Dr. Jeremy Weisz: 13:53
I’m curious about the business model originally, because I could see you both come from consulting, right? So what I, I don’t know, when I was doing research for this, I’m thinking it’s very hard to I mean, at least in the beginning, I would assume to raise a big fund, right. It’s a lot of work. I mean, well, they come from consulting. They could consult a lot of companies and be like, hey, we’ll get you in the military and by the way, we’ll take a cut of it. So when you sell $100 million into the military, we’ll take 10%. No, mere 10% or whatever. So I’m curious of why you went. I mean, were these things rolling around? Did you experiment with different business models? You know, with this.
Alexander Harstrick: 14:39
JBro, I want you to answer that. But let me just clear the record by saying, Jeremy, I was glad to get a job in consulting. I hated being a consultant. I think it is largely a completely useless field that is and should be replaced by AI, and most of these firms will not live through it and deservedly so. I can’t wait to see the industry collapse on itself. JBro?
Jonathan Bronson: 14:58
Yeah, no, I think, Jeremy, you actually hit the nail on the head, which is, is the traditional business model for helping these companies is let me take a cut. And then separately, you have investors who say, let me invest and we’ll be generically helpful, right? And I think actually by combining those two, there’s some real magic, you know, and in particular, and this will resonate with every founder, right? Any founder who’s looking at taking money, they hear the exact same thing from every venture capitalist. Everyone sits across the table, looks them in the eye and says, I am the most helpful person you’ve ever met. I have the best connections. I give the best advice, right? And every one of them sounds exactly the same, right?
And so we say, hey, we think we can do all of that, right? But in addition to all of that, which, you know, you really can’t verify, we can help you navigate the most complicated but most impactful source of procurement in the world, which is the US military. And that really resonates with founders. And that’s given us access to great deals, you know, such as ordering.
Dr. Jeremy Weisz: 15:56
How is the difficulty of raising the fund? Because I know you’re oversubscribed, but like that’s easier when you have more people. But I’m talking the very beginning.
Alexander Harstrick: 16:10
Yeah, yeah. This is well detailed in a Harvard Business School case about us, which is J2 Ventures in the war to diversify beyond venture where I would say, you know, Jeremy, between funds, I have never been pregnant, and I am not going to pretend to understand what it is like to birth a child. But you have to appreciate that there is some aspect of amnesia that happens in a woman’s head that makes them want to go through the experience again.
We have a portfolio company in Ireland where the average household churns out eight children and I just can’t believe that by number eight, you’re just like, well, now it’s easy. You know what I mean? Every single one is so idiosyncratic. So to that regard and that perhaps very offensive and jarring comparison, I would say that’s a lot like fundraising, which is it doesn’t matter who you are, where you are, however many times you’ve done it every single time carries a very idiosyncratic difficulty that you did not see the first time. But you love every fund regardless. And if it does happen to be really easy, then that’s great. And in the case of our third fund, it actually was really easy. But in the case of the first two, I think we got rejected on our first fund, Jon, 150 times in person, maybe more.
Jonathan Bronson: 17:28
Usually the rejection doesn’t happen in person. They follow up by email right afterwards. But yeah, definitely north of 100 easily.
Alexander Harstrick: 17:35
Yeah. And that is Jeremy, that is doing the song and dance, getting them into the data room, looking at all of your background and saying, I just don’t think you guys are going to be very good. And the reality is when you’re raising a fund and people are looking for emerging managers, what they’re actually looking for is someone who worked for ten years at a known name and is leaving with their book, with their connections and starting a new fund.
They’re not actually looking for someone who is new to venture. And I think that was an issue that we did not fully appreciate when we were getting started. That being said, because we didn’t fully appreciate it, we didn’t really care. And so as a result, every fund has been oversubscribed because someone can’t criticize you if you don’t understand what they’re criticizing you for.
Dr. Jeremy Weisz: 18:15
I want to talk a little bit about any I mean, you’re talking to a lot of high level individuals through that process. Does any advice stick out? Because I’m sure you have many, many conversations. You get a lot of questions. And if they’re investing their money, they’re probably hitting you maybe some pretty hard questions or, you know, things to think about.
