Gary Benitt is a managing partner at Social Leverage, a $99 million seed fund with investments that include Robinhood, Rally Road, Kustomer, and more. Gary is based in Orange County and prior to Social Leverage, Gary was a serial entrepreneur and part of four founding teams.

Gary, I believe that your partner, Howard Lindzon, founder of StockTwits usually does more of the talking so I was thinking, for listeners, it's interesting, I think to get a better picture of you, and maybe we could start with a bit of an overview of your background.

Sure happy to do it. Um, first, unfortunately I have to correct the opening just a bit. I'm based down in San Diego, which is just a little south of orange county, but still in SoCal.

My background is really, as a serial entrepreneur, I helped start four companies. Three of them were in the customer service space.

And support software space. a couple of those companies, we raised very little money, a couple of.

Or one of them, we raised over $70 million. three very positive outcomes, one less positive outcome. the last company was a company called assist. My partners, Howard and Tom were actually angel investors in that company.

It was prior to them founding social leverage that funds. And so they invested their personal capital and, um, we exited to Salesforce about 18 months after their investment. So not intended that way, but a very quick. I spent four years running the company that Salesforce acquired at Salesforce, living in San Francisco.

And, um, coming out of that, uh, decide that I want to invest full time and was fortunate enough to partner back up with Howard and Tom.

Great. And so for Assistly, what was the key insight?

A couple of things. Uh, so I had done customer service in my first few companies, enterprise scaled solutions. And then the third company was more of a consumer play. And what we realized is that, the consumer aspect belonged in the enterprise. Like people really want to have a modern UI and UX. They want easy administration and configuration and really being able to set up a solution.

Over a weekend, as opposed to spending three months just buying the solution and other six or nine months implementing it. and social was starting and we knew that I was going to be very relevant to customer service. So the insight?

was to build a modern, very easy to use software that allowed, for social channels.

 at the core of it,

and who were you selling to?

it? was SMBs. Right? So fast-growing companies, I mean, we have some great names today. They're great names, you know, back then that were small growing companies like Yelp and. Twitter And so, vulnerable. This was our first customer. I remember because there were site number six, the first five were, tests sites and they were number six and I'm the support manager there literally set up configuration for six agents over a weekend.

Like he trialed the product. He. You know, experience with, for example, and there were no salespeople and he was up and running and had his six, support folks on the system by the time Monday rolled around. So we made it very easy, very, very self administrable, very intuitive. We. put things in place where we were prescriptive and how customer service should be done so that you don't have to start from scratch.

Like most support organizations that care about their customers, would have a similar viewpoint. And so things like resolution times and things like, auto replies that are meaningful and, uh, in tune with the customer needs, things like that were prebuilt into the product. So you didn't have to spend a lot of time, kind of reinventing the.

you know, we had some other innovations, from a business model perspective that I think made us very attractive to fast from companies.

Like what. the biggest of which is that everyone charges on a seat basis, which makes sense. But in support, there are times where you want your executive team to be in the product to understand customer pain points. you might have I don't know, an outage and you might have all hands on deck to support that outage.

 And so we came up with this, part time, worker concept, where you could log into the system without paying for a full-time seat and you would pay on a collection of aggregate hours and use.

So, you know, you might pay 40 effectively the same price as your. For a full time agent. That's 40 hours a week. He paid 40 hours a month, but that could be split across 20 or 30 employees.

Got it.

So in addition to having these innovations and the easy to get up and running, you know, how did you think about go to market? Because often selling to SMBs is considered a challenge.

Yeah. So a couple of things. One, I think that we're still relatively new in the web tool world. So there was a lot of press around what we're doing, especially with that business model innovation. you know, I, I don't know how many tech crunch stories where we were in, but it was, it was enough to get us a pretty good following.

to, you know, I think that the distinction is less SMD and more fast-growing startups. And so, if you think about SMBs in the traditional sense where it's, I dunno, pizza place or a doctor's office. Yes, you're right. It's very hard to go after them. If you're trying to scale an organization quickly and you know that you have to support your customers at scale, then you're you're looking for technology solutions and those are the people that were mostly looking for.

