Predicting Consumer Trends By Studying Global Culture - Ascent Conference

Predicting Consumer Trends By Studying Global Culture

Marlon Nichols, Co-Founder & Managing Partner @ Cross; Martine Paris, Tech Reporter

Ascent Conference 2019

Martine Paris [00:00:06] Excited to be here with Marlon Nichols, Marlon is a venture capitalist and his firm has just merged. We’re here to talk about cross-cultural trends, but he’s also just had a merger with Adrian Fence’s venture capital firm. And a little bit, I guess I should introduce myself. I’m sorry. I’m Martine Paris. I’m a tech reporter. I write for a variety of outlets. I write for a fast company. And VentureBeat, I’m a contributor at Forbes and I also cover FinTech for Queens Asking the Block. I write about a lot of things. And then last week I was interviewing Steph Curry at Disrupt. So I get to do a lot of exciting things and I am very excited about speaking with Maalin because you have a special way that you invest. And so can you introduce your fun to the audience and tell them a little bit about how you incorporate cross-cultural trends into your investment thesis?

Marlon Nichols [00:01:08] Cool. So, hey, everyone, I’m Marlon. Pleasure to be here. Yeah, my I started a fund four and a half years ago called Cross-Cultural Ventures. Cross-Cultural Ventures is a fund that invested in seed stage tech and tech enabled companies with a thesis of cultural investing. And we define cultural investing as basically a look at pop culture under the guise that pop culture drives everything in our society. And so what we try to do is study human behaviors and figure out which of those behaviors are emerging and can become social norms or part of popular culture and then make investments in companies that are producing products or solutions that are poised to ride the waves of those emerging trends. And at the top of this year, we merged, as Martin was saying, with another L.A. and San Francisco based fund called M Ventures and rebranded our firm to make venture capital. And it’s a it’s an interesting endeavor because of the people that are involved. So along with with me, I have the fifth mayor of Washington, D.C., who also spent about four and a half years with Andreessen Horowitz as a special advisor to companies like Lyft and others navigating highly regulatory environments. We also have one of the top eight Hollywood agents ever and a guy named Charles King, who represented at one point Oprah Winfrey, Tyler Perry, Michael Michael B. Jordan, Ryan Coogler, Prince, et cetera. So it’s a it’s a very interesting and different team as it relates to to venture capital.

Martine Paris [00:02:59] Yeah. How exciting. And Adrian, he’s had his hand in investing in conversational A.I. Are you guys continuing with that as a theme, investing in A.I. or.

Marlon Nichols [00:03:11] Yeah, I mean, so A.I. is a technology. It’s not necessarily a behavioral theme. Yeah. So unless you count robots and their personality. Yeah. Or automation I guess would you know could, could, could, could be a theme or the future of work. So the future of work is definitely a place where we’re spending a lot of time and, and have made investments and I can play a big role there. One, for example, one of our investments is a company out of Maryland called Satellite that’s basically recruiting engineers, software engineers, not from the Stamford’s or the enmities of the world, but from community colleges and Craigslist. And they’re targeting people who have no experience coding. And what they’re doing is they’re giving them an idea of an aptitude test to determine whether or not they could be a great software engineers. And should they score high on those on those tests, they then train them for six months and then hire them, as you know, software consultants to Fortune 100 companies like Nike and et cetera. So, yeah, it’s going to be a big part of our world.

Martine Paris [00:04:28] Yeah, that’s a super hot trend. I mean, that’s triple by. So thing is that they can find talent anywhere. You don’t have to be from Stamford or be in San Francisco to become a coder and.

Marlon Nichols [00:04:37] talent is ubiquitous. Opportunity is not. And so that’s what this company is trying to change. Let’s make both of them ubiquitous.

Martine Paris [00:04:45] Fantastic. OK, well, share with us what you put out a report every quarter, is that right? On trends?

