Beyond The Pitch – The Future Of The Venture Capital Landscape With Samantha Lewis, Part 2

 

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Welcome to another episode of The 7 in 7 Show with Zack Ellison, which features full-length interviews with the world’s leading investors in innovation.

Episode 9 Part 2 of Season 2 features Samantha Lewis, a Partner at Mercury Fund. Her specific focus is on Mercury’s Power theme, where she seeks to fund startups utilizing blockchain, data platforms, and fintech to rethink the way people access capital and opportunity, build wealth, spend money, and organize as communities.

Samantha currently serves on the boards of Mercury portfolio companies Apparatus (infrastructure), Arden (infrastructure), Civitech (data platform), Brassica (fintech infrastructure), and Cooklist (data intelligence). 

Samantha is an active Kauffman Fellow, the world’s premier venture capital fellowship. Prior to joining Mercury, Samantha was the Investment Director at Goose Capital, a Houston-based investment group of serial entrepreneurs and F500 CEOs, where she led deal sourcing, structuring, and portfolio management. During her time at Goose, she led investments in Syzygy Plasmonics, Rufus Labs, and Emerge. Samantha is a repeat entrepreneur with a background spanning agribusiness, logistics and supply chain, beauty, and deep tech.

Samantha received her MBA from Rice University and a B.A. in Political Science and History from Texas A&M University. Samantha remains deeply committed and involved in the efforts to build diverse, robust innovation ecosystems. Outside of Mercury, Samantha actively mentors founders, teaches a Venture Capital class at Rice University, and supports Ukraine through fundraising and medical supply deliveries.

In this episode, Zack Ellison and Samantha Lewis discuss:

1. Venture capital’s evolution: From pitch to sustainability
2. Diversity in venture capital: Identifying untapped markets and founders
3. Venture debt: Bridging startups to success
4. AI’s role in startups: Beyond hype to utility
5. The importance of geography in finding venture opportunities
6. How venture lenders catalyze startup growth and validation
7. Enhancing investor returns with DPI (Distributions to Paid-In capital)

Beyond The Pitch – The Future Of The Venture Capital Landscape With Samantha Lewis, Part 2

The Importance Of A Sustainable Approach

I have with me Samantha Lewis, a partner at Mercury Fund. Sam, thanks for joining.

We’ve covered some of it. I’m just going to almost summarize a few things.

Yeah, perfect.

The venture is and always will be a game about lives. It just is, that’s like the power law, one-on-one a venture, but that does not mean that you can’t provide consistent returns fund over fund over fund by deploying a better portfolio strategy. We’ve already covered this. How do we do that? We drive DPI. How do you drive DPI? There are a few different ways to do that. We think we’ve nailed one and so, or a few. I think that that’s super important because you still need the outliers to have outsized returns, but not every single one of your companies needs to have an outsized return.

You can also do base hits. It’s okay to have a $500 million exit. It’s okay to have a $100 million exit if you have enough ownership. It’s really not about the number. It’s about the returns, the cash on cash returns. I think a lot of times, in venture, people do not think about that and they don’t optimize for that. You don’t have to just take my word for it. Our model has proven it by being in the top decile of our vintage year for Fund4, but also one of our big LPs is Baylor Endowment.

 

 

They were written up in the Wall Street Journal that their endowment is now basically leaving the IVs in the dust. They’re killing it. They’re very contrarian when they’re thinking about how you deploy into the venture. They love our model. Just like the same things we’re talking about, Zack here, on really thinking about fundamentals and thinking about how to drive cash on cash returns and all this other stuff. In venture is a very attractive thing because it lasts through cycles.

Institutional OPs want to know that you’re going to be able to last through cycles. Mercury has been able to figure out how to get venture upside with private equity downside. That is a super bold statement, I know, but now we have a few different cycles where we’ve been able to prove that. We continue to hone that model and LPs who are attracted to that opt in to come to us. Some LPs don’t want that. Some LPs want just the power law and it’s okay to have 50%, 60% loss ratio. They might not be the best fit for Mercury. I think that’s a common mistake across venture and it has ramifications so much.

