Recorded live at the HR Tech Conference from the Fuel50 booth in Las Vegas, Chad & Cheese sit down for a candid conversation with Philip Dur, co-founder of Peakspan Capital. They discuss partnering with growth-stage companies post-product market fit, offering domain expertise and capital. Dur also highlights focus, talent, and scalability challenges for startups on our space, and they also delve into investment strategies, avoiding trendy markets, focusing on high-impact solutions, and foreseeing societal responsibility in HR tech. To learn more about Fuel50, visit https://fuel50.com.
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Chad: Coming to you live from the Fuel50 booth at the heart of HR Tech, it's the Chad and Cheese Podcast. We are diving deep into the world of HR technology, tackling workforce challenges with innovative solutions. And we'd like to give special thanks to Fuel50, the science-based talent marketplace that bridges skills gaps, unlocks hidden potential and supports better retention and engagement. Let's do this.
Intro: Hide your kids. Lock the doors. You're listening to HR's most dangerous podcast. Chad Sowash and Joel Cheeseman are here to punch the recruiting industry, right where it hurts. Complete with breaking news, brash opinion, and loads of snark. Buckle up boys and girls. It's time for the Chad and Cheese Podcast.
Joel: Oh, yeah. What's up everybody? It's your blackjack table's favorite podcast, AKA, the Chad and Cheese Podcast. I'm your co-host, Joel Cheeseman, joined as always, the Siegfried to my Roy, Chad Sowash. We are recording live from the HR Tech Show in Las Vegas from the Fuel50 booth.
Chad: Tigers everywhere.
[applause]
Joel: And we're excited to welcome Philip Dur.
Chad: He's a Tiger.
[laughter]
Joel: He is...
Phil Dur: I wish I was wearing stripes.
Joel: The co-founder and managing partner at PeakSpan Capital.
Chad: Woo.
Joel: That sounds really fancy.
Chad: Like those glasses. That doesn't...
Joel: And the jacket.
Phil Dur: It's awesome to be here with the two of you.
Joel: You didn't have to take off the ascot for our show, by the way.
[laughter]
Joel: You could have kept it on.
Phil Dur: Well, it's a little warm in here.
Chad: Yeah, that's a good point. That's a very good point.
Joel: Oh, it's gonna get hotter in this episode.
Phil Dur: Oh boy. Here we go.
Chad: So give us a little, Twitter bio of you.
Phil Dur: Yeah, yeah. So I've been partnering with entrepreneurs for 26 years. Just joined my 41st board, which is amazing.
Chad: Holy shit, 41st?
Phil Dur: And I see that... Isn't that crazy?
Chad: Wow. How do you keep it together after that?
Phil Dur: Well, they're not all at the same time.
Chad: Okay, good.
Joel: It's not like women.
Phil Dur: Wow.
Chad: Oh, okay.
[laughter]
Phil Dur: Oh, my gosh.
Joel: Which you have, anyway...
Chad: I can only, I can only take care of one, okay?
Joel: Back to Philip, back to Philip.
Chad: Too much.
Phil Dur: 26 years working with entrepreneurs, which is amazing. I pinched myself that I get the privilege to work with these incredible pioneers and innovators. My firm is 27 Folks in New York at Silicon Valley. We've got a billion dollars of committed capital, $585 million most recent fund. And we, I think we fill a gap in the market. We partner with what I call emerging growth stage companies. So it's when you're through the product-market-fit woods.
Chad: Gotcha.
Phil Dur: And it was really hard. Like you really had to focus to get through those woods.
Chad: So we talking A stage?
Phil Dur: It's funny 'cause our companies will typically bootstrap or quasi bootstrap to five to 10 million in revenue, so even though they have real scale, we're usually their first institutional investor. And they're bringing us in because they've gotten through those product-market-fit woods, and now they find themselves at the foot of a mountain called go to market scaling and mechanization. And that's where we come in with capital and more importantly, domain expertise and experience and an awesome network to help them crush that.
Chad: Now, do you find at that point that many startups, you've got a lot of startup founders that are out there, great people, great vision, but once you get to growth, that's an entirely different animal. Do you find that at that point you have to have a hard discussion and say, "We need to bring... "
Joel: Are you the one that brings the adults in the room, is the question.
Chad: [laughter] Do you bring bring the adults in the room? That's a great way to say it, Joel, because this is very hard for many founders to understand that it's just a different animal going from founder stage to growth stage to IPO, etcetera, etcetera.
Phil Dur: It's a really excellent question. I would say most founders think that establishing product-market-fit is the hardest challenge they're gonna see in their journey.
