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Rick Heitzmann

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2023-11-13
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2023-11-13
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  1. “When we were starting, no one knew us. We subletted a French law firm's extra space in Midtown, so very different than maybe some of the cool offices some VCs have today. We were so non-consensus a lot of the people were happy to take our money because it was non-competitive. A lot of people didn't understand gaming as a service. A lot of people thought that social curation wasn't an interesting category or that these Canadian guys who were selling snowboards didn't seem to follow the IBM playbook. Where we were at the time, it was less competitive because we were looking for people who coided with our thesis. I think all of venture capital has become much more competitive now. And oftentimes we were the first institutional investor and that could have been at the precedes seed or series A level. Now there's oftentimes a precede investor, oftentimes a seed investor before we do series A, which is our natural entry point. And those seed investors and precede investors also have friends who are in the market.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “We should be right on our thesis, and if we backsolve, we're generally right on our thesis. Sometimes we're wrong on timing. And then we have to find people that we both like and are consistent with the thesis, and then we have to help them execute. And that's how you build huge companies. And you could be a grand slam home run hitter. So that's how you get to those power law outcomes.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “So there's two things that have to happen, both of which we could get wrong at any given time. Well, three things. So we could have a thesis. Our thesis could be wrong. They could have a thesis, which although aligning with us might not be perfectly aligned and therefore it might not work, and then they can misexecute. So there's a lot of things that could go wrong. And then in addition to that, all those things we just discussed, there were two or three different things which were non-consensus. So certain things they could be right about or we could be right about, certain things they could be wrong about. And you only need maybe a half to one of those things to be wrong for the company not to work. And then on top of it, you have to execute. But what we've seen is we're in a power law business. How do you get extreme outcomes? If you're doing multiple non-consensus things and you're able to execute, that's how you create the Grand Slam home runs, the Shopifies, the Pinterest, the Riot Games of the World. So we have to understand”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “Social elements of gaming was going to be important. And on top of that, they were going to steal or borrow the Asian model of item-based economies within the game. So instead of paying $70 for a CD that you were going to put in a console and figure out if you like the game, you're going to be able to pay as you go not dissimilar from software as a service and create games as a service. If you talk to the biggest game publishers at the time, some of which you're doing most of their revenue today in service-based gaming and virtual economies, they said that's never going to work. The guys at Best Buy, who I sell my Xbox to, also I sell my disks to, they control gaming. This isn't China. No one's going to buy item-based economies. So all three of those things were non-consensus. It's why we decided to do the first round at Riot Games.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “And we want to create a way to pull that content, store that content, and be able to inspire people with that content. That sounds really great. We believe in curation. We believe in mobility. We believe in all these things. Where is it? Like, no, no, we just believe in it. We don't have anything. But I thought that was a great, that lined up with all three things were non-consensus at the time. Still a very much a desktop-driven world, still very much text-driven world, and still early days of curation. But because we aligned with the way the entrepreneur was thinking, we decided to do a seed investment in Pinterest. If you think about riot games, and they believe that gaming was going to be networked and it was going to be community driven, and you were going to be able to drive both customer acquisition through these communities and increased engagement through a network community in an era where most people were buying CDs and putting them in game consoles and playing by themselves.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “And as a small firm, you can't chase every car, you have to be very deep in the thesis that you have a lot of conviction around. And I'll give you another example, so probably now thirteen, fourteen years ago I was a judge at the NYU business plan contest. Now famous Scott Galloway was the professor there at the time no one really knew him and he had a TA who had his girlfriend's brother who was trying to have a startup. So connected in this odd way and he had these two guys who lost the business plan contest but came to our office and said, hey, here's what we believe the iPhone was about four or five months all the time. Your phone was going to be your main computer and it was going to be the main way you consume content. And because of that, you're going to move from a text-based world to an image-based world. And in addition to that, there's going to be so many images. Those images are going to need to be curated by either people from your social network or experts.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “Very thesis driven. We want to be able to understand what we call swim lanes better than anyone else. I have a partner Matt Turk, who's very deep in data, machine learning, and artificial intelligence. He's had a thesis around it that he's published for 12 years. Besides being very good at Twitter, he's had a range of different things that he's done in and around that ecosystem. He has a very defined thesis of what's AI and what's not AI. Most of what people call AI we consider not AI. And how is that AI doing jobs to work? You have a partner, Adam Nelson, who does a lot of things in financial technologies. And what does it mean to be a back-end financial technology player? Matt runs data-driven, which is the biggest community around data science, AI, machine learning in the world. Adam runs FinTech driven, which is one of the biggest communities around FinTech. And that brings together people from startups, people from industry. So you're hopefully getting the best of those folks together. And then you have a thesis and you could go deep on that thesis.