Meet the GP's - Dan Frydenlund

Dan Frydenlund, Founder, Chairman, CEO & General Partner of Stage Fund, joins us for our third episode in our “Meet the GPs” series. Dan speaks about developing the Stage Fund model, building a female-led private equity fund, and the evolution of Stage for their first and second fund.

Dan founded Stage Fund in 2009, after an exceptional career spearheading restructuring and turnaround events, and has led Seed stage investing through IPO for over 25 years. Dan has acquired more than 26 companies with an 80% debt capital return rate. Dan is based in Denver & Steamboat, Colorado.

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Watch on Vimeo, listen on Apple Podcasts or Soundcloud, or read the transcript below.

Austin Grisham: We’re back with our third episode of our “Meet the GPs” series, introducing the General Partners of Stage Fund. Stage Fund is a majority female-led private equity fund focused on acquiring control interest in tech companies undergoing a change in capital structure, strategy, operations, or growth. Today, we’re with Dan Frydenlund.

Dan founded Stage Fund in 2009, after an exceptional career spearheading restructuring and turnaround events. He led seed Stage investing through IPO for over 25 years, having raised over a billion dollars in debt and equity capital. Dan was managing director of the Sturm Group, a $500 million private equity fund with a portfolio of 17 technology investments.

Dan successfully led the restructuring, mergers, and sales of all 17 Sturm portfolio companies, assuming C-level and board positions and returning capital to the fund at unprecedented levels. After working with the Sturm group, Dan was recruited by the Gores Group’s London office to manage their European investment opportunities and the financial restructuring of Real Software, a [00:01:00] $175 million tech company.

Dan facilitated the exit of Real Software in 2008. Going downstream of the Gores Group model, Dan returned to Colorado and began leveraging his own capital to assume ownership and restructuring of companies on a one-off basis. Over the next decade, Dan grew and evolved the operation to a formal private equity fund, partnering with Krista Morgan and Ingrid Alongi. Since founding Stage in 2009, Dan has acquired more than 26 companies with an 80% debt-to-capital return rate. Thank you for joining us, Dan.

Dan Frydenlund: Good morning.

Austin Grisham: Tell us about Stage Fund prior to the new partnership with Kristen & Ingrid. What worked about your model and thesis and why did you develop Stage?

Dan Frydenlund: So after leaving Gores Group, I saw an opportunity that was primarily between the venture equity investors and the senior debt or venture lenders out there.

There were a lot of companies out there that were not the shining [00:02:00] stars of local venture capitalists here in Denver, but also had drawn down debt because of the relationships between the equity and debt providers. And what I found was that there were great companies that were no longer going to be able to receive additional follow-on capital or series B preferred or C preferred.

But had to work out a situation with their debt holders because they were obviously running out of capital and hit a road bump for whatever reason. Some of those reasons were based on the current venture equity investors and then other economic situations. This was right prior to the financial crisis that the company and the world faced.

So I found an opportunity to go in and work in between or right in the middle of the equity provider and the debt provider to say, “this is a great company, your current equity sponsors are no longer going to fund this opportunity. [00:03:00] But I’ll  work with you, being the banker, to return your capital. In response for that, I need the equity sponsors to take a haircut and a restructuring of their portfolio.”

So it was a very hands-on early stage I knew how to get my hands on a business and do the restructuring, cut costs, get the company stabilized, and then start to service that debt. And it was a relationship then that the debt holder was happy and the equity holder was happy.

So it was a perfect situation in time to see if the model that I learned at Gores worked downstream.

Austin Grisham: Thanks for that. It was a pretty critical time in terms of US economics. We had just gone through the 2008 financial crisis. How did that have direct impact on you seeing the opportunity in the marketplace and how did it also create the shape of your model for the time?

Dan Frydenlund: [00:04:00] So what was happening there is a lot of equity investors start to sit on the sidelines and they also looked very closely into their portfolio to say, what are the shining stars? They were unsure of themselves being able to raise follow on capital for their next fund.

