Maybe I'm about to give away the secret sauce that will end my business. I don't like being a fund manager. I don't give a [__] about any of that stuff. I am good at one thing, legalizing disruptive [__].
When's the right time for a founder to bring on somebody internally to do this?
Sometimes the answer is day one. You're not going to be able to hire anyone who works for me because you can't afford them. If you are someone like Jay or me, establishing your credibility publicly is really important. I disagree. If you're not willing to give me preferred, you probably don't need us in the first place. And if you need us that badly, you should give me whatever I need because it's [music] going to multiply for you tenfold. I mean, there have been companies where I like everything except the personality of the founder. And I'm like, I don't want to work with this person for the next 10 years. And so, I'm not going to do the deal. If you are an AI founder right now, there's going to come a point where there's going to be some huge winners and a lot of failures.
What do you think most VCs get wrong about [music] regulatory risk? The first would be...
Hey everyone, welcome back to Climb. I'm Jake Kapor, general partner of VSSC Ventures. You know, on season 3, we've talked a lot about how AI is changing the way we build and back companies. We haven't talked enough about how AI has changed the way that funds are built and backed. So, today I'm thrilled to have on my friend Bradley Tusk, CEO of Tusk Ventures. Bradley works with companies when government, local regulators, and politics stands in the way of them and growth. And he really cut his teeth in the heyday of the sharing economy, helping companies like Uber break through the noise in cities like New York City. Given that we have a similar model where we do equity for services and investment, I thought it'd be great to have Bradley on to talk about how incentives and venture capital have changed, how mega funds have changed the way that funds are built and companies are backed, and more importantly, what AI means for the next generation of capital availability for founders. So, if you're thinking about how you find the best investors for your business, how you build businesses in the age of AI, more importantly, how you raise venture capital in 2026 and beyond, this is the episode for you. Bradley, thank you so much for joining me.
Jay, thanks for having me.
You know, what brought us here is this idea that we've been talking about on season 3. How is AI changing how we build and back companies? We hadn't really had an in-depth conversation about how it's changing how we build and back funds, right? From an LP perspective, from a GP perspective, and you've had this great post about how the current venture model is broken.
It's now been about a year, I think, since you announced that you were walking away from Fund 4. Just to give a little background, I think Fund 1 was 35.
Fund 2 was 70, Fund 3 was 140.
We kept doubling, which is the kind of classic story of an emerging manager.
And then you decided to walk away. So maybe let's set the stage a little bit. What prompted that decision and what broke first? Was it LP appetite, founder experience, or something?
Yeah. So I, you know, I'm not originally of venture, tech, business, really any of that, right? I started my career in politics. And then I broke into tech kind of by accident, which is I ran the campaigns to legalize Uber all over the US. And this I started in early 2011. I had started my first company, which is still a consulting firm that runs big legislative and policy campaigns all over the country. It was fine, but I learned a few things along the way. One, I don't like being a fund manager. I don't like being responsible for other people's money. I really hate asking people for money. And then a lot of stuff that I think people who, you know, maybe love running funds or are interested in portfolio construction, board seats, compliance, I don't give a [__] about any of that stuff, right? To me it was all an annoyance. I am good at one thing, legalizing disruptive [__], right? And that's what I like doing. And I like meeting founders I think are interesting and betting on them. And so we were raising Fund 4 and we were about to circulate the subdocs for the first close and I think it would have been around the same size as Fund 3. So we weren't going to double again but it would have been, you know, roughly based on we were at I don't know 50 million or so in commitments for the first close. So we would have got to about the same place.
Yeah. And it kind of hit me that I didn't need to raise outside capital because when I looked at all those companies that I just named, none of them took—those are all hot deals, right? And none of them needed my money. What they all wanted was our political help, right? They wanted us to solve whatever regulatory problem they had. And I started asking some of them like, 'Hey, if I had just asked you for equity like I did with Uber or Clear, would you have done that instead?' And they were like, 'Yeah.' And so then it hit me like I'm doing all these things I don't enjoy doing. What if instead I kind of created a new hybrid model that is part what I did initially, part subsequently. So now we're taking equity for services like I did with Uber and Clear, or also taking our pro rata, and then I'm either doing that off my own balance sheet or SPVs with my former LPs or other friends and people like that. And I just think it's for me a far better model, much more upside. Now, there's one meaningful piece of downside, which is I am spending a couple of million dollars a year on my team who has to do all of the regulatory work and comms work for our portfolio companies without management fees coming in to pay for it, right? If there's no outside capital, there are no fees.
Do you also take like fee clients? So, you know, you got startups over here, maybe there's a regular way.