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “So you're bringing these people together, you're part of building this network, you've targeted these industries, enterprise software, consumer applications. How did you think about the investing part of it? What types of businesses you wanted to create inside those verticals?”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Help stoke that ecosystem. So we run over 100 events a year here through our platform. We have a thing called guilds, where we pull together people around interest sets that stoke our platform. We ran a demo day for the healthcare ecosystem about a month ago. And a lot of folks are here, and whether they work for CVS, Pfizer, a large health system are still getting to know people, but are interested in what does digital health mean for providers or for payers, or what does it mean as more drug companies or thinking about the data that they can understand about their customers? And what does that mean from us from a data science perspective, a consumer perspective, or an ecosystem perspective? So having the ability to get all those people in a room in New York is probably unique to maybe any other city in the world.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Generally means on the enterprise side some nexus to New York. Oftentimes a lot of the customers are here. So even if you look at company like Dataiku, which does data science software, a lot of the customers are the big banks, big insurance companies that are here. So enterprise software companies that benefit from that. If you even look at a Shopify, how do you understand commerce and everything goes around commerce? Although Shopify East Coast Company, Ottawa, Canada based. But if you think about all the work we had done in commerce, we understood why the legacy monolithic software systems from places like IBM maybe were working for Macy's but weren't working for the latest entrepreneurs. And then if you think about New York as a center for media, for advertising, for financial technologies, for insurance, for pharma, you got a lot of talent and you get a lot of customers that are here. And then you also get a lot of capital this year. So there's a lot of things you could pull together. We still do a lot of different things to”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Go back to the Bay Area? Do I have to go back to Boston? Now if your startup fails here, it's no different thing where else, oh, I could go work at Adobe. I could go work at Google. I could go join this other startup which has a thousand engineers here in MongoDB, or actually the guys who I just started the startup with have the opportunity to seed something else. So the ecosystem is really, really working.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “A lot of the analysis we did, especially as we're trying to recruit people, or especially working with LPs, the Bay Area, as that heated up over the last 10 years, became much more expensive than New York. So engineers, despite the challenge of Wall Street, were always at a discount to the Bay Area. The cost of living in San Francisco became much higher than New York in the last five to seven years. So you had a choice if you were coming out of college or coming out of grad school. Do you live maybe in a lower cost of living Sunnyvale, which is a young single person isn't the greatest place to live? You could live in San Francisco, which is more expensive, probably not as fun place to live, or you could live in New York. And also you could go to a startup and now with places like Google and Facebook and other tech giants here. If the problem was during call it 10, 15 years ago, if you moved to New York to work at one of the 15 great startups and that startup failed, now do I have to”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “By the financial crisis, it was actually accelerated by COVID. In addition to that, that as people left San Francisco, left a lot of places, even the folks that went down to maybe Miami or Austin are now all relocated into New York. So you have a breadth of industries and you have a really dynamic culture here around startups. And it's probably been the best time to invest here that I've seen ever, don't tell anyone.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “engineers. Snap has hundreds of engineers. Facebook, Meta has hundreds of engineers here. So it's become really an engineering hub. At the same time, you not only build a billion dollar company, but based on that core engineering, you have companies like Datadog and MongoDB, which are tens of billion dollar public companies focused on infrastructure software and really hard technology challenges. New York's always been a magnet for young people, and it's a place people want to live. So you're able to recruit people in from a technical and non-technical side. You had the boost of folks like Google or other magnets coming here. And then you've begun the virtuous cycle of very large companies, maybe starting with double click when that got acquired by Google, that the normal cycle of company gets acquired. Some people leave, they start their other company, their old boss might seed them and serve as a mentor. And that cut the flywheel going. And the flywheel is really going now. I think it was accelerating.