# VC10X - $330 Million Fund Without A 10 Year Cap - Jim Curry, Co-founder, BuildGroup

An episode of [VC10X - Investing, Venture Capital, Asset Management, Family Office, Wealth Management](https://invisiblenetwork.ai/podcast/1632806986), 13 Jan 2026, 42 min.

Audio: https://anchor.fm/s/a453ddd4/podcast/play/113913923/https%3A%2F%2Fd3ctxlq1ktw2nl.cloudfront.net%2Fstaging%2F2026-0-13%2F416012511-44100-2-934d282e0c69b.mp3

In this episode, we sit down with Jim Curry from BuildGroup to discuss why the traditional venture capital model might be failing founders. Jim is rewriting the rules of investment with a $330 million fund backed exclusively by family offices, operating without the traditional 10-year cap. This unique "Patient Capital" structure allows BuildGroup to align with founders for the long haul, prioritizing durable growth over short-term exits. We dive deep into Jim’s background as an operator who helped scale Rackspace to $2 billion in revenue with only $25 million in funding, proving that you don't need to burn cash to build a giant. We also discuss the dangers of the "fundraising treadmill," why we are currently in a bubble era, and his contrarian take on why the future of AI lies in "Small Language Models," not just the giants. ⭐ Sponsored by Podcast10x - Podcasting agency for VCs - https://podcast10x.com In this episode, you’ll learn: - The Broken VC Model: Why the 10-year fund cycle creates misaligned incentives between investors and founders. - The Rackspace Story: How to scale to billions in revenue with extreme capital efficiency. - Patient Capital Explained: Inside BuildGroup’s $330M evergreen fund structure. - The Fundraising Treadmill: How to avoid the trap of raising too much, too fast. - The AI Bubble: Why Jim believes "Small Language Models" (SLMs) are the real opportunity for B2B businesses. - Founder Advice: The one trait Jim looks for: being a "customer of your own problem." 🔗 Connect with Jim & BuildGroup: Website: https://buildgroup.com Email: jim@buildgroup.com LinkedIn: https://www.linkedin.com/in/jimncurry/ 🔗 VC10X Links: Prashant Choubey - https://www.linkedin.com/in/choubeysahab Subscribe to VC10X newsletter - https://vc10x.beehiiv.com Subscribe on YouTube - https://youtube.com/@VC10X Subscribe on Apple Podcasts - https://podcasts.apple.com/us/podcast/vc10x-investing-venture-capital-asset-management-private/id1632806986 Subscribe on Spotify - https://open.spotify.com/show/7F7KEhXNhTx1bKTBFgzv3k?si=WgQ4ozMiQJ-6nowj6wBgqQ VC10X website - https://vc10x.com For sponsorship queries reach out to prashantchoubey3@gmail.comTimestamps: (00:00) - Introduction to Build Group's $330M Fund and Patient Capital Model (00:37) - Meet Jim Curry, Co-founder of Build Group (01:58) - How Experiences at Rackspace Inspired the Operator-First Model (03:25) - The Problem with Arbitrary 10-Year VC Fund Cycles (05:48) - The Unique Structure of Build Group's Fund (08:21) - Why Build Group Prefers to Be the Only Investor on the Cap Table (11:47) - The Challenge of Helping Companies Get Off the VC "Treadmill" (16:00) - Deployment Period and How the Investment Thesis Evolves (18:24) - Build Group's Diligence Process vs. a Typical VC (23:08) - Competing with Over-Capitalized Startups (25:17) - Lessons from Building the OpenStack Community (27:48) - Key Qualities Looked for in a Founding Team (30:55) - Harmful VC Trend: Forgetting the Lean Startup Mentality (33:18) - Why Downturns are an Opportunity for Patient Capital (35:56) - The Importance of Founders Who Genuinely Love Their Product (37:55) - The Next Foundational Tech Opportunities in AI Orchestration (40:29) - Rapid Fire Round (41:50) - Conclusion #VentureCapital #SaaS #StartupFunding #PatientCapital #BuildGroup #BusinessPodcast #AI #Entrepreneurship

## Transcript

[0:00] It's a $330 million fund. That fund is 100% from family
[0:04] offices. We structure ourselves so that
[0:07] when we make an investment, we can hold it for two weeks or
[0:11] 2000 years. What's the popular trend in
[0:13] which capital right now that you believe is actually harmful for
[0:16] building durable? Businesses, we forgot about the
[0:19] LEED startup mentality in a lot of ways.
[0:21] And I think there's a lot of value to constraints when you
[0:23] have unlimited access to capital.
[0:25] There's poor discipline. What happens in a bubble era are
[0:28] there are companies that probably have good businesses
[0:31] underneath them that are going to over capitalize themselves
[0:34] and lead to failure? Hey everyone, this is Prashanth
[0:38] and I'll be host for the BC the Next podcast.
[0:40] And today we have Jim Curry with us.
[0:42] Jim is a Co founder of Bell Group.
[0:44] He's rewriting the rules of venture capital with the $330
[0:48] million fund backed exclusively by family offices.
[0:52] Unlike traditional firms, Bill Group operates without a 10 year
[0:56] cap, allowing for true patient capital that prioritizes long
[0:59] term value or short term exits. We discuss how Jim applied his
[1:03] operator for his mindset to help scale Rackspace to $2 billion in
[1:07] revenue with just $25 million in funding and why the Lean Sodom
[1:11] mentality needs to make a comeback.
[1:13] So without wasting any time, let's dive straight in.
[1:16] This episode is brought to you by Podcast Enix, my podcasting
[1:20] agency for VCs. We help VC start and run branded
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[1:28] Turn the conversations you're already having into a machine. 1
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[1:42] hundreds can brag about having you on their cap table.
[1:46] Check out our services at Podcast ten-x.com.
[1:49] I'll put the link in the description below.
[1:51] Now enjoy the episode. Hey James, so good to have you
[1:54] on the VC10X podcast. How are you doing?
[1:56] I'm doing good Prashad, thanks for having me.
[1:58] Yeah, it's a pleasure having John to start things off.
[2:01] But were your key experiences from Rockspace and the early
[2:04] cloud industry that inspired you to create Build Group's Patient
[2:07] Capital and Operator First model?
[2:11] That is a, there's a lot of questions embedded in that
[2:13] question. So I'm going to, I'm going to
[2:14] break them down into a few things.
