Andy Cloyd (Edition # 6)
Andy Cloyd (Principal at Cultivation Capital)
(Andy Cloyd, Principal at Cultivation Capital)
We are excited about today’s Edition of The Takeoff. Today’s interview is with Andy Cloyd, Principal at Cultivation Capital. The interview took place via a phone call between Andy and Michael Spiro (Founder at The Takeoff) in early April.
Cultivation Capital is a venture capital firm based in St. Louis, MO. The firm is focused on “investing in technology and life sciences companies whose ideas have the potential to transform the way we live and work.” Since being founded in 2012, the firm has invested in companies such as Gainsight, Planful (formerly Host Analytics), Benson Hill, DealCloud, and Summersalt, among many others.
We hope you enjoy today’s Edition.
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To start, what exactly is Cultivation Capital, and how did you come to join the firm?
Andy: Cultivation Capital is a family of funds that started in 2012 in St. Louis, when a group of local angel investors decided there needed to be some institutional capital to build an early-stage ecosystem around. Today, Cultivation Capital has 13 active investment vehicles, 12+ General Partners, and a staff of 9 in the back office.
The fund initially focused only on software technology but as the firm has expanded, we've launched some other verticals such as Life Sciences, Agricultural Technology - through a brand called The Yield Lab - as well as some early-stage business development programs in FinTech and Cybersecurity through the SixThirty brand.
Personally, I joined the firm in 2017 after joining a program called Venture For America and have spent the last two and a half years on our software team, working on both our earlier-stage seed fund as well as our flagship software fund. On those funds, I handle everything from sourcing and due diligence, all the way through board service, portfolio maintenance, and back of house fund admin as well.
I know you recently made the move from St. Louis out to Los Angeles. What exactly was the thinking behind that, and how has being in LA changed the type of deals that you look at for Cultivation Capital at the seed stage?
Andy: Making the move to LA was really a byproduct of Cultivation’s expanding footprint as we continue to grow and mature as a firm. If you look at our earliest fund, geographically, it was really focused on the St. Louis market, and then maybe a slightly larger bubble to include cities such as Chicago, Indianapolis, and some other markets of the like.
Over the last few years, as we have raised more capital and expanded our check size and thesis, we have started to expand our geographic footprint as well. Initially, this entailed spending more time in out of town markets on day trips, but over time, we realized the importance and value of having boots on the ground in given markets. Thus, the firm has expanded geographically, and we now have folks in Chicago, in Philadelphia, and then me out here on the West Coast in Los Angeles.
As for the thought on LA specifically, it makes sense on a couple of fronts. First, we have portfolio companies up and down the West Coast. We have some exposure in the Bay Area, we have companies in San Diego, and we also have a company in Salt Lake City. As we start to build a presence in markets like these, it becomes important to have someone who is a little more available to be pounding the pavement, being present at the events, and meeting all the stakeholders in those ecosystems; not just potential investment opportunities but other firms, angel investors, and other groups like that.
As you might have seen, the LA tech ecosystem is exploding. With recent wins like Honey and high fliers like Bird, the venture interest and dollars around have been on the rise substantially, but there is still enough white space for new firms to build a name in the market. That being said, due to the sheer size of the LA metro, I would say the market is relatively fragmented, which gives me the opportunity to build relationships and find entrepreneurs and deals around town that might have been overlooked or not yet discovered. We’ve already started to see that play out and currently have a strong pipeline of LA-based opportunities that meet our criteria for investment.
I want to go deeper on one thing that you touched on earlier, which was your experience with Venture For America. So, for some of our subscribers who may not know what Venture For America is, could you just touch super briefly on what exactly VFA is, and then also, how beneficial VFA was in your individual progression as a venture capitalist?
Andy: Absolutely. Venture For America (VFA) is an organization founded by Andrew Yang, who you might have seen as a candidate for the Democratic presidential nomination. VFA’s mission is to create economic opportunity in American cities by mobilizing the next generation of entrepreneurs. VFA is very similar to Teach For America, in that it goes out and recruits either recent college grads or folks that are a year or two into their career and brings them into a cohort under the thesis of growing emerging technology markets across the United States through entrepreneurship.
