Replay: Episode 20: Part Art, Part Process | Elevate Ventures Principal Patrick Sweeney on Data-Driven Startup Investing

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Today's episode explores three ideas that caught my attention:
① Startup investing is part art and part process - Patrick explains why early-stage investing cannot be reduced to a spreadsheet, but also why data can help investors ask better questions and avoid lazy pattern matching.
② Some founder signals matter more than we think - Patrick shares research-backed observations on immigrant founders, successful serial entrepreneurs, elite technical or business backgrounds, and the limits of applying averages to individual deals.
③ Empathy compounds over time - Most of an investor’s job is saying no. Patrick explains why the way you say no matters, and why treating founders with respect can pay dividends years later.

Patrick began his venture career on the research side at Harvard Business School, where he worked on projects related to venture capital, entrepreneurship, private equity, and diversity. Today, he invests out of Elevate Ventures, an Indiana-based evergreen fund focused on supporting and scaling companies across the Midwest.

During our conversation, Patrick shares:
• How he moved from venture research into venture investing.
• What he learned from studying diversity in venture capital.
• Why female VCs may be overlooked despite strong investing performance.
• Why investors need to look beyond people who look like them.
• What data suggests about immigrant founders and serial entrepreneurs.
• Why early-stage investing is both art and process.
• How venture capital has shaped the public markets and broader economy.
• Why empathy matters when saying no to founders.
• What investors often miss in due diligence.
• How Elevate Ventures supports founders and startup growth in Indiana.

Connect with Patrick:
LinkedIn

Connect with Andrew:
Newsletter | X | LinkedIn | Book | Website

Stuff We Reference:
Elevate Ventures
Venture Capital’s “Me Too” Moment
The Economic Impact of Venture Capital

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All opinions are personal and may not reflect the views of The Diligent Observer. Not investment advice. 

Transcript

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0:00:00 - (Patrick Sweeney): It's really part art and part process. Female VCs are actually a little bit better at investing than their male counterparts. You need to look beyond people that look like you because there's some really great investors out there. 3,4 of the value of publicly traded companies were at one time venture backed. There's more transistors in the world than any other product combined.

0:00:26 - (Andrew Kazlow): Welcome to the Diligent observer, where we help angel investors see what most miss. I'm your host, Andrew, and every week we explore what works, what doesn't, and why through conversations with experienced startup investors and operators. Today I'm replaying one of my favorite conversations on the topic of data driven startup investing. My guest is Patrick Sweeney, a former Harvard Business School researcher turned principal at Elevate Ventures, where he now invests out of Indiana's $225 million Evergreen Fund.

0:00:55 - (Andrew Kazlow): In this episode, Patrick explains why immigrant founders statistically outperform breaks down how a single regulatory ruling resulted in a flood of institutional capital into venture and helped build out companies that now account for roughly 75% of all public company value. And he explains why treating every no with empathy pays dividends for years to come. I hope you enjoy learning from Patrick as much as I did.

0:01:31 - (Andrew Kazlow): Patrick, thanks for being with me today.

0:01:33 - (Patrick Sweeney): Thank you for having me. Really excited to be on the podcast.

0:01:36 - (Andrew Kazlow): Okay, so Patrick, you recently moved from Austin to Indianapolis, Indiana. Say a little bit more about what are some of the differences between these two places? I I and many of our listeners will have never been to Indianapolis, so I'd love to hear what you've discovered over the last six months or so with this transition.

0:02:01 - (Patrick Sweeney): First off, there's four seasons here, so that's been nice so far. We're getting rolled to winter now, so yeah, we'll see how that goes. But it's not my first time I've lived in a place that has this much seasonality. I lived in Boston before, so a little bit of experience with that. But besides that, I ended up moving here for a position with Elevate Ventures and joined as a principal about five months ago or so.

