To know K.P. Reddy is to experience boundless enthusiasm for creating new ventures. K.P.'s multidisciplinary career spans the innovation continuum. Over 25+ years, he has been a technologist, subject matter expert, founder, CEO, advisor, investor, professor, author and coach. K.P. combines expertise in advanced technologies with critical, in-the-trenches experience as an entrepreneur. He is a globally recognized authority in AEC environments, artificial intelligence, robotics and automation, collaborative communication, mobile applications and cloud computing. His passion is in launching game-changing startups, raising substantial investments, and leading organizations to meaningful acquisition and IPO exits.
Shantel: Hi, K. P. Welcome to the Imagine More Podcast.
K.P.: Hey, how are you?
Shantel: Good. We're excited to have you on the show and learn from all of your wisdom in serial entrepreneurship. To kick things off, do you mind sharing with our listeners a little bit more about you and I know that that's a loaded question and where do you start or maybe more specifically about Shadow Ventures?
| THE GHOST IN THE MACHINE |
K.P.: Yeah. I basically started Shadow Ventures because I started seeing a lot of serial entrepreneurs wanting to get into venture capital. What's interesting is because you're an entrepreneur and had been successful, it doesn't make you a good venture capitalist. It's become a platform for folks that are very similar to me. I turn 48 in a few months that are, I call it, the midlife crisis of entrepreneurship where we look at it and we say, "Do I really want to spend another 5 to 10 years building my next company or would I rather have a portfolio of companies and more scaled my time than being in the trenches every day?" It's really hard to start a fund, it's not trivial no matter how much credibility you have because it's really just a different audience, you know, you're dealing with large institutional investors. The idea is to become a platform for serial entrepreneurs to maybe start a venture fund on my platform in a space that they are very passionate or interested and have deep expertise in.
Shantel: Where did the name come from?
K.P.: There's kind of a running joke that I'm in every deal, you just don't know it like there's this joke around town that, well, of course, K. P. is in the deal and always behind the scenes doing things. A friend of mine in the music industry was kind of like, "You're like the ghost in the machine around here, you're just always somewhere." We kind of play a model where we have a lot of industry knowledge and we're behind the scenes. It's very rare that an entrepreneur shows up to my doorstep that I don't already know everything about them, I'm just validating if you guys tell me the truth or not. It's kind of where it came from, just this behind the scenes approach.
Shantel: Okay. That's, yeah, like a good rapper name or something.
Shantel: Shadow or ghost. You mentioned you went into this with the thought that, okay, you don't want to scale another company so you want to be more mindful of time, has it been true to that and/or is it exactly like starting another company and you're figuring out a different completely model?
K.P.: Yeah. One of the things, I'm pretty true to sticking to seed stage companies so we invest in pre-revenue companies which is really really hard because your due diligence isn't whatever 10 pieces of paper that entrepreneur gives you, it's really your ability to leverage your network and knowledge outside and figure out is there an opportunity here or not. It's very different playing seed stage and what we figured out, to your point, is that we're having to build our business as we go in terms of how I hire. We had a lot of mis-hires because we thought people with venture capital experience would actually be super helpful, it turns out they're kind of like corporate people, it's not they aren't great at their job, it's just when you're playing in our space, it's just very different. You don't have time, you don't have resources, you have to be fairly self-sufficient at what you do and being super knowledgeable and willing to get your hands dirty. What we've done is we actually build a pretty awesome process to streamline everything. My background is more of the technical side so for me, if I have to do something more than twice, I'm going to get someone to write a piece of software to make it better and faster.
Shantel: What are you looking for when you ... Because they're in the seed stage, is it primarily the founder and their personality or the product and service or I guess is that part of that process in how you pre-qualify?
| MAGIC TECHNOLOGY |
K.P.: Yeah. I have fundamental opinions on if you're going to start a technology company, you should probably be a technologist or formally a technologist because, really, the technology is what people are investing and they're investing in the defensibility of that technology. I'm not a huge you have to have 10 patents type of person but if you really want to scale your business and be highly defensible, it's important that your technology kind of be magic, right? If you look at Google and you start typing in something and it starts filling out what you were thinking, that's kind of the magic of technology. I'm always looking for that spark of magic in the technology that makes it very interesting.