Do any of those conversations stick out as either, like just a hard hitting question that made you, that shaped something that you did or a lot like some, you know, maybe someone told you a story or a lesson or something like that.
Jonathan Bronson: 18:52
I think there’s like thousands of best practices, everything from how to present to investors to how to package materials, to how to think about diversifying your portfolio that you get from these various investors or our various investors. I think one of the things that’s truly amazing about raising a fund is you get audiences with some of the richest and most powerful and self-made people, and most of them are actually just really excited to see somebody else who’s trying to make something of their own. And, and so you actually get that excitement and that ability to learn from them in a way that I don’t think you can in any other capacity.
Alexander Harstrick: 19:30
Totally, totally. That is the best part is that even if they say, no, Jeremy, you’re in the room with someone who is going to give you some explanation. I recall one person who rejected us. Tom Weisel and I think Tom is a good dude. I. The difference between Tom’s rejection and every other rejection was Tom, one was very gracious and two, he did it on the call and he said, here’s why I’m doing this. I think A, B, C. And so as a result, I just don’t think this is a fit for me. But I’d love to stay in touch.
At the time, I found it really jarring. I was like, whoa, whoa, dude, you can’t just reject us right now. You don’t know that. But what I realized was he, as someone else who has founded something and built something, realized what most people don’t, which is that our time to get on to the next meeting and all of the development follow up, which is ours, right? You get into a pitch, I think it went well. You send a follow up, you go and you pretend like you’re in town just to be able to have an audience with them, to build more rapport. He was saving us all of that, knowing that it was not going to be worth our time.
And I think what I’ve now learned is don’t ask for permission from anyone who can’t say, yes, that would be the ultimate fundraising advice is, there are a number of people that will waste your time? Just decline the meeting. You won’t rue the day.
Dr. Jeremy Weisz: 20:48
I do want to get into the companies right themselves and which gets into your philosophy and everything. But before we do that, what, and we were talking about this before we hit record is I geek out on, you know, watching SEAL team and Homeland and all these shows. And so when I was doing research for this, Alex, I was thinking, okay, Army intelligence officer. What was like one of the grueling things you had to go through? Because it’s, again, it wasn’t a traditional path. You didn’t go right. You actually found out like from my knowledge, you hated consulting in this. And that was instructive for you to like, hated like, okay, I’m going to go join the military. Right?
Alexander Harstrick: 21:28
What, what made you think I hated it? I don’t know. Yeah, yeah.
Dr. Jeremy Weisz: 21:32
Various hours I’ve listened to.
Alexander Harstrick: 21:36
I, yeah, the nontraditional aspect was I enlisted. So I went originally to Jersey City. The armed forces recruitment center is next to a Taco Bell. That’s always an indication of really expensive real estate. And then, but I eventually enlisted in the South Bronx. And I think one of the, if you really want some good photographic evidence of the difference between my expectations and the reality of the circumstance, I think I was the only person in a three piece suit that enlisted in the military. I didn’t realize that this wasn’t something you should be really, really excited about. I think there was sort of like varying degrees of circumstance coming into it. And I was just really pumped.
So yeah, Columbia did not have a robust ROTC. I didn’t really want to do it at the time. And then through a varying degree of circumstances to include a resentment of consulting and a very linear path of what I knew was going to happen if I stayed in venture. This was the right time, age, everything to be able to join the army and do what I wanted to do. But I think, much to the disappointment of a lot of my mentors who said I shouldn’t do it because I’d be setting my career back potentially indefinitely.
Dr. Jeremy Weisz: 22:52
What was one of the most grueling things you went through, either in training or I know you served in Afghanistan. I think Iraq also.
Alexander Harstrick: 23:01
Yeah, I think this answer is tough because I’m supposed to give you an answer that sounds really intense. You know what I mean? Like I should say something where someone on the military be like, oh, that was tough. You know, that’s like really, really hard. And, and if I say something not like that, Jeremy, then everyone’s going to think I’m really soft. So I, you know, you put me in a hard position. It’s kind of like, you know, in business school, they would say, what did you do before this? And you could have given an answer, but everybody had to talk about the top line revenue they generated and all the people they managed. And what I would say.
