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Speaker 2This future construct podcast episode is supported by applied software. Applied software is on a mission to transform industry by empowering their clients and championing innovation with real world expert consultants. So visit asti.com. It's a S T i.com. And please let them know that we here at future construct and BIM designs sent you. Hi, welcome to the future construct podcast. I am
Speaker 3Your host, Amy Peck. And today our guest is KP Reddy, who is the founder and general partner at shadow ventures. Welcome KP.
Speaker 4Hey, I mean, thanks for having me
Speaker 3Pleasure and there's a lot more than, than shadow ventures. You're also a best-selling author and so we want to get to all of it, but I'd love to just hear a little bit about your journey to becoming a VC.
Speaker 4Awesome. Yeah. Um, it's uh, interesting and it's somewhat unusual, but, um, so basically I'm a second generation civil engineer, which, um, that's not something they teach you in civil engineering school in terms of venture capital, but I was super fortunate. My dad, um, bought a computer when I was 13 and said do something with it. So I started learning code and my first product was structural engineering analysis software for him. So taking all the stuff he did on paper and turning it into software, uh, was kinda my first product. Um, it helps my mom's actually a, uh, a software program too. So I was kind of like designed for this, so to speak. Um, so what's Georgia tech, um, work as a traditional civil engineer. Uh, other than I wanted to connect everything to a laptop and put a sensor on everything, which was really expensive. This is in 1994, so pretty expensive to do that kind of stuff and was still coding at night. And eventually, honestly, my, my side hustle was making more than my main hustle, uh, so to speak because civil engineers are very well compensated. Um, so yeah, so I started a company, um, was fully focused on construction management on the web launched in 1997, within three months. Uh, every general contractor told me the internet was a fad. Uh, fax machines were forever friends for forever, and I was wasting my time and the internet was a toy. Um, so I pivoted and focused on telecom and so construction management and project management, you know, it's a little bit easy to pivot to that. And so we're very fortunate. We grew from 12 people to 1200 people three years and took it public and it was very, very successful. So, um, that was my first taste of scale, right? Like, oh, wow. Like you can take a company from three, you know, two guys to 1200 people in three years. Like that's amazing, right. It's, it's a great ride. And I think as an entrepreneur, you're always looking for that. You're looking for that right rush.
Speaker 3It's a rush, right? I mean, it's a three-year rush
Speaker 4Have some time off built the company and, you know, started looking at BEM, almost invested in Revvit technology Corp, other than I, um, went on vacation and miss the opportunity and, um, you know, focused in on Ben because I really wanted to get back to my roots and do something in the kind of construction and engineering space and built a company and sold that in oh nine. And so, you know, long story short just kept starting companies. And then eventually seven years ago decided to, uh, at the time it was to retire, I was like done, I'm done working. Um, and then started kind of investing, um, ended up working at Georgia tech, Alma mater and running their incubator and was writing small checks. And then friends of mine wanted to write checks with me. And then honestly, all of a sudden people in our industry started calling me saying, Hey, I want to start getting involved with startups, help us understand about innovation. Um, one of those first calls was a company called Thorton, Thomas settee up in New York, big structural engineering firm. They're like, you know, this is like a cold call. Like you're the only civil engineer we know that does startups and is investing. Can you help us start this incubator we're building? And then after that, I just started getting more calls from AEC firms asking for help, and then they wanted to start giving me money to invest. Um, so kind of decided this only three years ago decided I wanted to be a VC full time and, um, and not be retired and, uh, basically go to work. And so we're, you know, our firms, um, just over three years old and all we do is focus on AAC space. I've got about six people that work for me. Uh, and we've been super fortunate to this day, all of our investors, um, most of them I've known for a very long time, about 70% of them are from the industry. So I'm still supporting the industry so to speak, but from a little bit different angle and it it's, it's great. Like we wake up every day and we're super thrilled to be continued to stay in the industry, but take a different angle at it.
