Episode Transcript
[00:00:00] Speaker A: Foreign welcome to the Victory Podcast.
Hey, victors. Welcome to this episode of the Victory Show. If this is the first time you're joining us, I'm Travis Cody, best selling author of 16 books and the creator of bestseller By Design. I've had the privilege of helping hundreds of business consultants, founders and entrepreneurs write and publish their own best bestselling book. And along that journey, I discovered a really fascinating pattern. A lot of businesses hit a revenue plateau, usually around a million dollars a year, and they struggle to break through that. So on this show, I sit down with some of the world's Most successful founders, CEOs, leaders, business owners, to uncover the strategies that they use to overcome those plateaus and then scale their businesses to new heights so that you can do the same thing. So get ready for some deep insights and actionable takeaways that you can implement in your life and business, starting now. My guest today is a seasoned investor, probably the most season investor I've ever had. She's a board member, a storyteller with decades of experience backing bold ideas and the people behind them. Gene Sullivan is a longtime institutional investor who has been involved with over 160 companies, bringing capital, guidance and heart and insights to founders across industries. Known for sharing real stories, both the wins and the setbacks, Gene brings a rare level of honesty and perspective to the world of venture and entrepreneurship. Her journey is one of impact, influence, and unwavering belief in the power of innovation. Jean, thank you so much for being here today. I have so many questions for you.
[00:01:38] Speaker B: Well, I've got some answers, Travis, thank you for having me.
[00:01:41] Speaker A: Yeah, well, let, let. Before we get into it, I let this just go back a little bit to, to the beginning. I always like to uncover someone's journey into entrepreneurship, especially from the investing side. So did you set out at a young age knowing you were going to be in the business world or did it sort of find you?
[00:01:58] Speaker B: Kind of. My best story is my dad said, why don't you be a teacher? And I said, I was like in 8th grade, I want to carry a briefcase.
[00:02:06] Speaker A: Who says, did that come from you watching Perry Marshall?
[00:02:09] Speaker B: I have no idea, but who says that? So I always knew I wanted business, but like many young people, and I'm really dedicated to this, Travis. No real insight, help, guidance. Hey, what about this or that? So I'm really into that for young people. And because I had kind of a zigzag path, I like to show people how to make that a straighter line because I believe the earlier that you can find your Way to professional joy, accomplishment, you know, wealth creation, feel good vibes, the better for yourself, for your family. And so I'm really into trying to help people figure it out and I love doing that. And I really believe in, in the art. Like, do you ever listen to, I want to say Scott, Scott Galloway. I almost forgot his name. He's a brilliant writer, podcaster, and he says, don't just follow what feels good, figure out your talent. And so I really am into that. What is your talent that you can map against something to build? Now that brings us up to really important insights about people that I've seen and boards that I've been on because I love sharing. I've been on some of the smartest of the smart and the stupid of the stupidest in companies. Companies as an investor and sometimes they're the same company.
[00:03:33] Speaker A: That's the title of your first book, the Smartest is the Smart and the Stupidest of the Stupid. Real life stories of investing in companies.
[00:03:40] Speaker B: I love it. I like that. You know, myself, what happened was people opened doors for me and I walked through them. I was, I've always been a technical nerd, even as a kid. And I got into AT&T and Bell Labs in my young years. And then I worked side by side with somebody who flipped open the door so I could become a general partner in really interesting company where we sat on boards with some of the great in Silicon Valley and I learned the ropes from them. These are some of the great venture capitalists really learned. And I was the only woman I didn't even notice, but I was. And then the reason why I was always in Silicon Valley, I was in New York City. There were no companies to invest in As a venture investor in the late 80s and early 90s, there was only one dude, Allen Patrick, and he had a great big private equity firm. But now, as you may know, New York's quite a mecca for tech and AI and biotech. So it's really grown up in these years.
[00:04:45] Speaker A: But you were, you were an odd duck back in those days.
[00:04:47] Speaker B: Exactly. So I really learned the ropes just by doing. And so that was exciting. Some real early stage stuff. So here's a pattern that happened for me. Early to be in tech, early, then to be in Internet kind of stuff that evolved to more sophisticated things. And then guess what? I found myself early in the cannabis industry.
