March 19, 2025
[Full Podcast transcript at end of page]
In venture capital, the role of corporate investors has long been debated. Are they truly aligned with startups? Do they move too slowly? Can they deliver more than just capital? These questions have shaped how corporate venture capital (CVC) has evolved over the last decade.
We sat down with Dan Reed, Managing Director and President of American Family Ventures, to unpack how corporate venture capital has shifted, how his team transitioned from a single-LP corporate fund to a multi-LP venture model, and what it really takes to add value beyond just writing checks.
When we first met Dan in 2018, American Family Ventures was a traditional corporate VC fund, investing solely on behalf of American Family Insurance. Over the years, it evolved into a multi-LP venture fund, bringing in other insurance carriers as limited partners. This is a rare model—most CVCs remain tied to a single corporate parent, often limiting their ability to act purely as investors.
Dan’s transition into a multi-LP structure was driven by a realization: other insurance companies were trying to replicate what American Family had already built. Rather than competing with new funds, Dan and his team invited them in. Their third fund in 2019 included 13 new LPs, and by Fund 4, they had doubled the capital base and expanded their network even further.
The key lesson? Industry collaboration beats duplication. Instead of multiple firms trying to spin up their own venture arms, pooling resources and expertise has led to smarter investments, stronger deal flow, and better alignment across the insurance ecosystem.
One of the most insightful parts of our conversation with Dan was how he categorizes startups into two buckets: disruptors and enablers.
Dan’s fund invests in both, but over time, he has seen a shift. Early money in insurance tech went toward disruptors—startups trying to reimagine the industry. But as the market matured, the enabler side grew faster. Selling into an industry like insurance, where distribution is everything, often yields a shorter path to revenue than trying to take down billion-dollar incumbents.
This isn’t just true in insurance. In almost every industry, startups must decide whether to compete or collaborate. And while disruption makes for great headlines, the enabler model often wins in the long run.
A decade ago, corporate VCs had a reputation problem. They were seen as slow-moving, misaligned with founders, and prone to pulling out of deals when markets shifted. Some forced startups into exclusivity agreements or added strategic restrictions that made raising follow-on capital harder.
But Dan’s perspective is clear: that stigma has faded. The best corporate VCs today operate just like traditional VCs—with financial-first thinking, faster decision-making, and cleaner deal structures.
Of course, not every corporate investor is great. We’ve all seen bad actors, but we’ve also seen traditional VCs behave poorly. The truth is, it’s no longer about whether an investor is corporate or institutional—it’s about whether they actually help the companies they back.
Venture capital is full of overused buzzwords, but none are thrown around more than “value add.” We teed this up for Dan because, let’s be honest, most VCs who claim to add value don’t actually do anything beyond introducing founders to other investors or writing a Twitter thread about their portfolio.
Dan’s team at American Family Ventures, however, is structured differently. With six full-time team members dedicated to connecting portfolio companies with LPs, they are actively building bridges between startups and industry decision-makers.
Startups don’t just need capital. They need access to customers, partners, and talent. A warm intro means nothing if it doesn’t lead to actual commercial traction. Dan’s team understands this and operates with a long-term mindset—helping both startups and LPs navigate complex industries like insurance.
So, where does CVC go from here? Will we see more companies shifting to multi-LP models, or will most stay locked into traditional corporate-backed funds?
Dan is optimistic but realistic. The market is warming up after a rough 2022-2023, but it’s still uncertain how corporate innovation strategies will evolve. The challenge for many firms is staying committed through market cycles—something Dan and his team have been able to do by focusing on real returns, not just corporate innovation buzzwords.
The key takeaway from this conversation? The best investors—corporate or not—aren’t just writing checks. They’re actively creating pathways for startups to succeed. And in a world where distribution and industry access matter just as much as technology, that’s where the real edge lies.
