VC Investing in Early-Stage and Growth Stage Companies

EMS:
Absolutely. So to kick off the conversation, tell us a little about the firm and how you got to where you are today.

DH:
Sure, I'd be happy to. I'll go a little bit back in time. So graduated from University of Michigan, my alma mater. I was a business major, started my career actually in investment banking in New York City. Did that for a couple of years. And had the very unique opportunity fairly early on in my career to move to Philadelphia to take a role at Comcast, the big cable media company. So I ended up spending about 14 years there and really there is where I got into both venture capital and corporate venture capital. So I was one of the people that helped start the Comcast Venture Fund. Actually worked closely with one of the founders of Comcast, Julian Brodsky, while I was there.

And it was a really amazing experience, Elana. We generated a significant amount of impact to both Comcast and also the startups that we invested in. And that led to the thesis for what I'm doing now, which is called Touchdown Ventures. So started that firm with two other co-founders back in 2014. And what we do is we set up partnerships predominantly with large corporations. Examples today include T-Mobile, Kellogg's the food company, Olympus, and many others. And what we do is really both build and manage their branded corporate venture capital funds.

EMS:
Great. So to start off the conversation, I wanted you to share your outlook for VC investing in early and growth stage companies.

DH:
Great. No, great question. And I think the summary would be the outlook we think for both early and growth stage companies is quite positive right now. We're just seeing a lot of innovation, particularly in areas like AR, artificial intelligence, robotics, vertical software. These are some of the key themes that we're focusing on and that's where a lot of the corporate partners that we're working with are either investing in and where we're seeking investments. The venture financing market is down from highs from particularly 2021. But I would say while the market is down and there's less financing, I would say the quality of companies, just the innovation and number of companies being started, is still very high. And that really gives us optimism on the outlook, to answer your question.

EMS:
And David, more specifically, where do you see some of the greatest opportunities and why?

DH:
Yeah, we're really big believers in AI, artificial intelligence. I know that's a very popular topic within the trade press right now. But I really do believe this is one of the biggest and most disruptive technologies we've seen over the last 20 years. Bill Gates, who obviously co-founder of Microsoft and really technology legend, has really described it as significant or more significant than the computer or the internet or some of the other big breakthroughs. So it really is that level of both innovation and disruption.

So really at the end of the day, why is it [inaudible] it really has the power to automate a number of manual processes, which will really lead to both cost savings, potential labor savings, but also efficiency and accuracy. We've actually been investing in AI for a number of years in areas such as legal tech, healthcare, and even in built world. And some really good examples, as I mentioned, where we're seeing AI saving money, saving time. For example, one of the companies that we've been involved with is using, in the case of healthcare, AI to really identify new drug targets as an example of where this technology can really help solve big problems in the healthcare space, find drugs for diseases that normally haven't been able to been solved for with current medicines. So it's really exciting overall. Hopefully that gives you a sense of why we're excited about this area.

EMS:
Absolutely, David. And on the other hand, what are some of the greatest challenges you face and why?

DH:
I would say just the economic environment overall is the biggest challenge. It is a bit of a tale of two cities. And what I mean by that, on one hand I would say a lot of the challenges are with some of our portfolio investments. And right now, it is a very difficult time as we discussed raising capital and attracting capital for the business, which obviously a lot of these startups need to be successful and survive. And really, what we've been working on is figuring out how our companies can extend runway, live another day, and knowing that it's going to take longer and harder to raise money in this environment. On the other hand, for new investments, it's actually a really good time to have capital to deploy. We're seeing valuations come down. But even more so with our model, more interest in the startup companies to work with corporate investors who these startups see is really valuable in this economic environment, which obviously fits well and really is on point with our corporate venture model that we've developed here at Touchdown.

EMS:
David, to shift gears a little bit, ESG, DEI, have been top of mind for the industry and wanted to hear how your firm is integrating these into your firm.

DH:
No, that's a good question. I'll probably start on the DEI side. I would say we've made a lot of focus on that area really ever since the tragedy of George Floyd in 2020. I think a number of our key leaders in our firm said, "We really need to take a look at this and really figure out a way to make a difference." And I think actions speak louder than words. I've always believed in that. So there were a lot of people issuing statements and we did that as well. But we said you really want to do things that are more action oriented. So we've done couple things that I'm really proud of. One, we've actually set up a whole set of diverse internship programs. We actually call micro internships, which give underrepresented students an opportunity to gain real world adventure capital experience. And so one of the things that's really ... We can actually give those out to more students by giving specific projects out that might be more micro in fashion. So we've done that and that's been very successful.

We've also spent a lot of time just doing a lot of internal education to our team on diversity. Things like racial bias training and things like that that we think will make our team better informed and promoting diversity. And then the other thing that we've done is we've gone to and tried to educate, whether it's high school students or other minority populations, about venture capital and entrepreneurship. So early on in their careers and their education, they were aware of these opportunities, I think has been one of the issues around DEI. So as you can see, we're doing a lot on that front.

On the ESG front, I would say that has also been a focus area for the firm and a number of our investments touch areas such as sustainability. Energy transition is a big focus currently around ESG. And then just overall, I would say a lot of this fits into the area of carbon reduction. So I would say on the DEI side, it's been more about focusing on that from our team and our training perspective. On the ESG side, it's probably cut a little bit more of our investment strategy as well.

EMS:
David, we covered a lot of ground today and wanted to see if you have any final thoughts you'd like to share with us.

DH:
No, well, thanks again for having me. I think the punchline is we built this pretty unique business at Touchdown working with large corporations, especially with all the innovations that we talked about, AI, robotics, et cetera. We really think this is the right time where large corporations should have this type of venture capital strategy. So really our growth plan, you asked about our future, is really to continue to identify and find these corporations that are looking to build out these innovations and work with them side by side to build and manage their venture programs. And ultimately, it's all about impact. It's a word that we use at touchdown in terms of our cultural values and really bring that to these corporations and really bring both financial strategic impact to those corporations that we work with. So that's our plan. Just continue to do more of what we're doing today.

EMS:
David, thank you so much for sharing your perspective with our listeners.

DH:
Well, thanks for having me again, Elana. I really appreciate it. Enjoyed this conversation.

EMS:
And thank you for listening to the EisnerAmper podcast series. Visit eisneramper.com for more information on this and a host of other topics. And join us for our next EisnerAmper podcast when we get down to business.

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