[00:05:09] Speaker A: You've always been ahead of the wave, huh?
[00:05:11] Speaker B: Always. I've just seen the wave and gone for it. So that's the risk taking in me and that I Don't mind nascent new opportunities where it's not figured out. That's thrilling to me.
[00:05:24] Speaker A: So did you, did you get some bruises going through the dot com bust?
[00:05:27] Speaker B: Totally. We were smart enough to do one thing. A lot of people lost their venture money because they just went crazy. People would come to us early stage, no revenue, $100 million valuation. We said no way. We were smart enough to hold on to our dried powder and not invest during those early dot com days.
[00:05:48] Speaker A: So was it the pet, the pets.com? you weren't in that little bubble?
[00:05:52] Speaker B: Didn't do it. We did one thing during that time that was the jewel in our crown and it relates to the very on point issues you have. How does a company really scale? So here it is. It's such a good story.
So Larry Ellison, you know who he is? Of course.
The genius behind Oracle, invented a company that's name became netsuite. The CEO knew us. He came to our company in New York. He had already been up and down to all the VCs in Silicon Valley and they said no. He came to us in New York. Here we were, three women, general partners and we had our one trophy male. We said, yeah, right on. Now my fingerprint were that I was the only one of the four of us that really had a deep tech background. So I saw it immediately. He actually was one of the first to invent cloud based computing and software as a service. I understood it.
[00:06:54] Speaker A: Did he have patents on that tech?
[00:06:55] Speaker B: Patents? I don't think he had intellectual property at that point, but he saw the future in cloud based computing. And I had been going to Esther Dyson's conferences for many years. She was one of the early thought leaders bringing in a great opportunity in Phoenix, at Scottsdale, at the Princess Hotel. And she say, bill, come on stage. And that was Bill Gates or Steve, you know, Steve Jobs. So she had like unbelievable early stage leaders speaking to us. And I knew that cloud based computing was the long tail. This is now back in 1919, 2000.
[00:07:35] Speaker A: Yeah.
[00:07:35] Speaker B: So we got to go to Larry Ellison's house, the one in Atherton, with the Japanese servants bowing down to us, serving tea and meet with him. And that was a thrill. And he waxed philosophically about what he was building. Now here's the leadership story because the end, the end of the story on NetSuite is that Oracle ended up buying it many years later for 10 billion. I know. And he had put a lot of his own money in to start it. And here's what he did. He picked the smartest guy he knew as a programmer at Oracle to be the CEO. And this guy is even still there today as chairman of this netsuite. However, he couldn't scale it. And I saw that. And we went to Larry and said, larry, in order for this to scale, we need somebody who really knows how to do that. What does that take, Travis? Here's my definition. That CEO has to be able to look left and right and look out over time, and he or she will know how to get the financing, how to put the right people in the right seats on the bus, and how to build that business, how to go to market properly. And so, sure enough, brought in an amazing CEO named Zach Nelson, who Larry happened to have known along the way. So he went along with that. And I teach entrepreneurs this story, because guess what? The guy who built it originally, Larry's guy, just moved to a different seat on the bus. He didn't leave. He wasn't kicked out at the IPO. He was thrilled to have $200 million in his bank account. I. I'm the only one who says this from the stage. And here it is. If you are not the right person to scale the business, say that at the right moment to your investor that you're looking at across the table and say, look, I have the fire in the belly. I started this company. I've built it this far. But at the right moment, let's you and I find the right person to scale the business. Guess what happens? You as the CEO, founding CEO, you're not fired, you're not kicked out. You are putting yourself in a different role on the bus that's very satisfying to you. And let somebody who can scale the business scale. And so many entrepreneurs come up to me and thank me for saying that. And I am telling you, I am the only one who tells that story from a stage.
[00:10:05] Speaker A: You know, I interviewed a guy who has his own fund maybe a month ago, and I asked him what was the. I'm like, what from the companies you've invested in? I'm like, what. What's the. Been the. The biggest obstacle to companies scaling? And he said without hesitation, he said, founders that refuse to let go of stuff, he's like, because they, they build a company to a certain point, and then they, Their identity gets wrapped into that, and they think they're the only ones that can do it. And he's like, but the things that get you to a million won't get you to five or 10. And even then, once they got you to 10, isn't going to get you to a hundred. And so you need to realize that like, oh, I'm the guy that can get it here and then I need somebody else that's going to do that and I can do this other thing over here.
