🎧🍌 Inside Roger Ehrenberg's New Firm, Game Changers Ventures | Investing in Sports, 10x Funds, Traits of Top Founders
Current state of Seed, not investing in AI, how sports changed during COVID, advice for emerging managers
You might know Roger Ehrenberg from starting IA Ventures in 2009, an early stage venture capital firm. He proceeded to return multiple 10x funds to his LP’s over the next 12 years. He then decided to step away in 2021, retiring from the world of venture capital forever to invest his own family office.
That plan changed when he became a minority investor in the Miami Marlins. He started seeing how many opportunities existed investing in early stage sports companies.
Today, he’s back in the game, building Game Changers Ventures. He’s fresh off raising a $100 million Fund 1, 10% of which came from himself.
We go deep on the current state of the Seed stage market, why he’s not investing in the traditional AI companies, how sports changed during COVID, advice for emerging mangers he picked up over the past two decades building IA Ventures.
Special thanks to Jesse Beyroutey, James Fitzgerald, Michael Kim, Jon Oberheide, Sarah Smith, Daniel Feder, CFA, Marc Weiser, Joey Levy, and Charles Hudson who all helped suggest great topics for us to hit on!
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Timestamps to jump in:
3:45 Current Seed stage market
7:17 Starting Game Changers to invest in sports
12:25 Investing in the Miami Marlins
16:45 Investment opportunities in sports
18:21 Tomorrow Golf League
23:54 Investing in sports teams
25:50 Business models in sports
27:12 Importance of real estate development, gambling
32:53 How COVID changed sports
38:41 Clippers experimenting with cheap tickets & concessions
41:51 Opportunities monetizing super fans
46:51 Sports as an investable venture asset
53:24 Great founders find big TAMs
56:31 The desire to win
58:09 Sending letters to break into Wall Street from Michigan
1:02:38 Raising IA Ventures Fund 1 in 2009
1:07:58 Advice for emerging managers
1:13:18 The Trade Desk’s three bridge rounds
1:18:03 Lessons on recycling capital
1:20:16 What it’s like working with your kids
1:24:53 Brand Detroit
1:29:14 Being world class at multiple disciplines
Referenced:
Find Roger on X / Twitter and LinkedIn
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Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Roger, welcome to the show.
Roger Ehrenberg:
Thanks so much, Turner. Great to be here.
Turner Novak:
I’m excited. You were mentioning just before this, we were talking a little bit about current status of the seed stage market. A lot of people will say, oh, it’s the worst place to be investing, et cetera, et cetera. But you’re saying you’re really excited about seed, so why are you excited about seed stage investing right now?
Roger Ehrenberg:
Throughout my career the notion of being conferian has always been a hallmark, and I’ve generally wanted to look for the places where people are most uncomfortable and most concerned and generally view that as fertile ground. And in this case, I think that really applies and that’s honestly the impetus for me getting to formally get back into the venture game as opposed to investing out of my family office. It’s because I see such a massive opportunity in pre-seed and seed, just not in the areas that most of venture dollars are currently flowing to. Not that things that we invest in don’t have AI embedded in them, they certainly do. Everything does. But in terms of not investing in base models or vertical AI, that’s really very much around AI agents and productivity. Things I’m doing in sports media entertainment intersected with technology is really very under invested in, and there are very few people like me with my orientation and background that are devoting their career to this area right now.
Turner Novak:
I want to ask you more about that, but hitting a little bit more on the AI stuff, shouldn’t you be investing there? Because the companies are going fast, the dollar, the follow on capital is being attracted there. In theory that’s the recipe for getting these maybe temporary, maybe permanent venture like returns. Is there something that’s going on where you’re like, eh, this just doesn’t make sense for me? Are there certain pieces of it that you feel like the cracks are showing you to show?
Roger Ehrenberg:
I think there’s a few pieces to it. Part of it is personal and part of it is environment. On the personal side, when I left IA Ventures a little over four years ago now, focusing on hardcore tech and harder science and tech applications, I did that for a long time and I really enjoyed it. And part of my deciding to make a change, aside from giving Jesse and Brad the opportunity to really own IA and build it in their vision and to take it forward was for me to express these new passions and interests that I had discovered. And this notion of sports, media, entertainment, the centricity of fandom, the value of intellectual property really sent me in a different direction, both emotionally and also from an investing standpoint, really seeing opportunities that I had very much been closed off to during my time as more of a traditional tech VC.
And now in today’s world, look, there are obviously unbelievably impactful companies being born in and around AI and hundreds of billions, and now literally trillions of dollars are being deployed in this space. And it’s not to say that there aren’t... And there are clearly firms that are going to make generational returns on these investments. It’s just not clear to me that being a seed stage investor, even with my track record and my brand, will allow me to have the impact and to garner the returns that I could through this alternative strategy.
Turner Novak:
Then can you maybe talk a little bit about, it’s called Game Changers Ventures, can you talk about just the arc of how you got into this, decided? Because I think you retired, I don’t think you wanted to do this necessarily back in 2021. Can you just take us through that retiring, leaving IA, and then, okay, now you’re starting Game Changers, or I guess technically a couple of months ago probably?
Roger Ehrenberg:
Sure. This is the second major transition in my work life. The first one was in late 2004 when I left Wall Street and then spent really the next four or five years investing in seed stage tech, building a whole new set of networks, developing a whole new set of pieces around how the future would unfold and my role in that. And then that’s ultimately what kicked off founding IA Ventures around the notion of big data is an investable fame.
Here again, almost I had a 17-year Wall Street career, and then after 17 years of doing early stage tech, I had this sense of I want to change. And tired, I don’t know if it was so much fatigue as it was that sense that I wasn’t personally feeling like I was having the impact I wanted to have. And I’m the kind of person that if I’m not all the way in, I’m not in at all, there’s really not a middle ground. And when I could feel that intensity and passion waning, I had said to myself when I started IA and ultimately brought on Brad and Jesse that if I wasn’t going to be all in, I needed to leave. And so I did exactly what I had said I would do.
Turner Novak:
Is there something that you picked up on where you noticed you weren’t quite in it? If somebody’s in the middle of something, and I don’t know, you’ve been gung ho about it for a decade, was there anything specific where you’re like, you know what? I’m not quite as passionate about this as I used to be?
Roger Ehrenberg:
And it’s interesting, Turner, I wish I could say that there were objectively observable signs, but for me the same thing I believe that’s made me a successful very early stage investor pre-product market fit often pre-product is that I have this instinct and I’m very in touch with my internal state. And it became clear to me over, it was probably a six-month period when I was very much feeling like what had been working incredibly hard and feeling incredibly passionate and incredibly proud, started to feel like work. And for me, when I’m happy, work isn’t work.
Turner Novak:
You’ll work like 18 hours a day, whatever-
Roger Ehrenberg:
Work is life, it just becomes embedded in my consciousness. And it doesn’t mean that I don’t do other super fun things, but it’s just something that just beneath the surface, I’m always percolating. I’m always thinking, I’m always just building in my head.
Turner Novak:
I think it was with a shower test, like when I’m showering and there’s just no distractions, it’s like, what do you think about? And it’s like, oh, that one portfolio company, you have this idea. Or oh, she would be really good for that designer role that they’re hiring for. Or like, oh, he should meet Roger because he might help with whatever, whatever. That’s usually my test. I use that for investing. It’s like the shower test. It’s like, would I just naturally be thinking about this and just enjoy, I don’t know, the osmosis that would be around it. And when I lose that for something or I don’t have it, for me, that’s like a bar that I use, the shower test. I don’t know.
Roger Ehrenberg:
I don’t know if you have seen me mention something like that on other conversations.