[laughter]
Phil Dur: And I tell them no, it is a hard challenge. But scaling your business with real repeatability is even harder unfortunately. I'd say that one of the things that we do a lot of is kind of increasing talent density, right? So typically when we partner with our founders, they're torch jugglers, they're running sales, they're running product. They're the part-time CFO. And so over time we'll help augment that team so that we can really kind of concentrate and reinforce their superpowers, if that makes sense. And different founders will have different... I've had some founders who are the best strategic salespeople on the planet. I have other founders whose superpower is their product. And so it's all about identifying where can you have the most impact as a leader in your business and complementing you at the right team members.
Chad: Right. Some founders are revenue sales focused...
Phil Dur: That's right. Absolutely. In their DNA, like they're amazing at it.
Chad: And some are tech and they're developers.
Phil Dur: That's right.
Chad: Does it matter to you guys? Is there really a sweet spot for you guys when you're looking at a founder that you want to...
Joel: I'm guessing the best is both.
Phil Dur: Yeah. But you rarely see it, right? Like most people, unfortunately, are not polymaths when it comes to being excellent at all things at the same time.
[laughter]
Chad: Yes.
Phil Dur: I'd say that we always wanna start with a couple of essential ingredients. One is you gotta have a good product. Second, we try and avoid whatever's in the white hot chewy center of whatever Silicon Valley based venture capital's interested in.
[laughter]
Phil Dur: Because Silicon Valley venture capital is like, they're like rabbit farmers, right? They get excited about a category. And then if you fast forward like eight quarters, there's 12,000 companies that are all going after the same small addressable market. So we look for entrepreneurs that have a great product. They live in a relatively dense meaning favorable competitive environment. And what they're doing is something that matters and has impact. And those tend to be the best partners for PeakSpan.
Joel: Name some names. Give us some of your like big exits, your most sort of...
Chad: Portfolio, baby. Portfolio.
Joel: High profile. Yeah.
Phil Dur: I'll give you some early hits in my career. So one of my first investments that I ever worked on was in a business called Plateau Systems, which was a great LMS, not a great name for a software company, Plateau Systems, but great software business that was acquired by Success Factors and now is SAP's LMS.
Joel: Okay.
Chad: Nice.
Phil Dur: I was privileged to join the board of at the time, small business called HireVue, and they were about 3 million in revenue scale. And it's great to see them as one of the leaders and pioneers here now. Within the PeakSpan portfolio, Fuel50 is obviously an amazing partner of ours, but we also work with a number of other businesses. There's a company called Epignosis. Their flagship product is called TalentLMS. And they have probably 11x'ed revenue scale in the four and a half years that we've been partners.
Chad: That's two LMSs right out of the gate. Is there a focus on the LMS side of the house?
Phil Dur: So I'm not... I don't need to be particularly clever. I look for big pain points.
Chad: Yes.
Phil Dur: And we lean into those. So we think that if you look at the shortage of talent that is facing North American, Western European companies in particular, over the next several decades, there's gonna continue to be a massive focus on re-skilling and up-skilling, and how I can be super creative about addressing those needs, yes, with external candidates, but also with the folks that work for me currently. So we've made investments in businesses like TalentLMS, which is a high velocity LMS for departmental and mid-size businesses. We're partnered with an incredible business called Arist that serves enterprises with a continuous learning solution. The flow of work, they basically break down your content into micro courses, and they deliver that through Slack Teams and text. It's almost like putting your reps in every day as opposed to sitting in front of a screen for two hours. We work with a business called Bongo Learn that does video based training and assessment with AI to...
Joel: I'm sensing a theme here, Chad. A lot of L words.
Phil Dur: We also obviously... I mean, Fuel50 is right at the forefront of helping you develop your internal talent to meet your future needs.
Joel: I think one of the criticisms of investment firms is that they tend to chase the shiny thing. So if CNBC's talking about AI, well, we gotta get into AI. If they're talking about remote work, well, God, we gotta get headfirst in remote work. It sounds like you guys are a little more disciplined in that. Talk to the shiny thing trend and how you guys stay focused on apparently the learning side of development and employment.
Phil Dur: My analogy for what you just described, have you all seen the movie? I've got an 18-year-old and a 20-year-old, but when they were tiny, tiny, I embarked on a wonderful relationship with the Disney franchise. There's a movie called "Finding Nemo" that you probably have heard of.
Chad: Oh, yeah.
Phil Dur: Great scene in that movie...
Joel: Just keep swimming Phil.
Chad: Swimming baby, Dory.
