Jim Stewart, True Ventures COO on Taking 4 Companies Public

Michael Koenig: Between two COO's his podcast. We're phenomenal. Chief operating officers from all sorts of companies come to share their insights, advice, and crazy stories. Hello and welcome to between two COO's. I'm your host Michael canine, and I'm excited to welcome our guests. Jim Stewart, the chief operating officer at true ventures. True is a venture capital firm with an astonishing track record of investing in the best companies like Peloton, Fitbit ring, do a security automatic and Sweetgreen, which just this week announced its S one 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. He has held numerous operating and CFO positions leading for [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 as young. Our six motorcycle. Welcome Jim. Thanks for being here. I'm excited to have you out. Thank you

Jim Stewart: 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

Jim Stewart: motorcycles? Yeah, it doesn't pay the bills very well. Is the, is the primary reason, but it's. Uh, interesting as we'll learn about my journey. It's a, there are some commonalities in that I love some elements of calculated risk. Uh, 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, 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, um, they're complimentary in my world. How interesting.

Michael Koenig: All right, well now you've got. How did you first end up as a CFO and then as a COO at. [00:02:00]

Jim Stewart: Yeah, it's a great question. And I would, I would give credit to the, the amazing team at Tru that founded this company as, as you know, from your experiences with us. Uh, John Callahan, one of our founding partners and I, uh, we're together at a company that I did do a public offering for, uh, with Morgan Stanley. And John became a quick fast friend and is true scaled and got larger. We like all firms, um, got to a place where, you know, adding some additional resource to build out a team and scale. Became a, you know, 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, you know, put us in a position to continue to scale and grow. But particularly interesting for me was the opportunity to consult with our companies. That's actually the fun part of my job. So John, uh, was, was wise in recognizing that that was probably what would excite me. So Jim,

Michael Koenig: 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. What is often overlooked though? Are the back to 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. Like. So part of the, uh, 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. 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

Michael Koenig: office. 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. When you have those board meetings, is there any sort of issue ever with that cadence? Would companies be better served if there was more frequently? In which data was

Jim Stewart: shared. 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. And I would say particularly with early stage investing that we do at. The relationship between our team broadly, the partner, you know, in the initial discussions, but, but ultimately a bigger team than that, um, is, 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. 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, um, 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. 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 different. 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. 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. Head spinning. So our team is very facile 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. 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, um, 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. It will include sector analysis. It'll include. How to deals mature, what [00:07:00] are valuations doing across, uh, financings, et cetera. Um, and then finally, we're really on call as a resource to the founding team, which in many cases, we'll start without a lot of finance talent. They'll have great engineers and great founders. And so in some ways we will be a support tool to them as they make their own financing decisions. And that's, uh, a meaningful part of how we spend our. I probably spend the highest percentage of time actually helping founders inside the company. I travel a fair amount. Um, in the last week I've probably worked with eight or 10 companies. So that's a fairly high percentage of what I spend my time, um, 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. Um, 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. 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 and you're on a. 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. And I won't go as deep in helping those companies as I would, if I were there. Full-time. That makes a

Michael Koenig: 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. Absolutely extraordinary.

Michael Koenig: That's fantastic. Now, one of the things that you said, which was interesting is that company. 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, th there is some, 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. Can you build a cold. Can you build a team and attract world-class talent as the company grows. Can you make the right kinds of decisions about, you know, trade-offs of growth versus, you know, capital expenditures, uh, 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 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. 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. He has 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, um, was very much the same, right? 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. 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. Is that something that you would agree with? Do you tend to see in some of your more successful portfolio companies, a shared duality

Jim Stewart: of that? Well, I think the, the best situations Michael, that I've had experienced in you in fact become the right hand partner of the CEO. I think that in my particular case has most often started. Uh, in a, in a fairly traditional CFO role. And you know, that often is that first hire of, 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. Um, 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. Um, 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, um, you know, additional things that made me broader than just the finance

Michael Koenig: person. 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, um, 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. Um, and particularly as companies start to approach the public markets, um, that can be a moment when you need to do things to sort of broaden the strengths on the team, to, you know, 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 were, you thought. Never thought I'd see that.

Jim Stewart: Well, it, you know, most of the big surprises came early in my tenure. So, you know, given my background, I very often came in at a later stage. 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. 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 don't overreact, adding drama into that complex situation, rarely helpful. Um, and the better answer is to sort of quickly assess where are we? What's the right priority for what we need to do next. And sometimes that was happening. Sort of behind the, you know, 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. You

Michael Koenig: 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 as I've mentioned before, about, 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 lab cloud public, as someone who's taken four companies public. Did you have those moments or is that a CEO?

Jim Stewart: Yeah, I'm not as talented as Ben. So my stories are probably a little less dramatic, but, but it is not particularly uncommon. Um, I can, I could have a couple that I'd call out, but you know, I'll give you one fun story. 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 we. Product that was in violation of some us export laws and not a small problem, a big problem. So mobile 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. Um, 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. I needed time, great lawyers, a bunch of consultants and over, you know, 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. It's probably not a serious [00:18:00] flaw in the company or the, or the situation. And we move 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. 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. Oh, FAC violations are no laughing matter for sure. That would definitely keep me up at night. 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. Yeah, we

Jim Stewart: absolutely. Department department of commerce was that was, were the groups that we were [00:19:00] concerned about. And we hired as one of our consultants and X 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. But, um, it wasn't without a fair bit of anxiety and, and, 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. 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. And I'm sure that

Michael Koenig: 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. 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 and you have this story sees, what have you found as a leader? The best ways to maintain calm, to have everyone not only feel, but no. That everything's going

Jim Stewart: to be okay. 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 directive in explaining what that is, whether that's assessment recalibrate execution, however you view it within the company that you're part of. I think employees are really capable of understanding with Canon. Um, 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 tender 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. 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. 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. 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. 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 a true is almost nobody ever leaves. 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, uh, 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 Canuck, and a very special thank you to our guests, Jim Stewart, for joining us tune in next time for our next COO chat, um, 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 between two cfos.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 [00:26:00] long.