's really thinking about production. How can we leverage technology to make these industries more efficient or to improve the quality of life for individuals?
And that requires a lot of the same disciplines that I've seen. The private equity school of thought. When I, when I worked on life view, you know, as well as from the value investing principles that I saw in Columbia business school. And we've tried to meld that together with both the venture experiences that I've had working on a couple of different firms at various different stages, as well as my partners, I, you know, mentor experience that he's had working at growth stage with IVP and then a kind of more traditional early stage venture and venture on two of the most Stallworth firms in venture cap.
Gopi Rangan: How do you do that? What kind of technologies do you prefer [00:07:00] or are there certain types of industries you touched on care and a few other things? What's your preferred.
Rick Zullo: So there's probably three segments to that. When we're looking at industries, there's four shoes for us. We're on catalysts. You know, we think about competition.
Uh, we think around connectivity and we want complexity. So, you know, we're looking at the industries that we think have the most cataclysmic change, you know, that are going to create. Basically tailwinds for the next couple of decades, that if we're on the forefront of that, you know, we're going to be part of a really successful transition into that.
And, you know, uh, there's a couple of industries that we've already highlighted, and we'll certainly talk more broadly about that as a firm, but these are big, huge portions of GDP, um, that touch every aspect of our lives. You know, that we think are just going through really cataclysmic change. We want to make sure that we're identifying industries.
That are significantly complex so that we are compensated for the time that we spend researching and understanding the nuance of those, you know, so you wouldn't see [00:08:00] us and kind of things that have, you know, surface level complexity. You know, we want the things that are hard. We want the things that are complicated.
We want the things that the standard one size fits all approach doesn't work. Um, and I think that's where we shine. We also want to avoid competition. We want to go to places that we think are under-penetrated from a venture perspective. Cause that's where founders need us the most. And you know, being in those sectors really enables us to develop a pole position to be a leader.
And we think that's extremely important from a differentiation perspective. And, you know, lastly you need to be places that we already have organic connectivity to, you know, if I told you that I'm a healthcare expert or a real estate agent. No, that's just not true, but, you know, can I pull up a bunch of fortune 500 executives in the trucking logistics landscape or, you know, in the insurance landscape, you know, you better believe it.
And we think that that level of connectivity really enables us to provide a lot of value to the entrepreneurs, which the entrepreneur class here is also what we would believe represents a [00:09:00] little bit of a different point of view. Then a myopic perspective of what the stereotypical entrepreneur is in the traditional Silicon valley sentence.
So, uh, we've backed founders from geography is that most investors have never invested in my first six investments add light bank. You know, we're in six different states, you know, our first, you know, five, six investments at equal or in three different geographies, you know, w we think that's the future.
We think the future of entrepreneurship is going to be more dispersed. Um, but we also think it's going to be more democratized. So the reality is, you know, we think that this is also a very different type of founder than an existing task. This isn't someone who was born, you know, with a computer in their hand when they were six years old hacking way, you know, that can be the case for folks who are going to redefine these industries.
Technology has just become so much addressable to the mainstream on these industries require such nuance knowledge, deep relationships with folks in those industries that, you know, uh, we think that it kind of bucks the trend of the prototypical [00:10:00] entrepreneur, that the pattern recognition of Silicon valley firms has really reinforced.
So, you know, for us, we, you know, my first six investments at whitepaper in six different cities, You know, our first, you know, six investments at equal ventures, they come from three different geographies, um, sooner, like likely next investment. And it will be in a fourth, you know, we're, we think the future of entrepreneurship is going to be more dispersed in that.
And part of that is the industry nature of what we invest in. You know, enables us to be, uh, enables those confounders and those companies to be closer to the customers. And that's extremely important, but you know, we also think it's going to be much more democratized. So it's not the typical founder that went to a certain set of schools and circumstances, uh, you know, background experiences, a lot of the founders that we've backed and had success.
I've never worked at startups before they come from a ministry or a, you know, someone like Kabir SIADH from RiskMatch. You know, his company was based in Greenwich, Connecticut. He was in his late forties. He wore suits, you know, there, there were a lot of venture investors who said, this guy is not going to be [00:11:00] a great founder and sure enough, we had a phenomenal accident with Kabir in a very, very short run.
And I think that demonstrates, you know, the diversity that we can add to the landscape. Of having a broader point of view on what is a great founder, because for each one of these industries, you're going to have founders of different profiles that really fit that market. Uh, the founder of a childcare company is going to look unequivocally probably different in terms of experiences who are competencies background that they have, then someone who's going to transform, you know, the trucking industry or the insurance industry.
