Why your "why" matters : Purpose driven Investing ft. Earnest Sweat | Ep. 25

here in the Bay Area. We'll jump into why Ernest is here, his mission, and what he is doing very shortly, but before that, I wanted to welcome you all to the twenty fifth edition of Startups. They'll say, it's this very special episode, and I'm so glad that Ernest has agreed to be as a guest on this particular podcast. I also want to thank all of my previous guests we've been on this podcast. It's almost ten months since I started this and little did I imagine I'll get

to a twenty fifth episode. So thanks to all of you for your tremendous support. That Ernest welcome to Startups. We'll say, thank you.

so many others. Why don't you just tell us a little bit about yourself? Yeah?

that I wear. He was also a full time pastor, so that whole like, you know, being able to balance an act and you can be a full person even though as humans we always try to like box people in just so we can take on all the information. He was living proof of that and inspiration. And then my mother who in our own right just like phenomenal person. She has always been an educator, and so she taught in public schools and Little Rock for about forty years,

half of that being in Pe. And then around when I started going to high school about to go to college, she went back to school and then became a science teacher in middle school. And so they those careers choices of theirs really put it imprint on me and my sister is like, you want something where you can earn a living but also be able to constantly feed your desire to learn, which they had to do in their careers.

And then the cherry on top is if you can find something where you're using those learnings to literally invest in other people's success. And so they did that as teachers, preachers, government workers. And when I actually found Venture, I was like, all right, this is like a through line to kind of what our sweat mantra is.

I mean, so beautiful story. They're honest since little Rock and you know your college and I've seen that you've been a consultant in a financial services firm. You were a founder by yourself, and what you're trying to do to pave the way for the next generation of founders. So I know it's a long and arduous journey. I'm sure right. I mean, you've had a fun, a lot of fun along the way to realize saying Okay, I'm ernest. This is my mission in life to go help the

next generation of founders do my own fund. If you will talk to us a little bit about you know, how did you come to the realization that this is what was your calling at least from a professional perspective from where you were. I mean, you obviously took your first job. I guess that came right out of college where you were just tell us a little bit about that.

to not bury the lead. Had experience as an equity research analyst, then a failed founder in the world of kind of like future of work in at tech and that experience in Sunsetting that that company led me to go to a business school at Kellogg in the Chicago Land area, and I had every intention kind of to either kick the can down the road and just be like a management consultant, or if I was lucky to find a you know, startup, to be the first, second

or third business hire for them. And I came across this opportunity through Kellogg to work at an international venture firm and be placed there for the summer, and so I applied, I got in, and I was placed in New Delhi for an organization called Central Square, which I had a venture firm under the Umbrella organ and I got placed in New Delhi, India. And so that experience, despite in the summer it being one hundred and seventeen degrees fahrenheit, you know, it was a blast. I loved it.

I saw how I could take my experience from equity research and apply it to the private markets and just the things everything I've been missing in other career stops. It answered right. Having the ability to talk to a ton of people, having the ability to thesis, build and then putting skin in the game. Had everything that I wanted. And so that's what really motivated me not to had every intention to move back to New York after business school.

But that gave me the inspiration. I was like, hey, maybe I should probably look out to the Bay Area. So that's what brought me out to the Bay. It made me kind of like zero in to venture got it.

How can I help circumnavigate some of those things? And you know, in today's world.

ability to have learning velocity. And what I mean from that is like when they get information from the market that might be a hidden insight, or whether they get like smacked in the face from competition or a mistake with a customer, they're able to take that learning and quickly iterate on it to then get escape velocity as fast about and so being able to always take information figure out what to do next move I needed to apply in my own life as well. So yeah, without

that framework in mind, I came across it. But when it looks back at like, hey, my company failed because I picked a really tough go to market motion, trying to sell through universities or through municipalities. And second kind of like a compounding mistake together is if you're going to choose that path, you need to have advisors who can help you skip steps. And I didn't do that. And so ironically enough, as I became a venture capitalist and joined a corporate VC out here is my first

kind of stint as a full time venture capitalist. I really got good at like helping companies with go to market, helping companies find the advisors that could help them find strategic partners or customers, And yeah, I just leveraged the hell out of my opportunity working at a large real estate company that was in the intersection of logistics and real estate and commerce, and not just leverage at brands, but really ug in and got my own relationships through

that organization that could help my portfolio companies and help companies that weren't even my portfolio companies but were from founders that I respected or that I was trying to convince to take my money.

