00:03 Intro: Hi, everyone. Welcome back to the Unpolished MBA podcast. In this episode, Mac Conwell, a tech entrepreneur turned venture capitalist talks about his career journey, all the way from leaving his college to take a job for the government. And we even talk about his startup journey as well. He talks about how his first attempt wasn't successful, but then the second one was, and now he invests in other startup founders and shares his wisdom on Twitter. We had a little disagreement on Twitter about startup founding, and that's actually how we met, but we hashed it out on this episode toward the end. Let's jump in.
00:44Host - Monique Mills: So, I'm going to jump right in with the first two questions I ask everybody. And the first one is, are you an entrepreneur or corporate employee?
00:53 Guest - Mac Conwell: Yes, I'm an entrepreneur, the CEO of a venture firm. I'm a managing partner of a venture firm, so yeah entrepreneur.
00:59 Host - Monique Mills: Yep. All right, so MBA or no MBA?
01:05Host - Monique Mills: Whoa, I love this. I love this conversation now. It's very, very interesting because you're the second guests. Yeah, you're the second guest that has had no college degree, but it's still quite successful, and the other guests who has no college degree, but is a college professor actually at Stanford and Columbia. And that person is Steve Blank. So, Steve Blank does not have a college degree and he is like one of the, you know, like gurus we consider in this whole lean startup world. So, very interesting. It's a pleasure to have you on and, you know, share your story. So, you said no college degree, but I know a little bit that you have a software background, right? So, how did you learn that? Where did you pick up those skills?
01:53 Guest - Mac Conwell: I don't have a college degree, but I did matriculate at a college. And so I studied computer science at Morgan State University at HBCU here based in Baltimore where I'm from. And so, my sophomore year of school, I got an internship with the DOD and got a top secret clearance. And so, my junior year of school, I dropped out because Northrop Grumman offered me a bunch of money, that's kind of how I got my career started.
02:17 Host - Monique Mills: Yes those secret clear, I was just mentioning to someone like a couple weeks ago, I used to have secret clearances, and good grief it's not too many people can get those clearances and so those jobs go unfilled many times because they'll want someone, and then when they start the process to get their clearances, they can't get them.
02:37 Guest - Mac Conwell: Yes that's the big hurdle...
02:37 Host - Monique Mills: Yes the big hurdle, you know, young people keep your credit clear and keep your record clear because those kinds of jobs do pay well. Well, that's impressive. Northrop Grumman is one of the top employers in your area, right? So, how did you jump from there into entrepreneurship at some point?
03:00 Guest - Mac Conwell: So, you know, I've always been somebody who tinkered with the idea of having a business and being an entrepreneur and I attribute a lot of that to my father. When I was a kid, I used to want to be a rapper and I'll never forget the day my father asked me, he's like, "So, do you know who signs that rappers checks?" And I was like, "No." He was like, "Well, if you want to be a rapper, you need to go figure that out." And what he was trying to teach me was, the person who signs the rapper checks is the person who makes the real money. And so like, I've always been one who wanted to do that. And then, when I got my internship with the government, I got lucky that all the folks who were part of the internship were either computer science majors or electrical engineering majors.
03:41And there was a group of like 30 of us, 30 black people who were in the group. And they became my core group of friends in my early twenties. Like, these really well-educated, super smart, young black people were the same people I went to go party in DC with. And one of them is a gentleman by the name of Patrick Jackson. And Patrick was the first person I knew who would always talk about how he wanted to be the black Mark Zuckerberg. Like, he was building iPhone apps in like 2007, right. He's building websites and like all this stuff. And you know, we're all engineers so we can do the same thing he can. And so, a core group of us kind of came together and started like talking about technology and coming up with business ideas. And so then in 2010, me and told my best friends just said, you know, let's start a company.
04:30We had no clue what we're doing. Like, we didn't know anything. We were just like, "Hey, we're going to build something." That kind of started me down the path of, you know, starting my first startup and later becoming the CEO of it, and going down the whole, you know, startup life thing.
04:44 Host - Monique Mills: So, what problem were you solving with that business?