0:02:30 - (Patrick Sweeney): Indianapolis is. It's a pretty neat city. I would kind of describe it almost as it reminds me a lot of Austin whenever Austin was kind of up and coming circa 2005 or so. Right. And so definitely it has that vibe. There's a lot of growth here. I feel like a lot of people are moving here as well. It's a good place to be. The people are really kind and friendly. A lot of great places to Eat as well. It's also growing up in Texas my whole life, it's weird to be in a place where I can drive to multiple states in the course of like an hour and a half.

0:03:07 - (Andrew Kazlow): Right.

0:03:08 - (Patrick Sweeney): So living in Austin, it would take five hours to get to Oklahoma. And just a few weekends ago, I drove to Kentucky and Ohio in less than an hour and a half. It's been going really, really good so far. We're enjoying it.

0:03:22 - (Andrew Kazlow): What's the best place to eat that most people don't know about in Indianapolis?

0:03:26 - (Patrick Sweeney): Oh, gosh, a lot of people will know this, but goose, the market, it's a few blocks from our house and so it's this really cool local butcher shop in Delhi. We make really good sandwiches. They have great charcuterie boards and the like. We'll go there, grab a charcuterie board to go and bottle of wine and just phenomenal. So that's the place I always recommend to anybody who's coming to Indianapolis. Now there's a whole bunch of other places too, but we love that place.

0:03:54 - (Andrew Kazlow): We'll have to check that out next time I'm in the area. So, Patrick, you have been in the venture world for five years now in a investing role, is that right?

0:04:08 - (Patrick Sweeney): I really started in venture on the academic side. I was a pre doctoral researcher at Harvard Business School. It's actually really where I got my start into venture. I was working for a guy named Paul Gompers, phenomenal professor. But we were doing research with regards to venture capital, entrepreneurship, private equity and diversity. And so that's really where I got my first taste into venture.

0:04:31 - (Patrick Sweeney): While I was there, I did a lot of coding and the like. My primary job was to make sure the research that we worked on was moving forward so we could do analysis and write papers together and publish those papers. So got to do work on a bunch of really fascinating projects. Anything from trying to quantify the effects of being on Shark Tank to at the time it was during COVID 19, we surveyed over 900 individual venture capitalists to figure out what was going on in the VC industry with regards to how COVID 19 was impacting their ability to invest, to find companies.

0:05:08 - (Patrick Sweeney): Right. To raise capital, things like that.

0:05:10 - (Andrew Kazlow): I have to know what is the impact of going on Shark Tank?

0:05:14 - (Patrick Sweeney): Unfortunately, I don't have like a great conclusion there. Really. The long and short of it was is we were trying to collect the data on the contestants that made it onto the show, but it did not air. So the idea is you could compare that to the people that made it on the air, you could quantify that effect. We worked with some of the sharks to try to get the data and ultimately ABC put their foot on a break about that. They didn't want to release the data for whatever reason.

0:05:44 - (Patrick Sweeney): That's the nature of research, right? You follow a lead and you see how far it will go. Sometimes you don't get the results you want, but that one was pretty interesting. The one paper I worked on that I'm a co author on is called Venture Capital's Me Too Moment.

0:05:59 - (Andrew Kazlow): I would love to learn more about that. So I was skimming that in preparation for this call. And it's fascinating because this whole moment was prior to my entrance into this community. So I wonder if you could summarize The Ellen Powell vs. Kleiner case case for us and then maybe some of the conclusions from your research.

0:06:23 - (Patrick Sweeney): Yeah. So to give your listeners a little bit of background on it, Ellen Powell was a junior partner at Kleiner Perkins and she got skipped over for a promotion, ultimately ended up suing Kleiner for gender discrimination. Now that was a well publicized court case and was picked up by lots of major newspapers, et cetera. And during that time, Paul, the professor I worked for, is getting calls from VCs asking, hey, do you know any, like, female venture capitalists? We don't want to be sued, et cetera.

