We recently had a conversation with Ty Findley, managing partner at Ironspring Ventures, exploring how he started in the industry, the importance his network plays in the firm’s growth, and ideas for the future.
Tell us a bit about the journey that led you to Ironspring.
It all starts in some form with the word “Industrial.” I grew up with two generations of family that were founders in the manufacturing industry, so I lived it growing up and I saw that if you’re not digitizing, you’re not evolving. I also took away a firm appreciation for how big an impact industrials have on our daily consumer life behind-the-scenes and the amazing skilled laborers who make it all happen.
My first job was with Boeing in Seattle. I got an engineering degree and spent some time there really focusing on deploying technologies like advanced design, industrial IoT, robotics, and supply chain automation. As an engineer, getting to deploy those technologies to business units all across the world was great exposure and made me sympathetic to why it’s so challenging to sell technology into these industrial markets. There’s a lot at stake within an OEM production environment, and now as a venture investor, I always try to put myself in the customer’s position when evaluating the purchase of a technology solution.
During my time there, I figured out I wasn’t the smartest engineer in any room, so I ultimately decided to make a career change. I went to business school and since then, I’ve been at three different venture funds before jumping out on my own to help start a new digital, industrial-focused fund, Ironspring Ventures. One of those three firms was GE Ventures; helping that industrial company in investing out of its venture capital arm. Digital industrial and supply chain applications around sensors and data, analytics, robotics additive, logistics – you name it – I was very fortunate to be investing in solutions I had experience with as an engineer. It was a great opportunity from a venture capital perspective and from the perspective of learning how innovation is driven internally at the highest level of corporate management. Both are critical for startups to understand in tandem if ever selling into large industrial customers.
I then spent time before joining Ironspring Ventures at Pritzker Group Venture Capital in Chicago; which was a fantastic experience to help expand that platform’s digital industrial and supply chain footprint within the venture ecosystem. So, winding this all back to Ironspring Ventures, I ended up leading a deal where one of the co-investors was one of my now-current partners, Peter John Holt at HOLT CAT. “The rest is history”, so they say.
What would you say makes the firm unique?
If you think of Ironspring Ventures now, it’s a brand new, independent venture capital fund, completely sector-focused on digital industrial innovation. That means everything from supply chain & logistics, transportation, construction, energy, manufacturing, you name it. I like to joke that if Mike Rowe and the “Dirty Jobs” T.V. crew would film it; we want to find a way to get software involved to help increase productivity, decrease costs and upskill skilled labor. That’s really where we want to differentiate, and ultimately show up, to support founders driving innovation forward in these critical industries.
From a stage perspective, our focus is that we want to sit right between seed investors and growth investors, to really show up for founders in that post-seed/Series A round, that we feel are underserved in the venture ecosystem. We typically write a two to four million dollar check leading or co-leading rounds in more of a ‘seven to ten million’ pre-growth round of funding. With that combination of sector focus and stage focus, we are spending a lot of time this year trying to build our new brand up in-market, to meet that need.
The last part about Ironspring that differentiates us is that all of our investors and the broader network of supporters all are, or previously were, industrial operators. When we go into our ecosystems, we go quite deep. We want to help founders by providing a network of support filled with people who understand their domain, understand their pain points, and can really plug in to be the best partner for that company’s projection in the future.
We feel it’s a pretty unique position as a venture capital fund and one that we’ve ultimately let the founders help guide us to, based on their feedback. At the end of the day, it’s truly all about supporting the founders’ needs.
What kind of challenges do you come across when looking at industrial projects that can be digitized?