Shantel: That is a good point and really fascinating to think through. You touch on a background in tech, let's dive even deeper so tell us a little bit about the companies you've had before this, where does it all start.
K.P.: My first company, I sold when I was 19 while still at Georgia Tech which was kind of a real estate play. Then I started a software company, worked for about three years while building it on the side. My first company was focused on project management like construction management on the web and that was in 1997. This is a company that me and a partner started on credit card cash advances. Turns out that construction people in 1997 thought the internet was a fad and that fax machines were forever and I was out of my mind. We're fortunate we pivoted into the telecommunication space that didn't have that attitude. In that company, we're able to scale from 2 guys to 1,200 people on the NASDAQ in three years and that company was called Verso Technologies. Did that and after 9/11, created a lot of ripples to the business environment we're in and I ended up leaving that company in 2002 and took, well, it's supposed to be a two-year sabbatical, it lasted about a year to go find my next thing and then started a company. I saw this technology called building information modeling which was, essentially, simulating construction in a computer before you actually build the building. I saw the technology and have fresh scar tissue from all the construction people that told me the internet was a fad so I approached it in a very cautious way and built a company around them and basically been in analytics that we ended up exiting in 2009 to a group in the Bay Area. Then I commuted to the Bay Area for about two years working on wrapping up my earn out and all the things that happen when we sell the company. Then after that, I got a call from a group that was investing in Frank Gehry, the architect, out in LA and they were creating a tech company focused on architectural design. They brought me in to try to do something with that. It was about a year commuting to LA. Then after that, I took another sabbatical for a year. Actually, I have a book called What You Know About Startups Is Wrong. I kind of chronicle all the massive failures I've had and what I did to strain my relationships and all that good stuff. Took that year off and then basically got recruited to come volunteer at Georgia Tech's ATDC and then next you know, I was in charge of ATDC so I did that for a year. That's when I decided there're a lot of folks like me that had been serial entrepreneurs that we still want to get our hands dirty, we just don't want to have to deal with the day-to-day of getting our hands dirty and the idea of being a mentor at one of these incubators just isn't fulfilling enough to those of us that actually do things and the economic benefit doesn't exist. I mean, at the end of the day, a lot of us have a ton of experience and we still have economic goals that we're trying to achieve. Unfortunately, we try to give back to the community as much as possible but that's not really something that we can focus 100% of our effort on. We're actually out, still trying to build and win markets and disrupt things.
Shantel: Looks like the competitiveness coming out of not being able to settle, I imagine. Well, I have so many questions. I mean, the first thought, I certainly relate on the fax machine and, thankfully, we don't get pings for that but there's still some people that are like, "Do you have a fax number?" it drives me bonkers so we're still not over that hump apparently. The other thing that I had written down, kind of frantically writing notes, that software company, the Verso Tech, three years, 2 people and 1,200 people and I can't imagine ... the process and the assistance and the hiring, just for us to hire one person every month this year has been overwhelm. Were you always in the CEO role for that company or kind of CTO?
K.P.: No. Before we went public, I took myself out of the CEO chair and brought in an entire management team. I was 28 years old or so, I basically believe I had no business running a public company. Funny story, the first stock, brokerage account I had with public company stock in it was my own company. I never even own a share of GE or anything, that's not my background, we didn't grow up with brokerage accounts and things like that. I really felt like I was highly unqualified to run a public company and so what I basically ask the board was I want to stay on as CTO and work on mergers and acquisitions because we're doing a lot of acquisitions and I just wanted to learn, I want to get my MBA on the job, so to speak. We had a stellar executive team. I think we're doing about five or six acquisitions a year and I was driving all of those so I got a lot of experience in the M&A world in a very hands on way.
Shantel: Very self-aware to be able to put that vision or passion, I mean, whatever the word you want to use in that scenario aside and say, "Someone else needs to be doing this with more experience." I mean, on the flip side, when people are going public, there's still imposter syndrome like am I the right person to be leading this company, who am I, I don't know anything, I'm just figuring this out as I go but I imagine when you're about to go public, it's a different scenario so that's really interesting.
