Cliff Holekamp (Edition # 1)

Cliff Holekamp (Co-founder and General Partner at Cultivation Capital)

** Please note that when this interview was released, The Takeoff was called Casting Ventures. We have since rebranded to The Takeoff. **

A few weeks ago, The Takeoff sat down with Cliff Holekamp (Co-founder and General Partner at Cultivation Capital) to learn more about Cliff’s background and Cultivation Capital. Cliff also offered some incredible advice for students and aspiring entrepreneurs.

We are excited to release the interview with Cliff as The Takeoff: Edition # 1.

Michael: To start off, it’d be wonderful to get a high-level overview of Cultivation Capital and how you came to be a Co-founder and General Partner at the firm.

Cliff: Absolutely! Cultivation Capital is an early-stage venture capital firm. We manage thirteen different funds and focus on three different verticals. We operate in software, life sciences, and health tech. And, we also operate in Ag Tech under the brand Yield Lab. I work particularly in our software funds.

Cultivation Capital started in 2012. It started basically just with a small group of us getting together and recognizing that there wasn’t a single technology investment firm in St. Louis. St. Louis had a couple of highly regarded Life Sciences firms, but ,believe it or not, in 2012, there weren’t any software venture capital firms located in our city. We recognized that if our city and region was going to keep up, have a future, and care about economic development, we have to foster an entrepreneurship and innovation ecosystem within the city. And, capital is a critical component of that. 

We saw both a financial opportunity to be the first to market and an opportunity to have an impact in our local community that was important for the economic development of St. Louis.

Michael: How do you think being located in the Midwest and in St. Louis, in particular, has played a role in (1) Cultivation’s strategy and (2) in some of the investments that the firm has made?

Cliff: Being in the Midwest is part of our DNA and who we are. We definitely look at investments differently being located in the Midwest, specifically. Many of our funds have a philosophy of looking for deals in undercapitalized markets, so we tend to avoid the Bay Area, New York, and Boston, which are all great markets, but they are also great markets with lots of local investors. We really focus on the rest of the country — on those regions that don’t have such an abundance of capital, and where we can get an advantage in getting to know the entrepreneurs better than anybody else and recognizing opportunity before anyone else recognizes it because we are of that community. So, being of St. Louis, and being of the Midwest, is a critical part of us being able to network to great entrepreneurs, identify great entrepreneurs, and relate to great entrepreneurs in our region and beyond.

Michael: Do you feel that venture capital firms from the coasts, in cities like Boston, New York, and San Francisco, sometimes overlook Midwest companies and founders? And, do you think that coastal VC firms sometimes don’t actually spend as much time looking at companies in the Midwest as they should be?

Cliff: I’m not going to answer whether they should. But, what I would say is that people know their own market better than any other market. And, geography does matter. The place where you live and the places where you have your personal connections and networks are going to contribute to your experiences and inputs. And, I’m not sure there is anything wrong with that. I think that it is important to know your market, to be of your market, and to live in your market. So, I’m not sure if they should be looking more outside of their markets, but I would say, yes, they sometimes don’t operate outside of their markets as much as some entrepreneurs might like. That’s simply why we need to make sure that there is local capital. There’s actually a really great research study sponsored by Kauffman Foundation from 2012. The study came to the conclusion that 80% of angel stage investments are made within 20 miles of the angel’s house. There’s a lot of reasons for that, but what we do see is that early-stage capital is local and as a company matures, capital becomes more and more regional, national, and international. And, it makes sense. As the check sizes get larger and the company becomes more mature, it makes more sense for somebody to get on an airplane to go check it out. So, I think it’s perfectly logical that early-stage capital is more local and that as companies mature, they grow international markets.

From an economic development standpoint, I think it’s very important for any region to have local capital at the early stages. Once a company gets to the A round and past, it doesn’t matter as much. The money will look for great deals everywhere.

Michael: I’m sure that this next question is going to be super tough to answer, but: If you have to narrow it down, what would you say is your favorite part about being a venture capitalist?

