Building Startups Stronger Pat Riley's Accelerator Playbook with Michael Conniff

Speaker A: Hello again, everybody, and welcome back to the Accelerator with Michael Conniff. I'm your host. Great to be with you in a podcast devoted to startups, founders, entrepreneurs, and Also the angels, VCs, investors, investment firms, family offices that cater to them. It's great to be here. We are on all the major platforms. Make sure to like us, share us, review us, uh, open us when you get our emails going out now to thousands of people. Um, and, uh, look for us on all the major platforms, including Apple, Amazon, Audible and others that don't start with the letter A. Also Spotify and YouTube for video and audio. Today I am extremely pleased to welcome to the podcast Pat Riley.

Speaker B: Hello, Pat.

Speaker A: Thanks for being with us.

Speaker B: Hi. It is so good to be here. Thanks for having me.

Speaker A: Um, you are going to. You're kind of like the, um, the hardest working man in show business, as they used to call James Brown. Pat is the CEO of Morrow. We'll, we'll explain what that is in a minute. He's also the managing partner of Morrow Ventures, which has investments in 43 companies. We could easily, easily, without even breaking a sweat, um, have him on the angel podcast, our companion podcast. But I want to tell you this about Morrow. They, um, are, are involved with accelerators, hubs, studios and corporate partnerships, and also, as I said, a venture fund. So, Pat, um, I hardly know where to start with you, but why don't we start at the beginning of how did all of this get started? You're in Denver now, you've got a partner, you've got a lovely office, as we can see. How did you get started? And is this going the way you thought it would?

Speaker B: Uh, well, well, the answer is always, how's it going? Is it going the way you thought you thought it would? Answer is of course no. Uh, which, which we can get to. Um, no, but, but how I got started was I, I worked for a non profit, I worked for the American Red Cross. I was chief of staff there in D.C. and it's about $3 billion, $3 billion a year in revenue.

Speaker A: It's a big job of which of

Speaker B: which 2 billion comes from them selling your blood. So what I realized is that this for profit company is really powering one of the nation's largest nonprofits. Um, so I left that and going, hey, I actually want to go try a startup. So I did a healthcare startup. I, uh, was on the leadership team at that. We ended up selling that company and then I joined a group called techstars.

Speaker A: Let me get this straight. You went from Taking blood to giving blood? Is that what you're saying?

Speaker B: There you go. Exactly.

Speaker A: Uh, and then you went to techstar.

Speaker B: Then I went to techstars and I led their growth for a few years. And while they're there, there are all these people who said, hey, I want to start an accelerator. And we launched a company to go and help them do that, which is now Morrow. Uh, so I ended up taking it over from Techstars fully in 2014.

Speaker A: Oh, it started out as part of Techstars. Really? I didn't know that.

Speaker B: Yep, exactly. And now. And now I've been running it ever, uh, owning it and running it ever since.

Speaker A: Now, why the split? Why did you go in different directions? What was it about this that made you think it could stand alone?

Speaker B: Yeah, well, I didn't know if it could stand alone. And that's always the risk, right when you start off. Um, but it was this idea of going. It was funny to have this organization inside of this behemoth, which is techstars. So techstars getting bigger and bigger, and we have this effectively side business inside of it. They were saying, hey, it's actually helping hundreds of accelerators. But Text was also trying to build their own accelerators, so it didn't really fit with what was happening. So it was much easier, competitive, ultimately.

Speaker A: Right?

Speaker B: Yeah, I would never say competitive, but complementary and also not a core business of theirs. So it was much easier to spin it out and have its own thing.

Speaker A: All right, that makes sense. Uh, did you say 2014?

Speaker B: That's 2014.

Speaker A: 2014. So, uh, nearly ten years ago, nine years ago. Um, what did you have, uh, on the table in front of you when you first started? What were, like, the assets? What were the ideas?