Phil Dur: Great scene in that movie where Dory pops up out of the water near a pier and there's a bunch of seagulls sitting there and one Seagull sees her, and she says, "Mine." And then all the other seagulls go, "Mine, mine, mine, mine, mine." That is the US venture capital industry in a hot second. [laughter] So what happens in my industry is something gets hot and I can actually show it to you in the data. We can actually go back and look at company starts and media mentions. Right now it's GenAI. Before that it was e-scooters. Before that it was big data. [laughter] And as soon as that topic gets hot, everybody's gotta have their play.
Chad: Yes.
Phil Dur: And so you see this massive increase in the number of companies going after the same opportunity. And if you fast forward three or four years later, sadly there's like two or three players that own 80% of the segment value and the rest are struggling to find a home. It's not a great way for entrepreneurs to build value. Not a great way for us to harvest and accrue value for our stakeholders. So we tend to look for business, I'll use Fuel50 as an example. If you look at the competitive set going after their segment of talent, marketplaces, intro mobility, and career pathing, you've got some really credible players, Gloat and Eightfold and Fuel50, but given the size and quality of the market opportunity, you don't have like 60 that you can rattle off. Right?
Chad: Right.
Phil Dur: And we as investors and partners find that when we're working with our teams to be an exceptionally compelling dynamic, got a huge market opportunity, it's something that's hard to do. So there's natural walls and moats. And there's very few vendors that are actually doing it with grace and elegance.
Chad: Well, talk a little bit about the due diligence, if you would, because we've seen, and we will continue to see a shit ton of vaporware that's out there. There's a over promise, under deliver, and a lot of that has to do with the sugar rush of the cash that came in in the first place.
Phil Dur: Yeah, you bet.
Chad: And the explosion of some of these TAMs and we'll say Eightfold for... They started off with a very short, small TAM that was focused on parsing and matching. And now they do everything, which to me, come on, how can you explode that fast? So you see those types of things every single day. If I'm a founder and I want to go after cash and funding and I get cash and funding, what does that TAM, how do you play with that TAM from founder to founder to founder? Because sometimes it just explodes. But then you see some organizations that stay hyperfocused. What's the right answer? Is there a right answer?
Phil Dur: There's no perfect right answer. I think if you try as a small business to go after too large an addressable market early in your development, in my experience, in my quarter century doing this, it's a little bit like when your kids try and play 10 sports at the same time. [laughter] The odds of them being good at any of them go down dramatically. Whereas when you see people that are really exceptional in what they do, they wake up every morning and they just try and get a little bit better at that sport. The other analogy I use with my entrepreneurs is, I'm not telling you that you can't go after that big grand vision someday. But it's a little bit like dropping a pebble in a pond. Let's not go after the sixth ring first, let's focus on that immediate ring that we created right around the pebble.
Phil Dur: And once we've really crushed that ring, then we expand to the next ring. And the beauty of that to your question is your team wakes up every morning and they know exactly what they're doing. Product knows who they serve. Customer success has seen all the problems and objections. They know how to speak the language of the customer. Your sales team knows how to sell to that ICP in their sleep. Your marketing team is making the same content over and over again, so they get really good at it. It's like anything else in life. Practice makes perfect and focus trumps in expertise. So, I'm a huge believer in focus first for most businesses.
Chad: Gotcha.
Joel: I wanna touch on societal responsibility.
Phil Dur: Sure.
Joel: And we touched on chasing the next shiny thing. There was a period in our business where diversity, equity, and inclusion was a hot topic. The George Floyd murders, the Me Too movement. There was a lot of money going into companies focused on inclusivity and diversity. That seems to have dried up, that seems to have hit companies where Wall Street Journal reported a lot of companies are laying off their DEI management team or whoever's in charge of that. Does capital have a responsibility to continue to push the envelope around these social issues? Or is it strictly a market decision to say the money's not there anymore, we're gonna go somewhere else?
Phil Dur: I actually prefer to be an optimist. And when you said that...
Joel: Well, that's no fun.
[laughter]
Phil Dur: When you said that, what immediately went through my head was actually some conversations that we've been having. In my role, we don't need to be that smart. We talk to buyers. So we talk to CHROs, we talk to people leaders and we stitch together those conversations and pattern match. And that's how we get excited about new and emerging themes where we feel like innovators and pioneers can have an impact. One of the areas that I'm hearing CHROs talk a ton about even in this market, which is a tough market because budgets have been slashed and people are feeling a lot of constraint. They felt abundance two years ago, and they're not feeling abundance today. The couple of the key areas that we hear people talking about over and over again that I think are exciting is, one is pay equity. Pay equity is a super important and hot topic right now, which I think is encouraging.
Chad: Yes.