04:47 Guest - Mac Conwell: We weren’t solving a problem, we were just doing something we thought was cool, which is one of the problems we had. And what it was, our original idea is a company; it was called nobadgift.com - terrible name. And what we were doing was we were trying to create a platform where people could crowdfund money for gifts. And really what we were trying to solve for is like, gifting is hard; you never know what to get people. But like on your birthday, all your friends would say happy birthday to you on Facebook, like, this was always been a thing. And we said, "What would it be like if everybody that said happy birthday to you on your birthday gave you a dollar towards something you actually liked?" And we were like, "Well, that sounds cool," and so we started to build that. It was a crowdfunding platform for people to crowdfund money for gifts that you want it. And we ended up running that for a year and a half and had no customers because we didn't know what we were doing.
05:39We then started going through the process of networking or learning what networking was in like 2012. And that led us to getting into an accelerator in Baltimore. And then we followed that up and we went to San Francisco and went to the New Me Accelerator, which was the first accelerator for underrepresented founders. And that was like our introduction to Silicon Valley. And that was very eye-opening. We learned a lot, we built the network and then we also realized like a bunch of VC’s had already made bets in the space. It was really crowded and we needed to figure out how to differentiate ourselves. And so, we ended up creating a technology, allow people to gift their friends anything from the iTunes store. But the way we would do it is, your friend would get a text message or an email with the link, then when they clicked it, it would just download. And at the time nobody had ever seen interaction like that, and so we pivoted the company to just doing that. And we started selling that to businesses that did loyalties and rewards and stuff like that. Again, we went from being like a B2C company selling directly to consumers, to a B2B company, selling directly to businesses, not knowing what we were doing and trying to figure it out as we go.
06:55 Guest - Mac Conwell: Yeah, like everybody does. And so, that's how we ended up running that company for four and a half years and eventually sold the IP off to a division of one of our clients who was a Fortune 100 company. And so, that was my first foray in the startup world.
07:12Host - Monique Mills: It is interesting because I always share with people like the different types of exits when you exit a company, because people were like, "What do you mean exit?" Because some people are like, "Oh, you know, I can run this company forever, and my kids can take it on." And you know, in our world we call that a lifestyle business. Somebody wants an exit, so there could be a liquidation event. So, my question is, was it a... we talk about three exits-- a new car exit, a new house exit, or a new life exit?
07:44 Host - Monique Mills: That's one of the things that I talk with founders about too, because you know, there's experience you can get as a startup founder that you are not going to get doing anything else, like, you just aren't. And you can't get that in college, you can't get that anywhere, but just understand that not everybody gets a new life exit, actually very, very few people. Yeah, your journey is definitely going to inspire many folks that are listening. So, shout out to you for sharing all of that. One thing that you mentioned, and I'm so glad you did, was luck. You were like, "Well, I got lucky”, you know, when you were talking earlier about some of the early starts in your career. Do you believe, and I'm just telling you I'm biased, I believe. Do you believe luck plays a part in startups success?
08:30Guest - Mac Conwell: It plays a huge part; luck and timing. Luck and timing are gigantic. And I'll give an example, right? So, at the State of Maryland, we invested in this company called Clear Mask. It's a company that's making clear surgical mask. For year a year or so they've been trying to get off the ground and they were having a hard time because at the time the idea of a clear surgical mask was actually more of a luxury than a need. But one of the founders of the company is a woman who is deaf, and the company is born off her experience of getting surgery and not being able to read her doctor's lips because they have mask on. And she started freaking out and they just put her under.
09:14Guest - Mac Conwell: And that preceded them to want to build this, but because it was a clear mask, as a plastic mask, it was more expensive than your traditional surgical mask, and so, you know they had been struggling. And we decided like, hey, this is something that needs to exist. There's value here. That's January, February timeframe of 2020.
09:40Host - Monique Mills: Oh my goodness. And you didn't even know about the pandemic yet?