Cliff: I would say my favorite part is working with our existing portfolio companies — helping our entrepreneurs as they’re growing and dealing with growing pains and trying to figure out problems and being in a situation where I dealt with that problem before, or worked with another company who dealt with that problem before. Being able to help and be a part of that solution is really gratifying. It’s so exciting to be part of the story of all of these individual entrepreneurs. It’s rewarding, it’s exciting, and it’s a lot of fun to be able to make a difference and help.

Michael: Off of that, do you have any previous operating experience?

Cliff: Yes. I actually started a chain of podiatry centers called Foot Healers, which sounds completely wacky because my background before that was working for IBM. I went to get my MBA at the Olin Business School at Washington University and while I was here, with the help of my stepfather, came up with an idea for a new type of medical clinic that has more of a retail look and feel. We ended up calling it Foot Healers. Foot Healers is a retail podiatric clinic that is combined with a foot product store and is located in shopping centers around the St. Louis area.

Foot Healers was a total departure from my prior world in tech, but it gave me a little bit of a side view into healthcare. I had a good experience with Foot Healers, managed to open up five offices in a little over four years, and ended up selling to a local private equity syndicate in 2007.

Michael: Wow, that is really amazing and huge props to you for being able to start your own company and to now be able to use many of the things, skills, and tools that you learned there to now help other entrepreneurs at Cultivation’s portfolio companies. Now, for the last question on the topic of venture, what was Cultivation Capital’s last publicly announced investment and what made you and the team so interested in getting involved? (Please note that we recorded this interview in October and that Cultivation Capital has made several investments since then)

Cliff: The last publicly announced investment was Balto Software, which is a great one to bring up because Balto was co-founded by Marc Bernstein, who is a WashU graduate. Marc is actually one of my former students from when I was an entrepreneurship professor at WashU. It was pretty darn rewarding to be able to invest in one of my former students. Marc co-founded Balto with Chris Kontes, who is a Venture for America graduate who was placed in St. Louis. The two of them met a TopOPPS, which is another one of our portfolio companies, so Balto just has crazy WashU and St. Louis DNA.

Marc and Chris got together and wanted to solve problems related to sales. They have developed a software that has artificial intelligence that listens in to the phone calls being had by inside sales professionals. The software gives sales professional real-time advice or prompts about what exactly they should or should not say as they are proceeding through the call. It does real-time coaching. Traditionally, a boss might listen in or record calls to listen to later and say: “Hey, that last call you were on, you really messed that one up. Here’s what you should have said, here’s waht you could say, or next time do this…” And of course, that sale is already lost and the bosses can only listen to a small percentage of total calls.

Balto’s software listens to every call and gives real-time help to help steer that sales rep through that call and to a more successful outcome. I’ll be honest, when Marc and Chris first came up with the idea I thought it sounded amazing. It sounded like science fiction, and I didn’t know if they could actually pull it off. I certainly had faith in the team and figured that if anyone could do it, they could, but it sounded like quite a challenge. And, you know what? They really did! The product is amazing and is being used by a large number of top-name customers. We were incredibly excited and impressed with their traction over a fairly short period of time, really over just a couple of years. It was quite exciting for us to invest in their last round.

Michael: That’s really amazing. It’s great to see the St. Louis startup ecosystem doing so well and to watch young WashU alumni starting such amazing companies. I think the discussion of Balto and Marc ties nicely with what I was planning to ask you next: I know you recently retired from your position here at WashU, but could you just discuss a little bit about what you did during your time here at WashU?

Cliff: Absolutely! As mentioned earlier, I went to WashU for my MBA, so my experience with WashU really goes back to when I was an MBA student between 1999 and 2001. I studied entrepreneurship and certainly had a great experience, but, broken down, there were really only two entrepreneurship courses: Introduction to Entrepreneurship and the Hatchery.