Marlon Nichols [00:04:50] We don’t really have a cadence. We do it when we kind of when we feel like you, OK, but yeah, we call them the state of technology and culture. And we’ve released three of them so far. The first one was. Kind of like an unconference, the unperfect parent. Right, so the idea that parents are not perfect, but they would like to be. And so how can technology help them in that in that journey? And out of that, we made investments in like a baby food company called Yummy, a health care digital health care company focused on prenatal and postpartum health called Mommy. And if you’re looking that up, it’s not like you think M.A HMV and then Wonder School, which is kind itself as the Airbnb of early childhood care. So just like Airbnb turned, help people turn their homes into hotel rooms, one to school is helping people turn their homes into daycare and preschool facilities. So that was one. The second one we we release was culturist currency. And that one was looking at the huge underserved black and brown communities that spend ridiculous amounts of of of capital on technology and new products, et cetera, but that have significant challenges and their own and have tremendous influence. By the way, when you think about pop popular culture. But I have a lot of challenges in those neighborhoods that haven’t been addressed. And so the thought behind that one was if you actually build solutions that fit with those challenges, if they’re spending capital or their their their money on things that aren’t necessary, imagine how much they’ll spend on the things that they actually need. And so, you know, culture is currency. And then the the most recent one we call the conscious consumer. And this is really about consumers and employees using their either their dollars or their, you know, their their attention to force bigger brands to do the things that they care about or pay attention to the social issues that they care about. And so the kind of the what we’re searching for, there are companies that can help brands and companies understand customer, consumer and employee sentiment before you lose hundreds of millions of dollars by being on the wrong side of, say, an immigration ban. So, yeah.

Martine Paris [00:07:40] Fantastic. All right. Well, a lot of people in the audience might be curious just to hear about and check size stage that you’re investing in and tell us a little bit about.

Marlon Nichols [00:07:52] Sure. What you guys are doing. Yeah. So we’re seed stage investors. And for seed stage these days means a lot of things to a lot of people. For us, what it means is that a company has built a product and they’re starting to get some feedback from the marketplace. That doesn’t mean that they’ve had a full launch. It could be a beta launch, you know, it could be a partial launch or whatever. But the audience that you are targeting as a customer is reacting to that. And so in addition to how, however we may feel about what you’re building, we’re getting some data back to support or to detract from what we what we think. And then our check size, typically half a million to one point five million and with a target ownership percentage of 10 percent.

Martine Paris [00:08:43] Wow. Nice. OK. And in terms of, you know, seeing traction in the marketplace and like, are you looking for a size of the installed customer base for that size check.

Marlon Nichols [00:08:58] So it depends. Right. Some some, some companies that metric that we’re going to look at is our sales. For others, it could be, you know, viewership and or retention of our viewers, et cetera. So it’s whatever whatever the key metric for that business is, that’s the thing that we’re going to have to look at. For instance, we one of our early investments is in a company that’s focused on mixed reality for the for the enterprise. Right. So new ways to do training, new ways to to to do manufacturing remotely troubleshooting remotely for, you know, companies like Lockheed Martin and Boeing and so on. So the so we wanted to make sure that those target companies were actually spending time with them, that they were going through pilot projects with them, that they were paying for those pilots, and that there was you know, there was a direct line or something that suggests if you. Do these things properly, then this will result in a bigger commercial contract, so that’s just one example.

Martine Paris [00:10:12] So making sure they have their relationships in place, not necessarily don’t then have to have the deals closed, but certainly that.

Marlon Nichols [00:10:19] The Joint Enterprise Company, you want to make sure that they do have relationships with the their prospective customers and that those relationships are growing and that the value proposition that they’re telling us, you know, is actually about the same value proposition that the prospective customer sees.

Martine Paris [00:10:38] Very cool. Are you are you leading rounds at that size? And then at what level of involvement do you like to take within the company? It sounds like you have a lot of talent on your team in terms of even getting brand integration or a celebrity or social media influence or integration into campaigns for these companies. Can you speak to a little bit about, you know, how you see yourself helping your portfolio companies?

Marlon Nichols [00:11:06] Yeah, I mean, so the thing our relationships are really, really key, right? You’d be pretty hard pressed to find another seed stage fund that has a robust, robust and deep relationships and media and entertainment in professional sports and government and municipalities, Fortune 100, 500 companies, et cetera. We bring all those things to bear when we’re working with with our with our portfolio. And then on top of that, one of my other partners was a stand in, you know, acting CFO and CEO and CFO for a number of of companies. You know, when he worked at two of the most prominent accelerators and in L.A., which was science and amplify. OK, so there’s also operational things. You know, I was an early employee at a software company, Help Scale. That company, took it to Europe and we sold it to SAP. So, like, there are very specific things in our background that we can we can bring to bear day to day. And then our network is unmatched.