Turner Novak:
I have not.
Roger Ehrenberg:
That is exactly the way I do my best thinking.
Turner Novak:
Your showers were drifting from tech, big data, fintech and maybe the AI you just couldn’t quite... There wasn’t quite... There wasn’t entering the shower yet, so you were transitioning to more, okay, explore it.
Roger Ehrenberg:
It’s where the processing went from problem solving around portfolio companies, coming up with ideas, thinking about the next thing I was excited about investing in to, wow, why do I feel the way I feel? Why do I not feel that intensity for this work that had really been just so inspiring and exciting for 17 years? And that was definitely part of the catalyst for me shifting. Very similar to the transition off of Wall Street, I had done something that without any forethought or thesis got me to move in a totally different direction when I created the space was, when I was on the street I made a few angel investments in early stage technology companies. And then when I left I started spending more time with those companies. And that’s really what provided the impetus for me to tap into that passion and excitement about seed stage tech investing and set me off on a mission that would define my next 17 years. Here I had had the opportunity during COVID to invest in the Miami Marlins.
Turner Novak:
Did you invest?
Roger Ehrenberg:
I did.
Turner Novak:
Oh, nice.
Roger Ehrenberg:
I’m a minority owner of Miami Marlins and on the advisory board. And that was something firstly never in a million years that I think I would be in the position to be a part owner of a professional sports team and much less a baseball team.
Turner Novak:
That’s like every kid’s dream, like teenage kid dream is like, I want to own a sports team when I grow up.
Roger Ehrenberg:
Well, I would say Turner, I was so far from that, I wouldn’t even say it was a dream. It was not even anything my mind could consider, even if it’s in its most aspirational state, so that was dizzying to be able to even consider doing that and ultimately doing it. But again, I was still at IA when that happened. That was probably about six, nine months before I left IA, I closed that investment.
Turner Novak:
When you made that were you still all in on IA or was there a seed of questioning things?
Roger Ehrenberg:
No, I was still all in, so it wasn’t like, oh, this is going to be my glide path towards transitioning out. Literally, it was just an investment. But when other things conspired to get me to just acknowledge that the time had come for me to figure out the next phase of my life, I then had this thing that was very significant that I could start really getting my mind around. And I’ll say, once I made that investment and it became public, I started to get a bunch of deal flow in and around sports and media tech. And so that’s bubbling in the background.
And then for other personal reasons I decided to leave IA. But then again, once that space was created I was then able to really dig in and in exactly the same way that I spent those years dogfooding both my own investment acumen, building this whole new set of networks and ultimately developing a new set of theses around the future, that’s exactly what happened here. And it was almost a similar amount of time between the time I left IA and the time that I started Game Changers that I went through this percolation process.
Turner Novak:
We’ve got probably 16 and a half years more of you permeating the sports world?
Roger Ehrenberg:
Well, no. You need to tack on the four, so call it 12, 13.
Turner Novak:
Well, yeah. And so what’s generally the thesis in sports? Because I think I’ve come around to changing this a little bit over the past couple of years. I maybe have had the same realization that you’ve had that there’s different opportunities. But I feel like historically you think of sports, you think of owning a sports team and you just think it’s a trophy asset. They don’t really produce cash flow. They perform pretty well, honestly, just the sports teams historically. But that’s the, I don’t know, the Warren Buffett value investor type screw knee of the industry. With that lens coming in, what are the opportunities in sports? Because you obviously made a huge bet on this. You obviously think there’s a lot of ways to make money or build businesses in sports. How do you think about it?
Roger Ehrenberg:
I really view it in two different pieces. One is sports franchise, which is what you just mentioned. And so at this point out of our family office, we have interests in several sports franchises, minority owners of the Marlins, of the Alpine Formula One racing team.
Turner Novak:
You own a soccer team too?
Roger Ehrenberg:
And Real Salt Lake, and the Utah Royals. We are new investors in the Detroit WNBA team.
Turner Novak:
Oh, that’s a thing. I didn’t know that was a thing.
Roger Ehrenberg:
We’re also... Oh, it’s big thing.
Turner Novak:
Is that new or am I just out of the loop?
Roger Ehrenberg:
It is new. It was this year, so a group that was led by Tom Gores and Arn Tellem, so the Pistons ownership, we’ve been working on this for quite some time. Three new WNBA franchises were awarded, Cleveland, Detroit, and Philly. And so yes, we got one of the three new franchises and we are significant players in that new team. And then also the new TGL expansion golf team, the Motor City Golf Club.
Turner Novak:
What is TGL, the golf league?
Roger Ehrenberg:
No, that’s Tomorrow Golf League. Tomorrow Sports, that’s where they play the indoor golf in the stadium in Palm Beach, SoFi Stadium, where you have Tiger and Rory McIlroy. Literally the best golfers in the world are golfing in a team golf format in this state-of-the-art indoor facility with stadium seating. Unbelievable, mind-blowing technology. It’s on ESPN and we’re just about to kick off our second season. There were six original franchises. They just awarded a seventh. And a group led by Michael Hamp and Kevin Kelleher led this Michigan group and it’s wildly exciting. We could talk about that by itself for a long time. I’m a huge fan of what Michael McCarley and the Tomorrow Team are doing in applying technology and innovative formats to new kinds of sports entertainment. And the first product out of Tomorrow is TGL. That was done specifically with Tiger and Rory as the anchors. And it really shines the light on the excitement of team golf. And then you think about just having gone through the Ryder Cup, this is that level of energy and excitement. And with that team format that’s very different than the traditional PGA tournaments.
Turner Novak:
The way that it’s different from classic golf, when you just think about growing up watching it on TV, everything is team-based and you do it in a stadium?
Roger Ehrenberg:
Yes.
Turner Novak:
Is it like eighteen-hole course thing or is it custom-built? What does the actual gameplay look like?
Roger Ehrenberg:
Think of it as the most mind-bending golf simulator you could possibly imagine the scale of it, so you’re hitting into a simulator, but the visual experience is similar to if you were bird’s-eye view in an outdoor real tournament, the ball flight. But then of course there’s advanced statistics and everything flashing on the bottom of the screen. You see this both in stadium and on TV, but then there is a physical rough and green that adjusts based on the hole, so the undulation, the shape of the green actually changes. It’s hard to describe. You really should pull up some YouTube videos on it. And again, the new season is going to be starting soon, but it is... At first when it came out, I was like, what is going on here?
Turner Novak:
That seems like a video game in a way.
Roger Ehrenberg:
It does-
Turner Novak:
Like an in-person video game.
Roger Ehrenberg:
... but here’s the thing, the players love it. Again, remember this is not just some players in these contests. You have these teams. These teams have many, if not most of the best golfers in the world, in this setting that you’ve got fans who are loud, the energy is palpable.
Turner Novak:
It’s like the opposite of normal golf.
Roger Ehrenberg:
It’s the opposite. But they’re having so much fun. It is, but it isn’t. It’s like every hole is like the 16th hole at Waste Management, which is that stadium setting where literally it’s like you have the crowd over the hole and if somebody makes a bad putt, the crowd’s like, “Boo. Boo.” And then somebody does something amazing and the place explodes.
Turner Novak:
It erupts.
Roger Ehrenberg:
And so the players love it because firstly, you’re not at the Masters so it’s more relaxed. They want to win. These are some of the most competitive people on the planet and they’ve got teammates. They want to play well for their teammates. They want to play well for their own personal brand and they want to win. But because it’s in the setting that it itself is more fan-centric and fans are more a part of it, they’re just having a good time and they’re more emotive. You’re like, wait, somebody makes it. You could just see the raw expression more than you would at a traditional golf tournament, so yes, the technology aspect is next-level crazy video game, but the emotions and the human aspect is very real.