0:06:58 - (Patrick Sweeney): And so it kind of gave him the idea of, all right, there's something that's happening where maybe there's like a real measurable effect of this court case. Ultimately, Ellen Powell lost that court case. The primary reason was that Kleiner Perkins was actually hiring more female GCs than industry average. And so while I was at HBS, we actually got the data for that time period. And so we were able to create a research design around that and tease out the causality between that court case and increase hiring in female VCs. And interestingly enough, in our paper, what we find is that there's a causal link between that court case and they increase hiring in female venture capitalists.

0:07:38 - (Patrick Sweeney): What we find is it actually increased around the 50% increase during that time period. Now, keep in mind, the beginning number was 10%. So it increased to 15%. But there's a real causal link there. Now the, the fascinating thing about that, and this kind of ties into this sister paper that's called, ironically enough, the Daughters paper. And in this paper, they first off, try to understand if a male venture capitalist having a daughter, if that increases the probability of them hiring female venture capitalists. Right? So it's like they're more aware of women's issues, and so they're more prone to hire a female vc.

0:08:17 - (Patrick Sweeney): The way that they go about that is they use an instrumental variable. And if the venture capitalist had a. A daughter or not. And so that's random. Right. And so the idea is like, you can tease out causality through that. What they find is like, yes, it increases the probability of hiring a female venture capitalist. But also what they find is like, on average, those female VCs are actually a little bit better at investing than their male counterparts.

0:08:45 - (Andrew Kazlow): So what was the impact or implications of that?

0:08:50 - (Patrick Sweeney): Yeah, so really, I think the takeaway there is that, why do you have such low levels of female VCs and adventure capital? The research we worked on, the way we understood it was through this concept of homophily. And this concept comes from sociology. And essentially what it says is people like to associate with other people of like characteristics. Right. And so what we find is that venture capitalist teams are very small, and so the smallest preference will have, like, an outsized impact on the makeup of the industry. Right. And so, unsurprisingly, you see, like, male VCs on average want to hire other male VCs.

0:09:31 - (Patrick Sweeney): I think the takeaway for venture capitalist should be, is, like, look, you need to look beyond people that look like you, because there's some really great investors out there that on average, might actually outperform the person that you thought would be better just because they look like you. Right. So that I would say that's the takeaway is like, really consider anyone and everyone that could potentially be a good investor for this fund.

0:09:55 - (Andrew Kazlow): Well, it's a fascinating start to a career in venture, and I'm sure that has influenced your career as it's progressed, both your time at Alumni Ventures and now at Elevate. How have you seen those themes kind of shape the way that you operate as an investor?

0:10:12 - (Patrick Sweeney): I definitely would say I lean more to the quantitative. I mean, if you asked Larry, our mutual friend, he would probably tell you as much. I used to work for Larry at Alumni Ventures, specifically under the Ring Ventures umbrella. I think we were a really good team because we kind of counterbalanced each other. I tend to lean more to the quantitative. He tends to lean more to the qualitative. And because of that, I think we made some pretty good investments together.

0:10:39 - (Andrew Kazlow): I love it. Well, you certainly need both.

0:10:40 - (Patrick Sweeney): The thing to understand about angel investing or even venture investing, especially at the earliest stages. It's really part art and part process. This isn't investment management or Private equity, where it's very, very quantitative. You can run a model and know on average this is what I should expect. But with venture there's so much variation. You're making decisions with this puzzle that's incomplete and there's these foggy areas. You're having to get comfortable with the lack of data and you're having to lean into like other aspects of evaluating a business. Right. And so, you know, one of those things, right, obviously is the team and assessing them, understanding. Is this like the right team to take this venture, make it successful? Do they have quote unquote, shatter market fit?

0:11:29 - (Patrick Sweeney): That's hard to quantify. Right. I mean there are aspects that you can quantify and in my previous job as a researcher, we definitely tried. One of them would be immigrant status. We found like a strong relationship between that and the probability of a successful outcome for a founder.

