For the Past 30 years Bob Karr has been both an active angel investor as well as in business development founding and growing some of the most powerful networking groups in Silicon Valley. His current company, LinkSV is an online information service providing curated, detailed information about the senior team, board members, key partners, customers, angel, institutional and VC funding on companies in Silicon Valley.
This episode we talk about:
- How can parents encourage their children to become entrepreneurs?
- What is LinkSV?
- How to create a network that leads to being able to access anyone?
- What advice do you have for people on having fun in life?
I would like to thank Brett Sharenow who made the introduction allowing the interview to happen.
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Pre intro (00:00)
You’re listening to the Silicon Valley podcast.
On this week’s episode, we sit down with Bob Karr for part two of our interview with him, who is for the past 30 years been an active angel investor, as well as in business development. Founded and grown some of those powerful networking groups in Silicon Valley. His current company, LinkSV, is an online information service providing curated, detailed information on companies here in Silicon Valley. On this week’s episode, we continue where we left off and we talked about what is LinkSV? How could one create a network that leads to being able to access anyone and advice for people on how to have fun and enjoy life? This is much more on today’s episode. And also, we encourage everyone to read a review on iTunes and any other podcast platform to help encourage and share this information. All right. Now let’s start the show. Enjoy.
Intro 00:58
Welcome to the Silicon Valley podcast with your host Shawn Flynn, who interviews famous entrepreneurs, venture capitalists and leaders in tech. Learn their secrets and see Tomorrow’s World Today.
Shawn Flynn 01:14
These companies that are able to attract these top people to be advisers or on their board. What type of incentives do they normally give them to convince them to do that?
Bob Karr 01:26
OK. So that kind of varies across the board and I’m involved in bunch of these companies, some companies know that they really want to say thank you with early stock. OK. And so they’re very willing to give shares that there had been some foremost in the past for this. There’s always been foremost for board, for board members and for board advisors. And it could be a half a percent, could be a percent. It could be whatever from my perspective, given the opportunity and given the person you’re bringing in. Nothing matters. It’s where that it’s about that. It’s about that situation in that environment. You could have some guidelines, but it does bring me to a situation that I’m concerned about as an investor. We can talk about years ago and again, I’m not exactly an expert on this, but look, you’ll get the flavor. Years ago, companies would create a valuation for their company, and they would say, I want to be an investor. What’s your company worth? Well, I think I can justify the company is worth two million dollars or five million dollars. Well, how do you how you justify that valuation? Because I’ve been working this with so many man hours and we have IP going on and all this kind of stuff. Okay. So the game changed somewhat. I’m not sure when it changed. I think the lawyers and the VCs changed it. I’ve loved it. I’d love to hear the inside story inside baseball on us. So now when I go to look at a company, I’m offered stock in a company on a convertible note, which you’re probably familiar with. Right. And so because I’m an early investor.
Shawn Flynn 02:56
Can you go into more detail? What a convertible note is?
Bob Karr 03:00
Now, when I’m offered the opportunity to get into a company. I’m talking to the founder and the founder told me the company is worth two million, five million, five hundred thousand dollars, whatever. And I know that coming in I can get a 10 percent stake in that company. I like that idea because I was really on why was I deserving of getting a nice stake in the company? Well, let’s think about it. I’m doing all the heavy lifting. I’m coming out at a point in time. When they have no customers. They have no IP. They have no co-founders. They have none, it’s early stage, right? OK. That’s a big lift. That’s when all the heavy risk is. Everything I in, that invited to more recently, even the things I’m invited to there very early on because they’ve already had a lawyer involved. In some cases, not. But basically speaking. The new strategy is between the lawyers and the VCs. To create a note, an IOU. It’s called a convertible note. And so when I make an investment, the company, I’m getting a convertible note and that note is convertible. To a point in time when the A round investor comes in. And then they set the valuation for the company. Looks like this because the A round investor comes and says exactly what I talked about earlier. Well, tell me why I should invest in the company and put in 10 million dollars or whatever at a 10-million-dollar valuation. And you’re going to justify how you did all that and you’re going to tell your very best story. And the investors are going to push back. Everywhere they can because they want to get in at the best possible valuation of the company. And they’re going to tell you they have to get a strike. They have to strike a good valuation because at some point we’re going to try to attract the B round investors. And if we came in at eight dollars a share. And we can’t make it worth sixteen dollars or twenty dollars. How can my investors in A round make money? So we have to. So unfortunately, even though you’re trying to get us to invest and aid, we wanted to for. Well, this is this happens all day long. This is the story. So I don’t know. As the angel investor, I have no idea what the valuation is going to be. So anyway, it’s going to be whatever it is, they’re going to pound it out. And somewhere between the story that you told us, the startup company. And the investors that you’re trying to get to come in your company, you’re going to cave because you need the money and hopefully you’re going to find the right one. If you’re lucky, you found the right investor. Or investors. You’ve got the right valuation. You got a great group of people who can help you grow the company. If you’re unlucky, you’re going to get some investors you’re not you’re concerned about a little bit. You don’t know the trackwork for the commitment they’re going to make. And they struck a deal, which is tough for you. So let’s suppose it wasn’t such a good deal. it wasn’t the eight dollars you were shooting for, it’s four dollars. So my stock is going to be pegged to the four dollars. And what it what did I get from either risk? You know, if they do, they give you a discount. So if they paid four dollars, then if I’m very early on, I’m one of the first guys in the door. I get a 20 percent discount. If I came in maybe a six months later because they raised three hundred thousand dollars, I’m one of the early investors in the three and a thousand dollar group and they raise another five hundred thousand dollars. Those people got a 10 percent discount. So big deal. I got it. 20 percent discount because I on day one, I invested in this young company. And they didn’t make it. I am dead if they did make it, I got a 20 percent discount for all the heavy lifting that had to be had to go. I don’t think that the risk is commensurate with where they want to come in. They’re going to come in with a team with all these things that are happening. And I got a 20 percent discount to that. I’m not interested. I’ll never invest again in a company where I’m invited by some high faulting big deal VCs who think they can because they’re there. All that of all their importance and all they can do. And I’m lucky to get a discount because to be on that team. Not interested. That’s the story. Now, this may be the prevalent way things are going, but I’ve noticed in my circumstances that I’ve been able to walk around that a little bit. I’m not going to take it lying down. I am not going do it. I’m just not interested.