 I'm curious how you see the world of fast growing startups and their, their customer service needs evolving.

Yeah. So we're investors in a company called customer with a K and a it's actually my ex partners that I had done assessment with. So the one thing that we didn't build at Assistly is an extensible platform the customer guys built a beautiful product, on top of very extensible platformthe other two kind of innovations that they had on their end that I think are the right ones. One is being truly Omni channel. by that, I mean, you could send an email and say, oh, by the way, I'm leaving my desk.

Can you text me? And the customer service rep has the ability that instantly changed that conversation from an email threads or a text thread, or likewise you might be texting. And the customer service rep says, Hey, listen, this is a deeper issue. I'm going to send you an email. the second thing that they did, and I think that they're the only ones that are doing it is to really stop obsessing over, cases and interactions, because they're, sub-components really what you care about is the customer. And what happens with the customer, which is why that, you know, the name of their company is so appropriate.

And so they developed a timeline that takes into account. All the things that you do as a customer. And so, you know, when they're integrating with companies like rent the runway, all of your orders, and I took her, the customer service rep knows that, Hey, you just rented this particular dress and maybe you want a different size and you could do that within that timeline, everything is kind of in one view, we're actually using multiple applications and thinking about it from a different case perspective.

So before I move into social leverage What are your thoughts on sort of Salesforce is role in the ecosystems and how is that ecosystem evolving?

Also, first of all, I'm a huge fan of Salesforce, the company and the leadership. think what mark Benioff has done there is, phenomenal and, the way that he truly projects a vision beyond just selling software, is really a powerful, so from that perspective, I've got a lot of respect and obviously, you know, the, the, the leader in the space and the space of the CRM CRM on its own, it's a pretty huge, category, right? So that encompasses sales, the first stop and then service, and then marketing and effectively that's anything you need to run your business.

and there are multi-billion dollar public companies that are built just on top of Salesforce. So obviously they've created an ecosystem. That's incredibly powerful. I'm sorry. I think I probably forgot the initial question.

No, but you're kind of answering it, which was just, what are the role of these huge platforms like a Salesforce, and how do people compete? Right. So like, look, they struggle to meet all segments, right. And so they're great. Mid-market and enterprise, and they're not great at the lower end. Like their products are too complex and they're too.

Overbearing and the sales process to actually buy their products is also not the best. And so, I think they bought a system at least in part to help catalyze some of that internally and to, kind of reinvigorate that, and so I thought there's, there's ways to attack Salesforce, for sure. I think customer has done it, by building a false solution. I think that's the right way to do it from the start.

There's certainly other people. try and do it from point solution perspective, maybe just email or just chat And, uh, I could never get over the hump of believing that you need an omnichannel solution. You need more than just chat. You need kind of all of the channels on which. someone might engage with you on, to really make a big dent.and so like, that's my bias and I fully admit it, but, uh, I think that, by and large investors kind of have that the more we know the less likely we are to invest And so maybe this gets to what you're looking for as an investor and could you just give me the overview of social leverage

Yeah, as you mentioned, we're on our fourth fund, $99 million fund, where investors primarily in two categories, the first is FinTech. My partner, Howard is his background and expertise among other things. He's the founder of softwoods, which was the largest social network for traders.

And so we invest in FinTech, our kind of claim to fame there. As you mentioned as an investment at the seed stage, I'm Robin hood, which just went public last quarter. uh, you know, we're looking.

for more of the same on that side,

We're all looking for more Robin hoods.

Yeah. So tools to empower the individual investor, uh, to actually do trading, to educate, to, Get you more control of your finances, And, you know, from that perspective, Howard is more consumer-focused than enterprise. the second area that we invest in a lot is enterprise and that's my background and expertise. I've done a lot of vertical in. recently. so those are the two areas that we invest in most and the last area is kind of everything else, but it tends to be more consumery. So products that we can understand, play with, be helpful with.

good example of that would be manscaped in San Diego, which. Uh, CPG product for a below the belt grooming for men, which, I wouldn't think that we would have been investors in, but we didn't close our eyes. And we met the founder, thought that he was fantastic and had a really great vision.

and it's been one of our fastest growing companies. So Generally there'd be more, software tech, enable tools. Wag is a better example for something that we would do in that space, which was Uber for dog walking. Now our typical truck size with that a million bucks at seed,

So I'd love to talk more about your portfolio and some of those stories, maybe we stay on customer for a second.