So they had to be very careful in calculating on their investment portfolio to say, we have a finite amount of capital. We’ve got, let’s just use a number, 20 investments in our portfolio. And we don’t have enough capital to support them all. They’re all still good companies. But some are the rising stars.

So naturally they fund the rising stars and push away or ignore the ones that need capital. They’re still great companies, but they’re not going to return the funds. So that was the situation that came out of the financial crisis.

Austin Grisham: I want to fast forward a little bit in that, because we’re going to get [00:05:00] into the updated fund model.

A lot of that development came through a bit of insight that you shared coming into 2019. We entered into COVID-19. How would you say the climate changed with investment opportunities and perspective as we moved into kind of an early stage in COVID that shook up the marketplace, it shook up potential investment. How do you feel like that event created the next step or next stage for what you were building?

Dan Frydenlund: Great question. So there are a lot of similarities to the financial crisis and COVID, completely two different reasons. But what happened in COVID was very similar. People started to slow down, take a look at their portfolios once again because the world was changing. The difference in what makes this time even more exciting for the Stage model is the amount of additional capital that was put to work [00:06:00] prior as compared to 2009, it’s radically different.

So what that meant for Stage, and when Krista and I sat down and said, how do we change our current model? And how do we take advantage of this situation? So the opportunity grew. There was still uncertainty across the board of investing, but it just presented a lot more opportunities for us combining that with now 10 years or 12 years out there with the relationships that the firm had built with the senior lenders and the equity sponsors out there. The calls started coming in more and we had to sit back and say, okay, how do we really take advantage of this? And that was one of the discussions with Krista and myself that led to this next evolution

Theron McCollough: I don’t want to segue too much, but are you a PE firm or are you VC firm? Where do you fit in that ecosystem?[00:07:00]

Dan Frydenlund: So I would say we sit somewhere in the middle. We still believe our model is most effective with control provisions and control at all levels. Because in a distressed or restructuring environment decisions are not made well in committees and groups and board meetings that are postponed to the next board meeting and those types of decisions.

So from that standpoint, control is key which leads you more to a PE model. But we’re also stepping out there and looking at different segments and, finding the right partners at some point that would have additional sponsors on the equity side that we would partner with. But the model works best with control.

Theron McCollough: Yeah. This is a lot different than PE, right? Cause PE, you’re not taking a big company and then that’s the PE model, right? So sensitivity to the founders. How did the founders feel about this? Are they still [00:08:00] on board? Kind of what happens? How does that break down?

Dan Frydenlund: Long and short, history shows that not all of the founders make it through a transition during a restructuring event.

What we’ve found though is with our new model, with additional capital that we can help these founders understand the tough decisions that need to be made. And with additional capital then to step on the sales and marketing engines of these companies, we’ve been much more successful in our model with the fund than we have been in the past. Because in the past we had limited resources, we had to cut to the very bone and sometimes into the bone of these companies to survive. And unfortunately, in the early years, a lot of the burn rate that’s associated with the company in trouble is actually at the at the top end or the C-suite level. So a lot [00:09:00] of the, the folks that are actually driving the organization have been let go to save the C-suite.

Theron McCollough: So in this use case then you’re not necessarily saying we, we need to replace the whole org and we’re going to come in. You’re saying, hey, we can support you to help you get to that next level with us.

Dan Frydenlund: We want to retain as much knowledge and experience and history in the organization as we can. Yet, installing the Stage way of looking at the business, going forward of saying, how can we do more with less, how do we offload some of the back office. So the advantage then is we can show the entrepreneurs and the founders of this particular organization ways to save dollars by going to a Stage Studio.

Theron McCollough: Excellent. Thank you.

Austin Grisham: Awesome. I think this is a great movement into the new thesis of Stage. You founded Stage in a post-’08 [00:10:00] environment. You developed an updated thesis. What is the new thesis? How is it different? How does the impact look different in both the positive way and an opportunistic way of company impact?