Want to continue the conversation? Reach out to us at ben@highlinebeta.com or marcus@highlinebeta.com
Dan Reed 00:00
What are you seeing right now, just in your deal flow? You know, the way we think about it is there are companies that are seeking to compete in a new way with the incumbents, and then there are companies that are looking to sell to and serve the incumbent base in a sort of enablers versus disruptors type of concept. And we've got positions in both, really in insurance. It has a lot to do with how do you lower the cost of insurance by being more efficient? That's tends to be a major thesis that comes through on the disruptor side. But at the same time, there are companies that are trying to sell to the incumbent saying, you know, here are solutions that you can embed into your existing scale and be more efficient. A lot of the early money went to the disruptor side of things, but there are far more companies on the enabling side, I would say,
Ben Yoskovitz 00:53
Dan, thank you for being here. Really appreciate the time to have a conversation with you about your experience in venture capital and working with corporates. You and I met, I think it was 2018 when Highline beta was working with American family, looking at building new businesses adjacent to American families core. We ended up together, spinning out a company called Relay platform. You were involved in that a little bit, and then that company ended up being acquired in 2022 by at bay. And that was, you know, quite, quite the interesting ride. And maybe we'll talk a little bit about that, but that's how we originally met today. You're managing director of American family ventures, which is actually a multi LP venture capital firm. So really, that's an important point for us to dig into, because some folks might think of that as just a corporate venture capital, where you have one LP, the company I know Previous to this, you know, iteration of American family ventures, it was a CBC with with one lp. And so we can talk about that evolution, I think, is just really interesting, just because you have so much broad experience on that front. So maybe we'll start there origin story of American family. You've been there a long time, investing and evolving and growing into this multi LP structure,
Dan Reed 02:16
yeah. Well, good to see you again, man. And nice to see you, Marcus. And thanks for having me. Yeah, you're right. When we met in 2018 we were we were just in the process of making a transition from a single capital partner in American Family Insurance, where we had started to something that represents a little broader swath of the insurance industry in the United States. So the origin story for us At American Family ventures was we, I was working in strategy At American Family Insurance. And for your viewers who don't know American family it's, it's a top 10 insurance carrier in the US. We're headquartered in Madison, Wisconsin, where I live and and we've been, we've been in business 98 years now. So back in 2010 or so, I was thinking in in a strategy role about how does a company like that really built for stability and with a long history of success, how does a company like that get involved in new things in a more effective way? And it just the concept of American family ventures came to me really by accident, because I was having partnership discussions with large and small companies about what, what can we do together? And, you know, by large, I mean companies like Toyota, you know, how do we want to work together on auto insurance, but also companies on the, you know, the startup end of the spectrum that had raised $50,000 and we're really just getting started, and some of the startup conversations, they really had to hit me on the head with it. It was probably a dozen companies where we were trying to form some sort of partnership around data or around customer experience or something, and a few of them would come to me as part of the contracting process and say, we would love to be able to use your logo on our website. Is that okay? Or we'd love to use your logo on our pitch deck. By the way, we're pitching for a series, a financing or something, and and we've got this partnership. Would you ever think about participating? And it was always, no, you know, that's not really what we do. And then one day was like, I don't know, like, maybe the 10th time that happens. Why are we doing? Yeah, we're already working with right? Yeah, and, and, you know, long story short, we we started making some of those investments, you know, candidly, using a little bit of a loophole in the corporate investment policy that said, essentially. Actually, as an insurance company, we have to invest our capital in this particular set of ways 99% of the time, but there was a 1% exclusion that said we could do more strategic type stuff and and that that was really what we needed to do. So we did a handful of those types of investments. Found that there's a place for this. Found that fairly quickly, it just engendered a new type of conversation around what, what a big company can do, and how we can explore in a way that that casts a wider net and also hopefully pays for itself through the value of the investments that we're making and and ever since then, it's been every year we try to evolve it and get a little little little better at it, a little bigger at it. We did the first two funds just from American families. So fund one was a $50 million fund, and fund two was 150 million. And at this at that time, by the time we did fund two in 2016 the insurance startup environment had just exploded, and people started talking with InsurTech, and I started getting calls from other carriers, insurance carriers, saying, How did you get this this now? Now it's almost like six years old. How did you get this thing set up? What did you talk to the board about? How did you hire for it? How did you do a lot of the questions that you guys get on, you know, startup studio construction, you know, what's the, what are the lessons you've learned? How do we do it, right, you know. And so some of those conversations turned into, well, you know, why would you want to replicate it, you know, why would you want to? Why don't we just work together on, you know, the next stage of our evolution, and fund three for us in 2019 so a bit after we met was, was the first time we did a multiple carrier fund. We had 13 other parties. And then fund four in 2022 was we doubled the size of it and doubled the size of carries. And that's really been our focus. Is growing that footprint, growing that network and and, you know, trying to be useful and trying to be smart, like every other like every other VC tries to do.