Most of the individuals involved are looking to join early-stage companies in the effort of gaining the experience that they are going to need to build companies later in their careers. If you look at the markets that VFA operates in, you have St. Louis, Columbus, Cleveland, Detroit, and other similar cities, you’ll see that the organization is focused on exposing fellows to places they may not look at otherwise.
Personally, I found VFA after having spent a year working at a management consulting firm in Philadelphia and realizing that the traditional consulting to MBA route was not for me. In terms of my path into venture, (and potentially life in general) I would say I owe everything to VFA. It was not only my connection to the startup world in general, but also my connection to St. Louis, Cultivation Capital, and the incredible group of friends I’ve made along the way.
When I was a senior at the University of Alabama, if you would have asked me what a Series A was, I maybe could have told you that it was an investment round, but beyond that, I really would have known nothing.
Venture For America really equipped me with the insights and the tools to, one, learn about the industry, and then, two, realize that it might be a great fit for me. Once I decided that venture was a fit for me, I was able to connect with some of the Partners at Cultivation Capital. They were looking for somebody with a little bit of experience, so having worked in the consulting world, I was a good fit.
And, then I just had a feeling that venture is an industry that rewards curiosity and a desire to learn, which was something that I always thought I had and that has really played out over the last few years as I continue to expand my role within Cultivation, having the opportunity to look at companies across the gamut of industries, strategies, business models, etc.
Great! One thing that I'm wondering is, what kind of networking goes on amongst the people participating in the VFA fellowship? Obviously, there are so many brilliant recent grads and young professionals participating in the program in any given year. What type of network is built among all those people?
Andy: I would say that the network is where a lot of the long-standing value of VFA really lies. During the course of the fellowship, you have a group of peers that are going through similar situations to you, whether it be working at a similar company, living in the same city, or going through some of the same problems that anyone might be experiencing early in their career, and that’s invaluable as you’re trying to figure yourself out as a young professional.
And although that’s fantastic in the moment, as you see these people start to go in all different directions, the network can become so much more than that. Not only have I built some of my closest friendships through VFA, but, for me as an investor, I’m getting a front-row seat to hundreds of future entrepreneurs who are building companies I may want to partner with and invest in in the future, or even now.
For example, Balto, here in St. Louis, was actually founded by a Venture For America fellow that moved to St. Louis to work in an early-stage startup, gained some experience, and then ended up founding a company in the same space that he had previously been working in. I was able to build a relationship with the entrepreneur, based on our common background as Venture For America fellows, and that ultimately led to Cultivation Capital investing in their Seed round alongside a fantastic syndicate of investors from across the country.
As you can tell, I’m pretty passionate about the organization. The highlights of my year are the few times we [VFA fellows] all jump on planes and get together in whatever city for whatever reason, whether it be an informal ski trip, which we dubbed SkiFA, or a reunion in Detroit.
Amazing! VFA sounds like an incredible program, and Chris, Marc, and the team over at Balto are building something really amazing. Off of that, I'm curious, what was the most recent publicly announced investment that you were a part of, and what made Cultivation so interested in getting involved?
Andy: The most recent publicly announced deal that I worked closely on was a company called Swell CX. The company is based in Salt Lake City, Utah, and that investment process was pretty typical for Cultivation.
We met the company when they were a little earlier than we're typically looking from a revenue perspective. However, I really liked the team and spent anywhere from three to six months building a relationship with the team, staying up to date on their progress, and watching them really execute on the plan that they had laid out to me. Although it seems simple, getting to see a team do what they said they were going to do is a huge part of getting comfortable and excited about an investment.
Salt Lake City was a new market for us too, so it was a process of not only getting to know the company, but also the market and speaking to some folks that knew the ecosystem a little better than we did and getting comfortable with that as well.
But, what really got us excited, like I mentioned, was the team. It was two entrepreneurs who are extremely scrappy, capital-efficient, and persistent in growing a business month over month; all the things that Cultivation likes to see. We also felt that it was an opportunity for us to come in and add some value because we have some folks in our network that are well versed in product-led growth strategies, which we saw as a huge opportunity for Swell CX, as well as just bringing some more experience around the table building and scaling organizations.
When we initially invested, it was really just two founders and a couple of contractors around the table, and now they’re at a team scaling well beyond 10 and looking to be at 20 or 30 by the end of the year.