Dan Frydenlund: As I stated before, trying to compare the ’09 situation to 2019, there’s a lot more opportunity out there and there’s only one way to be able to truly take advantage of that situation is to be able to have more capital and deploy it quickly. And the other major change in Stage 1, if you will, to now, Stage Fund is restructuring the balance sheet day one. In early Stage, we didn’t have the capital to go into the banker and say your debt is truly worth about 20 cents on the dollar and here’s your check and immediately then the company is debt free and the balance sheet is more in line with a [00:11:00] company of that size. We can do that now. We can do that quickly. It’s better for the company. And what we’ve found is in watching the changes on the senior or venture lending side is that’s what they want too, and they want these problems basically to go away. And so we give them reasonable returns for the situation that they’re in, the company survives, and now it’s more financeable going forward.

Theron McCollough: You recapitalize, it sounds like everybody these, let’s say three buckets are all winning: you’re helping the lenders, you’re helping the founders, and as a thesis, you’re able to make an investment and get them somewhere.

Dan Frydenlund: Absolutely. The balance sheet gets cleaned up. We have a tremendous opportunity because so much of the economics in a situation like this are determined on the buy side. The company now has the capital. We clean up the haze and the fog that’s been going on with a company that is [00:12:00] in this situation. There is a clear path ahead. We step in at all levels, we support the leadership and leverage our back office. And then, with the fund now, when the right time exists or presents itself, you step on the sales and marketing engine.

And that was, again, an area that without a fund we were limited on. 2009 through 2019, we use the company’s cashflow to slightly step on the sales and marketing which led to much longer exit periods.

Theron McCollough: Stage Studio, from a founder position, if you’re taking care of my back office and my CFO component, and you’re helping the sales and marketing, I’m happy. I don’t want to deal with that stuff anyway.

Dan Frydenlund: CEO in a company like this is working with the technology side to make sure the product or the service [00:13:00] that we’re delivering is growing and improving and then also, has to lead the way on the sales side too, has to be the person that is closing deals and working with the company.

We take over immediately and provide that leadership better, stronger, faster data and results of how the company is actually performing. And we do it at a cost that is a fraction of what they would have to do internally.

Austin Grisham: Thanks, Dan. I want to shift to Stage Fund’s structure and leadership a bit. I want to hear from you on the process that Stage took to evolve into a female led fund. I know that wasn’t necessarily the entire plan. What created and shaped that and how did that come to be?

Dan Frydenlund: It was serendipitous. I actually met Krista via her documentary at the Boulder Film Festival, probably six months before I actually met her [00:14:00]. It was an amazing documentary showing the aches and pains that a female CEO is out there trying to access venture capital funding. So I had met her and then shortly after that I got a call from P2Bi to take a look at the company for some of their loans that they had put out there that were struggling. And obviously with our background, with all the other senior lenders, Stage came up. The call was made and I met the company and initially just started to help them restructure a few problem loans. P2Bi was growing extremely quickly and any lender out there knows that you’re going to have problem loans. And that’s just part of the process. I helped them restructure a couple of loans, started working with the company a bit further when P2Bi was hit with a massive fraud. And faced its own challenges of change and the road bumps so they’re out there for early stage [00:15:00] organizations. Krista reached out to me and said, this is a very tough situation, can you step in and help manage this process so we can get this company fixed and put in a better situation?

So I joined the company as executive chairman. Krista and I worked well together, day one, and that was really the change that I saw in the opportunity. A lot of CEOs in problem situations run for the hills. Krista stood and delivered, and she took some heavy shots from not only her bankers but her equity investors. Didn’t shy away from that stood, delivered. I said, if you work with me through this, we’ll come out the other side, but it’s going to get real ugly and real tough. And she said I’m all in, it took us many months to work with all of the lenders and the equity sponsors to get the company restructured and put into a good place for [00:16:00] for an exit. Shortly thereafter, Krista took a little bit of time off to clear her head, came back, and we chatted about what could we do different at Stage.