[2:17] What is, you know, Rackspace is a really interesting story.
[2:21] We went public in 2008, we'd started in 1998.
[2:26] And for those who don't know the full Rackspace story, you know,
[2:29] we were an early web hoster turned into a cloud company,
[2:33] early competitor with, with Amazon.
[2:35] And so our business was putting up data centers and filling them
[2:38] with gear and training people to run them.
[2:41] Yet somehow we only raised $25 million in venture capital
[2:44] before we went public and made all that work because we built a
[2:47] really hyper efficient built business model.
[2:49] And the story of the company was one of consistent growth, but
[2:53] not runaway growth. We grew at a compounded annual
[2:56] rate of 50% year after year after year.
[2:59] And that took us from a company of, you know, a few $1,000,000
[3:02] to a company that did 2 billion in revenue when I left.
[3:05] And you know, that was a long ago.
[3:10] Most people are familiar with the stories about things that
[3:12] happen overnight. You know, we're all familiar
[3:15] with Open AI and Anthropic. I could give you a list of we
[3:18] all know them. But the route of it is 99% of
[3:20] the great companies out there take time to build.
[3:24] And I can talk through the financial advantages of it.
[3:26] There's a lot of financial advantages to investing in
[3:28] things that are long term growth stories as well.
[3:31] And they're easier to find, quite honestly.
[3:34] So that was lesson #1 lesson #2 was in two.
[3:39] We went public on August 8th, 2008.
[3:42] You might remember that as being the start of the financial
[3:44] crisis, literally days before the Bear Stearns collapse.
[3:48] We were the first IPO that year in about 6 months, and we were
[3:52] the last for about 12 months. And it was a brutal process.
[3:56] And So what drove us to do that? It wasn't the fact that we
[4:00] needed the capital. We had over $100 million on our
[4:03] balance sheet. We were growing at 60%.
[4:05] We had EBITDA positive, we're like 35% EBITDA margins and we
[4:10] have great investors, right. We had Sequoia and Norwest were
[4:13] our main backers and no issues with them at all.
[4:16] But they have structural issues on their end which is their 10
[4:19] year funds and they were in a situation where we were, they
[4:23] invested this in the 90s. Those funds were done and they
[4:27] need a liquidity and so we gave them liquidity, but it came at a
[4:30] cost of the company in terms of distraction, etcetera.
[4:34] I think if we could have kept private, we would have stayed
[4:36] private for longer, certainly would not have gone public
[4:38] during that period of time. So one of the things I learned
[4:41] in that process is, first of all, great companies are often
[4:44] built over time or more often than not built over a long
[4:47] period of time. And the second thing is when you
[4:50] are making investments, they shouldn't be tied to arbitrary
[4:53] time frames. So you know, the idea I talked
[4:57] to our students a lot and the first thing I asked him is,
[5:00] well, would you pick any stock today and then tell yourself
[5:03] that regardless of where it sits 10 years from now, you have to
[5:05] sell it. And I know I would never do
[5:07] that. And I go, well, that's how our
[5:08] industry structured and, and I think it's, there's some
[5:11] problems with that. And so that's why at Build
[5:13] Group, we set ourselves up to track companies that are focused
[5:17] on the long term build. And the second is we structured
[5:20] ourselves so that we can stay with them for that long term,
[5:22] which is we don't have a 10 year investment window.
[5:26] We can hold things for as long as investors want to go.
[5:28] One of the things I had to deal with initially were were with
[5:30] build Group on this is people thought that meant everything
[5:33] had to go forever. Yeah, we've had a number of
[5:35] exits. The way I describe to people is
[5:38] I don't ever go to the company and say I need them to exit.
[5:41] The company comes to me and say, hey, I want to exit for good or
[5:44] bad. And that is actually the way I
[5:46] think this industry should work. Absolutely.
[5:48] That's quite interesting. And how is Build Group
[5:52] structured? I would not say it's a wind
[5:55] capital fund, but what would you call it?
[5:58] Yeah, it is. The way to think about it is,
[6:01] and I'll contrast it to other funds.
[6:03] I think one of the first things to keep in mind is how we've
[6:05] capitalized ourselves. So we are fun.
[6:09] We have one fund today. We'll likely have others in the
[6:11] future. It's a $330 million fund.
[6:14] That fund is 100% from family offices.
[6:18] And one of the things I learned in this process was when you
[6:23] look at how people picking investors, and I do think it's
[6:25] important, like I was, I told companies, hey, be careful about
[6:28] who you pick as your investor because you're going to be
[6:30] married over for a long time. It's no different when it comes
[6:33] to destruction of fund. And what I learned is you find
[6:37] the family offices tend to have longer term mindsets that way
[6:41] you find it institutions. There's a couple things that
[6:44] drive that. One of them is that they're
[6:45] taxpayers, right? So in the United States at
[6:48] least, right? So in the US, if you're Harvard
[6:51] or University of Texas and you're the endowments, you don't
[6:53] pay taxes. If you are a family office,
[6:56] every time you get a distribution, you pay taxes on
[6:58] it, right? So there's real cost to getting
[7:01] liquidity. And so a lot of these family
[7:03] offices want to be in a position where things can actually roll
[7:06] for 20 years in compound. They don't want to deal with
[7:08] that, right? They're also people who have
[7:10] built businesses before and most of them have it built in tech.
[7:14] So this idea, they're like, wait a minute, you want to build and
[7:16] sell something in three years? That just doesn't seem
[7:19] realistic. And if you go to them and say,
[7:21] well, yes, we might have some that we build in three years,
[7:23] but some are going to go 15, they understand that.
[7:25] And so I think that's a, you know, key part.
[7:27] So starts with our investors. The second thing is our
[7:30] structure. So we structure ourselves so
[7:33] that when we make an investment, we can hold it for two weeks or
[7:37] 2000 years. It can go as long as someone
[7:40] wants. And that to me is the definition
[7:43] of permanent capital. When I go to a company and say
[7:46] we're going to give you money and you can go as long as you
[7:49] want and we're going to follow you as long as you want.
[7:51] Now that doesn't mean we'll challenge them and that they may
[7:54] need to exit particularly things are not going well.
[7:57] But but we structured ourselves that way.
