Episode 001 – Taking Risks

Princeton Spark
Princeton Spark
Episode 001 - Taking Risks
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Welcome back to the Princeton Spark. 

On this episode about taking risks, here now are two men with Texas-sized entrepreneurship goals, deep in the Lone Star State. Meet Marcus Stroud and Brandon Allen, the founders of TXV Partners, a venture capital firm.  

Marcus: Yeah, my name is Marcus Stroud, class of 2016 from Princeton, I am one of the founding partners of TXV Partners, we’re an early stage venture capital fund, based in Austin, Texas with an office in San Francisco as well. We focus on early stage investments.

Brandon: Hi, I’m Brandon Allen, one of the other founding partner at TXV, as Marcus said, focusing on early stage investments, a lot of which is in the consumer space, in the enterprise space. And so I tend to handle some of the enterprise related companies.

The two of them set up shop in Austin, which is certainly on the rise. But frankly, not the most obvious place. 

Marcus: I will say this, it definitely is risky, because at the end of the day, two-thirds of venture capital comes from one part of the country, which is Silicon Valley. And then a larger concentration is also in New York City and in Massachusetts obviously. And Texas is kind of a state that is going through this initial growth of venture capital. Historically, we have had successful funds before from the likes of Austin Ventures or Sevin Rosen and we’ve never had venture capitalism, the level that other parts of the country have, regardless of how incredible our economy has been for the last 10-15 years. So there’s definitely substantial risk that we’re taking in saying that we’re betting on Austin as a venture capital fund regardless of our network, the strength of it that largely resides in San Francisco and New York, and other places. But at the same time, venture capital is inherently risky asset class, you have to take that and double down on places that people may have some skepticism about. And, we are making that bet on Austin and Texas as a whole.

Not obvious, like Silicon Valley, although they do maintain an office out there. But they observed and calculated that Austin – and Texas – have the resources to make this idea work. 

Marcus: I interned in New York. And then, when I got into my professional career spent a substantial time in San Francisco, in various investment roles on behalf of firms in Texas and New York. And being in those places, really taught me that, man, Texas has all the resources, has just as much capital, that you would need to build an ecosystem. But I’m not sure that there are a lot of folks that have the same vision that maybe needed to create an ecosystem of something of that magnitude, or that could scale.

Texas is great, in that Austin has a great amount of venture capital funds, there’s a ton of funds moving there. There are a ton of people moving from the Valley to Austin every day, because the cost of living is so much cheaper. And then the standard of living is a little bit higher, as a result of a lower amount of money needed to do well. But being a native Texan, I have a ton of pride in Texas. And when I was pitching Brandon on setting up shop in Texas, he saw the same vision in Texas also.

The two of them are building a $50 million venture fund. TechCrunch says TXV is the largest fund led by an all African-American general partner group.

Marcus: as far as we’re concerned, we know, as of right now, we’re the largest African-American GP-run fund in Texas. As far as the country, I’m not sure, because there’s a lot of great firms out there right now that are building strong track records, building large funds like Harlem Capital and others. So we’re not sure but you know, we’re glad to be in the conversation.

TechCrunch also called the $50 million dollar number “lofty”, especially for two young, black men starting their first fund. In Austin. In Texas. But to them, it was almost necessary to set that as the goal. 

Brandon: We definitely set a pretty high target for ourselves. I think that was driven by the work that we felt that we could do with the perspective that we thought we could bring. $50 million for a first time fund is definitely a little bit higher than some other people would have chosen to do. But at the end of the day, when Marcus and I decided to do this, we decided to do so with a mission, and to have A mission driven firm. And so for us, the amount of the fund is just simply going to be a factor in the amount of good that we can do. 

Marcus: Yeah, I’ll say this. I think in life, you gotta have big goals. And like, you gotta take crazy shots, you gotta do things that folks aren’t willing to do. I think if we were in Silicon Valley or New York City, then you’re playing by those standards, you’re playing by those norms, you’re playing by what the venture are rules out there, then yeah, you can call it lofty. When you’re in a different place, a different ecosystem, you’re playing under different rules, the LP base is a lot different, things are just much different. And so I wouldn’t necessary call it lofty, we’re just playing in a different ecosystem in different worlds than the rest of the venture capital world. So we can do things a little bit differently. 

