Capital Series: Sandy Guitar, HX Venture Fund

Financial Services

Jun 14

This episode is part of our new Capital Series hosted by MCJ partner, Jason Jacobs. This series explores a diverse range of capital sources and the individuals who drive them. From family offices and institutional LPs to private equity, government funding, and more, we take a deep dive into the world of capital and its critical role in driving innovation and progress.

Sandy Guitar is the managing director of HX Venture Fund.

HX Venture Fund is a fund investing in venture capital funds and they are seeking to transform Houston into a world-leading hub for innovation by bringing together key players in the ecosystem, linking investors to startups and startups to capital.

In this episode, Jason and Sandy discuss Sandy’s background and the origin story of HX Venture Fund. They delve into the fund's inspirations from various regions, highlighting the key factors contributing to its success elsewhere and the rationale behind applying their model to Houston. They also talk about the current standing of the firm, their investment criteria, and notable examples of their investments. Looking ahead, Sandy provides insights into the future direction of HX Venture Fund and her aspirations for Houston's future.

Get connected:
Jason Jacobs
Sandy Guitar / HX Venture Fund
MCJ Podcast / Collective

*You can also reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.

Episode recorded on May 18, 2023.

In this episode, we cover:

[3:03] An overview of HX Venture Fund
[5:00] The firm's origin story
[10:17] Sandy's background in venture capital
[15:03] HX Venture Fund's portfolio split
[15:47] Key learnings from the firm's first fund
[18:52] Early VC focus on strategy compared to returns
[20:20] How HX sources deals
[21:28] The firm's energy transition investments
[23:39] Venture Houston event on September 7, 2023
[25:20] Houston's role in the energy transition and major players in the city
[31:10] Criteria for evaluating funds in energy transition vs other categories
[33:41] Traditional vs non-traditional portfolio construction and HX's position on the two
[34:51] Generalists vs specialists in the energy transition category
[36:34] Importance of impact tracking
[39:12] How strategic LPs engage with HX Venture Fund and its portfolio companies
[46:45] Sandy's thoughts on growth vehicles
[51:13] Advice for emerging funds working with fund of funds vs directly with strategics
[56:55] What success looks like for HX Venture Fund and measuring it beyond financial returns
[59:43] How HX Venture Fund sets itself apart
[01:03:29] Who Sandy wants to hear from and where HX needs help

Jason Jacobs (00:00:00):
Today on the MCJ Capital Series, our guest is Sandy Guitar, managing director of HX Venture Fund. HX Venture Fund is a fund investing in venture capital funds and they are seeking to transform Houston into a world-leading hub for innovation by bringing together key players in the ecosystem, linking investors to startups and startups to capital. We have a great discussion in this episode about the origin story of HX Venture Fund, some of their inspirations from other regions, some of the reasons that it's been successful in other regions and why they thought this was the right model to apply in Houston. We also talk about where they are to date, their criteria for investments, some examples of investments that they've made, and directionally where HX Venture Fund will be heading in the future and where Sandy hopes Houston will be heading in the future as well. But before we start,
Cody Simms (00:00:58):
I'm Cody Simms.
Yin Lu (00:01:00):
I'm Yin Lu.
Jason Jacobs (00:01:01):
And I'm Jason Jacobs. And welcome to My Climate Journey.
Yin Lu (00:01:07):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (00:01:13):
In this podcast, we traverse disciplines, industries, and opinions to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help.
Jason Jacobs (00:01:26):
And with that, Sandy Guitar, welcome to the show.
Sandy Guitar (00:01:30):
Thank you Jason. Excited to be here.
Jason Jacobs (00:01:32):
Excited to have you. We did no prep call. This is our first time speaking, but I'm hearing so much about you from my partners because as you know, we are doing this the beginnings of a world tour. We've got a few stops planned just to kind of get out and meet people in person and Houston is such an important contributor to the clean energy transition and it's an area where we know a few people but we're not that tapped in. And everyone we talk to says you need to know Sandy. And so we got introduced recently and I know you're going to be involved in this event when we come to town and I'm so excited to learn from you and to have you on the show.
Sandy Guitar (00:02:12):
Thank you. And we're really excited to host you. Houston is on a journey itself from the energy capital of the world to the energy transition capital of the world, but to really make that journey work, we need My Climate Journey. We need your ability to echo the amazing parts of our founders like you already have with Gaurab Chakrabarti, Moji Karimi, Trevor Best and more. Amplifying their stories is part of building this ecosystem and a really important part of that. So thanks for helping us with that.
Jason Jacobs (00:02:48):
Of course. I mean selfishly we're trying to learn ourselves. And speaking of learning, maybe just to frame the discussion for me and for listeners, it'd be great if you could talk a bit about HX Venture Fund, what you do and how and why you came into being.
Sandy Guitar (00:03:03):
Sure. Thank you. So HX Venture Fund is a venture capital fund of funds focused on two key things. Number one, like most venture fund of funds, we are focused on high returns for our limiteds, but very importantly and a equal second I would call that is our ability to connect Houston's innovative corporations with top tier venture capitalists at Houston founders. So there's a triangle here that we are very deliberately trying to convene and the reason we're doing that is that traditionally Houston has been a flyover city for venture capital and that is changing and we would like to hasten that change, if you will. The way we do that is we invest in great VCs that would pass anybody's test in terms of producing top tier returns, but also find those VCs whose investment strategy we believe will find fertile ground here in Houston. Now I'm choosing my words carefully there because it is a carefully constructed concept.
(00:04:14):
If we asked star VCs or tried to sort of force an investment in Houston, we of course would not get the best venture capitalists as part of our model because they have so many choices. They're oversubscribed funds and of course are running co-mingled funds which are honoring the needs of all of their limiteds, not one limited. For that reason, we are working to make sure that their investment strategy is something that we think will work in Houston. And then behind the scenes we make the introductions with sourcing young founders to the right kinds of VCs and connecting corporates in at the right time of the conversation. We're doing that every day so that cap tables eventually are built more faster.
Jason Jacobs (00:05:00):
When did the firm come into being?