Yeah, but in a sense different business. So, Tusk Strategies, which was that first company, you know, I don't run it anymore, but I still own it and that's a pretty profitable company. And so, I take a couple of million dollars of profits from Tusk Strategies, use that to pay for Tusk Ventures. And then, so I own the downside, but I also own the upside. So, the employees of Tusk Ventures have about 25% combined over the equity. So, basically kind of inverted the GP/LP model where now effectively I'm the LP in many ways. And we'll see. But when I think about—we can get into the math and how I've been modeling it. But I can afford to lose the money luckily if everything goes to zero. But if everything kind of works out the way I hope it will, you know, it's like a 40 or 50x. And that's not even being crazy with estimates. And I've got a very high risk appetite. And so to me is if you have a skill that people will give you equity for without getting capital in return and you have the cash to be able to cover your cost of doing so and the risk appetite, it makes sense to do it that way.
Well, let's talk about a couple of the assumptions you're making in that model, right? We'll get right into it. So one is you can go to founders and say, 'Hey, if you are willing to give me equity instead of taking my cash, would you do that?' Right? Instead of doing that. So that's one big assumption. Some say no.
Right. And I think I want to get to that in a second. So I think that's a big assumption. The other assumption is...
You've got the capital to be able to, you know, execute this model and the risk appetite to do it, which again I think not every agency, you know, marketing agency, PR agency, whatever, would do. And then I think the last bit of it is that when you go and do an SPV into these companies, there's going to be LP appetite for it. And so I think those are three big assumptions that we're making here.
All requirements to do a lot of work.
Yeah. No. Well, let's start with the equity one because I think, you know, again a lot of the audience for the show is founders and so I want them to think about, hey, how do you build a cap table?
I'll say it from our perspective. One thing founders do like when we offer equity for service and a check is they say you're putting your money where your mouth is. You have real conviction in what I'm doing. This is not going to be about, you know, do six months of work and then f off and move on to the next thing.
You're aligned with me on my cap table for a while.
Right. And that's because you're writing a check or because you're taking equity instead of cash? Well, sometimes we do both. But we lead with the check, right? So, VSSC Ventures is a standalone $20 million vehicle. So, typically I'm writing a 500 to 750K check. And so, when I go to a founder and I say, 'You've got a story that I think we can turn into a category leader.' And I believe in it so much that I'm writing a check, that's something no other agency or vendor is doing for them, at least in the PR world, right? When they come for regulatory, we can always point them to Tusk, right? But for us, that's a unique value prop. Sure. No other agency is doing for them. At the same time, I tend to find—and you tell me if you agree or disagree—a lot of the best founders are very equity tight these days.
Sure. If cash—it really just depends on the market cycle, right? If cash is plentiful, then they're equity tight.
We're in the market today where cash is plentiful.
Correct. If cash is tight, then they're equity generous. And so, but keep in mind...
I don't take anything where I don't believe that our work specifically can truly move the needle for the company's future, right? We are not passive investors. So, fundamentally, for you to give me one and a half percent of your company, let's say we're meeting you at seed. Yeah. You have to believe and I have to believe that our work is going to meaningfully increase your TAM, build a regulatory moat for you against your competition, things like that. Also because I'm only interested in companies that are highly regulated. The other value—so the main value would be one, all the regulatory stuff, two, comms, but then three is there is some value at this point to having our name on your cap table because like for example, Doctronic is one of our portfolio companies and Matt Pless was one of the founders. He was on a podcast recently and I was quite pleased that the question they asked him, which is they said, 'We see that Tusk Ventures is on your cap table, clearly you're taking regulation very seriously,' right? And so I think there's a market signal. After, you know, I've been in and around politics for over 30 years, I've been doing stuff with startups for almost 15 years at this point, and so there's market value, A, I think in the symbolism or name, and then B, one other thing that I spend a decent amount of time on is fundraising, not in that I'm out there finding you investors. I mean, if I know people, I'll happily do it. It's in the diligence, you know, talking to VCs who are looking at it to explain here's what I think the regulatory issues are. Here's how we are going about solving them. And here's why I chose to take equity in this company and bet on this founder as opposed to being paid in cash.
It's a high level of conviction coming from you being on the cap table, you know, to push on that a little bit if you don't mind. Right. One of the things I've seen as funds have gotten bigger, which you talked about in your kind of initial setup of our chat today. As funds have gotten bigger, they add operations teams. One of the most hired-for roles I'm seeing on a lot of these larger, you know, mega funds north of a billion dollars is a regulatory operating partner.
I've thought about that, wondered about it, and so far at least, and maybe I'm about to give away the secret sauce, so that will end my business, but...
