Kevin Horek: Welcome back to the show.
Today we have Tarun Gupta.
He's a partner at Jump Capital.
Troon, welcome to the
Tarun Gupta: show.
Hey Kevin.
Thanks for
Kevin Horek: having me.
Yeah, I'm excited to have you on the show.
I, I think.
What you guys are doing at Jump Capital and specifically the FinTech space,
whereas one of your specialties is actually really interesting and cool
and kind of at a unique time in history.
But maybe before we get into all that, let's get to know you a little bit better
and start off with where you grew up.
Tarun Gupta: Yeah.
So I was born in New York, uh, born in New York City.
Lived there for a couple of years before moving to the suburbs, handful of
years, uh, in the greater New York area before going to high school in Boston.
Okay.
Uh, spent a couple years there, uh, and then outta nowhere, found my way to the
Midwest, uh, Michigan undergrad, uh, was at the Ross School of Business, um,
studying a whole host of different things, uh, but ended up really focusing in on
finance there before making my way to Chicago to start my professional career.
Kevin Horek: Okay.
So what made you want to go into business Spec, specifically?
Finance,
Tarun Gupta: uh, Yeah.
So business was kind of something that was rooted in me at a very early age.
Okay.
Uh, both my parents, uh, were actually business school professors.
Oh, cool.
So that kind of drives things, uh, quite a bit, although both
of them were in marketing.
Uh, so I think maybe there was a little bit of a rebel in me that was like,
okay, I gotta find something that isn't marketing if I'm gonna do business.
Uh, the finance side of things, honestly, really just circumstantial.
I ended up, uh, linking up with Bank of America and then a credit risk role,
uh, as one of my like internships, uh, I believe right after my junior year.
And that kind of provided the foundational, uh, jumping off point
for me to get into financial services investing as a true like career option.
Very
Kevin Horek: cool.
Okay, so walk us through your career.
Maybe some highlights along the way up until, uh, joining
Tarun Gupta: Jump Capital.
So I started in investment banking, um, right out of college.
I think a lot of, uh, students in business school, at least back then.
Consulting and investment banking were kind of the, the routes that
you took, uh, the, the default paths if you weren't truly sure
what you wanted to do career-wise.
And so worked at a small middle market investment bank in Chicago, focused on
m and a sell side advisory work, uh, just helping advise companies as they
were trying to sell and get acquired.
Investment banking is a very unique job.
Uh, the, the grind, the hours, all of that is very real, but, uh, it provides
a very good foundational skillset.
You get to really learn about businesses, get to really learn about deal transaction
processes, and really build really solid foundational skills in Excel,
PowerPoint, storytelling, et cetera.
So I think it was a really good base for me.
A and then at one point I sort of came to the realization that as interesting
as components of the job were, there was something missing for me.
A and I wanted to be a little bit more involved in the actual
investment making decision process on who you acquire and why.
Uh, which is why I then moved over to a publicly traded company called
Scientific Games, which is in the casino game and sports betting space.
On their corporate development team.
So I helped them over the course of four years, acquire eight different
businesses across the various product lines of the business.
And so it was across casino games, sports betting.
They had a lottery business and a mobile free-to-play business in social games.
So really, really interesting industry to be a part of.
Really interesting experience.
Um, and had a really great four years there.
And then came to a realization after that period of time that as interesting as
that was, I wanted to work with founders and businesses at an earlier stage and
actually help them grow throughout their lifecycle as opposed to sort of being
their exit, which is what led me to venture capital and was very fortunate
that sort of the jump opportunity worked out, uh, as I was looking.
Okay, very
Kevin Horek: cool.
So walk us through the types of investing that Jump Capital does
and then let's get into your
Tarun Gupta: specialty in, uh, FinTech.
Yeah.
So JUMP has been around for about 11 years.
Uh, Chicago based venture firm, typically focusing on leading series A rounds.
Okay.
We typically write initial checks in that like five to 10 million range.
I like to think of us as broken up into two sort of segments.
So roughly 50% of what we do is FinTech financial services oriented, which is
where I sit and spend all of my time.
Now.
The other 50% is more general enterprise vertical software, uh, investments.
And that can be stuff in general, workflow automation, corporate learning, et cetera.
Um, and so we're investing out of our seventh fund, uh, which we close and fall
2021, which is a 350 million vehicle.
Um, so fortunate, uh, in timing and all of that, and very active right now looking to
make new investments despite sort of the economic, uh, environment that we're in.
We're a small team, uh, roughly 12 people, and we're very operating centric at heart.
And so what that means is that most of the team, whether you're operating team or
investing team, has come from working in a company in some, uh, former or fashion,
and then our operating folks specifically.
Work really, really closely with our company's post-investment across
a couple of key different pillars.
Um, and the ones that stand out for us are go to market.
So helping companies with all things related to thinking about like sales
team, sales, uh, playbooks, icp, stuff like that to the talent side of things
around hiring org structure, culture, and actually managing all that has a lot of
teams now become remote and distributed.
Uh, and then the last pieces around strategic finance.
Um, so we look to work really closely, hand in hand with our
company's, uh, post-investment.
Okay.
Kevin Horek: Very cool.
