True Ventures COO, Jim Stewart, on Taking Four Companies Public, Venture Capital Firm Operations, Keeping a Cool Head, and Export Controls

INTRO - Michael Koenig: [00:00:00] Between Two COO's is a podcast where phenomenal Chief Operating Officers from all sorts of companies come to share their insights, advice, and crazy stories. 

Michael Koenig: Hello and welcome to Between Two COO's. I'm your host Michael Koenig, and I'm excited to welcome our guest, Jim Stewart, the Chief Operating Officer at True Ventures. 

Michael Koenig: True is a venture capital firm with an astonishing track record of investing in the best companies like Peloton, Fitbit, Ring, Duo Security, Auttomatic, and Sweetgreen, which just this week announced its S1 filing to go public on the New York Stock Exchange. Jim initially joined True Ventures, the CFO in 2012 and now leads all operations as the firm COO, where he brings substantial operational and financial experience in venture backed tech and biotech companies. 

Michael Koenig: He has held numerous operating and CFO positions, leading [00:01:00] not one, but four companies through their IPO process. When he is not focused on operations, he's doing all sorts of high-octane activities like racing his Yamaha R6 motorcycle. Welcome Jim. Thanks for being here. I'm excited to have you on.

Jim Stewart: Thank you very much, Michael. It's a pleasure.  

Michael Koenig: Likewise. A pleasure. So let's talk first about racing. Why, why finance? Why are you not racing motorcycles? 

Jim Stewart: Yeah, it doesn't pay the bills very well, is the primary reason, but its, interesting as we'll learn about my journey. There are some commonalities in that I love some elements of calculated risk. 

Jim Stewart: I don't drive race cars much anymore, but I do crew on a pro race team, which is also good fun. So there's a common theme, which is you take a little bit of risk in a calculated way. You can build great things. And so, they're complimentary in my world. 

Michael Koenig: How interesting. Alright, well how did you first end up as a CFO and then as a COO at True. [00:02:00]  

Jim Stewart: Yeah, it's a great question. And I would, give credit to the, the amazing team at True that founded this company as, as you know, from your experiences with us. John Callahan, one of our founding partners and I, were together at a company that I did do a public offering with Morgan Stanley. 

Jim Stewart: And John became a quick fast friend and as True scaled and got larger, we like all firms, got to a place where, adding some additional resource to build out a team and scale, became the task that was important. And when I joined True almost nine years ago, now that really was sort of business number one, which is, put us in a position to continue to scale and grow. 

Jim Stewart: But particularly interesting for me was the opportunity to consult with our companies. That's actually the fun part of my job. So John, was wise in recognizing that was probably what would excite me. 

Michael Koenig: So Jim, when people think about venture capital, they think about the romantic [00:03:00] aspects on the investment side, finding those exciting companies, cutting the checks, sitting on the board, helping take their portfolio to IPO or acquisition. 

Michael Koenig: What is often overlooked though are the back office operations of the firm. Can you give us an overview of what a COO at a venture firm does?  

Jim Stewart: That's a good question. And in fact, there's a lot of overlap, particularly in early stage venture capital firms. So part of the opportunity for not just me, but our entire team is to be available as a resource to help the founders as they grow their business. In my case, I've been in companies of a wide array of sizes. And so some of my experiences are particularly valuable, but you're correct. The primary job of what we're doing day in and day out is executing on that investment decision and supporting our investment partners as they decide to move forward with the company. 

Jim Stewart: But the data around that, how we monitor the progress of the company, how we helped them through the [00:04:00] different scaling channels is in fact an important part of what we do in the back office.

Michael Koenig: So that's very interesting in terms of the relationship between investors and the companies themselves, when monitoring the data, oftentimes it's on a quarterly basis. 

Michael Koenig: When you have those board meetings, is there any sort of issue ever with that cadence? Would companies be better served if they were more frequent in which data was shared?

Jim Stewart:  Yeah. You know, the best of our companies, Michael, actually have closer relationships than, than I'll call it the routine quarterly reporting or even the routine board meetings. 