Their regulatory teams don't do what we do, okay? They're kind of like general counsels where they're like, 'Oh, we can help find the right lobbyists, the right PR firms, the right, you know, grassroots, whatever it is.' Or more likely, take Andreessen Horowitz. They have like a platform team that's bigger than the US Post Office at this point. They raise money for candidates. That's what—and there is some value in that and clearly Andre bet on Trump and is cashing in incredibly well on that. So good for him. But what we do specifically is we go pass laws in states. So for Doctronic, we just passed regulation where now Utah is the first state to allow prescription via AI. So no longer a human being, just Doctronic itself through its AI can say, 'Okay Jay, you have a sinus infection, we will send in a prescription to your pharmacy to fill it.' I have yet to see a platform team at any fund that does that, goes state by state by city, passes laws, blocks laws, writes regs, blocks regs, deals with procurement, deals with unions, all deals with the media around a particular regulatory issue.
When you look at some of the co-investors you've worked with or even the ones that you have seen pass on some of the deals that you're in, what do you think most VCs at this kind of seed through let's say Series B stage get wrong about regulatory risk that they're...
I mean, I think the good news is this: I do think that awareness of regulation and politics has improved materially on both sides of the equation, both on the founder VC side and on the regulator side. So, and on the VC side I would say I remember especially in the early days, you know, the typical conversation with the founder would be, you know, them—me explaining the regulatory issue and then them saying, 'No, no, no, you don't get it. I went to Stanford. I was at Y Combinator, you know, and Sequoia or whoever, you know, Kleiner Perkins is on my cap table. So when these stupid regulators see what I want and I explain it to them, they're just going to give it to me.' Yeah. And I'm like, you are so clueless that you're going to fail. And so now that arrogance has dissipated because enough startups have suffered enough regulatory problems that it has sort of smacked VCs and founders into a little more reality, you know, but still even today, you know, if I'm on a Zoom with a founder and it's very clear to me that they don't know what they don't know or they're not going to just get out of the way and let us do our jobs, then I have no interest in working with them.
When's the right time for a founder to bring on somebody internally to do this versus work with an external?
Yeah, it's a few things. So, one would be—I mean it's always sort of a stage and capital question to a certain extent—but let me break your question down into two pieces. So, the first would be when is a regulatory issue top of mind? And not to tout myself too much, but I wrote my first book, it's called The Fixer, and it literally gets into specifics like how do you think about all these questions and what should you do? So, if you're interested in this stuff, go check out The Fixer. But, you know, some of it is, do I need permission on the front end and what happens to me if I don't get it? So like with Bird, it's like they'll impound the scooter. All right, fine, right? If it's Lemonade or say Coinbase or whatever, it's like you're going to go to jail. Different story, right? So the first question is just when do you need to engage from a regulatory standpoint? Sometimes the answer is day one. Sometimes the answer is not until you have to. Now if I were a smart founder, I would find someone—and some do, and I'm always impressed by them—find someone like me and just say, 'Hey, I just want to meet you, not because we need you today, not because you'd want to, because there's nothing for you to do today, but when the time—I know the time's going to come, I want to be able to get you on the phone, right?' And founders listening to this, you know, feel free if that's your situation to reach out to us. And we're happy to at least meet you and, you know, consultation call. Yeah. You know, but we like this stuff, so we're always happy to kind of learn about what people are doing. Anyway, the second question is when to bring someone in-house. And then typically to me that's less of a regulatory question and more of a capital question, which is when you are early stage, all of your money should be going to engineering and go-to-market, right? You really don't want to have to spend money on anything other than those two things, which means, you know, having internal regulatory or comms people at that stage is probably not the best use of fairly scarce resources. I guess if you're an AI company at seed that raises $400 million, different story, but even then you're raising that because your engineers are wildly expensive, right? So, those—to me, like the best way that these things unfold would be let's say someone at the earliest stages does need regulatory help. You know, we'll take equity for that. You're not spending capital on that. We give you a level of work that you just can't get with an employee because if nothing else, keep in mind, we have a team of people doing it, right? That's different than one person. And with all due respect to whatever founder it is, you're not going to be able to hire anyone who works for me because you can't afford them. And the level of work we do, they're not going to walk away from being able to do really intellectually engaging, high-level work for multiple startups to just work for one, no matter how special you think you are. And so in a perfect world for me, we'll come in at the seed or A, we'll do our thing, and then by like the B or C, it's like, okay, you know what, this—like Ro is a really good example of this, right? Where when we came in, Zach needed us because he had created a new model. It's funny, what we meant with Doctronic, which is prescription via AI, part of the reason I was interested in working on Doctronic and confident that we could deliver was we helped legalize prescription via text. And so in the early days that eventually got to like, you're becoming a really big company issue, and then we've ended up working with them on compounding and other stuff too, and he and I are friends and we still talk all the time, but like putting that aside, they got to a point where it's like, okay, you're ready for someone in-house. The needs are not so severe that you need us every single day. You shouldn't need to still spend money on us. You know, we did our pro rata and whatnot, but—and so that actually is kind of the ideal way for it to unfold, but obviously it's startup world, so weird [__] happens every day.