Turner Novak:
Mm-hmm. It seems more fun to watch too, because I never got into golf because it’s just some people standing around and you’re walking. I don’t like golfing because it takes four hours, and it’s mostly just walking around and watching. But this sounds so much more exciting, being in the crowd, even being in a stadium versus lined up along a little rope thing and a course out in the beating sun. I mean, maybe that’s fun for some people, but this sounds like a little bit more fun to watch too.
Roger Ehrenberg:
It’s super cool. And you’ll see that the TV product is really, really good. Well, I think there’s another phenomenon here that we can tie in to the other part of the discussion. So all the sports franchise stuff, Turner, this is not part of Game Changers. This is all part of our family office. So our family office invest in sports franchises. And I think we’re also, I can’t mention the name, but we’re more investors in one of the best European football teams in the world. So what that’s given me, aside from this great portfolio of sports assets, is an incredible network, because the people that tend to be owners of these franchises are both very successful and generally have more than one interest in sports. So the relationships that I’ve been able to build have been valuable, but also the insights on what is going well at the team level and what are areas that are weak.
And I would also say things like my involvement with Michigan Athletics and my knowledge of college sports also informs how I think about the venture side of the business, which was done out of Eberg Capital, out of our family office, where over the four years we deployed basically a seed fund’s worth of capital in sports tech, gaming, media, analytics related to this space. We’ve now raised this $100-million institutional fund to actually build a full team to prosecute this opportunity. But the insights from the franchise side have been unbelievably valuable, and continue to be valuable both in terms of new-product creation and ultimately go-to-market for these companies.
Turner Novak:
So really quick on the TGL business model for something like that, is it mostly you do streaming licenses, sponsorships, tickets, concessions, merch? Is it generally what the model looks like for something like that?
Roger Ehrenberg:
Yeah, I mean, it’s pretty much the way you would think about any professional sports enterprise. There’s the league, there’s the tomorrow level, and there are the teams. And so as I said, there were six original teams. We are the seventh, and we will start playing in ‘27. Right, there’s the broadcast deal. So there’s the network. And then you have league branding, but then the teams themselves run their businesses much in the way that an MLB team, an NFL team, an NBA team would. So they make the in-market revenue, and where branding, advertising, sponsorship, and tickets and merch drive most of the revenue.
Turner Novak:
It feels like generally speaking, there’s a little bit of gambling and betting that’s slowly weaving its way in into the business model. I think it was Mark Cuban said specifically part of why he sold part of the Mavericks was because he didn’t like that he had to invest in real estate, development and building this whole complex around the team. So he was starting to remove himself out. Is that becoming a big part of a lot of this, real estate, in-person entertainment, betting, gambling?
Roger Ehrenberg:
Massive. If you look at the stadium projects that have been done really over, I would say the past decade, but it’s certainly picking up steam, every project has a significant real estate component to it, like the ballpark at Arlington or The Battery in Atlanta, there were a couple of early examples of that where literally they become entertainment districts. So the thing that Mark viewed as a bug is actually a feature. And while it has, you could argue a longer time horizon, because literally if you’re saying, “We’re going to do this now,” to get the permitting and all of the requisite approvals and the financing, and then you’re shovel ready, and then you build, I mean it’s-
Turner Novak:
It’s by stages a building too.
Roger Ehrenberg:
Oh no, it is. I mean, literally it’s the stuff that’s closest, and then it concentric circles out. And again, in some cases there’s literally entire neighborhoods being built around these stadiums, but stadiums add value, they add real value to the real estate that’s proximate. And then you think it’s not just residential, it’s all of this entertainment that goes along with it. So 100% there’s not one professional team owner, that is not a group, that’s not thinking about, “How do we expand our footprint?” And if it’s a team that is playing in a stadium that’s aged, then the question is, renovate versus build net new. And if renovate, well, are there areas around the stadium that would help you improve the long-term economic picture because of these ancillary revenues, or are you fairly trapped? And if trapped, you’ve either got to get a great deal on renovation and a new lease from the municipality, or you may look for another place to play.
So that dynamic is creating both tension and opportunity within the communities where these stadiums exist. And you see this play out all the time. It just played out in Philadelphia with the Sixers Stadium. I mean, that took years to kind of figure out, was it going to be in a new location in Chinatown or the existing location? A lot of tension there, because also there’s, with tight local budgets as well, do we give tax breaks in order for a stadium to either stay or expand our footprint, or do we just say no? Well, if you look at what’s happened with the Tampa Bay Rays, that’s been practically a decade-long struggle. And then Stu Sternberg just sold the team, but it’s a huge issue.
Turner Novak:
And it feels like that could be a bigger problem if we, as I think about, I don’t know the 20, 30, 40-years-ago way of doing this, it’s just there’s a stadium, there’s just a massive parking lot around it. That’s what I think of the classic football stadium that’s in America, that’s the picture I maybe think of. But to your point, you have a stadium, but there’s restaurants, commercial development, offices, casino, movie theater, people that live around the ring. You basically build a ton of taxable value there. The city can make a ton of money from just commercial activity happening versus just a massive parking lot that’s a square mile or five square miles just around the stadium.
Roger Ehrenberg:
And I think this was Miriam Adelson’s vision of why she wanted to buy out Mark Cuban with the Mavericks. And then I think look at what Steve Cohen’s doing around Citi Field, and the talk of the new hotel and casino complex and the new soccer stadium all basically in the parking lot in and around Willets Point. So you’re 100% right. I mean, this is happening everywhere. We have these couple of very proximate live examples of it happening in real time. So I think that is the harbinger of the future. And you’ve seen also new groups emerge that are designing these districts. Again, it’s moved so far beyond stadium, it’s the whole neighborhood. So you’re even seeing more interesting competition in and around that space, because you look at every professional team, and they need to have a strategy.
Turner Novak:
Interesting. And one thing I’ve heard you say before, which I’m not sure I understood your answer, so I want to ask you again because I’m curious, you said that COVID really changed sports. I don’t know if that was an offhand thing or if that’s a big thing that you believe. How do you think sports changed from COVID?
Roger Ehrenberg:
So I would say in two huge ways. One, it hastened the rise of emerging sports as people had more time to think about entertaining content that was broadly accessible. I mean, the explosion of emerging sports formats, either leveraging existing sports or designing net new sports, the rise of Google and Twitch as free distribution channels, so not needing a network deal in order to get your show shown. We had been talking about golf earlier, Good Good Golf and all of the different YouTube golfers, even with Bryson DeChambeau now, he’s one of the best golfers in the world, his participation, COVID was a massive catalyst for this phenomenon where people could sit at home, watch great content, and see these new innovative sports and sports formats emerge.
Turner Novak:
I wonder if the Darth of Hollywood content, because you definitely hit it, there’s probably almost two years it feels like, where the studios, I think they weren’t allowed to shoot or something like that. So there’s probably this massive hole of just fewer good movies, good TV shows, and sports content had the opportunity, because it was, to put it like a guy golfing on YouTube, “lower budget.” It’s just a guy with a team, you can go out, shoot, make some good content, and way cheaper also than $200-million crazy production, maybe more interesting too, but they might not have that opportunity had the studios vacated the showtime or the airtime.
Roger Ehrenberg:
So 100% that was a piece of it. Another piece of it was there was a period when there were very few professional sports that were being played. And so just the tonnage of pro-sports content went way down. Well, how do you fill it? And there was this phenomenon like ping pong. Eastern European ping pong was a huge thing, and people were betting crazy amounts of money.