There are a lot of challenges selling into industrials. The one that resonates the most within the venture ecosystem is the typical long, complicated sales cycle. These are big, complicated organizations where numerous stakeholders within a company need to be in constant communication as they all have a voice in the buying decision – so it’s definitely a long go-to-market cycle. And even if you get the go-ahead to buy, you may have to battle being the first SaaS subscription purchase they’ve made as opposed to their legacy comfort of buying traditional s/w licensing and maintenance contracts. There are also all sorts of security-related and data-integration facets that you need to be aware of before you could even go live with a solution within a production environment. In my opinion, and I believe the venture community is realizing this more and moreover the last few years, these aren’t industries where you can ‘blitz-scale’ in and then make up for any errors down the road. These are environments where your solution can’t afford to go wrong the 1st time. It really all goes back to having that customer empathy, to fully appreciate the risk they are taking on, to take a chance engaging with a startup. At the end of the day, from a venture investor’s perspective, all of this can get very challenging and it’s why I feel you will only see more and more sector-focused venture capital funds pop up to specialize and support founders facing these specific realities and others.
One key part of diligence I’d point out is beginning with the end in mind; to think about what exit opportunities may look like. And within the digital industrial ecosystem, there is still a relatively immature exit outlook to run comparable transactions against. Thus, we hear from a lot of investors who look at all of these challenges and then compare that risk against a return profile based on a vague exit outlook. Ultimately resulting in them having a hard time investing behind a lot of these companies. We take a contrarian view that, with the right capitalization outlook and cash efficiency in mind, this is the perfect time to be investing in this ecosystem ahead of the curve. There is no doubt industrial industries are ripe for evolving their digital capabilities, but the strategy of how a startup leverages venture capital in these environments is the reason we launched Ironspring Ventures.
How do you source deals? Is it your own outreach or people approaching you (or a mix)?
I’d say there’s a high level, then a more tactical level. At the highest level, it’s network development. For me, it comes down to a ‘Give-first’ mentality, and a shout out to Techstars for being the driver of that ethos. Venture capital is such a long-term career path that I think it starts with helping others without expecting much in return. Don’t get me wrong, none of us are doing this just for altruistic, feel-good reasons but if you’re genuine in your approach, it does start to cultivate a network that benefits everyone, including yourself. I distinctly remember it was about three years into my venture career when I really started to see that flywheel effect occur. The dividends start to pay off when you have founders recommending you to other founders and co-investors reaching out with investment opportunities. All because you were supportive in some form or fashion along the way. The flywheel starts that way.
Then on a more tactical level, I look at it as a traditional hunting-gathering structure. On the hunting front, I will still develop my own thesis/outlook about where I think there’s a pain-point. And I have no problem doing cold outreach to those founders that I think are doing something innovative to fill a whitespace. Similar to founders, if I see investors and/or corporations making innovative news, I’ll proactively reach out to try and cultivate a relationship where we can mutually share the benefits of a combined network. We’re not getting on a plane anytime soon and we’re not having events; so you really need to be thinking about new ways of reaching out in this virtual environment. That can mean developing content, whether it is a blog or podcast, to use inbound tactics to seek out others who align with your interests or thoughts.
On the gathering front, it really lends itself to the conversation earlier, where I’m really fortunate to now be in that flywheel effect of good-quality deal flow coming in from the relationships I’ve built over time. You can’t really define this aspect, it either happens or it doesn’t.
You mentioned ‘Giving’ as an ethos. How would you describe your network development efforts overall around and beyond that?
It’s really mission-critical in every way. Deal flow and the exchange of ideas is the lifeblood of venture capital. Especially when you’re such a sector driven fund like we are. In industrials, we deal with some of the most relationship-driven industries you’ll find. With relationships that have been built over decades and decades of engagement, with a comparatively low tolerance for innovation risk. So, from a venture investor perspective, you really have to demonstrate to those constituents a consistent and engaged appetite for actively listening to their interests and problems. In order to build genuine trust over time, that you are not just a ‘tourist’ investor sightseeing within their ecosystem. Once you’ve built that trust, they are often willing to send across innovative startups they’ve run into, jump on a call for diligence support, or meet with one of our new portfolio companies to explore commercial opportunities. Again, it’s all about consistent and demonstrated action that you deeply care about their ecosystem and are going to be there for the long haul with an educated opinion.