Brandon: I think whenever you do something, especially if it’s atypical or ambitious, or whatever word we choose to use, is you have to be willing to risk it all. And so I think that if you set a goal, like raising a $50 million fund, when it’s not done too often, especially at the ages that we are, you have to be willing to really go for broke. You know, there are times I think that, we think about what our lives were before. And you know, what we’ve given up, but I think we actually circle back to what we’ve gained, and what we’ve been able to do with the people that we’ve been able to meet. And so risk doesn’t play into it anymore. For us what plays into it is, what’s the scope of what we’re trying to do, and how do we get there? And how do we execute on a plan that you had say, How much were you willing to risk to get this done? I’d say that we will continue to risk everything.

For Marcus, his risk taking is a kind of personal mission. His story is a classic, come from small-town poverty to make good at Princeton, and then get a great job on Wall Street. He thought he was set for life. 

Marcus: When I began working in my first job in New York, I wasn’t fulfilled, I wasn’t satisfied. And I actually got very tough phone call from family members saying, “Hey, this is kind of position the family is in right now.” And here I am on my first day of work in New York City, really happy, just got a great signing bonus. And I’m getting a phone call from a family member about how bad financially the family is doing. And I just knew in that day, it was crazy. That first day of work. I just knew in that day that my life had to be atypical. Because we didn’t go through normal things. And I think if I was going to help change the trajectory of my family, you know, change generations, I was going to have to be the one to take a significant risk in my life, because I was the one who was afforded the opportunity to go to a place like Princeton, where those resources are numerous, that folks will back you up on your crazy dreams, you’re taking a risk that they took themselves.

To start a venture capital fund in Texas, instead of going down a traditional Wall Street path, that takes some risk. But they weren’t completely starting with nothing. 

Marcus: We didn’t have a numerous amount of money. We didn’t have an absurd amount of capital. We didn’t come from wealth, but I will say this also: I would be lying if I didn’t say we didn’t have an upper hand compared to a lot of people. Yes, we didn’t come from wealth but I also was fortunate that I had somebody by the name of Torii Hunter and Katrina Hunter.

Yes, that Torii Hunter, the baseball star. He lives in the same small town as Marcus in Texas. Torii Hunter took Marcus under his wing, and gave him his first experience with venture capital. And now he’s encouraging him and Brandon – almost mandating them – to be bold and take on risk. 

Marcus: He said, “You’ve been afforded the privilege you have, by going to a place like Princeton, by having a mentor like me, you better take some risk.” And so I didn’t see any other opportunity not to do something like TXV. It was just meant to be. 

TXV Partners is focused on millennial and Gen Z founded startups. When these startups walk in the door, this is how they weigh the risk.

Brandon: It’s a lot of different things. I think the first thing is, when the founder walks in the door, it’s presentation. So presentations, first thing that anybody always notices about everybod y. After that, the second thing you look for is mastery. Does this person know what they’re talking about? Do they have a lot of knowledge in this space? Marcus and myself, the rest of our team, we don’t know every single thing about every single industry in the country. And we never will. But the people that we back should know, almost every single thing about the field that they’re in. I think that’s the second thing. As far as risk, there are going to be a lot of things that happen, just in the course of running a business. Pivots are going to be required. So the third thing after that is, you look to the person, to the level of grit and intensity that person has, Is this person relentless in accomplishing their goals? And so, things change, people change, markets change, company shifts strategy, but we’re betting on a person or group of people to adjust to those headwinds or tailwinds, or macroeconomic factors or whatever else it may be. And so it really does come down to, I think, the person at the end of the day. 

For partnership and investment opportunities, send an email to connect@txvpartners.com

Many thanks to Vaidhy Murti, Daphne Earp Hoppenot, Marcus Stroud and Brandon Allen. You can read the show notes for this episode at our website princetonspark.com. 

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