Speaker 3So that kind of brings me to my, actually, I guess it's, it's for you, your, your literal and your figurative bookends because you've written a book on them and you've written a book on startups. So, and with several years in between, so start with, with the BIM book. So what, what, you know, Y why have been booked at that time?
Speaker 4Yeah, it's interesting. You know, I, at the time, um, you know, very close to unbelief Chuckie's man at Georgia tech and kind of a mentor. And, um, I started seeing all the BIM books out there were for been people. I like technical people, and I saw it over and over my work with GSA and U S army Corps of engineers and other large owners that it's like BIM was being reserved for the nerds in the industry. And there wasn't a place for business people or non-technical people to understand them. And so my, my book was highly focused at owners and developers, uh, and what they need to understand how they needed to educate themselves. So, you know, I figured there was plenty of tips and tricks around Ben and parametric this, and, you know, all that stuff, but what was the, what was the opportunity for a business person to understand them? So that's why my book is very focused on that. There are no tips tricks
Speaker 3You gave them. Well, you gave them the decoder ring, I guess. And then, so what prompted, what you know about startups is wrong because I, I think you're right in that as well. And, and I agree with the stance of the book, but I'd love for you to share the motivation behind it.
Speaker 4Yeah. So the motivation was, um, uh, my, my dad passed away when I was 15, so I always kind of live with that, that in my head. Right. And my boys were now 20 and 1920 and 18 now, um, when I wrote the book seven years ago, or six years ago now, uh, when I started actually writing it, it was really meant to be kind of a journal for them, like lessons that I learned, because one thing is I haven't had like a W2 job since my engineering job. Like, I haven't had like a job for a long time. It's funny, I've never had a resume. Right. It's like weird things about my kids growing up around that. It was always weird to them. Like, what does your dad do for a living? Like they didn't know what to say. Right. It was always like, well, we're not sure. Um, and you know, it was hard for them. A lot of times me being gone all the time and w what does that do? And, uh, ebbs and flows of income and all those things. And so I really wrote it, started writing it as kind of a journal for them when they got older to see, like, you know, your dad might've been a little bit crazy, but there was actually, here's the background of the crazy that you saw. Um, and so I showed it to a friend of mine, dear friend of mine, and, and, um, that I help with, you know, diversity and inclusion initiatives. She's in PR she's a dear friend. And I was like, Hey, like take a look at this, like being a little bit vulnerable. I was like, take a look at this. She's like, oh my gosh, you've got to turn this into book. I was, you're kidding me. I'm not putting this out there. This is for my kids. I'm not going to like, share this with people. Um, and she finally convinced me and it, and it was her, for me, it was, um, at that time that I was like writing it, the, the, the startup hustle, right. All the means all the Instagram posts about startup hustle and this and that. It was like getting really, really big. Everybody wanted to be an entrepreneur. Uh, everybody thought the world was shark tank, you know, and I really started, um, I dunno if it was an actual thing or I just saw the pattern like, oh my God, people need this book. And it's really not typically what people think it is. They think it's like tips and tricks. Once again, I'm not great at those books. The internet is very good at tips and tricks. You don't need me for that, but it's pretty much just my life stories of different things, including almost dying on a flight and just a lots of stuff. And it's almost the underst, you know what I tell people as being an entrepreneur, it is a bell that cannot be an unwelcome. Like if you're going to quit your day job and go to a startup, you might tell yourself, you might tell your significant other that, oh, like, if it doesn't work out, I'll just go get a job. That's a big lie. Like you never will. And even if you do, you'll do it for a minute, you'll be terrible at it and you'll be miserable at it. So, um, I wrote it for people to really understand the personal toll, um, and not all the big, you know, the urban legends that people like to talk about. The bill gates and the mark Zuckerbergs. And I talk about the urban legends behind that, that, you know, that's not most of us. I started my first company with two credit card cash advances. Um, I've never taken venture capital, right? So it's, there's people that'll take it a different path. So when people hear these urban legends, they really, um, they think that's how it works. And the reality is that's not how it works. So I tell people all the time, like if you're not going to read it, give it to your significant other before they kind of give you permission to take the second mortgage or quit your job or whatever, let them read it first and see, give them a chance to change their mind.