Marcus Daniels 07:13
And obviously, through that evolution, you really built off the success of delivering financial returns and kind of growing that fund size. Have you seen any noticed anything different in the ecosystem with the respect to the interface of just American family and the ecosystem more broadly?
Dan Reed 07:30
Yes, I think so. I mean, when we, when we started part of that original presentation to American families board, back at the very early days, was, I'm an ex consultant, so the frameworks and slides and stuff like, it's, I used to write, I used to write letters to my wife in PowerPoint, you know, like it was, I kind of moved off of that. But we can
Ben Yoskovitz 07:53
talk more about that if you want. Dan, like you can,
Dan Reed 07:58
yeah, the less, the less is better about that. But the the framework that I had in mind at the time was, there was a lot of talk in the in, like the corporate venture world, and I was doing a ton of reading back in, you know, this is now, just about 15 years ago. But how to do corporate venture, how to do it right? You know, what to avoid, how not to be, you know, overbearing and the approach that you take to this. And, but one thing that kept coming up is is, how do you balance financial returns with, you know, the strategic interests that you have in the space and, and my solution to that was a two by two chart that said, you know, it were the axes on the two by two were financial and strategic. And for me, it wasn't, you know, hey, we're 50% financial and 50% strategic, or we lead the strategic and have the financial. It was every, you know, of those four quadrants, every investment that we make we believe is satisfying the financial, the financial aspect of it, which is, you know, can you make 10 times your money over a five to seven year period? You know, something that's a return that's commensurate with the risk, but also has to satisfy that it's providing some strategic option, or some strategic visibility, something strategic about it, and and the belief was, or, you know, the way I was thinking about it is that everything we do has to be in that top right quadrant when we when we write that first check, and some investments will stay in that in that top right quadrant where you kind of win on both fronts, but a lot of and those are great, and we've had some, you know, go that way and but others will move away from the strategic and just become financial. Some will move away from the financial and just become strategic, and then others will return. Neither you know, you'll end up with, with with no, no outcome. And it was important to me to talk about, first of all, you can kind of win in those three ways. You know, you. But it was important to me to talk about, if we're going to embark on this type of activity, we need to end up with some we're not aiming to have some in that, you know, total zero type quadrant, you know, where you don't get a financial return and don't get a strategic return. But we have to be comfortable with having some of those types of outcomes. Because if you're not comfortable with it, or you don't end up with any of them. You're probably not taking enough risk, and you're probably not thinking aggressively enough. And I got a lot of nodding heads about that, and that was really the approach that's evolved from that very simple dynamic to lots of ways that you can define what strategic means. Mostly it's become we invest in areas that we know in advance are areas of interest for our limited, limited partners, you know, for all of those different carriers. They, you know, they all want to understand more about AI. They all want to think about, you know, distribution claims, advancements, you know, new opportunities across the value chain. And we kind of leave it at that, you know, we don't pre qualify whether something is specifically strategic or and we don't seek to get special terms for, you know, strategic benefits. It's more just like the activity itself is strategic. And then we underwrite the financial side. Because as you take on more money, and you take on money from more partners, that the notion of fiduciary duty becomes, it becomes stronger and stronger. So you have to, you have to focus first on the returns, but you do it in a way, and then you evolve it from there to say, every investor in the pursuit of financial returns has to have some angle, you know, has to have some edge. And for us, the vertical focus backed by people who are in that industry is hopefully the thing that provides us some edge. You know, it helps us evaluate complicated insurance concepts a little bit in a little bit sharper way, and it helps us be useful after the investment. So it's the two are not really at odds, the way that, the way that some people were saying back when we were getting started, they they should really work together, the idea of strategic and financial
Marcus Daniels 12:18
again, with just thinking about taking on other capital and stewarding capital from partners. How has that changed in this evolution, the timeline with respect to delivering financial returns compared to before? The thing
Dan Reed 12:31
that gave us confidence to be able to do that is to make that expansion is that during fund two we established some some processes and really a mindset of transferring what we're seeing in the market to to our Capital Partners, to American family at the time. And so we created some staffing around that. We created some events, we created a little handful of methodologies to make sure that what we were seeing was was useful. It wasn't just stopping with us, and it wasn't very hard for us to expand that, you know, to say, like a lot of the programs that we built and the mindset that we had, and the processes were, were totally expandable and transferable to that broader base. So we have, we have, a, you know, engagements that include some all limited partners. We do events that way. We have events and engagements that are sort of limited to individual partners. Each one of them has their specific interest areas, and all of them have a lot of commonality around the things that they want to see. So we just, you know, as as as the fund has expanded, the team has expanded, and we've been able to kind of staff to that new expectation,
Ben Yoskovitz 13:49
right? And when you, when you make an investment in a startup, they know that you've got a whole host of LPs behind you in this industry, and you're making very specific investments that are vertically focused. Do those startups try to go through you to get to those LPs and say, Dan, open the doors to all those LPS because I want them as customers or partners. So back to that strategic you're not required for there to be some kind of partnership, certainly with American family out of the gate to unlock the investment. You guys are just making investments, but I would imagine those startups are trying to hustle with you, or through American family ventures to get to LPs.