Since making that investment, co-founders Zeke Kuch and Drew Sparks have only continued to impress us, and I’m grateful to have the opportunity to partner with such impressive entrepreneurs.
That sounds really great, and it's amazing to see a bit into Cultivation's mindset and how the firm evaluates companies and does due diligence when actually making an investment. I'm wondering, having Cultivation Capital being based predominantly in the Midwest, in St. Louis, and now obviously you are in LA and there are several individuals in other cities too, but how has being a venture capital firm in St. Louis helped Cultivation Capital? And, what are some of the cons of being located in the Midwest versus in one of these bigger cities such as Boston, New York or San Francisco?
Andy: I think being the most active firm in St. Louis allows us to be deeply rooted in a rapidly expanding tech scene and be active in helping grow the ecosystem, which is not only rewarding, but also valuable for the firm. We really get a front-row seat to anything that's being built in St. Louis, based on relationships that we have and investments that we've made, and often times get the first shot at the exciting things being built in town.
Being in St. Louis has also connected us with some of our most important LPs, who obviously make everything possible at Cultivation. And, St. Louis, itself, is a great ecosystem. We have spaces all over town between Cortex, downtown, 39 North, etc., all participating and building the ecosystem in their own way. St. Louis also has a lot of entrepreneurial support organizations, capital, and large corporations that bring a lot of talent to the town. All of that is very critical to growing a venture capital organization and, obviously, the early-stage ecosystem as a whole.
I think the main challenges revolve around the smaller number of tech companies that have been built and sold in the ecosystem. Big exits provide both capital and talent that often stick around and provide critical capital and experienced talent to the earlier stage businesses being built. Indianapolis and the Exact Target acquisition is a tremendous example of that process playing out. I see tons of businesses funded, led, and staffed by Exact Target alumni which has been a game-changer for that market.
Really love learning your perspective there. The next few questions are more of advice-related questions for our subscribers. So, the first question here is, what advice would you give to a current student who is interested in starting a company, either while still in school or post-graduation?
Andy: I think one of the most important things is really starting with why. Building a company is extremely hard to do at any point in your life. There are going to be a lot of challenges along the way. It's going to be an extremely testing experience, and I think really knowing why you want to be doing it is the thing that will give you the determination and strength you need when the going gets tough.
Once you decide, “Hey, I want to move forward with this,” you need to talk to as many people or stakeholders as you possibly can. Experienced folks are typically willing to give feedback, thoughts, and time to students or people early in their career because they really feel like they're in that give-back part of their career; you can harvest years of knowledge and learn quickly using people smarter and wiser than yourself.
In that process, you are going to get a lot of advice, and some of it is going to be conflicting. None of it is gospel, but just having as many conversations as you can to understand all parts of whatever ecosystem or market you're looking to build a company in is super important: customers, other folks at different places in the value chain, investors, etc. Understanding how people are going to perceive your business is going to be really important because you don't have the career experience to truly understand the context of what you are building
The last piece of advice I would give here is really getting smart people around you to help you with it. There are going to be skills that you don't have or perspectives that you don't have, and finding people who are as bought in as you and are ready to explore and go down this route with you is going to be really important.
I really love the advice there. And, now I'm wondering, what advice would you give to a student who may be interested in getting into venture capital? You obviously went the consulting route into venture capital. A lot of other people do banking or work at a startup in an operating role prior to transitioning over to venture. Do you have any advice for people who are in the boat of wanting to work in venture?
Andy: One thing that is really interesting about venture is that there is certainly not a standard, cookie-cutter path into the industry. A lot of people have their own stories about what got them to where they are in the industry, and I think that is part of what makes it interesting. There is no recipe for how to get into the world of venture.
I think it's really about understanding why you want to be working in the industry and then figuring out how you are going to get the tools that you need to put yourself in a position to succeed.
At the early stages, just making sure that you understand what the industry is and some of the skills that you are going to need to be a venture capitalist are table stakes. To check that box, you can learn a lot by reading a book like Venture Deals by Brad Feld or many of the other online resources that are out there.
However, from there it is really about doing what you can to get in the middle of everything that is going on in the venture world to the extent that you can; things like starting to build a network of founders or investors and adding value to firms or companies along the way, whether it be by sourcing deals, sourcing talent, you name it.