Martine Paris [00:12:17] And you have there’s a whole bunch of really exciting funds that don’t like to lead, like, for instance, Steph Curry’s funds. He has C30. They only like to go with established partners. They don’t take a lead. Are you do you have like kind of like and they just have, like, their C30 summit? Right. A lot of the venture capital firms are building out both the media platform like you have with your your reports, as well as network effects like these summits are these conferences where they can also bring in other investors like staffs, funds or other funds. Are you guys doing something similar?

Marlon Nichols [00:12:53] We do two things. So I’m one of my partners. Charles runs a media company called Macro. They actually produce films and in series and four at Sundance every year. There’s it’s kind of a party, but you invite, you know, people from all all walks of life, different professions, and you bring them all into the same room and you watch the magic happen. We also do an event called the Culture House at South by Southwest.

Martine Paris [00:13:25] Oh,.

Marlon Nichols [00:13:26] Yeah,.

Martine Paris [00:13:26] I have to cover it this year, huh. Next year.

Marlon Nichols [00:13:29]  Ben. OK. yeah.

Martine Paris [00:13:32] I’m going to cover that. He sent me an invite. Yeah.

Marlon Nichols [00:13:36] So that one’s that one’s pretty cool because we, we integrate some content. So for instance, this year I interviewed T’ai his his business partner Jason and B, Michael Cox, which is one of the most successful producers in like history about the intersection of music technology and investing. And then the other kind of conversation was with Dylan Parnell, who is one of our CEOs. He runs a company called Play Verses, which is in the E sports space, just made a lot of news because he raised 96 million in thirteen months. And yeah. So.

Martine Paris [00:14:18] What’s the franchise really to do like Yeah.

Marlon Nichols [00:14:22] Well seems so, so it’s a lot of them. Yeah. Basically every, every important game and that’s out there now. Anthony Yeah. Targeted at high schools and amateurs. So we had a conversation about, about that, the formation of that company and where we see the EA Sports world going. But in addition to that, I mean, it’s a day long networking and event and party filled with all the people from those different groups that I mentioned. So great opportunity for startups to, you know, to meet potential partners and potential other investors.

Martine Paris [00:14:57] Yeah, I was going to ask you so about deal sourcing. How do you you know, how how are you finding your best deals? Are you affiliated with, like, YRC or any of the other? You mentioned two accelerators out of L.A. and tell us a little bit about your sourcing strategy.

Marlon Nichols [00:15:11] Yes. So the our best deals come from within our network. We’re a little bit different than most venture firms in the sense that we actually read and investigate at some level every single deal that sent in to us from our website. Not many venture firms can can, you know, do that. So if it’s so if it’s interesting and it fits what we’re doing, you will hear from us. Well, you’ll hear from us one way or the other in 14 days. There is not a good fit or we want to continue the conversation. Unfortunately, we haven’t sourced a great deal from that platform yet, but I’m hopeful that it will happen one of these days. But our best deals come from our network. The very best deals come from entrepreneurs that we’ve worked with in the past. So, you know, we just we just close a deal recently with a group that I had invested in their first company, Crosscourt, which got acquired by another one of our portfolio companies fare. And so they did their their earn out with fare and they left to start a new company, which is still in stealth mode. But we were one of the first calls that they made and we invested in that. Another example of that is we’re early investors in Thrive Market, which is like an online grocer, and Ganar Lovelace, who was one of the co-founders and co CEOs, left his his gave up his CEO role and created another company called Good Money, which is creating a new bank. So we’re in that one kind of like Time Square, and that’s different.

Martine Paris [00:16:51] A new bank.