Speaker 3Yeah, I think, I think that's great advice and, and it's true. It's, it's, it's sort of like, you know, it's, it's the Instagram world of startups where you just see all the high notes, but you don't realize kind of the shrapnel that goes with really building a company. And I think, you know, your story is remarkable in that you built that company. I mean, very, very quickly from, you know, it was a three to 1200, so that's, I think that's a, that's a great perspective. And I, and I, I love the fact that it was from your, from your own kind of personal perspective and from your journey, because I think we all blink and we look at, I, I, I, to have two big hairy man children on 18 and 20, 19 and 20 now, and, you know, I look at them and I think, wow, you know, like I did, you do miss there, there you miss certain times. Right. And it's a, it's a trade-off. Right. But now hopefully they look to you and they think, wow, this is what he did. And this is, uh, a series of, uh, accomplishments that I can aspire to.
Speaker 4Yeah. I think my youngest one, I may have missed eight birthdays in a row
Speaker 3As has, has he or she forgiven you yet?
Speaker 4Yeah, he, well, he actually jokes around that, like, oh, wow. It's weird to have you around for my birthday.
Speaker 3It's very weird dead well, but it's good though. It's good. It's good. They, they eventually, I feel they eventually come back to me. They appreciate all the efforts and sacrifices their parents made. Hopefully
Speaker 2This episode of the future construct podcast is supported by the amazing team at applied software. They have solutions for any modern project. Applied software is on a mission to transform industry by empowering our clients and being the champions of innovation with their real world expert consultants. They have a comprehensive suite of solutions for ADC, MEP and manufacturing, and they have a singular focus to help you achieve higher performance. They have software training, support consulting, and custom development applied software. Has you absolutely covered for all of your workflow needs? And BIM designs is proud to be a client and partner of applied software to visit asti.com. That is eight S p.com. And please let them know that feature construct in Dem designs sent you. So
Speaker 3I'd love to talk about, you know, your, your, uh, portfolio and, and, and sort of your investment ethos, and, you know, what excites you in, in some of the companies and maybe share some of the successes of your portfolio companies would
Speaker 4Be great. Yeah, I would love to. I mean, I think our investment ethos is all it's very focused at to the technical founder. Um, we love technical founders, some of it's my own roots. Um, our CTO we've worked together for the last 12 years on various things. And, um, he's very, very, um, he's very good and very accomplished. And one of his first companies who've worked that was construct where, uh, while he was still in college, right. So he's kinda grew up group right up, similarly in this space. And, you know, we really are looking for highly transformative technology. Um, not another plugin, not another whatever, right. We want, um, something that will disrupt not market or process, but also the technology that is highly disruptive technology. And so that, so a lot of times we see things, we get things that are, oh, great. You built a form. That's cute, but that's not that transformative. Um, and so we're always seeking for that. That's the stuff that we get excited about. Um, and so if one of our portfolio companies, icon 3d does 3d printed houses. So, you know, they're solving robotics problems, computer vision problems, material science problems. Um, and we really believe that if you can build companies that are solving deeper to technical problems, revenue tends to become irrelevant. And, and I've kind of had a track record of investing in companies that maybe do like a million a year in revenue maybe. And I sell them for 50 million. Um, and it's because technologists look at it and they go, oh, we have to buy this company. If they become anywhere successful, they're going to put us out of business. Um, and so it's really about that. And yeah, I mean, so our, our messaging, those is very much about tech founders tech first, um, that you're solving technical problems, just not industry problems. Um, and we think that's one of the challenges in this space is almost every startup we see the founder is from the industry. That's th that's where they're from. Um, and their technical co-founder is maybe mediocre at best and at the end, no problem. And, you know, I don't know how many companies we, you know, the founder says, oh, I'm solving this construction safety problem. Great. I want to talk to your CTO. Oh, well, we don't have a CTO. We've off short software development without sourced it. Like, that's not how you build the company. You don't build a company by outsource, you're a company. Right. And it's just, it doesn't work that way. And so, um, it, it gets pretty frustrating. And I would probably talk to 10 to 20 startups a week. Um, w we have a very different process. Most VCs, you go through an analyst and you like work your way up to the partner. Um, I actually review every website, submission myself, and then I pick and choose which ones I like and me and my CTO do their first call. Um, I don't, I think it's almost disrespectful to a founder to put them in front of a young analyst that is, you know, asking questions because they're trying to learn not because they're, you know, they're trying to learn the basics. So I think it's in a world of founders having very limited resources. I think it's pretty disingenuous for BCS to make the meat with the straight out of MBA grad. Right. It's, that's not really that helpful. It's a waste of their time. So I try to meet with everybody first meeting with me. Um, and one of the things that I see is they understand the problem. They understand the industry, they do not understand technology, nor are they surrounding themselves with people that really understand technology.