Speaker B: Oh, we. We had a playbook for running accelerators. We had data. What's happening with accelerators? Um, we had. We had a great, we'll say, event program set up when we got. When it got accelerators together from around the world. So we had this really great recurring revenue from accelerators all over the world. So you started off with a really good foundation that then allowed us to build Maro from there.

Speaker A: Okay, so, um, take us through the first few years of this. It sounds like you were fundamentally focused on accelerators. What were the kind of things you were doing to help?

Speaker B: Yeah, well, I think it all starts off with. So the mission of Mauro is to give startups the power to create and grow their business and to make an impact wherever they call home. And if you think about what it means to Give startups the power to create and grow their businesses, make an impact. It requires building a bunch of support around them. So when I think about accelerators, um, to date, you know, there is a good amount of criticism on accelerators today, but I still don't know of a better way to help an early stage company than the accelerator model.

Speaker A: Forgive me for interrupting, but what is the criticism you're hearing?

Speaker B: Oh, too much, you know, just, it's a criticism I've heard from the longest time of too much equity for the amount of money they're giving, not enough support for the companies, um, too many, you know, they're effectively only uh, one or two companies succeed coming out of accelerators, you know, out of like the 10 that they accept. And a lot of that's unwarranted in my, in my opinion. Um, but nonetheless it's, it's feedback that accelerators are getting. So, so when I, but when I look at accelerators today, I go, I got so excited to support them because they provide this support and ecosystem and network around startups that they couldn't have otherwise. And it just, you know, it just makes us get, that's why it gets us excited to come alongside accelerators and go, what do they need? And we can talk about that if we want to.

Speaker A: Yeah. You know, it reminds me of Benjamin Franklin's uh, definition of democracy, which is, uh, it's uh, you know, I think something like it's, you know, it's the worst system imaginable but nobody's come up with a better one. So maybe that applies to accelerator accelerators as well as democracy. So um, what do you do when you advise accelerators? And we'll get to your other operations in a moment, but what do you do to make a difference, to be different, to make sure that these problems don't occur when you advise accelerators?

Speaker B: Yeah, for us it boils down to the three things. It's first of all going, let's give them the data to benchmark. Benchmark themselves. Um, there's a lot of data out there about accelerators but, but it's fun to be uh, on the forefront of accelerator data. So number one, it's going, are you doing a good job? And that's that I think people can benchmark themselves that are part of Morrow 2. It's lonely running these things. You know, a lot of these people are in mid sized cities, uh, around the world and they don't have a support system. So it's fun to build a community around these people where they have A support, support group with them. But the final thing is there's a lot of tools that they're craving to help startups. It's things like finding startups. It's things like investor connections. M. It's things like helping their startups with pitch decks. Um, it's things like what sort of programming do I offer my startups? And those are all the tools that we get excited to help accelerators with because it's really, really hard to come up with all that on your own. And we, you know, so we can bring all those, all those, all those tools to them, but also to the community and data as well, to help them run quickly.

Speaker A: And of course, I'm doing the accelerator all on my own. It's an influencer accelerator, no doubt. It could, it could, it could benefit from your wisdom, don't get me wrong. But, um, it does, it does show that, you know, anyone can do an accelerator. It's sort of like anyone saying they're a therapist, right? In most states, anybody can just stick up a shingle and say, you know, I'm a psychologist or therapist or, you know, mental. It's not perfectly regulated. So, um, let's assume for the conversation, um, that, you know, accelerators, you're sort of trying to do best practices with them, it sounds like. But you've got other pieces to the puzzle here. So let's talk about incubators and for people who don't know the difference, um, can you explain the difference between incubators and accelerators and then tell us your work with incubators and how that's different?

Speaker B: That's right. So, okay, so I'll give you, I'll actually give you three definitions. So an accelerator is an investment vehicle, typically, that welcomes in five to ten fully formed companies into an office. Again, typically, but not always. And works with them for three to six months, usually capping off with some sort of demo day. So companies coming in get support for three to six months and then effectively a launch at the end of the three to six months. The, uh, accelerator is usually also paying the company. Typically, like the average right now is about $90,000. If they're giving.