09:44 Guest - Mac Conwell: No. Like, something's happening, but we don't know what's really happening. Come March, they're in the middle of getting FDA clearance and they kind of got accelerated because they got multiple million dollar orders from all over the globe because everybody's just looking for surgical masks at that point. And so like, that was all timing and luck. So like, you know, that's how this stuff works.
10:09Host - Monique Mills: It is. In order to catch that wave, you have to be in it, right. Some people are on the sidelines, like just waiting, you know? But by the time you find out about it, somebody else has already kind of captured the opportunity because they've already been working on it for five years. So, I'm incredibly excited for that company. And having deaf friends as well, I bring that topic up and actually it makes some people kind of be like, "Oh, never thought about that." You know, about why we transcribe our episodes and I'm like, "Well, some people want to read it because it's quicker." But having been a person where part of my university was NTID - National Technical Institute for the Deaf, I have deaf friends, and so that's just kind of second nature for me to consider that population of people.
11:01And so, I'm doing a podcast, I know that they can't hear it, but they can read it. And you know, so that's just something that I automatically do because I have diversified my life experiences and the people I associate with. So, I say all that to say, let's talk about diversity.
11:21 Host - Monique Mills: All right, I know you have some things to say, but it's important. I just took it back to even just the deaf population and considering them in things and that right there alone has gotten you a win in the startup space of investing. How important do you think diversity is?
11:41 Guest - Mac Conwell: I think diversity is critically important, but I want people to understand what it is when we talk about diversity. Very often people use the word diversity to talk about their own affinity group. Diversion does not mean black and brown. Diversity does not mean women. Diversity does not mean disabled. Diversity does not being LGBTQ. Diversity does not mean native. Diversity does not mean immigrants. Diversity means everybody. So when you start talking about diversity, please be talking about everybody. If you're not talking about everybody, then be clear about who you are talking about, and that's okay. Don't try to use this word diversity as a catch all when really you're just talking about black and brown people, or you're just talking about women because diversity is really important. And all those other issues are important too, but let's not overlap them all.
12:33 Host - Monique Mills: Yes. That's a very, very good point because one of the terms thrown around a lot, especially we're going to get to you being in a venture capital world now; the phrase used a lot is diverse founders. And when they say that, they really mean black and brown, right. And really, a lot of times, most people mean really just black. You know, they don't even think LatinX community or you know, others, it's just that's the term they use for black founders. So, being very clear about who you mean when you throw out diversity, that's such a poignant point that I don't want anybody to miss. Okay, so now let's talk about how this plays a part in what you're doing with your venture capital firm now.
13:21Guest - Mac Conwell: Well, I'll take a step back and I'll walk forward, just so everybody understands the process, right? So after my two companies, I worked at a marketing firm for a year before I found my way to the investment arm of the State of Maryland, the Maryland Technology Development Corporation. While I was there, I started doing seed investments, but when I was there; they were struggling to invest in black-led startups. And one of the things they were looking to solve for is this idea of black-led companies say they like access to friends and family capital. I took that knowledge and started a pre-seed fund for them where the pilot year was just for a blacklist startups. And then we eventually opened up to women in all minority groups. So, I ran that for two and a half years before I went to go start my own fund. So, that is the lens of which I have from the investing world, investing really early and investing for diversity. But when I started my own fund, we do not have a diversity mandate within rare breed because diversity means everybody. Now, is my portfolio going to probably over-index on women in black and brown people? Probably, but a lot of that has more to do with my network and where I go to look for founders.
14:36 Host - Monique Mills: Again, it's the same thing with, you know, non-black founder - with white founders, it's the same, right? So they have access to family, friends, and all of that because that's their network.
14:46 Guest - Mac Conwell: Exactly. And so, like even when I was working at the State of Maryland, they were like, "This is amazing. We did this for black people. You know, now let's just make sure we can do this for white people too." And I was like, "That's awesome. I'm probably not the best person to do that." Like, I can do that, but when I started the fun ended, the pilot year, it was really easy for me to reach out to black founders in the State of Maryland, because I was one. I knew where they were. I knew where they hung out, like I knew what university they went to, I knew what meet ups they did. And when you have a diverse team, you're going to lean on your network to an extent to find companies from an investment standpoint. And so, this is why it's really important to have a diverse team, and diverse team does not just mean gender and ethnicity. It also means age as well.