Austin Grisham: Excellent. Thanks for that. With the evolution of Stage coming into its newness, Krista was identified through that experience. What led to Krista and Ingrid coming on as first-time GPs? Where did you see the potential and then what led to the founding of this new era of Stage?

Dan Frydenlund: One of the decisions that I made with Krista and why she could be a great first time, general partner — she’d been in the lending game for seven years. So I looked at it as, this is not her first role as a GP. In many respects, P2Bi had to look at deals. They looked at them purely from a debt perspective, obviously they were a debt lender. However, the diligence and process that she had been working on and building through [00:17:00] P2Bi was perfect for our situation.

So when I sat down with her, I said, we’re looking at an unprecedented amount of capital in the markets. We’re going to see companies not hitting Series B or Series C equity. And the opportunity’s going to be big. The two pieces of Stage Fund back then that were not being satisfied was I don’t have enough experience around me at the general partner level. And I don’t have enough capital. And those were the two pieces that changed with Krista and Ingrid.

We were looking at over 12 or 13 years now looking at technology companies and I would leverage other friends in the industry to help me analyze these companies, cause I’m not a technologist. And so that third piece happened to be Ingrid and she just, she fit [00:18:00] fantastic day one. She’s a great entrepreneur. She’s a great technologist. And we needed that level at the general partnership to round out the next team.

Theron McCollough: So you’re saying you’re not just a standard “we all went to finance school.” But they’re both operators themselves, especially Krista has this lending background too, which is helpful to this model. And then Ingrid Ingrid is built a lot. She has her own right of being a successful founder and going through a lot of this.

Dan Frydenlund: She is extremely strong. She is patient, which is necessary in this. I don’t think myself or Krista are nearly as patient as she is. And has the experience being a founder, having taken a company from concept all the way through a successful exit, integrating into the company that purchased them, and riding through that next Stage. And [00:19:00] having her quickly be able to look at the code, look at how the software is structured, does this company need 5 million more of development dollars? Is it good enough now to take to market? Or is this something that would cost us so much that it just doesn’t fit the Stage model? And so that was the third leg to our stool.

Theron McCollough: That’s great. It feels like more funds need to be built this way because there’s always a lot of deficit when it comes to the GP structure.

Dan Frydenlund: I’m a firm believer that we cover a lot of bases now, the three of us together, and then the organization as we move down expands and supports us greatly.

Austin Grisham: I want to touch on something that I feel is often left out of private equity conversations, especially as it relates to you three as leaders and then, like you mentioned: the [00:20:00] team. Stage has four core values: fearlessness, adaptability, candidness, and empathy. When I often have conversations with people surrounding funding our model, our thesis these are pretty unique core values to roll into private equity. They’re often missing from the approach to the deployment to operations. Why is empathy a core value? And why does it matter when you guys approach the table? Pre-acquisition, why does it matter with how you operate a business and how you carry to a successful exit?

Dan Frydenlund: Empathy is key because the three general partners in our organization have been there in tough times. We pride ourselves with the knowledge and understanding of what founders and senior leaders are going through [00:21:00] when they hit that point of change and it’s not comfortable. And it’s hard. What Stage does, is hard. However, when you combine the years of experience with the general partnership. Now there’s very few situations that one of us hasn’t seen. But what we see, and it’s universal on every transaction that we involve ourselves in, is there is stress on the founders, in the leadership. In some cases, their equity sponsors aren’t returning their call anymore. And what happens after that is the debt holder starts to call. It’s a combination of stress that a lot of folks don’t understand. We do. And we can sit with that senior executive and say, I know exactly where you’re at and we understand, and let’s talk through how we take those next steps and alleviate some of the stress and grow the company to the next level [00:22:00] where you want to see it go.

Austin Grisham: Thanks for sharing that, Dan. I think it’s critical. The relationship that you guys have built from what I see in those early interactions with both founders, venture lenders, I think it’s amazing how it seems to be unique in what is brought to the table and who is brought to the table. You as GPs and leaders seem to have everyone’s interest in mind, which also feels very rare. Will you tell me a little bit about that in terms of how you guys approach the table when this larger negotiation is happening for an acquisition on behalf of both the founder and the debt lender? It’s very unique.