Sandy Guitar (00:05:03):
So in 2018, Houston had a bit of a conundrum. We like many, many cities didn't make Amazon's top list of locations as they considered significant headquarters. And we were frustrated by that frankly, the greater Houston world and specifically the Greater Houston partnership, which is a collection of about 140 CEOs here in Houston focused on Houston's development. And we were like, why is this happening? From that conversation amazing people who preceded me, including my partner, Guillermo Borda and an amazing woman now GP of Genesis Park called Gina Luna came together and said, what can we do about this? At the same time, there was a gentleman called Chris Rizik, he runs Renaissance Venture Partners in Michigan and he came to Houston and said, "If you really want to make Houston a destination for venture capital, you should try this model that we," Chris says, "are using in Michigan."
(00:06:09):
It says, invest in VCs, ask them to come to town and look at your deal flow and if you pick the right VCs and if you have the deal flow, this model can have an amazing multiplier effect on the innovation life cycle. Well, Guillermo and others got together on that concept and said, let's give this a try. And thankfully Cornerstone Limiteds came and put their capital together and trusted us with it, namely people like Insperity Corporation, LyondellBasell, Shell, Chevron, HEB, many great corporations here in Houston and they said, let's co-mingle this capital. And they gave HX Venture Fund the privilege of enacting this model. So since that time, that's now late 2018, we've invested in 16 venture capitalists, all superior VCs from the Bay Area, New York, Boston, and invited them to our community. We do that through formal events once a month.
(00:07:07):
We basically have a VC here, yesterday Scale Venture Partners was here from the Bay Area and then we do one of big event a year called Venture Houston where about 50 or 60 VCs come. Listen, they have one very important purpose, which is sharing acumen with the audience. We think that matters because we think if founders can hear advice from those who have been there and done that, it can save them a pivot. And that can mean everything to a founder. But it's not just that, behind the scenes of these events are a lot of conversations that eventually lead to building cap tables and we've created proof points along that dimension. So we're really proud of that.
Jason Jacobs (00:07:46):
And just from a logistics standpoint, what fund are you on? Assets under management, typical check size when you invest in funds, just whatever kind of general information you can share.
Sandy Guitar (00:07:56):
Yeah, so we're raising that right now. So we can't go into too much detail, but we have investments in about 16 funds and our investments are typically single digits, millions. And our influences not just in our capital but also in the way we activate. So basically what happens when a VC works with us, they come into Houston and in 24 hours we introduce them to corporate CEOs, Houston founders and other ecosystem leaders such that when they leave this community, they tell us that they've made networks in a day that would otherwise take them a year to get to know the ecosystem. That's our goal. Interesting parallel, Jason, so last year, venture Houston, we were lucky to have Dana Settle of Greycroft interview, Gwyneth Paltrow here in Houston, actually in this building I'm at right now, which is significant, a building called the Ion, which is our innovation hub for Houston.
(00:08:57):
And here at the Ion, Gwyneth and Dana told the story of LA 10 years ago, right? 10 years ago, LA was also in many regards a flyover city for venture capital, but it had obviously a superpower in media. So quite deliberately, perhaps more deliberately than people realize, they use their superpower in media to attract venture capitalists to the community. And fast-forward today, LA's undeniably its own center for VC and VCs obviously reside, fly there all the time, it's quite a well-developed ecosystem. There's a parallel there, we believe for Houston. We have superpowers in solving really hard problems, the problems of getting to Mars with NASA, the problems of solving cancer in the Texas Medical Center and the problem of solving the movement of energy to a successful energy transition. These are massive global problems that take molecules more than electrons to solve. And we have the talent and the capability and certainly the objective to do that here in Houston. So that's a big part of our journey.
Jason Jacobs (00:10:17):
And I asked you some overview questions about HX Venture Fund. What about the Sandy story? So how did you come to do the work that you are doing? And also you mentioned in the brief couple minutes we talk before we hit record, that this has been a transition for you from, and I don't want to put words in your mouth, but from bits to atoms, so it'd be great to hear a little bit about that transition as well and where you are on that journey.
Sandy Guitar (00:10:38):
Absolutely. It has been a big and exciting journey. So I started in VC in 2000. Prior to that I was working in consulting and then for a short stint actually in a traditional oil and gas company, helping them build their first internet and intranet and their IT strategy. This is in the late '90s. And I had an amazing boss at the time who said to me, "You'll do fine here at this company, but if you really want to fly, you might want to consider my husband's company. He's building a venture capital fund of funds." So I got lucky enough to join her husband's company. It was called Knightsbridge, it's a venture capital fund of funds quite established. And I was there from 2000 to 2006 where I sort of learned what venture was about. And this was a product of venture capital, late '90s, early 2000s, this is what I call fund of funds 1.0 when the game of venture had top 10 players and success was how many of these top 10 were you in?
(00:11:46):
And if there are two or three funder funds sitting side by side, maybe Jason, you had a funder funds and I have one, and you got into 6 of the top 10 and I got into 5 of the top 10, limiteds and consultants like Cambridge would scorecard you and I and they always said, "I'm going with Jason, he's got 6 of the top 10, Sandy's only got 5." So that was sort of the rules of the road. At the time there weren't that many players and there was this very strong sense of here are the best. And then there are a few others. In mid 2000, specifically 2006, myself and three of my former partners spun out to co-found Weathergage Capital. Weathergage was a fund of funds that took a different turn on this. We said yes, access to the great names resource is absolutely important, but we also knew that we were at a time after those 99 upswings and then the collapse, the great talent was spinning out to form lower Roman numerals.
(00:12:43):
And Roman numeral itself wasn't the correlation with success. It's actually of course more about the GP, their chutzpah, their grit, et cetera. And we were very successful, thanks largely to my partners there in accessing groups very early on that today are in a very sort of enviable, highly branded state. And what we knew under the covers is some of those Roman numeral twos force ranked really high in returns as compared to some of those with very high Roman numerals. And to quote one of my partners, the leading indicator of success for a venture fund in our view was the reference calls with the founders, lagging indicators of success was brand strength. So brand strength lives on for a long time, but it may not be relevant today, it may or may not be. And you can't be lazy as a fund of funds to use brand strength as the highest correlation.