Phil Dur: And by the way, way overdue and needed. Second is we hear people talking about a real desire to have better workforce analytics. So, before we can address some of the questions and problems that you're talking about, we first need to understand what the heck is the state of play. And what's embarrassing is I think most mid-market enterprise people leaders would tell you if they were being honest, they have no clue what their organization looks like. And so I think we first need to make sure that we understand what does the state of the union look like. And then I prefer to be optimistic and think that leaders have good intent and that we will correct these things over time. That's my view. It keeps me energized.
Chad: You know where intention takes you, right?
Phil Dur: You're gonna be negative now, aren't you? I'm just a guy.
Chad: I'm just saying... So from our standpoint, intent has been wonderful, but it hasn't moved the ball. It hasn't. We love to talk about pay equity, but the only way we're gonna get there is through government intervention. If it wouldn't have been, then we would've done it years ago.
Phil Dur: But that's coming too. So we see EU and US states moving more and more to transparency which is I think an essential ingredient to pay equity. And you've got some amazing vendors. There's businesses here like Compa that are crushing it with an awesome novel approach to providing that transparency and decisioning for enterprises. There's companies Figures in Europe that are doing the same for the European market. So look, I hear you all, I'm not in any way ignoring or taking any currency from your observation, but I'm in the business of being an optimist. That's how I wake up every day and get motivated. And so I do think we're gonna hit these issues and see improvement.
Joel: Does government regulation drive investment decisions and should it?
Chad: Hell, yes.
[chuckle]
Phil Dur: Government regulation can be a massive catalyst to investment decisions because it will drive customer behavior.
Chad: Oh, yeah.
Phil Dur: And vendors will respond to customer behavior, we see that all the time.
Chad: Yeah.
Joel: So we've seen a massive shift. We saw '20 to '22 free money, unicorns everywhere in every industry. That's dried up. We're starting to see some cracking of the ice with HiBob getting investments, Harry just got a big investment. I just wanna get your take on the world that was, the world that is and the world that will be in terms of how money is being freed up.
Phil Dur: Yeah. So, one benefit of having done this for 26 years is this is my fourth economic correction that I've seen as an investor, that 2020 to 2021 period was the most buoyant that I've seen in my career. I think referencing that as a baseline or as a comp is probably not the right mentality for an entrepreneur to have.
Chad: No. [laughter]
Phil Dur: But I think that there are things that are just true. So going back to our comment around focus, focused vendors I think will always trump. People that have the best product in their category will always have access to capital. I think we went through a period and you guys were referring to as sugar rush. We went through a period where people were looking for candy all the time. And what they learned, unfortunately is that candy is not good for you.
[laughter]
Phil Dur: It feels good, in the moment, but it's not good for you.
Chad: Yeah.
Phil Dur: We're here at Vegas.
Joel: Everything's good for you here.
Phil Dur: The all-you-can-eat dessert buffet looks good, but it's not good for you guys.
Joel: Wait, where's that?
[laughter]
Joel: Where's that?
[laughter]
Chad: Don't tell him.
Phil Dur: So I'd say, a lot of the companies that we work with are bootstrapped or hyper capital efficient before we show up. And you should see the return that these companies are able to glean from the capital that we contribute because they're athletic. Their DNA is around taking any dollar they get and really making it go far.
Chad: Oh, yeah.
Phil Dur: And the beauty of that is that you can create the most extraordinary wins for everyone, for your employees, certainly for the founders and for your investors at outcomes that are very different than what some of the valley companies require to make everybody feel satisfied.
Chad: Yeah.
Phil Dur: Sometimes those expectations are very hard to meet.
Joel: Phil, thanks for hanging out with us here in the Fuel50 booth.
Phil Dur: This is awesome. You guys rock. This is so much fun.
Chad: Thanks, Phil.
Joel: For our listeners and particularly those startups out there that may be looking for some capital, where would you send them? How can they connect with you?
Phil Dur: Come, see us, reach out to us. All of our contact detail is at peakspancapital.com, and I wanna thank the two of you. This is awesome.
Chad: Thanks, man.
Phil Dur: And if I can ever rejoin you, I'd love to do it. So thanks for your time.
Chad: Amen.
Joel: Philip McCracken, I mean, Philip Dur, everybody. He's the co-founder and managing partner at PeakSpan. That is another one in the can. We out.
Chad: We out.
Outro: Wow. Look at you. You made it through an entire episode of the Chad and Cheese Podcast. Or maybe you cheated and fast forwarded to the end. Either way, there's no doubt you wish you had that time back. Valuable time you could've used to buy a nutritious meal at Taco Bell, enjoy a pour of your favorite whiskey or just watch big booty Latinas and bug fights on TikTok. No, you hung out with these two chuggle heads instead. Now, go take a shower and wash off all the guilt, but save some soap because you'll be back like an awful train wreck. You can't look away. And like Chad's favorite Western, you can't quit them either. We out.
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