Turner Novak:
I’ve seen memes about people on-
Roger Ehrenberg:
On ping pong. But that’s just a single example, but there was so much of that happening. And again, I think the distortions of COVID unleashed creativity that you couldn’t have imagined. I remember the story of Shayne Coplan of Polymarket developing Polymarket during COVID in his bathroom. So there was definitely limitations, and I think this is a great metaphor for startup culture, all of these constraints unleashed all of this creativity, because you got to.
Turner Novak:
We’re all locked in our homes and-
Roger Ehrenberg:
What are you going to do? So I think that was one part of it. The other part of it is the continued polarization of society and the fact that, I think, sadly, a lot of people are really stressed and unhappy about the direction of their societies. And I’m not saying the US, I’m saying-
Turner Novak:
It’s a global issue.
Roger Ehrenberg:
... generally there’s a lot of tension, uncertainty, concern felt by the younger generation coming of age. There’s something about sports that is a unifier, it brings people together. And this then gets back to the original thesis of when I transitioned out of IA, started spending time in and around sports, why did I decide to go all in on this space, I think it is among the most...
Turner Novak:
Would you say wholesome or pure?
Roger Ehrenberg:
Yeah. Well, but not recession proof, durable assets because of affinity, and because of passion, and from an investment perspective, the value of scarce IP, and that if you control that. But it’s something ultimately that, A, brings people together, but is also highly monetizable as you’re able to deepen fandom. Then it really occupies this unusual place in the universe where, yeah, there could be wars, there could be bad things that happen, there could be strife, but there’s always sports. And it’s always been that way, but now that sports is bigger than ever and more accessible than ever, I think it’s more powerful than ever.
Turner Novak:
Yeah, it’s more global, I feel like.
Roger Ehrenberg:
More global, but also multi-platform where you don’t need cable to see sports. And simply, if all you did was had YouTube and YouTube TV, you could cover a huge amount of the landscape. You’re not going to see everything in these days because of fragmentation across streaming services. Amazon’s got their stuff, Peacock’s got their, et cetera.
Turner Novak:
You’ll see highlights and the clips, you’ll see all the best parts.
Roger Ehrenberg:
Sure. So it’s, yes, the barrier towards accessing professional sports as a viewer has gone down. As an in-stadium, it has gone up, because the price of attending a sporting event has gone up a lot, which is partly why you’re also starting to see innovation around that, with what Steve Ballmer’s doing with the Clippers.
Turner Novak:
What’s he doing?
Roger Ehrenberg:
So he just opened this brand new $2.2-billion stadium with the latest technology. And there’s this dedicated fan section where the ticket prices are kept super low. So you don’t need to have a lot of money to be able to see a basketball game, whereas right now to, whatever, take your family of four to a Knicks game is, I can’t even count the dollars, which is why so much of in-person is now corporate and people related to business, because they have the money. Oh, and also things like, there’s several teams that are now experimenting with ultra-low-cost concessions. So inexpensive hot dogs, inexpensive sodas. You can bring your family of four for not 500 bucks. It can be 200 bucks or 250 bucks.
Turner Novak:
Yeah. So why did we need this dedicated fan or the ultra-low-cost concessions, why don’t they just make them cheaper? And then how do you specifically segment that out? Are there 10 seats just in a certain spot that are cheaper, or how does that all work?
Roger Ehrenberg:
Well, again, I think Steve Ballmer’s example is an N-of-1 right now, and lots of people are experimenting, but he literally built this into the stadium and the fandom concept. His thing, I think it’s called the fan wall, it’s not 10 seats, it’s thousands of seats.
Turner Novak:
Are they worse-quality seats?
Roger Ehrenberg:
No, they’re on one end of the court. I don’t think so.
Turner Novak:
And they’re just-
Roger Ehrenberg:
They’re not up in the upper ring or anything like that, it’s a wall. Think about it like this, if you go to European football game, you have these fan clubs that generally occupy a section of the stadium, and they tend to be in one of the ends.
Turner Novak:
They’re usually louder and they do the chants and stuff?
Roger Ehrenberg:
That’s the fan wall.
Turner Novak:
Got it, okay, because seen that kind of discourse online where people will say, you look at a Knicks game and you compare the ‘80, the ‘90s with today, and back in the ‘90s it was all just people in jerseys, cheering, super pumped, and today it’s just some dudes in suits and some models, and they’re on their phones or something. And it’s just completely different fan experience or engagement that you get from the fans. The true fans are almost not at the games, because it’s four or five figures to get that front-row seat. You basically need to be, it’s corporate-
Roger Ehrenberg:
Spike Lee.
Turner Novak:
... to your point. Yeah, or Spike Lee, I guess.
Roger Ehrenberg:
But at least he’s a real fan. No, 100%. So this notion of democratization, I think is super important. And again, a lot of the things that we’re looking at at Game Changers are about the fan, and are about delivering a better experience to the individual, because ultimately, look, selling to teams direct, and I think what a lot of people think, “Oh, the TAM’s not big enough in sports venture because there were only a number of teams and they’re hard to sell to.” Totally. I would not have started a venture firm if all I was doing was enterprise sales to teams. Teams are notoriously difficult to sell to, they’re cheap, like many enterprise buyers. I’m just saying they’re not different than an enterprise, except most are more tech backwards than most corporations that we would be selling SaaS software to. That said, they are extremely focused on how to best expand and engage their fan base.
So that whole sphere of issues, which is direct fan experience, it could be payment in the stadium, it could be media. I mean, we’re looking at a company now where there’s a AI-powered experience that gives you unbelievable nuance. Think of querying one of the big LLMs, and it gets to know you and will give you this incredible content back, all that stuff involves serious tech, but is really about tightening the relationship between a fan and a team, or fans with other fans or fans of the team. And that’s incredibly valuable. Anytime you can drive engagement and stickiness in material ways, you can make a lot of money.
Turner Novak:
So it’s really thinking about how to make the fans care more and spend more money probably, or just increase the lifetime value of a fan instead of LTV of a customer instead.
Roger Ehrenberg:
I don’t know if it’s care more, it’s they care, but they’re poorly served. I don’t know about you, most of the stuff I get from the teams I like stinks, it’s terrible.
Turner Novak:
It’s just an email with a Mailchimp template, and it’s like, “Season tickets are now on sale,” or whatever?
Roger Ehrenberg:
Great. It doesn’t know me from anything. And then it’s either that or I get spammed by premium ticket sellers, because they know, “Oh, so you bought Legend seats to the Yankees. So we know you have money. Do you want to buy a package?” And I get why these things exist. And sure, whatever, I’ve got some young nieces and nephews in my family that are doing that exact job, and it’s a tough job, but there’s so much more to, especially today, leveraging technology, leveraging data to provide what feels like a one-to-one experience with a fan. And that’s the beauty, it’s not even like you need to change somebody’s mind. They already are a fan, they already care. Give them more ways to express that fandom, more ways to feel connected, more contextually appropriate offers, more opportunities to engage with the team in ways that are meaningful to them, which is not a Mailchimp email.
Turner Novak:
Yeah. We need Mailchimp for sports, or maybe a lot more than that.
Roger Ehrenberg:
Yeah, I feel like we’re in, to use a sports metaphor, the early innings of this notion of the centricity of fandom and having businesses spring from that, that of course ultimately are in service of sports teams, media companies and entertainment. But man, it’s just like, and this comes back to the very first question you posed about kind of people. Some people say this is the worst time a generation for seed. And I’m like, no, no, no, you’ve got it wrong. Just everybody wants to back the next AI dot-dot-dot, and I’m much more focused on, you do that, give me this pool of technology from which to draw, and my founders are going to help build incredible applications that make teams’ relationship with fans, fans’ relationship with the teams, and fans’ relationships with other fans that much better.