[8:00] And the last thing about our model is and it's, it's not as
[8:02] related to the long term principle, but we have recycling
[8:05] built into it. So our investors can continue to
[8:08] invest and build the fund in a thesis.
[8:10] But it also helps assure our companies that like, hey,
[8:12] there's additional funding there if needed as they grow.
[8:14] Although we are highly focused on capital efficiency.
[8:18] So we try really hard to work with our companies to get to a
[8:20] position where they don't need to raise capital again.
[8:22] Absolutely. That's very insightful.
[8:24] So do you target to be the first and the only investor for a new
[8:31] company and see them through all the way?
[8:34] Your great, great question. And I would say there's what
[8:37] I've done in the past and how I'm trying to alter things in
[8:39] the future. I think if you put yourself in
[8:42] a, in a founders position or CE OS position and you're trying to
[8:45] manage investors, no matter how you do it, it's very, very hard
[8:51] because everyone is going to give you different directions.
[8:55] So if you have 3 investors on your cap table, you have a seat
[8:57] investor, A investor, B investor, they're never going to
[9:00] be 100% aligned ever, not in terms of the strategy, not in
[9:04] terms of the exit timing, not in terms of the, of anything.
[9:08] And that's a real challenge for the CEO.
[9:10] So one of the things I really focus on with our with our
[9:13] companies is you really need to be in a position where first of
[9:16] all, you pick lead investor. And that's the one that you
[9:20] should not only expect to be your, your main advisor, but
[9:24] their job should be to go to other folks on the cap table to
[9:26] really kind of organize it and make sure that they're doing,
[9:29] doing the right things. So the way I think about it for
[9:33] us though going forward is that's been really challenging
[9:37] and where incentives come in, for example, around growth.
[9:41] And 20, if you go back to our initial offering documents, we
[9:45] focused very hard on this idea of getting the capital
[9:47] efficiency and trying to be the last money in.
[9:49] We didn't have to be the first in, but we want to be the last
[9:52] money in and I'm an operator, so and we only vested in maybe one
[9:57] or two companies per year and the whole idea was to be able to
[9:59] engage with those companies. But we want to give me cash flow
[10:03] efficiency. That worked initially in 2018
[10:06] and 2019-2020, 2021 it did not. And the reason being was we were
[10:11] often times having to deal with incentive differences of opinion
[10:15] with other investors on what growth should look like.
[10:18] And so going forward, I'm much more concentrated on making sure
[10:22] that we are probably the only investor on the cap table,
[10:26] certainly the only really active one.
[10:28] And for me, it's just, it's a better way to serve the, the CEO
[10:33] or the founder and works better. But also for my model, I want to
[10:38] make sure that we're in a position to be able to execute
[10:40] our our operating model, which is often times at odds of what
[10:43] you see with the C stage or an A stage Fern.
[10:46] Absolutely. I completely agree and that is
[10:47] the reason I ask that question because there can be a certain
[10:50] dis alignment from the way you would approve things as an
[10:54] investor who can potentially hold it for as long as possible
[10:57] as long as the business is growing at a speed that is good
[11:01] to you. But from the angle of the
[11:03] perspective of VC investor, he might want a faster rate of
[11:06] growth, he might want to burn more in and all those sort of
[11:09] things to be able to get to that exit point within that 10 year
[11:13] time frame. So it it makes sense if you do
[11:17] it all by yourself, as if there is less friction with existing
[11:20] investors. But with that, another problem
[11:23] that arises is that venture capital model is a very popular
[11:26] one, right? Almost everyone who starts a
[11:29] company is somewhat attracted to it or pulled by it.
[11:32] Whether it's a good thing or bad thing is a different debate, but
[11:37] they're attracted to it and they raise some money even as early
[11:42] as the idea stage, you know, But once you raise, it's really hard
[11:46] to get off that, you know, get off that treadmill, right?
[11:49] So how do you deal with that? Let's say is a good company, but
[11:52] they've already raised one or two rounds from venture capital
[11:55] investors and now you meet them, you think they're building a
[11:59] good business, but the cap table doesn't look so attractive to
[12:02] you because it's dis aligned from what your expectations
[12:06] would be from the company. Yeah, it's a great, it's a great
[12:08] point. I'll just tell a story and I
[12:10] don't want to use the name of the CEO cuz everyone would know
[12:12] him. But, you know, 15 years ago, I
[12:14] met Aceo right before his company was going public and for
[12:17] breakfast and I just read the S1 and he owned less than 1% of the
[12:23] company. And I said to him, I go, how do
[12:25] you feel about that? He goes, feels like I put in a
[12:28] lot of work to own less than 1% of the company.
[12:30] And I said, yeah, I can totally get that right.
[12:32] And I, I think that's hard. And I get a lot of people that
[12:37] come to me that have already not only added a raised a lot of
[12:41] money, but they've already deluded themselves way down.
[12:43] And so the first thing I say to them is my #1 objective, if
[12:46] we're going to work with you, is I need to make sure that you are
[12:49] at a point where you're not going to get deluded any further
[12:51] other than hiring employees and doing the typical stuff you do
[12:53] to bring on people. We need to keep you at that
[12:55] point. The second thing is if we can
[12:58] get people off your cap table, let's do that.
[13:01] And so I can even give you an example with a portfolio
[13:04] company, we've been in a situation where they've been
[13:07] approached by a strategic in the past.
[13:10] The founder doesn't want to sell, early Investors want to
[13:12] sell. This is a tricky situation
[13:15] because what do you do? And the answer is you go get a
[13:18] private equity firm or to come in, buy out the early investors.
[13:21] But all you've done is reset the clock and you brought out
[13:24] another investor that's going to have a whole lot of things.
[13:26] So once you're, you've actually brought up the really key point,
[13:29] once you get on this train, it's really hard to get off of it.
[13:33] And you've set a time frame for yourselves and some of you know,
[13:37] if you can control it and be in a good situation, which you have
[13:41] to remember the number one thing is once you take outside money,
[13:44] you're on a clock. That clock is usually at most
[13:46] five years. And, and that's a really hard
[13:49] thing. I actually celebrate people not
[13:51] needing to raise money. And I tell people, a lot of the
[13:54] work I do, especially in the last 3-4 years has been, hey, I
[14:00] know you're trying to raise 25,000,000 bucks, but I've done
[14:02] the math on this and I think you should raise 10.