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Institutions isn't the only place to be. Rank got cheaper. There was a lot of people available and there was a reforming and in a very strange way the financial crisis, which was very bad for New York, was incredibly good for New York tech. As all these assets were thrown up in the air, at the same time you had a number of small companies that were growing very quickly and building out infrastructure. We had our annual meeting last week and one of our LP shared with me a diligence call they had on first mark when we were starting and it came up in notes in one of their things and this is from call it fifteen seventeen years ago. They said these guys are so tied to New York but you have to realize as an LP though no one will ever be able to build a billion dollar company in New York and there's no tech talent. So fast forward to now Google, Microsoft, all the biggest companies this is a huge engineering headquarters where Google has several million square feet where they're putting more and more”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “Exploding, so coming back to mid late 90s, it was the era of double click and welcome to Silicon Valley from double click was the big billboard as you entered the flat iron district. And that was very much an ad tech ecosystem, some media, some commerce, some gaming, but it was an interesting ecosystem that generally was hurt really badly by that downturn in 01 to 03. And then from that basis people had left New York for dead and a lot of the capital allocators we spoke with were saying why New York? That would be a terrible place to build a company. Wall Street dominates that. It's a one industry town that you're not that one industry. Are you really going to be able to pay for real estate there? Are people really going to want to come there? Are you ever going to be able to build a billion dollar business in New York? So fast forward to today and a couple things happen which really accelerate New York. So the financial crisis gave people an idea of New York's a great place, but maybe financial...”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “We can't be in Silicon Valley. Showing up as new guys in Silicon Valley often is a very difficult proposition. What's a great area? We love New York. Can New York be a venture hub and can we be one of the key pillars of that venture hub in New York? And also, can you get involved in the earliest stages where at time where entrepreneurs really needed a lot of help and can you be involved at the earliest stages of making your mark on that company and building from there? So if you get involved in the earliest stages in capital efficient businesses that you know really well in a geography that you think you could have some leadership in, that's a fine enough point and a focused enough strategy that you're able to raise some money and get started.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “We're going through generational transitions. Obviously, some of that rhymes with the current state 20 years later, some of them had expanded too quickly, maybe entered markets that weren't either that great like cleantech at the time or areas that were not growing as quickly like telecom equipment and semiconductors. But if you start with a blank sheet of paper, you're not burdened by all these legacy people legacy ideas, everything else. So with a couple partners from Pequot, we form first mark and we said, if we have a very focused strategy, we could take advantage of all the trends we saw. We want to be focused on certain industries. We want to be some of the best investors in industries we chose. So we looked at basically just the application layer of the internet. Either enterprise software or consumer applications, very capital efficient, especially as you're getting into the era of AWS and shared infrastructure. Then we looked at from a geographic basis”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “So, what I started to realize at the time was this thing called the internet, which a lot of people had left for dead in a one to oh three definitely had some legs. It wasn't perfect, but I was able to see my own business that a lot of the promise of the internet was going to work eventually. A lot of great companies were going to be built and therefore it wasn't the end of an era in 0103. It was really just the beginning. And I deeply believed in it and figured out, all right, so what are we going to do to take advantage of that? I thought as still a relatively young guy in a time where it was really hard to raise capital, how do we go about building a business? So I went back to Pequad Ventures and I had some partners from there who actually had invested in first advantage and had some great returns from that era and from that investment. And we thought about what would a venture capital firm look like at the time and a lot of the firms were either older that had a lot of success in the late 90s.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “So, you had this idea of getting into a growth area from your original background restructuring. Then you find yourself restructuring again and doing a bunch of acquisitions. How did you get from there to what became first market?”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “32 different companies changing the focus of the business from consumer to enterprise and being a background screening, drug screening, credit screening business, and rebranding the company at first advantage, which now parts of it exists in a whole bunch of different worlds. There's now a public company called First Advantage, which is the background screening and drug screening arm. There's a big third-party credit bureau called CRIDCO, DOR Track and Core Logic was a combination of some of those assets, which are multi-billion dollar private companies, and even Concilio, which is a biggest discovery company in the world. It's part of that ecosystem after all of that, I decided it was interesting and fun and maybe interesting and fun at different times, and maybe not all at the same time. But that was a great experience. But what I really loved was being an investor and being in venture capital.