So walk us through kind of the types of FinTech companies maybe you've
invested in and maybe some that you're looking to maybe invest in or types
of ideas for maybe the listener.
Tarun Gupta: Yeah, and we're very sort of thesis thematically
driven in how we invest.
So the way I like to think of it is we are very proactive as opposed to reactive in
the conversations we have with startups.
Yes, of course we leverage our network and utilize that to
help us get into the best deals.
But we do a lot of work understanding sub-segments of a market before
we proactively go and find a company that is sort of quote
unquote disrupting in that space.
So to give an example, in the FinTech domain, uh, we invested
and led a Series A in a company called Acre Trader in early 2021.
That deal came from doing a lot of background work on the alternative asset
space and understanding which forms of alternative assets were really attractive.
So we went through a whole deep dive in the category determined that farmland
in our view, was one of the most attractive asset classes that accredited
investors had meaningful appetite for, but had difficulty accessing.
And we then went and proactively found the handful of companies that were.
Building solutions in that space to make it easier to invest in farmland
and Acre Trader ended up being the one that sort of blew us away.
One from the product and two really from the team and sort of the unique founder
market fit that we always look for.
Uh, the founder there has this really unique blend of having worked in financial
services but also grew up in the ecosystem on a farm and was able to sort of build
those really deep relationships, uh, with farmers that you need to be able
to make this business super successful.
Kevin Horek: Interesting.
Okay.
So what does Series A traditionally mean to jump capital?
Because, and you can correct me if I'm wrong here, it seems like
depending on which coast or where in the Middle of America, series A can
mean a bunch of different things.
Cuz you kind of said five to 10 I think earlier, but is like, is that kind
of your range or what's your range or what would Jump Capital consider
somebody's series A and actually
Tarun Gupta: potentially invest in.
Yeah, it's gotten, uh, kind of blurred over the past couple of years.
What sort of nomenclature is for, for the various rounds?
Um, when we think of Series A, there, there are a couple
of things that come to mind.
One, some indication of product market fit.
Okay.
It could be revenue.
We generally look to see the businesses are roughly at that
million dollar revenue, a r r mark.
Um, or it could be just a meaningful base of customers if you're not quite at
that million in revenue yet, that show that there is truly appetite and adoption
for the solution that you're building.
Um, and then the five to 10 that I quoted was sort of our typical check size.
So businesses that are typically looking for a meaningful infusion of
capital to accelerate their trajectory.
So they've found something, some level of fit in the product and adoption
from customers that they wanna pour.
Um, you know, some more fuel on the fire to accelerate things, whether that's
go to market specific, whether that is building more components of the product.
Those kind of inflection points are what we look for when we lean in and invest.
Okay.
That,
Kevin Horek: that makes sense.
So I, I'm curious because obviously we've all kind of heard that especially FinTech,
especially crypto isn't, is getting crushed right now and kind of the tech
space is a little bit negative right now.
How do you see the state of, you know, FinTech the investment community
and maybe just as a whole, and then maybe like, where are some places
where, you know, you're seeing some positive stuff happening because
like Yeah, I, I think it's really
Tarun Gupta: easy to go negative.
Yeah.
And, and there's already a lot out there, um, on the negative side of things and,
and some of it obviously justified.
Um, I'll, I'll take sort of the more positive side of things.
I think that everyone overextended themselves a little bit the past couple
of years in how they were looking at opportunities, how opportunities
were priced, and how quickly people moved in investing in new companies.
I think the positive on the time that we're in right now is that you
actually have time to get to know founders, to get, to really understand
their businesses before you invest.
And I think that is beneficial both ways.
One, from an investor standpoint, of course, you're not getting into these
situations where someone has a term sheet and you have like a week after
first meeting to make a decision.
You actually have, you know, potentially months.
Uh, and that's obviously good for us because we get to go as deep
as we want, fully understand, um, the business, the market and, and
our sort of unique advantage if we were to partner with that company.
But I think it's also really beneficial for founders.
I, I think over the past couple of years there were probably a lot of instances
that people took on money from venture firms and they didn't fully appreciate
what it was like to work with that specific partner or that specific group
because they'd only gotten a chance to know them over a couple of weeks.
In this instance, you get to know and see how someone can add value to your
company over a longer time horizon so that when they actually invest in a
part of your cap table and potentially on your board, There's no surprise,
you know, what it's like to work with them and you're excited to work with
that person for hopefully, you know, five to 10 years, um, sets the positive
spin that I would take on things as it relates to this specific environment.
I, in terms of areas that we are particularly excited about right
now, I, I would say one that comes to top of mind is anything in and
around the compliance ecosystem.
And that is for a couple of reasons.
One, I think we're seeing a lot of regulatory pushing in this specific
space, whether it is partner banks and fintechs and that ecosystem getting a
lot more scrutiny than it did before.
Whether it's whatever will come out right of sort of the chaos we're seeing
from SVB and the likely additional oversight regulators were put on
that side of the financial ecosystem.
I think it's a really unique time for startups to be building
in the compliance space.
Um, and then the other piece that we look at and why we're so excited is
compliance as a must-have type tool.
It's not a nice tab.
You have to be compliant.