[14:04] And here's why, because I very focused on helping them get the
[14:09] capital efficiency. I think the other thing that the
[14:12] misalignment on this stuff is you have to remember we are, and
[14:15] this is, you know, I could talk a lot about the industry, but
[14:18] one of the things that I don't love about the industry is if
[14:21] you look at it, we are asset managers, we are deployers of
[14:24] capital. We're incentive deploying more
[14:26] capital because that's how we make money.
[14:28] You make money on fees and carry based on how much you put out
[14:32] there, right, And so you haven't a misalignment there where one
[14:38] of the reasons I think people frankly push growth is they're
[14:41] arguing that like, hey, let's hardware sales and marketing and
[14:43] go to market. By the way, everyone fails
[14:46] because of golden market. It's very rarely product.
[14:48] It's usually just massive over investment and and inefficient
[14:51] go to market. But that's why they raise big
[14:53] tons of money. And so you have to mind it like
[14:56] you got a problem, you got them on your cap table.
[14:58] You've already established a time frame, they're giving you a
[15:00] whole bunch of money to grow really fast and guess what?
[15:03] You're going to need to raise again because of it.
[15:05] And then you're going to just compound the problem.
[15:07] So my my advice to folks is the less on your cap table, the
[15:11] better, which includes starting with not having any of us on
[15:14] your cap table. That will be the preferred.
[15:16] I love bootstrappers and if people tell me they don't need
[15:18] my money, I love that. I think it's awesome for them,
[15:23] but the second best thing is just put yourself in a position
[15:25] where you have an aligned partner.
[15:27] And I think this is where we really do stand out to someone
[15:29] if they want to have flexibility, which is, look, I
[15:32] will come to you and tell you that you might need to sell this
[15:34] company because your time has run out.
[15:36] The market opportunity is gone. But if you want to keep building
[15:39] and going because things are going great, I'm never going to
[15:41] be a hindrance to you. But it's hard to find that in
[15:43] the industry. But yeah, I, I think the best
[15:46] thing to do, in my, my opinion, don't ever get on the capital
[15:49] race thing if you, if you can avoid it.
[15:53] And if you have to do it, you better be careful about who your
[15:55] partners are and make sure they're as few as you need.
[15:58] I would not do a whole bunch of them.
[16:00] Absolutely. That's quite interesting.
[16:02] And you mentioned something on the lines of that you're only
[16:05] making two investments a year, right?
[16:08] Correct me if I'm wrong. So how long will your deployment
[16:12] period be for this fund that you have 300?
[16:15] And 30, yeah, it's structured and that way it's structured
[16:17] similarly and that we have a five year investment window.
[16:19] So we raised it in 2018 and it went through 2023.
[16:23] We can only invest in new platforms out of it as we have
[16:26] realizations. So as there's as, as we have a
[16:28] realization and there's liquidity, we can invest in new
[16:31] platforms. So it'll go forever and be able
[16:34] to continue to make those types of new investments.
[16:36] That's one thing that's different about it.
[16:38] But you know, margins also change a lot.
[16:41] You know, one things about these 10 year funds and about thesis.
[16:43] If I go back, I go back to our first fundraise deck.
[16:46] One thing we got really right that led to our exits was really
[16:49] being focused on data enabled workflow SAS companies or said
[16:53] very simply, if you go back 10 years ago, the focus was, hey,
[16:58] workflow SAS companies, whether they serve humans or machines,
[17:02] generate tremendously valuable data to those end users on how
[17:05] to run their business. So how do we take that data and
[17:07] actually do that, make it into an insight engine, allow them to
[17:10] execute on top of it? What I did not foresee is AI.
[17:15] Very few people did. I thought AI was, you know, we'd
[17:17] be talking about in 20 thirties, not right now.
[17:19] And our companies were really well prepared for that.
[17:23] And people come back to me and said, oh, you had an AI focused
[17:25] fund and I go, no, I just had to adjust around it and we were
[17:29] ready to go with it. A lot of these funds, even in a
[17:31] five year window, things change. I think we're in a dramatic
[17:34] change period right now. And I don't think people know
[17:37] exactly what it's going to look like.
[17:39] So I do focus really hard even with this existing fund of
[17:42] saying to investors, hey, the markets, markets do change and
[17:46] our thesis will change as we go along with it.
[17:48] And the biggest thing I think is changing right now is I do think
[17:51] that companies are going to need a lot less funding going
[17:55] forward. I think the VC industry is going
[17:57] to go through a significant downsizing because of it.
[18:00] So existing fund might have to focus a little bit more on
[18:03] buyouts of existing investors or things along those lines, which,
[18:07] you know, you have to change a thesis to do that.
[18:09] So, you know, I do think there's an advantage as to having
[18:13] ability to be more flexible on it.
[18:15] This is a little bit of the disadvantage of a permanent
[18:16] fund. I need to go to my investors and
[18:18] say, hey, we can go for a long time, but over 10 years things
[18:21] change a lot and we're going to have to change how we think
[18:22] about investing because of it. Absolutely.
[18:25] That's a very interesting point you brought up.
[18:28] Can you talk talk about how Bill Group gained conviction for one
[18:32] of its a few investments and how your diligence process differs
[18:35] from a typical VC? Yeah.
[18:38] Well, I'll answer the last question first, because I've
[18:40] been accused of running APE like diligence process, which means
[18:44] it's very heavyweight for an earlier stage company.
[18:47] So if you think about it, I'm typically dealing with companies
[18:50] that do Series A and Series B And just to be blunt, that
[18:53] diligence is usually very lightweight.
[18:55] I approach it much more from perspective of I want to
[18:58] understand how this business operates, the operations of the
[19:01] business. I really want to understand the
[19:02] customers really well in their use cases.
[19:05] So our diligence appear I think on the surface level is much
[19:08] deeper than what you would find. And I think by the way, there's
[19:11] negatives to that. I think the best deals that we
[19:14] have, we have done, we actually did less analysis than are the
[19:18] ones that we did a lot of analysis on.
[19:20] And why is that? Because I feel like the, there's
[19:23] a, there's a, if there's a curve point where you start to analyze
[19:27] so much, you talk yourself into things or talk yourself away
[19:30] from things. And so I think we've gotten much
[19:32] better that overtime. And by the way, these are small
[19:35] companies, so you have to be really careful about how much
[19:37] you rely on data. But, but I do think that's one
[19:40] difference. And I think we've gotten really,
[19:42] really good at it now. But for me, like there are, I
[19:47] mean, I'll give you some stories on how I, I think about these,
[19:50] but I am not all, I don't chase 200% growers.