Speaker A: Well, is it paying or investing? Is it paying or investing?

Speaker B: Oh, great. Excuse me. Investing $90,000 in the company in return for 6% of the, of the company. Okay. Incubator, on the other hand, um, is working with the same type of company, fully formed companies, but instead of them, um, instead of them giving investment to the startup, the startup is typically paying the incubator. And that's the key differentiator. And also, and also a startup isn't usually forced out of the incubator. They can typically stay kind of as long as they want until they maybe reach a certain size or go under. Um, and there's not as much programming

Speaker A: there and we don't do a lot

Speaker B: of work with, with, with incubators. But there's a third group that we've started to work with called Venture Hubs

Speaker A: or Venture Ventures, sometimes called Venture Studios.

Speaker B: Actually that's another group we work with. But the hubs. Exactly. It's like the new, the Venture Hub is like the new iteration of the incubator. And Venture Hubs are usually the front door to entrepreneurship in a city where they're welcoming in individuals who want to start companies or companies that are looking to get their first round of funding. But they're typically um, literally like in the center of the city. I can think about 36 degrees north in Tulsa. They are plop in the middle of Tulsa and startups can both get, get their foot in the door and stay there. But they're usually venture scale companies that are looking to sort of uh, to grow. But the hub comes along them at any stage of their company.

Speaker A: So would it be like, um, um, is there a co. Working space element to that?

Speaker B: There is, of course. And that's, that's. Yeah, exactly. That's a piece of the hub as well.

Speaker A: Okay. And okay, so finally Venture Studios.

Speaker B: And then there's this emerging uh, investment vehicle called Venture Studios we work with. This is fun what they do. It's typically wealthy individuals or companies, large companies, who said, we have all these ideas but we don't have the team to go in and build the ideas. So what they do is they come up with a list of ideas and they go find the CEO and then together from day zero they build a company for usually six months to 18 months. But uh, instead of the accelerator, where accelerator takes 6% equity, the studio is usually taking 35% up to 50% of the company. Um, but it's also putting in $500,000 up to 2 million, uh, into each company that they're launching. So, so

Speaker A: also staffing it in some cases or helping it get staffed, helping with tech, helping with everything.

Speaker B: 100%. Like we, um, I know it sounds like we're doing a lot here, but at Morrow we've launched uh, our own studio. We have two companies at our own studio. And that's the thing, we have resources coming in to help the company grow. Yeah. So there's usually a CEO, but then the studios bring in a lot of help as well.

Speaker A: Okay, so I think that um, Pat, uh, you're the perfect person, uh, to ask about these related industries. I guess it's all the same industry, but related permutations or iterations of the same basic idea how to get a company started, how do you make it successful, how do you find money, all those things. So you're kind of in a unique catbird seat is how I would put it because you are seeing all of this um, at every level. So what is working and what could be done better?

Speaker B: Yeah, um, I think it all goes down to the money. I think ultimately what all these groups are trying to do is get companies funded to get to wherever path they're trying to go down. So when I'm looking at the whole world I go venture scale companies that are really good are typically being funded even still, maybe not as much as they were two years ago, but they're still being funded. Um, the biggest issue I see is for non venture companies that are going to have strong year over year growth, get the funding that they need. And if I was going to sort of say like man, where would I love there to be a ton of, uh, a ton of, we'll say focus. Uh, I would say it's called, I would call it non venture high growth financing, uh, that I don't think exists today.

Speaker A: Okay, so let me ask you this. So does that, this is going to sound really dumb but uh, I've never been afraid of that by the way. But um, does that mean that if, if companies don't raise money they are essentially doomed?