You have to adhere to what the regulators are saying.
And especially in this environment where companies are, you know,
thinking about how to differentiate.
We think actually one of the unique ways they can differentiate is on
their level of compliance and how strong they are in that realm.
And that can actually help change compliance from being viewed as
a cost center to a way that they can actually win new business.
Kevin Horek: Okay.
Give me an example of that, cuz that's like, that's an interesting
thought, I guess that I never really
Tarun Gupta: thought about.
Yeah.
So in the like B2B realm, um, I, I'd say it's a little tangential to like,
if you have SOC two certification, then other businesses are really
excited about working with you, right?
Or at least you have that like, baseline level of clearance.
So in this instance, if you are.
In like a B2B setting, you have a certain level of like compliance and
thresholds that you are meeting and you're using certain software tools
that are better than the typical manual processes that exist today.
For a lot of the compliance tasks that exist.
You can showcase to the potential customers that you're going
to work with, Hey, I'm at this level, I'm using these tools.
My fraud rates are well below average, whatever the right metric might be.
And that could help you win business in that realm.
The other side of it, if you're talking from a consumer standpoint, is you've
seen, without naming specific names, there are neobank out there, right?
That have seen pretty high fraud rates.
And that actually has resulted in consumers who had obviously great value
onboarding in a really fast manner, no longer being able to use their debit card
or credit card at certain institutions in ways they thought they would want to.
And so now like that's a huge problem for them, right?
And so if you can showcase to consumers that, hey, like somehow we've achieved
certain level of thresholds where this isn't going to happen to you,
that could help you pull business away from some of the legacy players that.
You know, are running into some issues right now.
Kevin Horek: Yeah, that's interesting.
Considering like, and you can correct me if I'm wrong, it's usually a lot
of, like FinTech, especially kind of the banking space seems to be pretty
far behind and in adoption of tech.
I think it's starting to speed up.
Do you, do you
Tarun Gupta: agree with that?
I think it's starting to speed up.
I think my view of the past five to 10 years is most of the tech adoption in
that space was very front end focused.
Okay.
It was very customer acquisition, pure sales, immediate revenue
generation, uh, was the priority.
I think what we're seeing now is that there's a lot more of a focus on making
sure the underlying infrastructure of how you set up your whole tech stack,
uh, that has become prioritized.
And we also think that.
Other, other tools will go back to the compliance side for a second.
Things that were thought of more as cost centers are being prioritized a bit
more, or will be because we view them as true differentiation points and not
just, you know, something you need to have playing around in the background.
Yeah, okay.
Fair enough.
That,
Kevin Horek: that's interesting.
So I'm curious, is there specific things that you maybe look for in a company?
Uh, you kind of talked about a thesis a little bit earlier, but I want to dive
a little bit deeper into like, what are you really looking for in a company
outside of kind of just the million dollar milestone or some traction?
What else can people kind of expect from you guys to do when you're doing due
Tarun Gupta: diligence?
Yeah, so I'd say a couple of things.
Uh, and we'll keep the metrics to the side, um, because that's fairly standard.
Uh, one for us is understanding the market tailwinds behind your business.
Uh, a lot of what we are looking for is, there are a lot of great
ideas that exist out there.
But timing really is everything.
So why is this solution super relevant now and what is happening in the
broader economy that is going to push this to the forefront that will
force your ideal customer profile to actually adopt this with frequency
and then makes your solution a must have as opposed to a nice tab.
So that's like one piece of it.
The other piece is around the founders that we partner with, and
there are a couple of things there.
One is looking to see that they have a unique viewpoint and
unique level of knowledge in the space that they're building in.
So do they either have the right background in financial services for
a FinTech business or have they had some sort of exposure to something
that gives them a unique angle on how to approach this particular problem?
Um, and then in addition to that, we are very, very focused on founders that
are really, really good at bringing interesting people around them.
I, I think one of the things that we've really learned from, you know, doing
this for a little bit is it's great to back a founder that seems incredible
and knows the space really well.
But one person can only take you so far.
Even though venture is very much a, you know, founder-driven culture,
it's really important to back those individuals who understand their
own strengths and weaknesses and are able to supplement themselves and
bring on really high quality talent around them and are comfortable,
like deferring to those people.
Uh, and so that's another thing we really look for in the
people that we end up backing.
Kevin Horek: How do you determine that though, because
that's gotta be really hard.
Like, are you physically spending time with the founder and their
kind of core C-suite team, for lack of a better term for it?
Or how do you figure that out?
Because that's
Tarun Gupta: really challenging.
So I think it's a little bit more doable in today's environment.
Okay.
In 2021, almost impossible to the degree that we would've liked to, uh,
just given how fast things would move.
Now there are a couple different ways.
One is we look to meet founders and their teams in person before we invest.
Um, that's sort of a internal criteria.
For us, and I think it's a really important one because there's a lot
you can learn from someone in person.
And two also that you can learn from them.
Not on like a Zoom call that is just focused on the business of the company.
Yeah.
You like, that's fair.
Taking people out to dinner, get a chance to know them, what makes them tick.
Uh, so that's one piece of it.
