Jamarlin talks to prodigy Delane Parnell, founder and CEO of high-school esports company PlayVS, which just raised a $15M series A round. They discuss how he grew up in the streets of Detroit, developed a passion for business and tech, and closed an exclusive deal with the NFHS, which writes the rules for most high school sports. Delane also talks about how he put together the raise, and how entrepreneurs can keep a positive attitude after being rejected by investors.
This is a full transcript of the conversation which has been lightly edited for clarity.
Jamarlin Martin: You're listening to GHOGH with Jamarlin Martin. We have a go hard or go home approach as we talk to the leading tech leaders, politicians and influencers. Let's GHOGH! We have a special guest today. Delane Parnell. How's it going?
Delane Parnell: Yeah, everything's good man. Just one day at a time moving forward.
Jamarlin Martin: Yeah. So GHOGH is still in LA. We're at the beautiful office space of Delane's in his movement that he has going on. He has been very cracking in LA and a lot of momentum. Before we get into your momentum as a founder, give us the short story of how you grew up and the path to being an entrepreneur.
Delane Parnell: Yeah. I grew up in Detroit, in the Jeffries Projects, raised by a single mother. Myself and my older brother, both of our fathers passed away. My brother's father passed away from sickle cell. My father was murdered a few months before I was born, so it was really, for me at least, I was raised by sort of a friend of the family. My brother was raised by my grandparents because my mom was 23 years old, two children, both of their fathers deceased, she was just going through her struggle of figuring it out and eventually moved back in with my mom as I got older and she was just more stable and sort of ready to take on that responsibility. And she sort of introduced me to entrepreneurship, and that came about from helping me get a summer job. And her premise was, keep my boys off of the streets because we lived in a pretty gang-infested neighborhood. So my brother worked at a meat packing place, like a store. I worked at a cell phone store, and from that moment I've been fascinated by business and in business since.
Jamarlin Martin: And you own your own cell phone company?
Delane Parnell: Not initially. I started off initially just working at a cell phone store and it actually started off holding a sign. I was 13 years old going into my first year of high school and I was holding a sign at this cell phone store. We sold Sprint Nextel phones, just outside of Detroit. And it was actually the most embarrassing job I've ever had. It's the only I would say embarrassing job I've ever had. Imagine holding a sign and dancing. I can't dance actually. So I just had movement, and eventually the guy who owns the store, his name is Wasam, but we call him Sam, he took me in, taught me how to sell phones and as his business grew, my role and responsibility within the store grew. And a lot of it was just because of my dedication and commitment. I would go to school and literally right after school I would take a bus. The bus driver would get me as close as he could to the store and I'd walk half a mile depending on the store. He had multiple stores at some point, so half a mile to a mile until I had a car and just work everyday until closing. And when I didn't have school I would work start to close.
Jamarlin Martin: Your motivation at that point, was it more of, hey, I'm young, my pockets are getting fat, or was it, Hey, I love doing this?
Delane Parnell: So I think it was probably a combination of both. Right? So, one, I really love doing this. I love having control, having influence, learning. And then also I was like, I want to get rich, I want to get my family out of this situation and be able to contribute. So working gave me means to be able to take care of myself, help support our household, and one of the other drivers was just saving for college.
Jamarlin Martin: You lost your dad early on. You want to talk about that?
Delane Parnell: I mean it's not much to talk about actually, right? Because he was murdered before I was born, so we didn't really have a rapport, or were able to even meet each other. I do have a stepfather, his name is Jerry, he's basically like my dad and he's amazing.
Jamarlin Martin: How do you get to starting your own esports company?
Delane Parnell: Yeah. I'd like to say it was a short journey, but it wasn't. So it really started so when I was able to purchase three cell phone stores, with some partners, when I was 16 in Detroit. Fast forward maybe a year and a half later, my mom introduced me to this guy named Mark. He owned a collision shop, wanted to get into the car rental business as it was beneficial to customer acquisition in his business, owning the collision shop. So helped him start a car rental, which now has 16 locations, in South East Detroit called Executive Car Rental. And it didn't have 16 locations initially, it was just one and it was just Mark and myself, and we were sort of hustling and figuring it out. And eventually the company started to grow and we started to get a lot more customers and a brand within the city started to grow. So sort of halfway through the initial growth phase, I left. So we had maybe four locations. It was a few years in, left as the company was just professionalizing, we were getting a CEO and responsibilities were changing and I just felt it was time for me to sort of depart and go do my own thing. Plus around that time I become super fascinated with tech and startups, mostly inspired by the story of Groupon. And there they were using software to help brick and mortar businesses, which is what I was mostly accustomed to acquire customers. And I was just blown away, right? Because I grew up in a household where we didn't use computers, we didn't have internet, and to learn about this stuff, and learn that people were making money...
Jamarlin Martin: Was it the business story or were you actually using Groupon in your business?
Delane Parnell: No, we weren't using it. No, it's just like wow. People are going online buying stuff with people they don't know to drive the price down, and then that's actually transacting into real dollars for small businesses. And so I was just fascinated by it and I also noticed a bunch of flaws in the Groupon model, for business owners, their margins were swallowed by Groupon. There wasn't a lot of loyalty within that customer base, and I came up with this idea to build a competitor that was like a self-service subscription model called Plenty Discounts. It never got off the ground. I never really pursued it. But man, I spent so much time researching and putting plans together and throughout that process of, even at ideation process, I learned how to do financial models. I learned how to do wire frames and really think about the user journey and stuff like that. As I was doing it, I learned about the engineering process, and Scrum and all of these things. And so, it was dope. And so I'm really grateful for that experience that also led me to just a realization that Detroit didn't have a tech scene. And so one of the things that, this is prior to Dan Gilbert purchasing any buildings in the city or any venture funds sprouting up or anything like that, and so what I did was I had a few friends who were in the tech, and we started hosting these events. Initially they started off as 50 Founders, but we changed the name. So the whole concept was like my favorite 50 founders who we bring over some period of time to Detroit to speak to an audience of entrepreneurs. Right? And over time we changed the name to Starter Talks, but we were able to bring people like Alexis Ohanian who started Reddit, Charles Adler, who started Kickstarter, Mitch Kapor from Oakland, Brad Feld, David Cohen, all of these amazing entrepreneurs and investors. Some even before they really took off to Detroit to speak in the audience. It grew from 30, I think was the first event, to 1500 people. And it was just like a really amazing experience, and then Dan started purchasing buildings and we started doing a bunch of work with him and eventually ended up getting a job as an associate and senior associate at a venture fund called IncWell with Tom LaSorda the former CEO of Chrysler. That's really where things started to really take a turn for me as just a career and how that even came about was pretty interesting. Hosting these events in Detroit allowed me to, one, just bridge the gap between Detroit and the suburbs, Detroit and Ann Arbor, all of these other sort of tech communities, even small but that existed. And also Detroit and the coast, right? I was bringing people from San Francisco, from New York, from Chicago, all of these different major cities that had tech hubs that were just more established and no one really had connections like that in Detroit, not even some of Dan Gilbert's people, which was crazy to me. And so everyone sort of looked at me like, what's going on in Silicon Valley? What's going on here? Could you introduce me to this person? And stuff like that. And so I became this sort of resource and a support system for entrepreneurs in Detroit and I want it to monetize that. And the events were great, we were making money from doing events, but the way to do that fulltime was to be able to support entrepreneurs in some capacity and being a VC was the sort of ideal route to do so, for me at least. So I was talking to a bunch of firms all over, but I wanted to stay in Detroit. I was pretty committed to the Detroit startup scene and there were only two funds. There was Detroit Venture Partners with Dan Gilbert and his guys, and then there was Tom LaSorda over at IncWell. And Tom, he'd done a fund a year prior, like a $10 million fund. It didn't really go so well. And I love the way that he approached me about it was like, 'Hey, we had this fund. It didn't really go so well, but we're really excited. We've been talking to people about who just knows a lot about startups and we want someone who can come in and contribute, right? Like we're a small team, four people, and you know, you can come in and make decisions, lead deals. Along the way, like there's a bunch of us partners are like GPs, LPs in the fund who, have made a lot of money elsewhere and have a lot of experience in other markets and we're totally down to help you learn about those. Right? As much as you, as much as you're interested in'. And that was exciting to me and plus to be able to sort of rub shoulders, right? I'm 20 years old, rub shoulders with guys who were billionaires like Roger Penske and Dieter Zetsche, chairman of Mercedes Benz. That was like the go, right? I was like, how did you make your money? Tell me how.