Turner Novak:
So you think, is that what you’re kind of doing differently than everyone else in the market? And then maybe you have more of an institutionalized approach versus other, I don’t know, early stage sports tech investors? I don’t know if that’s a fair way to frame it.
Roger Ehrenberg:
Yeah, I don’t know if that’s a fair way to frame it either. Let me think how I would put it.
Turner Novak:
Yeah, I guess it would be like, what do you think gave you the right to win or what made you different from just kind of the landscape of early stage sports and investors? Like yeah, aside from all the tech stuff-
Roger Ehrenberg:
Sure.
Turner Novak:
Or maybe that is, you just have that approach and that’s good enough.
Roger Ehrenberg:
I think it’s a combination, Turner, of usually there are not that many firms that are focused on precedence seed in this space that have the expertise and the focus. The intersection of my being a professional sports team owner, having been a very successful technology venture capitalist and having dog-fooded this using my own capital and a lot of it for the last four years I think puts me in an unusual category, which is probably why in this challenging environment to raise for seed that I was able to raise an institutional fund. Again, there are some firms that have invested in this space that are more commonly thought of as traditional VCs that I think have done fantastically well. And I guess one that I’ll call out is Forerunner. They’ve got a handful of investments in this space that I think are really, really smart.
Turner Novak:
Interesting. I didn’t even know that. I mean, I know Kirsten. I didn’t know she was investing in sports.
Roger Ehrenberg:
Yeah, so I wouldn’t say she, as they are investing in businesses that with their consumer lens they feel they have an edge. Some of them happen to be in and around sports and gaming. Really smart. I mean, I expect nothing last out of Kirsten, which is just to say there clearly are some firms that are those who you would consider more traditional tech VCs that are playing in this area. I would say at this point she’s downstream of me, where she’s managing way bigger dollars. I’m still being like, this year, the 18 million Series A of Novig or whatever, and I’m one or two steps upstream of that.
But the insights and the perspective is great. And to me, I’m excited to help those kinds of firms and others that start to realize that this is a really fertile area that can build multi-billion dollar companies that have been systematically under-invested in, which I think will then create this flywheel of great founders saying, “Hey, I want to build in this area.” And I think that’s also part of my excitement for why sports, media, entertainment tech, why now, is that we’re already seeing so many smart founders who love sports, but are first and foremost great builders starting to apply their brains in this space. But I think we’re at the very, very beginning of this phenomenon.
Turner Novak:
It seems like there’s just a real lack of capital, and it favors the capital. You can get a little boost to your returns versus if you go the other end of the spectrum like AI stuff. It’s definitely in the favor of the equity or the stock, the founders, the company where the investors are, you’re paying higher prices. So it’s like they might be great businesses, but you’re kind of chopping, if you just think of an extreme end, you invest in a company of 5 million post-money versus 50 million post-money, you just assume the outcome’s the same. Maybe that’s not the right way to do it, but there’s like a 10X difference that you kind of miss out on by coming in a 50 instead of five.
So to your point is if you think the outcomes are still going to be massive, you just get this extra tailwind from just a place that just doesn’t have the same kind of, I don’t know, competition in a sense. And maybe we’re ruining your edge right now talking about this, but also a lot of things attracting downstream capital, right? Because a lot of people still might say sports like, nothing there. I am going to stick with AI. So I feel like that’s part of the battle too, is can you get people to just care about this?
Roger Ehrenberg:
For sure. And that’s our challenge. Our responsibility is to work with founders to get them to the point where they are venture back-able downstream of us. And again, because so much of what we’re doing has that deep technology component to it, the AI inside where it’s really the models themselves aren’t novel, the applications are novel or using cross models depending on the context within a single application. These are not things that are easily replicable. There is genuine IP in these businesses. So at the end of the day, Turner, I think what I’m doing isn’t sports media, entertainment, tech VC, it’s just tech VC. It’s just this particular vector has some really compelling founders building really interesting products in areas that we believe have applications often well outside of sports, but sports is the best place to go to market and to hone the direct-to-consumer relationship, which I love.
To me, having that very narrow go to market and being able to just create these unbelievably passionate users that word of mouth tell others about it, because I think one of the big issues, and I will say, something I fight with all the time in myself, even having been a reasonably successful VC for more than two decades, is that notion of, man, if I can see a huge TAM, why am I spending my time on this? And then I need to constantly remind myself, great founders find the big TAM. And the most important thing is building and shipping great product that users are excited about first and foremost, especially at the preceding seed stage.
Turner Novak:
Yeah, because you can say huge TAM, but you just never get there because you didn’t build a product and no one used it.
Roger Ehrenberg:
A hundred percent. So I really do, and this is something that my friend Harry Stebbings has said for a long time, and it’s always a great reminder, just it really is that the preceding seed stage, it’s about the founder and it’s about their ability to ship a great product and create a super happy customer. And then everything springs from that.
Turner Novak:
And so what do you think have been the characteristics of founders throughout your career that have been able to do that? Is there anything that you typically are able to pull out or that you’re looking for?
Roger Ehrenberg:
I mean, most, not most, every successful founder I’ve backed had deep empathy for the problem, deep understanding of that thing they’re building towards. It wasn’t an intellectual exercise, but they’re like, “I’m really smart. I think that there’s a need over here and then I’m going to go build over here.” And I’m not going to say that you can build a great company that way. I’m saying, in my experience, the best companies that I’ve been involved with, the founders were angry. They had a chip on their shoulder. There was something about either their own experience in using a product or trying to do something that was just such a crappy experience. Or they had been building something, they were part of a company that that first venture underperformed, they’re enraged about it, and now they’re going to go and do it right. Those two personas to me have been the most successful personas of anybody that I’ve backed in the past.
Turner Novak:
When you say angry, that’s like a surprising, but you feel like that’s important. Does that motivate you if you’re-
Roger Ehrenberg:
Massively. Frustrated. If it was, I was involved in building something that maybe it was, we had a hard time going to market. Maybe I disagreed with my co-founder. Maybe we were too early, maybe we sold out too early to a terrible buyer that wanted us to do things that we knew were bad. And so the dream was never realized. The underlying thesis for the dream hadn’t changed. The realization had been truncated. So then they’re able to start something net-new with both the market knowledge, the passion, and a level of drive that is powered by the desire to win and to prove. I can say, that drives me.
Turner Novak:
I was going to say, did you have that at all? Did you have moments like that growing up, or?
Roger Ehrenberg:
I would say I had moments like that starting in college. Just elements of disbelief. Well, no, if I’m truly honest, it started before that.
Turner Novak:
Yeah.
Roger Ehrenberg:
Yeah, definitely a rocky relationship with my parents growing up, and they were trying their best, but they themselves were pretty messed up. And so they didn’t believe that... I wouldn’t say this. They would not stipulate that I could do great things. My mom, again, and I ended up having a great relationship with my parents for 15 years before they died. But in that era, they didn’t express belief in me. And my mom was always, prove it, prove it, prove it, which didn’t feel great as a kid. And that definitely was this, seeded this white-hot fire inside me. And then when I was in college, I wanted to go to Wall Street, and coming out of University of Michigan in the mid-1980s was not a hotbed of Wall Street recruiting. And-
Turner Novak:
How’d you do it? How did you make it work? Obviously it worked.
Roger Ehrenberg:
Well, it worked. I had a stack of rejection letters this thick. I literally-
Turner Novak:
You were literally writing people letters from Ann Arbor, or did you move to New York?
Roger Ehrenberg:
Of course. Oh, no. Well, I did both. I sent how many? I’m going to say a hundred, 125 letters to, what I did is I would cut out the tombstones of equity and debt offerings out of the Wall Street Journal, and I would call and then send letters to every single one of those firms.