Dr. Jeremy Weisz: 23:29
I, just, you know, the reason I ask is like just painting a picture for people who have not been in the military. What was some of the training? I don’t know. You know, there you know, you see all these things. As far as hell week or I mean, just these are probably normal things where you just they woke you up at three in the morning and you basically go run five miles. I mean, it didn’t have to be anything crazy.
Alexander Harstrick: 23:51
I think the most jarring thing is in like, an experience that I found to be very unfun, and I wish I didn’t do again, 99% of my military service I absolutely loved. The jarring part was the military operates something called SERE school, which is varying degrees of how they teach you to withstand torture. SERE stands for survival, evade, recovery, escape, and or I’m like, now I’m blanking on the algorithm, which I guess, excuse me on the acronym, which probably impacts my credibility here, or maybe reinforces it because I don’t really remember what it stood for.
But when they, eventually they do capture you. That’s the way it works. And then they put you into captivity. And so the captivity is where they, like, hold you into like a small room and they interrogate you and they do all sorts of different enhanced interrogation techniques. The nice thing is they more or less given up on waterboarding. There’s really no way to stop somebody from hating waterboarding. So they don’t even train you because it doesn’t lead to any muscle in being able to withstand it. Note on waterboarding it’s super bad, but they do a lot of other stuff.
And without getting into the specifics, because, you know, obviously telling you about the tactics would then allow the enemy to understand the tactics and work around them. And I wouldn’t want to do that. But that school was really unfun. And I think that was because it was the only time that it felt like in the middle of the training, there was no higher order to what I was being taught in the military. Back to your point about like waking up at 3:00 in the morning, making your bed and running five miles, that teaches you lessons on being orderly and disciplined and in shape and all these kind of things. And you can get your mind around that. It is that SERE school made me a lot more empathetic to one, how people just ask questions and make you feel kind of duress that obviously, it’s hard to get back into that.
Dr. Jeremy Weisz: 25:47
You incorporate that in like your hiring process now at J2.
Alexander Harstrick: 25:51
I, you know.
Dr. Jeremy Weisz: 25:51
You have to go through one of these.
Alexander Harstrick: 25:53
In all honesty, Jeremy, it’s why I’m so bubbly now. I think like the bigger feedback that I’ve always gotten from people is like, you never seem to take anything seriously. And I’m like, well, I think you take too many things seriously. You know, like it doesn’t make you look tough to ask a bunch of really hard questions and be really serious all the time. Like, and that kind of like reminds me of that circumstance.
And I think number two was anyone who’s been through captivity or something really hard where the person doing it to them feels really impersonal. You talk about survivors of trauma, which I will not pretend to be, but at least got a taste of it. The hardest part about it is that another human being completely disassociated your humanity from you. And I think that makes you a lot more empathetic, which, of course, I have to tie this into all things VC. Which is, that is how we approach founders.
The worst thing in the world is when you’re like, why did I give equity to this guy who’s now an asshole to me and is going to turn around and use what should be an intimate and great circumstance as a method to punish me. And I think that makes us a, that is something that is colored the J2 experience a lot moving forward.
Dr. Jeremy Weisz: 26:56
No, I appreciate you sharing that. And Jon, I want to talk about some of the companies. Why don’t we start with Tasso?
Jonathan Bronson: 27:05
Yeah absolutely. Tasso is an amazing technology, two PhDs from University of Madison. And they’ve made a painless self-administered needle free blood draw. So that allows for at home testing, that allows for testing in all kinds of austere environments. And you know, we always joke like the market for this is really the Venn Diagram intersection of people who have blood and don’t like needles, which is pretty much everyone.
And it really just kind of unlocks all kinds of amazing treatments and abilities to monitor and provide preventative care for patients that you couldn’t get otherwise. So hugely impactful technology. They’ve done millions of blood draws already. They’ve been involved in FDA approvals, like really just an extraordinary company.