[00:10:43] Speaker B: Somebody can have the EQ to understand that. It just is a game changer.
[00:10:47] Speaker A: Yeah, well, you just saying it from stage, it gives, gives people permission now to go, oh, I don't need to say I know everything.
[00:10:53] Speaker B: I know because here's what happens from the investor lens. He or she will say, thank God I don't have to fire this person.
You know, I like the company as an investment.
I don't like this person as the CEO. I don't have to displace him or her. And that, that's the cool part.
[00:11:13] Speaker A: When you look at it and it seems like such a common sense viewpoint then and you just look at the venture capital industry and go like, why are they, why is no one else doing that? I don't understand. Right. It's just such a.
[00:11:23] Speaker B: Isn't that cool?
[00:11:24] Speaker A: Yeah, that's, that's a great.
[00:11:25] Speaker B: One of my biggest life lessons, business lessons.
[00:11:28] Speaker A: So let's talk about from a leadership perspective then. Like what, what makes somebody an effective CEO? What are the traits?
[00:11:36] Speaker B: I've even written about this. I believe this and this is very controversial also. The CEO is the most important person on the team now. The C Chief Revenue Officer goes, what the heck? What about me? I just built all the top line revenue. The engineer who built it or the manufacturer. What about me? I made the product, you know, down the line. Got it. But the CEO can hire and fire, right? Get the financing, look left and right, rally the team, keep the team. Esprit de corps, really. Cooking has an open communication that inspires people. When it is that way, it is thrilling and exciting, especially if one's on the board or an investor and can see this. And there's such a difference. And so I really believe that, you know, there's an old line, you know, bet the jockey, not the horse. And so that that leader, that CEO is critical to me in making that investment decision.
[00:12:39] Speaker A: What is it about? Obviously you're like, you're spotting trends and getting in on the early stages of stu.
Are there sort of markers for you with Nation Industries that you go, that's going to be something versus that one's going to fizzle out?
[00:12:52] Speaker B: That's a good question. I hadn't really thought deeply about that. But there is like a combination of the brain and the gut agreeing that, oh my golly, I see the trend. I see what's happening even in cannabis. The story I told you my husband wanted to do it. I knew nothing about it, but I could see the momentum. I'm a voracious reader. I'm tuned in to what's going on in a variety of ways. And so then it makes, you know, that instinct is so strong toward, hey, yeah, let's, let's investigate it, let's try it. What does it feel like now? For me, I was embraced fully because, see, the thought of somebody, let's put it this way, in my cohort, like this little old chick who's like saying, what the hell is going on in this industry that sells? Because people say, hey, if Gene likes this, maybe it's not so bad. Because in the early days, Travis, people would say to me, why are you doing this? Meaning being in the cannabis industry as if I'm running a porn ring. It's like a stigma, real big stigma that's gone away now a lot. Although having just spoken in Europe, it's there too. And I shared that story just now about the stigma. I can see it's there. And, and so what happened to me is, hey, come on in, join us. But here's the other thing that happened. I, in going to Vegas, your very town, and speaking or meeting everybody in the first, it's a huge conference people back then. And I met one of the great, they're called OGs, you know, for old, old gangster. I met somebody who wrote a fabulous book, Steve d'. Angelo. And he in fact became a founder of arcview, the very company that put the net over my head in that early day, saying we need a classically trained investor to help us with deal flow and with investors. I read Steve's book and I said, what, we arrest all these thousands of young black and brown men and boys, I didn't even know that. So I learned about the racial stigma, the problems, that Nixon even used it to arrest the hippies. You know, I didn't even understand that that, that grabbed me. So we are bound together by the mission. The mission has me really tight on working in this industry, investing in it, being on boards, trying to help entrepreneurs make it happen despite all the over regulation and craziness.
[00:15:24] Speaker A: Yeah, and that's what I was going to ask you next. So there's one challenge of just being, you know, in a tech business and learning how to scale, but you're, you're purposely going into an industry that is insanely regulated. So what, what are let's talk about, you know, what are one or two of the big change challenges they have. And then like, how are you addressing that as an investor?