Jim Stewart: And I would say particularly with early stage investing that we do. The relationship between our team broadly, the partner, you know, in the initial discussions, but ultimately a bigger team than that, is actually somewhat continuous. So if issues come up, one of the things that is an important part of what we do [00:05:00] is being the sounding board or the resource to solve problems real time. 

Jim Stewart: I think you're exactly right. The cadence of recurring board is often not adequate. And so it would be unusual if, if our partners weren't talking to the founding team, on a weekly or bi-weekly basis. So it's, it's much more frequent communication, perhaps not in a formal board.  

Michael Koenig: I want to jump back real quickly to some of the back office that goes on in venture capital firms. 

Michael Koenig: I've been in tech, I've been working with venture capital firms my entire career now. And even, I don't really know what goes into the operations of running a venture capital firm outside of the investment side. Could you maybe give us a little bit more detail so we can start to understand, and also what are the similarities that you've seen or perhaps differences between being a COO at a venture capital firm versus a company?  

Jim Stewart: Yeah. They're a great question. So a little bit about what goes on in [00:06:00] our team, in the back office. Not necessarily just me, we like all firms have accounting issues. You know, we're subjected to audits with Ernst and Young, across every fund. 

Jim Stewart: So a bit unusual in the sense that we're currently working on 18 or 20 audits. You know, most companies deal with one and that's enough to get your head spinning. So our team is very agile and very good at doing that. The primary accounting issue that we wrestle with is valuation. We're required to mark our investments to market on a regular basis, which we do every quarter. 

Jim Stewart: So there's a fair amount of accounting content to that part of our job, but the data that we gather and the ability to use that data to analyze portfolio performance, how we're doing, you know, what we should be thinking about forward looking financings, is sort of the, the data analysis and I'll call the support function of what we do that frankly is most interesting and a great value to our investing partners. 

Jim Stewart: It will include sector analysis. It'll include how deals mature, what [00:07:00] are valuations doing across financings, et cetera. And then finally, we're really on call as a resource to the founding team, which in many cases, will start without a lot of finance talent. They'll have great engineers and great founders. 

Jim Stewart: And so in some ways we will be a support tool to them as they make their own financing decisions. And that's a meaningful part of how we spend our time. I probably spend the highest percentage of time actually helping founders inside the company. I travel a fair amount. In the last week I've probably worked with eight or 10 companies. 

Jim Stewart: So that's a fairly high percentage of what I spend my time working on, particularly now that I've taken the broader COO responsibilities and have the benefit of a great CFO who really handles much of what I used to do over there in my initial time. To your last question, differences between here and what life was like as a CFO or a COO in both private venture backed companies and ultimately [00:08:00] public companies. 

Jim Stewart: It's mostly about concentration. So in a COO role or a CFO role at a public company, or even a private company, you're waking up every day focused on the company's issues. You're very much part of a team that you're on. Here, we've got over 200 portfolio companies. So the diversity of what might come up on any given day is probably a little bit broader. 

Jim Stewart: And I won't go as deep in helping those companies as I would, if I were there full-time.   

Michael Koenig: That makes a lot of sense. And one of the things that you said, I think I know the secret to why you're going through 18 audits and your head isn't spinning is because you have a CFO.

Jim Stewart: a world-class team they're the best. 

Jim Stewart: Absolutely extraordinary.  

Michael Koenig: That's fantastic. Now, one of the things that you said, which was interesting is that companies, when they enter into the True portfolio, sometimes don't necessarily have that finance function built out. And obviously [00:09:00] investors bring tremendous finance experience. I'm wondering too, do you see a pattern match as well around operations and around the COO role within the companies that you tend to?  

Jim Stewart: You know, there is some significant pattern recognition. I would say our investing partners, Michael, are particularly good at this both early on in understanding what success starts to look like. And it's across some fairly important, but straightforward criteria. 

Jim Stewart: Can you build a code. Can you build a team and attract world-class talent as the company grows. Can you make the right kinds of decisions about, trade-offs of growth versus, capital expenditures, and then ultimately, are you able to tell the story and capture the imagination of existing investors, but attract new investors to the story when that is working well, you're very often watching the pattern of success for a company that understands how [00:10:00] to grow and become successful. They may in fact, not have a perfect vision of what the company's ultimate destination is going to be. 