After I sold my company in 2008, some of the first people I was excited to tell about the sale were my old professors. When I told one of them, Bart Hamilton (an economics professor at WashU), he said, “Hey, did you ever think since you have a little free time, maybe you’d want to do some teaching for us?” And, I thought teaching sounded pretty neat. It was something I never really thought about before, but I said, “Sure, I’ll give that a shot.” 

Next thing you know, I started with one class as an adjunct professor and one semester later they asked if I would come on full-time. Over the course of 11 and a half years at Olin, I managed to have the opportunity to really build up the entrepreneurship program into what it is today. I helped start 15 new courses on top of the two I started with. I was instrumental in founding the social entrepreneurship program at WashU. I was also instrumental in starting a summer fellowship program and starting a seed fund. During my time at WashU, we really tried to roll something new out every single semester. I suppose they left a little bit of a fox in the henhouse letting an entrepreneur get into an academic organization because I really just started making things and building things.

Luckily, I found a lot of support and found that in an academic environment — if someone has initiative and is willing to put in the work to start something, they’ll find support and find allies to help them. Fortunately, Olin was really fertile ground, and I was able to do a lot of building and collaborating during my time at the university.

Also during this period, I think one of a few other big accomplishments was helping to recruit and hire to II Luscri, who is the current Director of Skandalaris Center. When I started, he was actually a coordinator at the Center, one of the middle-level employees. Being able to work with him and help mentor him to the point where he’s now a Director was really, really exciting.

Of course, working with so many students who I got to know when they were 18-year-old kids and now having some of them as my co-workers at Cultivation Capital and seeing some of them receive multimillion-dollar investments from our firm has been really rewarding. To be here [at WashU] long enough to see the evolution in peoples’ lives and careers and to be a part of their stories. has already been incredibly rewarding.

Michael: That’s incredible, Cliff. As a student and someone who is interested in the startup world, I personally have to say thank you for everything that you have done for the entrepreneurial scene here at WashU. In terms of II and the Skandalaris Center, I actually run an entrepreneurship club on campus and II and the Skandalaris Center have been incredible resources for the club thus far. 

I know you talked about many things from your time here at WashU that have been rewarding: Can you pinpoint it down to maybe one or two of the most rewarding aspects of going back to academia and becoming a professor so that you could help inspire the next generation of students who may be interested in starting a company or going to work for a startup?

Cliff: Well, a couple of my former students have had big successes. JD Ross, for example, co-founded Opendoor. Jeremy Friedman and his team over at Schoology have had incredible traction in the area of classroom management (Since the interview, Schoology was acquired by PowerSchool). Chuck Cohn, who was a senior when I first started at WashU, is another great example. Chuck is the founder of Varsity Tutors, which has been incredibly successful. So, I’ve definitely seen some of the generation from when I was just starting at WashU really come into their own and become major successes. I know I will continue to see that for the next ten years as the different generations of students I’ve had are going to grow into their own and get that traction and big success.

I think being a part of the story of these incredibly successful young people, but also in hiring them, has been incredibly rewarding. Several of our employees at Cultivation I first met because they were my students. To later get to become their colleague is really incredible. Elise Miller Hoffman, who is the Principal for our Life Sciences fund, was my MBA student. Matt Plummer, who is the principal for Yield Lab, and Joel Brightfield, one of the Principles and Director over at SixThirty, were also my students. I met all three of those people from WashU. Getting to start off with somebody as a teacher-student relationship and to have that evolve into having that person be my colleague and partner is really special.

Michael: What advice would you give to a student or recent grad who is interested in working in tech but doesn’t actually have a technological background? Do you have any advice for them? Would you recommend going and trying to learn how to code on their own? Or, do you think that having backgrounds in other areas can still leverage a lot of opportunities in the tech space?

Cliff: It’s really hard to give blanket advice, and I think people should always be wary of blanket advice because really, every single person has an individual career path and has to make strategic decisions on an individual basis depending on their own opportunities. So, I’ll take that question in a couple of different ways with a big — it depends. 