[19:55] I chase people who really are focused on, you know, I'd say
[19:58] typically they're 50 to 100% growers, but I'm really looking
[20:01] for things that I feel like are filling a gap in the markets.
[20:05] I, I think that if you look at our exits, they've been to
[20:07] strategics and I think that's because of the way I think, you
[20:10] know, my, my background is in product.
[20:12] I ran a Corp dev team for, for Rackspace.
[20:14] So a lot of what I'm thinking about is, OK, where is the
[20:16] market going? And someday I need to acquire I
[20:19] that where acquisition can make a big difference to us.
[20:21] So we go back to Rackspace days. The project we actually our
[20:25] whole cloud platform and the entire open stack platform came
[20:29] from an acquisition we made of a little company called slice
[20:31] source back in the day. So I think that way, you know, I
[20:34] tend to and look in the markets and say where is there a gap?
[20:37] So I'll give you a great example.
[20:39] A company we had vesting called Case Text.
[20:42] Case Text is considered a legal workflow and AI and they, this
[20:49] is 6 years ago when I met with them, they were growing 50%.
[20:52] They weren't a particularly interesting company on the
[20:55] surface because what they're really trying to do was compete
[20:58] with Westlaw and LexisNexis. And for folks who may not know
[21:02] what those are, for lawyers doing their legal research,
[21:04] those are the platforms you did that on those platforms, the way
[21:07] you even interact with them is similar to what you did in the
[21:10] 1990s in terms of how you even query it.
[21:12] It just hadn't evolved a lot. And I wasn't really interested
[21:15] in it, but I met with the, I went to meet with the founder
[21:18] and over breakfast, over pancakes.
[21:20] And when I walked in, he was kind of coding and we talked and
[21:24] he gave me the pitch. And pitches are never
[21:26] interesting to me. I, I, I, to me, I'm just, I wait
[21:28] for the pitches to be oversight and talk more about what's going
[21:30] on and said, Hey, what were you working on there at the very
[21:33] beginning? And he goes, oh, let me show
[21:34] you. And he turns it around And
[21:36] remember, this is 6 years ago. And he was showing like, hey, as
[21:39] I'm doing research here, it's suggesting citations and pulling
[21:43] over some language to start drafting A brief.
[21:45] And I go, that's really cool. Why are you not sharing that?
[21:48] Because well, I mean, it's early, you know, AI technology
[21:51] is not quite there yet. And he goes, and I said, So what
[21:54] drives your foundation, your belief here he goes.
[21:57] If I look at the legal industry in tech in the space today,
[21:59] everyone's focused on the back office.
[22:01] How do I enable better billing? How do I enable better
[22:04] operations? No one's focusing on the core
[22:07] work a lawyer does and making that more efficient.
[22:10] And he goes, and we're just now getting the tools do that.
[22:12] And by the way, I have 8 years of data on how lawyers do this
[22:16] type of work and I'm going to use it to build a great
[22:19] platform. And I was fucked because I saw
[22:21] someone that saw where the market was going.
[22:23] I hadn't heard anyone else that was talking about doing this.
[22:26] And I was like, this is going to be a great platform.
[22:28] And by the way, I asked him, I think I said, when do you think
[22:31] AI is going to happen? He goes, I think it's going to
[22:32] be sooner than 15 years, but it may be 10.
[22:35] So you might have to stick with me for a long time.
[22:37] And I said that's OK because I see you actually building
[22:39] something that's really interesting and it's not what I
[22:41] expected on the surface. So long way of answering your
[22:44] question of like I don't like pitches.
[22:46] I always try to get to where people are really trying to do
[22:48] things and understand them. And then once I do that, my next
[22:52] engagement with him was operational.
[22:53] Let's talk to how you take this to market and how you build
[22:56] things. So we do a lot of deep diligence
[22:58] on it. A lot of it's learning how to
[23:00] work with their partners because I spend more than four days a
[23:03] year with them. I spend all significant amount
[23:04] of time with them and making sure we have a good engagement
[23:06] model. Absolutely.
[23:08] Yeah, that's quite interesting. But how do you coach your
[23:11] founders to build durable companies when their competitors
[23:14] are raising huge grounds and chasing growth at all costs?
[23:18] Yeah, great question. So first of all, I don't like
[23:21] the term coach founders because it implies that I, I sit over
[23:24] the top of them. I always describe it as a, as a,
[23:27] as a two way relationship where we're both equally right and
[23:30] equally wrong. We're trying to get to a better
[23:32] answer. You know, in my experience when
[23:35] that is happening and, and case text by the way is a good
[23:37] example. We did exit that company, but
[23:39] there are a lot of folks raising a lot of money right around the
[23:42] time. The biggest thing I tell folks
[23:44] is like you really just even in the market where people are
[23:48] raising a lot of money, there's going to be a segment that you
[23:50] can go and dominate. And like of the people that are
[23:53] raising a lot of money are probably going to have a much
[23:56] broader focus, not as much of A narrow focus.
[23:59] They're probably going to drive unprofitable customer
[24:01] acquisition because I see this all the time.
[24:04] And I think often times growth is really hard for these guys to
[24:08] actually manage and build a better product.
[24:10] And every company I've invested in is dealt with really
[24:13] significantly capitalized competitors.
[24:15] And the way we typically respond is we define our niche, niche
[24:19] really, really clearly, which is hard for people, right?
[24:22] Because in the end, if you go to start up and you say, do you
[24:25] want to earn the own the Earth or do you want to own the
[24:27] universe? Well, guys, oh, I want to own
[24:29] the universe. And I reminded we go, there's
[24:30] pretty big like, so like, why don't we start with the Earth?
[24:34] Because of my belief, it's really hard to start by owning
[24:36] the universe, But you can go from the Earth to Mars to
[24:39] wherever. Let's build our way there.
[24:41] And I think it's a more focused approach.