Shawn Flynn 07:33
But Bob, can you share some stories of companies you may have either mentored or invested in over the years?
Bob Karr 07:39
Well, I’ve invested. I’ve invested probably 30 companies and probably way too many in the .com era. My very best and most exciting thing, by the way, which is you could edit out, is that some friends I had back in the early days were so, so desperate to go back to New Jersey, where they came from, that his wife was a secretary at a technology company. And the company wasn’t worth a nickel at that point in time. And she said, Bob, would you could I give you my worth of stock? I just have to have bus for back to New Jersey to give me your stock. I put it my safe deposit box. And then about eight years later, I got in the mail. I got a check for sixty-seven thousand dollars from a company in Japan called Yamaguchi Pharmaceuticals. So that’s all we today will always be my biggest head ever. OK, so dispensing with all that. I think a couple things that are happening right now are probably worth talking about. So one of them could be a company called Limelight Health and the founder of that company is a close friend of mine that I’ve mentored for years in before became a technologist. We were good friends and I was always giving advice. He was quite a bit younger than me. And so we had lots of conversations. And Jason had a chance to start a company. And that company was focused on when the Obama Obamacare came in. There was a huge opportunity to having do with the with the enrollment, by the way. And so Jason has had a lot of close friends that were involved in in the 58 counties in California. And so, they had a very strong ear of all of the counties to be able to conduct the enrollment because it because there was a chance to enroll all these people up at Obamacare. So, he quickly set off to start a company surrounding Obamacare and enrollment. That company pivoted as companies will pivot to different opportunities. And that company pivoted to another thing, another project. And that project was going to be the insurance. The major life insurance companies were interested in what he was doing because they wanted to get. They wanted to be out, if you can picture this, in somebody’s living room, talking to a customer to be able to give real time quotations to people, rather. And we’ll go back to a plan for you and come back and see you in a week and a half when you pull off the whole thing. So right there in the living room, they could have it. They would have instant information there on that project. And they were so successful going down this going down this road and learning things along the way that they then went to it to their final project where they are now. In that they are literally speaking. They have created software to allow companies that are creating quotations to be able of platforms to be able to build these quotations. In a much more ready fashion, but not for the end user, not for the last mile, but to create for these companies to create platforms, to be able to put out to their people and so forth. This has been a very successful investment for me. I know already that I had an opportunity to get a six and half times my return on this last investment because he said, Bob, if you ever want to get. I know, I know the current vest would have loved to buy you out. So I’m very happy with where they’re going. I get on a conference call with them probably every two months with Jason, where he updates the angel investors about what’s going on. I’m not so sure that we have any great contributions any more to make. But if we do in that conversation, we’re able to talk about stuff that’s going on and hear about where they’re headed. And I’m very excited about Jason. I’ve watched him grow as a first time CEO and the challenges he’s had. He’s had a lot of challenges in certainly in HR, attracting people, moving their facility, just a bunch of stuff. So I’ve been very excited to watch him grow his company from right from the get go. Another company I’m very, very involved in. And this gets back to my kids. One day, my son, my son, by the way, founded a company called Guayaki. We will talk about that. We’re drinking it as we speak. And one day he was paddle boarding up in the Gulf Islands. My kid, my son David lives up and off of Vancouver in the Gulf Islands and on an island called a Salt Spring Island. He was out there paddle boarding with a good buddy of his Isaac. And Isaac was telling him us that he was just he had to start this company, now it’s in his bones, it’s ready to go. And he has two co-founders and they’ve been consultants in the industry for a long time and all about the fabric and yarn and all this. And David said Listen Isaac, I so much believe in you that that I’ll just let me help you. So they got off and on to land. David wrote a check for fifty thousand dollars. He called his little brother, Steven. Steven called me and said, Dad, can we put the other fifty thousand? So Steven and I put the other fifty thousand dollars in. That all went in to get their IP, all went in to kind of hire a lawyer to start getting IP to make a trail here. The exciting thing about this company is that Isaacs has two founders, have had greater expertise in it about yarn and in the water conservation anyway. So the product they built, they set out to build was a fabric that would replace cut. Now, as you know, cotton and probably omens require an enormous amount of water. And so being able to create a product that was that would create an alternative to cotton was a big deal within the first year, within the first six months. Isaac went and made a presentation in New York with 250 other companies and won the whole thing. And they got a grant for six hundred fifty thousand dollars. Pretty impressive. First, we’re talking to Isaac all the time. Well, he wants to go do and we love it and we’re breathing it in all the time. But to hear him get validation for other people who don’t know him is a very exciting thing. Then he went to Stockholm, Sweden, and made another presentation, which was even more even more had more cachet to it than. But that had a two hundred fifty thousand dollars prize. He won that prize. But in that particular presentation, he got the eye of Adidas and Converse and Nike and Levi’s, and they just swarmed him, and they loved what he was doing. In fact, he when he went to Levi’s and he showed this new fabric and they ask him to stretch it and that because Levi’s said stretchable fabrics, expandable pants. They couldn’t believe it was it was made without all the stewpot and all those chemicals in it, chemical free product. And so now cut to two years later, we’re working with major, major manufactures around the world. So many I can’t even tell you who love what they’re doing. And we have big contracts from these companies to supply them, so. Right. So within that, in this industry, for example, we might be working on a major roll out that Nike is going be doing in the end of 2021. And the products, a scale of the suite of products could go from. Right now we’re working on things for shoes and whatever, but it could be the clothing. It could be anything. Once you get into these companies and they like what you’re doing, the scalability of the breadth of the product line and the scalability of work ago is enormous. Now, the exciting part about all this to let you know it is for real, is that these companies have no contact at all their manufacturing facilities around the world. So they’ve been introduced to these facilities around the world so that the facilities will organize their manufacturing to be able to handle all this. We’re in Taiwan, we’re in Vietnam. We’re all over the world. So now we’re hand in hand with all this. Now, this product that they’re creating this product from is from agricultural waste. It could be pineapple stalks, banana stocks, whatever. It’s the waste of agricultural products which produces a fiber. It’s the product of the waste that is the cutting room floor. When people are cutting and building, you know, they’re cutting all this manufactured, all this waste, because after all, where does all this waste go? It gets bundled up into to that into these patterns and goes into dumps. It goes into landfills. So now we’re doing three things. We’re taking waste from these companies. They’re getting credits for giving us waste. We’re taking the waste and we’re converting it to product. We’re also saving enormous amounts of water because this new product, which is now being produced, I’ve seen as Isaac walk around a new suit produced by this, by this new product. So now we’re producing a product which doesn’t take any mirror anywhere near the amount of water. And if you look at the aquifers in California. Not only do we have water prices in California, but a lot of these places are sinking because we’re stuck together. The agricultural people are getting much more allocation for water because they got to water all the produce. Right. And some of the biggest produce. And I’m not an expert on this, but I know enough from learning about this