Jason Finger of Upper90: 5 Things I Need To See Before Making A VC Investment

An Interview With Orlando Zayas

I tend to like the extremes of markets — -niche markets that are not already saturated with 500 competitors and incredibly large ones. If someone is entering a new segment or is an early market leader, I’ve found that I can be particularly helpful as that has been a lot of the professional experience that I have had. So, I believe that my capital is “greener” than the next person’s. This also ensures that I will feel that I can have an impact on the company beyond just providing capital. And, the psychological satisfaction for me of feeling like I have contributed and pulled on the oar with the team in some capacity is very important to me. I tend to be a contrarian.

As part of our series about “5 Things I Need To See Before Making A VC Investment” I had the pleasure of interviewing Jason Finger, Chairman of Upper90, a hybrid fund that provides founder-friendly credit and equity to top disruptors in e-commerce, enterprise and fintech. Jason previously served as the Co-founder and CEO of Seamless (GRUB) and sits on the board of Yipit, Bouncex, Live Auctioneers and Freshly. Upper90’s portfolio includes Thrasio, Clearbanc, Octane Lending, Filmrise, Crusoe Energy and Braavo Capital.

Thank you so much for joining us in this interview series! Before we dig in, our readers would like to get to know you a bit. Can you please share with us the “backstory” behind what brought you to this specific career path?

My mother and aunt operated a very small jewelry business when I was growing up. It was perpetually riddled with financial distress, culminating in personal bankruptcy. While it created challenges (some day-to-day, and some more structural (we moved regularly to avoid creditors which meant new schools, new friends, etc.)), over time, I was able to recognize that those experiences helped me to develop extremely valuable lessons, some tactical and some more structural, like resilience and grit. Paradoxically, the experience motivated me to want to start my own business. I wanted to create jobs for others that were secure, in a manner that improved people’s quality of life — and to help the small and medium-sized business community. That led me to co-found Seamless with one of my best friends. We viewed ourselves as pioneers, building a new industry, in a company with a mission and values that had deep meaning to us. Many years later, I decided to leave the business because I wanted to have a deep impact on other industries, as well. I began to do private investing and business incubation. And, as I knew first-hand how common it was to have a business struggle from my upbringing, I also developed a passion for helping founders and executive teams to minimize dilution with their financing decisions so they could maximize the fruits of their labor should their business achieve success. That led to the launch of Upper90, a fund dedicated to utilizing both credit and equity in creative ways so that early investors and teams can maintain maximum ownership in the businesses they’ve developed. While I certainly enjoy investing and lending, the best part for me is to learn about new business models and new challenges and to try to help the companies in which I get involved the way that I had always wanted someone to help my mom’s business.

Is there a particular book that made a significant impact on you? Can you share a story or explain why it resonated with you so much?

Victor Frankl’s Man’s Search for Meaning and David Burns’ Feeling Good have both had a transformative impact on me. Both these books helped to provide context and tools to remember that change in the world starts from within.

Do you have a favorite “Life Lesson Quote”? Do you have a story about how that was relevant in your life or your work?

I love quotes. I find it incredible when someone encapsulates complex thoughts succinctly. So, I keep a log of quotes that have resonated with me. The list has likely over a thousand entries. So, with that context, I do have favorites but to pin it down to one is hard. Perhaps one that I think of most regularly is “to the world you may be one person but to one person you may be the world”. This helps to remind me of the importance of my family and to understand the huge impact that every person can have.

How do you define “Leadership”? Can you explain what you mean or give an example?

This is one of my favorite topics. There is a classic fable of a man who asks 3 laborers wielding a pickaxe — each with a boulder behind them and a pile of rubble in front of them — what each person is doing. The first laborer responds, “I’m breaking rocks”. The second, “I’m working to feed my family”. The third, “I’m building a cathedral”. To me, leadership starts and ends with connecting action to a higher purpose.

How have you used your success to bring goodness to the world?

This is an interesting question to me as there’s often a presumption that “goodness” has to come outside the context of a company or through a specific philanthropic activity. I look at it slightly differently. As I’ve built companies, my teams and I have created tens of thousands of jobs. We have tried to have a positive impact on all the constituents with which we have been involved. And, we have tried to do that with integrity. Many of the people with whom I have worked have gone on to build other successful businesses, which have also created jobs that pay for medical needs or a child’s education or simply vacation. I have definitely focused on the proverbial “teach a man or woman to fish” versus giving fish. I enjoy having a positive impact in society and businesses have been my canvas.