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Delane Parnell: And so took that role, and it was great. The first few months were great, but it was an uphill battle because these guys were obviously very wealthy guys. They were really protective of their personal assets. And so they make entrepreneurs sign NDAs or like ask for really bad terms within the deals, like redemption clauses where you have to give them their money back at whatever value the company is at, at some point, like some trigger event that they could opt into.
Jamarlin Martin: Kinda like a Detroit flavor on VC.
Delane Parnell: Ah man. It wasn't even Detroit flavor. It's just bad. It was terrible.
Jamarlin Martin: Yeah. It sounds like they're deviating from the consensus in terms of the market.
Delane Parnell: Yeah, certainly. And we had a bunch of conversations about that stuff and they were, most of the time, reactive to those conversations in a very positive way. But some stuff didn't really change, like they wanted entrepreneurs to apply through some sort of portal that had these terms and conditions around privacy and all sorts of just weird stuff. And entrepreneurs, the best ones, they don't want to have to sit there and apply in this 10-minute sort of form to send you their deck for you to evaluate the business. And so, while we saw a lot of great companies, we also lost a lot of great ones just because they didn't want to go through the funnel. And I remember one of the first companies that made me sort of stand up for entrepreneurs in that regard was the guys behind Managed By Q. They were raising like a $750,000 or a million dollar round. And it was one of the early rounds. And I was like, man, I'm so fascinated about this company. I want to talk to these guys. And I send them a message and they respond. And we were in a conversation and they're like, 'look, I'm not doing this whole portal thing. While like you, I'm not doing this'. And I'd heard that feedback so often from entrepreneurs, and I went to the firm, to the partners and said, 'look, we can't do this, we have to change that'. And I think I was rocking the boat too much. They weren't really happy with that. And I also fight for entrepreneurs for anything, right? Like entrepreneurs who we have flying in on their own dime and then we tell them no. We were a yes before they came in and as soon as they get here, now we're no and nothing's changed about the business but it's just something that, one partner doesn't like because their process was that they have these pitch meetings and they invite a bunch of their LPs to the pitch means. Because all of these guys were like friends and individuals, and every person had to agree on a startup for that startup to actually get an investment. And you can't, there's no consensus on that. It's hard to get consensus when there's 12 people sitting at one table to make one decision.
Jamarlin Martin: With the veto power kind of mechanism?
Delane Parnell: It's like you have 12 people at one table and you need every single person to agree that we need to make this deal. And so people would bring up all sorts of reasons on why they didn't want to do the deal. And a lot of it was that they weren't close to the business, right? Because the four of us at the fund has spent the most time communicating with these startups and we understood the business. And so you're here for a 30 minute, one hour meeting and now you have all this in depth knowledge on like the business, which you don't.
Jamarlin Martin: Give us a frivolous reason where one partner would just say, I don't like this about this guy.
Delane Parnell: It could be anything, right? I remember Rodney Williams, we were talking to him about Lisnr. And one of the partners didn't like that his assistant booked the meeting, and they were like, 'Nah, I don't like this'. Right? And it was a no just because of that.
Jamarlin Martin: I pitched to a billion dollar private equity fund before, and the feedback was one of the two members didn't like how my lawyer looked.
Delane Parnell: It's insane, right? I mean, I brought so many great companies to the table. Cruise, which we even sold for a billion dollars to GM, we negotiated a deal on that company that would have returned our fund four or five X alone, and one of the partners said, 'oh, this will never commercialize'. And my argument was like, someone will buy it for just R&D purposes. Right? And he was like, 'look, I ran a car company so I know best', and it's hard to argue with that. But at the same time I'm like, man, you're just not connected right now to what's going on in the markets. And so we lost that company, there was a lot of other companies that we lost, and I think back in my career if we'd done those deals and I was able to lead those through, you know, next year I would have had already next couple of years, two or three companies going to hit a billion dollars in valuation. Maybe I'm not sitting here today talking to you about a company that I started but a fund that I raised. Right? The crazy part about that entire story, was that I just cared a lot about entrepreneurs, about venture. That's my entire dream. I never really wanted to be an entrepreneur. It was something I was sort of thought I had the spirit for, but I always wanted to support entrepreneurs because I could empathize with them.
Jamarlin Martin: Yeah. But this helps you kind of be a Deion Sanders in terms of, hey, you have been in on the VC side and you switch up, you got both of those skillsets. You've had a good look at the VC side as well.
Delane Parnell: Yeah, sure. It's been helpful. And a lot of those skills I was able to leverage and use to raise a round for our company today. But in general, I felt like I'd done so much great work there, and it just didn't pan out. So I left that company. I left that fund, joined a startup called Rocket Fiber that was forming within Dan Gilbert's family of companies, and it's led by this guy named Marc Hudson, and they were building a gigabit ISP, so like Google Fiber for other markets, but also residential and commercial real estate for commercial properties. And no one really understood how to build an ISP. Certainly not me. And today I still really don't understand how, but it was a small team. There were three founders and Marc. I was, when I made the decision that I was going to leave the fund, it was like to go to another fund and if I did so it would have been out of Detroit or to go work on the startup side, but it had to be a founder that I really believed in and Marc Hudson, I think, truly is probably the most underappreciated CEO, certainly in Detroit, maybe in the country. I know there's a lot of great CEOs, but this guy, he just gets it. He's an engineer by trade, and so he can obviously engineer himself, but he can also speak to engineers across a bunch of disciplines extremely well and he just gets their plight, and then he's also a good design thinker. He understands design, he understands user experience. But he's also a really strong business guy. He's the perfect trifecta. You don't get this in an economics finance guy. You can't find people who embody all three of those things, which makes him really perfect. And beyond that, like I just said, I cared about venture, I think he just cares about everything. When he's passionate about something, he dives into it, he immerses himself fully and he cares about his customers, he cares about his team and he just goes the extra mile. I know him because one of my closest friends, that's her boyfriend. And so when I talked to them about this idea and he was very transparent with me on like, here's the challenges that we face and here's sort of what I'm thinking about it and I don't know how we're gonna overcome some of these things. But I'd like you to be a part of the journey. And I thought it was genuine and I wanted to help him get to his goal because, when you join a startup, the most important thing is do you believe in the person leading it? And I would've given him my kidney if it meant he could get to the next milestone, and I think he's just a phenomenal CEO and so I had an opportunity to go and work with him on strategy. I worked directly with him and it was just me and him for a while. And then another guy, DeAndre, who now works at Disney, he joined the team and we worked with Marc together. And that company went from a handful of people to 50, 60 people in the first year. We raised $31 million. We moved into an office. We built an office and moved into it. We built the fiber lines and then deployed them. And it was crazy. I got a chance to witness a startup's extreme growth, right? In one year, so many new things happening, so many new faces coming in and also, things that went really well and then things that went terribly, not well. And a lot of those things where like cultural things from making bad choices and hiring and leadership positions, even business decisions on units or product lines to focus on that just were too much in investment that didn't pan out.
Jamarlin Martin: So you're getting a great education on kind of what not to do, what could go wrong.
Delane Parnell: What to do and what not to do, both. But because Marc and his partners Randy and Eddie, they did a lot of things right, but there were some things that they did wrong. And it's funny, I just had a conversation with Marc maybe a month ago now, and it's funny, some of the things that we were doing wrong, they cut off and made changes to, and it's benefited them and others they didn't and they went down the rabbit hole and they lost millions of dollars on it, but they learned from them and they're better leaders because of it.