The other piece is having broader conversations about a business where
not only the founder is a participant in that discussion, but a handful of
their leadership team is also involved.
It's pretty incredible how much you can learn about how everyone on a team works
together from an hour call when you dive into their business where either
the founder is dominating the call and they're taking up, you know, 50 minutes
at the time versus actually like when it's relevant, deferring quarterbacking to the
individuals on their leadership team who have better depth in sales, in product,
whatever like the segment might be.
Um, so those are just two examples that I can think of.
Kevin Horek: Interesting.
Yeah, I guess like it's all that stuff that really plays into it.
Yeah.
That's interesting.
So how long, traditionally would your maybe due diligence,
diligence process take?
Like obviously, is it like three to five months, six months, a year?
Does it really depend on the company because now that deals aren't
getting signed and you have a two week deadline or a week deadline?
Tarun Gupta: Yeah, it varies a lot.
I think one of the things that we're seeing right now is there are a lot of
interesting companies coming up, but there aren't a ton of like immediate fundings.
So companies are kind of deferring trying to wait for either the market to be in
a better, uh, place or waiting for their traction to be at a better level that
they can combat some of what we're seeing, um, from a market correction standpoint.
So the timing varies a lot.
Sometimes we work with businesses and get to know them.
Over a six plus month horizon because they're not looking to raise right now.
And then you can build really unique relationships, showcase your
value and how you can help them get access to new customers, uh, new
potential, uh, hire, stuff like that.
Other times it's a little bit more imminent where they are
raising and you have to sort of go into a process more quickly.
Um, and those obviously move at a much, much faster cadence.
Okay.
I
Kevin Horek: wanna dive a little bit deeper into that first point
because I don't think a lot of VC firms actually do that.
Is if, I don't know, I have a FinTech company, I'm, you know, maybe say I'm
$500,000 a year in recurring revenue and I'm on target to maybe hit that 1 million.
How do I make that connection to you and start building that relationship?
And, and kind of what do you expect for that?
And then walk me through kind of what you just said about like maybe helping me, I
don't know, build my sales team so I can get that extra, you know, $500,000 for
Tarun Gupta: a simple example.
Yeah, so we might be a little different in how we sort of think
about this, but again, very proactive.
So let's say we built a thesis, we find a sub-segment, whether it's in compliance,
whether it's in debt management, whatever the category might be.
We've identified through that thesis work, five to 10 companies that
we think are super interesting.
We have conversations with those companies and through that and
through sort of our own internal like diligence and understanding of the
founder and the market they're going after, we make an assessment on which
one of those businesses we think is most interesting and most likely
to be the disruptor in that space.
Let's say that specific company isn't planning to raise for six
to 12 months, because as you said, they're 500 K ish of revenue.
They wanna get to the million mark, or you know, they have cash right now and they
wanna wait, uh, for, you know, a handful of other milestones to come through.
What we'll do is we'll focus on two primary things.
One is.
Just generally staying close, obviously, but two, introducing
them to prospective customers.
Okay.
And that has multiple benefits.
One, it shows the value that we can add and the value that we are adding when
we're not even invested in your business and we're not even on your board yet.
So imagine the value we will add once we are, uh, two.
It's actually a great way for us to get validation on if this idea and business
is as much of a game changer as we think.
It's so the startup gets the value of potential customers coming in the
door as potential additional revenue.
We get the benefit of our network and the people we know who could be customers
for these different solutions coming in, evaluating them and letting us know if
they think it's super interesting or not.
And if they sign up, that is the best validation that we can get.
That this business is really interesting and there might be like meaningful
adoption, uh, on the horizon.
So that's one piece of it.
The other piece is around like talent and hiring.
And so we look to understand what the potential gaps are on
the teams that we work with.
It varies, obviously, by company.
Um, but if I were to generalize, most of the businesses that we work with,
the, the founders and the early stage teams are very, very strong from like
a product and tech perspective, but they usually need a little bit of help
on like a sales go-to-market side.
So it's potentially helping bring in that first sales hire for them, whether
that's a head of sales or more of a, you know, sort of junior salesperson to help
transition the business from being fully founder led sales to having like the
early signs of a sales org being built.
And so we can help supplement that side of things by bringing in the
right people and then also helping them think through more sophisticated
processes around how to build that go-to-market engine, um, in sales funnel.
Interesting.
Okay.
What advice do you
Kevin Horek: give to people?
Like if I was a cold outreach to you, and maybe I'm even less, maybe I'm not
ready for a Series A, like how can I start building a relationship with you today?
You know, and hopefully in, you know, maybe three to five years
Tarun Gupta: I will be raising a series A.
Yeah.
So it's funny, I've actually had this happen, uh, handful of
times with businesses that we are very much actively tracking.
And so the ones that have been most successful, I mean, one I I read
every email that I get, so, okay.
That's, uh, it's a personal problem and doing that, uh, from
a time allegation standpoint.
But I think one of the things that has been really successful for founders
who have emailed me as inbound is attaching their business and idea to
some sort of thesis work that we've done.
We usually are Wow, interesting.
Relatively outgoing with where we're spending time.
So on our website we have an insights page and we put our
areas of focus for the year.
We publish sort of our thesis post and where we're spending time and
actively hunting for opportunities.