Speaker B: No, not at all. Yeah, I think to your point, like how do people fund? People can fund with their own money, their family's money, also through revenue. Uh, of course. Um, but, but I do think though especially like I see a lot of these companies that are run by people of color or in smaller cities or even mid side cities that are just good companies but you know, they're not going to have 10x or 100x growth, but they're going to have solid 2 to 5x growth. Yeah, like they're just not getting the funding they need. Like you know, if I think about our 43 ventures we've invested in, the question, uh, my partner always ask ourselves is, is how can this company, for this venture company, what's their path to a 10x our investment but do they have a potential path to a hundred X? And we had to, we had to have an answer for Both of those. And both those answers had to be yes. There are so many companies out there, right, that are again awesome companies that are going to do 2 to 5x their current valuation. But we'll never hit that for a variety different, you know, but can't get funding because that's not the venture model.

Speaker A: Well, so that's raises a very important point. So the way I would phrase this is, you know, success comes in a lot of flavors. Success is different for different people. Success is different for different founders. They can define it very differently. So, but basically once you uh, and you correct me, Pat, you know more about this than I do. But once you enter into this ecosystem, um, as a company, basically, let's say the 10x thing, right? Like if you're not going to grow 10x, you're probably not going to make it in this ecosystem. Um, if you're not going to grow 100x, there's another more selective ecosystem that will like, ah, like an antibody reject, you know, reject that company even though the company may be growing a lot or have tremendous potential. So uh, this is an ongoing question. Maybe there's no answer to this, but the question is really how do we get a broader definition of success? So it's not just the unicorn, but it's the guy or the woman or the, you know, them m. Whoever it is who starts a company and um, is profitable and creates a lot of jobs and goes on for, you know, indefinitely. Like how come, how come that's not a success?

Speaker B: Uh, I think I'm probably more like you than uh, not Like I can't tell you how much I look at success as uh, the person who creates a company with $200,000 in EBITDA for 30 years. Like that to me could be a huge success. Um, I even get, every time I talk about this I get a little emotional. But like, like I love running Maro, um, because it's not a 10x company. You know, Mara is like a solid 3 to 5x company. Like we're growing. Yeah, but we're, we're not growing like crazy. And, but also too. My kids know me and I, my wife knows me and, and I'm able to take like, and, and my mental health is like not perfect, but it's perfect. Pretty, you know, but it's good. But also too I'm. Because I'm not, I'm not on this treadmill of, of um, just growth, growth, growth, growth, growth for the sake of growth. So that's my story. But it's not that's not everybody's story but I think it all starts off with, I don't know for every person what's going to bring them fulfillment. For some people it's working really hard for five years. And like I'll give an example, one quick example. I was with, I was with a founder in New Mexico who's, he's one of the, one of the biggest exits in New Mexico. He sold his company for a ton of money and after he sold his company for a ton of money he asked his wife where his kids school was because he didn't know how to get to it. He's never been there. And I go that's not the story I want. But he has a lot more money than I do and that's it. But you know, so I go at the end of the day it's, I don't know what the success is but I think we have to define that and then build backwards.

Speaker A: No, no, it's a great point. So um, and I want to point out Pat that you're, you have this, this better balance. Um, my theory is in part because you're in Denver and uh, Denver is a wonderful place to have balance. Um, and a ah, great place to have a startup for that, for that matter there's such a great infrastructure of which you're a part. So um, what in terms of the work life balance and the stereotype of the entrepreneur, uh, who never takes a minute off which of course is like humanly impossible but that's kind of the stereotype in your company in Morrow. How do you mitigate against that and how do you convince people like there's that, that a startup is only part of a life, it's not the entire life. Or do you try to do that or do. Would you tell them something else?

