S6 Ep16 - Shane Neman - Seasoned Entrepreneur and Venture Capitalist

Speaker A: Pitchdeck is proudly supported by Carter is the leading provider uh of um, equity management and company building solutions that underpin the multi trillion dollar private market ecosystem. Since its founding in 2012, Carta has grown to manage over $2 trillion in equity for over 2 million people. Carta is trusted by now over 40,000 companies and over half a million employees to manage cap tables and share plans and valuations. By making it as easy to issue equity to employees as it is to put them on payroll, Carter is creating more equity owners and taking steps to close the equity ownership gap. If you want to learn more about Carter's wide range of products for startups, head over to Carter.com to find out more information. Google Cloud is the leading provider of UH cloud solutions for startups. The Google Cloud product suite allows startups to build and scale faster through Google Cloud's Managed services secure Global infrastructure, leading tech and AI powered solutions. It reduces your infrastructure costs and has features like automatic scaling which allows you to meet real time demand while only paying for what you need. Pitch Deck has partnered with Google Cloud to give our listeners access to the Google Cloud for Startups program where you'll find financial benefits, business support and technical guidance and training. Search for Google Cloud for Startups to learn more welcome to Pitch Deck where we have bite sized conversations with investors in early stage startups across the entire spectrum from early stage VCs to angel investors and exited founders or operators turned investors. Whether you're currently looking for funding, thinking about funding or just interested in the startup ecosystem, then Pitch Deck is for you. Let's dive into the Pitch Studio and speak to today's guest. So I'm super excited to welcome Shane Niemann to UH Pitch Deck today. Shane is a serial entrepreneur, venture capitalist and real estate developer with a career spanning over two decades. Shane's path began with a degree in Computer Science from New York University and he founded his first startup, June Buug, a digital events platform that disrupted the events and hospitality industry in 2001, growing it to over 25 million revenues and exiting to Skynet Media Group in 2008. He continued his UH entrepreneurial success with Easy Texting, the largest business SMS software platform in the US with over 50,000 SMB customers, which was later acquired by Coolfire. For the past two decades, Shane has been Principal of Niemann Ventures. Shane focuses on identifying unique and often overlooked opportunities across venture capital, private equity and real estate. His investment portfolio includes notable companies such as Athletic Greens, Kraken, Flexport and GraphCore and over 20 large scale property investments across major cities in the U.S. so Shane, really excited to speak to you today.

Speaker B: Thank you. Thanks for having me. I'm super excited as well.

Speaker A: Uh, I like to zone in on a line I just said about unique and overlooked opportunities. Uh, in the world of investing at the moment. What do you think some unique and overlooked sort of verticals might be?