Speaker 3Yeah. I think that's, that is very unusual. And, you know, there, especially in Silicon valley, the, you know, the TV series actually, I think does as much as it's a comedy does actually depict the, you know, the song and dance, uh, the, the Sandhill shuffle that, that people have to go through. So I think that that's a very, you know, honorable and respectful way to deal with founders. And so are you, are you getting most of your, and again, you don't have to tell tales out of school where you're getting most of your, um, inbounds just from, you know, being in the industry and having the reputation that you do, or, or are there other ways that founders are finding you?
Speaker 4Yeah, it's interesting. You know, we, um, as a civil engineer, I hate even using the word brand. I think it's like a weird thing. You know, it's just a weird thing. Um, and we have kind of built a brand around being super deep in the industry, being very challenging, being very direct. Um, I do interviews with startups. They get 30 minutes. It's not uncommon for me to eat in the call in seven minutes. I don't think I'm doing them a service of making them feel good. If it's not a real thing, then it's not a real thing. I'm going to tell them and they can move on with life and they can call me names afterwards. That's fine, but I'm actually doing it to help them. So they don't waste your time. Um, and I think we're building a reputation for being very competitive too. Um, we like to win and if we invest in a company, we put our full energy behind them and we put our full energy around, like destroying their competitors too. So it's not like, you know, um, we, we don't mess around with that stuff. We are very much sure on our side of the table or you're an enemy. Uh, and I think it comes through our portfolio. Companies are just like, wow, like you guys. Um, and so we're just very focused that way. Um, and I think, um, that drives inbound. We also accept an ad for a long time. A lot of my relationships are with a lot of the larger old school VCs, the mainstream VCs, the sequoias and NEA and insights and Cosla and all these folks. Um, and I get a lot of referrals from them because we've played pre-seed and seed, right. We we've brought in companies, indoor incubators that didn't even have a name yet. We help name them. Um, so there's no such thing as too early in our book. Um, and because of that, a lot of the mainstream VCs, they, they run into startups cause they're brand like everybody wants to meet with Andreessen Horowitz. So we get a ton of referrals from them and they'll say, Hey, you guys are too early. You need so much more help than money. You need people that understand the industry and they can make it happen. They should go talk to KP. And so we get a lot of inbound from upstream VCs. And I think part of it too, is our, our LPs are tremendous. Um, and our extended network is tremendous. People ask me like, why are we called shadow ventures? And it's like, you kind of don't know everyone that's behind us, but they are very powerful and very influential. And they don't like to lose either. They picked our team because they know that, um, I am aggressive about pursuing, winning, you know? So, um, so yeah, so I think that's what drives a lot of inbound. Just, I had one guy call me the other day, email me. He's like every VC I've talked to recommended. I talked to you. That's, that's a great thing. Yeah, yeah. Unfortunately his startup was not a good idea, but oh
Speaker 3Yeah. Listen, maybe he'll come back and two or three years with a new one. Yeah. So are you seeing any particular trends in the industry? And I find that AEC is, is interesting in that you have, you know, the sort of faction that even, even, I think you mentioned that the just said, you know, the interest in the internet and it was never going to be a thing, and there's this sort of arcane systems that, you know, people are cleaning too, but then there's another side where there's some really incredible new technologies coming out and actually, um, you know, being embraced. And so where are you seeing that the sort of next trends in, where should, I don't know if I'm, uh, you know, uh, a huge commercial builder, where should I be looking for, you know, this kind of next, next level technology?