So in that case, we actually invested. Pre-product.

and Facebook just bought is buying.

Some process. It was announced last November, but, uh, some regulatory hurdles for them to conquer, across different, government agencies. So that us being one, but also the UK, he U Germany. And so they got good news from the UK last week. So things are moving along and we're helpful.

Sometimes, I don't think much about all the different regulators then, um, maybe safer topic, easier to talk about. Let's talk about alternative asset investing. You have an investment in rally road? Seems like everyone is moving to alternative assets. Should i be rethinking my asset allocation.

Yeah, I don't think most people would consider or should consider shifting their entire portfolios around. But I think, you know what, we believed in before we met the rally team. And I think what the rally team, caught on is, you know, it's expensive to answer. And you cannot want to share an Amazon for a couple of thousand dollars.

And what do you get? You get like a digital certificate that you don't really have Or you could have something that, you know, will appreciate or has appreciated historically in much the same way as the stock market has or better, And you, feel like you're part of something like, I don't know.

I guess if you own a share of Tesla or apple, you feel like you're a fan boy or a person, but, uh, you know, at the same rate, like you, you, might've been talking about this collectible car for, the last 10 years. And it's always been out of reach because it's 300,000 or half a million or whatever it is.

And now you can only share about car, maybe 20 shirts. And it could sit in your virtual garage and you could kind of like talk about it with your friends and like flip through the pictures and show it to them. And there's something really empowering about like telling your own investing story through things other than stocks.

So I don't know. I think it's pretty special, they just raised the be around from Excel, but still very early in their evolution.

what about NFTs? Do you have, have you been looking at that space?

We have been looking at it and we've got a term sheet out to one company. but, uh, more of the picks and shovels of it than the actual, assets. I mean, it's hard for venture investors, I think, or at least I'll speak for myself to kind of appreciate the value appreciation that's happened in the NFT landscape and how fast that's happened.

I can't value that, but I could say that, the trend isn't going away and companies that provide the tools to, uh, enable you to transact store analyze and FTE is, will be around for a long term.

Agreed for sure. And as we discussed, social leverage is known for its early Robinhood investment among other things. Can you share some of that story It was prior to me joining the funds. I mean, I'll give all the credit to Howard. As I mentioned, StockTwits is a great jumping off point for anything that's FinTech, If you can talk about your product on there, there's, people that are interested and, relevant to you. And so it's a good kind of marketing hack. And for that reason, people seek Howard out

And how big is StockTwits right now? It seems like it's become a huge part of our site guys. I mean gamestop uh wall street bets, et cetera

Yeah, it's a 12 year overnight success. Right? So I think for 10 years it was a, very much a slog and a lot of slow growth in fits and starts. But. we've recently brought on a great CEO and I think that there has been some, some tremendous tailwinds just in the market. So obviously crypto has been a part of that.

The volatility has been a part of that wall street. Bets has been a part of that. So just renewed excitement for. having a conversation around what you might be doing from an investment and trading perspective. And, obviously, the platform, the community, the software all have to enable that interaction to occur.

And I think that we've done to that the maturity level of the product where it's really usable and, and loved by so many. I dunno, we're talking about. Millions of users, hundreds, hundreds of thousands of daily actives. but it's a very engaged and a sticky community.

I interrupted. I'm sorry. And so, so Howard has sought out for something like a Robin hood.

Yeah. So, I don't know if they were introduced or if the founders sought him out directly, but in either case, it was because of his domain and, kind of experience on the retail side, to stop to it. And he met the team early. Yeah. You know, saw the mock-ups of the products and those before they had that million user waiting lists and, he made immediately got it and wants to be a part of it.

And I can say, so we invested a fund one that was at the seed. I think it was a 10 million cap

Wow.