(00:13:45):
So we build a great platform on that over a billion and four top quartile funds of funds successively and I learned so much during that time typically about capital efficient software. And towards the end of that journey, B2B SaaS related venture capital investments, my partners who are older than I decided to sunset the firm and we are still working together as Weathergage, but it's a distribution business now. We don't raise or invest new capital, which freed up my time and with their blessing, I went on to take on what I'm calling now fund of funds 3.0. So if fund of funds 1.0 is about the top 10 in the '90s and fund of funds 2.0 is about what I call fresh DNA. New groups backed by very experienced VCs, but now with low Roman numerals, fund of funds 3.0 in my opinion. And one of the reasons that I chose HX Venture Fund as my next journey is the entrance of corporate venture capital side by side with financial venture capital and how that combination can take on some problems that capital efficient software alone may not be able to as well.
(00:15:02):
So we've built a portfolio here that top [inaudible 00:15:05] puts about a third of our capital in the life sciences, everything from therapeutics to digital health, medical devices included. And then a third of it is traditional B2B SaaS, the home of venture capital traditionally. And a third of it is energy transition. And why? Because for many reasons, because we believe innovation lives there, but also because we believe those three pillars are very relevant to Houston given that we have the kind of hard tech expertise here as well as soft tech expertise to leverage things like the Texas Medical Center, like NASA, like the energy capital of the world as we go to the next stage of innovation.
Jason Jacobs (00:15:47):
So when you set out to pull together your fund one, which presumably we can talk about since it's in the rearview mirror, how did you think about LP composition and the mix of those financials and strategics? And also which one did you start with or did you just go broad net out of the gate? And similarly, how did you think about and what was the pitch in terms of the criteria for funds that you would back and then how has that manifested with the 16 that you've backed so far?
Sandy Guitar (00:16:17):
Yes. So Guillermo Borda started this idea and gathered around the table with the help of many leaders in Houston, a subset of the Greater Houston partnership, which is really an amazing organization that Houston benefits from which is sort of a chamber of commerce on steroids, the top CEOs of Houston coming together for the betterment of the whole of Houston. And in that community certain key leaders stepped forward, Insperity, which is as sort of human capital management and HR benefits corporation under the leadership of CEO Paul Sarvadi was the first to step forward and then many followed him. Paul Sarvadi, by the way, himself is a driven entrepreneur and built the business from nothing. So he understood the entrepreneur's journey and the power of that given their significant presence in the HR world now. And he helped us gather the kind of capital to gather that was interested in making this transition work.
(00:17:21):
Also key was Chris Rizik, the founder of Renaissance who could come into the room and say, "Hey, it's working in Michigan and if it works in Michigan, it should work even better in Houston." So with his credibility as well and with the leadership of Guillermo, we were able to get this started. And what did that look like at first? Well, one of the interesting things that I noticed at first was that corporate VCs we're not that interested in returns. And that was very foreign to me because my prior LP base at Weathergage and at Knightsbridge quite rightly obsessed with returns as were we. And we had to start with the conversation of what if you really don't care about returns, we may not be the right partner for you because we believe deeply that high returns are correlated with companies that are going to be built to last, make it to Main Street. In fact, we think that's the highest correlation of that kind of success.
(00:18:20):
And we talk to corporates about your time is valuable and your innovation team here is trying to create huge KPIs. Let's make sure we put that muscle behind the right kinds of companies. And if we introduce companies to you that are not making high returns, then they may fizzle out and that effort may be lost. So it was interesting, we had to sort of convince them, first of all that returns matter.
Jason Jacobs (00:18:50):
What did they care about Sandy?
Sandy Guitar (00:18:52):
They cared supremely about strategy, right? They're solving, trying to solve some strategic problems that are inherent and specific to their market map. We believe we can do both. And we said, listen, we can source fantastic high-growth companies from our portfolio on a look through basis and make those introductions to you so that you could be an early customer in those companies or a co-investor in those companies. But we only want to introduce to you companies that we think are going to go all the way to Main Street. We're doing early stage venture investing that requires partnering with great VCs who've been there before, done that and have a proven track record, whether that's in low Roman numeral that's parsed apart in their prior lives or in higher Roman numeral with the existing team either way. And you know what, the world since then has come along in corporate VC to now I'm hearing that mantra more and more, but three years ago it was actually a lonely phrase, returns matter.
(00:19:54):
Now I think they're seeing that corporation and I think there's a lot of sophistication being built quickly in the corporate VC world. Of course it's, they've always been sophisticated investors strategically, but I feel a turn now that incorporates the kinds of financial metrics that the B2B SaaS venture world has always embraced. To your question of how do we source deals? We source deals a lot like the Weathergages and Knightsbridges of the world, which is we have a very defined 14 step process. That 14 step process is tendered on the idea of find a fatal flaw fast because you trying to keep a very broad top of the funnel.
(00:20:38):
We literally have looked at over 500 funds since 2018. We think that's super important in order to avoid what we call type two error, you want to make sure you see great deals, see all the deals, to find the great deals, and then we have a very defined process to narrowing the funnel in ways that makes sense to us. And it starts with financial metrics because if this isn't a group that can create the kinds of returns we need, that's a non-starter for us. But then within that community of those that make great returns, we then apply our thinking of what we think will work well for Houston. And that is predominantly, I would say 75% early stage with some growth equity and it's about a third B2B SaaS, a third life sciences and a third energy transition on a top-down basis.
Jason Jacobs (00:21:28):
And I'd love to talk about that third energy transition. So what do you look for? Where are you on that journey of defining that criteria and how active have you been to date in the space?
Sandy Guitar (00:21:40):
Yeah, so we are still in the learning curve, but we're getting more sophisticated quickly. So I would say we've been digging in for about a year now. We've reviewed about 130 on our market map of which we've probably met and dug in with about 20, 25 groups. And we're learning what great looks like, but we have a prepared mind now. I won't say we're anywhere close to the end of our learning journey because I don't think that ends, but I think we've really come through a big hump over the last sort of nine months of understanding and bucketing for us the best generalists in this space, the best specialists in this space and the best impact players. And we're trying to figure out which of these are best for us. We intend to make three to five investments in the coming year. I'm super excited about 2023 vintage year for reasons I think we all know.
(00:22:35):
Now is a great time to get started in this. We tilt towards early stage because of the return potential there. But in energy transition in particular, we also think growth equity is pretty darn important because of the higher level of tech risk that needs to be understood in this journey. So some of what we have done is look at some of the greats that you've interviewed, Jason here on My Climate Journey, the Houston founder greats. They've been super kind at sharing with us their journey in finding venture capital, what worked for them, what didn't? Everything from MIT, the engine who got Gaurab Chakrabarti started to other sources of capital as well that fill out those cap tables. And those VCs are coming here for board meetings once a quarter already. So we're leveraging that flow and going beyond it and as a result we think we have an idea of what we're looking for and we're getting ready to deploy here soon.