[24:43] And it's, it's very simple. It's somewhat of the kind of way
[24:46] you think about Icps, right? Because I don't think there's
[24:48] one ICP. People treat it like a finish
[24:50] line. You get your initial ICP and you
[24:53] really own it, and then it's going to evolve or you're going
[24:55] to add another one, right? And you're constantly doing
[24:57] that. And they start to be layers that
[24:58] build on themselves. But to me, the way you win in
[25:01] the space when, if you're in a situation where a competitor
[25:03] raises $300 million and you don't have that, you got to
[25:06] really clearly know what your niche is, but really clearly
[25:09] understand your customers and own that.
[25:11] And I think honestly, it's easier to do when you have
[25:14] competitors that are really broad based and trying to
[25:16] service everybody. Yeah, absolutely, totally makes
[25:19] sense. What what was your biggest
[25:21] lesson from building the Open stack community and how can
[25:24] today's founder supply that inside?
[25:26] Yeah, I mean, you know, that that community was unexpectedly
[25:30] successful and I'd never run an open source project before.
[25:35] I'd never, you know, have been in that situation and what I
[25:39] still get inspired by or I'd like to tell the story.
[25:42] I think it was the second conference.
[25:44] I always got up and I gave a state of the open stack and I
[25:46] would talk about, you know, contributions.
[25:48] And one of my favorite slides was contributions by by country
[25:54] and number one was the United states #2 was China.
[25:57] Then my second slide was contributions by entities and
[26:02] one was U.S. government, other one was Chinese affiliated
[26:05] government. And I remember saying like,
[26:07] where in the world does this happen?
[26:09] Like it just, you know, it's amazing.
[26:12] And so I was amazing, really amazed at what the power of the
[26:15] community can do when people are really focused on the objective
[26:18] of writing, writing code. And I think for us, a lot of
[26:24] what I spent time trying to understand is also how to give
[26:27] people the ability to carve out their own niche with an open
[26:30] stack that allowed them to be either successful as a as a
[26:33] developer or as a company. And one of these was really
[26:37] awkward was when I was, I was at Rackspace employed the same time
[26:40] I went to other companies, including Rackspace competitors,
[26:44] direct competitors and spoke to their customers and I spoke
[26:47] globally about them. And the reason being was it was
[26:50] really important to me that everyone owned a piece of the
[26:52] market where they were successful.
[26:54] And again, it could be, it could be commercial or it could be
[26:56] development. It didn't matter to me because
[26:59] that's the way you built a thriving community.
[27:02] And we had a, we still do have an awesome community, but it, to
[27:05] me it's like it's really trying to member people don't come in
[27:08] and contribute things just, you know, they, they always have a
[27:10] rationale for it. And how do you really make the
[27:13] most of that and make it work? The downside to that is once I
[27:17] got a lot of companies involved, trying to keep them aligned on
[27:20] the objectives of the overall project was really difficult.
[27:23] And so there's a lot of things I would do differently about how
[27:25] we approach that. We had a, a much more community,
[27:29] you know, guided approach to the road map.
[27:31] A lot of projects have very clear ownership of those.
[27:34] I'd probably do more clear ownership as opposed to
[27:36] community guided. But I do think we excelled at
[27:39] bringing people on the project and helping to figure out how to
[27:43] make it really relevant to them from monetary or from a.
[27:46] I'm great at coding this perspective.
[27:49] Yeah, absolutely. And when you're looking at
[27:51] companies evaluating whether you should invest or not, what
[27:55] qualities in the founding team do you look for that is beyond
[28:00] the metrics or the numbers that you look at?
[28:03] Yeah, I think, like I said to me, I throw people off the pitch
[28:07] first thing I do and just see how they react.
[28:10] Second thing I really push on them is like, why don't we, why
[28:13] don't you give me a problem you're working through today and
[28:15] let's talk about it. You know, it's a test how to
[28:18] work together and I find the best leaders.
[28:21] Their problem is never, it's not a product issue, it's not a
[28:25] specific go to market issue. It's a people issue because they
[28:29] want to. They're talking about an org
[28:31] issue, an individual issue, a missing leader issue.
[28:34] I think it's a great sign, right?
[28:36] Because in the end, companies are all about people.
[28:37] These leaders need to be really good at bringing on people who
[28:40] are aligned to the mission and and motivating that mission.
[28:43] So that's the second thing I look for.
[28:46] The other thing is like I I do feel like finding people that
[28:50] are humble. I'm not of the world where I
[28:53] like, I mean, Frank, I don't like talking about myself that
[28:55] much, but I like it when people, I have a humbleness because
[29:00] humbleness always, almost always is tied to curiosity where
[29:04] people don't think they know everything and they are really
[29:07] engaging to learn from other people.
[29:09] I think that's a new really important characteristic because
[29:12] you're going to get hit over and over and over and you need to
[29:15] learn from it and seek advice and be humble enough around it.
[29:18] I think that's also really important.
[29:20] And the last one, I leave it for last two, this kind of an
[29:22] obvious comment in the VC industry, but it's sort of a
[29:25] rule for me is I want people who are customers of their own
[29:28] problem. So they they they were on the
[29:31] side where they needed this for what they did.
[29:33] So I mean, example, I'll give you Jake, the founder of Case
[29:35] Tech was a lawyer Benicius, who's the founder of flow space,
[29:40] which is a virtual three PL. used to run things for a rent
[29:43] supply chain for The Honest Company.
[29:45] So I can give you examples like that, but they needed this thing
[29:48] to exist to do their to how their products work better.
[29:51] And I feel like those are really good.
[29:53] And then for me, actually, I'll add one more thing to that.
[29:55] For me, I often times I never assume I'm going to be better
[29:59] understanding the market or product than they are.
[30:03] You know, I, I, I might be able to help them with the process,
[30:05] how they go through and analyze things.
[30:07] But the operation side, I can almost always do a really good
[30:10] job with them on. And a lot of what I'm testing
[30:12] for is how much are they going to allow me to do that?
[30:15] Because in essence, I think it's hard to be honestly a really
[30:20] good product and customer leader and a really good operational
[30:26] leader at the same time in an early company.
[30:27] What I mean by that is like they're really two different
[30:30] things. What is processes and tactics.
[30:33] The other one is really deeply understand what's going on with
[30:35] customers. And I always say to the
[30:36] founders, I go, the more time you spend with your product
[30:39] team, with your customers, the better.
[30:41] And if I can help really get this stuff going really well,
[30:43] that's what I want to do. So I do a little bit of testing
[30:45] for that as well. Absolutely.