Dr. Jeremy Weisz: 27:57
How does this fit into your thesis and philosophy?
Jonathan Bronson: 28:02
Yeah. So if you think about the VA as the largest capitated health care system in the world, and in particular the VA has a mandate to take care of veterans no matter where in the United States they are. And it turns out most veterans don’t love living in incredibly crowded urban environments. So the ability to be able to provide care in these remote locations, frequently the blood draw becomes the bottleneck in telemedicine, right? You can do pretty much everything else virtually and that’s where you get stopped. And this allows you to do the entire, you know, care through, you know, through remote monitoring.
Dr. Jeremy Weisz: 28:38
You know, on the theme of blood. Alex, do you want to talk about Safi?
Alexander Harstrick: 28:45
Oh man, I think Jon may be the better one to comment. I always love talking about it, but anytime you have a scientific question, Jeremy, you should direct it to Jon. I just see in chemistry this is knowable information.
Jonathan Bronson: 28:57
Yeah. So he’s amazing company. I was with the founder last night too. So very, very top of mind. Yeah. So they manufacture human red blood cells, right? And it allows for a couple of different magic tricks. Right. So the first is you can manufacture any type of blood cells you want, including universally accepted. So no longer have to worry about, you know, matching type A B, you know, positive or negative. Right. You could just have a blood supply.
The other thing that’s actually extraordinary about their blood is, is you can freeze it and you can freeze it without any nasty preservatives. And they even have some preliminary data that that frozen blood is much higher quality than traditional donor blood. It’s a bit of a gross example, but if you’re familiar with, you know, produce, frozen vegetables are actually more nutrient rich than what you get in the store that’s not frozen. And it’s kind of the same process.
And so they’re really building something that can transform the, you know, blood supply network and allow people to recover faster from surgeries, to get care, you know, that they couldn’t get otherwise. And then of course, for, for the warfighter, you know, blood shortages are a hugely critical issue.
Dr. Jeremy Weisz: 30:08
So I’m curious, what’s your favorite story of one of the companies and, you know, diversifying into government military? Is there a favorite one out there in the use case?
Alexander Harstrick: 30:22
And by that, Jeremy, do you mean like a company that probably did not begin with the military in mind, but ended up?
Dr. Jeremy Weisz: 30:28
Yeah, exactly. Yeah.
Alexander Harstrick: 30:30
I think Lumia Health is probably one of my favorite in that. So Lumia, obviously we’re investors in Oura despite the on pause IPO. It’s pretty amazing to get a wearable all the way to the point where they are in considering IPOs and will successfully be able to pull this off in the future. In the case of Lumia, we started from the infancy of this product and if you look at it, most of Lumia’s advertising is going to be some really stylish person, probably in Southern California going out and like, you know, getting a green juice and reconciling all of the issues that come with their changing body in some kind of condition that Lumia helps them manage. And so if you look at this picture right now or any of these pictures, none of these look like wearables. And I think that was really, really important.
One of the experiences that we’ve had in our investment in the wearable industry is it can’t make you look sick. If people do know what it is, then it needs to make you look sophisticated. And number three is the information needs to be actionable from a health perspective. Even if it is not FDA cleared, somebody getting it can look at it and say, look, I can make a change from this. It can’t just be, hey, you know, it’s 100 degrees outside. Fantastic. I have that on my watch.
What people don’t realize about Lumia is that most of the funding that comes from how the product is built is from two audiences. Fighter pilots and Navy Seals. And what’s amazing about that is like, both of those places are really, really focused on what happens to your body when it is under significant arrest. In the case of fighter pilots, is how do you get blood flow all the way to your brain when you’re having, you know, multiple G-forces? It’s basically half the plot line of Top Gun 2. And in the case of Navy Seals, I mean, if I have to tell you about how tough those people are, then like, I think there’s a lot about this podcast that you’ve probably missed so far.