Dan Reed 14:34
Oh sure, yeah. I mean that that's one of the that's one of the things that that really all VCs talk about is, is almost to the point of being like a cliche is, what's the value add that they provide? Value add? Yeah,
Ben Yoskovitz 14:49
there it is. There it is, yeah, ding, ding, ding, yeah. Once again, we were gonna say it, we teed it up for you. So yeah,
Dan Reed 14:56
thank you. Yeah, exactly like it. Like, it's kind of, it's kind of a thing. It's to the point where, like, you know, you make a stupid comment in a board meeting and it's like, hashtag, VC, value add or whatever. But, yeah, exactly, but, but Yeah, certainly they look for that kind of business development, you know, connectivity. And then what's nice is the the limited partners are looking for that too. So it's, it's, it's an easy connection to make both sides want to meet each other. We, we do a lot of that, you know, sort of very intentionally for the portfolio companies and for the LPS. But one thing that I've noticed is it's not really just about the portfolio. The the pipeline matters too. And so, you know, we'll make a lot of introductions. It's, you know, I looked at this once for, for every company, for every portfolio company, where we'll make an introduction. There's probably 10 pipeline companies that will make introductions for as well, right?
Ben Yoskovitz 15:53
That you're not investing in, right? You're, you're deciding it's not a fit for the fund, but could be a fit based on what you know, LPs are looking for from a partnership perspective,
Dan Reed 16:04
exactly, yeah, maybe it's too early for an investment, or, you know, or whatever, outside of our scope, or something, but, but we, you know, we think we can, we can still be useful to all parties. Because the the, you know, the venture capital business is really just like a network business. And so you want to, you want to be seen as a good partner. You want to see as someone that people want to talk to. And there's, there's a few ways that you can do that.
Ben Yoskovitz 16:26
Do they ever send you deal flow the LPs, because I'm sure every one of them is getting hit up by by startups all the time, right from a partnership perspective or a sales perspective. So do they ever send you deal flow and say, Dan, we've got a partnerships team or something. On our side, they're looking at startups. We think they could be interesting or or even from American family as well. You know, does deal flow come that way, where there's already a notion of some strategic fit?
Dan Reed 16:53
Yeah, I mean, that's, that's one of the ways to mark because he asked, and I didn't get to it because it was rambling on and on, but the that's one of the ways that this space has evolved. So it doesn't I mean, typically it doesn't happen nearly as often as the other direction, like most of the time we're in market, talking to startups, and we sent through but there have definitely been occasions when you know someone is at a conference, or someone's working with someone as a partner, they say you should take a look at this. And we love it when that happens. I mean, that's kind of the power of the note. It happened to me yesterday. One of our friends at one strategy for one of our limited partners says, Hey, you should talk to this person. And it's great when that happens. We have, we have a couple portfolio companies that happen that way. Yeah, so it's fantastic.