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “From distributed data. which meant that than the way people Using phones and faxes. And then I also realized if you could find people like that, could you also do background screening and drug screening? So I was able to raise another $13.2 million. It took 87 meetings. I lost 14 pounds and was generally sweating in the snow all winter and was able to get the company to profitability as well as do our first acquisition in the background screening space. And then through that, we basically said, hey, can we continue to acquire some of these legacy companies, put them on our technology platform, have a better, more efficient infrastructure, and use the existing customers that those companies had? And fortunately for us, we were not the only companies hurting, but there was a lot of other companies not terribly dissimilar than today who also didn't have efficient capital machine. And they were also suffering from a negative economic downturn. I had the ability to buy those companies maybe more cheaply than what they had been in a boom. And we wound up buying about”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “Tried to raise Million dollars between Thanksgiving Year Allocator of capital had no So actually, got that And then realized despite burning a lot of money on things that didn't really They actually That was able to”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “Was a company called It 1 8 Loved ones via infromerate. For consumers Your old war buddy, and they play these info. In the middle of the night, and say, Hey, you should really be better connected. You call Members and loved ones generally Offline capabilities, and then the internet came and someone said, hey, if you call it 1-800 Your company worth 20 times more. So they did that. And Lehman”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “Had in nineteen ninety nine and took But the job that you'd give to a 20 year old who hey kids why don't you see Because there's not And”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  26. “You're And you're able to say, Oh, what Still in my 20s and no family, no kids. And I have these skills around restructurings and not.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  27. “very little even idea. School let me meet people who did that gave me time to understand. Part of an industry that was growing so they had to let So they had to open To people who were not engineered. And were people who were going to Maybe had some bad So that provided a”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  28. “Sports scores using Or football without having to mail in the things, I think that Very cool, and if this could be really great, but no one would”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  29. “Thinking that I'm figuring this. Value. I'm doing all this stuff. I'm changing World where maybe this idea I had of growing before”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  30. “And they needed a way to offload that so Against those bonds and some of the So, they need to offer. So I was part of a fund that was buying. Bulk of Individual basis. And one of them was a bakery. And we A bunch of things. Things and simple Using Lotus We could What's A bankruptcy closing hearing, and I thought I was really good because we had wound up doing some math. We were All of it was really great. Leaving this huge The family, and she Hey, are you my boss? And I said, no, I'm not. I'm just this kid here to fill out some paper. And she said, I just want to tell you that your Name, there's a special place in hell for people like that. Just try and steal people's business So I went from feeling like”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  31. “Silicon Valley and Tech Hey, there is a way to invest in a growing pie and really create new and interesting things of what to do. So I thought maybe that would be a better way to invest and a way to create value and be less of a financial engineer and be more of a company builder, which took me a path to change careers despite actually being on a pretty good trajectory to go back to business school and take advantage of this booming new internet trend. So how did you pivot from financial engineering distress to a concept of, oh, growth, growing pie sounds great. So we had bought a bakery at a bankruptcy. We actually bought bonds from a big insurance company. And in the late 80s, the insurance companies all of a sudden realized there were junk bonds. And these junk bonds are just like regular bonds, but they have a much higher yield and not much risk. Obviously, we all know in order to get the reward, you have to take the risk.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  32. “Rick, great to see you. Great seeing you. It's awesome to be on. I'm a huge fan. Why don't you take me back to the beginning for you? Coming out of college, I was trying to figure out what I was going to do. It seemed like a good place to go was to go to Wall Street, and that would be the fastest way to pay back my student loans. And as a kid growing up in suburban Philadelphia, New York seemed a million miles away. So I went to Wall Street, started working in investment banking, then got into distress buyouts. In the early nineties there was a lot of opportunity in distress buyouts and a lot of things going on. So as I did that, had success, started really getting itch for investing. At the same time, I realized distress was oftentimes a knife fight over a shrinking pie. While at the same time you were seeing an acceleration of this new thing that people were interested in called the internet. And the internet was saying, wow, I didn't realize this, obviously being an East Coast guy with limited exposure to solar.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  33. “Rick is a one man treasure trove of venture insights. Our conversation includes his background across distressed investing, operations, and growth capital, the New York Tech scene, creation of value-added guilds of hundreds of thousands of people, and investment theses across digital health, gaming, and the venture environment. As has any great New Yorker would be, Rick is a tried and true Yankees fan. What more can you ask for?”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source

  34. “My guest on today's show is Rick Heitzman, the founder and managing partner of First Mark Capital, a network-driven seed and series A venture capital firm managing $3.5 billion that backs entrepreneurs to high-growth consumer and enterprise technology sectors focused in New York City. Some of FirstMark's past wins include Pinterest, DraftKings, Shopify, Upwork, Stubhub, and Airbnb. And Rick has been named to the Forbes Midas list as one of the world's top venture capitalists for the last four years in a row.”

    2023-11-13 · Capital Allocators · Rick Heitzmann – New York Venture Investing at FirstMark Capital (EP.350) · IDENTIFIED FROM THE TRANSCRIPT · source