(00:23:39):
I don't want to give too much away on in terms of who and where for, but I will say we're bringing together a lot of VCs at an important event coming up on September 7th in Houston, and that's our big event called Venture Houston. So Venture Houston 2023 on September 7th is actually about the intersection of digitalization and decarbonization. It's very brutally defined on decarb, so it would be everything including B2C sides of that, everything in the life sciences as well, but also traditional energy transition at the core.
(00:24:13):
And we have amazing VCs coming to us, the GPs of groups like Congruent or Prelude or Lowercarbon or many others. So we're excited. Keynoting for that is Carmichael Roberts who is the chairman of the Breakthrough Energy Ventures investment committee and he will be facilitated by Reggie DeRoche, the president of Rice University, who is doing incredible things for Rice in the innovation space alongside Paul Cherukuri. So we're launching that conversation all day long and behind the scenes we are making sure that Houston founders are meeting great venture capitalists in this space. We think deals will get done in that way when you fast-forward 6, 12 months from there.
Jason Jacobs (00:24:59):
Well, there's plenty more questions I have about the actual fund of funds and that energy transition bucket, but maybe I'll switch gears for a moment and just talk about Houston because as you said, Houston is transitioning from being known as the city for energy to the city for the energy transition. Where do you think Houston is on that journey? Where do you think the big companies, whether they're LPs in HX venture fund or not, are on that journey and when do you think the tipping point is, if there is one where the pendulum shifts from protecting existing to leaning hard into the transition without looking back?
Sandy Guitar (00:25:44):
Yeah, I think it is an extremely exciting time right now here in Houston, the energy globals here are fiercely focused on the transition. They're putting their top human capital and their dollars behind it. They're doing so of course for business reasons. Many of them are also doing so for other reasons and Houston frankly will depend on this outcome in part. So there is a lot of energy and I will say a lot of excitement on this journey. I think you'll see it when you come. I'm so glad you'll come and that will help galvanize this, right? Because convening matters when you're in an early stage of building an ecosystem and a movement. So My Climate Journey coming is a amazing thing too. But we are convening all the time, literally every day on this topic somewhere. Greentown Labs has their second location here in Houston and the global head of Greentown's investment, Juliana Garaizar is the head of the Houston Greentown Labs.
(00:26:58):
We have amazing ecosystem here between the Ion, which is the convening body and building that I'm in right now and Greentown and the large corporates. This is a constant conversation and deals are getting done every day here. Really interesting to the deals on a, one of your prior podcast noted this that you need a certain kind of scientist to build great energy transition companies and we have them resident here. So isn't it fascinating that Moji Karimi from Cemvita and Nic Radford from Nauticus were both NASA engineers, they were solving zero gravity and then they took it to a different place. I think this is fascinating. So in case of Nic Radford's journey, who would be a great speaker sometime on MCJ, he built a subsea robot and is using all his zero gravity knowledge to send robots out to the subsea in ways that mean that large vessels don't have to go out to fix problems in the deep sea.
(00:28:10):
So it's having those kinds of engineers in the game that is super important. Listen, a Houston founder and a Bay Area founder are so different and I think it's really fun to make up compare and contrast. Houston founders didn't go to Stanford, typically. They went to Purdue or like Trevor Best, they went to Texas Tech and hung out in Midland or they went to science oriented places like that, perhaps not the heralded Ivys in old cases, right? They then didn't go straight to the cool B2B job that was born out of Sandhill Road. Instead, they went to Baker Hughes or Schlumberger, Shell or Chevron, and they got frustrated by some problem that they didn't feel they could solve in that environment. And they had the optimism, the drive, those characteristics that you guys looked for at MCJ for membership. I think they're brilliant. They have those characteristics, the determination, the ambition, the optimism and the collaborative spirit.
(00:29:22):
I love those. I love those four pieces because actually I think they're key to ecosystem development, which is what we're trying to do and they're key to the movement that you're building. So it's something we certainly have in common and I think our Houston founders have in common as well. So look at Gaurab, Moji, Trevor, Nic and others. They're in their 30s, not their 20s, they're not in hoodies, they have pocket square type look to them physically, they have a great education, but it's not the well-trodden path of Silicon Valley. And there is a very important role for that founder. And if you're a VC and you're looking for a founder to move the transition, you're going to need to be in Houston. You're just going to need to be here to meet those founders.
Yin Lu (00:30:11):
Hey everyone, I'm Yin a partner at MCJ Collective here to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning. And doing that goes beyond just listening to the podcast. We started in 2019 and have grown to thousands of members globally. Each week we're inspired by people who join with different backgrounds and points of view. What we all share is a deep curiosity to learn and a bias to action around ways to accelerate solutions to climate change.
(00:30:38):
Some awesome initiatives have come out of the community. A number of founding teams have met, several nonprofits have been established and a bunch of hiring has been done. Many early stage investments have been made as well as ongoing events and programming like monthly women in climate meetups, idea jam sessions for early stage founders, climate book club, art workshops and more. Whether you've been in the climate space for a while or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to mcjcollective.com and click on the members tab at the top. Thanks and enjoy the rest of the show.
Jason Jacobs (00:31:10):
And you might not have these answers yet depending on where you are on your energy transition journey. But when you think about energy transition as a category, as you're evaluating funds, how is the criteria different, if at all versus the other two categories that you mentioned?
Sandy Guitar (00:31:32):
The criteria really isn't different. It is harder to find long track records in energy transition related fund investing with a same team that has been doing it for a long time. So in my prior life we took a close look at Cleantech at 1.0, we all called it, and this is 2006 to 2010 ish. We at Weathergage did a full market map of that space and at the end of that market map we determined to step aside and not play. That's hard to do when you put in a ton of work and looking back, it was probably right decision for us at the time. It's always risky to say now it's different. Every good investor is nervous about making that sentence, but I do believe things are different now. And I do believe it's also important to apply the same kinds of differentiated analysis on the energy transition that we do in other areas.