that, you know, the things like almonds and rice take a lot of water to take it one step further. Isaac, it was his speech featured speaker at a conference call at UC Davis County in Riverside, California, Davis, on this topic. And now all these rice growers are all excited about converting, converting their land to growing hemp. Then rather than because that’s another story. And I think there may be a separate corporation being formed in this regard. So anyway, everything he touches, people have an enormous amount of interests. So going back to our member earlier conversation about so what are you going to build and who’s going to buy it? I was I’ve always been interested in who is your customer. Isaac has turned the table on me. All I’m hearing about are all these incredible stories going on about customers who are really interested. On top of that, there’s a huge technology component because he was invited to invited to the Sir Edmund Hillary Foundation, where they did take eight people a year in New Zealand. You may know about this from your travels. Go to this incredible founder of Project New Zealand in there. He met an incredible guy who is one of the foremost guys in Bitcoin. And so Isaac always wanted to tag all the product from the farmer to someone walking in a Neiman Marcus to buy them to buy that valuable or whatever. Everything used to be tagged with Bitcoin as the ultimate product for all this salesman solution. So now we’re building a technology component to all this, which we think will help us help us one, save an enormous amount of money because we are he is already is going down that path before Bitcoin, thinking about how you’re going to track all this to one that’s going to save a huge amount of money. But it’s also going to give us a technology valuation as we become much more of a technology company, along with now having these incredible companies that we’re talking to. So, I mean, Isaac’s problems are how to scale the company. And he has promised Palco we’re looking for key people. And now, by the way, we’re trying to make sure that we have money in the bank. So that’s why I’m involved right now talking to the A round investors who want to talk to me. So I was on a conference call only last Monday with the other major. So, I’m the largest investor of my two boys. But the other two other second largest investor out of New York. So we are all on the phone talking with this potential investor, which is goes on name for the moment. But they want to know all about what we thought about the company and our experience. They wanted to know how well we thought about vying with the company was really I thought was funny because we’re a crossword, different positions. And they also want to know what we were going to be doing for them. And I said, listen, we’ve already done our job. We’ve been helping these people from square one and we want to do more. But we want to know what you’re going to do for the company because every venture investor is going to raise or give you capital. But they’re also saying, you know, we’re the right investor for you because we understand your space and our people are going to open up lots of doors. Right. That’s their pitch. It’s not just the money today. You want to know what they can do to help you. So I went to what you can do to help us. So that was a very lively conversation both ways. It was very fun to be part of. But I can’t say that I’m involved in all these conflicts. It happens occasionally. But I. It’s a great place to be. But so in this case, we’re in the process of raising. Of doing this A round now because the company needs to raise their capital. And the issue now is when we’re going to be raising the B round. So I talked to you earlier about you’re always raising money and then you raise you’re a round. You’re always looking at the milestones, what you’re going to be able to accomplish in the store. You’re going to be able to tell your B round because you’re going to raise eight million dollars here. The next round is going to be at 25 million or 30 million or how you’re going to justify that. So this is an ongoing story. You’re always raising capital and everyone’s always talking everybody else about the contribution they’re going to make. So it’s so it’s more fun to be talking to a company that’s on the rise as they come on this flat or declining. Those are very, very difficult conversations.
Shawn Flynn 19:50
So to find out more information about blockchain, Bitcoin, IOT solutions, check out our past interviews with Ben Bartlett, Aman. They go into great detail about the whole supply chain and track in. So, Bob, I did a little research. You have connections with venture lending, a venture lending firm. What is venture lending and what does it do?
Bob Karr 20:14
Well, first of all, I think about this. Traditional banks can only lend. When they have assets to lend against. So a lot of these small technology companies have nothing that they can lend against. Covenants, the bank don’t allow them to make loans. So the first thing the banks want to do is they want to see you raise venture capital and put that money in the bank. And that’s when that’s why Silicon Valley Bank is so successful, because the VCs are investing that money. So five or 10 million dollar goes in the bank. They’re not deploying all that money rapidly. The bank gets used that money, but try to be a company who hasn’t raised any capital or is struggling to raise capital or has raise some capital, can’t raise any more capital. There is a whole lot of people out there that are lending money to companies. Then there are leasing companies. They’re leasing the capital equipment. So venture lending, I think, would be characterized as companies that are willing to make investments be on the covenants of what the traditional banks are willing to lend. So I happen to be an investor, a new investor, by the way, in a company called Costella Kirsch. I really like what they’re doing. They’ve been doing it for 30 years in Silicon Valley. They’re not newbies at this. And they they’re on their seventh fund. Well, it’s pretty exciting for me. And the turnover in the when I say turnover the number of companies who have failed. Where they actually failed in their covenants has been under five percent. It’s amazing because they are investing in companies they believe in. And also to by the way, they are standing at the head of the table. So when you’re in a senior, but when you’re sitting in a seat very in a very senior position ahead of the preferred shareholders, you’re the first person to get to be paid a debt. Even if you go out of business, you have some assets. There’s something left you can go. Whenever was a classic. He may have two million dollars of debt and six and a thousand dollars assets. Well, these people are the first at the doors. So, they do not get stiffed very often. But in the meantime, they are paying a handsome reward to their investors much greater than you’d get in a traditional investment. I think the program I’m involved in is going to have about a 16 percent internal rate of returns. That’s very good. I’m excited about that. So how can I help them? Who are they looking for? They’re looking for these companies that are probably four or five years old, stalled a little bit. Here’s the point. The company is willing to pay the high rate of interest because they’re going to pay. What’s going to happen is that this venture lending company is probably going to write him a check for a million dollars. And they’re going to pay back one hundred and thirty thousand dollars. We said 30 percent interest monthly over the course of a three-year period. We’re going to lend them a million dollars that they’re going to repay over a three-year period. At a rate of 30 percent, what they’re betting is what the eventual lending firm is betting on and what the borrowers betting on, that they’re so excited about the way they’re pivoting their company or the other about their opportunity. That they are willing to take that high rate of interest. It’s not usurious. It’s the rate the companies charge to take this kind of a risk. So, again, they are looking at lots of companies. OK? They get referred companies all the time, but they have to step back. And be very careful that companies are looking at, the companies do have a good opportunity, they don’t want to be sitting like the wolf at the door collecting money. Collecting bad debts. So they’re constantly getting referrals and they’re getting referrals from ANX other VC, investors and of course, because they’re well established, they’re getting a nice flow. I’m helping with the introductions as well. So I like them because they’re they get a chance to look at good companies. Companies who high with high opportunities. And so that’s what’s going on. And there’s probably a number of companies I’ve talked to the company the past that are. But they’re what they’re probably looking for harder assets in this case. We’re looking more at the entrepreneur’s vision of what they think they can really do. And we want to hear a good story. Yeah. That’s what’s going on.