[00:15:42] Speaker B: So hard. It was easy and fun for about the first five or six years because it was very vibrant. Canada was alive and well with a lot of investors. They have a CSE stock exchange that took on all the cannabis stocks.
[00:15:57] Speaker A: Wow.
[00:15:57] Speaker B: And they all went public. So there was a lot of money. And then because so many people invested, a lot of that money dried up.
So today there's a dearth of capital, a real lack of capital in the business. And then because Congress nor the feds have done nothing to help and they could have with real banking. Yes, there's some local credit unions and state banks that will take deposits, but none of the big banks will play. And so again, I share from the stage in tech investing. We couldn't have lived without real banks doing equipment financing and loans and real institutional co investors, the big private equity firms. And I say, who do you think funded all these tech companies? And still do. But they are not present in the cannabis industry to our detriment. So even great companies can't quite make it very well. And then because the public markets have really declined, people have lost a lot of money. Money. And they're no longer interested in continuing the fun. So it's not a great time, it's a hard time for the business. And that's why going to Europe and seeing it come alive again, nascent, was a thrill for me for the last three weeks.
[00:17:16] Speaker A: So for you, what are the big opportunities in that space over this next five to 10 years, especially here in North America?
[00:17:22] Speaker B: You know, I'll be speaking again next month in June at a major conference with that very question and again in Vegas. And you know, I don't want to paint a bleak picture. What are the opportunities? So here's an example because I live in New York City. We've been, you know, and New York City, by the way, has about a 5 billion dollar illicit market. It's everywhere. Something that somebody, most people don't understand. You know, they come to New York and they smell all this weed. And a lot of people don't like that. I don't mind it. I like it better than cigarette smell.
[00:17:58] Speaker A: Sure.
[00:17:58] Speaker B: And the reason why is New York was one of the few states that made it legal to smoke anywhere that cigarettes can be smoked. So you can't smoke in Central park, but you can't smoke cigarettes there. But you notice in Vegas, every hotel, people out there smoking Cigarettes, but not weed.
[00:18:15] Speaker A: Yeah, because it's. Yeah, the law was you have to keep it in your room. Technically you're not supposed to be smoking in a public room like a hotel. Not that that stops people.
[00:18:23] Speaker B: No, they don't want you smok in those hotels. Big fine. So. So basically, you know, it's just been completely crazy as far as the regs, but here I am in New York waiting and waiting for a real program, a legal program.
And so what happens? They kind of screwed it up. Now I believe in helping the people who were harmed by the war on drugs, but they kind of went a little overboard and they awarded over the first 400, 400 dispensaries to people who were harmed by the war on drugs and had an arrest a non violent drug crime. And they were given these first retail store licenses. So that was hard because they don't necessarily know how to run a business. Sure. Not to raise the money. Are they successful? Some are, but many aren't. So right now those licenses are either for sale or shops are being closed. Plus what we have, all this illicit market, hundreds of stores, thousands of stores that just opened on the fly and selling and you'd never know it. Tourists didn't know it. Lights are on, doors open, come on in. So we've had to fight that. That's been better. So a real better and a better answer to your good question is finding the operators who could really make it happen and who could really build a business and scale and maybe build another business because you're allowed to have more than one. And so happy day. So now there's over about 400 stores that are open in the state and there's some wonderful products. There's a lot of New York and Vegas, I mean California and Nevada, products that are coming into New York because you know, no, you can't send the best. If you built a product in Vegas, you can't even ship it to New York. You have to build it here year now. How dumb is that? So that's the problem with the federal legality issue.
[00:20:23] Speaker A: I was going to say what's interesting too with like, you know, when we're saying cannabis industry, most people immediately think, oh, it's, you're, you're only getting the joints and the, the rolls and that's it. But there's such a huge market of the ancillary products that are coming out of that that I was just sharing this before we talked, but you know, I twisted my ankle last week and I twisted the same ankle about a decade ago and I was on crutches for about two weeks. The difference was this time around I actually had some paste that had CBD in it and I was like, I've never used it. And I thought, let me try it. And by the third day, like the swelling was 90 down. And I've never seen anything like that before. Right. So some people could say, well, maybe it wasn't as bad of a twist. And I'm like, you know, but it was such a noticeable difference that less than five days I was off crutches and walking around. And I'm going.