K.P.: It's funny you say that. Generally speaking, you're generally not the right person. As an entrepreneur, you're generally not the right person for the job and that's generally unimportant.
Shantel: Yeah. That's a really good point. We're about five years in and I know that the CEO role is not right for me. I would love to just kind of be left alone and cranking up sales but we're not there yet so we got to figure that out. Well, I guess since you were in Georgia Tech and in college, you've had your own companies so you've never worked for anyone else with maybe some consulting pieces fitted in but did you come from a family that were serial entrepreneurs.
| A TIME FOR REFLECTION |
K.P.: A little bit. My dad passed away when I was 15 so my memories of him was always ... He was a nationally known structural engineer here in town and he always had something going on. As a kid, I remember him always having something, there was a real estate deal, there was something. His day job was never satisfying enough, that's all I remember. I think there is that thread. Actually, one of my brothers and my sister are very entrepreneurial as well and they do their own thing too. Me and my kids and my fiancé, we've been going through this process of charitable giving for the future, laying out vision. As we facilitated that process, it's been very focused on, well, you care about entrepreneurs, that's probably where your giving should go or you care about people that are not entitled, that are not privileged and you think they make the best entrepreneurs so probably our charitable giving strategy for the future should be more focused around those kind of things. We're very entrepreneurial.
Shantel: That's great. How often do you sit down as a family? Is this a yearly commitment to sit down and reflect and plan for the next year?
K.P.: Yeah. It tends to happen around this time of year. I try not to work work as much, I tend to do a lot of lunch and breakfast meetings with friends and former colleagues and all the people you don't get to see all year because you're too busy. This is actually the first two weeks in a row I've been in Atlanta this year all year so my travel schedule has been pretty hectic. I think December tends to be that time of reflection for us to say what did we do this year and what worked and what didn't work and start to map out what we want to do next year and try to start working to manifest that for next year.
Shantel: That's great. You touch earlier on, you know, if you do something twice, then you're going to figure out a program, software, write down the process. When you were first starting all of these other companies or even Shadow Ventures, what is the first thing you typically outsource because you recognize it's not a strength?
K.P.: The way I look at outsourcing is you still have to build your own process. Whenever you outsource something, you're rarely upscaling that capability, you're generally downscaling that capability. You can not give them directions. Well, a lot of it is figuring out how do you descale your processes in a way. Accounting is usually the first to go just because once you set it up the right way and you get it all going and you have your process, it's very easy to outsource that or automate that. I'm trying to outsource less and automate more. If I can apply a little bit of AI here, a little bit of this there and take people out of the equation, I'm going to continue to do that.
Shantel: Nice. I guess just bringing back the people piece, I really admire ... when we were even scheduling this to set up, you bring in someone else to help with that process so there's not that back and forth for you of what day works, what doesn't work, you know, the follow-up piece. Have you always have someone helping to monitor emails and taking that off your plate so you don't have to get bogged down with some of the weeds?
K.P.: No. My email volume is now edging 400 emails a day. I actually put a post out there on LinkedIn because I've had people get mad at me for putting them in a process cycle and they're like, "Well, I don't understand, why can't I just have a call with you?" I send them my calendar link and they're like, "Wow, you don't have anything available till March," and I'm like, "Exactly," I'm trying to build process here, right? People get offended and I posted this little post on LinkedIn and saying, "I'm sorry if I'm offending you but I'm trying to build a business and create process here." It's just gotten a little bit out of hand, our inbound has become super tremendous, we get a lot of referral base. Our investors love us and when the investors love you, they tell their friends and all that. I got a great team and everybody knows what they need to do and I try to hire people that are just better at what they do than I am, it's just the total talent scale of how you look at people. We try, we're trying to keep up still.