This is why I wish more venture funds would think the way that we think, not just Mercury, but funds around like our GOs, because when venture capital drives up, innovation drives up. When innovation funding drives up, this has ramifications about everything, the security of the country, about economic viability of certain things within our nation-state. I could get very philosophical and we don’t have to go down that rabbit hole, but people need to think about how to build venture, I think in a more successful, sustainable way so that innovation funding doesn’t completely evaporate whenever we’re like in a bus cycle. That’s how we think about it. We want more. The billions and trillions of dollar fund managers out there to think about it that way, too.

I love the way you think about it. I think that’s why I really wanted to get you on the show. The way that you and others at Mercury are thinking about it really jives with the way that I think about it as well. It need not be a dart-throwing game. There are consistent, repeatable processes that you can utilize, even in early-stage venture equity, to generate consistent outperformance.

I think there’s this false narrative out there that was probably generated by the VCs, which is like, “We can’t really be process-driven because this is too early.” We have to just make 100 bets and hope that 5 of them are big winners and another 2X to 10 Xers. I think that’s a false narrative, and that’s from about 40 or 50 years ago, when people didn’t really understand how to manage portfolios in a sophisticated way.

It’s a super early industry. I don’t mean to interrupt, but I think we can’t overlook that. Venture has been around for a fraction of the time of other types of investment models. Venture existed with power law and things like that, like in the whaling industry and things like that, but venture is very young. When people think we have it all figured out, we do not. As an industry, we don’t because the type of environment we just went through is really, some would argue, second time we’ve only gone through that. I’d argue the first time we’ve really gone through that type of cycle. We, as an industry, need to remember that we’re adolescents compared to a lot of other finance professions.

Part of that’s because venture capitalists, although many are brilliant, are not trained investors. There’s a very different mindset and skillset that you see on Wall Street from people who have gone to the University of Chicago, Booth School of Business versus somebody who’s like, “I didn’t even go to college. I started a couple of companies. I’m a great operator and now I’m a VC.” Both are smart. Both are great at what they do in many respects, but they’re inherently different beasts.

People need to think about how to build ventures in a more successful, sustainable way so that innovation funding doesn't completely evaporate. Share on X

I think that VC has gotten sloppy and has always been sloppy, not gotten sloppy, but it’s been very sloppy in 2021 and 2022. I think there needs to be a reset and a rethink about the whole industry. I don’t think that VCs are very good investors, generally. Getting lucky is not investing. I’m sorry, it’s not. If you can’t do it with a consistent process, then it’s luck. There are 50 finance books you can read that prove that. I’ve got an MBA from Booth and a Master’s in Risk from NYU, and I’m working on my Doctorate in Business at the University of Florida.

This is what they teach you. I’m not just like pulling this out of thin air. This is what the best schools in the world will teach you. This is what the CFA teaches you when you get the CFA charter or the CAIA. They teach you how to invest, but they teach you how to think through things in a logical way and become process-driven, look for repeatable ways to generate outperformance. Anyhow, this is just one of my, in a way, not pet peeves, but when I look at the industry, it’s disappointing. It’s like so many people that pretend they’re investors. You don’t deserve to have that on your business card.

The sad thing is, though, those people, if they had luck, LP capital still chases them. LP capital will still chase those. Being an LP is very difficult. I know that I have many friends who are LPs and they talk about how you are trying to decipher whether it’s luck or whether it was skill and that is very hard to do as an LP. I don’t necessarily envy that, but a lot of capital flows to those who are likely just got lucky. Unfortunately, a lot of capital, especially in this market environment we’re in, is not going to flow to emerging managers who actually might be great investors because they’re not going to be able to drive liquidity in a short period of time to be able to raise their next fund.

It’s almost like this cycle that just keeps repeating itself because the lucky ones are able to get significant more capital. They’re going to sit on that capital and continue to deploy. I don’t want to take us off too much, but there’s a super interesting tidbit here that I’ve been thinking about. I’m reading Annie Duke’s book, Thinking in Bets. Have you read this?

No, I haven’t.

You have to. Annie Duke was a world champion poker player. She also has PhD in Cognitive Behavioral Science or something similar to that. She now coaches and speaks to a lot of different traders, Wall Street-type traders and big CEOs. She works in the venture industry, too. What she says is that people need to separate the quality of the decision you make from the outcome.