And being able to tie the business that you're building to that thesis is an
immediate sort of like, click for us and like, okay, we should dive really
deep here and see what's going on.
So that's really like the first piece of it.
Um, and then it kind of varies based on conversations from there.
Okay.
Kevin Horek: Interesting.
How long
Tarun Gupta: or short should that email be?
Um, I wish I had more specific advice, but I, I wouldn't go super,
super, like long on the email.
I'd say just like a line or two at the intro set of what the business is.
Maybe a couple of bullets and then if there is like a deck or some sort of
material set that you can send over that gives like a better sense of the
business, the product, that's usually enough, um, to spur initial discussion.
Fair enough.
Kevin Horek: Okay, that makes sense.
So I'm curious then if I have a FinTech company, maybe.
And you guys reach out to me, walk us through that process a little bit,
um, and kind of what can I expect?
And sometimes that's kind of a weird conversation.
As a founder, I think sometimes it's like, sometimes that email from an investor I,
I found, and it is, it almost like, is a little bit scary, especially if you've
never raised money before, if you've been, especially if you've been bootstrapping.
So walk us through that a little bit.
Tarun Gupta: Yeah.
So couple different ways we handle that.
Um, one, wherever possible, we like to leverage our existing network, right?
Warm intros are always more powerful, uh, than cold outreach.
So we try and find, if we find an interesting company and we see someone
in our network, whether it's another venture firm, whether it's another
startup founder we've backed, or just a larger player in the ecosystem
that's connected, we love getting connected through those individuals.
That's the, the priority and the preferred approach.
If for whatever reason that isn't a possibility, Then yes, cold outreach
happens and maybe I'm in the minority on this, but I actually have found
relatively good success with that.
Awesome.
That's great.
And for me, the approach has been, and back to your point of like finding like
the right like length of these emails outlining why your firm is unique and
why this founder should talk to you.
And for me, the approach that has been most effective is outlining our view
on their market and why we think their approach is potentially interesting.
And so for us it's always been about identifying like why we have a unique
viewpoint and that we understand the market that you're building it, so
that when we talk to you, you're not educating us on the market, you're not
educating us on the size of the market, who the players are, where it's heading.
We, if we've done our homework correctly, we already have
a viewpoint on all of that.
And the conversation is purely about you, your team, and your product, and
why you think you're the right group to win in this particular segment.
Interesting.
Kevin Horek: That's actually really rare from a VC standpoint to do
that much homework in a market, usually, in my experience anyway,
you're usually, as a founder, always having to say what you just outlined.
So that's pretty cool that you guys are spending that much time
and effort in those areas right before you actually reach out
Tarun Gupta: to me.
That's the goal.
And, and, and we think that's one of the ways that we can
differentiate ourselves, right?
I sure, I think I heard it on prior podcasts, uh, that you've had with
other folks in the venture ecosystem.
And, and I agree.
I I really do believe capital in and of itself is a commodity,
and so venture firms do have to find other ways to differentiate.
I think the operating angle that we take and how we lean in and support
companies, both pre-investment and post-investment is one of them.
And I think the work that we do from a thesis standpoint to be really educated
on the markets that we're interested in, to really facilitate those intro calls
with founders is, is the other one.
Kevin Horek: A hundred percent agree.
So, and you're, I guess you're kind of in an unique spot because
you're usually doing series A.
You know, kind of stage investments.
But the reality is, is I think a lot more companies can bootstrap at least
for a period of time, because the cost to build a lot of software is a
lot less, and in a lot of cases, like almost in very inexpensive Right.
Be with especially some no coat code stuff.
And just, you know, maybe something off the shelf a little bit, but
what's your thoughts on like when a founder should raise money or maybe
they should just keep bootstrapping, because I always find it's interesting
to ask, like, what's your opinion on when a company should raise money or
should they keep maybe bootstrapping
Tarun Gupta: and delay it?
Yeah, I think venture money really only makes sense for a handful of
companies, a, a much smaller universe than maybe most folks truly believe.
So, I think founders have to be really honest with themselves on what type
of business that they're building and the capital needs of that business.
Uh, if you're trying to build a really, really massive business that requires a
meaningful amount of capital and upfront investment to be able to scale to the
markets and acquire the customers that you're looking for, and you're okay with
at the end of the day not owning a hundred percent of that business, then venture
might potentially make sense for you.
And if you're going through that process, it's very important to understand
what happens when a venture investor puts dollars in how that potentially
changes your economics from a return standpoint, if the business exits
and what it's like to work with that person over a really long time horizon.
There are a lot of other businesses that frankly, either don't need that
level of capital or the founders just want more holistic control
of their business and want to own.
A hundred, or if it's not a hundred, like a very, very large stake in that
company as opposed to what happens in venture businesses where, you know,
everyone gets diluted round over round.
And so I think that's sort of the first thing that you need to be
like, honest about is like, are you really building a business where
venture makes sense and understanding the pros and cons of taking venture
dollars and what that means for you.
Kevin Horek: Yeah.
No, that makes sense.
I'm, I'm curious, is there a range of equity you guys
are kind of looking to take?
And then is that, does that include a board seat, yes or no?