So we really want to take that nuanced viewpoint to make sure that we can have honest. What's the right founder for the industry is based on the knowledge that we have for those industries. And certainly there are types of business models that we prefer over others, which, you know, we're having a, it.
Gopi Rangan: Yeah, I can see, we are cut from the same clock. Uh, I've had this philosophy that investors need to meet entrepreneurs, where they are versus the old school venture capital style where [00:12:00] entrepreneurs need to come to investors. I respect many of those firms that still have that philosophy and they only invest in areas that are comfortable and typically in their own local regions.
But I have invested in many different cities, New York, Boston, Cincinnati, Minnesota, Atlanta. Seattle and other places, and that's where new ideas and our new entrepreneurs are coming from. And I see that you have a very similar approach. Like what do you look for in an entrepreneur when you first meet them?
Maybe you could pick an example of one or two companies and show how that conversation went.
Rick Zullo: You know, as I look at some of the entrepreneurs in our portfolio right now, as well as some of the entrepreneurs that we've worked in the past, the contrarian bats that we've taken now, the non-obvious ones, you know, you back someone like Sean chow, who is a co-founder of Fieldglass, a company that sold for a billion dollars.
So it was a seed investor in his next company. Catalytic, you know, Sean could have raised from him. I'm frankly, lucky and fortunate that he let me go on that journey within and the [00:13:00] company's performed incredibly well since, you know, but it's not exactly a contrary that Mac someone who's been part of building a billion dollar company before the work difficult bats to take are the folks who have never worked at startups before and by have amazing industry expertise.
You know, have, uh, you know, in some cases, a chip on their shoulder, so to speak to it, that they're out there to prove something, you know, but I would just have a tremendous amount of passion. And then, you know, as you look at them as individuals, uh, just really understand, uh, the degree of integrity, uh, in leadership that they have.
And, you know, I've been fortunate to work with a handful of entrepreneurs that I just think are really, really great demonstrations of that. If you look at the teams from Vettery and Brendan out of there, The team at RigUp or the team at RiskMatch, you know, across all three of those companies, which, you know, um, two of those had very successful access and is currently valued at $2 billion.
None of those companies, the founders had ever worked at service before.
Gopi Rangan: So [00:14:00] what's price you in those conversations when you first meet.
Rick Zullo: So, you know, in all cases there, they're kind of longstanding relationships that you get to know and see someone evolve over time. Um, you know, for, for, you know, ring up, I was fortunate enough to go to business school with Mike and, you know, he was just one of these guys who was absolutely incredibly intelligent.
You know, had the opportunity to go to Ivy league schools, but decided that he was going to go walk onto the Texas stadium football team. You know, he's the type of person who, you know, could argue in class with other folks and go toe to toe with anybody who was, you know, in the value investing program and going to go work at a hedge fund like Jana capital partners or Appaloosa, and do so with attentive Copenhagen in front of me.
You know, perfectly fit and had come from the bones of the oil and gas industry, you know, really knew that he was going to persevere based on his intellect and passion and, and, you know, experience from relationships that he had, [00:15:00] the proper funding and cultivation. And, you know, I think as I look at Brian, Adam, you know, very, very similar yet, you know, folks who were incredibly passionate, incredibly hardworking, had incredible insight, knew the industry, but really struggled to raise.
You know, got the chance to get to know those guys, work with them. And eventually, you know, be one of the first investors in that company. You know, you look at can beer, all very similar story. These companies struggle to raise money because you know, it's harder to understand, you know, the nuances. No, the staffing industry and oil and gas industry or the insurance industry, but, you know, taking the time to really understand those, you know, I really think enables you to have a lens around what is the right founder for this industry, you know, that goes above and beyond the resume and more to the intangibles of their relationships, their integrity, their management style.
And ultimately, um, you know, their passion for the market, which I would say [00:16:00] the folks who demonstrate and live sleeping, eat the industries that they're, that they work in. You know, those are the folks that we want to back.
Gopi Rangan: So with people who you have a past relationship, you have an existing relationship.
There's time for you to pick up on things, form an opinion. Is that typical among the investments that you've made? Like how many investments have you made with equal ventures so far? And, uh, how many of them are on founders who have known you or your partner and have known for.
Rick Zullo: Yeah, I would say the average length of relationship, you know, w with us and the founders that we worked with is honestly years.
And, you know, this is one of the abuse. It is a of being able to start a firm, you know, having been investing, you know, my, my partner has been an investor for eight years. Yeah, I'm coming up on eight years now as well. Um, you know, we've had the chance to know strong operators in the ecosystem for a long time, you know, and being embedded in these industries, you know, w we get the chance to know and come across, you know, folks that [00:17:00] we want to work with, you know, down the road.