What are your workflows for promoting network development? And what systems do you use to keep track of those efforts?
We have a CRM that helps to track deals, relationships, and updates with notes attached so that we can run quarterly analytics reports on to track how we are doing. In turn, and there is always room for improvement, we try to use that data to schedule regular meetings; either with founders, investors, or corporate innovation arms we view as priority relationships. And now that everything is becoming mostly virtual, we also try to be more engaged in making virtual conferences, panels, podcasts, blog appearances, etc, that may help build and diversify the Ironspring network. We try to institute systems and processes around all of this to make sure we’re being efficient with the most valuable asset we all have – time. Time is always a scarce resource, and above all, you want to be available for your own team and those founders that you’ve made a commitment to supporting when they need it. It comes down to having the discipline to make sure you’re building a solid structure to manage your time and not just winging your calendar each month.
When it comes to maintaining relationships, how do you stay current on your network activity?
I would say mine is fairly standard, and I can probably do a lot better with it. One tool that I would point out is that I’m incredibly specific in curating my LinkedIn feeds; I think it’s a very powerful tool to make sure you’re following people and content that’s important to you, amongst all the noise out there. Other than that, I try to give myself 30 minutes every morning to make sure I’m caught up on all of my important daily newsletters and social feeds, to stay on top of things and see who is doing what. But I do think it’s important to bound in that time block of reading/scrolling – you can never read it all.
Can you think of any components of your deal flow, deal sourcing, or due diligence efforts that you feel are unique?
I don’t know about unique, but this goes back to what I mentioned about discipline being a key driver of success for me. A lot of folks in venture would say primary character traits for investing need to be curiosity, foresight, networking, etc. And those are hugely valuable but for me, disciplined decision-making is top of the list. As Annie Duke wrote in her recent book, ‘Thinking in Bets’, “Investors shouldn’t be focused on a specific outcome alone but rather, on the underlying decision-making process taken to try and maximize the odds of that decision having a positive outcome.” Venture is a risky asset class and not every investment will have a positive outcome. But I do find having a solid decision-making process, as a foundation to my investments, helps me sleep a lot better at night. One of the greatest investors of all time, Ray Dalio, is also well known for his outlook on having a disciplined and systemized investment process so that it’s scalable, repeatable, and ultimately has guardrails to make sure you’re not chasing because of FOMO (fear of missing out). Oftentimes, the counter back to all of this is, “You need to be flexible in venture…”, which does have a lot of merit. But I would say, those comments sometimes are just a deflection from those who don’t have a systemized way of making decisions – it’s a little more shoot from the hip. I’d rather take my chances with a very disciplined, systematic approach, given how risky the venture asset class is, even for the most decorated investors.
Is it a safe assumption that the diligence process for your sector is a lengthy one?
Not necessarily. As an example, I think we moved on from start to finish on a recent deal we led and syndicated within a month total. So we can move very quickly. As long as we’re setting up-front expectations with the founders, about our defined process, and what it will take to get to a decision. All the diligence and homework we’re going to conduct is mostly laid out upfront and it then comes down to how fast we get scheduling done. Of course, there are always things that pop up, but there is still no surprise on the founder’s part about how we get to a decision. I think founders really appreciate that open level of communication and transparency.
Any predictions for the future of venture capital?
Since Ironspring Ventures is in this new wave of emerging, sector-focused funds, I’d predict you’re only going to see the venture capital industry continue to further specialize. Funds are getting very specific in picking a certain stage, sector, geography, etc., or even a combination of multiple aspects, in order to build products that founders are now seeking out in more specific interests, to help them grow their companies. The idea of remaining as an everything-to-everyone fund now seems like a tough proposition other than for a handful of brand name firms. I’m excitedly watching more and more emerging managers carve out these specialty funds. And most importantly, I think this all flows down to benefit the most important folks – the founders who are in the arena every day.