(00:32:28):
It's harder to find long track records, but if you put the work in, you can solve for that problem and you can find the great VCs that are most likely going to be leading this journey going forward in our opinion. So I said at the beginning we have two key criteria. One is returns and second is the ability to interact well with Houston. Point one's a little harder, you have to dig harder to solve for the financial piece, but you can and we have. And then point two is actually easier solving for people who want to engage in Houston is easy because almost all of these funds want to engage in Houston for the reasons I've mentioned.
Jason Jacobs (00:33:13):
So I mean I have a little punch list of questions just to pressure test thesis and try to understand it better. So when it comes to, for example, traditional portfolio construction versus non-traditional shots on goal, any bias there and as an example, like a typical venture fund with concentrated positions and lead and board seats and stuff versus like a Techstars or a Y Combinator or an SV Angel or someone else that maybe just has a kind of a fundamentally different point of view.
Sandy Guitar (00:33:41):
Right. We're still fairly traditionalist because we still believe that having board seats matters, that having enough skin in the game so that big winner can have an impact matters. So we are following I guess the traditional playbook there on the whole, although I will say speaking to some groups that challenge that and I love that and I learned from that. So I'm still digging into groups who are saying, no, we believe we can do this by investing in a 100 groups in a different kind of way. We haven't actually invested in one of those yet, but I'm learning and I'm open to learning, we are open to learning on that regard. But to date, our investments have been in the traditional model, early stage folks probably putting out 15 to 20 investments per fund spread over two to three years. Discipline deployment, board members whose references show that they know how to do everything from the CEO swap when that's needed to the side-by-side shoulder support when that's needed. So it's the typical sort of lean startup playbook I would say so far for us.
Jason Jacobs (00:34:51):
Ah-huh. And given that every sector and every geography needs to transition, how do you think about generalist versus specialist in the energy transition bucket and relatedly, are there certain categories that you're more interested in and certainly categories that you're less interested in?
Sandy Guitar (00:35:08):
Yeah. So this is a new problem with the energy transition that I think is different outside of the energy transition, which is the generalist specialist impact player buckets. So far we believe that the generalist and the specialists are both buckets we should be in. Generalists that force rank energy transition are really important because we believe that the decarbonization movement will be somewhat in decades to come like the software eats the world problem, this problem, decarbonization is going to become so ubiquitous within the venture investment space that you don't need to just stay in specialist buckets. And the generalist force rank I think adds really nice differentiation to the problem that belongs in our portfolio. But there is a specialist focus here and some of the science is so complicated that specialist investors I think are the right way to enact that. So we plan to pursue both of those buckets. Impact only gets harder because it depends how you define impact only, but to the extent impact only is defined as strategic over financial. We come back to our model of needing both financial and strategic.
Jason Jacobs (00:36:22):
Mm-hmm. I mean when it comes to impact, do you care whether impact is something that's quantified and tracked or given that you're strictly financial investors? It's just a financial decision.
Sandy Guitar (00:36:34):
We absolutely care, why because our limiteds care. So no, that's not the only reason I personally am involved in this movement. But from a business point of view, we care because our limiteds are trying to solve large energy transition related problems. Recycling, our limiteds include waste management, LyondellBasell, which is a $50 billion chemical company, et cetera. They are trying to solve all kinds of climate related problems right now and impact outcomes are the leading indicator to what will work for them strategically.
Jason Jacobs (00:37:10):
Why do your limited care about the impact tracking in the fund investing?
Sandy Guitar (00:37:15):
Because it's core to their strategy. So they are trying to create a world of energy that meets their customer demand, which absolutely includes clean energy and positive climate related outcomes. I love [inaudible 00:37:33] phrase world positive outcomes.
Jason Jacobs (00:37:36):
Ah-huh. How do you think about things like science risk, things like capital intensity and things like regulatory dependencies.
Sandy Guitar (00:37:45):
We're taking a close look at the role of venture capital side by side to infrastructure spend, private equity, project finance, et cetera, and trying to find the right place for us in that layered capital stack. We will be taking on some seed and early stage risk here with people that we think know how to solve for that risk as best as one can. The tech risk care is enormously important and costly. So to create the financial outcomes we're looking for, you're exactly right to press on this point. You have to be able to be with VCs who know how to do that and yet have a vision to identify early what great will look like.
(00:38:27):
So we're solving for this through diversification as a fund of funds, we're fortunate to be able to back probably 10 to 15 venture groups in each of our fund of funds. And within those groups diversify by stage in technology. We're not trying to call the bull as to which energy transition tech is going to be the winner. So we're trying to cover the waterfront, but to date, the VCs we're looking at aren't particularly deep in things like fusion and hydrogen, the longer plays, although some are speaking to that, but most of them are speaking more to technologies that can come to Main Street on mass in five to six years.
Jason Jacobs (00:39:12):
The strategics that are LPs, I mean you mentioned that they hadn't cared about financial returns, but now they're starting to talk about it more and that they've always cared about the learning and the strategic value. In what ways do they want to engage with the funds and, or with the portfolio companies directly and what typically do they have to offer if there is such a thing as typical?
Sandy Guitar (00:39:42):
Yeah, great question. So they are very interested in engaging in an efficient way. So most of these groups have relatively small teams and are using HX Venture Fund in some ways as an outsourced investment office for this. So what we'll do is we'll sort of cultivate our list and they're looking to first co-invest at the right time with the right people. So every day we are looking through our portfolio at underlying companies either directly in our portfolio or in the portfolios of VCs that we partner with sometimes from earlier funds in other words. And when they are doing rounds that are open to co-invest from corporate strategics, we introduce those corporates to those VCs and the founders of those companies, that's a win-win for everybody. So the VCs love that because that allows them to get strategic capital at a time when that kind of capital makes sense in the cap table typically a little bit later on.
(00:40:50):
And the corporates love that because frankly I think we play a role in culling the universe of potential opportunities in a way that is mindful of what will make it to Main Street and where their time will be best honored and their capital. So we've done that many times and have had great co-investments from those relationships. Essentially what it looks like is we'll say, okay, corporate A, we think you would like to co-invest in one of these three companies that we know of. And they say, "Yeah, Sandy, that one, but maybe not the other two." So we say fine, and we put those two, we go to the venture capitalists and say, "Hey, would you be interested in having a call with this great global corporate? They're interested in a strategic relationship with one of your underlying port codes." And the VC says, "Absolutely." And the Zoom call's put together.