[30:47] Quite interesting. What's the popular trend in
[30:50] which capital right now that you believe is actually harmful for
[30:53] building durable businesses? Oh God, that's a great question.
[30:58] We talked a little bit about things I see wrong with VC
[31:01] overall. I think we are absolutely in a
[31:04] bubble era right now. And I think it's, I think what
[31:09] happens in a bubble era are there are companies that
[31:12] probably have good businesses underneath them that are going
[31:15] to over capitalize themselves and lead to failure.
[31:19] And that's frustrating to me. So you know, the example, you
[31:23] know, I, I've talked a lot about this recently.
[31:25] I think there's a whole lot of value.
[31:27] We, we forgot about the lean startup mentality in a lot of
[31:29] ways. And I think there's a lot of
[31:31] value to constraints. And did the latest example of
[31:34] that for me has been China has been an amazing innovator in the
[31:39] LLN space. How to train them, how to do it
[31:42] at much less cost, how to run them on less expensive, lower
[31:45] energy consumption chips. And why is that the case?
[31:48] Because we've imposed restrictions on them. the US
[31:51] has, has restricted their access to all this technology.
[31:54] So they're working around it and that's going to lead to some
[31:57] great innovation. What do you have unlimited
[31:59] access to capital. There's poor discipline.
[32:01] There's all that kinds of. And I think we're back in that
[32:03] mode again, in particular around AIA.
[32:07] Lot of what I look at are all these agentic AI startups.
[32:10] So I, I spent a lot of time, big folks of mine is using AI and
[32:13] operations. Now, if you wanted to get an AI
[32:17] chat bot to do SDRS, there are literally dozens of them and
[32:20] they are all funded and none of them really have the right to
[32:24] exist. Why is that?
[32:26] They don't own unique data. They're trying to win by raising
[32:29] the most capital. And almost all of them are going
[32:31] to go out of business. And so I look at that and I'm
[32:33] like, say, like, what would happen if they raise less money?
[32:36] And they were constrained and someone went to them and said,
[32:38] OK, awesome. You've, you've built the best
[32:40] trained LLM for this use case. How you going to acquire the
[32:43] data? What's going to be your
[32:44] compelling value proposition against all the others who are
[32:46] saying, no, no, I've got the better trained LLM for this.
[32:49] What, how are you going to do that?
[32:51] I think a lot of those discipline questions are not
[32:52] being asked right now. And in those companies, there's
[32:55] probably a few that actually could survive.
[32:57] It'd be great, but they're going to get, but because of the
[32:59] capital over deployment, they won't.
[33:01] And that's disappointing me. Absolutely.
[33:04] That's a great perspective there on how you cut through the noise
[33:07] in the AI hype, right, Yeah. Can you share a story where a
[33:11] market downturn or slow progress tested your patient capital
[33:15] approach and how you held your conviction?
[33:18] I love downturns by the way, like I, I think downturns are
[33:21] awesome because I think the, the way I think about down and by
[33:24] the way, a downturn in a permanent model is really is a
[33:29] highlight of our, of our situation.
[33:31] Because I, as I said to you, we had to go public at Rackspace in
[33:33] 2008 during a down cycle. The last couple of years we have
[33:39] VC funds who want an exit companies to there and 10 year
[33:41] old funds. It's a horrible time to be
[33:43] getting out of a business in general.
[33:46] And I don't have that problem the way I always treat it as I
[33:49] look at downturns. And we just the last couple
[33:52] years for B to B SAS have been challenging and not just from a
[33:56] valuation perspective, but from a from a sales perspective.
[34:00] And what I said to all of our companies coming into this were
[34:02] there's a few ways we can approach it, survive and thrive.
[34:06] There's one which is, hey, we're already in we're not in a
[34:10] position we can get aggressive. We just need to have a plan to
[34:12] survive this and come out the other end because a lot of
[34:14] people won't. And for me, a big part of that
[34:17] is making sure that you're not birdie, you're in control the
[34:20] business, you can survive it. And I did that with with some of
[34:23] our companies. The second one is go on the
[34:25] attack. That's my favorite.
[34:28] When you have we competitors, you can go after them.
[34:30] So we, we have really the last two year I've been really
[34:35] engaged with our companies around this and we've had a
[34:37] combination of those two strategies.
[34:40] But it's hard, right? And it's hard not because for
[34:42] me, I've been through so many cycles.
[34:44] I should have grayer hair that I do, but I've been through a lot
[34:47] of these cycles and I know we'll come out the back end of it, But
[34:50] a lot of people, especially when we're in a business, you're
[34:52] nervous you're not going to get out of the cycle or you're
[34:54] nervous you're missing something wrong and you don't want to
[34:56] continue holding the course. And a lot of what I have to do
[34:59] this is remind they're like you're, you're, we're going to
[35:01] be fine and we're going to get through this and come out the
[35:03] other end. So it's also about my
[35:06] conviction. I feel like I can be really
[35:07] patient. It's often times just trying to
[35:09] keep the company in the right direction.
[35:11] And by the way, if you can help them be aggressive, if you can
[35:14] help them know that like, hey, it's OK, maybe gross, not where
[35:18] you want to be. But guess what?
[35:18] We don't need to raise money. So we're fine.
[35:21] Getting them in that position, I think helps to get them in a
[35:24] much more comfortable spot. But I, I will tell you, I, I,
[35:27] the CE OS and founders have a much more difficult time with it
[35:30] than I do. I love downturns.
[35:32] Absolutely, and we'll do a separate episode talking about
[35:34] Jim's hair care routine, so that can benefit more of us.
[35:39] I don't diet, it's just how it is.
[35:42] You're just blessed, right? So till the next one, since you
[35:47] make so few bits, right? What specific leadership traits
[35:51] do you look for that can't be found on a resume or in a pitch
[35:54] deck? Yeah, I think that for a founder
[35:59] to really want to go long term, they actually have to, they
[36:03] actually have to, I don't want to say love the business.
[36:06] They have to love the product and what they're trying to to
[36:08] build and go and do. They cannot be financially
[36:12] oriented if a founder. And by the way, if anyone's
[36:15] sending me a pitch deck that talks about exit options and
[36:18] they that happens, I almost always immediately don't look at
[36:22] those because that is a, that is a sign that someone's really
[36:26] much more focused on the financial outcome.
[36:28] I'm a capitalist. I totally get this, right?