Shawn Flynn 24:25
And you’ve also founded many different networking groups in Silicon Valley. What was your inspiration for the first group and what did you want to accomplish with it?
Bob Karr 24:35
Well, stepping back for a second, in my 35 years in insurance business, I certainly got a lot of business through that, through the network, through people working together. So I always believed in alliances. And so in those days, my alliances could be with lawyers and accounting firms, whatever, but I always wanted to meet good people who were also calling it the same kind of customer. So I carried that forward. And when I retired from the insurance business and reloaded, whether I was investing in companies or starting LinkSV, I love to meet other people who had worked really hard to have good clients and good prospects, because I always felt that if somebody was willing to take the risk and to introduce you, after all, they’re risking their client relationship. So why would they? Well, I think when they do, they get a bigger seat at the table with their customer. Because when I can give a classic story, one of my friends was out visiting a Corp., a corporate prudential corporate client. He was sitting in front of the client and all of a sudden, the guy on the telephone yelling and screaming on the phone. And somebody in Port George is sitting there waiting for the guy to get off the phone. And when he did what, he was upset because the contractor hadn’t built out the bathroom and his big executive office correctly. And George said, well, you know, I’m with a with a you know, I’m in the most a business of our people. Can we design that stuff? We contract. Anyway, the guy calmed down. He talked to George about it. George had what people come out, they solve the problem. And what George conveyed was which became very much in my mind, that when you’re sitting in front of somebody and you’re there and they’re your client, no matter how well you know them, you’re solving that problem if you can help solve a problem in another area of their business. You’re now a trusted adviser. So I’ve been around the trusted adviser concept for many, many years. And I’ve talked to many people about it. And people understand it. But you don’t take it lightly. It’s not like introduce me to all your friends is, hey, if I’m doing some things here and if we’re it looks like we’re aligned and I can help you. Will you go at risk? Introduce me. Well, people do it all the time. They do it one off. They don’t do it in the form of large organizations. Everybody has a good friend. Lawyers get the referrals from people and they give her referrals back. So do accounting firms. Everybody does it on a one-off basis. I’m more interested in doing it in a more organized basis. So, for example, for the Angel Breakfast Club, we got started years ago was a group that we did with the VCs.
I started a group called Epic. This was a group of this was all service providers in the Silicon Valley. And I and they were invited by me and by my friends and by the other people. At one point, we had three hundred people in the group. My objective, of course, was to get people together and also lend a hand, lend a hand to people who were not that well connected. But were good people. And again, I judge people by the by what’s in their heart. What’s the what what’s in their character. They’re conscientious. But again, somebody smaller people can’t scale well and they don’t have resources. So if they can meet other good people and they can then deliver by making alliances by other good people, they can begin to scale as well. So we ran that group for probably 15 years. The reason I. Fell back. Oh, bit on it was two or two reasons one. It keeps becoming harder. You have a meeting at seven thirty in the morning and. And over time, that’s the failure of groups because you’re trying to get your kids to school and not do a lot of other things. And so eventually we move that to an online venue. So we saw the group running. It’s we still the Yahoo! Group for it. And so people go on and they’ll post a request. But I’m not working out as conscientious as I have in the past. So here’s what happens when you have a group. What’s the failure in groups or how you make groups work run well? You have to people that are passionate. They have to be passionate on wanting to support your concept. Just can’t be me putting a group together with a lot of people saying, well, gee, where’s my? What’s happening next? No. Anybody who joins in part of a group has to be group of the willing that to be passionate about the concept and passion about wanting to help you make it grow. So as I’m starting things together these days, anybody I get involved in a group has to be really passionate about the idea, has to take ownership of the idea and wants to help me make it grow. And I’m on it. I have a group like that right now and I’m really excited about it because everybody there knows that it’s only going to be successful if we all work together at it. But what if I joined together? It’s a fintech group and we have people that are from all walks of fintech. We have a we have a good law firm. We have a good accounting firm. We have a good group of interim financial people. We’ve got people doing or onboard globally. We’ve got H.R. people. We have proper, we have liability insurance people. We’ve got executive search people and one from each group. And so it’s a very, very good. So I’m very excited about the concept of it. But I’m going to I’m going to work very conscientiously, to make sure that although we may only be meeting physically. Two or three times a year that people individually are getting together, sharing ways they can help each other and so forth and so on, so that’s that that’s the new venue. And it’s not easy. And nobody’s doing it on a regular basis. But I’m doing it.
Shawn Flynn 29:25
Bob, these groups sound amazing but, what is the best way to find the key people in a group? The key, Connectors?