Shantel: Yeah. No, that's fascinating. I'm glad you mention that process cycle. Recently, our whole team added something to our email signature about prioritizing human interactions so we only work to clear our inbox once a day but we'll definitely respond within 24 hours and then we also utilize tools like Calendly so that there's not just this horrendous like, "No, I can't do this date," I mean, it just drives me nuts. There have been two emails so far like, "Oh, you prioritize this human approach but you basically are just, I guess, adding us to a process cycle." I was shocked both times I received this, I was like, "How do you guys not get it? Do you really want to spend time doing this too? Your time is valuable." It was interesting to hear that feedback.
| IT’S ALL ABOUT FOCUS |
K.P.: Yeah. It's hard. We all prioritize our time and spend our time appropriately. I actually have a couple of AI tools I run on my email. I have a couple of different email boxes and one I'm testing right now with a bot that basically responds because when start-ups hit me up, I have a pretty standard rubric in terms of how I engage with them. I started to, actually, run an engine that will say, "Go read this and see if we're a fit," and then they come back and it's like, "Well, go read this other thing and see if we're still a fit. Go fill up this form and see if we're still a fit." It's amazing, entrepreneurs are so optimistic that they go through this rubric and the entire time we are not a fit, from step one we are not a fit and they keep pushing it ahead, somehow they're going to convince me that they're a fit. I have zero portfolio companies in cannabis, yet I have people that are in cannabis somehow think ... it's nowhere on my website, I don't talk about it, it's nothing I do but I think the optimistic tone of entrepreneurs is like, "No, no, no, if I can just get a meeting with you, I will convince you." I try to explain to people we are disciplined investors, we have limited partners, we have other people's money, it's not just my money, we have to be great fiduciary of that money and that means we have a box in which how and what and why we invest in companies. If you don't fit in that box, it doesn't mean that you're a bad company or a bad entrepreneur, it just means you're not fit for me. As much as I've tried to push an engine where entrepreneurs self-select themselves in or out based on what they see, I still have about 30% that just think that sheer will will get them to deal with me.
Shantel: I kind of admire that persistence but you wonder if maybe a couple of years down the line, they'll recognize and come back with just a different idea that fits that box a little bit better, that really want to work with you. I thought at first you're going to say that helps weed people out because people aren't patient to go through that process and it reminded me of our interview process. We got a lot of steps and a lot of small details integrated throughout that if they don't respond with a certain thing that we've asked them to, it's like, "Oh, you didn't read the entire brief," so I was thinking you're going say it weeds people out but it was the opposite.
K.P.: I mean, there are bad entrepreneurs, there's a talent challenge that we have because everybody wants to be an entrepreneur but they don't necessarily want to do the work to get the domain knowledge of being an entrepreneur. They get excited about an idea in solving a problem but in most cases, there is an investor looking for the right deal and there's a deal looking for the right investor. I feel like entrepreneurs sometimes don't ... they just want to spray and pray on emails, right? They just want to send their Gmails out, they don't do their homework. What they don't understand is most of us investors, we all talk to each other and so when you reach out to me like you didn't even read the website, you didn't read what our core thesis is and you keep banging on me, I don't even want to refer you to somebody because you can't even read the website. We really try to tell entrepreneurs like you got to read ... we all put out there what we do and what we love and what we're focused on and we don't have a lot of flexibility in that, that's not how we operate. If you meet me at an event and say, "Hey, K. P. I know I'm not a fit for your business because I've done my homework, do you have any friends that I could be a fit for? You know anyone in your network?" I try to be super helpful with that stuff. You'll get further by saying, "Hey, I'm going to acknowledge I'm not investable to you but could you refer me to somebody that I might be a good fit for."
Shantel: Yeah, that's a great point. I love to talk a little bit, just wrap things up, about risk reward and your investing a fund of other people's money, is there a mistake that comes to mind, maybe not so much as an investment, that you've made in your business history that comes top of mind that you would encourage other entrepreneurs not to make or learn from that mistake hearing it from you?
K.P.: It's all about focus. It's funny, when I say that, everybody around me laughs because I definitely do not focus well, I know I should take my own advice kind of thing. There's a basic theory that I try to get people buying in on. As a start-up, you have a limited amount of resources that's cash in time and so when you go to look at executing on that market or whatever you're going to do, you need to stay within the boundaries of those resources and that requires so much focus. You have to decide, you know, if I only have enough resources to be the best PR company in Atlanta, that's probably not good enough. You probably don't have enough resource to say, "I'm going to be the best PR company in Atlanta that serves start-ups under $5 million within the metro of Atlanta," then you might have a shot, right? It's that matching of resources. I think that's where I've made mistakes as an entrepreneur is I try to acquire market and customers beyond the actual resource I had available because I wanted to think big. I think you should think big and you should have a big vision but you got to figure out how to get that first. I call it the first monopoly, you got to go monopolize some market, it doesn't matter how big it is, you just need to own it and you go from there. My biggest mistake I've made that I try to give start-ups advice is you think you're focused, you're not focused enough.