Yeah. Yeah. You mentioned one thing that I thought was really interesting and I counsel founders on this a lot too, which is if you are, you know, from our perspective, it's about marketing and PR, right? Very similar model to you guys with the exception that we also still have a standalone fund in addition to the PR agency. I tell founders a lot if they've never hired a marketer before, how do you know what to look for? Right. The best ones, to your example, will do a lot of consultation calls. They'll talk to a lot of their friends who have CMOs to say, 'What's that CMO do really well?' They want to understand it. But, you know, when you're a startup and you're going really quickly, you sometimes don't have that. So, oftentimes what I will see a founder do, and especially when they work with us, is they'll spend six months with us. They'll understand, hey, this is what a top-tier PR agency does from an operational standpoint. And then when they go to hire internally, they'll come in and say, 'Hey guys, can you sit in on my interviews or can you actually help me figure out who we need to bring in?' Because now I've worked with you, but the volume of work that I need goes beyond.
We'll help interview or look at or recruit people when we get to that—when they get to that point because ultimately I have a lot at stake, right? If I own one and a half percent of your company or whatever it is, I need you to succeed as much as you do—or not quite as much, but still. So, I think it makes sense. But here's the other thing that you do and I do, but I think other people should think about, which is you have established credibility in the marketplace where now when you say to someone, hey, here's what I think you should do, because in part you're public, you have the successful podcast, you're out there in the world, you know, external validation creates credibility, right? So for me, the reason why I go on CNBC every other week, I host my own podcast, I write books, I give speeches, I have a column in New York, I have a Substack, all that stuff. Part I just enjoy it. But part also because all of that—when people see you on TV talking about how to regulate data centers or crypto or prediction markets or whatever it is, they're like, 'Oh, that's the guy.' Right? And so there is—so I think that part of it is what you describe, but part of it also is what you're doing. Even if I just revealed the secret sauce that you didn't want—no, no, it's not at all—which is if you are someone like Jay or me, establishing your credibility publicly is really important because that gives you the validation that you don't—like a founder and I will discuss whether or not I want their equity, whether or not they want to give me equity, whether we can—they have a real problem, whether we can solve their problem, no one ever says, 'Oh, tell me why you know what you're talking about politically.' It is assumed that if I say something, it's probably pretty well informed and right. I can be wrong.
No, no, I think you're spot on about that.
And I think the more complicated—so I'll, you know, kind of pat ourselves on the back since you teed me up for it nicely.
Exactly. We work with dirty, dusty, and dangerous industries a lot in this fund. It's a passion area of mine. It's not the only thing we do, but it's something...
Yeah. So, construction, manufacturing, transportation, public safety—I have four investments in public safety, one which we share. You know, and so to me when I say dirty, dusty, and dangerous industries, I'm talking about legacy industries that maybe missed the wave of SaaS but are now actually really opening up because of AI, right? And I think about that a lot. In the old days, you know, let's say in these dirty, dusty, digital, we had Procore and ServiceTitan and there's a couple of things that people were using, and now the availability of these tools for somebody—you know, voice AI for HVAC contractors, right? Massive. And now you can actually run a multi-million dollar HVAC business with a couple of employees because all of your customer service is being done through voice.
Yeah. You just need the people to actually fix the HVAC.
Exactly. So the point that I make to a lot of founders there is I say, especially if you're in those industries—if you're in consumer, fine, go build a media brand, go build TikTok, whatever. But if you are in a legacy industry, if you're in a dirty, dusty, and dangerous industry, you have such a white space to go and build media, to go and build content, to do a podcast. And I'll give you a prime example. One of my founders, Matt, runs a company called Multitude. They sell to police agencies. So 18,000 police agencies out there. Matt started a podcast, you know, on our encouragement and seeing he was on my show. Yeah. Seeing how easy it was. And he started a podcast called The Innovators of Public Safety Tips and he goes and he interviews police chiefs and he goes and he interviews data analysts at, you know, innovative police agencies, federal guys from DHS. And it's just a conversation about innovation in helping keep communities safer. Innovation in, you know, surveillance and how we're doing it in a way that is, you know, public-forward, not something that should be scary and Minority Report-y. And as a result, when he gets off the camera, folks go, 'Matt, that was a really interesting point you made there. How is your company doing something about that?' And then he's turned those guests into customers. Right. So that's how a company grows to three million of contractual ARR in the first year and a half of the business. Totally.
The media became a way for him to establish credibility with a customer six months before he sold him anything.