(00:41:45):
Typically, we step aside at that point because then the conversation gets very strategic and confidential, especially for the corporate but also for the founder there. And we let that one-on-one interaction happen and in that way we've had co-invest happen right out of our portfolio. So that to the co-invest problem, same sort of process for early pilots, right? So we're meeting with our corporates every quarter and asking them what are they trying to now trying to solve? Because it changes obviously throughout the year. And then we take their pain points and we apply it to our portfolio on a look through basis to find companies that could meet those pain points. And then in our quarterly meetings we serve up to them. Here are a bunch of companies that you could be an early customer to or any of interest.
(00:42:33):
Again, they'll pick from a list, everybody gets a chance to opt in the conversation. And if there's a opt-in on all sides, we put that group together and step aside to allow them a private conversation. We've been enormously successful of late here with Houston Methodist, which is a very innovative hospital system here and a limited partner of ours who've adopted many of our healthcare related underlying companies in their innovation ward as they really take that hospital to the next level of healthcare and patient treatment.
Jason Jacobs (00:43:10):
What are your expectations in terms of how funds that fit your criteria should think about reserves and follow on? And relatedly, what about especially in this environment, things like bridges and down rounds as far as the use of that capital and when to participate versus not?
Sandy Guitar (00:43:27):
So depending on the stage of the fund, we're typically looking at one to one or two to one reserve ratios. And the discipline that we're looking for at reserves really important. We take quite a bit of time to look at prior track record board here to make sure that good money didn't follow bad and the VC is able to make those hard decisions of when to cut the cord or not. Actually, annual meetings right now are super insightful in this regard because there's some annual meetings where people are not willing to address this problem of potential down rounds, very forthrightly. And there are other annual meetings where people are being relatively aggressive on taking markdowns now and being forthright about the couple quarters to come here where we all know things got very toppy 12 to 18 months ago, that means that the runway is already running out for some, but for many it's going to accentuate in my opinion, in the third and fourth quarter, particularly in the fourth quarter.
(00:44:29):
And so we have more to come, VCs that openly address that, I find that very attractive from an investment point of view because we favor people who have the confidence to do the right thing. And yet also we're looking for people who are founder friendly to totally overuse a phrase. And what I mean by that is we are talking to our founder community all the time about how a venture capitalist interacts with them. Were they helpful? You're not always going to get the response you want from a venture capitalist if you're a founder, but are you getting what you need? Do you believe, are you getting it in a way that is respectful and helpful? That matters to us because we want to bring in sophisticated venture capital, but the kinds of VCs that will help us develop this ecosystem. We all know ventures been through cycles like this in the past where VCs, there's a shared power continuum between the founder and the venture capitalist.
(00:45:35):
And we've been through stages recently where the founder had the balance of power and now we're in a journey where the venture capitalist is assuming the balance of power and it's along a continuum of course. But with those shifts, relationship matters whichever side you are, but you've got to be cognizant of where you are in that and you need to play a long game knowing that these balance of powers do change with market cycles. And at the end of the day, reference calls really matter.
(00:46:04):
And I would say to a founder, work hard on that and try to not have too much bias when you hear the response, you've got this VC you're excited about, but if you're hearing feedback that isn't positive, be wary. As Alex said from Scale Venture Partners yesterday on stage he said, "Listen, if a VC is being unhelpful in your early conversations, it's going to be that way in the boardroom." It doesn't necessarily get better the deeper you go with one another. So being very mindful, I think of the way that relationship is formed and the trust on both sides and respect on both sides is really important.
Jason Jacobs (00:46:45):
You had mentioned before that you are primarily interested in early stage, but that growth is important too. If you were to look at a growth vehicle, any preference in terms of some funds might have a percentage of an existing fund that's allocated at the growth stage beyond pro rata in the winners versus a separate vehicle. And relatedly, any bias as it relates to an early stage firm that launches a growth fund versus a firm that is only focused at the growth stage?
Sandy Guitar (00:47:17):
Yeah, listen, in the energy transition, I think a dedicated growth platform makes a lot of sense. The specialization required both from a science point of view and from the scaling point of view, scaling these companies is a unique talent and opportunity. So we'd like to see that. We prefer in transition in particular to not have the same players doing the early stage as doing later, but a lot of these names are misleading. So opportunity funds as they're often called now may just be a second bolus of capital. There's not really growth capital. So I think you have to dig down into that. But if you're talking about true growth capital, we'd like to speak with the growth players for that capital, the dedicated growth players.
(00:48:09):
And there are many, and one of the advantages of that is many of the best have actually been through that sort of 2006 to 2010 phase, the 1.0 of this, if you will, and have some really interesting lessons learned that they can build on from that. I find that a very interesting combination, whereas in early stage the deal flow is so entirely different, they're building very different kinds of companies. So from a diversification point of view, I like to see a early stage fund that is doing entirely new kinds of innovation and then a growth fund that has been there and done that before and is deep in the scaling problem.
Jason Jacobs (00:48:53):
And when there's an early stage fund that might have allocation, for example at the growth stage, do you have a preference in terms of those just being double opt-in introductions and hands-off versus SPVs and economics from those funds? And relatively what responsibilities does that fund have as a fiduciary in terms of the diligence that they do to facilitate an introduction and is it different if there's an SPV versus if it's just an intro?
Sandy Guitar (00:49:21):
Yeah, generally speaking, I'm going to answer that at sort of a high level, which is generally speaking, we think these funds should stand on their own feet, avoiding tide sales, avoiding opportunities, relationship convergence that isn't economically pure in that sense. So each fund we think should stand on its own two feet, and ideally the limited has the opportunity to pick its flavor, right? Having said that, we have invested in groups where that is not the case. Oftentimes more folks that would be in the generalist spectrum who do have track records in all of this and who for strategic and simplicity reasons choose to couple these together, whether it's in one fund or in tide sales, it's really the same dynamic, just different structures. So it's not a one size fits all, but I think broadly the venture capital community is getting more and more sophisticated and with that sophistication that includes the limiteds who want to allocate as precisely as possible to various entities by stage.
(00:50:33):
And we're looking carefully at diversification by stage. So diversification by stage means that we may want to go early stage in VC one and the late stage sleeve in VC two, and more and more we're gathering that opportunity in the venture markets. 10 years ago, this didn't exist. It was all in one fund. So I think this journey is part of this journey of maturation of the venture industry broadly. And with that a level of sophistication in the offerings, VCs that get that and provide that option are showing to me a level of confidence in the market that again, I think is attractive and to be rewarded.