Turner Novak:
So their numbers were on the-
Roger Ehrenberg:
No, of course.
Turner Novak:
Or you’d look them up?
Roger Ehrenberg:
Yeah.
Turner Novak:
Okay.
Roger Ehrenberg:
No, I mean, this is an arduous... Right? Arduous project. There was no internet.
Turner Novak:
You couldn’t just go to LinkedIn or just connect with them and be like, “I’d like to pick your brain over coffee.”
Roger Ehrenberg:
There was no internet, or public internet. It was crazy. So I just tried and tried and tried and tried and tried. And then finally, through somebody who lived on my same hall in my dorm freshman year, he was at City M&A. He said, “Oh, this,” and we had a good relationship and he knew of my job hunt and I think he was valedictorian to the class before. So he got on Wall Street and he said, “Oh, the head of Asian M&A in New York is looking to hire an analyst. Can I put you up for it?” I said, “That would be fantastic.” I went, I interviewed, and I got the job. That was the foot in the door, but it was brutal.
Turner Novak:
All the steps leading up to that was like, but it probably prepared you, right? You were probably ready to nail the interview.
Roger Ehrenberg:
A hundred percent. But it was like, that was the white-hot fire. And then it was leaving Wall Street and people saying, “You’re insane.”
Turner Novak:
Yeah, because you kind of made it, quote-unquote. You were running a whole division, like a group, right?
Roger Ehrenberg:
And I was making nice seven figure dollars. And yeah, things were pretty irie.
Turner Novak:
So why did you do it? Because most people would say you’re crazy for giving that up.
Roger Ehrenberg:
That’s the point. Most people said I’m crazy because that feeling I described about leaving IA is how I felt then. Things had gotten very political and I had a very senior job, and it ceased to be fun. I learned so much. I was in derivatives for a long time and I was at Citi and then went to Deutsche. I co-headed equity derivatives, structuring and marketing globally, and then became CEO of this large trading business. And it just became a drag, and I felt like I had done my learning and I needed to change, and it didn’t matter if I was making great money.
It felt at that point inauthentic and not fun, but again, disbelief, crazy. And then spent four plus years wandering in the desert, doing my thing, went through the GFC, hadn’t drawn a paycheck for four years, two kids in school.
Turner Novak:
Dad, yeah.
Roger Ehrenberg:
Those were tough times, mean. I mean, stress, a lot of, some of that founder existential, oh my god, should I go back to Wall Street type thing and go back to just making money doing what I did for 17 years? And my wife, God bless her, was like, “No, you made a plan. It’s a great plan. You always told me, stick to the plan.” And she’s like, “Look, if at the end of the day we need to sell this stuff and send our kids to public school and move to a suburb, that’s fine. We’re fine.” So a year later, things were covered, my investments did great, and I had this vision for IA. And that’s how I started IA.
Turner Novak:
So then how did you convince people when you made the transition, you started raising money for it? Because they might say, “Wall Street guy, what do you know about backing founders? Get out of here. We want someone who was,” I guess at the time, maybe like early Yahoo or something? Or a Google employee or something.
Roger Ehrenberg:
Yeah, I mean, so this was 2009 is when I started talking, the middle of 2009 when I started talking to people about IA. And for sure, because of the angel investing I had done and the relationships I had with some fantastic GPs, I was able to get amazing LP meetings, top fund of funds, endowments, whatever.
Turner Novak:
How did those go?
Roger Ehrenberg:
So great to meet me, but disbelief for sure.
Turner Novak:
What was the pushback? It was just that we probably don’t think you’re the right fit for that?
Roger Ehrenberg:
Well, also remember, we’re coming out of the global financial crisis. Most LPs are puking out where it’s not putting on that new risk. Emerging managers were not a thing yet. And I did not look like your normal central casting VC. So it was more, I mean, very polite, but just like, let’s stay in touch. So I ended up kind of brute forcing a first close with non-traditional investors. I had multiple proprietary trading firms, a few ultra-high net worth individuals, my own money, so a small but very non-traditional LP base, and brute-forced the first close of 17 million. But I had planted all these seeds with these traditional LPs and I told them exactly what I was going to do, which was we are going to build a concentrated seed state strategy. We are going to lead rounds and be ownership-sensitive out of New York City in technology.
Turner Novak:
Which that was all pretty much not, that was very contrarian at the time, not consensus.
Roger Ehrenberg:
Very contrarian. New York area, you had USV and you had RE and you had first rounds, but there was very little true seed and pre-seed money in the city.
Turner Novak:
Was it mostly angels? If you wanted to raise a million or two, it was like there’s a couple-
Roger Ehrenberg:
Sure. New York Angels, a hundred percent. It was a very, it’s hard to believe, because the New York ecosystem now is so strong, but-
Turner Novak:
Yeah. Now, everyone has a fund. And-
Roger Ehrenberg:
Now, 16 years ago, and again, this is, Meetup hadn’t really gone full bore yet. It started, but it’s just like the ecosystem hadn’t really developed. But I put this stake in the ground. And also, remember, big data is an investable theme, emerging manager, New York. Well, fast-forward from Q3 of 2009 to Q3 of 2010, market had recovered. Emerging managers were a thing, big data was hot, and people started to believe in New York. And all of a sudden, my $17 million fund with 25 on the cover, we had 85 million of institutional demand and ended up getting an LP waiver. We had a hard gap of 40. We ended up taking 50. And at that point we had convinced, so we were Michael Kim’s first LP commitment at Cendana, before Cendana was Cendana.
And we got Horsley Bridge, and we were one of Phil Horsley’s, I think we were Phil Horsley’s last fund that he was involved in the decision with. And then Fred Giuffrida, Elizabeth Obershaw and the team took it over from there. And then we just started to go. But again, massive disbelief, just unbelievable fire on my part to make this thing work and to prove it. And I’m super, super proud of what IA accomplished and continues to accomplish and what the brand means in the market. Now I feel that same disbelief about this theme and thesis at this point in this space at a time that’s very, very hard for pre-seed and seed, and I have that same fire to prove it.
Turner Novak:
So this might be, I’m asking this because there’s a lot of probably emerging managers out there that are listening to this. How did you get through that 18-month, 12-month moment of everything coming together from probably all nos to then suddenly the yeses? Were there certain moments or certain things that you did that helped things come together? And I ask because I just know a lot of people, they probably are ask about this. How did you actually raise the first one? I think it’s just a common question that a lot of people have.
Roger Ehrenberg:
Yeah, for sure. I mean, so just for, as a reminder, so I had a very clear thesis. I think clear differentiation is critical. Does the world need another smart young kid with a generalist tech fund? Oh, I have access to end network. That’s all over. It’s like you need a take that is novel, and not for novelty’s sake, because you actually believe you have an edge. And if you don’t, then you shouldn’t be doing it in the first place. Come on, Turner, you know this. I mean, you’re a hell of a lot younger than me, but you know. And even I know, even having accomplished what I’ve accomplished, this is a hard business, a soul-crushing business.
Unless you really want to do it and you really think you can be great at it, do not do it. Don’t do it. The same advice that I give founders. Like, “I want to start a company.” No, you don’t. No. You have to be crazy. You need to be crazy to be a founder, you need to be crazy to be a VC. And I know that the narrative, “Being a VC is easy, blah blah.” Man, being a startup VC, we’re not talking about the venerable firms and the billions that are management that are clipping coupons in Silicon Valley. We’re talking about starting a business. Starting a business in the world of venture capital is insanely difficult for all but the select few that are spinning out of a venerable firm and where they themselves have a huge brand.
Turner Novak:
Yeah.
