Herwig Konings (MVCA): Miami is a small community when it comes to startups. Can you tell us about your experience with how it has grown over time?
Andy Sturner: Sure. I moved to South Florida in early 1995 to join the founder of SportsLine USA. At the time, his vision was to build a bulletin board service akin to AOL for sports gamblers. This was at a time when the fastest connection was a 14.4-kilobit modem. Imagine trying to build a sports media company when each screen took 2 mins to load! Needless to say, a lot has changed since those early Web 1.0 days!
Well at least this got you down here! Since then, it seems you took a serious interest in creating a real startup scene here. Can you tell us more about what you’ve been doing?
I resigned as co-President of SportsLine.com in 2002 and founded Aqua Marine Partners to own/operate marinas. In 2010, after fighting my way through the “Great Recession”, I was looking at ways to add value to my marina portfolio and I checked in on the “scene” and found that little had changed in the 8 years since I had left SportsLine. So I got together with a group of fellow YPOers and we founded one of the first formal angel groups in Miami. The group ultimately became AGP (Accelerated Growth Partners) when Marco Giberti, Danny Echevarria and Juan Pablo Capello and I joined forces.
Sounds like AGP is when you were first able to start angel investing. Can you expand on this origin story?
When we founded AGP the goal was to add value to the eco-system. It was a “double bottom line” initiative. Of course, our objective was to help each other to make smarter startup investments. Ultimately though, our mission was about helping and mentoring young entrepreneurs. Don’t get me wrong, we all hoped our investments would generate a return, but the primary payback was to connect with young entrepreneurs and lend our experience to help them make better decisions. In return, we stayed relevant and connected with the “scene”. What I soon realized was that we unwittingly helped create a catalyst for the eco-system.
That’s a popular new phrase – double bottom line investing. Can you expand for our audience what that is exactly and your experience with it?
I’ve seen the expression used in a number of ways. Social impact investors think about a “double bottom line” in terms of the impact they make on society as their second “bottom line”. For me, it was the impact that I can make on an individual entrepreneur. To me, that’s the real bottom line. I love it when I can offer the benefit of my experience to provide some clarity on an issue that an entrepreneur is struggling with. It’s unbelievably rewarding for me when I can help a founder and his/her team work through a problem and pivot around it and take away a win!
What did you learn from being with AGP that helped you evolve your investing strategy over time?
My approach has definitely evolved over time. One of the most important lessons that I’ve learned is that you have two possible approaches to successful angel investing. First, you can take a “passive” approach to investing. If you are a “passive” investor, you must develop a large and diversified/portfolio. Making a one-off investment or two is unlikely to produce a good outcome. If, however, you are looking to go deep and take an “active” role, it’s impossible to do that at scale as an individual. So in that case, the only way to be successful is to focus on a few opportunities where you feel you can add the most value. The latter has been my preferred approach. But that is due entirely to my original thesis for why I invest. I was looking for that double bottom line that I referenced earlier! The only other advice I would offer to an angel investor revolves around “dry powder”. If you intend to invest $X into any particular startup; invest 50% of $X and keep some dry powder to invest in subsequent rounds. It’s almost never one and done!
You advise saving dry powder for follow-on capital. What led you to that conclusion?
Oh – that’s really easy… years of experience [laughs]. I’ve found myself on both sides of this issue. I’ve been an entrepreneur in desperate need of funding and my investors had only allocated a certain amount to the investment and had no ability to re-invest when we ran out of runway. I’ve also been on the other side, where I fully committed to a company and was disappointed that I couldn’t support an entrepreneur in a subsequent round when they needed me. Both were equally painful!
Your entrepreneurial side clearly has aided you as well. What else helps you? Do you have any favorite books? What do you read every morning to stay up to date?