0:11:44 - (Andrew Kazlow): So you're saying if I'm looking at a deal, let's say I'm looking at two deals. All else being equal, one is led by an immigrant founder and the other is not. You would bet on the immigrant option?

0:11:55 - (Patrick Sweeney): Yeah, yeah, for sure. Also, I like the fact you said all I see people are service paribus, as we say in economics.

0:12:03 - (Andrew Kazlow): I love it. What were some of the other interesting insights or data driven things? Because this whole podcast is about helping angels make better bets. So I would love to download your

0:12:15 - (Patrick Sweeney): list of tidbits I would caution people to understand. Hey, these are averages, right? So there's a variation within that. This can be helpful in informing those decisions. Obviously I don't think I'm telling anybody anything surprising here, but serial entrepreneurs, and especially if they were successful serial entrepreneurs on average, or a better bet to make when evaluating a startup, again, all else equal.

0:12:42 - (Patrick Sweeney): That's one that really pops out. There's also a positive and statistically significant correlation between going to like a really prestigious school, one of like the top MBA programs. There's a relationship there. Or going to like a top engineering school.

0:12:56 - (Andrew Kazlow): Okay, so Patrick, where along the way did you develop this personal mission? You come across as a very mission driven guy. And if I understand right, your kind of MO is that you're very passionate about the transformative power of innovation to enhance human flourishing. My sense is that each of those words is chosen very specifically. I wonder if you could talk a little bit more about your motivation and how you think about your role as a capital allocator.

0:13:27 - (Patrick Sweeney): I would say it like stems back to like especially in college, this desire of pursuing truth. I studied economics and part of the reason I studied economics is because I thought that was a good channel to do that. Right. You get to really pursue this idea of like trying to find causality or truth. You see what X causes Y maybe. Well, let's actually build a research design and understand what actually is happening there.

0:13:52 - (Patrick Sweeney): And just because two things happen together doesn't mean one is causing the other, right? The great example of ice cream cells go up in the summer and so do murders. So are the two related? It's the serious correlations. So there was always this kind of desire to work in an industry that had like a big impact on society. And so when I was at A and M, I got my master's in financial economics and it was kind of more applied, right.

0:14:17 - (Patrick Sweeney): And while I was there I really considered the idea of getting a, a Ph.D. in economics. Ended up working kind of part of the course as an A and M grad in energy finance on a energy hedge desk at a bank in Dallas. Great job, phenomenal boss. Met some great people there, but was really, really interested in trying to get back to working in something I felt like had a bigger impact. And I thought research was that channel.

0:14:42 - (Patrick Sweeney): So that's why I ended up applying for the pre doctoral research associate position at Harvard Business School and working on research there. Now when I was there I realized pretty quickly I didn't want to be in academia. It's big opportunity cost to get the PhD and the light. But of the research I got to work on and read one of the really fascinating pieces of research that I read was from this paper called the Economic impact of Venture Capital.

0:15:08 - (Patrick Sweeney): And so in that paper they go through and they create this like difference in difference design. And they tried to compare the other G7 countries to the United States and this pivotal event of the prudent man ruling being happening, and I think it was 1968. Essentially what that said is like endowments and pension funds or large institutional investors could start to invest into venture capital and private equity. And so you see this explosion in venture and if you look at all the companies that went public since 1978 onwards, you find that 3/4 of the value of publicly traded companies were at one time venture backed. 92% of R&D spending, 93% of patent value comes from those companies as well.

0:15:59 - (Patrick Sweeney): And so that paper also, you know, kind of informed me like, oh, like venture kind of satiates that desire to work in an industry that has a big impact on society. And then on the kind of day to day I get to talk to some amazing founders and startups that are trying to solve real world problems from anything from like ptsd, anxiety, depression, right. Some life sciences companies to a company I'm sure, you know, like Venus Aerospace and trying to make it so you and I could fly to Japan in two hours with hypersonic space plane.