Jamarlin Martin: That's not unusual for a startup.
Delane Parnell: Yeah. It's a little bit easier when you have $31 million, right?
Jamarlin Martin: Yeah. Let's fast forward to your current company. How did you get the idea to start it?
Delane Parnell: So, Rocket Fiber was actually really important for me beyond being able to work with an incredible leader. I think without that experience with Marc, I wouldn't have been prepared to ever be a CEO, and so being able to work directly with him and be a part of that journey sort of got me here, beyond just my direct experience from him being able to work with a CEO, but also because that's where I sort of dove heavy into esports. So Dan was looking at doing investments in esports and also Rocket Fiber had this incredible internet infrastructure in which a lot of the competitions for esports were held online, and so people were reaching out to use our internet, right? Tournament organizers, teams, just all sorts of people within the ecosystem. And so me and Marc were like the only gamers. And obviously Marc is the CEO of this company. He doesn't have time to evaluate this opportunity. And so I was sort of deemed the person who should be looking at opportunities for Rocket Fiber and for Dan Gilbert to get into esports. So I did so and I was meeting with everyone, I was talking to everyone. We would fly people in and have conversations with them. We put a few ideas together to try to start companies in this space with support from Dan. But they didn't get through, and it wasn't Dan's fault, it was more so the people we were trying to organize these opportunities with, but either way I was sort of heads over heels in the space and Marc Hudson, we call him Hudson, he gave me freedom to sort of explore it, and even when I was working at Rocket Fiber along with my core responsibilities there. Was able to start an esports team called Rush Esports, we sold it to Team SoloMid, which is the largest esports organization in the world. It wasn't a massive sale, frankly. It was sort of before its time and team ownership. What I realized there is that being a team owner of a esports team, at least at that time, it's a lot more professional now, was underappreciated babysitting, right? Having to break up arguments between guys for whatever reason, having to literally drive to people's house to wake them up to practice with their teammates. I was like, I can't do this. We were lucky enough to find a buyer for the team, from there went to go start a betting company in esports, so like a head to head skill betting, so me and you play each other, our teams play each other and we both put money on the line. You could also play in tournaments where you enter with some sort of buy-in and win a larger prize, and we built a really phenomenal product. We have some great traction initially. But that market really collapsed and we raised money for it too. And that market really collapsed when there was this under-age sort of gambling debacle that happened, and a popular esport, Counterstrike, and although we weren't even doing the same thing or even in that space, it just took the entire betting in esports down because it was just unregulated, and rightfully so. So I was really on like this hiatus. I was thinking about, what should I do, figuring stuff out. I was talking to venture funds that wanted me to join and be like, their esports partner. I was talking to startups in the space, potentially joining even some agencies in LA who were looking to get into esports.
Jamarlin Martin: Was it you that concluded that, hey, this market, this segment of the esports market is too hot and I need to come off of it? Or was it investors saying like, hey, we perceived this as too risky?
Delane Parnell: No, it was more so me, it was just like, look, this isn't going anywhere, right? I can spend my time doing something else or I can spend my time doing this, but even if I do this, it's not going anywhere. Some of the biggest companies in that space, Vulcun, they pivoted, they're now Streamlabs, Unicorn, which is doing fairly well now, they were struggling at the time. No other companies were doing well.
Jamarlin Martin: This is you analyzing the market and like, Hey, I gotta cut my losses.
Delane Parnell: And that's what the market told me. Exactly. And so I was fortunate enough to be able to be in a position where I could just figure things out and had a bunch of options. And then I went to South by Southwest with my boy, Marcus Carey a who runs Homage Hospitality. He actually convinced me to go. I wasn't going to go. I was like, 'Nah, I'm kind of chilling'. I'm in Detroit at the time and he's like, 'man, you gotta get out here, there's a bunch of people out here, a lot of familiar faces, a lot of new faces.' So I was like, all right, perfect. I didn't have a place to stay or anything. Booked the flight, we got out there, and just figured it out. And the very next day we went to The Culture House, run by Rodney Williams who runs Lisnr, who's at this point, like we talked obviously about investing in him early, but then over the years him and I became pretty good friends and him along with Ryan from Product Hunt and I believe a Susy, Troy and Marlon from Cross Culture. They held this party, it was a brunch, and basically everybody was there. It's like the who's who in tech and in business. And so as I'm walking by on the dance floor, I know all of the guys who were hosting it, but I didn't know Peter Pham from Science, and so sort of as I'm walking by on this dance floor, Susy who works with Troy Carter over at Cross Culture, she grasped me and said, 'Hey, you should meet Peter'. And I'm like, 'well, I know who Peter is'. Obviously he's a legend, right? He's raised a billion dollars for startups since 2011. He's incredible. Any investor, certainly on the coast, they know who he is. And so she grabs me and she's like, 'Yo, you should talk to Peter'. Me and Peter talking now, mind you, this is a packed party. I'm on the first level of the party.
Jamarlin Martin: And you're not dancing, you're just walking around?
Delane Parnell: No one's dancing. Peter's dancing. Peter's the only person literally in this entire party dancing. It's a business event so people are talking, drinking or socializing. Peter is legit the only person in this really tight space dancing and grinding, and I introduced myself. I'm like, 'Hey, I know who you are, big fan of what you do'. We're talking. We talked for like 20 minutes. He doesn't stop dancing by the way, which was awkward. Now I've come to know that's who he is, and along the way in a conversation, he started talking about esports. I was like, 'Hey, I just did something in esports. I'm really excited about that space. Looking for something else ideally within that space'. And he's like, 'I got an idea for you'. We exchange contacts. And the next day he hit me, via email, actually the next day, but then he called me and the conversation sort of just carried over a few months and I came to La from Detroit a few times, met with his other partners, Mike Jones, who was the CEO of Myspace, another great CEO. I would very much liken him to Marc Hudson. He's one of my favorite CEOs. Tom Dare, who's another partner. He sits on our board now. He's from Detroit, big fan of him and Greg Gilman, who's also another partner. So there's four partners at Science, Peter, Mike, Greg, Tom. So got a chance to spend time with them, got a chance to spend time with a lot of the other entrepreneurs. And essentially they gave me the hard sell like, 'hey, we want you to come do this'. And the concept that they gave me was like, hey, we should pursue high-school esports. Now, it sort of stopped there. They didn't say we should pursue high-school esports and here's how we do it. They were like, we heard this as a thing, you should do this. Right? And I was like, 'Huh, that's pretty interesting', because what I wanted to pursue in esports in general was like competition and infrastructure, and even how we thought about betting within esports was like, we're adding value to competitions. And so, I was pretty fascinated with it. Frankly, I didn't know much about the market. I knew that there should've been a market, but it didn't really exist for that demographic of players. I really didn't know how to build the company. What I've come to know by the way, that idea was really, to get back to your original question, was the concept was created by, well, I wouldn't say even created by him, but the idea to create a venture-backed company to do this was actually birthed from Matt Mazzeo, who worked at Lowercase with Chris Sacca, one of the highest performing venture funds. And now he over at Coatue, which I'm sure people know at this moment. I'm not even sure to be honest with you. So if they don't, Mazzeo I'm sorry, but Coatue's also an investor in us, which we're really excited about. But anyway, Matt Mazzeo came up with the idea. Apparently he told Peter and Mike, Peter and Mike really liked the idea. They told me they convinced me to move. I moved the last weekend in June, moved with a suitcase, gave everything away. I hadn't seen my place before. My boy Matt Haag, who's gamer tag is 'Nadeshot'. He runs 100 Thieves, which is one of the biggest esports teams, ironically, that Dan Gilbert is a big investor in, and he hooked me up with a place near his apartment and I just moved and I was like, all right, I'm going to give it a year and if in a year this doesn't work, I'm going to do something else in or outside of esports, and if it does then I'll keep doing it. And it's crazy, it was a year, Jul. 1, which is insane. And we've done so much in that timeframe.
