Wins Above Replacement: The New Way to Judge Founders

Samir Kaji (0:09)

Welcome back to another episode of Venture Unlocked. In this episode, I sit down with Carter Reum, co-founder of M13, to explore his journey from Goldman Sachs to starting a CPG beverage company, to building now what is a bi-coastal, multi-billion dollar venture platform in M13.

I've known Carter for nearly a decade, and he sits on the board of the company I co-founded called Allocate. Our conversation was a dialogue spanning everything from risk-framing and asymmetric upside, the concept of companies needing both a microscope and a telescope during their journeys, and what he thinks most investors get wrong about Founder Value Add. We also touched on how to make sense of what is becoming a very active and confusing venture market.

SPEAKER_2 (0:48)

Samir Kaji is the CEO and co-founder of Allocate. Allocate and Venture Unlocked are independent of each other.

Any statements or references made by Samir or his guests regarding third-party investments or securities are solely their views and opinions, and are not intended as investment advice or an endorsement of such parties or securities by Samir, his guests, or Allocate. Allocate or its clients may maintain relationships with or investment positions in guests, third-parties or securities mentioned in this podcast. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

Samir Kaji (1:27)

Carter, great seeing you, man.

Carter Reum (1:28)

What's happening? How are you doing?

Samir Kaji (1:30)

I'm good. I'm good. I've been looking forward to this conversation. And sorry we couldn't do this in person, but this beats the alternative of not doing it. So you and I have known each other for a very long time. We're going to get into the story of M13. But I think a good place to start because you have such a unique story.

And I want to go back post-Columbia. You're at, I think, Goldman at the time. And you have this kind of fork in the road of being an entrepreneur or taking this job at Oaktree. So maybe let's start there and what you were running toward at that point.

Carter Reum (2:00)

Yeah. So my brother and I both went to Columbia, as you mentioned. Neither of us knew what we wanted to do when we grew up. So we both ended up as investment bankers at Goldman. So I was joking around. It couldn't have ended up worse. I was on the deal team that took KKR public. So one of the first private equity firms, Anfrago Public. So I spent my entire two years working on that deal. Was debating whether to go work at KKR or move to the West Coast. I decided I'm a palm tree guy and wanted to move to LA. So I took a job at Oaktree Capital and their private equity group.

Conversely, my brother worked in consumer products, investment banking, and he was on a deal team for a 30-year-old who was about to IPO a billion-dollar company. And I always joke, now it seems like every 30-year-old is about to IPO a billion-dollar company, but 15, 16, 17 years ago, that was not the case. That 30-year-old kid was this kid named Kevin Plank. Therefore, the company was obviously under armor. And so my brother got inspired by him, called my dad and said, I'm leaving Goldman Sachs to start a company. And in fact, I persuaded Carter 364 days after I'd taken the job, three days before I was about to start, not to go to Oaktree. I always say if somebody like us left a place like Goldman Sachs today, they'd say, of course, you're leaving to start a company. People have to remember 15, 16, 17 years ago. They didn't actually think we were crazy. They honestly just felt bad for us. Like we were throwing it all away or something like that. So, yeah, so we left and didn't know what we wanted to do, but came up with an idea for a beverage brand, which we would then kind of build up and sell a decade later.

Samir Kaji (3:29)

Yeah, I'm always curious about like the mental model that people go through. And there's one that feels very safe, which is going to Oaktree, getting a W2 income, probably learning from really smart people or taking this jump into entrepreneurship, which is right with so much uncertainty, so much risk. You've always talked about like this asymmetric sort of bets that you make in your life. Like, how did this fit into that the model that you now talk about a lot?

Carter Reum (3:57)

Yeah, so it's funny, that's where you went, because that's exactly right. So I obsess about risk and probability-adjusted outcomes. You've heard me say it a million times, I'm looking for asymmetry to the upside, risk and probability-adjusted. And so it's really funny, when I would tell people, I turned down Oaktree to start a beverage company, they would say, that's so risky. And I'd say, I don't think you're thinking about risk the right way. And I said, okay, let's play this forward. So if I go to Oaktree for two or three years, I'm going to try to go to HBS or Stanford GSB, right? And I will look strong as a candidate, but I'll look like a lot of other people, another Ivy leaguer who worked at Goldman Sachs, and worked at a top-tier PE firm. Now, I said, play out the other scenario. I go start a company, and there's two outcomes. Either it will be successful, which is what happened, and I never need to go to business school. In fact, I've taught a case study on our company for 13 years at HBS, or I'll fail miserably at it two or three years from now. And 16, 17 years ago, if my candidate, if my application said I was an Ivy League, former Goldman Sachs investment banker who actually failed at a startup, I would be a shoo-it, right? Because that was a one-of-one, right? And so I talk, I use that example all the time because it was actually less risky. It seemed more risky, but when you probability and risk adjust that, it was a no-brainer, right? And so I talk about it all the time at M13.