Speaker 4Yeah, I think so. One of the things that, um, it's pretty interesting. I wrote a BIM book and therefore we get a lot of BIM deals, right. And I have to remind people, the BIM market is tiny. It is a niche of a niche of a niche market. And there is no addressable market there that is venture fundable, unless you are ready to destroy Autodesk and I'm game for that too. Right. So if you're willing to step up and say, revenue is terrible, it's a disservice to the entire industry. It has held the entire industry back for the last five years in terms of innovation, let's go destroy rabbit. We'd be thrilled to go beyond that, beyond that team. But outside of that, everyone's hanging features off of a product that that's not theirs. And so what we really have been seeing, like where things are starting to shift and people are trying to think about it. Um, I was talking to some investors who are investors and they joke around that they have a whole group that meets up and they call it AA and it's Autodesk anonymous. And they're like, we are actively having monthly calls to get out of our relationship with Autodesk to move off of rabbit, to do something different. And we're done with them and we're doing it quietly because they're mean, and they're, you know, they'll up our license, but they don't care about their community. Um, I mean, I'm sure you've probably seen the open letter to Autodesk and then Andrew responded and it's all cute. Um, but I think the big trend now we're seeing is we don't want to play ball with the incumbent software companies. And it's whether it's Autodesk, Bentley, knowing the property management side, we have the real pages in yard. And he's like every, every segment of our industry has the incumbent software company. That's just absolutely doing a, do service, doing a disservice to the industry.
Speaker 3All right. So that is a note to any startups out there. So the one who says challenge accepted, I think KP will actually take your call.
Speaker 4There's definitely something about in order to win, someone must lose. That's just how that works. It's just, how about perfect. Yeah. Yeah.
Speaker 3I, I was marveled, you know, like my kids kind of grew up at that. Everybody gets a trophy age and I was just fundamentally, again, I stood up, I stood by myself as one of the lone moms who was like, no, we shouldn't be giving everyone a trophy,
Speaker 4But it's the psychology. Yeah. My kids played soccer. I gave them$50 for every yellow card they got,
Speaker 3I used to, I used to actually pay my, my children for goals. And I also was ostracized for that. I'm like, this is your job. You do your job.
Speaker 4I said, wow. I was like, yellow cards are good. Red cards are bad, but if you're not getting a yellow card, you are not testing the boundaries and pushing yourself hard enough to get one. That means you're pushing hard enough.
Speaker 3Okay. I feel like there's, um, and maybe we should co author, like, you know, a sports parenting book next, like what you know about parenting sports parenting is wrong. So I, I'm going to ask you the question that I ask everyone on the show, which is that if you could project yourself, you know, 15, 20 years is the future and you can bring with you, you know, a service or a gadget. It doesn't have to be based in reality at all. What would it be and what would it do?
Speaker 4Yeah, I think I've gotten older. Um, if there was a device that would allow me to not just remember my experiences, but experience my experiences, that would be fabulous. I feel like every year I turned 50 this year. So my, my, my family is like, you're acting a lot older than you. Like, you're acting like you're turning to 80 or something. So I think it gets hard. You know, I, we work a lot. We move a lot. There's just a lot going on and you don't get to relish all the wins and any of it sometimes just keep moving. Um, and I think there's almost like, how do you, you know, at some point in the future, how do I look back and actually, um, go back and experience those experiences?
Speaker 3I think that's great. And I think, I think, I think that there's technology that's early today that will enable that in the near future. So you may get your wish. Yeah. Well, KP, it's been an absolute pleasure speaking with you today. Thanks so much for doing this. Absolutely good talking to you.
Speaker 1[inaudible].