Jamarlin Martin: Yeah. So I want to highlight that when you meet one of your investors in Austin, that it's not a random meeting, meaning that you already have social proof and endorsements from the community. You got other VCs, entrepreneurs vouching for you. So it's not like a VC is randomly meeting you on the dance floor, that your character, your track record, your personality, whatever, it's already vouched for by the insiders there and that opens the door.
Delane Parnell: Yeah, sure. That party was like an invite-only party anyway. So the people in that room were based on the host, they thought should be in that room because they provide meaningful conversation. I was fortunate and privileged enough to be in that room. And had I not met Susy, I'm not here today. And so she was the person who connected us and Peter gave me a hard sell, and there's a lot of people that are involved in the origin of this company, and I'm sort of super thankful for all of them. And the best part for me is that now they're all investors in what we do, which is definitely a full circle moment.
Jamarlin Martin: Yeah. And another thing I want to highlight is, I read an article and one of your investors was quoted as saying that you know the most about esports than anyone that he has met. And so when I'm thinking about how your readiness and knowledge was ready for the luck in terms of the opportunity to connect with an investor. I'm thinking that your curiosity and reading so much about your industry, although it didn't work, it opened another door in terms of how much knowledge you had about your market.
Delane Parnell: Yeah. To be fair, I do know a lot about esports, but there are people who just know more than me.
Jamarlin Martin: Yeah. But that being said, just for him, you knew the most.
Delane Parnell: What I would say to him, I need to go back and find that by the way, is that you don't know enough people in esports. No. We have a bunch of people on our team who are far more knowledgeable on esports than me. Certainly, I studied the space. I talked to people in the space. I was prepared to build a company in the space no matter what that company was, assuming I have passion for what it was, and it was just the right place, right time.
Jamarlin Martin: Can you explain to the audience what are traditional incubator does a and how that can really anchor you to kind of go out and raise money and develop your business model?
Delane Parnell: Yeah, so people generally confused accelerators and incubators. I think they just consider them the same thing. An accelerator is like a Y Combinator or Techstars, when a startup joins generally for like $100,000 or $120,000 investment for six or seven percent of the company, and you're within this batch of 100 other companies and it really ranges. It could be a dozen to 100 companies, and it's for three month period of time. You're just sort of heads down working on whatever you're working on, and at the end of it there's this demo day in which a bunch of investors from across the country come and they may or may not decide to invest in your company. And obviously many other investor conversations sort of happen outside of that demo day. But that's sort of like the culminating event of being in an accelerator. Incubators are a little bit different. It's more of a complete partnership. And so, I joined Science, it was literally just me and Science took a portion of our company, and they also gave us money, but in return they gave me beyond money, things that I can't quantify like a team. Their team became my team, and everyday whatever staff they assigned in this pot to me was working only on my company every single day. They gave me support. It's tough. I moved from Detroit here to LA, and it's a lonely place trying to build a company when you don't have a co-founder or you don't have a team of your own. They were there for me. They helped me model stuff out, as it comes to numbers to make sure like things made sense. They helped me do research. They helped me make connections. They represented our company, they traveled to places when I wasn't able to travel there and was a representative or a company that does stuff done.
Jamarlin Martin: They helped you with introductions.
Delane Parnell: Yeah. They were just there. It's hard to describe unless you're in it, but the best way I would say, it's like they become your co-founders in a way, and not they as in the partners, but they as in the partners plus the other 30 or 40 people that work for them, and also the other entrepreneurs that they've invested in. And so it's certainly not for everyone and frankly some of the terms aren't great for teams like large co-founding teams or founding teams. But when you're one or two people, it totally makes sense unless you've gone down and built the company that has some success that way.
Jamarlin Martin: Okay, got it. So they're on board. You just raised a monster series A round $15 million, the most or the largest series A round by an African American consumer internet founder.
Delane Parnell: Yeah. I think it's the fourth largest ever. So it's the largest by an African American consumer internet or gaming, and fourth largest ever I think. But it's interesting. They have another founder, I think his name is Kyle. I've only met him once. He runs a company called Harvey, which used to be called HomeHero. He raised $20 million. I think his is the third largest, also a Science company.
Jamarlin Martin: Okay. Got It. So they're on board, but before you close out your round, do you have to go out and pitch like other entrepreneurs to other investors?
Delane Parnell: Yeah, let me just walk through the journey of what we do and also sort of how that came about. So moved to LA end of June, was in the office first week of July. At this time we hadn't really incorporated the company or anything. We were just still researching and figuring it out. So the first few months all research figuring it out, we haven't started building yet. We hadn't even really figured out where we were going to build, but what we sort of boiled it down to is all of our key assumptions, which was like, should we be building a company in esports and focus on the high-school demographic, and what we found is absolutely yes, because a high-school teams are the most important demographic to publishers, to brands. And certainly if you're able to establish a relationship there with regard to teens from like a service or like I'm a product standpoint, they're obviously fickle at that age, but if you could get them to be loyal to you, they tend to be a fan of yours or a customer of yours forever. The other thing was that, when you think about the impact that high school has had, like high school as a system has had on any other traditional sport, it's been a catalyst for growth. And so we were like, if esports is going to grow well while it already has professional scenes that mirrored the NFL and NBA, these leagues, they don't understand or they don't know, they don't have a traditional funnel and like our feeder system established how they're going to acquire it or next group of superstars, and college was already bought in. There's 200 plus colleges this year offering esports scholarships and the NCAA is exploring their involvement, and there's still no amateur scene. So no youth scene, no high-school scene and certainly no even adult recreation scene. If you're a kid and you want to play esports today competitively, you just play multiplayer modes with strangers or your friends and you can play an ad hoc tournament which lasts a day or a half a day but you can't play in like a season in the position, develop as a player and there's no real in real life component to it. And so we validated that assumption. So it was like the first assumption was just to go back and consider, does it make sense to build a company in esports focused solely at high-school demographic, it was a yes. And then the second was, well, if we're going to do high school, do we do this inside of high schools or, how and where we do this outside of high schools, sort of grassroots and just focus on normal paid acquisition strategies to acquire customers. And what we found there was that if we did it outside of high schools, one, that had been done before, but those groups were never really able to establish market share because they couldn't validate if these kids were in high school, which was a big issue to say you're a high school-based company or primarily focused on high school demo. And the second thing was that it really didn't provide defensibility as a business, right? Because once the high schools decide they wanted to do this, then like your company's dead. The analogy I would use is like trying to build Pop Warner before high school football existed. It just wasn't possible. And so because the behavior wasn't even established, what ended up happening, which I'm super grateful for, we ended up getting connected. So Danny Johnson, who's one of our investors, he is an SVP in marketing I believe, at Paramount. He was at Fox prior, and he ended up connecting me to one of his friends who runs a division of MTG. I think he does all of their investments. MTG is Modern Times Group. They're a $20 billion Swedish media company. They've spent hundreds of millions of dollars in acquisitions in esports. They bought ESL, they bought Dream Hack, which are like two of the largest companies in the space. And, and frankly, like those guys had been like pioneers of esports. And we had a conversation, we sort of built a rapport and then he sort of down the road just randomly was like, 'hey, you should connect with the CEO of ESl, he did an intro, I didn't ask for it or anything, wasn't expecting it. He just connected me. And I spent time talking with Craig who's the CEO and, he's like, 'Hey, like you should talk to these other guys doing something, looking at high-school esports, I don't really know what they do, but you should talk to him. I'll connect you'. And I was like, all right, great. And at this time, by the way, morale wasn't super high around Science of building this company because we're in September and we haven't figured it out. We felt like we were getting close. We knew what we had to do but distribution to the schools was impossible. Like, are we going to go to every single school and try to sign them up? That process is so painful. And so Craig connects me to the NFHS, and I don't know if he knew it was the NFHS. I don't know if he was just passing the boat, getting it off of his desk or if he was like genuinely trying to help us.