Inherently, we are terrible at doing that as humans. We think if the outcome is good, that means our decision-making, like our pattern matching says, “That means our decision-making was good.” We keep deciding things based on what could have been a very flawed decision in the beginning. We’re seeing that play out now through the VC market. People said, “This worked, that means it must have been right.” They make that same decision again. That must have been right.

Eventually, the house of cards falls. It’s super important to think about and dig into the quality of your decision-making. Whether that is, I made a bad decision and had a good outcome is just as important as understanding that I made a good decision and had a bad outcome because that doesn’t mean I shouldn’t make that decision again if I went back. I’ve read the book before, but we’re reading it as a book club at Mercury right now. It’s just fascinating because it applies perfectly to our industry. Anyway, that’s a side note.

 

I appreciate that. That’s a great example. In the spirit of examples and anecdotes, I’ll give you one that I think is amusing, too. There was an angel investor who had worked at one of the big tech companies. He had made hundreds of millions of dollars as an angel investor during his career there because he had great information flow on everything. This is one of the behemoths. He saw everything.

This was a couple of years ago, but he was basically trying to raise external capital for the first time for an angel-stage, early-stage fund. In his pitch deck, he had all the investments that he had made that had done well, of course, not all the losers, not that like 95% of the investments that were zeros, but the 5% that had done well. The best-performing investment was Pinterest, which many people know. He had put in $25,000 in a very early round. I can’t recall if it was, as an angel investor, basically. He had made something like 950 times his money. That was a big part of the deck.

“I invested early in Pinterest. I’m so smart.” I asked him, “What’s your average check size, and what has been your average check size?” He said, “About $100,000.” I said, “How much did you put into Pinterest?” He said, “$25,000.” “You didn’t even have high conviction on that.” That, to me, is the perfect example. I don’t know what happened to him, but I’m sure he went out and raised a bunch of money because he invested early in Pinterest. If you actually like asked one question, like I did, you’d realize that he had low conviction on that investment and it was total luck. To me, that summarizes VC equity investing. It really does.

Unfortunately, you’re right, Zack. Speaking of Pinterest, though, I do want to bring it back to something else we were saying. Fred Wilson at Union Square Ventures is an absolute beast. I started reading him in like early twenty teens and that shaped a lot of how I think about venture. Although he’s a coastal investor, they’ve done things very differently from a lot of their counterparts. On keeping fund sizes small, really investing based off of a theme that the entire partnership gets around and has super high conviction around.

They’ve done some really interesting stuff at Union Square Ventures. One of the things that I think really does differentiate, they have plenty of outliers that have driven consistent returns year over year and then they have some that they find places for. He goes against the common thinking in VC that you piece out on the companies that aren’t working well. “They’re not working well, never mind. I’m going to stop showing up to board meetings because I need to put my time somewhere else.”

That’s just chasing deals. That’s it, but real company building, and he has said this and shows it with data on some of the different portfolio companies when they’re in the trough, for example, the death spiral, as you’re writing about, that’s when you really dig in as a VC or as a board member, as a partner to these CEOs, and you figure out how we unlock. If you can still figure out how to unlock, those are some of the best-performing companies and you get a buy-up in the time that they’re in the death spiral.

We made some mistakes, we got here. Let’s maybe give you a bridge note or whatever it might be, get you a little bit more capital, and buy up some ownership for USB. As soon as it unlocks, it can take off. It doesn’t work for everything because sometimes they’re in the trough, and they should probably just fail because some companies need to fail, like if you’re not finding product market fit, for example. I really appreciate that he writes about that. He wrote about that a few years ago. I really appreciated it because it almost validated the way that we think about things here as well. You don’t just stop showing up to board meetings because the company made a few bad decisions.

If you still believe in the market, you still believe in the product, then find a way to try to make it work. Also, be self-aware, look at yourself, and say, “Can we make this work? If you can’t, it’s okay.” Sometimes, you have to walk away. I wish more investors thought about it like Fred described in his blog. I think it would allow a lot more companies with value to find success and not necessarily fail just because they made a few bad decisions in the early days.