Jim Stewart: And I'd say the often overused term of pivot can become reality. So adjusting the perspective of what the market needs, listening carefully to your customer is often a bellwether of a team that's really doing a great job. So we watch for that. And in my role as a COO in, in sort of, I'll call it normal companies, not investors, was very much the same, right? 

Jim Stewart: You're getting data points from a lot of different sources, how you react to that is what's really important.  

Michael Koenig: So true is that it's very easy to change ideas. It's much more difficult to change team. And so what you've described about investing in a team that can clearly articulate everything that they're doing is what seems to be that big pattern that you were just talking about now, in terms of [00:11:00] some of those items that you just discussed. 

Michael Koenig: Conveying the vision, being able to hire great talent, speak with investors, make sure there's cash in the bank. Those are sort of three things that I generally associate with a CEO versus a COO. Certainly the COO of is the person that generally executes and brings that vision, the culture, the team together into life. 

Michael Koenig: Is that something that you would agree with? Do you tend to see in some of your more successful portfolio companies, a shared duality of that?

Jim Stewart:  Well, I think the, the best situations Michael, that I've had experienced with you in fact become the right hand partner of the CEO. I think that in my particular case has most often started in a fairly traditional CFO role. And you know, that often is that first hire of [00:12:00] what the CEO needs to be able to execute against the plan in one of, and this is true inside of True's operating portfolio, for sure. So getting that match, correct the cultural match, the skill match and what exactly the CEO needs to help get that job done is very important, and when it becomes a partner, literally you in a public company it's required, you have to be able to finish the sentences of the CEO. You have to be able to do investor presentations in front of broad public kinds of markets. It becomes extremely important, but I always found that the starting place for me, at least in my career, was it a CFO role that then often grew into, additional things that made me broader than just the finance person. 

Michael Koenig: And that's generally the first CFO to join the company. Certainly as companies mature, you tend to see some leadership turnover. Is that something that tends to happen prior to a [00:13:00] COO joining? When there is leadership. And I, I realize we're speaking in very broad generalities, but again, some of that pattern recognition is as someone who has 200 portfolio companies and works with so many of them day in and day out. 

Jim Stewart: Yeah. One of the ways I think about it, Michael, to answer your question is I think of the C-suite very broadly and that includes CEO, COO CFO, perhaps a chief marketing officer, et cetera. I think it's a complimentary pool of talent that is problem solving what a particular company needs. So for example, in a company that has a very elaborate and complex supply chain, it is very common to see COO responsibilities that take pool of work, out of the hands of perhaps the CEO who might be doing that job early on in the evolution of a company. So I think adapting the C-suite to the needs of the company, as it grows and scales is commonly one of the tough jobs for the CEO. And I think [00:14:00] recognizing when it's time to supplement talent or change out people, if you need to, it's always ideal if you can take advantage of the institutional knowledge of the people who grow with the company, that's not always the case, and particularly as companies start to approach the public markets, that can be a moment when you need to do things to sort of broaden the strengths on the team, to be ready for the Goldman Sachs and the Morgan Stanley's and the JP Morgan's  

Michael Koenig: Getting back to when you were a COO prior to joining true or, or just in general, an operating partner at a company, what were some of the things that maybe surprised you a little bit more, that you didn't quite see coming where you though, "never thought I'd see that."

Jim Stewart: Well, it, you know, most of the big surprises came early in my tenure. So, given my background, I very often came in at a later stage. 

Jim Stewart: So raise a large round of [00:15:00] venture money, getting ready to be public, et cetera. And I would say most of my aha moments were, um, "oops. You know, we got, we got some real catch-up work to do here." And the reality is, it is not uncommon in companies that are maturing and growing that you can't keep pace and necessarily have all of the systems in place. 