Jamarlin Martin: Would you share with the audience the full name of the organization?
Delane Parnell: Yeah. National Federation of State High School Associations. So the NFHS has existed since 1920. They're effectively the NCAA of high school. They decide what sports should be played in high school, what activities there should be competitions for in high school. And so they were basically the group who decided that football should be a sport in high school and then downstreamed it to every high school, basketball should be a sport in high school, downstreamed it to every high school. Even things like debate and drama and music and they're actually in the NCAAs office. So them and the NCAA operate parallel and they share an office in Indianapolis, and basically they control high school sports, right? And so he connects us to them. They're already at this point talking to five other companies in the space about introducing esports within their 20,000 high schools, which is every high school in the country that offers sports. And I'm a one man show, sort of last at the party competing with all these massive tens of billion dollar companies. And it was definitely intimidating, but I was excited. I was like, this is literally, if you're going to get into high schools to do anything, especially as a sport, this is the only company you have to talk to because it's the only company you can talk to. They decide what sports are played in high school and they can just control the entire boat for it. And so it was a super ambitious ask for me too because in 99 years, that's how long they've existed, they've never partnered with a company to turnkey a sport. Everything is internal. Like they operate their own sports. It's like, imagine if one company owned all of high school football. And so, I talked to them first time conversation was a great intro call and they weren't overly excited to try to make it work because they were already talking to a bunch of people. But what I did was I was like, well, what are you guys struggling with an they said, understanding the concept, what do you want to learn? Right. And they told me and so I sort of scheduled all of these back to back calls and we just were like talking about stuff that they wanted to learn, and that conversation allowed me to build a rapport with them, and we bonded. And I would like to say that we sort of established a friendship and obviously a lot of trust, but it didn't progress in terms of them working with us. It was more like I was just educating them.
Jamarlin Martin: Would you say that that's just a sales skill that you developed, in terms of your probing? How can I help?
Delane Parnell: Yes, certainly. Yeah, for sure. One hundred percent without working at the cell phone stores and being a part of that, I don't even understand how to do that in terms of how do you develop a funnel. And so like a month in let's call it, we've had a few conversations, and at this point my back's against the wall. We need to get something built because we know the next school year started. And so I'm like, 'hey look, I'm going to come out to Atlanta, which is where their for-profit arm is, and I'm going to show you guys what we've built'. By the way it was just me, we haven't built anything. Luckily I had the foresight to be like, let's set the meeting, it's early October, probably the first of October, let's call it. And I'm like, let's set the meeting in November, the first week of November, the seventh or something like that. Because I needed that time to go and build something and even prepare. I hadn't even thought about it. I just was like, I need to do this and this gives me enough time. And so they were like, 'alright, cool, that works out perfectly for us'. And my fear was, okay, within this timeframe, hopefully they don't make a decision on who to work with because I known that they've been talking to five people, but now I have a month to just put something together and blow them away. And so anyway, within that timeframe, Sean who's now our head of product, was a good friend of mine. He's from Detroit, but he was already living in LA, phenomenal engineer, also designer. And then Dawid who's our CTO, a good friend of mine, I met from DeAndre who I worked with at Rocket Fiber and he's like one of the best engineers that I've ever met. And so I reached out to them and was like, 'Hey, can you help me build something?' I wire framed exactly what I wanted to build, which was a simple platform and I wanted to simulate it to show exactly how esports could be played in high school because it can't be played in the physical world. You can't have one team. I guess it's obviously a physical element, in real life element, but the games have to be played through software. So you need a platform which connects to the game client to be able to play the games. Right? Even if kids are meeting up together, going and playing in their computer lab, they wouldn't travel from school to school. So like school A wouldn't travel to school B to play the games. It needed to be played through software, so we needed to build software that simulated that, and so I wire framed it up using Balsamiq or something like that, and showed it to these guys, specked out how I want it to functionally look. And they were like, all right, cool, we'll help you build it. And we did it in like two or three weeks and we polished it and then I prepared all my presentation documents and me and Peter, we went out to Atlanta to pitch them. It was supposed to be like an hour, maybe 45 minutes to an hour meeting, and it ended up being three hours. And so I knew that was a good sign and one of the things that I think stuck out the most there is that, because the meeting started off really intense, one of the guys, Robert, he was like, 'so look, we've already talked to five other groups, what can you guys do for us?' That's literally how he started it. So I'm like, I don't know, what have they said they could do for you? Right. I wasn't prepared for that. So anyway, we have a really good conversation, a lot of interesting stuff they were planning. They never really told us, you couldn't tell if they like this or not. They ended the meeting, even after three hours, saying we think we're going to make a decision in a year, you know how the school system is slow. I'm like, we might as well pack her bags and go do something else. They have a really beautiful office, and on the way out there was this ping pong table and I asked them, 'Oh, you guys played ping pong?' because they had the scores up on the whiteboard. And they're like, yeah. And Robert, the same guy who started the meeting that way, he's like, 'yeah, I'm the champ or whatever around here'. And so we ended up leaving. I just took that nugget. We ended up leaving and literally in our Uber on the way back to the airport, I ordered him this massive obnoxious ping pong trophy that said: 'The Man, The Myth, The Legend', and it got mailed to him. And so, I mailed this trophy over to him and it was like a 10-day order so they get it in 10 days or whatever and it's crazy how just got, we're expand because this like the same day they got it. They didn't have it yet, but the same day they ended up calling me early in the morning and said, 'Hey, I know we said we were going to make a decision in a year, but what we want to do is partner with you exclusively to introduce esports into high school. And here's what that means for us. Right? So we were going back and forth. We negotiate terms, just baseline terms and then later in the day Robert caught me and he's like, 'hey man, I got the trophy you sent.' It was just another reason or validation for them, this is why we should be working with these guys. And yeah, it was just great. It was great.
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Delane Parnell: We negotiated the terms, the principal terms, but then it was like another month and a half of not only diligence from them, but further negotiation on those terms. And what we ended up getting was this exclusive indefinite agreement to operate esports turnkey for the NFHS and their membership, which is 20,000 schools across every state including DC. And it's incredible. It's groundbreaking. It was scary because all of the other five companies found out that they were talking to us and they were offering them buku dollars. And we would have found a way to do it either way, but if someone else would have gotten this, this is everything, it's what you need. And so they set a date for us to come out and pitch to their board in Scottsdale, Arizona. And it was like the maybe the first three days inside of the new year. And we went and pitched to their board and it was the craziest feeling, me, Laz, who is our VP of PD and another guy named James who worked for Science. And by the way, at the time, Laz, last worked at Science and the story is so circular, because he last worked for Matt Mazzeo. He worked at Lowercase on their investment team. It was only four people on that team. And before he worked there, he was hired to build this company. So Lowercase, Matt Mazzeo, they were going to incubate a high-school esports company, to build what we're building. And Laz kind of fell in love with investing and startups. And so he just did that because that's sort of what was on their plate, and then when the whole Lowercase stuff blew up because Sacca retired. Laz was looking for something to do, so him and I talked because of the betting company I pitched to him to invest, and Lowercase didn't do betting companies so they rejected me, but me and him just built the relationship which is a lesson in itself. Entrepreneurs, if you're talking to an investor a first off, it's hard for entrepreneurs and investors to build real relationships because there's always an ask at the other end, but if you get over that hump and you're talking to an investor and they didn't reject you, sometimes it's not because they're rejecting, it's because their LPs don't like that sector of business or they've already done a competitive deal, or even if it is because they don't like what you're doing, that doesn't mean you can't have a relationship with them. Had I not had that relationship will Laz, even after they rejected me, Laz doesn't get the job at Science, and then Science doesn't hire Laz and come to close this deal with me and I don't get this deal.
Jamarlin Martin: I could see some immature entrepreneurs, they're getting mad because they were complaining, why did they reject me?