I joined for our second fund that that was in at the end of 2014 when we invested in their aid rounds. Um, and that was a 75 million posts, but we invested at a fun too, who is the only time that we had done a series a in cross fund investing.

how I knew that this was going to be a home run right from the start. And so believed in the team that even as a seed fund, uh, had written a term sheet, for the hay. And so, although we didn't win the deal, they knew that, you know, we would have. get the capital from our LPs. It wasn't part of the fund.

it kinda got us super pro-rata on until we were able to do more, into that series a round. And it's been a great journey. And obviously we're super thankful to the, founders and to the company and, excited for what what's in store for them in the future.

I mean, well, the interesting that 75 million valuation and pulling the trigger. How do you think about valuations today and what you'll participate in

So we are very, value and valuation sensitive. I would say that most of our deals get done at sub 10 million post money. And, generally not invest in things like YC companies on no day. but every once in a while you break a rule

You know, Howard quotes this from Fred Wilson. he says that Fred Wilson believes that if you love everything about the deal, but the price to the deal, anyone the price, shouldn't be the reason for you not to do the deal and for everything else is great.

 look at the seed stage. That's the difference between, whatever you would have gotten and maybe half of what you would have gotten, or a third of what you would have gotten, right? Because the numbers are so different, but at the same time you know, call it for a $50 million fund, if you're a part of a $10 billion company you want to get in at all costs.

Right.

And what about, I mean,

By the way that's harder to do and practice then, uh, for me say it, right? Like I know that, but someone comes to me and says 20 million pre I go, what? No. Right. So it's harder to actually, you know, believe with everything and invest at the higher valuation.

Yeah. and then what about the effects that are happening sort of more downstream? And I think, you know, maybe wag was an early example of a, I think sopping put 300 million into that company reasonably early,

That's right.

Did you refer to that as soft bank's cash cannon. I think it was, um, Darra at an Uber that?

said that he'd rather have SoftBank's cash Canon on his side, then you know, pointed at him, as competitor's side. And, um, look, that it is what it is. I mean, it's certainly a weapon, right.

And when you have that much capital thrust upon you and some companies ready for it and. And can use it wisely. And other companies kind of crumble under the weight. You know, your growth expectations go up so much higher. Your, your need to spend that capital goes up. Very quickly

Yeah, but it sort of goes to the point of leaning in early. You've had a lot of operating experience where do you tend to lean in and what sort of advice do you find yourself giving Yeah.

I was mostly a COO as an operator. And so the CEO role, I think of as the everything else role Depending on who your CEO is, that could be, product sells marketing a little bit of everything. and, um, I give advice to my founders on all of those accesses. Right? Sometimes they don't want my advice, progam product advice all the time. Like I want to be a user and I have intuition that I believe is right, but obviously it's just one, data point for my founders to take and to deal with what they want.

Um, you and I talked about sales before, there's some sales, uh, advice that I give to my enterprise founders. one example is not to hire a VP of sales early, Like I want my founders, even if they're technical founders to be on the front lines selling and to understand the objections and to understand what's working, but also to hire your first four or five, AEs before you hire a true leader. and the reason for that is, you know, if you're hiring someone at the BP level, the right person should be able to scale something that's already working versus figuring out how to make something work or how to do the sales yourself.

 then another example that I, tell my founders to hire. More than one AE at once, especially when they first begin So they'll say, oh, I'm going to hire an AE and I say, well, hire two or three.

And I mean, there's multiple reasons for that. I mean, obviously turned as one of them And.

 But I think a better reasons for it is, you're not really sure in the early stages of a salesperson.

I'm doing great or maybe the product isn't at the right place, but if you have two people competing against each other and really, you'll just get a better sense for whether or not it's a particular person that maybe isn't doing a great job or doing great, but someone else could do that much better.

So your expectations will, will reset. and like I said, the competitive aspects of a salesperson job, like they just want to win. So what are you winning against? Well if you're beating The person sitting next to you then, that just gives you a more defined target of what to go after.

You know, I think I told you I was going to borrow that one higher, multiple A's. How about managing people? Like you've managed big organizations do my advice for, I just it's the hardest part. I think people are the hardest part. I think Gary, um, how do you advise people to manage.