Dan Frydenlund: Again, when I started in 2008, 2009, there’s an implicit relationship between the equity sponsors and the venture lenders. And the relationship is, I’m going to the lender. I’m going to lend your portfolio company. I’m going to put a working capital line or a fixed line in place. And [00:23:00] you, as the equity sponsors are going to fund that company to a point where it can return the debt. The types of companies that are taking on this debt are all done through relationships because the company’s balance sheet is not such that it can afford that. It’s all on the relationship, it’s early stage and it’s high risk.

The making sure that all parties are happy when this implicit relationship breaks is the key to what Stage brought together and founded many years ago. As I would just sit directly between the equity and the debt holder and say, here’s a balanced transaction where everybody can walk away. But, most importantly, that relationship between the equity and the lender can go on and do more transactions. So that was really part of the core thesis. They had to be able to go forward.

Austin Grisham: You brought in Krista and [00:24:00] Ingrid due to their expertise, and then you guys had some pretty interesting early excitement surrounding that portfolio. Talk to me a little bit about the early close and portfolio success that was seen because of the playbook that was created over time and the newness that was added to that

Dan Frydenlund: So again, after Krista and I sat down and said, okay, what, how do we change the original Stage model? And go to a committed pool of funds. We tested the water with some very close, high net worth individuals, people that have worked with us in the past. And it saw that there was quite a bit of interest for this type of investment model. All along, our our deal flow was continuing because again we’re a new fund. But we’ve been in business now for 12 years in total, so the deals were coming regardless [00:25:00] if we had the fund solidified and closed at that point.

So we started to do a rolling close, and we would take in some capital. We were warehousing many different transactions and acquiring companies all along. Being the first fund, it takes a while. I think we had been fundraising for six or eight months. We had acquired some great companies. But what happens, every once in a while, and it was perfect timing for us, we ended up acquiring a great company. And a great company that was hit very hard during COVID and as COVID came out, we were able to work with the founders and the leadership there to help them restructure their debt get that off their back and to energize their  sales and marketing. And all of a sudden we had a very strong portfolio company in our fund prior to closing. So our [00:26:00] advisors who are also investors in the fund said, there’s two reasons to stop fundraising. You either have a strong winner in your portfolio, or you have a loser. We had a very strong winner in the company. So we were faced with, do we have to revalue our offering at that point? Or do we cut fundraising and then just close with the amount of capital that we’ve raised and grow these companies? So that was the decision that Ingrid, Krista, and myself made.

Theron McCollough: It’s interesting cause your pitch is unique in several ways. One as an emerging manager, I think this is a good lesson for other emerging managers. How do you build up the momentum? And you took this into this new model. But you almost could account for all of the capital to be deployed at first close and show immediate value. If you happen to be, I was lucky enough to be an LP, to be invited, you could see immediate returns on paper [00:27:00] by your initial check.

Dan Frydenlund: And I think that’ll follow into Fund II, because the way we went through the capital raise was not a traditional blind pool, where fund managers go out, get their commitments of capital, close their fund, and then start looking to deploy that capital over a traditional ten year fund period. They’ll deploy capital for the first 3-4 years. And then start the process of harvesting. Our limited partners were able to diligence and see the companies we’ve already acquired. So it wasn’t a blind pool. They could look, touch, and feel these investments that were out there. And then when you end up with a shining star, they can easily see the ability and path to returning the fund very quickly. That’s how we did it [00:28:00] and I see us deploying some of the same path in Fund II.

Theron McCollough: So are you, and if you don’t want to talk about Fund II, that’s fine, if it’s too early. But are you planning on trying to warehouse some of these, some portfolio to then put into Fund II right away?

Dan Frydenlund: Absolutely, because we think that’s valued to our limited partners because they, once again, they can see the companies that their dollars along with our own dollars from the GP are going directly into those companies. Fund I was pretty unique, where we had acquired six different companies. All of the funds were deployed. And we were growing our portfolio and working with these companies, which has led to the interest for more debt lenders, and opportunities to come our way, which will facilitate Fund II.