15:30Guest - Mac Conwell: So yeah, diversity is important.
15:33 Host - Monique Mills: So right now, you know, you mentioned a few things about the family that I call FF&F - friends, family, and fools, that round. And it's really across all ethnicities you know, Caucasian, black, white, whatever. It really comes down to your socio economic status. If you have access to a network of people who have money to invest in your business, or who has the... not even just having the money, but the risk tolerance, right? So, is that something that your venture firm can bring some balance to? Are you willing to invest in those founders that don't have access to that early round, but let's, say instead have customer traction?
16:22Guest - Mac Conwell: I hope so. I mean, that's the goal to invest in those founders. And not every founder we invest in is going to fit that profile, but I hope that there's enough of them that we do invest in that will lead you more investments in their communities going forward. The way this world works is every time a company does well, it has an exit. It creates several new millionaires. It's not just the CEOs, but also like their first call it 50 to 150 employees are all going to become millionaires. That's how this works. And if the entrepreneurs we invest in hire people that are from their communities or look like them, then that's going to create a new group of millionaires that will hopefully become angel investors, and VCs and mentors, and advisors in communities that don't have that now; that's the hope.
17:13 Host - Monique Mills: So, you know, right now for your firm, what's your thesis and what kind of companies are an ideal for your portfolio?
17:23Guest - Mac Conwell: So our thesis is, we need to invest primarily outside the major tech companies, outside of Silicon Valley, New York and Massachusetts. We invest at pre-seed and seed, so our sweet spot is companies who are raising with a valuation of less than 10 million. Will go higher for the right companies, but valuations at 10 million or lesser is like kind of our sweet spot. And we're industry agnostic; we don't do life sciences, but we'll do just about anything else. Well, we care about two things. One, if you're a software company; we'd like to see a clearly repeatable or unique customer acquisition strategy. You don't have to have a lot of customers, but you need to know how you get to your customers. And we like physical products, typically in consumer markets to have lacked innovation for 10 or more years, and really get your going act there can support a billion dollar industry; that's all I need. And if you're catering to those three pillars, then we can probably figure out a way to get comfortable making the investment, and that's the thought process I use so that I'm never the investor that misses out in the next specs. Like, just because I don't understand the industry, doesn't mean it's not a good industry to invest in.
18:26Host - Monique Mills: You're very good at explaining things to people on Twitter, because a lot of the venture capital world is kind of like, "No, not a fit," you know, and that's the end of the conversation. And so, you tend to take time to explain to people why they're best fit for certain things or not fit for certain things. So, when it comes down to founders that you invest in, what is your average check size? And also, what kind of traction, if any, do you expect them to have before you'll invest?
18:57 Guest - Mac Conwell: So our target check size is 250, our average to date is closer to like 150, but that just has to do with dynamics of us still in the process of raising our fund. The traction thing is difficult because in limited cases, we will do pre-product or pre-revenue, but usually, we want to see traction. And there's two things to do with that. One is, when founders are pitching investors, they're not just pitching against the other competitors in their space. They're also pitching against all the other founders I'm going to see over a certain time period. So in the given quarter, I can see on average 500 companies, sometimes more, sometimes less. If I incorporate my team, all together we'll see somewhere between 700, 800 companies every quarter. Of that, we'll invest in like zero-four. And so, when you say you'll come to me and you use like, "Yo Mac, I got a track and I'm doing this." I'm like, "That's awesome." I got this other company over here that has similar traction in a larger market, or has more traction in a larger market. Well, now, even though you have traction, that's worthy of you getting funded. If I'm just looking at the different, you know, companies I'm currently looking at the moment, you may not be the best investment opportunity; that's number one.