Is that kind
Tarun Gupta: of up for debate?
Yeah, so in the series a's, um, we, we like to lead where possible, when we
do lead those rounds, we do typically take a board seat and we are targeting,
call it roughly 15% ownership.
Uh, for us it's to make sure the fund economics work, uh, but it's also, we
want to have a meaningful stake in the business and be represented on the board
because we put meaningful resources into every company that we invest in.
And it just, If you're gonna put the full team behind an investment, which
is what we do, even though there's technically one partner that's kind
of the, the deal lead the sponsor and sort of holds the main point of
communication, our full team comes behind every single investment that we make.
And it just makes sense that way if we get to that 15% and have aport seat.
Okay.
So if
Kevin Horek: you are the lead on, say the FinTech deals, when you're evaluating,
are you pitching the other verticals inside of Jump to say like, is this good?
What am I missing?
What are the pros and cons of this potential deal?
Or is it kind of very like vertical agnostic or how does that kind of
Tarun Gupta: work?
Yeah, so we're, we're a very collaborative flat team in, in sort of how we operate.
And so any deal that we work on, even if I am the lead, there are at least
two, potentially three other people.
Actively involved in that deal with me.
And we like to bring in very different sort of points of view.
So I always like to have someone from our operating team involved one of these
deals to get their perspective on how they think of a particular business.
Depending on the subject, the segment and the industry that the business is in.
Someone else from our team might be a really logical person to pull in
because they've had experience in that segment, have looked at other businesses.
And so we look to bring our team in holistically to every opportunity.
So our core deal teams or call it somewhere in the two to four person range.
And then we discuss every deal as a full team before we invest interest.
Okay.
Very cool.
Kevin Horek: So is there geographic regions that you guys traditionally
like to invest in or walk
Tarun Gupta: us through that?
Primarily North America.
So we'll focus in North America.
Um, But within North America, we're pretty open to invest across the US even though
we're, you know, a Chicago based fund.
Yes.
If a business is based in the middle of the country and we see like a unique
opportunity there, that's awesome.
Uh, but we will invest across sort of, um, country and then
we do actually make a handful of investments internationally as well.
Those are a little bit more select.
The way I think about that is if we build a thesis and we happen to find
that the company we're most excited about is based in London, Israel, or
some other major market, we're totally okay leaning into those businesses.
Um, but we have historically avoided emerging markets,
at least for the time being.
Got it.
Okay.
Kevin Horek: That makes sense.
So I'm curious because you're, you're focused, well you specifically in kind
of the FinTech space, is there any advice or thoughts that you can give people?
About maybe coming up with an idea based on kind of what you see or predict will
be really popular maybe in a few years.
Like does AI play into that?
Does crypto play into that?
Does like, do you have any predictions on, on what maybe people can leverage?
Like I get some of the stuff's just buzzwords, like web three.
What does that even mean, really to, to a lot of people.
But is there specific things that you could maybe see that you'd maybe say like,
yeah, you might wanna look at this space?
Cuz we've, we've talked about a few, but is there others that you'd maybe give
people recommendations for that are maybe like, I really wanna build something, but
I don't really know what to build yet.
Tarun Gupta: Yeah, I, I'm happy to take a stab at that.
I'm not the most creative person from that standpoint, which is
why I'm a investor and not a founder amongst many other reasons.
But one, we already hit on the compliance stuff.
I think that is definitely an area of interest for us and we think there's gonna
be a lot more regulatory tailwinds that push businesses to think much harder about
the compliance solutions they have in house and how to improve that tech stack.
So that's one.
The second one is we believe that we are very early in sort of a reset in
people's like personal financial lives from like a debt management standpoint.
So if you look at all the numbers A across what happened during Covid, the level
of like delinquency in debt repayment or defaults was kind of at all time lows.
And you're seeing early signs of it starting to tick back up.
It's still well below historical levels, but we think that is going to increase
pretty meaningfully, unfortunately, given just the economic environment we're in.
And so we think that consumers will need better tooling to help them
manage their personal financial lives, but we also think financial
institutions will need more software driven ways to help them get in front.
Of consumers potentially becoming delinquent, find ways to actually
prevent it and find ways to actually help consumers potentially
get on payment plans to sort of meet, uh, sort of what the road.
So that's like another piece that we think is particularly interesting.
And then the last one, um, is kind of in the payment drum and very early in this
thought process, but Fed Now is something that's supposed to go live this year
and having access to real-time money, instant money movement is potentially
a game changer in financial services.
And looking at all the potential implications of that, whether it's helping
build the connectivity so people can get connected to those Fed Now rails,
whether it's looking at, okay, how does fraud change when money moves instantly?
There are a lot of different angles that you can take there, but those are
just a couple that are top of mind for me that I think are super interesting.
Interesting.
Kevin Horek: What are your thoughts on kind of AI in the FinTech
Tarun Gupta: space?
So it definitely has use cases.
I think that we are cautiously optimistic about the potential there,
and very careful when companies throw that word out in their business
description to understand what it truly is unlocking and why it's so unique.
Um, but I think it definitely has a place to play across the broader ecosystem.
Interesting.
Kevin Horek: No, I, I agree.