0:16:33 - (Patrick Sweeney): So I mean it's really cool. I give you that example of the paper is kind of the macro, but on the day to day you see that micro of these really interesting companies that are trying to solve real problems. And Sometimes it's a SaaS company and that's fine, but it's still in the grand scheme of things it does make society better off when we're more efficient. And that kind of gets back into this idea of like originally it was like working in research with regards to innovation and entrepreneurship. And the reason I was interested in that is because there's this concept called total factor productivity.

0:17:07 - (Patrick Sweeney): And so in economics there's this, it's called the Cobb Doug production function, essentially how much production does like a society produce. And your main inputs are capital, labor. And then there's this total productivity factor which is really a way to quantify like technology and innovation. And so if you want to increase per capita gdp, you actually have to increase total factor productivity. And so in other words, that's one way to make people better off and increase human flourishment.

0:17:41 - (Patrick Sweeney): That's really kind of how I, I came here and that's how I got into venture. It's a gratifying job. It really is. It's amazing to get to talk to founders. It's one of my favorite things. Imagine going to work and getting to talk to people that are really, really excited to be doing what they're doing. And it's like that passion really rubs off on you. Now, of course, my job is to do due diligence on these companies and to test some of their claims, but it's a lot of fun when you can dream with a founder and you can see what they're seeing. I get so excited when that happens.

0:18:17 - (Andrew Kazlow): A quick note before we continue the conversation. Alongside the Diligent observer podcast and newsletter, I also run an outsourced operations service specifically built to serve Angel Networks. My team handles things like initial screening, social media, newsletter prep, platform management, and a whole lot more. The kinds of things that either aren't getting done or shouldn't be done by busy community leaders.

0:18:39 - (Andrew Kazlow): If that sounds interesting to you, send me a note.

0:18:41 - (Andrew Kazlow): Now back to it. Explain more about some of the key themes or things that you learned during your time at Ring and then following that, would love to hear more about what's been different in your time at Elevate. How you've seen both the market change and kind of the cultural differences, the fund objective differences and how that has shaped you as an investor. Maybe let's start with Ring and then go to your last six months at Elevate.

0:19:10 - (Patrick Sweeney): The primary reason I wanted to work at Ring was because I got to work with Larry Warnock, who has been a great friend and mentor. And so I would say I learned so much from Larry. He's obviously you had him on your podcast. He's a three time founder. He worked at Austin Ventures and then Alumni Ventures. Getting to work with him, I learned a lot about that entrepreneurial journey. Working with him helped me to see it's like you need to have a lot of empathy for what these founders are doing. Like this is a really hard job.

0:19:41 - (Patrick Sweeney): And so I would say that's one of the things that I learned pretty quickly at alumni was that these people that are out there, they got their life on their line, they've got this vision, they're passionate about it. By definition, founders are probably under diversified, right? This is everything they have. I think that's something I learned pretty quickly at Alumni Ventures is try to have empathy for the founders and the journey that they're on. Like no matter what your decision is as an investor, you really need to treat them with kindness and respect because it does take a lot of courage to do what they're doing.

0:20:16 - (Andrew Kazlow): Maybe tactically, how does that play out or how did that play out at Ring and how did you see Larry work that up?

0:20:25 - (Patrick Sweeney): No matter what the answer was trying to spend some time with them and coach them and help them to see, hey, look, this is just like our opinion, but here's the things that we see that the reason maybe we can or can't invest, whatever it is, I think tactically that's how that plays out. And in the long run, what you really need to understand is these things come back around, right? How you treat somebody today does matter in the future, right?

0:20:51 - (Patrick Sweeney): You don't know what this person is going to be doing in 10, 20 years. Maybe this wasn't the right startup for them and now they sugared it out. And so if you treat those people with respect and you maintain that relationship, I think it pays dividends far in the future.