Speaker B: Well, um, okay, so I invest not just in venture, I invest across all different asset classes. So I do public securities, uh, like stocks, I do private equity, um, like more later stage businesses um, that are cash flowing, um, and my passion is in venture just to be honest, uh, because I've been there and done that and to a degree it's my way of giving back because I'm supporting the community that supported me. And I um, was in the startup founder shoes uh, several times and I failed several times before I found some successes. Uh, and so the things that I think are overlooked are usually contrarian. Um, so I'll give you some concrete examples that might be helpful, uh, you know, in the public markets. I've been taking a bet that I've been wrong on for a little while now, but um, I'm sticking to. My thesis is um, West coast office REITs, uh, Class A office REITs. So San Francisco, Los Angeles, um, there's a lot of concern about occupancy rates. There's a lot of concern about um, just rates in general, uh, with also debt maturities and how these office REIT owners are going to handle that. Um, my opinion is that it's overblown. I think the occupancies are going to and are, and I know that they are um, getting better. I think the return to work, return uh, to office is going to be sudden and vicious um, because every founder I speak to is going to SF or LA or New York. There's no more of this Miami, um, Austin, Nashville kind of uh, migration. In fact it's from anecdotally. I mean I don't have actual real uh, numbers on this but you know, I can only just kind of make judgments on what I'm seeing around me. Um, they're all going there because the talent is there and everyone acknowledges that the magic happens and in person and not virtually. And a lot of these REIT owners have class A iconic buildings that everybody wants to be in and the best locations and that that's going to, that's going to pay off for them. And I also think that you know, banks don't really want to take over these office buildings and so they'll work it out. I don't think that they're going to have these, um, disastrous kind of, you know, foreclosures and things of that nature. Um, I don't know what's going to happen with rates, but I do know what I, what I know about office and I know about venture and that's one of my bigger bets. Um, the other thing that I did about seven or eight months ago is that we bought for example, Pacific park at the Santa Monica Pier, which no one really thinks about. It's an entertainment complex. It's kind of like one of the most iconic places in, in the United States with the Ferris wheel. And not a lot of people even knew that it was privately owned if you think about it. And it's a very much like a Warren Buffett style toll booth business. It's been around for 30 years. It's one of the largest tourist destinations in Los Angeles. It's the second most touristed destination with 18 million visitors a year. Um, and so, you know, that's also the kind of business that you, if you think about, it's very hard to imagine a way that AI or deep tech or something like that will disrupt. So the investment style that I've been having in the last few years is who are the leaders in deep tech, quantum AI, robotics, synthetic biology, all those kind of really cutting edge frontier technologies and how can I invest in them, whether it's public or private, um, Tesla being one of them because they have Optimus. And I'm also a big investor in figure AI, which is the most advanced humanoid robot. Um, we're actually the seed investor in that company. And then what are, you know, what are the businesses that can't, or I don't have, again, I don't have a great, good enough imagination to think about how those types of companies can disrupt them. So tourist destinations. I'm actually looking at a hemorrhoid cream company, if you can imagine that. Um, because why the heck is Preparation H the leader for the past 70 years? It makes no sense. Um, and it's like a $3 billion industry. So, um, it might not be the sexiest thing, but it makes a lot of money. Definitely an interesting business if you think about it. So what's overlooked, that's overlooked in my opinion. Um, so those are the things that I try and really focus on. And, and you know, if you're doing it, you might as well do stuff that's interesting. Um, and you know, it's kind of hard to do that consistently because interesting stuff does not Come along all the time and you have to be patient. Um, and it's easy to kind of get impatient and uh, if you're an investor, try and um, deploy whenever you see stuff, uh, that may be remotely interesting and waiting for the really interesting stuff to come in. So, um, that's what I try and do. Uh, and that's my thesis right now.

Speaker A: I think that's super, super interesting. Most people I speak to, uh, a tech and only tech. So I think it's great to hear, you know, this sort of spread bet of a portfolio. I'm interested. Like how do you. Do you have sort of buckets when you're allocating funds onto like bricks and mortar tech, hemorrhoid cream, etc. Or is it what, what comes around when it comes around and the opportunity?

Speaker B: Yeah, you know, I have the luxury of not having to be so structured because I'm not a fund. Um, it's a family office and it's majority of my own capital. Uh, so I can outsize in certain sectors when the opportunity presents itself. Um, you know, I'm, um, probably. It sounds weird, but I'm probably outsized. And that's like West coast office REITs and real estate that's super depressed through the public markets. Because I think this is a once in a lifetime opportunity. And when you see things that are really weird, right. And don't make a lot of sense, that's when you have to take heavy bets. And I've been wrong, by the way. And I've been. I'm not right about it yet. Um, and the key is yet. But time will tell. I have been completely wrong about things too. But I have a lot of confidence in this, in this decision. So I try and be nimble and I try and, um, not kind of confine myself to. I only put this much in this and I put this much in that. I'll change my mind. And you know, they call it updating your priors, right. I'll change my mind and I'll be opportunistic. And that is, um, probably an advantage that I have over, let's say, other investors or funds. So, yeah, I don't have a set formula where I'm allocating a certain amount to this sector, that sector. There were times where I was mostly real estate, and then there were times where I disposed of most of my real estate. Actually post Covid, I own physical real estate too. So, um, post Covid, I decided I live in Miami. And Miami had gone kind of bonkers and bananas because there was A lot of influx of people from all over the world and major metropolitan areas like New York, Louisiana And a lot of those real estate folks came here and they started pushing the price of real estate up significantly to levels that, you know, were New York levels or LA levels. And Miami had never seen that before. And, and um, so I thought that that was a good time to exit at that point.

Speaker A: And how do you assess, uh, my own personal interest. How do you, how do you assess an opportunity like Santa Monica Pier as an investment versus you know, the obvious SAS tech build ARR exit?