Bob Karr 29:31
OK. By the way, if I find a key connector, I might start a group around them. So on this particular group I started, I knew the next group that I wanted to start, I wanted to be like part of a good organization that could really grow and value having a network around them. So, I started the group with Kathy Ryan. They have a very strong group called the Rose Ryan Group. They have one hundred and thirty-five people there are customer facing and they solve all kinds of counting issues for early Stage companies, they’re one of many organizations that do that in the Valley. But it’s a very established category and certainly the young companies who just raise venture capital or no capital cannot afford to hire a full time CFO at two hundred thousand dollars a year or whatever. So every small company engages these kinds of firms. So Kathy got challenges in that regard. You don’t become of an accountant and get an MBA and learn a lot about networking. So, the first person I brought to that to that lunch with, we had it my club at Saratoga. I invited Steven wares, a little plug for Steven. What Stevens company does, is that when companies are going to go abroad, they’re hiring a couple people in Germany, the U.K., whatever they have to onboard those people abroad. It’s a very difficult process, very complex. Steven helps these companies with all the issues surrounding the onboarding of these people up overseas. He’s very good at what he does, extremely good. And he’s got a lot of good connections. But more importantly. He’s a very engaging guy. And he knows this, he knows his business upside. He’s a real professional and he comes the table with a lot of life and a lot of enthusiasm. The minute I even mentioned it to him he says Bob, It’s a great idea. We’ve got to go do that. So I invited to lunch with Kathy. So the three of us have co-founded this group, of course I am the callus behind it. But the very fact I engaged Steven and Kathy to be excited about it, then I knew this was going to be a good group. Right. So, the three of us figured out the kind of people we wanted to invite somewhere, Kathy’s friends, somewhere, Stevens friends and some of my friends that even made it better. So we all they can get in the game. And all the people were invited know That if they don’t if they shouldn’t be in the group, will just ask and this is the wrong group for you. So we’ll tell you years. Now it’s going to work out. But I can tell you, I’m most excited about this. I’ve started three other groups, but now I’m going back to the other groups and figure how we work, how we can re-engage them. And they can stronger because if you can make the group strong and you can have the success where actually through a new introduction, you help somebody solve a problem. Now, your friend for life, because you’ve their client was happy. And Bob, thank you for that introduction. That’s what I’m looking for. And that helps you build your network and think about the importance of all that. It’s really cool. So that’s those are magic moments when all of a sudden you’re saying thank you for somebody to an introduction you made to them and they solved a problem for a client. That’s a really big deal. It’s a big, big deal.
Shawn Flynn 32:25
Now you have your own company, LinkSV. Can you tell us a little bit about it?
Bob Karr 32:30
Well, you kind of get the gist of what I’m talking about here. I’m really involved with companies. So what I want to do when I am doing it, I’m tracking currently fifteen thousand six hundred companies in Silicon Valley that come out of medical that the whole medical device community, the medicine med sector, the biotech sectors and all the tech sectors. And what we do is we track their boards of directors. Their key people down through director level and even some outstanding individual count contributors, advisory board members. We track their investors, the private equity people, the venture capital people, angel investors, corporate investors. We track also their customers and partners where if you can imagine putting out all in a jumbling it all together and shaking of all outcomes, all these interesting people. So we connect all the dots. How do we connect the dots? Let’s suppose a small company is trying to raise their A round of capital and the CFO, the CEO or the team is talking to Sequoia Capital. And they’re looking for their first there. In fact, they were told until you get a world class V.P. of sales and a V.P. of marketing. Come back and see us later. Right. Well, wouldn’t it be nice to talk to a company who already has had one of these people coming out of Sequoia Company so we can go and linkSV and put in Sequoia Capital and we’re looking for a V.P. A sales uptick comes seventy-five from people who have worked in a Sequoia company. There is a youth case for you because that company is it says I should be calling these people. So when I said to you that I’m helping all these young companies point them to how to raise capital, that could be a method. I could show them company. I could show them investors, VCs or angels who have raised capital, who have expertise in that area that the way it’s called connecting all the dots. OK. So most of my customers, however, are service providers. So think of this. Anybody use a service provider in Silicon Valley when they start there, when they’re planning for the next year? This now be 2020. Whoever they work with are probably going to up the ante and probably have to bring in another 10 or 15 percent new business going into the year. They probably lost 25 percent of the business because of acquisition, five percent. They didn’t do a good job at all. It lost some business, 20 percent because they companies got acquired. They have a really big delta. What they’re trying to meet this next year. Where are they going to get that business? They’re going to go back to everywhere they know. You get so tired asking the few people you know. Well, so what do they do? They go out to meetings. They may try to meet people. All these things. You think they try to stay active and work the network. So our business proposition is, look, in LinkSV, we connect all these dots and we’ll show you all these interesting people you should be connecting with and all these target companies should go after. The thing I’m thinking about these days, which is a prevalent my mind is if you found a group of companies, I am just making an example, second round companies that just raise a large amount of money in relation to their first round, three times of two times, the amount is normal and you’re excited to get eight on top of your four, then 12 million on top of four is a big deal. And that board of directors is. Those guys are very excited. So if those companies raise a bunch of capital and those are companies you want to meet, then you use LinkSV to see who is our linked in tags. Who are the key people, those companies. So now you just click on that and see how you’re connected. I’m connected. Everybody. Everybody in Silicon Valley by a second degree is hard to find someone to connect. So what would I do? I would see I’m connected to that person because now we share a whole bunch of first degree connections. And this happens every time I do this. Oh, my gosh. Well, you feel I know really well what two events are going to happen. One is I’m going to select the most likely people who are connected of first degree to my target and how they might be able to help me make a connection. But all these other people or people haven’t talked to for a while. So there’s probably a half a dozen people that I should be reconnecting with anyway, not just as not just behalf of this target company, but for all these other reasons that I’ve been telling people is for the longest time. I’ve started to do it in the last week for myself. I just I’m having an these aha moments of these people I know really well. And the reason I’m doing it is because we just released our version two and our version two is a big uplift from our version one version two means we’re now mobile, responsive. We have this newsletter now, it goes out to everybody on a daily basis. But you know, 80 percent of people are on their smartphone, on their mobile. They’re not looking at a P.C. like you. And I might be occasionally I’m married to my P.C., but those people are out and about. In a month or so, we’re going to put email addresses every to every person that comes on that newsletter. How about the fact that you saw this interesting company? You had a connection to a friend, you called your friends that, by the way, their biggest problem, they’re doing they are launching a project in the UK. And our focus is we’ve done a lot of projects for the UK. Something looks similar. That’s a lot better than saying, by the way, can I call on you for business? I need to. I think it’d be fun coming to talk to you. So I’m thinking about all these things. And so that’s our version, too, is very important to us. And we’re going to be open source, a lot of things downstream that are going to be valuable to these people.