Jim Stewart: And the full team built out that would be required if you're about ready to go public. So most of my aha moments around that moment in time. And I think one of the things that has served me well over my career was I don't overreact, adding drama into that complex situation, rarely helpful. The better answer is to sort of quickly assess where are we? 

Jim Stewart: What's the right priority for what we need to do next? And sometimes that was happening. Sort of behind the curtain to make sure that the company was seen in the proper balanced light for all of the good things they might be doing with customers and technology. And [00:16:00] you were playing catch up to get sort of the back office part of the business caught up to that and ready to be in a, in a much more broader environment.   

Michael Koenig: You spoke about the preparation and the cleanup. And as someone who's gone through four IPO's, I'm particularly interested in what that's like. And I think back to Ben Horowitz's book, The Hard Thing About Hard Things, and he described having to rush to the bathroom to throw up while he was on the IPO roadshow, in order to take Loud Cloud public. As someone who's taken four companies public, did you have those moments or is that a CEO thing?

Jim Stewart: Yeah, I'm not as talented as Ben. So my stories are probably a little less dramatic, but it is not particularly uncommon. I can, I could have a couple that I'd call out, but you know, I'll give you one fun story. 

Jim Stewart: We were, we were getting ready to do the [00:17:00] European road show on a public offering, good company, significant venture investors. And we had a dark moment as we were loading the plane because we realized, product that was in violation of some US export laws and not a small problem, a big problem. So my job over the next 10 days was to marshal the resources, find out how big an issue it was, go gather a bunch of data and persuade the investment, who were very high priority bankers, don't panic, right? Just take deep breaths. We're here in Europe, doing a practice round of road shows. The real road show starts when you get to New York and Boston, as you probably know. And the answer was, what I needed was time. 

Jim Stewart: I needed time, great lawyers, a bunch of consultants and over, phone lines and late nights we gathered the data. We quantified the problem. And by the time we made it to New York, our legal counsel and our accounting firm. Yeah, I think this is something we can disclose in the registration statement. 

Jim Stewart: It's probably not a serious [00:18:00] flaw in the company or the, or the situation. And we moved forward with the road show with no drama, priced at the high end of the range and everything went well. But for about 10 days, my investors, my CEO and the bankers who were with me in Europe were in a state of, uh, unrest. 

Jim Stewart: And, uh, and the biggest job I had for you was marshall the resources, let's gather the data, let's not prematurely, you know, get too excited about this. And sometimes, you know, lack of panic is in fact the core skill of.  

Michael Koenig: Yeah. OFAC violations are no laughing matter for sure. That would definitely keep me up at night. 

Michael Koenig: I think I would be like Ben, not necessarily in terms of talent, but definitely running to the bathroom to throw up. I have to ask. So you said you disclosed it and did you have to deal with US regulators department of treasury or 

Jim Stewart: Yeah, we absolutely. Department of commerce was that was, were the groups that we were [00:19:00] concerned about. 

Jim Stewart: And we hired as one of our consultants an ex-Under Secretary of Commerce. And by the way, the happy ending to the story, which took about 18 months to solve was tiny amount of a penalty that was frankly, completely immaterial. So we, we made the right call. We had great advisors and we were in a position I think, to, to do the right thing. 

Jim Stewart: But, um, it wasn't without a fair bit of anxiety and great support from a team around me,  

Michael Koenig: I'm sure that it also resulted in an upgrade to some of the operations around vetting customers prior to.  

Jim Stewart: Yeah, it was mostly our shipping team from an export import sort of rules. Point of view. It turned out that the real issue was the federal government had done a poor job of advising customers, shipping products, internationally, the rules changed and we, you know, it's our obligation to figure that out. 

Jim Stewart: So at the end of the day, there were lots of things that came together. Um, as an airplane pilot, they call it the chain of events, right? It's rarely one [00:20:00] event that causes the problem. It's usually five or six things. Kind of come together at the same time and we were, we were subject to that for sure.

Michael Koenig: And I'm sure that was an incident that somewhat panic moment that was kept very close in a, in a tight circle behind closed doors. Often companies have. Panic moments where it's not necessarily behind closed doors.  