Speaker B: Yeah, well maybe I'll start, I'll start going back to questions which is like you talked about. You asked me what the biggest issue is and with venture, you know, in this from the space and I said funding but not like non venture, high growth funded. Um, I'm fortunate enough to have investors in Morrow where I created a structure where like uh, where people have invested in the company but they also aren't expecting um, high growth dividends. Right. So but they're expecting certain dividends. But, but it's sort of, but it's different than you would expect from a venture company. So then it affords us because then I'm working backwards and it affords my team able to have certain lifestyles and it's Things like, you know, we take every other Friday off as a company. Um, you know, every. Every. Every week, there's certain. Every. Every single meeting we start off with, and I spend usually 10 minutes going, green, yellow, red. How are you personally and professionally? Um, anytime somebody joins our company, we shut down the company for the day just to get to know that person. Um, you know, I think about, like, you know, time off a year, right? We, like, our team effectively gets five weeks off a year in addition to every other Friday off. And I don't know. I think what I'm going with this is like. But. And when you take Fridays off, it's not to do more work or have a side hustle. It's like, it's to rest. And those. That's the expectations that you're resting. So I don't know. So I guess I'm going with. This is like. But I'm allowed to do that because I'm also in a different business than most, quote, unquote, venture. Venture investments that I'm around.

Speaker A: How many people in your company, Pat?

Speaker B: Yeah, there's about 14 of us here.

Speaker A: Okay, so, um. Uh, so you're kind of a role model in that sense. You believe in, you know, knowing your kids, knowing your family, knowing your wife, knowing your partner. Um, what can that be taught?

Speaker B: Uh, I'm gonna say maybe, like, not I taught or like, hopefully modeled. Um, you know, I think when I look at, like, the heroes of our generation today, you can even tell I. For those watching, like, I even get, like, you know, I'm, like, crossing my arms here. As I think about it. Like, I look at, like, Jeff Bezos, Elon Musk, uh, um, Bill Gates, right? These are the quote, unquote business heroes. But I look at all of them, and I'm like, again, if you're gonna get divorced, that's fine. I'm not against. I'm not against divorce. But I, uh, look at our business leaders, and I go, Bill Gates, for years was having, like, a purposeful affair with. With a mistress to like, keep his marriage going. You know, I look at Elon, his life's kind of goofy. Like, I look at Jeff Bezos, right? And what's happened? Like, what, you know.

Speaker A: Well, how many kids talk about not knowing where your kids go? Yeah. Six by six. Six wives or something like that.

Speaker B: That's right. And I go, like, I looked. I look at these guys and they go, they have accomplished so much. So much that I will never be able to accomplish. But I also, too, love that I have Two kids that know me and like me, or I think like me and a wife, like, you know, that responds to me as well, that likes me as well, and I really like her. So I don't know if that answers the question.

Speaker A: Well, it's a tough one to answer, but, you know, Jeff Bezos, I think, you know, up to what three years ago might have been pointed to as, uh, still married to the same woman who helped him get the company started. Relationships, uh, with his kids and so on. And now he's sort of a guy who, uh, has an overworked upper body, um, and uh, trophy wife and a yacht that is apparently so big people can't even describe it. Um, but it's sort of, you know, that's, you know, being close to maybe the richest or close to. I guess you can do whatever you do whatever you want and most people will think you're a genius. So. Um, but personally, uh, though it's not something anybody would want to model. Well, let me got a couple minutes left. I did want to ask you about your RO Ventures, your managing partner there. Um, tell us what you and these come to. First of all, tell us how you find these companies. I assume through your network. But. But what are you looking for?

Speaker B: Yep. So, yeah, so 43 investments, um, so far. Um, and typically it's, you know, it's. And again this goes back to like, I'm looking this time for venture scale companies. Right. So it's a. So now I'm going back to like, what am I craving? Um, and so these are companies that again are doing 10x to 100x returns. Things that we also. That's point one. Point two is that we have affinity towards like, we have like, we like the Warren Buffett model of like. I have to understand the company. Um, like it writes, if you're doing something in biotech, I typically don't understand it. But if you're doing something in, we'll say, um, like the healthcare space or like the mobile space or B2B SaaS. Like, I know that area so I can play in that. Um, and the third one is like, I'm looking for a team that is authentic humans particularly. Um, and final one is, is it an additive venture? And we describe additive of, um, is this additive to the humans that use it or the companies that use it or to the cities that exist in. And if it is, then we best

Speaker A: define additive for me.