Shantel: That's really great advice. I think that resonates quite a bit. We come across in our social media marketing space companies that will come and say, "I'd like to talk to and get in front of my customer market. My personas are ... it is 18 to 50, men and women." I'm like, "That's everyone, do you really think your product or service is meant for everyone?" Because I do think there's a lot of value specifically on the niche side so I'm glad that you mention that. You touch on traveling and I know you're extremely busy, how do you recharge when you're jumping from place to place? Do you ever feel drained or you just have this innate energy?
K.P.: No, no. Yoga is a big part of my life, breath work is a big part of my life. I try to over-hydrate. Actually, just before our call, I was taking a nap. I had this rule, when I'm sleepy, I take naps.
Shantel: That's amazing.
| IF YOU’RE SLEEPY, TAKE A NAP |
K.P.: People are like, "What?" I'm like, "Yeah. When I'm sleepy, I take naps," and they just think it's the most bizarre thing that I just say out loud. I tell them my portfolio, if you're sleepy, you should take a nap, you should go to sleep. I try to sleep as much as I can, constantly hydrate, meditate, just disconnect. I have two cellphones and one is a dumb phone like it's an emergency phone that my kids and fiancé and other people dear to me have, no one else has it. I leave my smartphone in the hotel room and I'll go to walk around for two hours and be disconnected.
Shantel: That's amazing. I truly appreciate the nap piece. If you're ever feeling tired but, let's say, you had an appointment like a podcast recording, I mean, are you known to push it because it's like I need that sleep, can we reschedule?
K.P.: It's really tough because I really feel like in life, I have a peer relationship with everyone around me whether it's someone that's an employee or an investor or a podcaster so I battle with me just being respectful of ... if people are going to respect my time, I want to be equally respectful of their time. There are occasions where if I can, one of my colleagues will fill in if they can. I just did three cities in four days last week and it's tough, right? I mean, I'm sitting on a plane on a Sunday evening and my entire team is at home in their bed and it's like, "Hey, what's going on?" I just kind of had to reconcile that part of it is I got to manage my time better and my availability and all that stuff so I try not to commit to things that I think I'll have to bail out of which part of that is just not being overcommitted.
Shantel: Yeah, that's a good point. Well, what's next on the horizon for you and Shadow Ventures?
K.P.: Well, we're in a steady clip. This year, we invested in some really cool companies, one was actually the largest fundraise in Texas, seed stage investment in Texas at $9 million and a company called Icon 3D, we're doing 3D-printed houses which is pretty cool.
Shantel: Was that with New Story Charity?
K.P.: Yeah, it is, it is.
Shantel: Okay. Brett is a good buddy of mine.
K.P.: We're investors in that. We're going to continue to make interesting investments like that. We're really ramping up our labs program, we're actually launching Atlanta labs. Right now, we have industry-specific labs which are basically just incubators which we get about 200 people will apply, 30% a year where we're launching our Atlanta lab to focus on ... Atlanta start-ups, there are tech start-ups, there are B2B and so we're pushing that out next year. Everybody says it's basically a strategy for me to figure out how to stay at home more.
Shantel: Well, it sounds like lots of exciting things, absolutely. How can people learn more about your company, you and your history and get in touch if they like to reach out?
K.P.: Go to shadow.vc, it tells you everything about the company and there's a link to my personal website. Find me on LinkedIn, I'm pretty active on LinkedIn in terms of actually communicating. Twitter and everything else just tends to be more promotional. Instagram just become this fun thing for me but LinkedIn is kind of where we're serious.
Shantel: Great. Well, K. P., thank you so much for carving out the time and giving up a nap, I really appreciate it.
K.P.: All right.
Shantel: We'll talk to you soon.
K.P.: All right, thank you.