Marcus Daniels 17:39
And Dan, how's the portfolio construction changed? Now, getting into fund four, and having all these limited partners involved in kind of supporting, kind of the overall interface
Dan Reed 17:50
the portfolio construction, we are able to cast a little bit of a wider net, so that, because there are so many more partners. The the, you know, back to that original framework of sort of, what's strategically in scope is now wider. You know, an obvious example is American Family Insurance doesn't have a health insurance business. And so, you know, we would back in, you know, 10 years ago, when we were just investing for American family, when we saw how when we saw health insurance businesses, was like, Well, I don't know if we can be useful here. I don't know if this is really a great fit for us, but now we have, we have companies that are in that business, and so that that sort of thing is a little bit wider scope for us. And again, you know, they're thinking about artificial intelligence. They're thinking about, you know, efficiency across their value chain, just like any other insurance company. And so there's definitely commonalities. But so that's one of the things that that shifted. The other thing that that has shifted is there, there are just so many people who come from the insurance industry that I mean, tell me if this is what you're seeing as well. But there's relative to 1015, years ago, the startup playbook, the startup you know, concept that just the level of familiarity with what a startup is trying to do and and how you can engage with it is, is much higher than it used to be. So a lot of our early programming was just like, What is a series? A or A series? You know, we would talk to people about, like, who, who you talking to when you're talking to a series a company, what are they trying to do? And that familiarity is there now, like it's so in the effect on the portfolio to your question is you end up with people coming out of the industry to form startups at a much higher rate than used to because there's more money there. There's more sort of proof points that that you know, and playbooks to see how you can do. It So, and that's good within the insurance industry, because it's, it's a sort of a complicated industry. So having people from the industry form companies is is a welcome development for us. What
Marcus Daniels 20:10
Ben and I are seeing a lot of right now too, in that kind of portfolio construction is the balance of AI being applied to maybe use cases with respect to digital transformation in the core, but also some going a bit more bolder looking at, you know, beyond the core, you know, AI applications. What are you seeing right now, just in your deal flow, you seeing a lot of these applications and deal flow for the core, or looking beyond,
Dan Reed 20:35
though, you know, the way we think about it is, you know, within the insurance context, and I suppose within any industry, when you think about the startups, there are companies that are seeking to compete, maybe in a new way, with the with the incumbents, and then there are companies that are looking to sell to and serve, You know, the incumbent base. And, you know, sort of enablers versus disruptors type of concept. And we've got positions in both, really. I mean, we see it as our job to make some investments in companies that that are trying to be in insurance. It's, it's, it has a lot to do with, you know, how do you, how do you lower the cost of insurance by being more efficient. That's tends to be a major thesis that comes through on the disruptor side. But at the same time, there are companies that are trying to sell to the incumbent saying, you know, here are solutions that you can embed into your existing scale and and be more efficient, and, you know, and compete that way. So, yeah. So I, you know, I, I don't know that there's been a significant shift. A lot of the early money went to the disruptor side of things, but there are far more companies in terms of company count on the on the enabling side, I would say,
Ben Yoskovitz 21:58
easier to sell to the big dogs on the street, I guess, than it is to try to beat them up.
Dan Reed 22:05
Maybe, I don't know. I mean, it's, it's hard to sell to anybody. It's hard to sell a big
Ben Yoskovitz 22:11
company. That's fair, that's true, yeah, I mean that that's very true. I don't, yeah, that's a good point. I don't know which one maybe is easier. I still think maybe selling in is still easier than trying to disrupt. Just when you just think about pure scale, you know, you just think about American family, you know, top 10 insurer. You know that your size, as a, as an or not, on the VC side, or some of your LPS will just be gigantic organizations compared to tiny startups that are attempting to disrupt versus trying to sell in,
Dan Reed 22:41
yeah, that's right. One of the things we like, I mean, to that to the point that, like, the sales cycle takes a long time in the insurance industry, like, like a lot of big industries, one of the things we like on the enabling side are companies that want to serve the insurance market. But maybe that's not the only market that that target. And so they can get up to speed, you know, then get they can get some initial traction and build out their business by selling to industries that may buy a little bit faster than insurance. And then we, sometimes we see it as something that we can do is help introduce them to a new vertical in the insurance market and help open that up and that that feels like that's a very doable path for us and for our partners, you know, to say that we can help one of our LPS be the first insurance company to work with, you know, some company that's been working in the, you know, property space, or something like that, that, I think that's useful.
Marcus Daniels 23:38
How has the team evolved? You know, from fund one to fund four in kind of supporting your initiatives.