Roger Ehrenberg:
I did not, right? I did not have a big brand. I had a very clear thesis. I had done angel investing and so I was founder referenceable. And again, even if you’re a young kid, you can put small amounts of money to work or advise companies such that when an LP calls a founder, “They’re like, yeah, tell me about Charter.” They’re like, “He was super helpful, gave me great perspective on my product, introduce me to these two potential hires.” Whatever it is. You need to be referenceable. It can’t just be story.
So clear thesis, a track record of your own making. Right? So this advising, angel investing, something where you’ve actually got something you can point to. And then it is putting a stake in the ground, here’s what I’m going to do. You may not back me today. I’m going to stay in touch and I’m going to tell you that I’m going to do what I said I’m going to do. And you’ll be surprised, you’ll be shocked.
And that’s essentially what I did is again, that brute force, that first close, with people who knew me. And I did have the advantage of having enough people with enough money who had enough belief in me to at least get me to 17 million.
Turner Novak:
Yeah.
Roger Ehrenberg:
And that was important.
Going from 17 to 85, so literally five times the interest, was a function of investing a lot of time in seed planting. And by the way, the warm introductions to LPs is critical. So you can point to my LP relationships as having been seeded by Fred Wilson, Josh Koppelman, Matt Harris of Bain, I think Jeff Buskang. There’s very few people. But friends, mentors, people that I had worked with in my angel investing. And they were incredibly kind and generous to make introductions to some of the endowments and fund-to-funds that they had close relationships with where they’re like, “You should really look at Roger.” Want to make the connection, that means a lot.
And by the way, now, so shoe on the other foot. I get asked all of them, “Can you introduce me to these people?” The answer is yes, if... If I believe that I would put my imprimatur behind you, right? Because I’m mot just going to connect somebody because I have a relationship.
Turner Novak:
Yeah, you’re going to bat. You’re saying you should spend a lot of time and probably put some money into this person.
Roger Ehrenberg:
So, and I have invested in a wide array of funds as an LP. That’s obviously the surest way to get a referral, but I’ve made others. As long as I feel like the people are, basically have what I said, compelling thesis, compelling background, differentiation and referenceable.
Turner Novak:
Mm-hmm. Yeah, makes sense. Okay. And one thing I wanted to ask you, I know we got probably 11 minutes left. It’s 10:34. I want to make sure we hit enough stuff. So how did Fund One end up going? Did it go well? Did you lose all the money? Did you make money? What was the-
Roger Ehrenberg:
You’re saying IA Fund One?
Turner Novak:
IA Fund one, yeah.
Roger Ehrenberg:
So IA Fund One, 50 million is right about 10 DPI and 13 TDPI.
Turner Novak:
Nice. That’s pretty good. One of those legendary 10X funds.
Roger Ehrenberg:
Yeah.
Turner Novak:
And the so I think maybe, I think I’m understanding this right, was the Trade Desk one of the big ones?
Roger Ehrenberg:
Yes.
Turner Novak:
In that one.
Roger Ehrenberg:
So Fund One, the big ones were Trade Desk, Datadog. Those were the two biggest. And we still have some pretty good stuff in there, even after all these years. But then Fund Two was better. So Fund Two was 105 million and that was Wise and Digital Ocean and some other interesting stuff. But those are the two that have driven returns the most right now. And that’s like 14 and a half, 15 DPI.
Turner Novak:
Wow.
Roger Ehrenberg:
22 DPI.
Turner Novak:
Nice. That’s also pretty decent.
And then I think one thing that I thought was super interesting hearing you a year ago, not this last DC Summit at Michigan, but the one I think last year, you talked a lot about with the Trade Desk. I think the company raised and you put in there was two or three bridge rounds. I think you probably invested a bunch of times in that one. What’s just generally kind of like the story arc behind the Trade Desk?
Roger Ehrenberg:
Yeah, so Jeff Green is one of those people nobody knew the space of Programmatic better than Jeff. He had co-founded a company called ECN that ultimately was sold to Microsoft in a really frustrating, annoying deal. He was not happy about it. And both pre and post, didn’t really want to sell. And then when they sold and didn’t like the experience of being part of the organization, had hyper clarity on what he wanted to build, but it was in a space that felt very over-invested in because at that point you had all of these new age ad tech companies that position themselves as tech companies, but I would argue were more tech-powered agencies like Churn and Media Math, Data Zoo that had raised hundreds of millions of venture dollars. App Nexus was another one.
Turner Novak:
So this was as the market was starting to pull back with for “Ad Tech,” quote-unquote, or was it still kind of a hot category?
Roger Ehrenberg:
It was hot but not for net new investment. It had received a lot of investment, but Jeff and we believe that it was investment in the wrong areas. And so he, again, is probably among the greatest examples of the chip-on-your-shoulder founder who had deep, deep, deep understanding of and empathy for the problem, and talk about a tough environment, raising for the Trade Desk in late ‘09. He spoke to everybody. Such a hard time. I mean it was brutal. And he didn’t have a product, he had a PowerPoint he hadn’t brought on his co-founder yet, but he could articulate very clearly what the plan was and what go-to-market was.
Turner Novak:
Yep.
Roger Ehrenberg:
And we ended up partnering with Founder Collective, Eric Haley and I worked very closely with Jeff and they were, Founder Collective is awesome. They were the best partners. And so we stuck by them through that initial seed and then three small bridges and then to a small Series A. And then there was this big, like I said, air gap because then once they put product in market and Jeff had built a great product and had already laid the railroad track for distribution once they had built the technology to the point where it could perform relative to the other RTBs that were out there and even better, that’s what happened.
Then it was rocket ship and then we had a chance to write one more check in the Series B and we actually recycled capital from our sale of Simple to BBVA and put that in their Series B. And that even at almost a 20X higher valuation, the Series A still ended up paying more than 30X.
Turner Novak:
Yeah. And then I think you mentioned that as kind of a part of the strategy was recycling. How do you recommend approaching that as an early stage manager? Because you just don’t know what the recycling is going to look like, right? You don’t know if you’re going to get anything.
Roger Ehrenberg:
You don’t. And that is a real challenge of being a very early stage investor is are you going to have recycling in time to be able to invest in those rounds in your existing portfolio companies? Look, you’re going to get recycling at some point. It just might not be the point that you want it, and that’s frustrating. But it kind of is what it is. I said this recently to somebody that the ultimate way to combat that if you can do it, which is hard, is to have similar LPs across funds. So you then can do seamless cross-fund investing without concern about conflicts
Turner Novak:
Yeah.
Roger Ehrenberg:
Because then you literally can take Fund A plus Fund B, add them together, and that’s effectively how you can manage that fund. Because if you have a Fund One portfolio company, there’s an exciting opportunity, you don’t have sufficient capital to make that investment, Fund Two can invest in that Fund One company if you have similar LPs. But cross-fund is a way to address that issue. But if you don’t have perfect symmetry in your LPs, then you’re taking a significant reputational risk if that turns out to be a bad shack.
So we had looked at some opportunities at IA Fund One before ultimate Fund Two and Fund Three were able to achieve symmetry. But Fund One and Fund Two were not. So there was a time in a Fund One company when we were seriously considering doing cross-fund and we spoke to the LPAC and they ultimately said you can do it, just understand it better work.
Turner Novak:
Yeah.
Roger Ehrenberg:
Right? Just because it’s a reputational risk. So we elected ultimately not to do it.
So look, at some point you’re going to get recycling that you will be able to deploy. It just might not be exactly when you feel you want it.
Turner Novak:
So I have two questions I really wanted to ask you that most people who I talked to before this, “You got to ask them about this.” So I got to make sure we fit them in.