I a hundred percent agree with you.
I, I'm curious though, is there, if I'm pitching you guys, is there
anything that you expect in a deck?
Do you have a deck template that I can follow when I'm pitching
jump or, or walk us through?
Is there specific things that you need from me if I'm just pitching
Tarun Gupta: you guys?
Yeah, we don't have a deck template, but as I think about like the major
things, um, The first piece, even though this is maybe a little bit
re less relevant for us, you're not building the deck just for us.
Uh, you, you do have to hit the market and sort of what that looks
like, who the players are, who competition is, that's one piece.
Two is hitting around sort of the model, like the product that you
have in place and like how you plan to monetize from that business model
and why you chose that business model and that sort of pricing structure.
Three is around sort of the traction momentum of the business, where you're at
from a revenue customer signup standpoint.
And then the, the last piece is just around the team and understanding who
the current team is today, why they're their unique group to build this solution.
And then also being pretty open about where the gaps are on that existing
team and what the key positions are that you need to hire for.
And if you're raising, and it's a fundraising deck, how much you're looking
to raise, why this specific amount of proceeds is the right amount, and what
you think those approaches are gonna go to and what that will get you to like.
Does that get you two to three years worth of runway and takes
you from 1 million to 5 million?
Or does it give you five years of runway because you're incredibly capital
efficient and you can scale even further.
Um, so those are the various things that we think about or
look for, um, in the decks that we re in the decks that we review.
Got it.
Okay.
Kevin Horek: So because you have quite a big potential range of the series A
funding that you would lead the round on, if you are interested in my FinTech
company, for example, and say, I, I figure out like I need 3 million or 5 million,
and we get talking and it kind of comes out like, oh, maybe you need closer to
six or like seven or whatever, right?
Like it needs to go up or down a little bit.
Like do you work with a founder to kind of maybe figure some of that out?
Because I know in the past when I've worked at companies that are pitching,
it's like sometimes it's like, you guys are not raising enough money.
You're not ra, you're raising too much money and it's such a weird.
The thing is the founder to figure out like where that sweet spot is and kind of
what's your thoughts and how do you work with founders to maybe figure that out,
especially if you're gonna maybe give them
Tarun Gupta: some money down the road?
Yeah, it's a, it's a great question.
So we look to see that founders have a viewpoint on how much money they need to
raise, and they have rationale for why.
So that's the first piece.
But we do our own analysis and work to determine what we think
the appropriate amount is and why.
And so if we're getting to that point where we're potentially nearing an
investment, we have a very frank discussion with a founder around,
Hey, you suggested you wanted to raise in the case that you just mentioned
somewhere in the three to five range.
While in theory we think that's great, we ran through your financial model, built
a bunch of assumptions on how we think you'll scale from a revenue standpoint
and what type of expenses and increase in hiring you might need, and how that
might change through your cost profile.
Our view based on all that, and we'll share that, you know, pretty directly
with them is you actually probably need to raise, raise closer to 8 million.
We think that gives you the appropriate runway, given the revenue assumptions
we made, which are X and the cost assumptions we made, which are y to
give you two to three years worth of runway to be able to build your business
and go from X million in revenue to y million revenue, which will enable you
to more successfully raise that series B.
So we look to have pretty frank discussions with founders around
that, um, to outline our view.
That being said, if there's a pretty dramatic difference in funding
like that, that it does become a harder conversation, right?
If you're talking about raising three to five and we run our numbers and
we think you need 15, that's gonna be a really tough conversation.
If it's three to five and we think you need like seven or eight, that's
something that can potentially be bridged.
Okay.
Kevin Horek: Fair enough.
So you say that you traditionally like to lead around, that's fine.
Makes total sense.
What are you expecting from the other investors that are
gonna be like after you guys?
And the caveat to that is if, are you fine leading around, even if.
You know, I, it takes me a while to get additional investors.
Like I've had, I've, the question I guess is maybe better put, like I've
had where it's like, we'll lead the round if you find one or two other
investors that believe in the idea.
And I get that you're a series A, so it's a little bit maybe
not relevant or, or maybe it is.
I, I don't know.
Just trying to figure out where you guys are with the series A.
And I guess it goes back to my earlier comment about Series A
seems to mean different things in different parts of the country.
So just trying to gauge how you guys would see that and what it
really means when you guys mean lead
Tarun Gupta: around.
Yeah.
Uh, when we lead around, we put out the term sheet which outlines how much
capital we think, uh, the business needs for this particular round, how much of
the round we would take up and pricing.
And that is a commitment from us that if we agree on these terms and everything
signed, that we are going to fund this business for X million dollars.
Let's say it's a 10 million round, let's say we're putting
in seven, we're in for seven.
The remaining three.
Either can come from a segment of your existing investors.
Most of the companies we invest in have raised a seed round.
So there's some levels of existing investors for the most part in
the A rounds that we, uh, lead, the existing investors usually are
pretty excited to double down and put more money into the business.
And so that remaining call it three mill in this example, gets sort of
allocated between the existing investors.
If for whatever reason there is still room after that or in a lot or handful
of instances, the founder wants to bring on another party for a specific reason,
they add some sort of value that the parties around the table don't currently
provide, then we slot someone else in, take a portion of the round, um, because
of the unique value that they bring in.