And all of those signals come in to read into, again, back to this woman in Los Angeles, trying to make it way, the way through her day to make sure that she’s having a great day. And I think the beauty of Lumia is that one audience does not interfere with the other at all. But the go to market motion is also no different. What’s good for the goose is good for the alligator. And at the end of the day, they’re both really excited that this product exists.
Jonathan Bronson: 32:43
Yeah. Yeah. And what’s unique about Lumia is just because of the placement of the wearable, it’s basically physiologically between your heart and your brain. And so you get this unique access of how much blood is actually flowing to your brain, which is why if you have a chronic dizziness condition, which is our primary audience, it makes sense. But also if you’re worried about like mass casualty triage and who has internal bleeding and, you know, in a special operator situation, it also makes sense, which is kind of wild.
I also should point out that, you know, health and human performance is a big part of our portfolio, but it’s the minority. It’s just that I think the companies are fun to talk about in a way that, you know, an amazing, you know, RF inference technology that actually is transformative is super, super cool, but doesn’t really resonate with, with, you know, oh, like my, you know, my parent or child or whatever could use this product.
Dr. Jeremy Weisz: 33:35
And for people who don’t know Lumia, they’re smart earrings, right? So I just had the, one of the founders of Shokz headset on the podcast. And I thought of you both because, I didn’t realize this when I talked to him, but I guess the manufacturer had started as really as a military product. And then he brought it the opposite way and into commercial use. And it was really mostly strictly used for the military. And he saw a big opportunity to bring that to the masses, which he did.
But, you know, I do want to talk about a company. I don’t know if there’s a company out there that was like, you’re just so close to investment, but then you decide not to. And you don’t have to name the company per se. I’m just curious, like, what was it? Because I’m sure all of the I mean, all these things are so cool. And I’m sure you see a lot of so many companies that you’re like, oh, I wish we could invest in this. We just, it just doesn’t meet XYZ. What, what was one of those that you were like, yeah, we, we have to, I wish we could, but we have to pass on this one.
Alexander Harstrick: 34:57
Yeah. Can I make a meta point before that, which is.
Dr. Jeremy Weisz: 35:00
Yeah. Go ahead.
Alexander Harstrick: 35:00
Why someone passes is not like a rule, you know. Oh the company wasn’t this. And then someone has to go back and say there’s some insurmountable forces going to keep me from ever getting funded. Like I would say VCs don’t actually think that much about who they pass on. What they do think about a lot is when they pass and then the company ended up being incredibly successful, and then that ends up haunting them.
And so, you know, where I will say is like, from a rule that I think founders can take away from this is we talk about internally a lot is things that are good for the species, but are their bad investments. And so there’s a lot of that when it comes to this is good for the warfighter. This is good for humanity. I agree with you. But whether it’s a good investment is that business case is not made.
And ultimately, regardless of whatever moral high ground VCs pretend to incorporate, they don’t. Our job is to make money for the people who give us money at the end of the day. And so if the business doesn’t do that, regardless of how important it is, we talk about prosthetic limbs, for example.
Dr. Jeremy Weisz: 36:02
I was just going to, I was just thinking of that exact example because like, it’s such a pull at the heartstrings. Like, wait, you don’t want people to have amazing prosthetics that work like, oh, but I mean, obviously you did invest in that one, which is.
Alexander Harstrick: 36:16
Yeah, as evidenced behind me right here. The Aether Biomedical hand, you know. And by the way, the prosthetic limb technology that comes into this is what’s fed all of the advances in humanoid robots. And so that’s where I would argue Aether does amazing work by helping people with prosthetic limbs. They do better work by controlling all of the EMG data that comes through how you use the robot hand, and then reselling that to a bunch of other robot hand companies and or to themselves. And that library is actually the investable aspect in addition to the hand. But the hand itself, there are a lot of these companies is a really, really tough place to invest. And by tough, I mean nearly impossible if your job is to have a high alpha.
Dr. Jeremy Weisz: 37:00
So are there any big misses? I mean, listen, the percentages are you have so many companies come across your desk. Someone’s bound to have something that’s like, oh, I wish we would have invested in that.