Shawn Flynn 37:37
Now, entrepreneur also runs in your family. You have very accomplished sons. Can you talk a little bit about the company that they founded? And also, can you talk about why not a tech company?
Bob Karr 37:48
I need no notes for this conversation. So my boys went to Cal Poly and when they were there, my son David had a friend who one went abroad to Japan for a year. And he came back and told his mom that he wanted to go abroad. Well, his mom, my wife studied abroad. She studied in Italy, and she went on digs. My wife’s a linguist and she spent all over the world. And so when she heard David wanted to go abroad, she couldn’t wait to help him on that. So David applied and he went he took a year off and he went abroad to France for a year. Then he stayed for another year and he spent time in Germany and Spain and then his little brother wanted to go abroad. So little brother was in France and Spain. So both my kids had two years abroad when they came back speaking fluent French and particularly speaking Spanish. They’re now Cal Poly. So, David, one day at Cal Poly, at the wandering around at the Thursday night farmer’s market. And he meets another guy. They both have guitars and they are speaking Spanish and having a good time. And there at that time, David was working for a small computer company. One of his buddies has started. And so Alejandro was telling David about this dream he had to save this rainforest in Paraguay because his family owned this big giant rainforest. And when David heard the story about saving this rainforest, he called us up the next night at Mammadov. Alex and I are going to start this company and we’re going to do this, but we’re going to save this rainforest and on this rainforest there’s a Jaguars and there’s a million species of birds. And you can imagine. And we can do all. What do you do? Well, we are going to, what is Yerba Mate? Well, first, I never even heard of your Yerba Mate. And so this is we’re going to go do it. First of all, my son David has a lot of leadership skills and you don’t stop him in his tracks. He’s good. You know, he marches to. And I was very impressed. I was. I love it when he was younger that he was not influenced by about a lot of kids. To do what they did. He marched to his own drummer. And so this is what he wanted to do. So, he and Alejandro start this company. Their goal was to import a Yerba Mate from this rainforest that the family owned. First thing it involved was, was to get this year Yerba Mate certified organic, otherwise it was you could not sell it in the States. Now in South America, all the gauchos drink Yerba Mate and they lived to 105 and with their day drink till they can’t see straight and they eat a lot of meat, but they live forever. So they knew there were a lot of qualities and there are a lot of qualities in Yerba Mate, basically, although it looks like Tea and acts like Tea. It’s tough. I say tea around them and then I am in big trouble. But anyway, they harvest a tea, doesn’t touch any processes. It’s sun-dried and it’s crushed into small little fiber, small little bits. And eventually it gets into your cup. And the cup is you add hot water to this cup and you may have seen people wandering around Silicon Valley or somewhere down in Santa Barbara or places in Colorado or Berkeley or here in Silicon Valley with a gourd and a bamboo over the gourd is where you drink from the gourd, the bamboo is the straw. And so they came to this nascent market to try and sell Yerba Mate. you’re promoting and they start out really small. It was just Alejandro and my son David and David recruited Steven. My son Steven had just been accepted to an advanced program at Cal Poly, calls us up and said, Mom, Dad, I got accepted to specialize closed graphic arts program. We’re all excited, high-fiving each other. Two nights, he calls us saying mom and dad, I’m not going to go on the program. I’m going to go with David. David, at that point, had they had no money, this is classic story. They had no money. They had a big dream, had no customers. But they were going to do this thing. The first thing they did was get Steven to join the company and they got a fifty-thousand-dollar grant or loan, I should say, from the county bank of San Luis Obispo who believe in what they were doing off of the strength of Alejandro senior project, the different senior product, a Cal Poly. So, now we got fifty thousand dollars. Mom and Dad put it, we put in some money. And they’re off and running. And Stephen joins us. So, they hunkered down and I watch these kids watch my experience from Silicon. I watch these kids. They eat the cold pizza. They work together. Nobody was getting paid. Our kids had nothing. In fact, years later, when John’s parents died and the kids in it, we made sure the kids inherit heard some money.
Brother. Just ask Steven. Our son Steven had to lend the company a hundred thousand dollars just to stay in business. We believe in the company, so. But Steven, it was paid back much later. So anyway, our kids got started. Their initial goal was to take the Yerba Mate, have it chip from Paraguay into the ports of L.A. take it out and get a process. So they did in early days. They found processors, they were processing the Tea, the Yerba Mate and their earlier customers were buying small amounts. They were selling initially to small stores. So their big break came when Trader Joe’s made a fifty-thousand-dollar order. And Trader Joe’s has the ability to order large amounts because they can order by region. So they made a big order. So the kids at that point in time decided to they got it. They had a Volkswagen bus. They had it all painted with Mate, Guayaki on the sides. And their sales are very small. I mean, we watched the company go from a thousand dollars a year to twenty thousand to one hundred thousand and so forth and so on. So very early on, they got this Volkswagen bus. They traveled across the country to a lot of these trade shows. A lot of them were personal traits, traits of that guy. I went on a six week and they’re both like Van and we traveled the country and but then they got the eye of Whole Foods. And so what happened with Whole Foods was they asked them to come down to Austin, Texas, where Whole Foods was headquartered, and they did Whole Foods love with it. And that’s the point. Now, when I flew and I met them, we traveled. But so Whole Foods like what they did. And so all of a sudden, Whole Foods took an interest in what they were doing. They were starting to get to get into company markets. So we watched the company grow from two million to four million along the way. They were growing. We were getting more of a penetration, but basically off of the backbone of, I’d say, Trader Joe’s and Whole Foods and. So what happens in this business is you try to get the attention of distributors. So very early on, the kids were down and out at the Anaheim trade show where everybody goes to show their wares. You bet. Your bet, your back and building number five in the bottom floor in the basement with a little card table with a little tablecloth across it. And people come by and you’re hoping to attract some of their attention. So, David, how the I forget all this will get seven great companies together and we’ll have a we’ll have seven tables. So all of a sudden, these kids, we’re getting more notice. They go to trade shows and basic, they get Samba’s. Almost part of that group has become very well-known and three or four other companies that were well-known. One of the companies got acquired for a lot of money, PEB company. And so the company was getting more attention. And as they grew, then they got a distributor. The first sugar they got was a company called Mountain Peoples, which is a big deal to get mountain people. But what happened is distributors say, well, why? Why should we care? You want. Who knows about your product? They don’t want to do any heavy lifting. They just want to. Oh, the others, they want to place a product because people are asking for it. Right. They learned that very hard questions. They learned very early on they had to be able to create their own demand. So that’s why they went around their Volkswagen bus and created demand and got Whole Foods that all these things. And they continue to create demand. And so they started doing very well and they were growing at 25 percent a year. I watched them go from 12 to 16 to 18 to 25 to 40. And now the company is doing over a hundred million dollars a year along the way, they outgrew mountain peoples and they were picked and they were then working with unify and unify is the largest company in the country in this community, doing these kinds of products. And so they worked with unify and they’re getting and that’s help. They helped them grow. But now the story gets even more interesting because. We attracted a world class person who knew how to grow companies in this space. And the guy was like a Navy SEAL. He had done this globally. I mean, what I tell you, a Navy