Speaker B: Yep. So that's that last piece of like, is it something that's both not going to detract from a human being fully human, or a team being a fully formed team at a company, or to something that increase a city's ability to be an effective city. And if it doesn't detract from that, we call it an added adventure. So like for instance with Facebook today, Facebook is, we say, detracting us or pulling us away from human relationships, which we found out now. So therefore I wouldn't call Facebook an additive. In my opinion, it detracts more than it adds. So when I look at ventures are trying to go like, we invested in a grill company that's like, in my opinion, increasing people's ability to come together and enjoy community with one another. Therefore it's additive to a human's existence. Therefore we invest in it.

Speaker A: Okay. To make the world a better place. You sound like the former chief of staff of, uh, the Red Cross.

Speaker B: So

Speaker A: that's a good. So in the couple of minutes we have left, tell me what your, uh, hopes and dreams are for Murrow. Um, you've been doing it since 2014, almost 10 years. Um, what's the perfect, uh, storm for you? What is the perfect outcome for this company?

Speaker B: Yeah, um, it ultimately comes down to, um, are we helping? And I go, the best outcome for me is like, there's another few hundred studios that get launched and create the next generation of companies that like, on the other part is that accelerators continue to reinvent themselves and we're able to help with that and that there's like hundreds of more adventure hubs that are created in every city, uh, around the world and then we're helping support those. So ultimately it comes down to are we helping both these groups, but also too, are we helping the next model that comes our way and how are we situated to help that? And that could me, you know, I think if we, if we can do that and we get good feedback on how we're helping, like, that's, that's the home.

Speaker A: What is, is there a next model? Is something coming down the pike that, uh, those of us in this, in this ecosystem haven't, haven't seen coming yet?

Speaker B: Not that I know of. I mean, I think there's fun stuff happening at universities that I think we need to be paying attention to. Like, I think entrepreneurial education at the undergrad level is pretty, pretty interesting. And I think too, you know, I talked about the, the non venture but high growth, um, funding. I think we're seeing some really interesting models there, but nothing that's like, nothing that's like the venture model. I think people are playing a lot there, but no one knows what. What the right model is just yet.

Speaker A: Yeah, well, listen, um, Pat, uh, I want to thank you. We've been, um, I want to remind you that, um, you've been listening to the Accelerator. I'm Michael Conniff, where, uh, one half of a two podcast tag team, the Accelerator and the Angel. And Pat is one of those people who could have this podcast, would work on either side because he's both an investor with, um, Moro Ventures. He's also running a company that helps incubators, uh, accelerators, hubs, and venture studios. And we didn't even get to corporate partnerships, so all of those and doing a bunch of events to boot. So it's a really interesting company. Um, and I want to remind everybody to rate and rank and share the Accelerator and the Angel. Um, we're on all the major platforms. You can also contact me on LinkedIn or at Michael Coniff. Um, or rather I should say michaelconneff.com is my website. You can go there as well. Um, and we're doing a big push on Substack, and everything is going to kind of run through Substack for us. So that's. That's a big, uh, big, uh, news, uh, a big headline for us. So thanks so much. And I want to thank Pat Riley. He is the CEO of Morrow. Um, he is the managing partner of Moro Ventures, um, with investments in 43 companies. They're both, uh, out of that lovely office we see behind him in Denver. And, um, Pat, it's really been a treat, and this is one of those where I felt like we were just getting started. So you will definitely have to come back, uh, sometime soon, I hope.

Speaker B: Count me in, Truly. Anytime. Michael, thank you so much.

Speaker A: All right, my pleasure. And thanks to you for listening. Remember, we'll be back with another podcast before you know it.