One was, I think you kind of alluded to it, after you stepped back from IA, started to work with your kids a little bit. Just generally speaking, what’s that been like, what’s it like working with your kids?
Roger Ehrenberg:
I mean, it’s been great. It was never the plan, which I think is part of the reason why it’s great. We didn’t have a family business. Ever. It’s only after I left IA and started kind of investing out of our family office that this enterprise started to look like a family thing. But at that point, older son Andrew was working at DataRobot as a product manager and younger son Ethan was at Michigan Ross.
As I started to get deal flow in this area though, I started just to send the deals to the boys just to get their perspective. And so they’re doing their lives and we’re starting to collaborate and I’m putting some family money to work in some of these companies.
And then a few years in, they approach my wife and me and say, “We’d really like to work with dad.” And it was not just, “Sure sounds great.” We had a lot of conversations about it. And one of the hallmarks of my relationship with my wife Karen, she’s a clinical psychologist, we’re very tuned into communication and transparency and everything being out there. Working with your kids can be fraught, right? Especially a family as close as ours where we so value the personal relationship, the friend and parental, adding work to that we needed to put some guardrails in place. That if for whatever reason we couldn’t keep these three roles in our heads at the same time and acknowledging that if they’re working with me, they’re working for me and I’m their boss and there’s going to be feedback. But it all needed to be okay. So a lot of work upfront went into the notion of, okay, let’s try this.
And fast-forward, it has worked really well. Each boy is now doing what seems to be their calling. In Andrew’s case, he was working on kind of the sports and media stuff with Ethan until I started really going very deep in business building in Detroit. And then Andrew came out to be a partner in that with a partner of ours, and is just crushing it. Super happy. Ashley just bought a house in Detroit and is putting down roots. So that has been, it’s incredibly gratifying for me to see him so happy and so effective, yet doing something that touches the family.
And then Ethan recently graduated from Columbia with a master’s in sports management and had been kind of working with me while he was in school since graduating from Michigan. And now he’s kind of come to be an associate in Game Changers. And it’s an institutional venture fund, it’s not an nepotistic. I mean this either will or will not be a great fit for him. And we brought in a partner, Simon Sokol, to join us, who’s fantastic. So we’re really building an independent firm, but this is something that Ethan was really excited to dig into and it’s nice to work with him every day.
Turner Novak:
Yeah, it’s probably one of those things, your point’s nice to work, you get to spend more time and develop an even stronger relationship and maybe you work better together than if you weren’t father and son. I mean obviously there’s probably downside of maybe there’s more or less honesty in some cases. I’m willing to bring something up sooner rather than later. Or is there any of, you brought it up so maybe there’s not this, but the sensitivity around feedback?
Roger Ehrenberg:
No.
Turner Novak:
Or you’re just like, “You got to fix this”?
Roger Ehrenberg:
That.
Turner Novak:
Yeah. Okay.
Roger Ehrenberg:
No, the whole thing is it’s normal. It’s I treat him as I would another 25-year-old smart young person working for me.
Turner Novak:
Yeah. You mentioned Andrew’s helping with this thing called Brand Detroit. What’s sort of the story behind that? What is it and then how did that kind of come to be?
Roger Ehrenberg:
Sure. So precursor to Brand Detroit is I co-founded a real estate business in Detroit called Great Water Opportunity Capital and Great Water Homes. And so four of us have been working on this since 2018 and we’re now the largest naturally-occurring affordable homeowner in Detroit.
Turner Novak:
Oh, I didn’t know that.
Roger Ehrenberg:
Yeah, we have about 2100 affordable units across the city.
Turner Novak:
What does that mean, naturally affordable?
Roger Ehrenberg:
Meaning we don’t get government subsidies. There was not a government program that is giving us money. It’s not subsidized housing.
Turner Novak:
Oh, that’s bold, because you could have done that.
Roger Ehrenberg:
For me and our partners that distorts outcomes. We want to rebuild neighborhoods using capital that can earn a market return, so the bar is necessarily high. But because of the makeup of Detroit, it’s not as hard as you would think. Most of our stuff is between 60 and 80% of AMI, which is affordable and, by definition. We also have started building single-family homes in the East Village.
Turner Novak:
In New York?
Roger Ehrenberg:
East Village, Detroit.
Turner Novak:
East Village, Detroit. Okay. I didn’t know that was a thing.
Roger Ehrenberg:
It’s a huge thing
Turner Novak:
Okay.
Roger Ehrenberg:
And you should look at Great Water Homes. Look it up. It’s right next to Indian Village with all the mansions and it’s incredible.
We’ve developed a home product that nobody else in the country has: a true energy-efficient, affordable, ultra-high-quality starter home. 1000 to 1800 square feet, not including a 600 square foot finished basement. And we are reprogramming this entire once great neighborhood doing so with input of the local community and these houses are being sold as fast as we can make them. And that’s, Andrew bought one of those houses in East Village.
Turner Novak:
He’s really dog-fooding it.
Roger Ehrenberg:
He is dog-fooding it.
Turner Novak:
Nice.
Roger Ehrenberg:
So then where did Brand Detroit come from? One of the other partners of Great Water and I, a guy named John Updike, very successful tech entrepreneur, founded Hook Logic that was sold to Cradeo for $250 million. Also, from the Detroit area, industrial engineer from Michigan. He started going deep in the food, hospitality and beverage community in Detroit. And from that we saw all of this incredible well of entrepreneurship in and around food culture here.
We then partnered with the founder of Marrow, Ping Ho, became part owners of Marrow, started a wholesale meat business called Marrow Detroit Provisions. Our meats carried at Zingerman’s, Plum Market, Bush’s, and that’s expanding.
We then bought some buildings in Eastern Market, three of the iconic buildings on Fisher Service Road that-
Turner Novak:
You mean those brick, kind of warehousey ones that I’m thinking of?
Roger Ehrenberg:
Exactly.
Turner Novak:
Okay.
Roger Ehrenberg:
And Eastern Market is the largest and oldest food market of its type in the country.
Food culture in Michigan is incredible. And the agricultural community. So we actually are getting ready to open a Marrow butcher shop, retail counter, bar, restaurant and event space in one of our buildings on 2442 Riot Pell. And then we have the building just next to it, 1530 Winder, which is going to be home of our venture studio. And we recently brought on a new partner, somebody with 30 years of brand building experience from zero to a billion to run the Venture studio as our partner. And then we have 2448 market, this very famous building with the mural with the watermelon on it, that’s the total wine building, that we’re programming to do something very exciting that we’re hopefully going to be able to announce before the end of the year.
Turner Novak:
Okay. So how do you do all this well? Because doing a lot of different things. That was something a couple of people were like, “Oh, you got to ask him about just how do you do a good job when you’re doing so many different seemingly non-related things?” Is there a thread of commonality, or...
Roger Ehrenberg:
So the commonality is that I work with great people. And in the case of Brand Detroit, John Updike runs that. Andrew really works for John and the head of the venture studio. Great Water is run by Matt Temkin and Justin Goldin. I run sports. That’s what I run. When I wake up in the morning, that’s what I’m thinking about. So I run Game Changers, I run the family franchise portfolio. So in terms of my bandwidth, my bandwidth is devoted to the sports media, entertainment business. I have helped co-found, seeded and effectively serve as a board member of these other activities, but it’s not my day-to-day.
Turner Novak:
So it’s really just partnering with the right people. It’s like finding a really good, and...
Roger Ehrenberg:
That’s exactly what it is.
Turner Novak:
Yeah. Okay.
Well, Roger, this is a lot of fun. I know you got to get going. But yeah, thanks for coming on the show.
Roger Ehrenberg:
Thanks so much, Turner. This has been great.
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