Marlon Nichols [00:16:51] A new bank we’re going back to the old days where if you bank with them, you have ownership within the within the company. You own a portion of the bank. So everyone’s and everyone’s incentives are aligned. The union like a credit union. Kind of. Kind of. Yeah. Just taking it a step step further. And then they’re they’re entrepreneurs. The entrepreneurs have friends that are entrepreneurs and they all kind of roll together. And so they have a great experience with us. And, you know, a friend is is building a company. They’re going to communicate to their friend that we’re an investor, that they should they should speak to. So those are our top kind of sources for deals. Then there are accelerators and and other venture firms that we’ve worked with in the past and like working with. So so they’ll refer or refer things. You want to mention some of those. I mean, so Science Amplify Founders Fund, Andreessen Horowitz, G.V., which is Google Ventures. It is a lot of them. And yeah. So that’s that’s primarily where we get our deals from.

Martine Paris [00:18:00] OK, so two things. Tell us the URL that they should go to to to send their pitches in and how they can best contact you and and then also tell us what you’re looking for in the pitch. Like what? What are the three most important things that you’re looking for when they send it in?

Marlon Nichols [00:18:17] So we’re easy just Mack MASC, Venture Capital, Dotcom, and you can there’s on the contact page, there’s a form, you just fill it out, submit your deck and we’ll be with you most of the question.

Martine Paris [00:18:31] And what are the like the three top things that they should pay attention to when they send in their debt?

Marlon Nichols [00:18:35] Yeah, the other way to get in touch with me on Twitter. So Marlon’s see Nichols’ at Wannsee, Nuckols and I. Tend to respond to almost anyone that reaches out, but the things that matter for us, the market opportunity, so we’re looking for really huge markets, right? So multibillions trillion dollar markets. And that’s important because if you only get a certain percentage of that market, we want to know that you can still become a billion dollar business and just kind of, you know, digging into that a little bit deeper, you have some old or mature markets that aren’t that are huge, that aren’t necessarily growing anymore. We’re not so focused on those. We’re focused on really large markets that continue to grow year over year. Then it’s, you know, what’s novel about what you’re what you’re doing. How are you different from other solutions in the in the space? And can you can you defend that space, you know, far into the far into the future and then probably the most important things. Who are you and why? You know, why should we back you? What what’s unique, what makes you uniquely qualified, makes you uniquely qualified to go after this opportunity and build it out. That’s probably the number one thing along with the kind of the aptitude and, I don’t know, personality of the of the founder. So are you adaptable? You know, are you are you coachable? Do you listen to the marketplace? And as you listen to the marketplace, are you flexible enough to move where you see the marketplace moving to things like that?

Martine Paris [00:20:21] That’s really helpful. You know, you’re leading these rounds white and you’re investing at seed stage. What timeline are you looking for? For exit? You share with us some of your strategy and you that it could be like five to 15 years or whatever. But what do you like what is your sense when you go in?

Marlon Nichols [00:20:37] Yeah, it you know, it tends to be longer, right. Scott Cooper at Andreessen Horowitz said recently in his in his book, Like Lemons Ripen Early. Right. So we don’t we don’t necessarily want our portfolio companies to be exiting too quickly. You know, we were in the early investors and Gimblett media that sold to Spotify and that was a sizable exit for us. But had they had it been a little bit longer, it would have been an even larger exit. So I don’t know on we’re probably looking at, you know, for really a home run type exits, six, seven years, hopefully before ten years, because that’s when the fund expires. But what if.

Martine Paris [00:21:23] How large is the fund? Oh, okay.

Marlon Nichols [00:21:28] What I would say is that right? What I will say is we invest, we target to invest and about 40 companies, which is exactly what we did, and cross culture. And again, you can kind of do math, but it’s you know, the check sizes range from half a billion to one point five. And then we reserve anywhere between 20 and 30 percent to follow on in our top 25 percent of our investments.

Martine Paris [00:21:56] Well, it’s such an exciting time for your fund. Is there anything else? We’re at a time. Is there anything else you’d like to share with the audience?

Marlon Nichols [00:22:02] No. I mean, if you have questions, happy to take them, but. Yeah.

Martine Paris [00:22:05]  Great, and Marlin’s heading on to I think we have to go off stage. But we can we can we’re going to step off stage after and take questions. Marlon’s heading on to Web summit, so if anybody’s heading there, it’s next time you can catch him speaking? Speakers are good.

Marlon Nichols [00:22:20] Yeah.

Martine Paris [00:22:20] And thanks, everybody so much. Thank you.




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