Jason Jacobs (00:51:13):
When it comes to selecting partners what advice do you have, let's say for an emerging fund in terms of when to work with a fund of funds like yourselves who have a bunch of strategics as LPs versus entertaining working with strategics directly? And then same question for the strategics in terms of when to work with the fund of funds in terms of deploying their capital versus investing in fund directly or investing in companies directly.
Sandy Guitar (00:51:41):
Yeah. So I'll take it the other way. First, so strategics I think are often doing both. So our strategics invest in us as a force multiplier to their work. And I'd like to think as an area of expertise to augment their own expertise. They are also doing direct fund investing, and what they tend to do is direct fund investing with groups, funds that are very specialized in pain points that are highly relevant to them. That's what we call solving for type one error, trying to solve a particular problem and then they focus with us to solve for type two error, meaning making sure they don't miss out on a great deal. So somebody who can help cover the whole, do a full market map and say to them, have you considered this group or that group with regard to those pain points? So we will help them in their direct fund investing as well as provide a portfolio for them that on a look through basis gives 300 to 500 high growth companies that may have relevance to their pain points. So in both ways.
(00:52:51):
Now taking the question as you first saw it the other way round, if you're a VC, how would you approach these strategics? I think the more you are in the specialized and impact side of the continuum, direct investing with corporate strategics is quite relevant. The closer you are to the generalist and specialist side, so that other, both of those, the less comfortable they may feel independently in that investment decision, at least our partners would probably look to us to opine on those as well. One thing that's important to note in this is a highly collaborative model. In other words, this is not a fund of funds gatekeeper model. If a fund wants to pitch directly to our LPs as well as to us, we welcome that. In fact, we facilitate that. It's all a win to us. I think the days are over where you define, you, fund of funds feel like, oh gosh, to introduce you to my limited is to somehow take away from my own platform.
(00:53:52):
If you have that level of thinking, I don't think you are on the right path for today's fund of funds world. I think it has to be what we call 1 plus 1 equals 11. The collaborative spirit works exponentially. So if I can introduce a fund as I did on Monday, I had two of our LPs meet a great LA based fund that everybody listening knows and it's not probably a fit or it may not be a fit for the fund of funds, but it may be a fit individually for our limiteds. So we like to work collaboratively in that way and we know that our limiteds value that service from us.
Jason Jacobs (00:54:32):
I know the denominator effect is a real thing with the strictly financial capital allocators. What about the strategics? What are you seeing out there just in terms of their appetite to do fund investing or fund to fund investing given the changing macro?
Sandy Guitar (00:54:46):
That's a great question. I don't think the denominator effect is as pertinent because they're not looking at a traditional endowment model execution. Sometimes this is just off balance sheets and so they're not subject to some of the same constraints. And honestly, I haven't given that a ton of thought, but I think that's a fascinating question. The logical consequence of that is that they could be great partners in the world coming up in the next several quarters for those looking for capital where the traditional endowment foundation space, some of them may be on pause.
Jason Jacobs (00:55:23):
And the types of strategics that you are engaging with, do they tend to have, and again, this is a generality and maybe there's no such thing because each one is different, but do they tend to have venture arms and is that where the decision tends to live? Or is it the CEO or the CFO or the head of innovation or who is thinking about this stuff?
Sandy Guitar (00:55:43):
Right. It's all over the map, but we think we partner best really at the CEO level. So it doesn't mean our daily and quarterly interactions are with the CEO, but the CEO needs to be involved in this strategic decision to get involved in the HX Venture Fund model for the model to really work because innovating through large global corporates is just very difficult and it takes top-down leadership. Having said that, KPIs happen when you have a chief innovation officer or something similar, you need somebody in a strategic seat who is at the execution layer. So the relationships that work the best, we have both. The CEO model and the chief innovation officer, or that person has many different titles depending on the corporation, but that strategic minded human that knows how to meet the strategy vision of the CEO, but understands the core business bottom up as well. So in most of the cases, we are lucky enough to have both. In some cases we only have CEO support and they're still building out, frankly, their innovation layer.
Jason Jacobs (00:56:55):
So bringing it back around, we talked early on in this discussion about how, and I'm paraphrasing what I think I heard, but tell me if I didn't hear correctly please. But that the real passion of HX Venture Fund is to put Houston on the map and that you believe that the best way to do so is by what you described investing in the kinds of firms whose capital coming to Houston would be a good thing, and then helping facilitate more of it. And of course delivering the goods from a financial returns perspective so that you can grow the piggy bank over time given that the financial returns is like an essential step on the road, but it's not the ultimate, it's not the driving motivator. What does success look like and how do you measure beyond financial returns?
Sandy Guitar (00:57:44):
Great question. So we're crazy about measurements. My consulting days are still very much a part of my DNA, and so it's multiple [inaudible 00:57:52] at the top line as you state. But underneath that, but equally important, we measure everything from interactions. We count every time we make introductions between founders and venture capitalists in our network, between founders and our corporates, between corporates and our VCs. That's the first layer. Those are collisions that are important, but they're not outcomes. We then of course measure how many customer pilots have started at our introduction, how many co-investments have started at our introduction, and we'd like to measure or on the path to measuring how many strategic acquisitions we'll be at our introduction. So those are where the rubber meets the road on what we call activation.
(00:58:41):
A quick shout out to an amazing woman who makes this elephant dance. Her name is my partner Aleece Hobson. So Aleece worked with us at Weather, worked with me at Weathergage in her prior life, and fortunately we were able to entice her over to HX Venture Fund as well. So she's also steeped into the fund of funds universe, but she tirelessly every day is making those introductions between venture capitalists, founders and our limiteds. She's the one that drives those quarterly conversations with corporates, measures the pain points and maps them. And then she and I connect on the VC side and say, okay, you've got these sets of pain points and then I'll get out my VC book and we'll try to make those interactions. And we do so in a pretty sophisticated Salesforce plus Tableau data warehouse kind of way, and we hold ourselves accountable to them. So that keeps us eye on the prize and keeps us hungry for outcomes. And I love the culture that we've developed on that and I think it's appreciated by our limiteds.