Ok, thank you for that. Let’s now jump to the main part of our discussion. The United States is currently facing a very important self-reckoning about race, diversity, equality and inclusion. This is of course a huge topic. But briefly, can you share a few things that need to be done on a broader societal level to expand VC opportunities for women, minorities, and people of color?

If one were to look only at the US market for a product or service, at least for consumers, the total addressable market for women, minorities, and people of color, collectively, would make up a majority of spend. So, from a purely economic standpoint, backing entrepreneurs who have first-hand, personal insight into these groups, because they are part of these groups, just makes fundamental business sense.

Moving up several levels, I’m a very big believer that most of society’s biggest challenges stem from inequality in access to high quality education as well as what is prioritized by our school systems. Schools teach basic math and history but they don’t teach critical thinking, financial literacy, or mindfulness.

One frustration that I have, especially at this moment in history for the US, is that people are far too focused on differences than similarities. I believe there are issues with the teachers’ union, campaign finance, entitlement programs, defense spending, the absence of term limits for certain roles, and a litany of other items — those are problems that affect all of us. Yet, we spend more time pointing to the flaws in “the other side’s” solution, believing that our perspective on the answer is an absolute, instead of working collaboratively and giving at least some deference to the recognition that life is not black or white, it is gray.

Can you share a story with us about your most successful Angel or VC investment? What was its lesson?

Success can be defined in so many ways but the first company that came to my mind is one that is definitely a top decile performer but also one that is amongst the most personally satisfying. The company was founded to target the daily deal phenomenon about 8 years ago. After a year of significant success, the company hit a ceiling and started to decline. The founders reached out to me as I had been a seed investor, and we began to discuss alternate models to pursue. People talk about a pivot but we were contemplating far more significant. Over a period of about 6 months, and after numerous conversations, the company began executing on a new business plan, capturing publicly available data to help investors and companies make more informed decisions. The founders asked me to be on the Board to help pursue this new strategy. And, we went from a small business with, what I’m guessing, was about $2M of annualized revenue to a thriving and highly profitable business with tens of millions of dollars of recurring enterprise revenue. The big lesson for me was that knowing that I played a large part in the evolution of the business and the incredible achievements of the founders, was definitely more gratifying than just being a passive investor in a business in which I might have had a larger economic return.

Can you share a story of an Angel or VC funding failure of yours? What was its lesson?

The first business (of many, sadly) that popped into my mind was a company that, when I invested, was an incredibly hot company. The company was coveted by mid- and late-stage VCs. It was represented to me as having long-term enterprise contracts and there was a likely near-term IPO. It was introduced to me by a friend and his firm was going to be one of the lead investors, and it is a well-regarded firm. I never spoke with management. I never reviewed materials from the company. But, I relied upon my friend’s firm’s diligence. About 6 months later, the company was discovered to be a fraud. One of the most obvious lessons for me was to invest only in companies based upon who is across the table (management) not who is around the table (other investors).

Can you share a story with us about a problem that one of your portfolio companies encountered and how you helped to correct the problem? We’d love to hear the details and what its lesson was.

The areas that I’m generally involved with relate to recruiting, strategy, access, and financing. The idea that I somehow “solved” a company is more nuanced, as a result, since most of the areas are just broader than an acute “problem”. I’ve recruited talent (ten back-to-back CMO interviews on a weekend), proposed acquisition targets that have ultimately been acquired, made introductions to customers and partners, built models, written business plans, devised compensation plans, and have provided capital and made capital introductions. The question that might be more illuminating of what I’ve done would be to describe two circumstances where my action caused a different decision to be made, that worked out better for the company. The first relates to a company of which I was a Director. The company was large enough to go public and, while we were interviewing underwriters, we received an unsolicited offer from a buyer. After several months of a process with a variety of parties, the Directors and the executive team had all approved the final terms of the acquisition offer. But, late that night, as I was reflecting on the decision, it didn’t sit well with me. I called several of the other directors and suggested that perhaps the team was supportive of the acquisition offer because there were personal liquidity concerns. I outlined an incentive proposal before the CEO was to let the buyer know that we were approving their transaction and then we discussed it with the team. The team decided to say no to the acquisition offer and advance toward the IPO. When we rejected the offer, the buyer increased its offer by 30%. That created several hundred million dollars of value for the stockholders. Another example is from when I was involved with a company that was going to be raising equity financing at a suboptimal point in time (it was a seasonal business and we were just entering the slow season). I convinced the CEO, over Board objection, to allow Upper90 (my credit fund) to provide capital to the company as a bridge to the end of the slow season. The term sheets that the company had received prior to Upper90’s involvement were in the $100M range. After we provided the financing, at the end of the slow season, the term sheets were in the $200M range. The company was able to raise the same amount of capital but realize half the dilution. The team and the investors were all extremely appreciative of Upper90’s involvement.

Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?

No “regrets” as who knows how things would have turned out — maybe if I’d invested in the “missed” opportunity, the company would not have been successful because I would have provided some stupid advice on something — it’s always hard to refute a counter-factual. I can tell you one company that I loved that I wasn’t able to finance and that story. The company was in the capital table management business. I had been an investor in one of its first clients. When I got an email explaining the service, my heart skipped a beat. I sent a long email to the CEO describing my background making several suggestions about how to grow the company and expressing my enthusiasm for the market opportunity. He called me a few hours later and we spoke extensively and discussed my involvement. He wanted me to lead the financing round and needed $8M at $15M pre-money. It was too big of a check and I hadn’t had any experience syndicating deals, nor did I know whether I would be a good investor as it takes a long time to find out in private businesses and I was fairly new to investing as I’d been operating for 15 years. Anyway, I ended up being uncomfortable with the size of the check needed (not because I didn’t think the founder was right about how much capital the plan would require but just because it was outside my comfort zone). The company went on to raise money about 5 months later at a much higher valuation and is now a very substantial business. The two lessons for me are 1-rely upon your instincts — in business, decisions must be made without all of the information — I didn’t have the confidence in myself and so the lost opportunity was significant and 2-as an early-stage investor, it’s essential to develop a relationship with a fund like Upper90 which helps to get leverage on startup capital. If I had that same opportunity now, I would be able to invest $3–5M and then Upper90 might provide the balance of the capital given how much data the company had. So, going back to my original comment, perhaps I would have made money had I invested in the business but, because I didn’t have the capital, it catalyzed me to start Upper90 and now we’ve provided capital to some of the fastest-growing companies in the U.S.

One company that comes to mind was a company run by one of my close friends. While I was not an investor, I did have a vested interest because of our friendship. The company was acquired by a large strategic buyer that was expected to be public imminently. Almost immediately, it was obvious there was a material cultural disconnect. The acquirer told my friend that he needed to deliver and increase one hundred million dollars of revenue on a short timeline. So, he did what one would do under that circumstance, he hired more people, he invested more money, expanded geographically. Then, the parent company ran into financial challenges. And, my friend’s business was losing meaningful money because he had been instructed to invest so aggressively. My friend called me to discuss the future of his company. And, after a couple of days of discussion, I encouraged him to immediately offer to buy the business back from the parent. Within 2 weeks we partnered on the transaction together and put together a letter of intent that was accepted with a very tight timeline. We were ‘round the clock to get everything in place and retain the team and retain customers. Though we were ready to close the transaction within 3 weeks, the parent ended up changing the composition of its Board so it was challenging to get an update on the status of the decision. Ultimately, we were able to buy the business from the parent and, because it was a very special situation, we were able to provide founder equity to every member of his team so that they could feel like founders and be compensated as founders. We were able to stabilize the business once the divestiture was completed and the company is now growing and, for me, it was especially rewarding to help my friend realize his dream of owning a substantial portion of the company he had created from scratch again and to enable the team to have a meaningful ownership of the value creation of the business.

Super. Here is the main question of this interview. What are your “5 things I need to see before making a VC investment” and why. Please share a story or example for each.

I have 4 things, not 5. Management, market, model, and money. First, I’ve been incredibly blessed with the people that I’ve had in my life. I have friends that are like family, I enjoy spending time with my wife and kids and periodically they enjoy spending time with me (ha ha) and I’ve been and am involved with some incredibly exciting businesses that are pioneering new business areas. So, for me to allocate my time to a new business requires that the people building the company are extraordinary. I meet people and ask myself one simple question, “are these people I want in my life because they will make my life better and more interesting”. For me, more interesting means that I can learn from them, that they are committed to their mission and inspire me, that they have unquestionable integrity, and they are not only open to feedback but they crave self-improvement and mentorship. When I’ve met people who have these characteristics, I look forward to my interactions with them and so I presume that they will be able to attract phenomenal teams, execute sales effectively, evangelize their product, build partnerships, and, importantly, that they will get better over time (compounding is not just a financial concept).