One AI deal or two AI deals isn't going to mean you're a good AI investor. Share on X

Who doesn’t make bad decisions in the early days? Sometimes, luck gets them out of it. It’s hard to make perfect decisions every day. You said this in one of your other episodes. I think people are an aggregate of every little decision they make during the day. Sometimes, if you recognize a bad decision early enough, then you can change courses. If you don’t, probably not, but recognize it, pivot, and move. If you can, then it’s worth potentially trying to back those entrepreneurs. I think that gets overlooked a lot.

Venture Debt As An Alternative Funding Option

I did want to talk about how, in the current funding market, we’ve got a lot of good companies, to your point, that are going to be abandoned by VCs. They’re just going to be ghosted essentially, never to get any capital ever again from some of these VCs. Some of them are good companies. What I’m seeing, and you’re seeing this as well, is there are a lot of startups looking for alternative forms of capital to grow the business, bridge them to a slightly better equity market for fundraising.

A lot of them are looking at what’s called venture debt, which is what my firm specializes in. I wanted to talk a little bit about it because I think a lot of folks don’t really know that it’s a very powerful tool for them. A lot of founders don’t realize what a great option this is. I guess I should talk for a minute what venture debt is because a lot of people don’t know. It’s basically growth capital for company startups that are generating revenue. They’re looking for some capital to grow their business, bridge them to the next equity raise, bridge them to an exit, and maybe get them to steady-state profitability.

They’re just looking for some money and historically, the only way to raise that money was through the equity market. What a lot of founders are realizing now is that once they’ve become relatively successful and have traction in terms of revenue, that’s somewhere typically north of 10 million. They have other options outside of equity funding.

A lot of founders have decided, “I don’t really want to sell my equity ownership. I went through hell to get here over 5, 10, 15 years. Now, I can see the light at the end of the tunnel and I want to keep everything that I’ve built. I still need some money to get over the hump or to get to a higher peak on the mountain but I don’t want to sell equity or I want to sell as little as possible.” That’s where debt is a very powerful tool for these founders because they can borrow money and the total cost of capital winds up being significantly less than equity would cost them if they were to be successful.

It’s also typically much faster to obtain. It’s very efficient in the sense that there are tax breaks too, paying interest. It has a lower cost of capital, faster to obtain, much less dilutive. Founders are starting to like it, but I wanted your thoughts as a VC who focuses on late seed A, mature A, and B rounds. Where do you think venture debt fits in from a founder’s perspective? How can it help them? Why should they look at it as an option?

We think venture debt’s an incredibly powerful tool, which is why I’m here, Zack, why we’re friends, but we think it’s an incredibly powerful tool and we’ve utilized it quite a lot at Fund4 for Mercury and Fund5. The thing that I think we always talk to our founders about is there is a balance and I’m actually interested to get your take on this, but there’s a point where the scales tip to where it is less expensive for you to take venture debt than it is future equity financing. At that point, you take a really hard look, see where the market is, and see if it makes a lot of sense to bring that debt on.

 

There are some additional risks of bringing debt on. Senior secured loans are very different from someone just owning an equity in your company. There are some different risks that we always take a look at. In a lot of ways, venture debt cuts through the bullshit that you have to deal with when you’re dealing with VCs. I say this, obviously, after I just walked through all the qualitative things we need to care about but that’s because we’re earlier stage. For example, where you come in, Zack is at a point where typically that happens after we invest.

We have already invested before it’s a great fit for venture debt. Sometimes it is, especially this mature A strategy, we’re pairing that up with a lot of venture debt, which we’ll talk about soon, Zack. We have a lot of mature A companies that are already fit to take on some debt capital. In some of the earlier companies, though, it’s tougher because you are still figuring things out. It’s not as certain. You still don’t necessarily have some of the predictability in the model that we all, including the debt providers, are comfortable with then putting debt on top of the business.

We like to bring debt in once there is some predictability in the model. At that point, then it makes a lot of sense. We love doing it. We love Venture Debt as a tool for our founders. It also helps us keep some of our ownership. Once our companies get to that point, we would love for it to be less dilutive capital. Once the companies reach that point, then we’re all for it. We really think it’s a powerful tool for entrepreneurs to use and for VCs to partner up with providers like ARA.