SEAL. So, Brian, we were courting Brian for a long time and saw about two and a half years ago Brian joined the company. And Brian is a global logistics genius. And we had also attracted a guy to the company who put a lot of his own money and who became who really became our marketing detail. And he knew Brian personally. So Brian joins the company. This whole new plan emerges. And here we are with Unify. This very large distributor in the new plan was to take them out because we were going to build our own distribution system. So we now have about 250 vehicles that we lease from General Motors which is the Chevy Bolts various energy powered and they’re driven by these individuals who now drive and these what we call our hot pocket markets. Anyway, we’re distributing into Santa Barbara and into Colorado and Austin. Anyway, the strategy was to not do a lot of radio advertising and waste a lot of might. No. to go into our hot markets and back my son David’s major plan. We had to part with our first V.P. of marketing who want to do a lot of radio advertising. And so David developed his pocket strategy, which has become very successful. And so now we are very heavy in the in these small emerging markets. And subsequent to that. My son Steven, who designed all the packaging for what you’re drinking, Mate, right now. He had to morph his position into another role because we have agencies doing things. And so, Steven, now because he has a good, good computer experience and knows about CEO and all this. As designed a strategy for the company to be able to understand our markets better, to understand the last mile who the customers are. So now his software that he’s been has put together and identify RAKE. Sales, how they’re growing in each segment. What we need to do. We can already tell you what the customers are going on a business trip. We can tell you the seven stores within a half mile of his hotel, whatever, have a lot of things we can do. Now, our company has morphed into all these drivers. And incidentally, a hundred of these drivers and as many as we can hire are coming out of incarcerator institutions. Because these people are getting released and the fellow who runs that program had done 10 years of hard, hard, hard time in prison. And he’s also been knowledge and photo’d with President Obama because this young man is as reform. We have hired all these people from the prison system and nobody has gone back to prison. We’re very, very proud of this program. And we’re travelling a country trying to find the right kind of people to bring in that program. But anyway, so we’ve replaced a good deal of unify and we still have unify engage in some places. But this whole program of identifying our strong markets and growing that way has become a very strong part of our company ethos of the company. And it’s going to continue that way. And of course, our direct program, Director to sale program has become very important.
Shawn Flynn 49:00
So what’s some advice you can give parents out there to encourage entrepreneurship with their own children? Well, first of all, both my kids told me. At different stages, they were going to join the startup company. I had to bite my tongue because I had actually invited David to come up to Silicon Valley from Cal Poly. I had personal connections in Silicon Valley Bank and also Seagate with the CFO out there. I got Davison’s really strong introductions and he said, Dad, it’s not what I want to do. He has gone to a school in Europe and all these things. He was thinking he had a different viewpoint of what he wanted to do in life. So I had to step back and sort of which it was hard for me. We wish you the best of luck. And I say, look at you need to go. And from my perspective, you know, my kids should have gone somewhere and worked for a large company and get a lot of experience. Most parents would think that way. Look, I don’t understand what you’re trying to do, but I know one thing. If you go to work for a large company, they’re going to spend a lot of money on you and give you a lot of training. And this is what happens if you’re lucky to get engaged by it with a large company. They’ll pour several hundred thousand dollars. of you in training and experiences. And then when you get some experience, you can then branch off. Well, that’s the training. That’s that was my thinking. However, a lot of young people today with it, with the growth of the Internet, are very attracted. And a lot of their friends are starting companies very early on. I’m not sure they know the journey, how hard it is. But then again, they’re learning life’s experience. I like to tell them because I helped the high school at Berkeley, I talk to lo these young people. If you go to work for a company that you may get a chance to work in an environment where you’re talking to a lot of customers to make all these customer relationships, you have some visibility. You learn a lot. If you’re laboring, trying to build a small little company in darkness with no customers. And it goes nowhere. Maybe you learn nothing about the customer and which is so vitally important, what you learn was the death knell for a small product. I’m not sure how good that is. How well it translates. I’m sure you learned something. So I think it’s a big risk for these young people today. They’re going to go out because it is so alluring to join a company. I’m not sure what the great value is, so I’m still gay. I’m still telling people, unless you have this incredible world class experience, it just it’s just so compelling. You also have to drop out of school for whatever, should give some thought to. If you had the ability to do some internships that are paid with good companies, you’re going to learn a lot. When you look at, by the way, when you look at all these people who joined the venture capital firms, go look at their resumes. They’ve done a lot of internships, paid and unpaid, invaluable set of experience. So, I think school’s out on this. But as far as parents are concerned, I think they need to understand that we all came out of a different environment. My parents came out of the Depression. So I have a little bit of depression mentality. And that’s why I’m fortunate that I save my money. I’ve made good investments. I’ve been cautious what I’ve done. And I take my risk when they’re measured, when I can afford to take a risk made. And that’s why I go all in some of the early-stage company but I can afford, you know, to take a loss, whatever. But these young people haven’t thought of this silly about that. But maybe they can still live at home and say, I don’t know. But there’s a lot of risk involved. So, parents, they have to be pretty careful can’t be judgmental because their kids aren’t going to do what they tell them to do anyway. The most important things parents can do anyway is have as have a strong relationship with their kids. The most important thing that kids can have. Young people can have a strong relationship with their parents. Because their parents are really going to be their best friend because now, they’re somewhere between 18 and 25 years old and they don’t have a lot of life experience and they need to know how to get car insurance and how to do this and how to pay bills. And their parents are the ones who may not be able to pay for it all, but can certainly give them good advice. So, I think it’s really important for parents and their kids to have really good relationships. The kids may not understand their parents and call them bunch of old whatever. And the parents better understand the kids. they’re the strongest relationships they can ever have and keep those bonds going. If they are lucky, their parents may be in business or in environments where they do understand and they can be helpful and maybe make an introduction or two. But don’t count on it for the kids. They need it just like they learned take shows, their classes in school. They’re like good professors or they have their friends they really like. They need to choose their friends in business very carefully as they go forward. It’s all about time. All we have in this world is time in these formative years. If you can if you can invest in these next five years. After all, when you’re twenty-one to twenty-six, you can blow that easily on just having a lot of fun. But did you walk away with some good friends? And some good relationships, well hopefully you did both. Hopefully you were scuba diving and like, look at my kids these days are surfing. They go into these great surfing trips twice a year. It’s a lifestyle company. They have a lot of friends. My kids right now are we speak with our Patala. Last week they were out in Costa Rica with the kids for a month. I mean, I’m watching my kids really enjoy. It’s not about working all the time. So it’s a good balance of work and play hopefully along the way. And in these years, between 20 and 30, they build a lot of strong relationships that are the foundation of what they’ll be doing further on. That’s what I feel.