It’s too hard to pick a “favorite” book. I have so many “go to” books depending upon the situation at hand! Personal development. Professional development. Spiritual development. Or just an escape. A few books that I highly recommend any start-up CEO read are “the Hard thing about Hard Things” by Horowitz. Topgrading by Smart; Mastering the Rockefeller Habits by Harnish and Start with Why by Sinek. Every morning I scan the headlines of the WSJ, NYT, the Financial Times, the Washington Post and anything Nancy Dahlberg has written for the Miami Herald. I’ll drill down into articles that resonate with me.
So let’s dive into your personal fund. How many companies do you currently have in your portfolio?
As I mentioned earlier, I prefer to focus on companies where I can take an active role on the Board or at a minimum on an Advisory Board. My largest and deepest investment by far has been in Boatsetter.com. It’s a passion play for me. I was approached about the idea back in ’12 by Marc Billings and was the first investor when we founded the company in March ’13. I incubated the business within my marina company and even became CEO for a few years before launching the business on the stage at eMerge in ’15. I happily moved to Chairman when I merged with a competitor relocating them from San Francisco to Miami. A couple of other notables – I was an early investor/advisor to Will Weinraub of Live Ninja before their sale to IDT. I am on the Advisory Board to Jon Lieberman’s iTopia cloud computing company.
That’s an interesting investment story. Tell us about transitioning from CEO to Chairman at Boatsetter and negotiating the merger and handling the integration of a competitor.
That was an incredible story. I was introduced to Jackie Baumgarten, the founder/CEO of Cruzin.com back in early ‘13 through a mutual friend. We knew and respected each other but were contented to meet on the battlefield. Fast forward to the summer of 2015. I had just launched Boatsetter on stage at eMerge and was in the process of closing a round of funding. I received a call from a DC-based venture capital firm who was interested in taking the last $1mm in our round. They did their due diligence and then called me up with an interesting proposition: Instead of the $1mm that I requested, they wanted to invest $2.5mm with one condition: I had to agree to merge with Cruzin.com. My initial response was “No” and asked them for an answer on the $1mm. Their response matched mine. No merger; no investment. So I – of course – agreed to entertain the merger [laughs]. But it was the 1st of June and I had plans to be in the mountains for the Summer. So I informed the VC that if Jackie was serious she had to be in my office by the end of that week before I left town. So they all descended upon South Florida and we locked ourselves in a room for a full day. By the time the day was over, I knew that I had found the perfect CEO for Boatsetter. But that was only the beginning. We had a ton of work to do to get to the finish line. We had to work out the details of the merger. We had to trust each other enough to allow diligence to proceed. We had to close the VC investment and get a plan together. We had to get Cruzin funded so that we could convert her notes and consummate the merger. And – more importantly – Jackie and I had to get to know each other at a much deeper level. Would we get along? Would our egos clash? Did we truly share a vision for the combined company? So, I invited Jackie to grab her fiancee and move into my house in Park City, Utah for a few days to really get to know each other better. Needless to say, a 3-day visit quickly turned into several weeks locked in my house living together! It was an incredible experience. We worked 18 hours a day, every day, taking breaks only to hike and eat. In the end – we fought through all the issues and worked it all out. The irony of it is that we never took the investment from the VC that put us together. The more we got to know them the more we realized that it wasn’t a good fit. You can’t imagine how hard it was for Jackie to walk away from a $2.5mm investment. That’s where the benefit of my experience helped guide us through the process. So my partners and I invested in Cruzin along with Stanford DAPER fund and Peninsula Ventures and we got her notes converted and we closed the merger in September ‘15. It was a long and interesting process but it’s been smooth sailing ever since. Sorry – I couldn’t resist [more laughs]. Since then we’ve closed on close to $15MM and we’re actually working on another significant acquisition as we speak. That will be another interesting story for another day!
Now that is a story you don’t hear every day! What a unique way to find out if your “business marriage” will be a good fit. You also mentioned being an investor in LiveNinja. Did you advise Will on the sale process at all? What was being involved with that exit like?