Delane Parnell: Yeah. It's not an emotional thing. It's emotional to be rejected certainly. Right? But it's not like...
Jamarlin Martin: What would you say that a lot of entrepreneurs are soft in a sense that you get a rejection by investor? . You take it very personal, right? But with you though you're not a Cosby kid, meaning that you're coming from the bottom in Detroit, and where your experiences, would you say that has hardened you where if you get a no, that's not a big deal?
Delane Parnell: Yeah, what's the worst that can happen? Okay, cool. Like you have a job to do and a part of that job was telling me no, but that doesn't mean that you and me have to be at ends, and so, that's just been my experience. And even before, we told Brian Brackeen from Kairos no when I worked at IncWell and it wasn't because I didn't like Kairos as a business, but because my partner said no. Me and Brian still developed a relationship and that's how you and I got connected and so it goes. So I think entrepreneurs, it's just a lesson, don't take it personal, just because an investor tells you no, doesn't mean they don't like you. It may mean they don't like your business, but that shouldn't prohibit a friendship and a relationship more than anything. And so anyway, look Laz works at Science, and he goes out there with me. Laz, James who works at Science, and then myself and we're in Scottsdale, Arizona and, we go and we pitch the NFHS's board, and this is the first time I've ever been like a boardroom when it's packed. It's like all of these executive directors who run these states and they have to make a decision and consensus to let us be their partner, versus everyone else. And it was pretty intense actually because even our emotions were running high because we were supposed to pitch at one time but then their meeting started going over. And so we had to wait outside of their board room for like four hours to even pitch. We then go in and we pitch and we hadn't ate, we couldn't even eat, we couldn't drink. We were anxious, right. We go in and we pitch and we're feeling like initially it starts off pretty rocky but good, it stabilizes, and then we start getting a crap-load of questions. It's me, Laz and James, and we're fielding questions from like five, six, seven people at a time. So it's like Laz is on one side of the room talking. I'm on this side of the room talking, James over there, and we're going to go back to back to back questions. And they were like, alright, cool. We'll be in touch in an hour. And an hour went by, then another hour went by, then seven hours go by. Right? And we're like, we're not going to get this. James brought his family. So he was spending time with his family because he just had a son. And me and Laz were just sitting at this fire pit, like, man, we just blew it. And then they call us and they were like, hey, we got the word, we're going to come down to see you guys in 30 minutes, but it ended up being like 45 minutes or so. And so we're like really anxious now. And eventually they get down there and then they're hitting us with small talk because it's three people who are supposed to come down. But they're coming down one at a time. And so the first one comes and then another 15 minutes, the next one comes, then another 15 minutes. So it's like this massive build up and we're doing all of this small talk and it definitely didn't feel good. And they sit down and they're like, all right, so, one, we're excited to do this. Which is amazing. Then they're like, well, we got one hangup, and I can't disclose what the hangup was, but it was great. It was more favorable to us and they were like, we were really arguing in there for whatever amount of a couple of hours, not because we didn't want to do it, but because of this hangup, which was incredible for us. And that was it. And they were like, alright, let's get this signed. And we got it signed that day, that night and it was super late at night by the way. It was literally the next morning and that was it. And we just got to work from there. And so then I hired Dawid, who's now our CTO, immediately hired Sean, who's our head of product and you know, they brought in some guys. We ended up being five people. We went from starting in January after six months just with me and then closing the deal, and then into January we were five people and now we've grown. We've grown a lot since then.
Jamarlin Martin: Okay. Got It. So how do you fill out your round after this?
Delane Parnell: So we don't initially go raise a round. It's funny though. That day there was an investor who's invested in the for-profit of the NFHS. He comes up to us and says, I really love what you guys are doing. I'd like to lead your round whenever you do go out and raise it. He offers us like $8 million or something crazy like that. Literally, the first day we met him and we were like, we're not raising right now, but let's stay in touch. Let's figure it out at the later date. And we go back and we mostly just focused on building the team, flushing out what we're building, spending time with the states because we need to learn at this point how high-school sports work because this is a 100-year-old history and tradition to how they do things. And so we need to spend time just learning how they do things so we can best adjust for the system. So the next three or four months were just that, spending time with the states, spending time with the NFHS, building a rapport, and fleshing out what we were doing. And what happened is we started getting investors just dropping by, because we go out and we partner to introduce esports into high schools, we're partnering, we own the distribution. No one else can do this, what we're doing, we're the only ones, but we have to go out and partner with publishers to get their IP, like how Spotify goes and partners with record labels to get the music content. And so publishers start to talk. They're like, oh, I heard these guys and we're not public by the way, at this time, no one knows we exist, we're super quiet. I don't even think I was tweeting at this time for a few months. And...
Jamarlin Martin: As it relates to you, can you explain to the audience a name of a publisher in terms of how you're thinking about it?
Delane Parnell: Yeah. There's a bunch of games that I would consider esports. There's dozens, but the biggest game is League of Legends, by Riot Games, which is owned by Tencent, and there's others like NBA 2K, which is owned by Take-Two, which the NBA actually has an esports league for, and Overwatch by Blizzard, there's a bunch of them. And generally what esports means at the highest level, it's a tournament defined competitive gaming, so people are playing in these competitive contests similar to sports, across different video games in a team-based setting. So one team versus another team with the outcome and objective being securing a win, right? It's no different than one basketball team playing another, doing a bunch of things in between to secure a win - exact same thing. And by the way, a lot of these publishers were our competitors in securing the deal, right? So these publishers were out to get that deal with the NFHS themselves.
Jamarlin Martin: What about EASports, were they in the mix?