Speaker B: Well, it's easier to actually allocate, you know, a large amount to something like the Santa Monica Pier that's been around uh, for, for 30 years and it's cash flowing and those types of things. Um, it's a, it's an art, it's not a science, let's, let's put it that way. And you have to understand that they're not the same with a SaaS company. You know, if you invest early enough, you know, you can do 100x but it could go to zero. Right. And that's a different risk profile than something like the Santa Monica Pier that's been around for 30 years. And you know that it consistently generates revenues and then there are ways to increase that and it would take a few years to do that. But you know, it's an established business so I think you have to shift your mindset in those cases and say, hey, you know, for me the Santa Monica Pier was, this is a once in a lifetime opportunity. It's iconic. Um, when is something like this ever going to be available and would I be happy looking back 10 years from now owning this? Right. If I have to. And you know, when, when I went through the checklist of things and you know, there's a lot more diligence than that. I'm really oversimplifying it, but um, I came to the conclusion that this was, this was just an incredible opportunity and I outsized my investment in that. Whereas when I'm making a, um, a bet on a SaaS company, depending on obviously the stage that it's in, right, it could be in a very early stage or uh, you know, it could be later stage. You know, I have to consider that this could, this could be a zero. It's not that something like the Pierre couldn't be a zero, right? Like there's some crazy stuff that could happen, like there could be a tsunami and the entire thing goes under the water. Right? But those things are improbable it could happen, but it's highly improbable. But the probabilities of Assassin's business going to zero are much higher. And so you size your bets accordingly. Uh, and you know also when, when I'm making a Bet like a SaaS company, I'm not just investing in the, let's say the, the, the, the product and, and, and the category, but I'm mainly investing in the, in the founders. And um, that's my bet, is that these founders can make this. Whereas when you're dealing with an established company like Santa Monica Pier, you know, you could pretty much plug and play any operator. There are worse operators, there are better operators, but you know, you have to oversee them and that kind of thing. So it's two different kinds of mindsets there.

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Speaker B: Sure. Obviously if there are other investors that have invested that are significant, that's a really great signal. Um, it already kind of filtered it out for me that you know, some other big VC has looked at this and they've kind of done their diligence. You know there are obviously exceptions like Theranos and that kind of thing, but um, for the most part that's a good signal. Um, don't let anyone tell you otherwise. Who you know matters. And you know, signaling, social signaling really matters because it automatically gives me ah, an immediate filter. Because when you're looking, you know, when you're looking at a lot of deals, there have to be signals that you have to use to be able to filter out the ones that you want to look into deep, deeper. So to the extent that you have a lead investor that's significant or known, that's really important. Um, but it's not always the case. I've invested in companies that don't have leads. I've led when I really absolutely love the uh, love the founders or the, or the technology that they're building. The other thing is, is that you have to be able to explain what you do in two to three sentences. I say this all the time and I've done other podcasts where I've said this, so it's like kind of cliche and I'm sure everyone else says this, but I can't explain to you how important that is. You know everybody talks about the attention economy, right? That applies to VCs, like we're human, right? Uh, we are looking at Instagram and Twitter and we're, you know, we're getting thousands of emails a day and you know, you gotta do what you gotta do to stick out. And you know, I'm literally not email, I'm not reading passages, first paragraph. And if you can't kind of get my attention in the first paragraph, I'm not going to read an email that's this long. And 99% of the time I'm not going to even open the deck, right. I need to know what it is in the first three sentences. And if that makes sense to me, I will open the deck and then I will. And this by the way, I believe this is the process for majority of people, uh, investors. Then I, I will either put it in a pile of no thank you and I'm going to send a no thank you email to them or uh, by, by the way I reply to everyone because I think they should get that courtesy or okay, I'm going to, you know, I schedule, you know, I snooze it to a time that I can actually sit down for five minutes or 10 minutes and take a look at it and see if it's something that I'm interested in pursuing. So um, that's really, really the most important. You know, everything else is great. Um, you know, like your deck should look good and this, you know, but the most important thing is, you know, no one's going to look at your deck if you can't get the first three sentences to hook you. Basically.

Speaker A: Yeah, I think that that's a, ah, great tip. I think concise, you know, conciseness in communication is a great skill. Ongoing sales, marketing product. If you can get, if you can say what you want to in a concise manner, I think that's an excellent skill for people to have. Um, it's interesting you talk about social signaling which is obviously important. Um, and any vc, uh, or angel that denies that Is, is, is fooling themselves. Um, and how, how would you say to say, ah, you know, a founder that doesn't have that network, you know, we have a problem in VC that is uh, the same type of person that gets all the funding because they one from rich parents. So like, if you don't have that network, what tips can you provide for someone who might be an incredible founder, might have an incredible idea, but doesn't have that network? How can they show that to you that they are the right person to invest in without that social signaling?