Relationship Between VCs And Debt Providers

You hit on something that a lot of people have misconceptions about. I get a very common question, which is, how do you compete with VCs? My response is we don’t compete with them at all. We collaborate with them. In fact, without VCs funding good companies, there are no venture loans to make. You’re at the top of the funnel. It has to go through you before it gets to me, by definition. It would be helpful for you to talk a little bit about the relationship that VCs, in general, have with debt providers. Also, what makes some relationships better than others? What can venture debt providers do that will make them more helpful for the VCs and also the founders?

There are a lot of things, but the one I’ll talk about, I think it goes down to what you and I have already covered on this podcast, that a lot of debt providers think about the financial markets and think about macro and think about fundamentals of finance in a very different way than VCs do some good, some bad. Having that other voice in the room with you when you’re making key decisions about strategic growth and potential liquidity in the future is incredibly valuable.

A bunch of VCs get in the room, and we can all very much disagree on as many things as we do, but we’re still VCs, so we’re still thinking about the world through the same lens. When you bring in someone who is a different type of capital provider, it actually helps round out. How we’re thinking about strategic decisions makes the company more attractive as it grows. Especially as a company starts thinking about either, whether it’s M&A transacting, but especially when it’s going public IPO markets and some of the more public-facing market stuff.

That’s where I’ve seen a significant amount of value by working with other types of capital providers with our companies. Another one is sometimes equity is just too expensive especially when we’re doing roll-up strategies. We’ve done a few roll-up strategies at Mercury and every time debt has been a super powerful tool for us to use there instead of just equity capital. At some point, equity capital is way too expensive for how much you need to really execute on a good roll-up strategy.

Those are great points. You hit on something that I talked about with Dan Espinal, whom you’ve referenced a couple of times. For those that don’t know, Dan was on episode 8 of season 2 of the show. Great operator, a tremendous operator, a great guy, has super high integrity, and is a great leader. We were talking about venture debt. For him, he said, “What it really brings these portfolio companies is accountability.” That was the word he used. I thought he really nailed it with that because it’s very different to raise a round of debt than it is equity.

Having your ducks in a row suggests how you're running your business. Share on X

We talked about before, you can raise equity with a pitch deck, blow all the money on whatever you want and nobody’s really going to hold you accountable. There’s nothing they can do to hold you accountable. With debt, it’s a different story. You have to have demonstrated success and real money to pay the loan. Pay the interest and pay it down over time. If you don’t have that, it basically signals that your house is not in order. I actually think, and it puts me on the record for this now.

We will see over the next 5 to 10 years that venture debt becomes almost like a must-have to validate that companies are real and they’re going to be accountable for what they say they’re doing. It’s basically like a stamp of approval because you can bullshit some equity VCs, you can’t BS me. I am going to find out exactly how much money you have and how your business is run and every single weakness. If you can get through that, it signals to the market that you’re the real deal.

What that means is that just by a good venture lender investing or making that loan, your equity valuation should go up from that signal. As you should go from, you’re worth X today, you pass through this rigorous due diligence process with a very respected venture debt provider, now you’re worth 1.2 X right off the bat.

I think venture lenders that are smart will start to realize that and say, “If we can help you as a portfolio company build value just by being partnered with you, you can share some of that with us, too.” I think it’s going to start to change the dynamic where smart portfolio companies and their VCs are not just going to look for the lowest form or the cheapest form of debt capital. They’re not going to just go out to some generic commercial bank and say, “Give me a loan at prime plus 50 basis points.”

In the grand scheme of things, that’s small money. You’re trying to become a unicorn and you’re telling me you give a shit about like a couple of hundred basis points of interest on an enterprise that’s worth 15 to 20 times the loan amount? Ridiculous. That’s what I think is going to happen. Mark my words, best startups going forward are going to start to partner with the best lenders. That state of approval is going to actually catalyze their next equity raise or their exit and increase their valuation almost immediately. That’s it.

I love it. I actually think there’s another piece of it, which I’m sure you’re getting to, but I think you’ve talked about some of the external validation pieces and the accountability, but it’s not just the accountability. It’s also the CEOs. The accountability is a huge piece of that. Maybe a sub-piece of it is actually that.