Delane Parnell: I can't disclose that, but the interesting thing is, imagine us securing it, right? And they know I'm just one person and the first month or so with publishers was rough because they were pissed. They're like, how did this guy go out and get this deal? One publisher restructured their entire team that was focused on high school, blew it up. And I was like, you know, wow. That's how I knew we had impact. Immediately I was like, oh, this is actually going to work. We just got to stay heads down and get through it. But this is inevitable. But anyway, so we spent all that time figuring out what we're going to do. And then, before we knew it was time to raise investors just started dropping by like, hey, we heard about you. Just dropping by our office, right? Hey, we've heard about you guys, we should talk, right? We sit there and talk for 20, 30 minutes, he'd be like, all right, cool, come up and meet with our partners. We want to make an investment, stuff like that. And at that time we were like, you know what, we're good, but it's good to meet with you and establish a rapport, and then we were really focused on just announcing what we're doing. And so we announced the company, this is in April when all of this started happening. And then we announced the company Apr. 19 and like it kinda shook esports. It turned the entire esports world upside down - video games as an actual varsity-sanctioned high-school sport where kids can win a state championship just like their peers in basketball and football, people couldn't believe it. So investors obviously start flocking there and then we went out, we put a pitch deck together, very light deck actually, and we started raising and the first investor we talked to said no, it was a video chat, and I remember it was a really big investor too. I don't want to disclose the fund, but it's like this massive investor, deep ties in Asia and China, a couple of startups with a lot of consumer companies and he's the main partner and frankly I think he was a little distracted because he was heading to the airport and he's like, 'I got to go to the airport in like 20 minutes', or something like that. So basically let's make it quick man, and I'm talking and I can tell he's not really paying attention. And then at the end of it he's like, 'you know what man, I don't know if this is venture-backable'. And I was like, 'what, explained to me', and I didn't take offense to it, I just wanted him to explain to me because we're using software. He's like in the same vein, the NBA wouldn't be venture-backable this season. And I'm like, 'dude, we own exclusive distribution in every high school in the country, which means we can target high school students for any product but let alone what we're doing for gaming, in their most native community, which is high school. That's when they spend most of their time throughout the year and throughout the four years during high school. If we can capture their attention, we can extract enormous value from it. And obviously we're building this incredible software that does all of these things that no one has ever done in competition platforms in esports, and he's like, Nah, it's not venture-backable, but alright man, I'll talk to you. That sort of thing. Alright, cool. That was a Thursday. The next day we fly up to San Francisco and we pitch a few funds and few of them literally that day, NEA included, were like... we're sitting in the NEA meeting, who led our round, we just left one of the funds that was next door to them because all of these funds are just next door to each other, no matter where they're at in Sand Hill or in San Francisco. And so NEA's Jon Sakoda is sitting there and he was one of the main partners, he just left. And Rick Yang who sits on our board and he's like, we should invest in this. He looks at Rick and says, no, I'm serious. We should write you guys a check. He says, how much are you guys raising? And Peter's like, name your price, that sort of thing. And he was like, I'll give you guys $20 million, that sort of thing. That's insane or whatever. In that meeting, they say come up next week. And we already have a bunch of partner meetings. So how it works is like you meet with a venture fund. Typically you meet with a venture fund the first meeting, sometimes there's a couple of meetings before you get to the stage. In our case we met with most of the venture funds we talked to and then we come right back up for the partners meeting, right, which is Monday. And that's when they typically make a decision if they're going to invest or not. And you know quickly, and then at some point they'll either have a couple of conversations with you or just issue a term sheet and you go from there. Then we met with a couple of venture funds on Friday. Two of those venture funds wanted to offer us. Came back up to the partners meetings. Things really progressed very fast and that first three days and um, and then we ended up doing a few more meetings, two or three more days of meetings, and we end up getting six or seven term sheets and what we ended up doing is like how I started, how we filter through the term sheets was, one, I started spending time with like the investor. So when someone's going to give you 10, 15, $20,000,000, those meetings are it, so you'll fly back up just to meet with these guys to do dinner, right? Because they need to get to know you just as much as you need to get to know them. Right? And beyond anything, we were getting pitched, so people were taking us to games. They were flying down doing dinner with me. They were sending me stuff. It was just crazy. They were putting decks together and giving me a full-court press on why I should be working with them. It was unbelievable. It was legit. They would organize dinners with their most successful founders, and a lot of these guys, you go around and I'm thinking this guy sold his company for $3 billion, this guy a billion. Insane. They were like organizing NBA owners to take us to games and stuff like that. Go meet the owner here. He's going to drive you or fly you into the game. That sort of stuff. It was crazy. I was like, oh, this is how the other side raises. And so anyway, very quickly, it was basically two weeks, and we decided to go with NEA. We ended up negotiating how much were we going to raise? We could have done like 25, $30 million. We decided that we were going to do $15 million. NEA put in their check, which was $10 million, and then that's when the real work came. It wasn't even like finding the lead, it was like all of the other people. And so we had like 20 or $30 million easily, not even including the term sheets, which I wouldn't include there because you can only have one lead. From participants, maybe more, it was probably 30 plus from people who are like, 'I want to put in 2 million', 'I want to put in 4 million'. 'I want to put it in a million'. Even 'I want to put in $50,000.
Jamarlin Martin: Once you have the lead everybody comes...
Delane Parnell: Before we had the lead though all of these guys were in. But when we had the lead, that's when they started dropping by the office and like, let's figure this out, we want to be in. What I'll tell you is, you lose a lot of friendships in that process. There were guys that I'd known before from my time in venture that we couldn't make work. I couldn't call them today, they wouldn't pick up the phone.
Jamarlin Martin: Like come on brother.
Delane Parnell: Because we didn't let them in. Some of it was like, the numbers don't work, right? We get NEA at $10 million, then Science has to invest again, right? They have pro-rata, so they're at $2 million and frankly they could invest more, but they are at $2 million. It could have been just NEA and Science. Then you have the NFHS who wanted to invest, , how can we say no to them? Right. And then like it's all these groups that want to get in and basically you've got this $3 million pie that you're trying to fit all of the most interesting people and or funds, into that slice of available money. And it's just hard. We had so many guys, like the biggest athletes in the world, the biggest musicians in the world, some of the biggest people who've impacted culture who wanted to write us checks and it wasn't that I didn't want them in, it was just that the numbers don't work.
Jamarlin Martin: And so we talked about entrepreneurs being too emotional on a no. You're talking about VCs where you had to shut the door for practical reasons, structural reasons, but you're saying that they were taking it personally.
Delane Parnell: Man, if you know the stuff we went through and just people who couldn't get in and the extremes they've gone, you'd be blown away. Off the record I'll tell you, I'll tell you post.
Jamarlin Martin: If you like what you're hearing, you can check us out at at www.moguldom.com. That's M O G U L D O M dot com. That's at www.moguldom.com. We have the latest information on tech, crypto, the business of Hollywood and economic empowerment. You can also check me out on Twitter @JamarlinMartin. Let's get back to the podcast. So a little bit about Delane. He was introduced to me by another founder, Brian Brackeen, in Miami a couple of years ago. And before this monster raise I was told, man, this guy Delane, you gotta meet this guy, this guy has more energy and more kind of drive than anybody out there. You had already acquired a reputation in the tech community that this guy is an entrepreneur of entrepreneurs. So just wanted to highlight that a lot of folks already knew where you were headed before you had it figured out. You had such a high reputation that folks knew, that you were the entrepreneur of entrepreneurs.
Delane Parnell: I'm blessed to hear that. By the way, shout out to Brian Brackeen man. He used to let me come and stay at his house in Miami. He ended up giving me a key. I stayed there at least 100 days, one year. I just come down, stay at his house, half of the time he wasn't even at his house, so it was like my little castle. I had a bedroom in his house. He was a big part of the journey.
Jamarlin Martin: One thing that's one of the many things I would say that makes you unique is that you go to Sand Hill Road and you're connecting with all these big shots in the tech game and the esports game and the VC game. However, you're still very visible in the black tech community. When you announced your raise, you talked about 'this is for a lot of the ancestors' and it's kind of like you're moving your drive, you got the people, talking about black people specifically, on your back, and a lot of times when folks start getting into these elite crowds, there's a detachment. Can you talk about how you're able to balance it and you're still representing the community while you're doing big things?
Delane Parnell: Yeah, sure. And this even goes back to the raise too, which I'm sure someone will want to tell the story at some point. We had all of these terms sheets on the table and one of the things that I was very vocal about beyond the terms itself was that, obviously we're going to have this support structure and one person's going to get a seat from the fund that leads our round, and Science is going to get a seat, I hold two seats, and there's going to be an independent. And I wrote into the term sheet, I won't sign a term sheet from any fun for two reasons. My two terms were, our independent had to be a woman. No matter what, had to be a woman and you had to be okay with that. And you have to be able to write that in. And NEA was obviously okay with that. They were happy about it, happy to do so. And the other thing was that we turned down a bunch of funds. We turned down a bunch of funds who wanted to issue term sheets because they didn't have black founders in our portfolio. For me it just meant more about working with a fund who does already support black people. For me, I don't want to be the first, I want to be with my people. Right? And you learn something in that process too. Investors would take you out to dinner and stuff and the type of restaurants they would take you to. And I'd be like, what is this? There's no black people in the restaurant. The only black people was the help people. And this doesn't feel like home to me.
Jamarlin Martin: And obviously you're thinking about the upside but you're thinking about the downside.
Delane Parnell: Obviously this is pressure in general, but if I'm fighting for black people from the investor that I want to take, but then like during the downturns at our company, and it doesn't go well or the investors are not happy, then they totally don't work with any more black people, right? Because they pattern-match. So they equate me not succeeding to support other black people, to other black people may not succeed. And so NEA was a little bit different than other tier one venture funds we've talked to, because they already supported black people and I talked to all of their black founders. A few of them, not all of them, they have a bunch, and I talked to the ones who specifically went through rough patches and they were like NEA was there for us. They would do anything for us. There were even rounds, the next round NEA didn't lead but they participated and they wanted to lead, but we chose someone else. But they were still there for us and that's a character trait that entrepreneurs need to make sure exists within the investor that they take, an investor who doesn't care about the color of your skin or the background you come from, who cares about you as a person beyond even you as an entrepreneur. It's super important.