Second, I tend to like the extremes of markets — -niche markets that are not already saturated with 500 competitors and incredibly large ones. If someone is entering a new segment or is an early market leader, I’ve found that I can be particularly helpful as that has been a lot of the professional experience that I have had. So, I believe that my capital is “greener” than the next person’s. This also ensures that I will feel that I can have an impact on the company beyond just providing capital. And, the psychological satisfaction for me of feeling like I have contributed and pulled on the oar with the team in some capacity is very important to me. I tend to be a contrarian.

Third, some business models don’t attract me. That doesn’t mean they can’t be great businesses — just that they’re not great businesses for me. While I have a great deal of marketplace experience, ad networks have never interested me. While I enjoy sales, ad-supported businesses that require quarter budget access is not my thing. I don’t like companies with very long sales cycles — I like immediate feedback from the market.

Fourth, I have found that I’m better off concentrating my time in a company versus spreading myself too thin and so having an investment structure on terms that I think are fair and, most importantly, aligning, is extremely important to me. I’m blessed in that, for the equity investments that I make, I am not a fiduciary. I would rather earn a 4x return and feel like there was great alignment and I contributed to the outcome versus 6x and I just showed up to a Board meeting and ate the donuts.

You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)

Influence is a relative thing. Running a business with thousands of people provides influence but then getting home and being reminded by the people most important to me that my wife is so much smarter than I am and so I’m #2 of 2 parents is very grounding. This said, to answer your question, allow me to ramble before I come to my point. I believe there are horrible structural issues with our educational system. I think the far left and the far right of this country are both saying the same thing, “my country is not set up to provide me with opportunity” but yet the “sides” can’t talk with each other. I believe the solution to income inequality needs to recognize that part of the “value” of income is the mental confirmation of someone’s efforts having a positive impact which creates challenges with the idea that universal basic income is the answer. I believe we should institute term limits but our politicians who would be required to implement such a thing will never allow it. I believe that there is structural racism in this country but there is also structural economic discrimination, as well. I believe the obesity epidemic is going to cause more deaths and decrease the quality of life of Americans more than any other issue we face — but that our healthcare system is set up to treat illness, not prevent it (and our economic system has outcomes that are perpetuating health problems). Those are all issues that present challenges. And, we’ve been poking at them but not solving them for dozens of years because all of us think we know the “right” answer. But, we must remember that, because we ALL worked together, without blame, without political interference, relying upon data, we had a novel virus enter the world less than 1 year ago and we already have numerous viable vaccines. If we work together, anything is possible — that’s my motto — that applies to home life, work life, and community life.

We are very blessed that some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might see this. :-)

I’d start and say, “my wife”. With 3 kids at home, and schools remote, it’s been several months since we’ve had a private meal of any kind. As a close runner up, I would say, “Tom Brady”. Going back to my criteria on investing, I start with people who inspire me. He has taken a holistic approach to his career and, from what I know of him, his personal life, as well. He has a mission. He’s oriented his major life decisions around that mission. He works tirelessly and in an incredibly disciplined way to achieve his goals. And, he’s been thoughtful about keeping the big picture in mind — -he never required the highest salary so that his team was able to invest in better linemen and better receivers. Putting the team ahead of himself has served him very well. He’s focused on the inputs and let those take care of the outputs. That is a key thing I try to emphasize when talking with my kids — I guess when I’m talking to myself, as well.

This was very inspiring. Thank you so much for the time you spent with this!

About The Interviewer: Orlando Zayas is the CEO of Katapult, an award-winning omnichannel payment platform. Zayas is known for his revenue growth strategies and visionary leadership in the eCommerce and retail space. His future-forward expertise has led companies such as GE Capital, Safe-Guard Products International, and DRB Capital. Zayas is also highly committed to providing educational opportunities to underprivileged communities through his philanthropic endeavors. Zayas’ business insights are regularly featured in publications such as Forbes, Entrepreneur Magazine, Retail Insights, and more.