Austin Grisham: To follow up [00:29:00] on the model itself, that is proving this thesis, it’s functioning well, it’s growing. A core piece of that is Stage Studio do you want to follow up on that? How has the Studio model impacted the breakeven scale and a path to exit in our portfolio?

Dan Frydenlund: The Studio model works for many reasons and the most important reason is it works for the general partner and the fund managers, as well as the senior leadership in each portfolio. The model allows our general partnership to look at data in the same way throughout the portfolio. The other way of doing it is leaving the individual companies responsible for the reporting. The timing is never there. That data doesn’t come in right in. And it’s hard to understand, and that [00:30:00] takes so much more time of the GP and it takes so much more time at the portfolio company too. It’s just simply not efficient to do that this way for the level of investment that Stage looks at.

We can scale and take on so many more companies with the Studio model, have the data there when the GP, as well as the senior execs or the C-suite needs it efficient, clean, clear. We know from a general partnership, everything that is going on in the portfolio company daily. In my past, in some of the big PE groups that I worked for in the past, the data would show up 25 days after month end close and you didn’t get your answers for how the company’s performing. So we have real time analysis. We control the cash too [00:31:00]. From my experience prior to founding Stage, surprises came out of everywhere to the board members and the general partnership. What happened? How could this have happened? We reduce that risk immediately because cash at an early stage of the restructuring is key. There are no surprises at Stage. So the Studio model not only allows the portfolio managers the real-time data, the CEOs love it because they don’t have a burn rate on their P&L and they’re getting their data faster, it’s cleaner. And it allows us then to scale to the next level.

Theron McCollough: In a sense you’re also creating some sort of downside protection.

Dan Frydenlund: Completely.

Theron McCollough: You’re the professionals that can step in and say, look, we know how to do this. We’ve done it a thousand times. Where, again, in the [00:32:00] founder position, even if I’ve done it several times, I haven’t done it a thousand times.

Dan Frydenlund: And in stressful times, again, coming back to that discussion on empathy, we know how stressful it is, and it’s not us trying to come in and say, we know how to do it better than you. We just know that the stress and the restructuring makes you drop balls and having Studio there alleviates some of the balls that a CEO has to juggle in these situations until the company is headed back up into the right. And it allows us to never have a surprise to say, oh it’s Friday and it’s payroll, we don’t have enough cash.

Theron McCollough: I don’t know if we touched on Stage and exit models. How do you look at that with each one of the portcos?

Dan Frydenlund: From the exit model, we’re looking at, if you’re talking multiples. 2-3X over a shorter period of [00:33:00] time, that’s what the fund is also designed to do.

We’re not doing 10 year funds. We’re doing five-year funds at this point. And we can do that because we get our hands on the companies so quick, we’re not going to do a pool of capital and say, all right, we’ll deploy it over the next two years. We’re deploying very quickly because our deal flow is that strong. And now with Ingrid and the general partnership and how Stage is formalized. Now we’re seeing opportunities and we can close on opportunities quite a bit faster.

Theron McCollough: Especially at a fund your size and having you come in so early through, usually your horizon is seven, 10 years. And you’re really able to squeeze that down to an average of a three year exit.

Dan Frydenlund: The IRRs are very exciting. When we can talk to our LPs and say, there’s a [00:34:00] high likelihood that in the first 18 months of Fund I, the fund will have been totally returned. And then the multiples for the rest of the exits are important, but we de-risk the situation. Everybody’s gotten their capital back and we get to focus on the remaining portfolio.

Theron McCollough: Yeah, thank you.

Austin Grisham: You put a team together, you acquired six companies in under 14 months. You’ve deployed capital, you’ve deployed operational expertise. You’re moving into your first exit. It is a unique model. What’s developing as a part of that, what does it look like for Fund II, and what do the next five years look like for Stage?