0:21:07 - (Andrew Kazlow): It's so hard. I mean 99% of your job is saying no, which makes the yeses really exciting. But man, it's hard to give feedback and take the time to really walk an entrepreneur through why it's not a fit.

0:21:21 - (Patrick Sweeney): Oh, yeah, no doubt. And I think a lot of venture capitalists and investors in general kind of get into that mindset of just saying no quickly. You're right. Not having a lot of empathy, I think that's a mistake. I understand, like, you only have so much time in a day, but putting a little bit of effort towards the way you craft your response when you say no to investment, I think that matters and it makes a big difference. Right. Every little thing we do in our lives does have a, you know, an impact on the people around us.

0:21:54 - (Andrew Kazlow): Okay. So empathy, big thing. You learned that is super important as investor during your time at Ring. Any other major takeaways or lessons in general?

0:22:05 - (Patrick Sweeney): I would say learning to diligence a company, it's really where I got my chops for it. Right. And learned from Larry and Brooke, who you also had on the podcast.

0:22:17 - (Andrew Kazlow): Big fan of the alumni ventures crew on. On this podcast.

0:22:21 - (Patrick Sweeney): Some great, great folks. That was one of my. My favorite things about working there is I get to work with some phenomenal people.

0:22:27 - (Andrew Kazlow): So on that topic of diligence, what's a category of diligence that you feel like many people skip or don't find that important? That you feel like is really important? That's a big miss. Because diligence sucks. Everyone hates due diligence.

0:22:42 - (Patrick Sweeney): That's my job.

0:22:42 - (Andrew Kazlow): I know. That's why you have a job.

0:22:45 - (Patrick Sweeney): I have a team of analysts. All we do is work on due diligence. But it's great. It's actually fun, I mean, because you're trying to put that puzzle together and you know, you've got the gaps in the puzzle. So it's like trying to look at the fact set, explain, like a story of like, hey, this is why we think we should invest or we shouldn't, or maybe we should coach this founder and try to lead the round or something like that.

0:23:09 - (Patrick Sweeney): With regards to, like, doing due diligence, I think it depends on the stage. I think people tend to kind of glance over at times, like, really what that customer value proposition is? I think that's a mistake if you don't really think through, like, what is this company trying to do? Like, what's that unmet demand or need that they're trying to answer with this product or service? I think that's really important in general, like, really broad strokes here. I like to think about deals through a framework of opportunity.

0:23:45 - (Patrick Sweeney): The people, the context and the deal itself. So like the terms is just a fair deal, et cetera in terms of

0:23:52 - (Andrew Kazlow): the actual value proposition. I think that's an interesting point because we spend a lot of time focusing on what's the market problem. But you're saying that folks tend to perhaps under index on understanding the actual solution being brought to the table.

0:24:07 - (Patrick Sweeney): Yeah. And how, how does this, how does a startup actually answer that problem? Right. That's what really gets me excited when I see a company that is in some vector of cost savings or efficiency or maybe like risk management, it's like an order of magnitude better than whatever's out there in the market. Right. That's the typos value proposition that if a customer's using some product or service that they would switch to that new product or service. Right.

0:24:39 - (Patrick Sweeney): I also think you're on the road to a great term here. Product market fit. And the way I like to think about product market fit is positive unit economics, demonstrated demand and then now you're ready for scalability to scale the business.

0:24:56 - (Andrew Kazlow): Love it. So many fun topics we could get into on due diligence for the sake of time though. Tell me more about the last six months. You're in a totally new state, new city, new culture, new everything. What's standing out to you in this season about Elevate? What's unique about this season in your story?

0:25:18 - (Patrick Sweeney): First off, Elevate ventures. We're a $225 million Evergreen fund, always deploying capital, one of the most prolific investors in the Midwest. And we really bucket our investments into three main categories. We're a generalist fund, but we tend to view it through software, SaaS, hard tech. So that could be deep tech, it could be CPG and then life sciences. I started back in July. It's been a phenomenal experience with the firm. It's really a young ambitious team.