Now, the CEOs and management teams of these tech startups actually understand and build a new muscle that they have from a reporting requirement or that they have from whatever it might be that is just a bit of a higher bar or a different bar than some VCs have. By building that muscle, it makes them much more versatile as a management team that is just going to make them better as they continue to scale and think strategically. Overall, it’s a great addition to start a Pico system.

I’ll give you a real-world example that that’s tangible. Through a debt raise with a reputable debt provider, you’re going to need to have a solid data room. You’re going to need to have a lot in that data room. It’s neat. It’s going to need to be well organized. You’re going to need to have all your ducks in a row. Now think about what that means for your next equity race. Now, when you go to raise equity, you’re already exceeding that bar.

 

You’re sailing over it as if it was nothing because you’re like, I already raised debt capital. That’s ten times harder than raising equity capital. This is what I think a lot of people don’t understand, going through this debt raise, it’s painful. Going through diligence is painful. It’s painful for me in the sense that building my company when LPs want to invest in my fund. I have a 100-page DDQ. Built to Ilpa standards. That’s just the starting point. I’ve got 200 documents in our data room, and it’s on point because that’s what I need to do to attract institutional capital. That’s the bar that they’re looking at.

It’s very different, of course, in the startup space, the bar is much lower for many valid reasons, too. There’s not as much data and not as much track record, I get it. That said, if you’re a startup and you want to stand out and all your peers have a sloppy pitch deck and a sloppy Google drive, and you’re coming with a full-blown institutional quality data room, who do you think people are going to invest in? You or your sloppy peers? It’s a rhetorical question. It’s obvious. It’s like 100% of the time or 99% of the time, let’s say, they’re going to go with those that have everything buttoned up.

That really does, like just going back to data rooms, even in the early stage where we are. Having your ducks in a row at a point where it’s not sloppy, makes us think that’s how you’re running your business. If it’s sloppy, that’s probably how their Dropbox looks. That’s how their customer onboarding process looks. That’s how their product specs look. It goes across the spectrum on the stages because you don’t need an institutional quality data room when you’re a seed stage company because you just don’t have that much information. As you grow, you’re working towards that. I think working towards that is always a good goalpost to go towards, for sure.

Perception is a reality in the early-stage investing world. It is. I mean, perception is what people invest in. They’re not investing in a track record or hard data because it’s not there for the most part. How do you create the perception? It’s all about signaling. It’s the same reason we go to good schools. It’s not like I’ve learned more at the University of Chicago than I would have learned out of a textbook. It signals to people, “Zack must be smart. Like he went to the best business school in the world.”

They wouldn’t know that. If I could be even smarter, there are many people smarter than me who didn’t go there and nobody is giving them that respect because they’re not signaling it. It’s also part of the reason why I think, a lot of folks say education is going to go away or higher education is not going to be necessary anymore. You’re not going to need to go to Harvard, Booth, or Stanford because you can learn it all online. I’m like, that’s not why people went there to begin with.

That might change a little. I think the only thing that will change it though is that massively successful people over and over and over again, over decades, if they have different backgrounds, then people start to realize, “It’s not such a strong signal.” I think it’s always going to be a signal. I think people are just going to recognize, I think people already are, that there are other signals you can look for. Besides a Harvard HBS or whatever it might be.

AI And The Future Of Venture Capital

I know we’re just about out of time. I wanted to just give you the opportunity to leave us with some parting thoughts. Maybe it’s where we go from here. Actually, before you do, we have to talk about AI for at least one minute because I got to keep the record going and talking about AI in every show. Quick thoughts on AI. Do you guys do anything in AI?

Yeah, we do. We’ve actually been doing some AI things for quite some time. The way that we’re looking at AI is that it’s a very efficient thing, a technology that you can apply to certain business models and businesses. Some make more sense now. Some will make more sense in ten years from now. It’s really identifying, I think, as our firm. I wish the whole industry was doing this, but we are an industry that chases outliers. Unfortunately, we’re in an AI bubble, most likely, but the way we’re thinking about it is, does this make sense for the actual business you’re trying to build and doesn’t make sense for the customer journey?

We think about the customer journey all the time. If the customer doesn’t care that this is AI-enabled, then you have to have a real reason why you’re adding that into your product suite. That helps us cut through a lot of the hype-driven companies out there right now because when you’re in hype cycles, people make a lot of money in hype cycles. Again, that’s not our model. We have to think about what is real here. How does that apply to real businesses? How does that apply to real customer retention or customer adoption? That makes a lot of sense.