Dan Frydenlund: Ingrid and Krista and I get together on a regular basis to check in and get off site and talk about where we’re at today and where we’re going. Fund I was probably the most exciting period of all three of our careers. Came together [00:35:00] very quickly. We had a foundation of great people, great supporters, not only on the LP side, but also on the lending side. And that had been frankly pushing me for years to take this next step. So it was very exciting when we formalized our story and really went out and told it, and it is unique. And we said to our LPs that we’re betting on ourselves also. We put our own capital into this company and we did the first fund with no management fees.

Like I’ve said to some, if not all, of the LPs, I want to be shoulder to shoulder with you. If you win, I win. If I win, you win. We’re taking that same approach to Fund II. We’re not thinking we need to go up market in a much larger scale. But what we are finding is, if we go up modestly, the [00:36:00] opportunities change quickly. Having a pool of capital and support from limited partners allows us to get our hands on companies that may only be faced with a restructuring. So if we can get our hands on the assets earlier, they’re still the same, roughly the same, economics that are going to be in this because the same pieces exist. You’ve got an equity sponsor that says, you know what, my capital is probably better deployed on a couple of other of my portfolio companies. So great company. Maybe they don’t take as big of a cramdown on their side, but they’re still going to have the debt situation that’s there that needs to get cleaned up too.

Fund II, I want to get my hands on the companies earlier and again, then using Studio as leverage, cleaning up the balance sheet, a bit more capital that would say instead of a $2-3 million [00:37:00] investment. Maybe it goes to 3-5 or so, primarily for hitting that timing on the sales and marketing side. A thinly capitalized company can never hit the gas when they really need to hit the gas. So that would be part of the evolution into II.

Austin Grisham: I want to follow that up with a statistic we talk about often and especially after looking at specific numbers. So in 2021, 201 billion dollars was put into early stage companies. In the last three years, there have been over 24,000 companies funded in early stage ventures. But what we do know is half of those companies will not reach a series B. So that opens up the table to 12,000 companies and that’s just the last three years. Deal flow is a huge part of the value that a fund brings to the table. Tell me a little bit about our [00:38:00] deal flow process.

Dan Frydenlund: The reason why the deal flow is there is because the model worked. And when you look at our history of how many opportunities came out of the debt side versus equity side you would look at the past and say maybe 80% of it came from the debt holder. They wanted an opportunity to get something out of that when the old equity sponsor basically said we’re out or we can’t, or our model does not allow us to fund this company going forward. So that combined with 12 years of being able to return debt to lenders. The door’s open. Combine that now where our original sourcing was coming primarily only from senior lenders or venture lenders. When you add in Krista’s eight years of working with other non-traditional lending sources the flood [00:39:00] gates just open. As we look into next year and the follow-on years and the next five years out there and also tying back to the amount of capital that you were referring to, I agree, 50% of these companies, aren’t going to get follow on capital and not all of them are bad. Some of them are very good companies. They just don’t fit the model that has to do, on the venture side, return 10X. We looked for ground doubles and triples. And then as we see with the first fund, I think we’ve got a home run in there.

Austin Grisham: Thanks Dan. It’s been really great having you here. I have one other thing I want to touch on. If you could, I believe you paint your fingernails regularly, which often comes up in conversation. It’s a little bit more playful rather than the tune of how funds are structured or where we’re looking to return. Tell us about that.

Dan Frydenlund: Absolutely. And thankfully I just got them done again. My mother was a big influence in my [00:40:00] life. And she made a statement early on in the early part of my career that she felt all men should go get manicures, keep their hands in good condition. That started out with clear and then eventually it turned into a color, my daughter always loved it.

And so it’s here to stay and I do get many interesting comments on a regular basis. And I should say that about 80% of them are positive.

Austin Grisham: Awesome. Thanks for touching on that, Dan. Awesome. Having you on here today. Thank you so much for your insight. Amazing to be a part of what you’re creating from a leadership perspective. So thank you so much for taking time today.

Dan Frydenlund: What an exciting time. I appreciate you guys. And onward and upward.

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