[00:21:05] Speaker B: Because the properties of CBD help inflammation. And now let me tell you another story.
So under the arcview umbrella I helped co found a fund and we've invested in 22 companies, just all cannabis companies, a variety from licenses to product. And so one product, the number one gummy on the market, one of them is called Wild. I didn't invest in this, wish I had. This is a sleep gummy. So if you take this gummy, it will really help you go to sleep. We invested in what's called the cannabinoid, which is the molecule called CBN that in this product. And so there's some wonderful, let's say, supporting products.
[00:21:48] Speaker A: Cbg. Cbn.
[00:21:50] Speaker B: You got it. Yay. Yeah, you, you're, you got the scene. And, and that is fascinating. And so there's more and more health benefits that can come from these various cannabinoids. There's about 140 of them in the plant, but only about 40 of them have been deeply researched. So you're going to see more and more. And how about this one? One something called thcv. Guess what that does?
[00:22:17] Speaker A: No clue.
[00:22:17] Speaker B: Herbs. Hunger.
[00:22:19] Speaker A: No way.
That's the opposite. I say take it. You get the munchies, right.
[00:22:25] Speaker B: So imagine the diet companies. THCV isn't that thrilling.
[00:22:29] Speaker A: Now does so like, because I know the THC is what usually gets the. Gives people the high, right? So does the thcv. No high, but curbs hunger. That is remarkable.
[00:22:40] Speaker B: Remarkable. Even CBN is non psychoactive. I could give you just a CBN little capsule that they make. This company we invested in, no psychoactive effect, but combined with these other properties, that's what creates, you know, other effects called the entourage effect.
[00:22:58] Speaker A: So why do you think there's still such a negative public perception around the cannabis industry?
[00:23:03] Speaker B: The number one aspiration that none of us expected, that wore down on us is the anti cannabis movement. Fighting against it, making up things. Big pharma and big alcohol. They're playing and they want to play and they're already playing. But they don't want to play yet. They want to play on their timing.
[00:23:24] Speaker A: Sure.
[00:23:24] Speaker B: So they have fought. Their lobby is so big in Congress, far bigger than our people. They are fighting against, fighting against it.
[00:23:33] Speaker A: Because they see you as competition.
[00:23:34] Speaker B: They don't want Ambien to be displaced by this yet. But they're the future acquirers. So that is the number one, let's say counter that we did not expect. And the answer to my question on stage at the Las Vegas show, what do you wish you knew? I had no idea of that effect and I had no idea that Congress of the feds wouldn't have legalized it 11 years ago. I thought by five or six years, it's 11 years later, we're still can't ship a product state to state. And you know, it's, it's not, you know, it's tough.
[00:24:12] Speaker A: Do you feel there's some, some part of it where they're keeping it there? Because there are some areas of the country that do like to use it as the excuse for arresting people and.
[00:24:20] Speaker B: Of course, absolutely. But now let's circle back to the leadership. Several of these companies or billion dollar top line revenue companies, including a wonderful company called GTI Green Thumb Industries led by a powerful CEO whose family runs Jim Beam. Another fabulous woman, Kim Rivers owns over 200 stores throughout the country. She's in Florida with a fabulous group called Trulieve Curaleaf. A very interesting company is the largest of, of all these companies are doing billion dollar top line. But guess what? Another goofy thing. There's an old arcane tax law that says you cannot deduct ordinary and real business expenses. You can't name one industry in the entire world that's under that kind of a problem. So they can't show real bottom line income. Most of them. Some can. But can you imagine? You can only deduct cost of goods sold.
Go figure.
[00:25:22] Speaker A: That's insane.
[00:25:23] Speaker B: Insane.
[00:25:24] Speaker A: Wow.
[00:25:25] Speaker B: But again, some of these companies are absolutely thriving because they have strong leadership that do know how to look left and right. Do know how to acquire other license licenses that could be accretive to them and really build their business. Do know how to acquire other top executives who can help them operationally.