There are a lot of ways that you, as a young person, can show tenacity and truly create value, particularly to a venture investor that oftentimes probably wishes they had the time to do certain things but don't based on all the myriad of things pulling them in different directions, which is just part of the job.
There are also less traditional ways like Venture For America. There are a couple of venture funds that typically hire every year from the VFA applicant base. That’s another, less typical way into the industry but that’s the path I took, and I feel extremely fortunate to have stumbled into venture via that avenue.
As for first jobs, lots of folks in the industry went the traditional banking or consulting route, and I think there is definitely some value in those experiences early in your career.
These last few questions are on more of a personal level, so hopefully they aren't too uncomfortable to answer. The first question here is, and you just mentioned Brad Feld's Venture Deals, which I actually think I read after you recommended it to me, but do you have any favorite books or podcasts that you would recommend to our subscribers?
Andy: Things like books and podcasts have been critical for me at every stage of my life, and my career trajectory is no exception. There have been different things that have been valuable at different stages for me. When I look back, I think about books like The Big Short, which I read when I was in high school, that really introduced me to markets and led me to pick up a business degree alongside my engineering degree. During college it was market-based podcasts like Motley Fool that got me thinking about business models (my first introduction to “cloud” and SaaS”, funny enough). Then as I made the move into VFA, I went all-in on all things Tech and Venture.
There is a podcast that I've mentioned to you before, The Full Ratchet by Nick Moran, that I think is great, too. Early on in the show’s lifetime, it was really just a how-to on VC. It walks you through everything from sourcing to term sheets to diligence and they are also constantly interviewing folks that have been in the industry for a really long time.
I still remember I was driving from New Orleans to Nashville in a U-Haul, barely knowing what Venture Capital even was, and I listened to pretty much every episode that had been released, which taught me everything I knew about venture up to that point in time.
There are also resources like The Twenty Minute VC with Harry Stebbings. Harry is somebody who is significantly younger than me and who has already accomplished so much in the industry and will be around for a long time. Listening to folks like that, you're the beneficiary of all the brain trust that they're assembling to these platforms via podcasts and blogs and things like that.
I also try to make sure I give myself the opportunity to read a fair amount of fiction, as I think an author that can really connect with the human condition and make you feel is truly a superpower that I wish I had.
Awesome! Just one last question here. I'm curious, how do you stay physically and mentally fit given the high demands of your job? Do you have a workout routine? Do you meditate or anything like that?
Andy: Staying physically fit is one of the most important parts of my day to day life. I typically start every day with a workout, maybe with a little bit of yoga, but then usually get to the gym, shortly after it opens, where I take in a lot of my information via podcasts, etc.
Also, I'm fortunate enough to live in a place as conducive to outdoor activities as Southern California. I recently started getting serious about running. I am training for some races and working on a more disciplined, dedicated running program right now. Obviously, you know, we're here in the middle of the COVID-19 pandemic so everything has shifted, but I think making sure that I continue to prioritize physical activity is acutely important to me, now more than ever.
Then, obviously, the mental side is important as well. For me, sometimes that takes the shape of meditating but really the way that I keep up with my mental health is by leveraging all the amazing people that I have in my life, whether it be friends, mentors, or peers within the venture industry.
Just constantly having conversations, taking the time every single day to call someone and hear about what they're up to, telling them a little bit about what I'm up to, and talking through the challenges is really helpful for me. Through this whole pandemic, I think one of the silver linings is having a little bit more time to connect with folks we might not talk to as often due to the craziness of our day to day lives.
Well, it was an absolute blast speaking with you. Thank you so much for doing an interview for The Takeoff!
Andy: Thanks so much, Michael. I really appreciate the work you're doing here, and I think this will really help out a lot of folks that are in those early stages of exploring a career in startups or investing or anything along those lines. I'm always happy to support in any way that I can, and anyone can feel free to reach out to me at acloyd@cultivationcapital.com.
** Please note that our interviews may be edited for length, content, and clarity **
Moderator: Michael Spiro (Founder at The Takeoff. Junior at Washington University in St. Louis. Incoming Summer Analyst at JMI Equity)
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