Jim Stewart: Yeah. By the way, I would say Michael, this was not actually behind closed doors. All the investors knew our legal counsel knew our consultants knew because in fact it was a go no go issue to solve for the public offering because. 

Jim Stewart: In the public domain, it needed full bright lights, disclosure as is often the case with most public offerings. So it was actually a fairly broad circle. It was, we were working quickly because timing mattered a lot, but, but at the end of the day, it was a, I would say it was in, in relatively bright lights as we focused on getting it solved [00:21:00]. 

Michael Koenig: To that story, one of the things with someone as experienced in leadership as you are, sometimes you have those moments where the entire company is aware of the rockiness, what have you found as a leader, the best ways to maintain calm, to have everyone not only feel, that everything's going to be okay. 

Jim Stewart: Yeah. You know, it, it's not the case necessarily that everything always ends up okay. But my strategy has been pretty straightforward and this has been true with uh, I'll call it a dozen companies. I think great employees are looking for transparency from their leaders. So let's, let's make sure that we've properly and accurately define the scope of whatever the challenge might be, whether it's, you know, hitting or missing sales numbers or customer strategies that are there that need to be revised, but [00:22:00] I'd say clear, open communications around the transparent understanding amongst the group of what's going on. But the most important part in my experience has been, have a plan of attack and be direct in explaining what that is, whether that's assessment, recalibrate execution, however you view it within the company that you're part of. 

Jim Stewart: I think employees are really capable of understanding with candor, what the problem is and what the solution looks like. I think it's also important though, that you have a sense of confidence and calm about how you do that. And so their tenor and, and sort of tone can make a big difference as well. 

Michael Koenig: I'm starting to understand why you're so comfortable racing motorcycles, flying airplanes. You certainly have the calm and tenor worked out there. That's for sure. So for COO's going into a new business, what advice would you give them about entering, assessing, plotting [00:23:00] what to do?  

Jim Stewart: Yeah. It is important. I think, to recognize that there's a spool up period that any of us, I don't, it doesn't really matter how, how good your background might be or how correct the fit might be for the industry. 

Jim Stewart: I've always counseled my teams and I try to follow this myself, that some period for me, it's usually at least 90 days, your job is to listen and learn. Take a lot of notes. You know, capture the information. And in very many cases, I was partnered with a CEO in some cases, very young and very talented. I always thought that my 90 day observations were the, the moments of sort of pure data before I became part of the integrated team and part of the solution. 

Jim Stewart: So I always had a practice which I quite liked, and I thought it was helpful, which is at 90 days I booked a slot with a CEO. Let me give you wrong information about what I see, what I think our priorities perhaps should be and where I think we have things to work on [00:24:00] that may not be at the top of the team's list for the moment. 

Jim Stewart: I always thought those fresh eyes were valuable and I encourage people who worked for. Um, to do the same thing, because I think it's a rare moment of sort of clean view and clean data. But I think capturing the essence of what's going on, trying to properly assess priorities is so valuable in setting the priorities going forward. 

Jim Stewart: And so I always found that to be a great way to start  

Michael Koenig: Well, very happy. Thank you, Jim, for coming on the podcast. Where can people go to keep up with you and True Ventures?  

Jim Stewart: Well, I try to keep information on LinkedIn so people will see what I'm up to, but the good news about being at True is almost nobody ever leaves. 

Jim Stewart: It's like the ultimate destination, but you can also watch the M's the racing results. And you'll see us on a routine PR one motor sports. So you can, you can see us there if you have.  

Michael Koenig: Fantastic. Well, thank you again, and thank you all for listening to Between Two [00:25:00] COO's. I'm your host, Michael Koenig, and a very special thank you to our guest, Jim Stewart, for joining us. Tune in next time for our next COO chat on Between Two COO's and be sure to subscribe on Apple Podcasts, Spotify, or wherever you listen to podcasts, so you never miss an episode. Just visit betweentwocoos.com for more info. And if you have minute, please leave us a review on Apple Podcast and tell others so they can get great advice from phenomenal COO's. Thanks for listening to this week's episode and until next time, so long.[00:26:00]