I’ll start with the question about someone who doesn’t have technical skills but wants to become a technology leader, say a CEO or a founder, but their background is in business, liberal arts, or something else. It is a big decision to decide whether to invest the time and to go back and learn the technical skills, or not. I think it really depends on where they are in their educational journey, what time they have, and how they are going to use the time they have. As an overall thesis, would I say, “Would it be wise to learn how to code?” The answer is absolutely. It’s one of the best things you can possibly do. But, if somebody is a senior in college and said, “Should I take another year off to go to a coding program, or should I start my startup right now?” — that’s a different equation. There’s always a trade-off of the time and the investment of that time versus doing something else. In many cases, it might make more sense to partner with somebody who has complementary skills. 

I will say to those of your listeners who are business students: The number one skill that you are going to need is not coding. It’s sales. And, that’s something that not everybody wants to hear. But, the fact is sales is at the core of everything in business — it’s at the core of leadership. Ultimately, any business leader is going to have to be the chief salesperson for their product. They need to be able to understand consumer needs and help develop a product that meets the needs of the consumer. And, that is called selling. At the core of understanding selling is understanding value and how to position and create what a customer wants in the way that they want it. That is the core skill that a salesperson has. Whether you’re literally selling your product to a potential client, or whether you’re trying to persuade your employees to follow, to do what they need to do to help your company become successful — that is sales. Leadership is sales because leadership is the act of persuading others to follow your vision, and that is a sales process. I think that the one thing that we teach the least, that actually matters the most, is sales.

Sales is not a dirty thing. The image people have of a fast-talking used car salesman, that’s not really sales. The reason why that’s a negative image is because that’s a bad salesperson. The reason they’re talking so fast is because they’re trying to say everything they can possibly think of that might be the one thing that will help you buy that car. That is not what sales is about. Sales is about understanding the need of a consumer or understanding the need of your employer and positioning what you have to offer in a way that meets their needs so that you can both move forward together in a partnership. So, I would say that equally important, or even more important, than understanding coding or some other technical skill set, I would say understanding the nature and the relationship of sales, which is the nature of the relationship of value, which is the nature and relationship of how to work with people.

Michael: What would you say is a good way for students to go and learn more about sales, given that there aren’t so many academic courses out there?

Cliff: You have to go sell something! I’ll take Marc Bernstein at Balto as a perfect example. He’s raised $5 million for a startup, and he’s only a few years out of school. His company is growing at a tremendous rate, at venture capital rates, and he purposely looked for the first job he had out of a college to be the most sales intensive job he could find because he knew he needed those skills to be an entrepreneur. Whether through summer jobs or university activities, you know, anytime you can get your hands dirty and get face-to-face selling something to somebody and really getting comfortable understanding the sales psychology, it’s going to help you be more effective leader.

Michael: Amazing advice. Is there anything else that you’d like to add before we close up today’s episode?

Cliff: About what?

Michael: Really, anything — if you have any other advice, if there’s anything about Cultivation Capital, or if there’s anything about St. Louis in general that you would like to touch on?

Cliff: Well, I would say that there are a lot of ways that people can get involved with entrepreneurship. I’m assuming that most of your audience has some type of interest in entrepreneurship. I would encourage people to realize that being a founder isn’t the only way. There are amazing high-growth companies that are desperate for talent, and talent is actually the number one thing holding back these companies, not money, in most cases. And, the bottleneck is being able to build up their team. 

They need incredible marketing people, especially people who understand digital marketing. They need incredible salespeople. They need product managers. They need customer service people. So, there are a lot of leadership roles for somebody who is passionate about entrepreneurship but maybe doesn’t have that idea, that can help them and certainly prepare them to be a founder in the future. I encourage people to think about multiple ways to get engaged with entrepreneurship besides just being a founder. You might find that they are going to be really rewarding and that there are really high-level leadership opportunities available for people that have high skill.

Michael: Great. Well, thank you so much for all the advice and for letting us learn a little bit more about your background and cultivation capital.

Cliff: Thank you!

Moderator: Michael Spiro (Founder of The Takeoff. Junior at Washington University in St. Louis. Incoming Summer Analyst at JMI Equity)