 

That’s how we’re thinking about it here. We’ve done quite a few investments in it over the years. We actually have also spun out. One of the co-founders of Mercury, Dan Watkins, spun out. It was years ago. Mercury Data Science was building a lot of different AI tools or AI-enabled products for our portfolio companies. We’ve been pretty deep in it for a while.

Mercury Data Science has now been rebranded to OmniScience, which is super interesting, but I’ll let everyone check that out if they’re interested. They’ve rebranded. One of the things that they’re chasing is all of the knowledge that they built up over time over AI, and then how we productize that, and then turn that into these consulting contracts that they had, turn that into product type revenue, and they’ve been able to do it really well.

That’s really interesting to us. We have that knowledge bank as part of our Mercury Core portfolio. We’re really lucky there. I would advise people who are out there either looking at AI deals or LPs looking at AI-type funds to make sure that it goes back to your story, Zack, on the Pinterest story. One AI deal or two AI deals isn’t going to mean you’re a good AI investor. Think about where the puck is going. Why does AI fit into that? Have a high conviction for that and invest in it. That’s how we think about it.

That’s great. I appreciate that. You nailed it with the do customers want it because just AI doesn’t mean it’s better. When I call up a company or customer service line, for instance, the last thing I want is something AI-generated. I don’t want to talk to a chatbot. I want to talk to a human who can solve my problems, people who are applying real intelligence. That’s the whole point. We knew this was coming.

We knew it was going to be AI-dominated in ten years. This was five years ago. The thought was what’s going to be the opposite of AI? The opposite of AI is applied to real intelligence, human intelligence in other words. There’s a use case for both, but we’ve got tens of thousands of years of use cases for human intelligence working quite well. We don’t have much evidence that AI is going to do everything that we hope it will do.

The innovation curve is very steep and we need to keep a finger on the pulse a lot for what type of data our language models are ingesting and how that actually applies to how people are making decisions. That’s another conversation for another.

We’ll have to get you on again. I know you have to go, but I really appreciate you coming on. Thanks, everybody, for reading this episode featuring Samantha Lewis, a partner from Mercury Fund.

 

Important Links

• Zack Ellison on LinkedIn
• Applied Real Intelligence (A.R.I.)
• 7 in 7 Show with Zack Ellison on Apple
• 7 in 7 Show with Zack Ellison on Spotify
• 7 in 7 Show with Zack Ellison on YouTube
• 7 in 7 Show with Zack Ellison on Amazon Music
• Samantha Lewis on LinkedIn
• Mercury Fund
• Transforming Animal Health: A Veteran’s Path from VC to Founder with Dan Espinal – Past episode
• Thinking in Bets
• 7 in 7 Show Disclaimer

 

About Samantha Lewis

Samantha Lewis, a Partner at Mercury Fund. Her specific focus is on Mercury’s Power theme, where she seeks to fund startups utilizing blockchain, data platforms, and fintech to rethink the way people access capital and opportunity, build wealth, spend money, and organize as communities.

Samantha currently serves on the boards of Mercury portfolio companies Apparatus (infrastructure), Arden (infrastructure), Civitech (data platform), Brassica (fintech infrastructure), and Cooklist (data intelligence).

Samantha is an active Kauffman Fellow, the world’s premier venture capital fellowship. Prior to joining Mercury, Samantha was the Investment Director at Goose Capital, a Houston-based investment group of serial entrepreneurs and F500 CEOs, where she led deal sourcing, structuring, and portfolio management. During her time at Goose, she led investments in Syzygy Plasmonics, Rufus Labs, and Emerge. Samantha is a repeat entrepreneur with a background spanning agribusiness, logistics and supply chain, beauty, and deep tech.

Samantha received her MBA from Rice University and a B.A. in Political Science and History from Texas A&M University. Samantha remains deeply committed and involved in the efforts to build diverse, robust innovation ecosystems. Outside of Mercury, Samantha actively mentors founders, teaches a Venture Capital class at Rice University, and supports Ukraine through fundraising and medical supply deliveries.