Jamarlin Martin: Yeah. That's a big takeaway in terms of you were strong enough to be very selective when you had these options. But what I was going to say is that, why it's so important that you properly vet the investor, right. It's easy to see dollar signs, but you don't want to be the entrepreneur like the locks in terms of, you know, you, you see folks dangling the money, but you got to think about, your company's gonna have a rough patch, right?
Delane Parnell: Yeah. It's expected.
Jamarlin Martin: Yeah. So there's gonna be problems. And in a lot of cases you're going to be battling with the investor, right? Who's going to be on the other side?
Delane Parnell: Who's going to be on your board?
Jamarlin Martin: Who's going to push me out faster when I don't hit the numbers yet?
Delane Parnell: By the way too, I would say don't really worry about that because, I think what entrepreneurs fail to realize is, your board works for you. It's not the other way around. They're there to serve you and if they're not doing that then you go talk to whomever you need to and make an adjustment there. But yeah, obviously that was a consideration to me. Who am I going to spend the most time with? And I want someone who understands where I come from and is okay with that. And not just that one person but like the group, right? Because investors, especially at funds, they have faced social pressure from their peers and I didn't want to be in a place where there wasn't a lot of black people who walked through those doors or who were a part of that community. And to some degree, some people do want to be the first, but I cared more about, I feel like I'm going to be successful. I wanna make money for people who are going to then disperse some of that money back into my communities. And that's why I chose NEA and they had black people on their staff. That was a whole other thing.
Jamarlin Martin: Yeah. They had everything working for them.
Delane Parnell: They had black people on the staff.
Jamarlin Martin: So the Silicon Valley critic Vivek Wadhwa some years ago, he studied Silicon Valley and he said East Indians were able to break through, one, they formed organizations with one of the organizations going to over a thousand members in terms of their networking, mentoring, they're helping each other. He said when he looked at the black tech space, he said, you guys don't help each other?
Delane Parnell: That's not true.
Jamarlin Martin: Hold on, let me finish.
Delane Parnell: So who is this guy?
Jamarlin Martin: Vivek Wadhwa. He's an entrepreneur. And then he went into academia, but he's been one of the...
Delane Parnell: He doesn't have a lot of black friends.
Jamarlin Martin: Yeah. At this time though, this was around, to be fair, about 2012, 2013.
Delane Parnell: It doesn't matter. He doesn't have enough black friends.
Jamarlin Martin: Okay. So you feel like that's totally unfair?
Delane Parnell: When we announced our raise, one of the first messages I got was from Tristan Walker, whom I'd never met before. Obviously I've looked up to. He sent me a message and was just like, 'Yo, I'm proud of you. You don't need me to be proud of you, but I'm proud of you. I see you, keep moving'. A lot of words of encouragement.
Jamarlin Martin: Well not necessarily encouragement or support. I guess what he's talking about is...
Delane Parnell: I'll give you another example. When we pitched Andreessen, and they didn't do anything in gaming so it just didn't really make sense. But Chris Lyons was like, 'what do you need me to do? I'll politick on the inside. We'll make this happen'. Brian Brackeen, when I needed to spend time in Miami and to figure out what we're doing and meet people there, Brian Brackeen opened his doors to me, let me live in his house. Marcus Carey. When we were putting together our financial models, we would send them to Marcus Carey. He'd reconstruct the entire financial model. He's building his own company, but he's spending a week, two weeks working on our stuff to make sure that we were ready to go out and raise. I've had way too many black entrepreneurs show support to me, help push me, take a bet on me, make connections for me, leverage their name to help get me in the door, for some clown like this guy to say that black people don't help each other enough. There's communities, by the way, for black entrepreneurs. There's stuff that Richard Kerby and Charles Hudson have done like Stealth Mode where people share jobs. There's Angela with NewMe. There's Hodge in Detroit who does nothing but try to help black entrepreneurs, not even in tech, but small businesses. He partnered with Wordpress to help black entrepreneurs build websites all across the country. I think this guy obviously hasn't been necessarily exposed to it and maybe he doesn't understand systematic oppression, but we're helping each other.
Jamarlin Martin: You've studied the tech game extensively and you've met a lot of people. Is there anything where our people, African Americans, we're late to the party in terms of the tech game, relatively speaking, right? We're getting into the game just now. Is there something that you feel like the black entrepreneurs that you come in contact with, there's something specific with the black entrepreneurs I meet where they struggle with specific things, and there's some specific areas related to this late party to the game where we need to step it up?
Delane Parnell: I don't even want to add any sort of weight to any sort of criticism other people give black entrepreneurs. I think the things that we struggle with all entrepreneurs struggle with, and some of that for us, it's not because we just struggle, it's because we weren't exposed to it. We don't have resources there. Obviously raising money is a very difficult experience for black entrepreneurs. Even harder for black women. Being able to get deals done sometimes, even when it makes sense and it's the right deal for a company or brand to do, is hard for black entrepreneurs. But I think we have to continue to work together, band together and work hard at whatever we're doing and support each other in that process. And I think this community of black entrepreneurs, especially in today's time, that's what I've noticed we've all done, and I'm happy that there are more entrepreneurs turned investors and investors like yourself who support black entrepreneurship, and are there to push down doors for black entrepreneurs to walk through them. And so, what I will say is that, there's been a bunch of times where black entrepreneurs have been early to the party and haven't gotten credit for it. You look at what DaShaun has done with Maven in the beauty space in general, but even in the black beauty space, creating new revenue lines for stylists to be able to sell weave extensions and even additional beauty products, and how massive that company has gotten, not enough people talk about it. When you look at Michael McGee and Neal Sales-Griffin who literally started this entire.... There was this moment in time where there was this big wave around edtech startups, specifically startups that we're teaching people how to code in three or four months. That wasn't started by General Assembly. That was started by Code Academy, which became Starter League because the YC startup Codecademy took their name and so they had to change their name to Starter League in Chicago, by two black guys that went to Northwestern. They were the first company that ever started a program to teach people how to code in three months. And they were doing Ruby on Rails and they didn't even know how to code themselves, but they ended up finding an instructor. They got an incredible story, finding an instructor, getting that person to build a curriculum the first three months. And then they put up a website, got 70 people to pay them $8,000 or something like that upfront, to build this school to teach people how to code. And they were in the classes themselves for the first three months, learning themselves. And over time the company continued to grow and Jason Fried and 37signals, now Basecamp team who created Ruby on Rails, they invested in these guys, which was like their first outside investment and they grew an entire ecosystem and they don't get credit for it People give General Assembly credit and they give Dev Bootcamp and Hack Reactor, all of these guys credit for creating that tech movement around teaching people how to code. But that was two black kids in Chicago.
Jamarlin Martin: In terms of building up wealth in our community, would you be open on your next round where there's some type of vehicle that would allow smaller investors to acquire equity under, let's say a Reg CF, where the vehicle could actually distribute shares or sell shares to non-accredited investors where we can push some of the equity down from more exclusive communities where our people can just acquire shares under SEC regulations?
Delane Parnell: Yeah. So obviously I can't commit to that today. I think we'd be down to consider it. And I don't know if it makes sense for considering what the valuation of that round will probably be for super small investors, but we're obviously always down to help and to explore ways to make more money for black people, our people. So yeah.
Jamarlin Martin: Okay, I'm going to follow up with you on that. Special thanks to Delane. Where can people check you out on Twitter and then also your company's domain?
Delane Parnell: Yeah. So I'm just @delane on Twitter and https://www.playvs.com. Thank you.
Jamarlin Martin: Let's GHOGH! Thanks everybody for listening to GHOGH. You can check me out @jamarlinmartin on Twitter and also come check us out at www.moguldom.com. Be sure to subscribe to our daily newsletter. You can get the latest information on crypto, tech, economic empowerment and politics. Let's GHOGH!
This podcast has been edited for clarity.