Dave Tucker, partner at venture capital firm Next Level Ventures, was recently the featured guest at the Technology Association of Iowa’s Tech Brew event.
Tyler Wyngarden, TAI’s vice president of strategic partnerships, interviewed him about how Next Level Ventures chooses portfolio companies, what technologies investment dollars are flowing to and more.
The following is a summary of the insights from the interview.
Tucker’s answers have been lightly edited for length and clarity.
What kind of companies Next Level Ventures invests in:
We invest in small companies, usually what we call a seed or series A stage. So they found a product-market fit. They’re ready to scale. We have two different series of funds. One is our Iowa funds, where we can only invest in Iowa companies. And then we have two fintech funds now, which are actually financed by credit unions, because during the pandemic, everybody was taking their Paycheck Protection Program checks, putting them in their credit union account. They said, ‘We’re sitting on a ton of money. We should do something with this.’ And so they said, ‘Let’s use it to invest in companies who can provide the services we need, and maybe we can better influence them.’ So really, two different theses, two different sets of funds, but we’re just looking for companies that fit into those funds.
Tucker’s role as partner:
We do a lot of work to find the companies, recruit them, see if they’re a good investment. So I’m the technology person. I’ll do the technical due diligence, dive into their architecture and the process, how they build software. Then as a partner, once we invest, if we put in enough I take either a board seat or an observer seat. I sit on about 10 boards now of companies that we’ve invested in. A lot of it is just working with each of the companies that I’m responsible for.
How he knows if a company is ready for investment:
The thing I usually look for that resonates with me are those founders who can just describe a problem really well, That’s really the hook, because people who can be really clear and concise and you can tell they’re really passionate about this, they’re going to be able to draw people in around them. They’re going to be able to really solve a problem. Then we have all the work like how you construct a portfolio. Do they fit in our portfolio? Are they investable? But for me, it comes down to how well can you really describe the problem.
The next best technologies are…
I think artificial intelligence investments just go crazy. That’s sort of an area of its own. But I think the place in Iowa where it really applies is agtech and autonomous vehicles. This is getting started in different places, but I know when I go to the state fair, I see these massive tractors and planters that are 54-rows-wide or something. I think it’s going to evolve into these small, like four-, five-, six-row, self-driving planters. I think a lot of that’s going to be stuff that’s automatable. And I think that’s really one of our opportunities here in Iowa, specifically. I mean, there are a lot of others, but that one stands out. It makes sense to me.
Why deal flow has picked up:
We really had slowed down there for a little while after the bubble burst – here in the markets, things really slowed down. And now it’s like, ‘Oh, my God, there’s another ag company. How much can we put in?’ And we have to get in there fast before everybody else does. The valuations are just stupid but that’s the emerging thing. Another one is crypto and stable coin is all of a sudden big in the market again, so that’s where a lot of people are putting money. It’s driven a lot of times by what the opportunities are.
The downsides of taking VC money:
If you’re starting a business, don’t take venture capital money unless you absolutely need it. You know why you need it. Because we want you to build a business. Because we’re going to sell your business, and we’re going to guide things in a way that helps maximize the value of your business, which is good. We like to think we offer a lot of help in that, but if you can build a business where you can fund it yourself, or you can get money where you’re not beholden to somebody else, that’s what I would do every time. It’s just that’s really hard to do, because if you want to grow and scale and do those things, then you also have to find a good VC that you want to work with. We try to be that kind of partner working with people. We try to really dig in and help you along the way. But not all are like that out there. And so I say just understand why you’re going to take money if you’re going to take money.