As you know, I was involved in 2 startups that went public and ultimately sold to large Fortune 500 companies. I’ve also bought and sold a dozen or so companies during the course of the last 25 years. One universal truth is that every deal is different and has different dynamics but it always comes down to people! I was so happy for Will on the sale! Every startup entrepreneur knows how hard the battle is every day! The process of selling your “baby” is surreal. I was honored that Will did seek out my advice about the sale. Relative to Live Ninja, Will and I definitely discussed the importance of a good cultural fit for Will and his team. We also discussed another struggle that many founders face when presented with the opportunity to sell their companies. Will was trying to ensure that he addressed his fiduciary responsibility to his three primary stakeholders: (1) his investors; (2) his team; and (3) himself, and in that order! Many founders fail to recognize the importance of that exercise. Many make the mistake of thinking of themselves first or even their team before they realize their first responsibility is to their investors. For Will, he had his head on straight and had his investors best interests at and heart and knew that his primary responsibility was to ensure that the transaction was in their best interests and fully maximized their opportunity and their investment. After he accomplished that, I give Will great credit for taking care of his teammates. They were the ones in the trenches that put their heart and soul into the company. For his team, Will wanted to ensure that the opportunity presented to them was fair and equitable while still balancing his fiduciary to his shareholders. Finally, for himself, he was very thoughtful in analyzing whether or not the sale allowed him to realize his vision and the dream that compelled him to found Live Ninja in the first place. Will did a superb job balancing all these competing interests and never wavered on ensuring that he was fully vetting his fiduciary responsibilities. This is a discipline that every startup CEO needs to master before entering into a merger or acquisition scenario.
There is a lot to absorb in that story, too! Will certainly created a real win for Miami too. Bringing it back to this, what do you think is currently missing from the ecosystem?
There’s been a lot of debate these days about the state of the ecosystem. The public pissing match between Brian Brackeen and the New Tropic has been quite entertaining to follow (see here) but unfortunately does little to actually address the real issues we face as a community. Beyond the smoke and mirrors, ego and spin, there remain some challenges that we must overcome. It’s true that we’ve made great strides over the last 5 years. The Knight Foundation has been a catalyst and we all owe them a massive debt of gratitude! That said, we still have a real need for more talent and capital if we are going to retain the startups that call South Florida their home. It’s been incredible how the community has come together to sow the seeds that have allowed a flourishing startup community to take root. Now we all need to come together to ensure that we have the structures in place to allow those startups to scale-up. So let’s stop worrying about “optics” and let’s get to work! That’s our next challenge as a community. I have faith.
We’ve spoken before and I know you are big on logistics, brick & mortar, and marinas – why is that?
I love the fact that Latin America views us as the gateway to the US market. Their “Silicon Valley” if you will. That’s huge. But the impact goes far beyond a myopic focus on tech/internet startups looking to penetrate the US market. While that’s going to be a driver over time, it’s only one small aspect of it when you look at it from an economic impact perspective. Let’s play to our strengths and not simply look for ways to mimic Silicon Valley or Austin or Boston. If you zoom out and look at the real drivers of the South Florida economy you must include real estate, hospitality, and tourism in the mix. Beyond those core businesses, we have another huge catalyst for growth. Namely, the economic impact being created by MIA and FLL airports! It is truly amazing. We are experiencing exponential growth not only in terms of passenger travel but cargo and logistics. When I left SportsLine in ’02, I had a point of view that the marriage of the internet/digital tech and traditional bricks and mortar was the key to long term success for online commerce and consumerism. Unfortunately, I might have been right… but I would have been “dead right” had I invested based upon that strategy back in ’02. For example, had I bet on Barnes & Noble or Blockbuster, two companies that should have owned their respective markets online – I would have been wiped out! But with Amazon’s acquisition of Whole Foods, I may find some redemption for my thesis at long last [Laughs]. To quote one of my favorite parables – “we’ll see”.
Good point! I think it’s valuable to keep in mind what Miami’s strengths are/ could be instead of looking to copy Silicon Valley’s playbook. That’s also all we have for now. Thanks for sharing your thoughts with us, Andy.
To learn more about Andy’s background and experience, click here