[36:30] People want to have a, people want to be able to monetize
[36:33] their success. But entrepreneurs that are going
[36:36] to build the best companies and really focus on doing over a
[36:39] long period of time aren't focused on the exit.
[36:41] They're really focused on if I build something great, but build
[36:45] a great product or service and I continue to evolve it, I can go
[36:49] for a long time. And by the way, I love it.
[36:52] I love it because I understand the problem of a cell phone for
[36:54] customers and it gets me really excited.
[36:56] I mean, I used to feel when I drive into Rackspace parking
[37:00] lot, one of these that really motivated me was just watching
[37:03] all these cars, right? We start with a couple dozen
[37:05] cars to hundreds of cars to thousands of cars.
[37:09] And I just thought, man, what's fun about this is we're changing
[37:11] people's lives as employees. And that was really motivating
[37:15] for to me. And it was something that gave
[37:17] me a motivation to want to continue going for a long period
[37:19] of time, especially because we're doing that in Texas where,
[37:22] you know, now it's trending to build tech companies here, but
[37:24] it wasn't 20 years ago. So finding people that are
[37:27] really focused more on the market and product.
[37:30] And when I say that they love it is a is a good sign when I get
[37:35] the sense that this is about me doing something really quick and
[37:38] getting a three to five year exit.
[37:40] They're very good chance of everything get to three to five
[37:42] year exit and there's very there's no chance they're going
[37:44] to build a long term deer of a company.
[37:47] Absolutely. And drawing on your
[37:49] infrastructure background, where do you see the next foundational
[37:52] tech opportunities that will define the communicate?
[37:55] Yeah, I think it's interesting, you know, because when we talk
[37:59] about infrastructure right now, we're talking AI and we're
[38:02] talking AI infrastructure more than anything else.
[38:05] I think there's a lot of things going on in the market that are
[38:07] that are you have to kind of breakdown.
[38:10] The biggest one is we're in the horizontal phase of the market.
[38:13] And what I what I mean by that, if you if you go back in the in
[38:16] the SAS world 20 years ago, everyone was focused on really
[38:21] building horizontal SAS. How do I go and build the
[38:25] platform for sales, the platform for marketing, the platform for
[38:28] product management, right. Obviously the reason why those
[38:32] are the biggest money opportunities totally get that
[38:34] right. That's where a lot of the
[38:36] dollars are today. If you look at all the dollars
[38:37] that are being sucked up in AI and I'm, I'm talking
[38:40] specifically about sort of software infrastructure, it is
[38:43] going to the big players that are in that space.
[38:45] They're trying to big solve horizontal mock markets.
[38:48] What will evolve is people that are really focus, focus more on
[38:52] more niche or vertical in the world of SAS opportunities or
[38:56] very limited horizontal opportunities in some ways.
[38:59] And I think we're headed that way in the world of, of AI.
[39:03] I'm a big believer that the world is going to be dominated
[39:06] by, by trillions and trillions, trillions of small language
[39:10] models that are tailor made to the task.
[39:12] And I think the reason being is it's going to be way, way
[39:16] cheaper to build and run those things.
[39:18] And I think they're going to be way better.
[39:19] The task to build for the orchestration of all those
[39:23] things is going to be really, really difficult.
[39:25] So one thing that's nice about the the large language models
[39:28] is, you know, they can kind of orchestrate everything.
[39:30] They're going to be kind of probably master of, they're
[39:33] going to probably be kind of orchestrating everything.
[39:35] The master of none, whereas LLMS are going to be really, really
[39:38] good at very specific things, but they're going to have to
[39:41] pull plug into overall work flows and overall, you know,
[39:44] different things. I think there's going to be a
[39:45] real opportunity to orchestration around that.
[39:48] You know, even right now, you know, I think about like in the
[39:52] days of cloud, you know, trying to figure out how do I basically
[39:55] get a workload so I can seamlessly move it from a
[39:57] private cloud to Amazon to Rackspace to Google.
[40:00] And we came up with the containers and all kinds of ways
[40:02] to deal with that. A lot of what we have to figure
[40:04] out right now is how to even just deal with state.
[40:06] How do you do a state within an existing model?
[40:09] How do you do a state would go into different models?
[40:11] So I think there's going to be a whole lot of orchestration work
[40:13] that has to get done. And I'm starting to look at
[40:16] really interesting companies in that space that are overlooked.
[40:19] But again, I'm working under the assumption that we're going to
[40:21] live in a world of a lot of specialty models and specialty
[40:24] AI, and how are we going to really make all that stuff work
[40:27] to deliver a really good overall solution?
[40:31] Absolutely. Quite interesting.
[40:33] And with that, we moved to the rapid fire around wherein I'll
[40:36] ask you 6 quick questions about the investing you're doing and
[40:39] you have to give 6 quick answers.
[40:41] Sounds good. I don't give quick answers for
[40:43] shot. I'll try try.
[40:46] You should have a gong or something in your ring if I go
[40:48] too long. Yeah, that that's a challenge
[40:51] for you now, right? Yeah.
[40:53] So the first one is what are the sectors and regions you invest
[40:56] in? We do North America, in Europe,
[40:59] Western Europe, and in terms of secular, it's all B to B SAS.
[41:03] Awesome. Pretty quick.
[41:04] Typical stage of investment. I would say typically 3 to 8
[41:09] million in revenue when we first get involved, but we've done as
[41:11] low as one or we've done as high as 10.
[41:14] Awesome. Do you lead rounds?
[41:16] We do. We always lead rounds.
[41:17] We only lead rounds. We don't participate.
[41:20] OK, where can founders get in touch in case there's a direct
[41:24] way? Jim@buildgroup.com I also run
[41:27] our IT so if you misspell something it comes to me as well
[41:30] so but Jim's a pretty easy name. J.im@buildgroup.com.
[41:34] Yeah, last one, where can I listen to follow you?
[41:38] LinkedIn is a name, a place where I do stuff and you know,
[41:43] we're we're about to launch a, a more aggressive stub sub stack
[41:46] strategy, but I'll have more to say about that on LinkedIn soon.
[41:50] Pretty awesome. Great.
[41:51] You did amazing awesome. So good to have you on the
[41:54] podcast Jim, and I wish you happy and resting.
[41:57] Thanks Prashan, I had a good time.
[41:58] That was fun.

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