Shawn Flynn 54:29
So, Bobby, you have a ton of energy. Your spirits uplifted. What advice do you have for people just to have fun in life?
Bob Karr 54:36
I have a lot of thoughts about that. It’s about a six-hour conversation that I kind of looted earlier that. You need to. Save as much money as you can along the way, because somewhere an opportune is going to come about. And when you’re young like this, you could afford to do things that don’t cost money. When my kids were hanging out, they were building Guayaki, I can assure you they drank a lot of Mate. They sat around a big circle. They told stories and they said they did. They didn’t spend a lot of money, but they had the most fun they ever had. And other startups will say the same thing. Other people tell you the most fun they had were the early years. And that journey and a lot of the unknowns. But if you think that you need to go to a lot of concerts and spend a lot of money and go to fancy restaurants, you’re not cut out for this. So my first suggestion is you got to really enjoy these early years and enjoy things that don’t cost money if you think you have to keep up with the Joneses and wear all the fancy clothes and do all the fat. It’s the wrong place to be. These early years are important for you because at some point you’re going to want to make some investments either in your own company or somebody else’s company. And it takes a little stockpile. That’s hard to do right now because there’s a lot of things that are tearing out you. You’re dating or you’re married and you get children a lot of expenses. Easy for me because I’m financially comfortable just to be cavalier about this early on. Save up. So you’re not driving the latest car drive a five-year-old car. In fact, your investors don’t want to see it driving as fancy cars anyway. Hunker down. Suck it up a little bit. Right. But then again, that’s going to help you later on in a big way. So that’s important for you. And then you also it’s all about networking. Now, I haven’t talked a lot about it directly about this. Everybody you meet today is successful has been a good networker. So look inward. First of all, you’ve got to learn to be a good communicator. What does that take? You got to be going to think beyond outside your own skin. How can you help somebody else? Have a good conversation. What’s your biggest problem? Good conversations lead to friendships that lead say, well, how can I help you at all? That tends to build people that you build friendships for a long time to come. And if you think you’re ever going to stop networking, you’re not in the .com era. But when we had the dot com bomb and every company was at half mast, the companies survive for the people who knew how to network and networked actively. So you’re always raising money or you’re always going to be seeking good people. But the first thing you want to be is you want to be the kind of person who is approachable, has a good personality, who is not all about themselves, who’s engaging, who is a good listener, who’s a good contributor. All that’s important. Those are people that you want to get ideally. There are also people that have a lot of common sense and a lot of business energy and a lot of good contacts themselves and are doing good things. If you can gather and those kinds of people into your business network, that’s a really important part of what you’re going to do downstream. And I, I love to call somebody who I haven’t talked to for a while, but I know they’re a good person. Why do they know they’re going to talk to me? Because I haven’t bothered them for the last year and a half with a bunch of stupid requests. They know if I come with one good thing, they know it’s important to me. So that’s. These are really important things.
Shawn Flynn 58:00
And, Bob, if anyone wants to find out any more information about LinkSV, what you’re working on, what’s the best way to go about doing it?
Bob Karr 58:07
First of all, our big thing is his daily newsletter we produce. Now, that tells you who just raised venture capital every day, new companies being formed, who got acquired, all these key people. So sign up for our newsletter. Just go to linksv.com and you can sign up for free with a call from your model. So you have a basic model for free and the like will do what we’re doing enough. We might even earn a membership for 50 dollars a month. But basically on our freemium model, you’re going to be able to get a newsletter. So that’s pretty cool. And you can also reach me. I’m all published all throughout linkSV.
Shawn Flynn 58:40
great. So we’ll have all that information in the show notes, we’ll have information on the show and our other episodes. So in this episode, we talked about Schmuel Silverman’s episode. We also talked about Ben Bartletts and Blockchain and many others. But I also want to thank Brett Sharenow, who is also a guest on Silicon Valley. He made the introduction to Bob Karr that allowed today’s interview to happen. So thank you, Bob. Thank you Schmuel who introduced me to Brett and all the other people that have made some amazing connections and really supported this channel. So, Bob, I want to say thank you again for your time today.
Bob Karr 59:11
Well, thank you for doing this. A lot of fun for me. I was probably off tracking a bit, but it was great to have a nice conversation. So thanks again.
Shawn Flynn 59:20
And also write a review on iTunes, share on your network that encourages great, great content like this. So once again, Bob, thanks for being on Silicon Valley.
Bob Karr 59:29
Thank you.
Outro 59:30
Thank you for listening to The Silicon Valley Podcast. To access our resources, visit us at TheSiliconValleyPodcast.com and follow our host on Twitter, Facebook, and LinkedIn @ShawnFlynnSV. This show is for entertainment purposes only and is licensed by The Investors Podcast Network. Before making any decisions, consult a professional.