Speaker B: Well, first of all, the power of meeting people in person is very important. There are so many of these tech meetups and there are so many things like YC and techstars and these types of things, um, show up, you know, make yourself presentable, go up to people and go up to VCs and introduce yourself. I mean it's, you know, they're, they're there to meet you. And so that, that's one way. The other way I would say is if you don't know any VCs or you know, you're not known, or uh, that kind of thing, then find other founders that do know them. And founders tend to help other founders. And if you find a founder that really likes you and believes in what you're doing, an intro from them is just as good as an intro from another vc. Actually the best investments I've ever made and the best founders I've ever met were intros from other founders that I've backed. You know, I take that seriously. I take it very seriously. When a founder that I respect and I know or has built a real business recommends you that that actually may even be a better Signal than another VC. And, and founders are much more approachable than VCs. I, I uh, would say. And you never know, they may invest in your company too. So that's not uh, yeah, well, I mean it's, it's really, I mean I think we know each other from a post exit founders group, right. And so like how seriously do you take it when another post exit founder sends you a deal, right, that they're investing in. Right. And so it's, it's the same, right? It's, it's the same kind of signaling.

Speaker A: Yeah, totally agree. And, and you know, obviously you've been a founder multiple times yourself, so with your operator hat on and now your venture hat on when you are looking at early stage opportunities, most founders that listen to this podcast are uh, early stage, what traction does, let's say precede what traction or type of traction do they need to show you to show that this problem solution is real?

Speaker B: Well, obviously revenue, if you can, which, um, not everyone can, but if you can, uh, that's the, that's the ultimate form of showing traction. Um, but you know, even running some simple A B tests with a few hundred dollars, right, and showing that there is demand, showing that you understand the metrics of your company and how, how you can scale that, you know, maybe getting one anchor, one anchor client that can validate for you. Those things are very important. And anyway, honestly, you want that yourself before you get, you get money because like maybe you're wrong. Most likely you are wrong just to be honest with you. Like that's, that's the truth. And so you should, you should just be trying to, you know, figure out how wrong you really are before you go and do all this other stuff around it. Because you taking someone else's money is not fun. It's just not. You know, you become beholden to them in a way that will cause it, cause you emotional distress when things aren't going well. And there's going to be plenty of times when things aren't going well and you know, like it not just, not just because it's another person's money, but because you know, you spent a lot of your own time and your possibly your own money, which is your time is worth more than money. Um, so uh, to the degree, you know, this is like cliche stuff, you want to fail as fast as you can, but you have to really understand that you know what you're doing before you go out and try and get money from anyone. Um, and if you have uh, you know, VC friends and stuff like that, I would do dry run tests before you go out and do that. Just show someone and get their honest feedback, um, and then fix those things because it's going to increase your likelihood, uh, of successfully raising funds. And my last piece of advice is if you can, don't raise money if you really can. Um, it's. Sometimes it's not possible, sometimes it's hard, but possible. But you really don't want an investor if you really can't, if you really can get, get by without it. It's this like funny thing about investors. Um, you know, investors want to invest in companies that don't need their money basically, you know, because they're like successful and they want to get into it, right? Like um, and so I think successful businesses and businesses that have stuff don't want investors because why give up A piece of your business to someone who's just bringing money if they can't do much more than that. Um, especially if you don't actually need the money and it's just some sort of psychological, I don't know, uh, crotch that you're using or something like that.

Speaker A: Yeah, I agree with that. I think it's, it's sort of inbred in new founders now that A, raising money is success and B, raising, uh, money is a signal, an ego signal externally that you're going to be successful versus just getting your head down and building a business.

Speaker B: No. Yeah, my, my first business that failed, we raised VC money. Um, and I did it during the dot com boom and two years later I was broke and I had really pissed off investors and I swore I would never do it again. And so I, I did bootstrap my, my next two ventures. I mean to the, to the point where when I first sold my first company, I used the proceeds, the majority of the proceeds of the first sale to, to fund the majority, you know, my next company. Because I didn't want to want investors. And also if you have money. Right. Which some founders do. Not, not, not, not all. I understand that. You know, there's, there's a whole section of founders that have no money and they're doing this like on a shoe shoestring budget. But there are also investors that do have money. They have a job, they have savings. You want to impress an investor, show them how much money you're willing to pay. Put up. I'd be if, if you have your money par. Pursuit. To me, the likelihood of me investing is very high. You know, if, if you look at like for example, figure right figure. AI it.

Speaker A: He.