Dan Reed 23:45
Yeah, the team has grown a lot. I mean, I think back to those very early days. It was just two of us, and then it was four of us, and there was eight of us, and now there's 27 all together, just as our Yeah, it's great. And the other thing, you know, people have come and gone, and some people have left to start businesses. Some people have left to start funds, like, you know, like anything that's been going for 15 years, you're going to have, you're going to have a bit of turnover. But I'm where we are right now as a team is a lot of people have been in the roles for for quite a few years, and they, I talk about VC being a network business, it's also the cumulative experience of making investments, sitting on the board, seeing them go well or not go well like it really does, start to add up, and having some level of stability and the sort of overall maturity of the team. You know, every year that goes by, we we gain 27 years of experience or something. So it's, it's, it's, it's been, it's been nice to see how that works, that the way we're structured, there's of the 2713 people are making investments. And then we have. Have, I think it's six people on that strategic transfer, or sort of engaging between the portfolios and the limited partners, and then we have financial operations and some technical operations and some support on there. But we were, like a lot of groups of our size now we're, we're sort of balanced between investing and a lot of the support transfer functions,
Ben Yoskovitz 25:25
but that's a decent sized team, six folks that are focused on trying to connect the dots between the companies that you're investing in and your LPs. I mean, that's the, I mean, their job is to just create value between those two groups, right? Because your LPs are not the ones making investment decisions. They've given you the capital to make those decisions. You make those decisions, and then you're, you know, shopping the company around is maybe not quite the way to describe it, but then the clock is there to say, how do we create more value to grow our investment in this, in these startups that we've put money into, yeah,
Dan Reed 26:02
that's, that's exactly right. And I don't think it's, it's not very different from from other firms. I mean, they, they often have some teams that are doing kind of broad based business development, or, you know, events, or whatever it is trying, trying to kind of expand the network. In our case, the the premise that we raise money under is, is pretty clear that we're going to be, you know, specifically valuable to our, you know, as that point of connection. And so we need to make sure that we deliver on that, on that promise. Puzzle helps drive investment returns. And so it's, you know, well,
Ben Yoskovitz 26:35
that's the way I think about it, like it's a, it's a out of self interest to connect those dots, right? That's not goodness of our heart. It's to we're making an investment in a company because we believe in it. Now, can we, if we can help them get a customer or a partner or some level of distribution or whatever it is, then we are, you know, back to, you know, joking. We can joke about value add, but if we can actually, genuinely create value add, that's a good thing.
Dan Reed 27:00
Yeah, one of the things we've been thinking about lately on that within that function, is improving the readiness on both sides. And, you know, historically, we've just kind of played it as it lies. You know, the LPS have some variability as to how they're organized around innovation, how they're staffed, how they have budget. Me, you see this, I'm sure, as well your partners and and similarly, on the startup side, there's, you know, there are seed stage startups that have never billed anyone before, and they're, you know, they're not ready for, you know, enterprise level, scale. And then there's others that don't need us at all to make those connections, because they have, you know, scaled sales teams or whatever. And so one of the things we've been thinking about is, how do we, how do we we're a more valuable partner, the the better both sides of those of that, of that market is, and so, you know, are there investments we can make with our LPs to help, you know, clarify what their innovation intentions are, or, you know, help them evolve their processes, learn from each other. And you know, how do we get the startups? It sounds sort of, I don't mean to be cheeky, but like, how do we help them navigate what could be a 15 month sales process, you know, in, you know, in an effective way?
Ben Yoskovitz 28:30
Yeah, I think those that have never done it before are really, especially if you're moving them from, you know, industry, a into, like, a different industry, into insurance, and then saying, Guys, this is how this industry works. This is how you have to be ready for it. I mean, you really it does take two to tango here. So we need both sides understanding what to expect from the other side. I would imagine on the broadly, on the innovation front, with LPs, you must see a variety of things, whether it's them sharing pain points with you, or opportunities that they'd like to explore, or level of sophistication of those LPS when it comes to innovation internally, or that that interface or connectivity to startups, the readiness for it, I would suspect that sort of all over the map.