So that's how we think about like leading those rounds.
And yeah, we issue the term sheet, put everything out there and commit to
funding the amount that we put out there.
Kevin Horek: Okay.
No, that makes sense.
How much due diligence do you do on the past investors?
Is it relevant
Tarun Gupta: at all?
So, uh, it's, it's relevant in the sense of, it's very helpful to
understand those investors' viewpoint on the company, the market, and
how they work with their founders.
And so we look to build really good relationships across the
ecosystem with other seed investors.
One, it ends up being a really good ground for sourcing.
Like if you've worked with a seed investor multiple times, you like their portfolio,
you like how they operate, hopefully you can get an inside track to look at their
companies as they come up for Series A.
But it is pretty critical to understand how they operate so that if you're sitting
on a board with them, you are aligned and you have sort of similar viewpoints.
Um, so for sure it, it comes into play and there are instances
that go both ways, right?
Like you've invested with people who you really like, who you wanna make
sure you sit on boards in the future.
And I'm sure everyone's had instances with people that maybe aren't the best
fit or don't think in the exact same way, um, that maybe aren't the best fit.
Down the road for you to partner with again.
Sure.
Kevin Horek: I'm also assuming that you could potentially recommend a firm in,
in your example, like if you put in the seven of the 10 to maybe give me that
one or three or some combination of that.
You have other firms that you potentially work with that
Tarun Gupta: you could bring in as well.
For sure.
Yeah, and that's another piece that we hopefully add value into.
Depending on the business and the sub segment that you're working in, we know
the other investors in that space as well.
And the ones that we think could be meaningful value adds on your cap
table if they were given the chance.
Kevin Horek: No, that, that makes a lot of sense.
We're kind of coming to the end of the show, but is there any other
advice that you would like to pass on to founders or entrepreneurs?
Tarun Gupta: Um, I, I think just to go back to something you said, it is
a challenging environment right now.
That being said, I think it presents really unique opportunities to
build really interesting solutions.
There still is a meaningful deed for continued, uh, tech innovation,
and hopefully it gives founders a chance to really get to know the VCs
that they might partner with, and so they can find someone who truly is
the best fit for them down the road.
I, I agree
Kevin Horek: a hundred percent, but I think the caveat to that is if I have a
business that is maybe making some money and doing okay, if, if due diligence takes
six months, it might crush my business.
So like what's your thoughts on kind of that, like, as a founder, if I'm pitching
you guys and for my series A and it's like, do you, you'll figure it out.
I get that you'll just run some, you know, you'll, during due
diligence you'll figure that out.
But how transparent or upfront should I be?
It's like I kind of need money in the next.
You know, 60 to 90 days instead of, you
Tarun Gupta: know, six months for example.
Yeah.
Uh, so bunch of things to unpack there.
Um, just to clarify, the six month example I gave is just in an Sure.
An environment where a company doesn't need money right now, if a
company needs right money immediately, we work on that timeline right?
To, to get fundings done right in handful of weeks, a month, whatever it might be.
Um, in, in terms of thinking about how you approach investors,
I think it's a balancing act.
I think you want to get out and have investor conversations reasonably
well in advance of when you run out of money or when you think you're
in that like two to three month timeline of like, I need money.
So if you have, let's say like 16 months of runway left, I would start having
those conversations with investors.
I'm just starting to get to know them and figuring out who you might wanna
really like, have deeper dialogue with in like the next few months,
as opposed to waiting for when you only have six months of runway.
To then start those conversations.
I would like to think that investors aren't gonna take advantage of situations,
but that's just not the reality, right?
Yeah.
And so if you are a company and you only have a couple months of runway
left, there's a chance that other investors are gonna take advantage of
the fact that you only have a couple of months of runway left and squeeze
better terms out of you for that.
Right.
That's just a cold, harsh truth.
Yeah.
And so you put yourself in a better position if you start those conversations
in dialogue when you're not in dire need of money, cuz then you can dictate the
terms and the pace a little bit more.
Kevin Horek: Okay.
So it sounds, and you can correct me if I'm wrong, is around that
like year-ish mark of like, you should prob maybe give or take a few
Tarun Gupta: months either way.
Yeah, I think that's right.
Kevin Horek: Okay.
No, that's, that's really good advice.
But sadly we're outta time.
So how about we close with mentioning where people can get
more information about yourself, jump in any other links you wanna
Tarun Gupta: mention.
Yeah, so for jump, uh, check out our website, jump cap.com.
Uh, you can see the companies we invested in.
There's also an insights page which goes into a bunch of the outward
facing content that we put out there.
Um, and then you can find both Jump and myself, um, on LinkedIn.
Uh, and then my email is troon jump cap.com.
Uh, always happy to chat about anything in the ecosystem.
Perfect.
Tarun, I really
Kevin Horek: appreciate you taking the time outta your day to be on the show,
and I look forward to keeping in touch with you and have a good rest of your day.
Tarun Gupta: Thanks, Kevin.
You too.
Really appreciate the time.
Thank you.
Kevin Horek: Okay, bye.