I think that's made some of those investment decisions easier, uh, and able to go faster, but make no mistake when we're meeting a new entrepreneur or for the first time, you know, we're not the type of firm that's putting down a term sheet by the end of the day, by the end of the week. Um, you know, I think one of the investments that that is demonstrating a lot of promise for us is a company called wash our benefits.
Um, you know, here's a case where you had two founders who worked together for eight years at an insurance company called sun life. They were extremely high performers in that. They left their jobs that were high paying jobs to go start a company that provided software to employee benefits, brokers, really seeking to transform all the efficiencies in that value chain.
And frankly, really struggled for several years, but it was fortunate that we got connected to them through some industry insiders that we knew who believed in the product and believed in the team. You know, we probably spent about 10 months getting to know that team. We spent a lot of that time, helping them [00:18:00] think through pivoting the company.
Uh, which, you know, as we look at where they are today, versus where they were, uh, when we initially met them, they were a SAS company selling software to employee benefits workers today, their service is completely free to employee benefits, brokers, and they're monetized as a marketplace and they are just having tremendous success.
So, you know, we love the opportunity where, you know, we get the chance to know a team kind of play a part in helping inform, uh, you know, a very early version. You know, tweak it and refine it and really play a role of rolling up our sleeves to help that those founders take the next big step as a business.
So we're confident that that company is going to have a lot of success moving forward, you know, but it was really one that, you know, the entire venture industry ignore them until what is now seeming like a much more obvious investment.
Gopi Rangan: Yeah. I remember in our past conversations too, you mentioned that you almost like to incubate the business and you want [00:19:00] to form that investment thesis and drill down on the opportunity to uncover nuances and build a business around it.
And along with it and find the right kind of CEO and management team to come together. Uh, I think that's sort of what you did with Jerry. Am I right? And we are both investors.
Rick Zullo: We have indeed incubated companies in Jerry. Yeah. Is one of them that we're very proud of. founder that I've known for many years.
And, you know, as we were going through the process of researching the space felt really compelling. Around an opportunity that's base. And unfortunately, you know, Fenlon who is one of the experts. There's few people who understand the elder tech, um, long-term care industry better than from Wong. You know, as we kind of try to validate that hypothesis with him, he got so excited that he wanted to be a part of building that company that said I w uh, you know, our general strategy is we are, we are investors first.
You know, those certainly be [00:20:00] opportunities that we find so compelling and so timely that, you know, we'll incubate companies and, you know, both then rock and light bank have had success with incubating companies in the past. And hopefully we will demonstrate success in doing so with equal ventures, you know, but, uh, for us, we were investing, you know, we, we know that the founders of the stars.
And I think that's incredibly important. You know, what we like to do is really just be the service providers. So, you know, I think this is where, you know, spending five years living on planes, you know, as a consultant, you know, really informed my point of view on how we want to work with entrepreneurs.
And now we understand that they're the ones doing all the arts, they're the ones making the tough decisions on hiring and they're the ones betting their careers on the line. And you know, which is. Absolutely love working with honors because in many ways they're heroes in their own. Right. Um, but you know, our role is to really help them kind of take things to the next level, which if we can go and say, well, maybe instead of a SAS strategy, you try a [00:21:00] marketplace strategy here based on other things that we've seen work well in the market that represents our ability to bring some of the best practices that we've seen.
Work in other sectors that have similar conditions or bring concepts that we validated with our network experts and take, you know, two founders who are already great and take them I'm really, to that next level, you know, by giving them, you know, a few pieces of targeted advice, you know, that, that we feel really confident.
And, you know, when we find that our vision of what is compelling in a playbook for that industry matched well, uh, with has. Yeah, that's when we have our greatest success.
Gopi Rangan: So what can founders do, especially in the first few days, few weeks, and few months of building that relationship, how does that help you evaluate it?
Rick Zullo: Honesty and self-awareness so that, you know, I look back at, you know, forming our relationship with, with Ryan, the CEO, watch our computer, the CEO of RiskMatch, or, you [00:22:00] know, Brian and Adam from Vettery. And those were all kind of warm processes that it took for us to get to know each other in all those cases.
And I'm not sure if we ever had investment. Yeah, they were never pitching. And that's what I love about those relationships that it was, you know, w we got the chance to know each other, and they were extremely upfront about the challenges and opportunities of their businesses, you know, and authentically looking for advice.
You know, they, they, weren't looking for a check. They said, Hey, Rick, what would you do in this circumstance? And, you know, here's what we're thinking. And sometimes. Rick, I think you're wrong, but sometimes they'd say Rick, I think you're right. And you know, I think we aren't always right. You know, we're wrong actually.