Dan Reed 29:16
It is. Yeah, it's all. I mean, they all have one thing in common, which, which was they decided to make an investment into us, and they have expectations of us. But you're right that the there are some that are explicit. They say we want to see opportunities in these three areas, and anything other than that, you know, don't waste our time. And then there are, there are others who maybe haven't defined those areas, and what they look for is just come in and just start, you know, just just start, like, rapping at us. Basically, just just go like you just come in and just start talking. And we'll, we'll let you know when you say something that makes any sense. And you know, no. Hmm. And you know, knowing which one is, which is kind of important for us, because, you know, it sort of aligns expectations. But, you know, and then you look back at the end of each year, or every couple of years, when you think about the cycles, like, Are we, are we being useful, or sort of mutually, are we achieving our objectives and other things we need to do, and like everything else, you just try to make, make improvements every year that goes
Marcus Daniels 30:28
by. And Dan, I mean, you have such a unique position and experience of to seeing the evolution of this corporate venturing model. How has, how you've co invested with traditional VCs changed, and now I've been having multiple, you know, corporate LPS involved in the deal making. I'm curious, just from your lens, just what you've seen,
Dan Reed 30:47
that's a really, that's, that's a great question, because it has changed a lot. When we first got started, I was speaking for myself, but, but other members of the team, we were all extremely sensitive to the notion of of CBCs, because a lot of the talk at the time, and this is like, you know, think about 2012 or something, there was a lot of talk about, you don't, maybe you don't Want to take money from from a CBC, because it was kind of a blanket statement, but I think about it, the heart of it was you need to be careful about how they act, and you need to be careful, as a founder, about are they taking terms that would, that would diminish your outcome in some way. Maybe it's a right of first refusal or exclusivity within your industry and you know, or when, in the case of you know, as it happens often and certainly over the last couple of years, when there's been a bit of a pullback in venture and capital has been harder to find. You know, if you have a corporate investor with intentions that are maybe less financial, directly financial, and there's a situation in which the insiders need to fund a bridge round or something like that. Is the corporate investor going to take advantage of that situation and try to be misaligned with the rest of the group? That was a lot of the talk in the 2012 and I remember thinking, we're going to design a bunch of our approach to be in opposition to the common complaints about cvcs, you really don't see that much anymore. I mean, it just it feels like complaints.
Ben Yoskovitz 32:33
You mean, you see less than that pushback against CBC and maybe the baggage that comes with it, or the strings,
Dan Reed 32:41
you just don't see it as much. I mean, I'd be curious to see, what would you guys see? But for me, it's like, every now and then you'll, you'll have a founder who talks about, you know, who has this notion of, like, there are, you know, tier one VCs, and then there's tier two VCs, and then there's, you know, then there's corporate VCs or whatever. And it's like, that's that, to me, is like, that's sort of a strange, hierarchical view. I mean, you want to, you want to look for, for an investor that has a perspective on space and is able to add some, you know, add some value to you. And you see, I just, I just haven't really seen many examples of long term VCs doing it from a corporate platform that you know, that have wildly out of market approaches.
Ben Yoskovitz 33:28
Well, I mean, I'll say, I think the we've seen everything under the sun, you probably have as well. We've seen VCs behave poorly, whether they were corporate VCs or not, right? Like we've seen what you would consider tier one VCs abandon ship. We've seen corporate VCs, you know. And I think some of those terms you're describing, you know, rights of first refusal, or, you know, often it's have a strategic relationship locked in first before we can unlock the money. So, you know, and then if that goes sideways, it can the corporate VC is maybe less interested. So we've seen all of that. But across the whole VC spectrum, you can't just point at one sort of subgroup and say, Oh, that's the group that's worse than this other group from a behavior perspective or approach or or lack of value. Add perspective, and we've seen the positive to corporate, you know, corporate VCs creating tons of value, or what you would call second tier, whatever, VCs creating tons of value. So I sort of, that's where I think you're right, that sort of notion of, it's not a one size fits all where you can, you can sort of paint, you know, all corporate VCs, or all of this type of VC with the same brush. It just doesn't work that way.
Marcus Daniels 34:47
Yeah, it comes down to the individual, the professional behind it. And I think again, you've earned, you know, the success of what you've been able to build and continue doing, fund after Fund, and the reputation matters, regardless of your corporate V. C or a traditional VC or a family office, but, you know, we've seen a lot more, I think again, looking at corporate venture studio models, partnering, not being competitive with other corporate VCs. And so we seek a good confluence of a lot of these models, but it always comes down to, like, the core values and the ability to deliver value off these platforms, right?
Dan Reed 35:23
Yeah, that's right. And that sensitivity that that my team has had over the years is it just has a different flavor now, like back then, it was, it was, it felt like a chip on the shoulder, you know, like, we're not that kind of corporate VC, we're not a CBC, whatever. And then we went through what was, you know, a deliberate and not easy transition into taking additional, you know, capital from from within the industry. You know, we were again, sort of sensitive to say we only transcended this corporate VC notion, but at the same time, we still take money from the industry and we still work for our parent. I'm like, whatever we could call us, the way I think about it is my like, if you can imagine, like, a blended family, you know, almost like, right? It's like, these, these folks are half sisters, or, you know, half probably, well, no, it's all just, it's like, what you it's what you make of it. It's, you know, and I don't know that probably is not worthy of keeping, into the, into the, into the podcast here, but the it's like, there's just, you know, whatever, we're CBCs, or we're not CBCs, like we are and we're not, and it really has to do with the individuals and individual situations.