20:20Number two is, and we see this with underrepresented founders very often, especially with black founders where they'll get upset, where they're like, "Look, I don't have any money to get started, you know, but I've done a little bit and I have some traction. This white guy from Stanford just got 5 million to do the same thing, but I've already done more than him. Why can't I get funding now too?" The problem with that argument is not comparing apples to apples, because what you don't know is the backstory to why that white guy from Stanford got funded. And typically nine times out of 10, it has nothing to do with the business, and it has everything to do with his network. So if you don't have the network, all you have is your business, everything being equal, his business isn't worthy of getting funded either. He just had a network of people that had enough disposable income that they were willing to just give him money.
21:12Host - Monique Mills: Exactly, they have a higher tolerance.
21:14Guest - Mac Conwell: If you don't have that, then you're playing a different game, so you cannot compare yourself to that, right?
21:21Host - Monique Mills: Yeah, you're right. You're right Mac. I think you need to have that conversation more often. You got to keep saying it over and over again, because I don't think every... don't get me wrong. I think that there are disparities in funding, definitely because of biases, but I don't think every decision or every light decision not to invest is based on race. I don't. I don't think they'll say, "Oh, that's a black person; I'm not investing in them." Like, I don't think that is always the case. I don't know how often it is, but I think we need to have more conversations about how venture capital actually works like what you do on Twitter.
21:56Guest - Mac Conwell: I mean, a hundred percent. I'll tell founders, like I had a founder who met with me and when he got done talking, I told me he was too early. And I explained to him, you know, from a VC standpoint why he was too early. And he stopped, he's like, "Yo Mac, I've talked to like 50 people. You're the first one who explained it to me what being too early meant. I just thought everybody was racist." I'm like, "No, they're not racist, your company's just not ready for it." But that can be a hard conversation sometimes, and a lot of VCs don't want to be honest because they're afraid they're going to piss somebody off. My whole thing is like, when you talk to me, I need to tell you this information because if I don't, you're going to start creating your own thoughts about the industry that a lot of times can be really wrong and it doesn't help you grow. Like, if you'll know what being too early means, then what are you going to do going forward? You're just going to think everybody's racist, nobody wants to back me; this is why VC didn't work for us. It's like, no, do more to build your company.
22:52 Host - Monique Mills: Yes. I really, really hope the audience listens to this. That that's going to be audio gram by the way. It's very, very important to get that point across. Mac, before we wrap up here, you and I have a difference of opinion on something. And if you remember, we kind of had a little back and forth, just a little bit, just a little bit, on Twitter about having 50/50 split with co-founders. I wrote that I don't believe in that, but you was like, "No, that's the way you should do it." So, tell me your reasons why you think that's the way it should be done.
23:31Guest - Mac Conwell: One, all these conversations around equity and everything should happen very early on. Have the hard conversations with your co-founder upfront. Two, having everybody give equal equity, just kills a bunch of time and noise and arguments and things that permeate into the company far into the future. Three, I view equity similar to accountability, and I got this from Michael Seibel from Y Combinator, told me this, and it's true. When I got 20% equity and you got 80% equity, but you breathing down my neck because you want me to work harder. I'm looking at you until you do more work with your 80; I'm going to keep doing what I'm doing with my 20.
24:18 Host - Monique Mills: The mindset, oh my gosh.
24:21 Guest - Mac Conwell: But then here's the other thing that I think founders don't get because founders will do this whether they... you know, I've build this company for a year, I just brought on this TTO, I'm not giving them equal equity." Well, here's the thing with that. If you don't have any customers, you ain't raised money, you ain't got no revenue; you don't have a business, you have a hobby, number one. Number two, the most important person in your company fluctuates over time. Because when you first get started, your CTO or whoever's building the product is the most important person in the world because you ain't got nothing until they're done building. The moment they start building and your products' out there, the most important person in the world now is the CEO, because now you got to go out there and get customers and then go get funding.
25:01Once you get funding, the next most important person in the world goes your CTO again, because now they got to build whatever you told the VCs you were going to build for your next thing going forward. Then as time goes on, you raise even more money; the most important person in your company becomes whoever's going to do the hiring because now you've got to go from 10 people to 60 people in the next seven months. There's these ebbs and flows for like who's more important and who's done the most, changes over time, and those changes can lead to resentment. And so, we just have equal equity; that just helps pulling all that stuff out. Now, if you want to negotiate equity and somebody who's willing to take less, hey, every company and every founder story is different, right. I can't tell you one way is better or right compared to the other; I just had my bias when it comes to that.