a little bit more data. But what you're trying to determine is like what's repeatable and what has the opportunity to actually have what you're underwriting against this, Does this team have the opportunity to do something special and unique and have a venture backable exit and so a lot of that, and this is even before you join the board. Invest A lot of that is determining is like, hey, do you know, I see these numbers, Like, all right,

what have you learned? What's the learning velocity there? Like what have you learned? What are you going to exploit because of that? What's going on in the market that might influence you? How's that going to you know, contribute or restrict your product? Roadmap. But then the other piece is just like who are you as a person, what

motivates you? What does success look like for you? And then how have you been able to do those things I wasn't able to do as a founder, but like build a strong team around you of both employees and advisors that give you a competitive advantage, and that really speaks to today's time and opportunity.

in the past. You have to question every paradigm because we are at a point in history, whether we're talking about venture capital or all the way to politics or economics, to healthcare, to every function, every industry, We're at a time of change where one world is dying and the other world is emerging. And so what you need to do is see with like I can't I don't know who said this quote, but people always talk about history

doesn't repeat itself in rhymes. You need to understand what's the rhyme scheme, what are the invisible truths that are non consensus today but will be trends tomorrow. And so for me, even thinking about what's the ideal founder that creates outlier you know, outcomes, I think that's actively changing too.

to be here? And the second part of that question and instance, I mean, how has Silicon Valley changed you as a as a VC? I mean maybe you wouldn't have done certain things, you know, if you were probably not looking at the eighteen number of vcs out here. And of course the founders are flocking here, especially in today's world with AI. I mean just as a person, right, I mean, how has Silicon Valley influenced you?

been a kind of big city person. And so even though I grew up in little Rocket's like all right, yeah, I went to New York next, and then you know, I went to Chicago, and now I've been in Bay Area.

They're all different in different ways. But I think it just speaks to kind of like my preference, and you know, as somebody who's always had the code switch and you know, society regionally, whatever I ability, I've always been kind of like in I've read this book last year called Range, which speaks about how like generalists will win in a specialized world, and there was one section about just like how Charles Darwin would always journal and talk to as

many experts as possible, and he the researcher called him a professional outsider, so he always would take in new ideas to like iterate on his own views, but he always appreciated doing both the both like internal debate as well as like talking to people who focused on it the best, you know, instead of just being like a big city person. I think that's what I aspire to, Like, I love meeting new people, and this is why this job is a perfect fit for me, and asset class

is the right fit for me. Is I'm paid to ask questions and meet people who are thinking big, Like that's literally at all and so for me they are the second question about like what it's done to me, I think it's just like what was already there. It kind of just made it more prevalent and made me think of like how my career can be aligned with kind of high view the world. Things I really appreciate and this idea of kind of truth and it's always changing.

So I don't know if that answers your question, but like I.

city Part one. And again, I also think in the way I understood what you said is that it also has brought kind of the best out of you because it kind of resonates with the energy of the place as well, right, I mean, which is more that founder of mentality and that v see mentality and the more like minded people you meet. I mean it kind of reiterates. That is how I read it.

like I'm in a better place now here. I've always liked it, but like realizing it's unlike like that New York mentality of like, hey, there are steps to success.

I add the dprogram myself from that and take the best from that of just like all right, I can make it anywhere, but also incorporate my southern ability to sometimes be so naive and my ability to like feel like I can connect anyone, but more importantly being able to genuinely disarm people in a way that makes them feel comfortable, and how we can co collaborate success successfully. So it's not perfect, and you can be successful a lot of different ways, but you have to break it.

Break the idea of I need to follow a playbook because if you ask chat GPT or Soro or an Adali, I guess to make a picture of a typical VC is not going to look like me. And so given that not going, I shouldn't follow a playbook that's set up for them. That honestly, even for somebody who does look like that, if they're from a different generation, like that's still not going to work because things are actively moving.

Unless you have that mindset, you're just not going to grow, you know, I mean, because the world is changing so fast. And I've also realized sometimes the hard way, you also have to unlearn some things as fast as possible if you think that's not good for you. So as much as learning is important, I always tell this to my daughter as well. I mean, whether it's bad habits right, Yeah, learning is as important in life as learning, but you need to know to what to unload and what's good

for you. Absolutely part of what you said, I mean resonated with me that way, because there's a lot of similarities there.

it's sixty percent? Wow, okay this But what he was getting at the gist is like, even well thought out advice isn't always applicable to you, you know what's inside And even this journey of a pie like it's been kind of like little tidbits and stories like that that can show you. Yeah, I had plenty of people who are well meaning, love me, respect me, think I'm smart and told me not to do it, and now we're sixty episodes and it's one of the most shrewd things I've ever done in my life.