0:25:49 - (Patrick Sweeney): We're in the middle of raising a growth fund right now as well. So we'd be deploying capital kind of series B plus. We've hit the ground running. Got a phenomenal team that I work with. It's a lot of fun to be in a place where everybody's like intellectually really curious and asking questions. And that makes the due diligence process that you mentioned earlier a lot more fun. When you're like exploring topics together and coming to the conclusion at the same time and pushing each other on your assumptions or whatever you might be thinking about a deal.

0:26:24 - (Andrew Kazlow): What's a recent topic that you got pushed on or that you guys worked through together? That was interesting to you?

0:26:31 - (Patrick Sweeney): I think one that is super fascinating, and I can't go into the specifics too much here, but we diligenced a company that is building a machine that's part of the microchip manufacturing process, essentially. That is just a immensely fascinating topic that I was trying to get smart on, and I want to get smarter on. But one of the stats that I found was there's more transistors in the world than there is any other product and service or any other product combined.

0:27:03 - (Andrew Kazlow): No kidding. Yeah.

0:27:04 - (Patrick Sweeney): And so that space is just so fascinating, right. And how much the microchip industry is advanced in a very short period of time. There's this concept of Moore's Law, and the question is now, are we getting to the end of Moore's Law of being able to double the number of transistors on a given chip every two to three years? There's a couple of ways that we could get around that, but the problem is, eventually you get to the point where you're talking about transistors that are an atom of cross. Right. So there's always so much further these things can go.

0:27:40 - (Patrick Sweeney): But that whole industry is really interesting. The whole supply chain of it is really, really fascinating. Obviously, tsmc, regards to Taiwan, is in the news a lot. It's strategically extremely important that the US and its allies maintain the ability to continue to get microchips. If TSMC was shut down tomorrow, right. Let's say there's an earthquake or something else worse happened, we would go into a global depression. There's no question about it.

0:28:11 - (Patrick Sweeney): And so there's this real effort to, you know, how do we maybe onshore more of the microchip manufacturing process and the like. And so you see that with TSMC actually building a FAB in Arizona recently, and that fab, surprisingly enough, is more efficient than the FAB in Taiwan, which nobody thought was going to happen. I'm just really interested to see over the Next, call it 10, 15 years where this industry goes.

0:28:42 - (Patrick Sweeney): There's a lot of strong tailwinds, right? Obviously, with AI and the like, that's an fundamental layer to the AI stack. It's like you need the silicon for the chips that power the AI models. And then on top of that, you also need the energy. So there's this whole debate on, like, do we use micronuclear reactors to run these data centers that we're not draining the. The power from our grids, et cetera. If you need a recommendation on a book, I would say Chip wars is a great Read.

0:29:15 - (Patrick Sweeney): Phenomenal book, Chip Wars.

0:29:16 - (Andrew Kazlow): Amazing. Yeah, we'll check that out. Okay. So, Patrick, I wanted to ask about. My understanding is at Elevate, you all actually manage some state funding, is that right? With your angel funds, I wonder if you could talk a little bit more about how those work and what the strategy is there. I think that's pretty unique.

0:29:36 - (Patrick Sweeney): Yeah. So there's two components. First off, we raise capital from the iedc, that's our lp, and that's the Indiana Economic Development Corporation. Then we go and deploy those dollars in companies that have some sort of connection to Indiana. The idea being it's like there's this economic development side of the house of like getting companies to come here helping seed startups in the state. And then at the same time, there's this venture component of trying to find really good investment opportunities in general. Like, that's how the fund works.

0:30:10 - (Patrick Sweeney): And as we continue to expand, we hope to raise this growth fund that we're in the process of raising right now to continue to have a stream of capital for these companies that go from precede the Series A. Historically, there hasn't been a lot of growth capital in the Midwest, especially in Indiana, and we're aiming to fill that gap with this fund that we're looking to raise.