Speaker B: He raised in 2022 when the stock market was like collapsing. VCs were going out of business. Tech was, you know, NASDAQ was down like 40% or something like that. You know, the whole world was like falling apart. And you uh, know there was like fire although cr. Like at all time lows. Um, and, and it was, it was a really risk off environment. Right. But you know, and all he had was like a few guys that he invent that he hired from Boston Dynamics. He had some renderings, some computer simulations of a robot and a hand, like partial hand. But the thing that kind of made me go like over and write a check when it was painful to do at a time that it was painful to do was he was putting in 20 million of his own money. Right. Because he was a previous founder that took the Company public. Now that's an extreme case, obviously, but it's all the same either way. If you're a startup and the founders are putting in 25,000, which is a lot of money, maybe, or 50,000 of their own money that they had saved up, you look at it very differently. You have real skin in the game. Uh, it's a totally different shift in perception.

Speaker A: Yeah, they're all in, basically.

Speaker B: Absolutely.

Speaker A: Um, lastly, for founders that are bootstrapping, the message here is you don't necessarily need to raise money. So for those that are, um, bootstrapping and don't have a ton of cash, are there any sort of tips to go from that zero to one, um, to get it off the ground to then see if raising angel money or VC money is the right way forward or you might be able to build a profitable company. Are there any hacks to go from zero to one without needing to spend a ton of cash and hiring expensive people?

Speaker B: There is no hack. Sorry. It really sucks and it's hard. I'm sorry. I wish I could tell you that there was an easy way, but if you want to hack, you shouldn't be doing this. Um, because people see through the bullshit. And maybe you can fool one or two VCs or something with some, some hack or some, some trick or something that you do. Um, but in the end, you know, hard, hard work, um, brain smarts, ingenuity, these things are irreplaceable. And, uh, it'll make you shine. You know, Uh, I think obviously there's, there's something to, about self promotion and people, you know, pay attention to that. But what's even more impressive is if you just are heads down and then all of a sudden you've built something brilliant and then you showcase it. Um, you know, you've been silent this whole time and then you came out with something brilliant. Um, um, those are hard to come by. You know, a lot of the stuff that you see on LinkedIn and stuff, it's all fluff. It's all a bunch of bullshit. It's a lot of people just trying to make themselves look better and bigger than they are. Um, you know, listen, I'm also like, I contribute to that, right? I'm not like, I post on LinkedIn because I understand the value of that, right? And at the same time, I'm trying to attract the best founders to myself, right? And so I have to self promote. There's nothing wrong with that. The only thing is, is that it's just like other social media, like instagram it's not real life. You know, the real, real, uh, founders are like not really posting on LinkedIn. They're really working hard. 24 7, right?

Speaker A: Yeah, yeah, I think that gets overlooked because like being a founder is very sexy now, but actually head down, hard work, smart, you can't really get past that as the key traits of a great founder.

Speaker B: Uh, it's actually the most unsexy thing you could possibly do. I could tell you it's, it sounds glamorous, but I can tell you there were nights, there were weeks that I didn't sleep because I thought I was going to lose my business or I was dealing with some sort of catastrophe. Um, and you know, you have to bear the brunt of it for everyone who's working for you too. And you have to like, act like, you know, cool and calm while it's all happening because if you panic, everyone else panics. So, um, it's not like the most enjoyable thing, but it could be the most satisfying thing for you at the end, um, if you stick with it long enough.

Speaker A: And lastly, if um, people want to sort of check out, Nieman Ventures, have liked what you said and ignoring your advice of not raising money but actually coming to you to raise money, uh, what's the best way to sort of impress you or come to you to try and get your attention? Apart from that three line hook, of course.

Speaker B: Um, really I check two things. One is if you email me through my website, um, I actually check those, I check every single one of them. Um, you know, and then, um, I also check my LinkedIn, uh, messages. So if you want to LinkedIn me, uh, that's, that's cool too. Um, but you know, it's pretty simple to get in touch with me. I'm not, I'm pretty accessible. Uh, and I'm pretty open about my investments and what I think and how, how I think about things.

Speaker A: So brilliant. Thank you so much and thanks uh, so much for your no nonsense advice today. I've really enjoyed it. Cheers Shane.

Speaker B: Absolutely. Thank you so much.

Speaker A: It can be easy as a founder to opt for off the shelf shelf legal documents and advice when setting up your company, employing your first, um, team member, or when raising investment. In my experience as a founder and an investor, having strong legal documents from the outset really sets you apart. That's why we partnered with seven Legal. Seven Legal works with high growth startups on their journey through funding, scaling and execution with a focus on concise, pragmatic legal advice at each stage of a company's growth. So if you're looking for legal advice for your startup, email the founder directly on billvenlegal uh.co.uk and mention pitch Deck Podcast.