Jason Jacobs (00:59:43):
I guess my final two questions. One is if you want take a moment and just speak to any, whether it's a strategic or a financial limited partner, just why HX Venture fund. And then same question in terms of the venture capital firms that you might want to partner with. That's kind of topic one. It's not a question one because I guess there's not a question there. And then the follow on to that, and I can remind you if it's too much in one gulp here is just where do you need help? Who do you want to hear from? So that anyone listening out there that might fit the bill, we'll know to get in touch.
Sandy Guitar (01:00:17):
Super, thank you. So I think our limiteds look to us as a source of expertise in the venture capital world as they look to solve their pain points in the energy transition. Humbly, I will say we too are learning, but we have multiple decades of experience in understanding the venture landscape 23 years in my case, and similarly in Guillermo's case of understanding the venture space and what makes venture capital work. So I think our limited see that in us, and I believe they're pretty delighted by the outcomes we've created. The KPIs I've mentioned so far in terms of helping them source the kinds of pilots, co-investments and fund investment introductions that help them innovate. At the end of the day, we're helping Houston as an outcome because if we help our limiteds innovate and they're headquartered here in Houston, that itself will grow the city in the right kind of way in an innovative way.
(01:01:26):
So to your second question, why HX for the venture capitalist? I think particularly for the energy transition capitalists we're speaking of today, in my opinion, to solve this problem, we must include the energy giants for their expertise, for their capital, and for their vision. Not everybody agrees on that, and some of your listeners won't agree and I respect that, but that is our point of view and we know the hearts and minds of our limiteds and we partner with them with pride to help solve this problem in the right way. So why would a venture capitalist want to engage in our model? We're sophisticated venture investments, we're prepared minds. So I think VCs like that, they don't have to explain the business and when things happen and they do, we're also prepared minds in those moments. That's pretty important. We're a consistent source of capital that's unnecessary but not sufficient item.
(01:02:27):
But we do more than other fund of funds, right? We are introducing to them relationships that can help their portfolio as the portfolio looks for the next co-invest round, as the portfolio looks for the next exit, as an early portfolio company is looking for a differentiating pilot that could get that young company on Main Street. We can make very meaningful introductions there. So the VCs tend to love it and the VC question is where's the catch? Are you going to force us to do X, Y, or Z? And we say, there's no catch. There's no side letter. There's the request and the genuine request and the expectation that they will get themselves involved in the ecosystem by visiting, by meeting with our founders, by giving our founders great feedback by partnering with our limiteds where it makes sense, but these are not prescribed agreements. These are typical relationships with a win-win on all sides.
Jason Jacobs (01:03:29):
And then the last question was just where do you need help? Who do you want to hear from?
Sandy Guitar (01:03:33):
I would love your help in getting the word out that HX Venture Fund is seeking to invest with the best VCs, also to founders in Houston who are seeking capital. If they have a raise coming up, one of the services that we want to provide is make introductions that make sense to you, the Houston founder at the right stage. We have great VCs by the way here in Houston as well as those outside and all of those VCs, Houston and non Houston VCs are relevant to these cap tables. Our particular expertise is to do that type two error, bring in VCs that our Houston founders may not already know, and we're trying to help them build sophisticated cap table solace that work for them.
(01:04:23):
So I think getting that word out is really important to our KPIs. Also, I'm just trying to learn, and I know everybody on my team is so I genuinely am so thankful for My Climate Journey for you, Jason, Cody and Yin, for your interest in coming to Houston for the Slack channel that I'm now trying to get more involved with. Even though I'm really not very good at Slack, it takes a lot of learning and collaboration. It's part of the work that we do that I absolutely love. It's changing my own personal behavior and making me, I think, a more sophisticated investor and I hope a better person on the planet, something I'm talking to my two daughters about all the time as well and getting them on my climate journey. So this is important work that you are convening and I congratulate you on it. You guys are doing an amazing job.
Jason Jacobs (01:05:13):
Oh, thank you. Well, one thing I will both offer, and I guess a mini request is like some of these big strategics that you're talking about, the people that are in them that are thinking the most about the energy transition and how to allocate capital outside of the firm, whether it be directs, whether it be in funds, whether it be in fund of funds. We not only love to talk to those people, we'd love to have a similar discussion of what we just had with them on the show to get inside their heads about how to think about it-
Sandy Guitar (01:05:43):
Do I have an idea for you, Jason, and I haven't even said this yet to Cody, but I would like to. September 7th, when Cody's coming to Venture Houston, and I ask your listeners to look at venturehouston.com. We don't have registration open yet, but that's where all the speakers will end up, and this is going to be an amazing conference, certainly the largest venture conference on decarbonization that Houston's ever seen, but I also think a very significant conference for the industry broadly.
(01:06:12):
But let's do a live from Venture Houston on the journey between digitalization, decarbonization, let's get Carmichael Roberts chatting with you guys for a few snippets at the same time as some of the other speakers there. That's one idea I have. Then as you know from those relationships, build out a whole list of others that may be worthy of consideration as guests on your podcast. Certainly one that I wanted to mention right away, Nic Radford of Houston Mechatronics, originally called now Nauticas Robotics. We introduced Nic to the VC Material Impact, a group we invest in. Material Impact has since invested in this and it's backed out. They've had an amazing journey. Nic is a amazing, originally NASA founder who's taking his space knowledge to the subsea. This is a Houston story if I've ever heard one.
Jason Jacobs (01:07:05):
That sounds great. Well, it sounds like we have a lot more to discuss both about the event and about other guests for the show, but most importantly, just so grateful that you took the time to come on and for the work that you're doing, and gosh, I mean, it makes me think that maybe there's something we can learn from what's been happening in Michigan and what's happening in Houston and apply it to the city where I was born and raised and that I've never left, which is Boston.
Sandy Guitar (01:07:28):
Exactly. There's more to come on this.
Jason Jacobs (01:07:31):
Okay, Sandy, thanks again.
Sandy Guitar (01:07:32):
Thank you, Jason.
Jason Jacobs (01:07:34):
Thanks again for joining us on My Climate Journey podcast.
Cody Simms (01:07:38):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity.
Jason Jacobs (01:07:47):
If you'd like to learn more about CJ Collective, visit us at mcjcollective.com, and if you have a guest suggestion, let us know that via Twitter at MCJ Pod.
Yin Lu (01:08:00):
For weekly climate op-eds, jobs, community events, and investment announcements from our CJ Venture funds, be sure to subscribe to our newsletter on our website.
Cody Simms (01:08:10):
Thanks, and see you next episode.