Yeah. I mean, I so agree with you and I think that's why I shifted from operations to investing. I think, you just have to, over-communicate like

I mean, you have to literally say the same thing, 10 different ways. 10 times for someone to truly understand that that's the vision and the go forward path. And, for them to believe it and be able to do the same thing down the chain, right? Like you're telling your managers, but there's maybe another two levels below where the message has to spread.

so yes, I think this is why we all shift into VC. It's much easier than managing people. How about, how about working with your partners or Howard is a fascinating figure. I think I told you I watched the podcast. I believe he gave you Adderall on the podcast.

I'm not really sure what I took, so it turned out okay. I wasn't twitching like an hour later, so I guess it was all right.

Okay. Good. So can you paint a fuller picture of your fund and maybe start by telling me more about working with Howard.

Yeah. I mean, I think, uh, Howard is an incredible person. I mean,he loves people. He loves interacting, he loves catching up. And, you know, he probably has 20 to 30 conversations on a daily basis he's on the phone quite a bit. you know, whenever he's traveling, he like, yeah, let's go to dinner and all of a sudden there's 20 people at dinner and you know, you're just engaging and charismatic and, people want to hang out with them and be in the same room and chat with them, which is part of our secret.

I think. And, um, you know, I love that about him, but he is hard to pin down. He is sometimes, you know, scatterbrained and, uh, that's part of it, right? Like, that's when you get with him.

 How about, are there any trends that you're following closely?

Well, I think it's funny, but like, if we see a company that's compelling, we'll go look And we'll see three or four other companies doing the same thing generally. That leads us having conversations about the trends. Like why are there so many neobanks being started? Why are there so many neobanks for very specific niches being started, which niches are big enough? What, niches really need the need to have a specialized banking service? You know, those are, typical conversations.

And you guys expanded into a SPAC

This is how pushing us peace. Yes. Um, so, uh, how is the CEO of this back? It's, uh, it's called social leverage, acquisition, Corp, slack. Uh, it is public, raised 345 million And went public last February. the one other interesting thing in that is that our, fund four is actually an investor in the stack. So although we're a seed stage fund, that's one example of us kind of doing the whole spectrum of investing. So From our side, when we, launched this back and while we were able to, get it funded relatively easily, I mean, literally it was like four weeks of zoom calls, is because there are very few founder led, stacks.

A lot of them are financial Lee led

Yeah, but I think my understanding is actually the road show is easier than raising the pipe at this junction.

Depends. I mean, obviously it depends who you're raising for and what the end goal is. Um, you know, perhaps to give significant, uh, size back. So depending on who the target is and you know, and what the redemptions look like. Um, I may or may not be necessary. The size of pipe might be smaller. I also think these things are cyclical.

And so there was a time where it was very easy to raise a pipe and actually a lot of the investors in the staff, you know, were clamoring to do the pipe as well. And so what to kind of see when we're ready to merge and we're not at that point yet.

Yeah. And when you say you're an investor, is that you sort of are putting in sponsor capital. Is that the structure?

That's right. So we put that at risk capital, the sponsor capital, to work in, we did some portion of it. I mean, in total or, eight, $9 million. We did some smaller portion of that, as the funds and we all did it personally as well.

Yeah, no, it's an interesting, I been hearing about VC funds doing it and I wasn't sure how it works. Interesting. Um,

everyone figuring it out and doing it differently. So there's, there's not necessarily a one size fits all, but, uh, it's, it's interesting to be part of that and, and to help figure.

Yeah. And as I understand the sponsor capital, you know, you put it in at some price, that's a dollar, $2 something, and I deal you, then go on the road, show you, you sell it for $10 when the company goes public

Yeah, it's something like that is right.

but it's also called risk capital because the rest of the money that we raised can be redeemed at the $10 price. If we'd never merged, for whatever reason this money goes away, it's already been spent. So it is from that perspective, like there is a risk to it and nothing ventured, nothing gained.

So.

Well, Gary, this has been great chance to get to know you better. I'm looking forward to working with you. We have two investments now together.

Well, let me say thank you for coming on the pod.

Thanks for having me. It was Great.

Really enjoyed it.