Alexander Harstrick: 37:13
Oh yeah. All the time I have like five. I like like five that are now deca coins. I mean, I like I’ll give a shout out to my friend Dino Mavrookas, who runs a company called Saronic. Saronic is a $9 billion valuation, probably going a lot higher than that. Dino was in the Navy Seals, went to Wharton, also private equity professional, great guy, talked to us about his pre-seed round and we said, no. The ownership wasn’t high enough from a J2 perspective. The round was really highly priced. It felt at the time. And had we invested then we would be nearly 500x, probably going on a thousand x huge miss. And I’d say the bigger issue there was that that I think we have now tried to convert ourselves out of is your network actually is what you are investing in.
Dr. Jeremy Weisz: 38:04
This is Saronic right here?
Alexander Harstrick: 38:05
This is Saronic. Yeah. And so if it’s someone that you trust, that is really high confidence, you should be actually relatively deferential to a lot of other aspects that would normally come into diligence because ultimately, by knowing someone for years, you have fast tracked a lot of the parts that these rules are intended to capture that they normally wouldn’t. And in that case, we confuse both signals with each other. And as a result, we missed out on Saronic.
And by the way, we’ve done this four other times with companies that are worth a ton of money. We will do it 40 more times throughout our investment career. At some point, our job is to miss because all of these guardrails are to make sure that we don’t do something like Theranos or FTX or, you know. Anyway, the list also goes on of a lot of people that experience FOMO and did really stupid things. So.
Dr. Jeremy Weisz: 39:00
You know, first of all, I have one last quick question for both of you. Before I ask it, I want to point people to J2VP.com to learn more about the company. And then I don’t know if that’s the best place to reach out if someone has like a really innovative company in this realm. If there’s a place where on the website you can, you can check it out, there’s a contact us and everything like that.
My last question for you is just favorite resources. This could be a podcast. It could be a book. It could be an interesting software you’re using as of late. What are some when you think of your favorite, you know, resources over the years?
Jonathan Bronson: 39:43
So for me, I think that there’s just a ton of amazing books on venture. I think, you know, one of the great things about the asset class is it’s probably realistically, what, like 60 years old functionally at the, at the most, which means that almost everybody involved in it is still alive. And that gives you this amazing treasure trove of actually being able to go back to the history of it.
And so there’s great books like, you know, The Power Law by Sebastian Mallaby. There’s, you know, there’s books like Zero to One by Peter Thiel. That’s his philosophy of how to, you know, grow them. And so there’s just, there’s just a ton that you can pick up by reading in the ecosystem. And then I think, you know, a lot of, as we, you know, try to push the frontiers of knowledge and say like, hey, what is the future of AI? What is the future of robotics? Right? You really can only do that by reading about what people are doing. And so I think that as a firm, we spend a huge amount of time with our reading list and encouraging everyone on the team to read these types of books.
Alexander Harstrick: 40:37
Yeah, I totally agree. And then I think to compliment that high engagement and EQ social media. So I don’t have Twitter. It just feels like a dumping ground cesspool. I know a lot of VCs do have it, but it just doesn’t feel fantastic to me. We do do a lot on LinkedIn. And I think to your point about how do you get in contact with us? Well, the biggest question that we will have about what you are doing is, can you sell the stock and can you sell the product? So sending a cold email is useless. Can you get someone else to make the introduction to you such that this becomes compelling? That’s kind of test number one as a founder.
And so LinkedIn is a great way to do that. If you aren’t paying for premium, you should. It is remarkably underpriced for the value that it produces. We probably brought in 50% of our LPs from some form of LinkedIn outreach. That is our primary engagement strategy. I am not a shareholder in LinkedIn. I’ve never even met Reid Hoffman, but that is truly amazing. And I think every founder and venture capitalist should have some strategy around the platform.
Dr. Jeremy Weisz: 41:43
Alex, Jon. I want to be the first one to thank you. Everyone check out J2VP.com to learn more and we’ll see you next time. Thanks so much.
Alexander Harstrick: 41:52
Thank you Jeremy.