In fact, a lot more of them are right. That is the job of being a venture capitalist, but to have really good structured debates, you know, about, you know, strategy and making it a two-way conversation, I just think is so important. And, you know, frankly, it's something that the venture ecosystem has lost.
Gopi Rangan: Yeah, I [00:23:00] think you said it really well. There's a lot of misunderstanding because of TV shows and things like that, where non-entrepreneurial go out and pitch and investors sit back in a fancy chair and give them scores and some high, sometimes even harsh comments. That's really not how it works in the real world and venture capital.
There's a lot of collaboration building chemistry. And the reason why the chemistry happens is because of the honesty. And self-awareness that you, you mentioned some of the best entrepreneurs I've worked with have that self-awareness and the honesty really helps bring out all the challenges and you put it out on the table and you discuss that makes it a lot easier.
A lot more articulately than I've heard before. We're going deeper and deeper on some of the interesting topics here. You covered a lot of territory. You started with your own background, starting with consulting and working with other firms and investing in geographies that other venture investors don't go.
And you kind of kept that philosophy going forward with equal ventures, the way you focus on [00:24:00] legacy industries to transform those industries with digital solutions. That's quite interesting where you like to work with entrepreneurs who have a lot of nuances and understanding of a certain domain. And they've mandated in that space.
And the way they think is very different from some two kids in a garage, trying to build a website platform by themselves without much experience in the industry. Uh, you talked about these complex industries, which have so many different, uh, aspects to it, being a student of that broader economies, how you look at it and that I like that.
You've been quite humble. You don't you say that you don't have a lot of pedigree, but I, I see you do including your business school, but I understand what you're saying. That there's a lot of bias towards pedigree and brands, and we don't need to do that. And there are very good investment opportunities in the asset class actually favors people who come with hunger that matters more than.
Rick Zullo: I think our strategy works for us. And that's not to say that we're not going to back, you know, founders who come from those schools or, [00:25:00] you know, those type of pedigrees, you know, I think, you know, we just want to make sure that our viewpoint of what a founder can be and what a successful founder can be.
Yeah. It is a very broad definition and a very nuanced. I
Gopi Rangan: like the way you, you, you finished some of your comments that founders are the heroes and VCs that are in a service provider business, and you look for honesty and self-awareness, I want to transition to the next part and ask you about community leadership activities that you're involved in which nonprofit organizations are you passionate about and why?
Rick Zullo: Yeah. So community in thinking about it, you know, broader act is something that's incredibly important to both my family, as well as, um, you know, our firms, uh, you know, my partner, Richard Kirby has been just a tremendous leader for diversity in the venture and broader tech ecosystem. You know, he's [00:26:00] been championing organizations like south Mo, which is a online, offline organization for African-Americans and tech.
You know, that's probably about 15, 1600 people strong. Now he's been, you know, extremely involved in various mentorship organizations and we've made that a part of equal. Now, um, you know, w every summer we, we bring on an individual from a HBCU, a historical black college and university, and we think that's a great way to increase top of the funnel for diversity in broader venture tech ecosystem.
And then as we look at the types of things that on the personal side, outside of the broader tech and venture ecosystem, that both my wife is a cancer survivor. Her mother has been battling pancreatic cancer for the last a year or so. Um, which, you know, uh, pancreatic cancer is, is certainly one of the most terrifying diseases that you will find out there.
And, uh, organizations like Jimmy V and others that are doing incredible work, you know for, for funding, uh, cancer. [00:27:00] And then lastly, I think it's important to think locally, which, you know, one of my favorite organizations that I've been involved with over the last couple of years is a organization called social venture partners, which a social venture partners has various chapters across the country.
Um, they don't have a chapter in New York city for some reason, uh, while my wife and I were in Chicago, we were both partners, uh, within their social venture philanthropy organization where, you know, we'll actually take board seats and organizations in the members actually put up their own capital to fund transformation of nonprofits to enable them to get to levels of sustainability and having sustainable and.
Well, thank you
Gopi Rangan: so much for sharing your time and your insights. It's great to see that both at home with your wife and also at your farm with your partner, you're actively involved in many community activities and your insights that you share today will be very useful for entrepreneurs. I wish we [00:28:00] could talk more and keep, keep this going, but we're up at time.
Uh, will I look forward to working with you and collaborating with you on more opportunities like Jerry
Rick Zullo: looking for.
Gopi Rangan: Thank you for listening to the shore shot entrepreneur. I hope you enjoyed listening to real life stories about early believers, supporting ambitious entrepreneurs. Please subscribe to the podcast and post a review. Your comments will help other entrepreneurs find this podcast. I look forward to catching you at the next episode. .