Ben Yoskovitz 36:44
And, yeah, I mean, there aren't many models. I don't know that. There are many models like yours, though, where you're taking capital from other corporates that you know at the corporate level might be competitive, but broadly speaking, do you think you know corporate venture capital. Are you seeing more corporates interested in that? Do you think as the sort of reputation, let's say, of not being problematic in deals lowers? Do you see more corporates getting into it, wanting to invest? I sort of curious about where you think broadly that in the industry is going in terms of just, well, corporate innovation and corporate venture capital being a component of
Dan Reed 37:26
it, yeah, you know, I think from sort of mid 2022 to maybe mid 2024 it was, it was kind of a reset from, from what was maybe like an overabundance of capital period in peaking in 2021, so I think that reset, and almost like a shakeout of some companies won't be able to raise the next fund, or some companies moved away from the venture strategy during that period of sort of a capital pullback, I think that's the dominant framework through which I look at the venture industry right now. And we're seeing signs of capital coming back in to the market, which is good, you know, the M and A market opening back up a little bit, and expectations around the appeal. So that, to me, dominates more than you know, whether corporates are engaging in this in different ways or not. And you know, navigating that market cycle is, is, is something that we've been very focused on, and I think everyone has been trying to get through. So we'll see what happens next. You know, I I'm optimistic, but we'll have to find out.
Ben Yoskovitz 38:46
Yeah, I definitely have no idea. I've, I've stopped trying to predict the future. Honestly, I just focus on the things I can. Focus on building businesses, you know, raising capital with corporate partners and founders, so I not great at the future prognostication part of the business
Dan Reed 39:07
has that affected the studio business as well, and the the sort of incubation,
Ben Yoskovitz 39:14
yeah, of course, I think, I think it's the, I mean, we, we experienced the same thing you were experiencing. But of course, at a at a different stage, right, like you guys are investing later stage, we're building companies from zero, but we still need those companies to raise capital beyond the capital we're providing so often for us, that's angel investors. You know, at the super, super early stage, you incorporate a company, we put in some money, some you know, can be co investors that are angels, but these companies have to graduate out of that, and we're trying to build venture profile businesses. So, you know the at, you know, 2022 2023 being difficult, after things sort of crashing a bit, yeah, it's just harder to raise capital. So in our model, we just shift a little bit try to stretch things. Out a little bit, build businesses that maybe aren't focused as much on the venture capital raise part of things keep the company surviving a little bit longer at that very, very early stage. So I think we're seeing the same things you're seeing in terms of overall warming up again in our model, we're often working with big companies, right and helping them innovate and spin new startups out. And so the venture capital part of that is also an interesting piece. Do they have a CVC? Will that CBC invest? Or is it perhaps too early stage still? You know, for their mandate, you know, what do cap tables look like with a corporate partner? So those are all the sort of things we're working on, but generally, I think you're we see the same things you do, which is, it's warming up a little bit, and that's nice. Of course, we're at the very beginning, so the exits are still many, many years away. So who knows what five plus years look like? And that's the part that I'm like, I can't predict that anymore. I not going to try.
Speaker 2 40:57
You try sometimes. Ben, come on, I do, but yeah, I know how you
Ben Yoskovitz 41:02
roll. Yeah, that's fair. And sometimes trying to predict it, but not, probably not good, is what I'm trying to say. You know, that's a long winded way of saying, I'm not good at it. Pretty good at building companies from scratch. Not so great at predicting
Dan Reed 41:16
the future. Yeah, yeah. Tell me about it. All right. Dan,
Ben Yoskovitz 41:20
thank you so much. I really, we really appreciate your time. Great conversation. I think what you guys are doing as a multi LP venture capital fund, having started as a CBC originally, is rare. I don't know of any others like that, but it's super fascinating to walk through the journey you've been through. Look at how you're connecting strategies, from those LPs to the investments that you're making, and just really appreciate your time. So thank you for having this conversation with us.
Dan Reed 41:48
Well, great to see you guys, and thanks for having me. And we'll, we'll, we'll see you out there.
We always enjoy conversations about innovation and startup building so please get in touch.
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