But I mean, you know, I think you mentioned it as well. It's not a resume, it's not this, it's not that. But I mean you have a certain vision for it. Can you paint a picture? And what was in your head when you kind of put that all together? I mean I felt like, I mean, there's a lot of thought gone into that for you to come up with that, because I mean eventually, I mean, it looks beautiful, but I mean you probably thought about it for many months, many years before you came up with that.

was at? Was I going to work in to have a seat work in something or vertical that maybe I didn't feel like I was equipped for, or you know,

actually maybe didn't even believe it. And so after a lot of conversations and speaking to Alexa as my co host for Swimming with Allocators, we were having similar stories, and she said and we were having conversations with LPs separately, and we both came to this idea of like, hey, this'd be great to share these conversations because I'm learning from your conversations as you tell me, and you're learning from mine. And when she came up with a name,

it was just like, we got to do that. Even if we suck and don't do more than three episodes, the name is something we have to try. And so that gave me the idea of like, all right, just putting myself out there and learning from other people and then we'll see what comes from it. And it gives me a kind of a trojan horse to developing relationships that will last me the next twenty thirty years. And

then I was able. Actually, the name Stresswood came from one of the interviews of a knew one to start affirm, but I didn't know what the name would be and and I've written about this and this and groundwork, and so people can go I can share the link that other people can see. But another conversation helped start something

that then helped me go to work. And so this balance again of like that I got in research, is like, yeah, you can be an individual contributor and come up with something, but I ideas come from like other people other ideas, and then you put your flavor on it, or you take analogies from outside of your own industry and apply it to it, and you'll have breakthroughs. So once I had the nose I always had the north Star, I was like, all right, it looks like I'm about to

start affirm. Okay, great, I got a name. Ames make things real. Yeah, you know the story and uh, you know the Christian Bible is just like and also the Jewish face the Torah is like, oh, when Adam is naming things, now they're realer. For some reason, they were still there, but like it makes them realer. And so now the way I'm thinking is like, all right, I got this north Star. I want to launch fundraising this

period in two years. Now what I need to do in the meantime in between to actually best position myself. And so that's why I kind of use the things that I was doing using insights to have kind of like these different pillars. And the podcast is a part of that.

two weeks I had my first guest. You know, so it is it is so true what you said. I mean, I can totally resonate with that part. So what why how would you differentiate yourself with the firm you're trying to build with stress word earnest I mean again based off of the learnings and you know you're upbringing and your values and everything. I mean, what what is your vision for stress word? Yeah?

And Sarah Samuels, who is from any PC, when we're interviewing, she spoke about this and then she told a juxtaposition like juxtaposed it to this experiment in the late eighties early nineties called biosphere to which was like in Arizona, this dome and was supposed to be like the best thing for any vegetation, no stressors, no wind, And what happened is the trees shot up, but then they fell over on themselves because they didn't have this certain type

of wood and bark that built up resilience and made them stronger. And so that was just like a light bulb to me of like as we enter, you leave the era of growth at all costs and enter an exciting opportunity. But equally as humans do if you overdo it in moderation, the proficiency at all costs or productivity at all. With AI and automation, you need certain type of founders to be able to navigate those changes. It was enough when like the market and macro stayed pretty similar,

was always up into the right. But now so much is changing from a macro climate to demographic factors, and so you need founders who have resilience, learning, velocity, and discernment of how to make decisions and how to build teams. And so what you need is this great combination of human plus machines and building a firm that lives through that applies. That is going to be critical. And so for us, it's really about the team of investors, right.

And there's been questions on like do vcs actually have that much impact? And I agree with folks like that, like if we want an analogy, it's like a more Quincy Jones than Michael Jackson. Right, the founder is going to be Michael Jackson.

do network effects look like? And I think it's a combination of having a team that is truly aligned, which doesn't usually happen in venture capital, and one in which that is a group of professional outsiders, so people who are able to gather those hidden insights that AI can't get and find what's non consensus today that will be consensus later to help bridge worlds for the firm as well as their portfolio founders.

this is really a problem I want to solve. I believe I'm equipped to solve it like no one else and hit a certain mark of exit and success that is appealing not only to this pilling to me as well as my team. Not because I think the by side of whatever market that I'm selling is that's what they're into, because that could be fleeting. And what we see now is a lot of growth companies that are in between kind of two different markets and now trying to shift again or figure out what they want to be.

So that why is important. And then for the investors, like why do you want to be a venture capitalist? Is venture the right asset class for you? Because it's more of an art than like lower market pe and so are you an artist? Are you an architect? Or

are you an executor? And let me not like you have to execute as a fund manager and venture but it's a little bit different than kind of like the kind of you know, the digits and kind of like the financial statements of one asset class and more of you looking at like being a coach, being a motivator, diligencing people, which is more soft.