0:30:35 - (Andrew Kazlow): Super cool.

0:30:35 - (Patrick Sweeney): Yeah.

0:30:35 - (Andrew Kazlow): I had never heard of a fund like that until was starting to learn more about Elevate.

0:30:41 - (Patrick Sweeney): Yeah, it's a really different model. It's a lot of fun because it forces us to be more empathetic, more founder friendly. Like, we're really happy to get in the weeds with these founders and try to help them think about, how do I raise capital. Some of these founders have never talked to an institutional investor before. Right. Maybe an angel investor if they're lucky. So, you know, at the earliest stages, we're talking to these founders and we're trying to help them figure out what's the playbook of running this company, what's the playbook of raising capital. And so we provide a lot of resources, even for companies that we don't invest in, to give them access to like, all right, how do we think about these things? We'll provide our due diligence checklist. We'll provide a broad overview of like, hey, this is how a pitch deck should look. And so it's a lot of fun to get to work with founders at, at that stage and to really try to add value even if we're not investing broader purpose. There is like, how do we generate great economic development for the state as well as financial returns.

0:31:52 - (Andrew Kazlow): And do you guys work with local angel communities as well? I assume so because it's in the name. But what does your interaction and co investment look like with different angel groups?

0:32:03 - (Patrick Sweeney): We have a really strong relationship with angels throughout the state. What we often do, or the way it works actually is like we have a one to one dollar requirement for any investment that we make at the seed plus is the level that we look at for that. And so if we make an investment in a seed stage company, let's say we put $100,000 into it, we're going to need to syndicate that deal to our capital partners throughout the state, throughout the country, et cetera. And so we oftentimes we work a lot with angels to help syndicate those realms.

0:32:40 - (Andrew Kazlow): Love it. Love that model. Here's a little bit. But go find some other investors to come alongside you also.

0:32:46 - (Patrick Sweeney): Exactly. You know, I think it's good in general for founders to have multiple funds at the table. I mean, if possible, it's good to have that depth of capital. Whenever things go sideways, which they probably will, you might need to raise an extension around to give yourself a little bit more Runway to go and iterate on this product or pivot. It's good to have a syndicate of investors that you can tap into that so not one investor has to pony up for that.

0:33:15 - (Andrew Kazlow): Totally agree. Patrick, what's one thing that you're really excited about right now?

0:33:22 - (Patrick Sweeney): I'm really excited about where Elevate is headed. I mentioned before about how great the team is. I'm very, very impressed with the team that I get to work with. It's a lot of fun going into work and talking about these deals and think about these things through kind of an intellectual perspective and so excited on where this fund is headed. I think there's a really bright future ahead, especially as we go and kick off raising this growth fund as well.

0:33:50 - (Andrew Kazlow): Love it.

0:33:50 - (Patrick Sweeney): Also very excited to spend more time with my wife. So there you go.

0:33:56 - (Andrew Kazlow): Recently married, I understand.

0:33:58 - (Patrick Sweeney): Recently married. Yeah.

0:33:59 - (Andrew Kazlow): Congratulations, man.

0:34:01 - (Patrick Sweeney): Anytime I can spend with her is like the best thing ever, so love doing that. Oh, I'm sure she'll be excited to hear you say that.

0:34:08 - (Andrew Kazlow): Well, Patrick, this has been a blast. Thank you so much for making the time today. I hope you continue to enjoy Indiana and next time I'm there, I'll definitely check out goose the market.

0:34:22 - (Patrick Sweeney): Thanks for listening to this episode of the Diligent Observer. I'm your host, Andrew. And if you're an angel investor looking for essential angel intel in five minutes every week. I think you'd enjoy my newsletter. I send my best stuff, interesting deals and more straight to your inbox so you never miss a thing. Subscribe today@thediligentobserver.com.