25:46 Host - Monique Mills: I feel like your thoughts on that does work. I mean, it makes sense. It should work that way in a perfect scenario. But from my experience, I see more imperfection than perfection when it comes to just dealing with people because we're all imperfect. And when it came down to... and this is what I had put in the tweet to you, I'm like, when it came down to decision-making when everything was 50/50, or you know, 33/33/33, you don't have any one to kind of cast that final vote. And it has led to one of the founders, "You know what, I'm out of here." And they leave, they want it to go their way, and they feel as if it should. You know, I own just as much of the company as you. I've only seen it come into issue when it came down to decision-making because everyone felt like they had equal rights to things to go the way that they thought it should go even when it varied amongst the team.
26:49 Guest - Mac Conwell: The problem with that is that ain't got nothing to do with equity; that's everything to do with team construction. Because here's the thing...
26:56 Host - Monique Mills: It does when it comes down to their argument.
26:56Guest - Mac Conwell: See, that's the thing, right? They made the mistake of assuming that equity has anything to do with decision-making. That's why I'm not okay with one founder saying, "Hey, we got co-CEOs." I hate that. Like, no, at the end of the day, one person needs to make the final decision. Who is that? You and your team need to have a hard discussion about that because that's true whether you have equal equity or not. And so, don't use equity as a proxy for throwing your weight around and making decisions because those are the conversations that you need to have in early days. Like, "Hey, well, we can't agree on something who makes the final say?" Because the whole figuring out by committee and all that, doesn't work well.
27:34 Guest - Mac Conwell: And separate that from equity, that's all.
27:37Host - Monique Mills: Yeah, it should be a separate conversation. But again, you are on Twitter, and just in your daily life, including like right now on this podcast, telling people how it should work. And I think a lot of people are in the startup world who have no idea how it really works. And so, a lot of things can seem unfair, and that's not really what's happening, right? It's like, well, this is the way the business works and they're learning as they go along, so they get a lot of bumps and bruises along the way. I know several companies that, I can say more than not, that by the time the company is in year five, there's a lawsuit with one of the founders against the company just because of things like this. And so, you know, it's tough. I think everybody needs to start listening to you a little bit more because you explain things in a way that's able to be consumed and understood.
28:30Host - Monique Mills: I mean, you know, you get your props on Twitter, which is awesome. So for folks who aren't following you right now on Twitter, how can they find you?
28:37Guest - Mac Conwell: You can find me on Twitter at Mac Conwell. I'm pretty active. I'm always tweeting, so hopefully you can get some more information from me and follow me through this journey.
28:52Host - Monique Mills: Thanks for sharing your story and some drops of wisdom with our audience. Thank you.
28:59Guest - Mac Conwell: Thank you. I appreciate it.
29:04 Host - Monique Mills: Well, that's it. So what did you think Mac was so transparent with us in this episode. And he even talked about this startup exit, which I think is really important. Understanding the concept in the simple terms of a new car, new house or new life exit has been helpful in the work that I do with other startup founders. Being an entrepreneur is tough, and not everyone is going to be the next Facebook, but you can certainly still be successful. I really like how Mac broke down what he looks for in companies and made it very clear how he sees diversity. He said it includes not all ethnicities, but also all ages. And we don't talk enough about age-ism in the startup world, but it indeed exists just like in corporate America, and I'm glad that he brought it up. Perhaps that's something I'll address in a future episode. You know, all of these isms, I sure hope these types of discussions we're having are getting us closer to where we want to be as humans. I hope that you learn something from this episode that will inspire you or even clarified something for you about the startup life or venture capital. Mac is very active on Twitter, educating founders, and he'll even tweet you back if you ask any questions. So, feel free to give him a follow.
Thank you for listening to the Unpolished MBA Podcast. To hear more episodes or to request, to become a guest, please visit unpolishedmba.com.