And so all that is still exciting in this cannabis industry around leadership, operational excellence, best practices and that sort of thing. Far away from all this other muck that we just talked about.
[00:26:00] Speaker A: Wow. This is such, such a fascinating conversation.
[00:26:02] Speaker B: It is. And that's why I'm still In it.
[00:26:04] Speaker A: Yeah.
[00:26:05] Speaker B: Detriment.
[00:26:06] Speaker A: You just like, as I say, you just like a challenge.
[00:26:08] Speaker B: It's a challenge. Plus, I'm so fascinated with the science, with the technology, with. With the leadership, with how to make it despite a real tough environment.
[00:26:19] Speaker A: Yeah. So interesting.
[00:26:21] Speaker B: And now for me, going to Europe and seeing that and speaking about the problems and don't make our same mistakes. Listen to this. They have things to teach us. In Germany, the illicit market is more expensive because on the legal market in Germany, the insurance pays for your cannabis. And number two, it's less expensive for them to build it. And build it. Right. A lot of it's imported, so it's more expensive in the illicit market. I wish it were that way here.
[00:26:52] Speaker A: Yeah. Wow. All right, well, I know we're running on time here, so let's. A few final questions.
From all your experience, what are three traits that you've seen in leaders that are great at building mega companies?
[00:27:08] Speaker B: I think number one is real clarity of vision. Real clarity. Not only conceived, you know, among the team or by the CEO, but then shared so openly. I've seen CEOs have a printed copy of what the initiatives are for the next six months, and everybody, including the secretary at the front desk, if there is such a thing, thing has that so really important.
Full transparency.
[00:27:38] Speaker A: I've never heard of anybody doing that before. That's remarkable.
[00:27:41] Speaker B: Remarkable. I think number two is to really value your key players and reward them. A fascinating woman has founded a great gummy company. It was privately held, not public. She got a huge buyout. What did she do?
She rewarded greatly all her people, greatly. Those people would have done anything for her and still would. And she took care of them. Love that. I think that's important, and I think that goes down the line. Even sharing stock. I believe in the participation in equity by everybody not holding on to it and being parsimonious about that. And I think the third thing is, you know, insisting on everything you do is quality, quality in every move, expecting quality from everybody on the team, and performance. And, you know, I'm fascinated by that, the insistence on that. And I've seen that in action. I've also seen something like the opposite of that is people who think they have to be the only one to perform and to do everything instead of spreading, figuring out a division of labor. That's all appropriate.
[00:28:56] Speaker A: What are the three traits that like leadership careers in a hurry, that.
[00:29:00] Speaker B: Number one thing to your point and question is people, EOs who think that they have to be the only one in the role and they don't know how to curry and grow team that they can really produce for them. I've seen CEOs that are very low level on the day to day kind of action item because it's very delegated and I'm fascinated by that. I think that's really interesting. I think another thing, the number one mistake I've seen entrepreneurs make and successful entrepreneurs will tell you this, is to have the disease of dilutionitis. They are so afraid, it's worse than Covid, so afraid to give up equity ownership by maintaining a high valuation that's wrongful and not market. That's one of the number one mistakes I've seen especially in early stage companies by first time CEOs who have no idea what the valuation should be. Whereas I really preach what I call a win win valuation. And let's see, the third thing would be just the again, the inability to communicate. Hide in their own office. Not really. Really pull in the people and make them feel part of the team. That's a disaster scenario.
[00:30:20] Speaker A: Well, if someone's listening to this, this, you know, this, this episode or they're reading the chapter in the book and they, they're, they're curious about what arcview does and they want to get involved in either arcview or they want to get involved in following you in the speaker circuit, how do they find you?
[00:30:33] Speaker B: I would love that because I'm really seeking more speaking engagements. I love doing that because as you see, I love sharing, sharing what's going on, helping people stay out of the same ditch that I or others have slid into. And so yeah, I'm easy to find on LinkedIn. Jean Sullivan Find me, text me, connect with me. I'd love it. And I thank you Travis for this discussion.
[00:30:57] Speaker A: Yeah, this has been fantastic. Thank you so much for your time.
[00:31:00] Speaker B: Thank you.
