The latest discussion in the Roy S. Pung Executive Speaker Series was led by Erik Brown (B.A. Finance ’97), president of Red Cedar Capital, a firm focused on investments in early-stage technology companies. Brown’s lecture was centered on venture capital, a form of financing that is typically provided by investors to early-stage, high-growth companies as well as later-stage companies bringing new products to market. He not only gave an in-depth overview of venture capital but also shared about his own career as an investor with two decades of experience under his belt.
Along with Red Cedar Capital, Brown is a venture investor at Decasonic, a Chicago-based venture capital firm investing in blockchain innovation. He also serves as an advisor to Michigan Rise, a pre-seed investment fund, and as a mentor with the Techstars Web3 Accelerator. Prior to his current role, Brown served as a principal at Aspire Capital, a fund dedicated to investing in technology and life sciences firms, with over $700 million of investments.
“In the last 10 years, advancements in technology, regulatory shifts and the emergence of crowdfunding platforms have significantly increased the accessibility of venture capital for the average investor. This democratization enables individuals to engage in venture capital through smaller investments and a broader range of diversification opportunities,” Brown said.
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Venture capital necessitates extensive networking to uncover promising investment opportunities. At Decasonic, the firm commits to examining 100 companies weekly by employing diverse methods such as attending industry events, collaborating with intermediaries and directly engaging with CEOs.
“The human element of venture capital and private equity is incredibly important,” Brown said. “It’s imperative to assess the management team, their motivations and the team’s ability to execute.”
Of all the companies his firm looks at, they typically will invest in about one in 500, depending on the industry. However, no matter the amount of calculated risk taking, venture capital can be unpredictable, and not all promising investments work out the way the firm hopes.
“If you are a start-up, everyone wants to be your friend when things are going well. We strive to be there for start-ups when things aren’t going well,” Brown said.
In addition to investing capital, many investors also provide strategic guidance and mentorship to the companies they invest in. Investment areas that Brown is particularly excited about include artificial intelligence and blockchain, although Brown warned of the risks of AI and the need for governmental regulation in this area.
“Investors last year invested $2.6 billion into 110 generative AI-focused companies,” he said. “Experts were not expecting this at this time — it really is amazing. Just this year OpenAI received $10 billion raised from Microsoft, Anthropic raised $300 million from Google, Jasper raised $140 million and Character AI is seeking $250 million.”
He added, “It’s very profound what’s happening right now. Artificial Intelligence and tools like ChatGPT won’t replace you as a knowledge worker today, but the people who know how to use these tools might replace you.”
Like many other speakers from this series, Brown was happy to pass along important lessons he has learned from different leaders and mentors throughout his life, including 14 inspiring takeaways. Some of those:
Brown also encouraged students to prepare for the new future of AI and how to maximize the utility of tools such as ChatGPT and DALL-E 2 by gradually learning to write effective prompts and experiment with the platforms. He believes that the skill of “prompt engineering” will be incredibly valuable in all areas, including medicine, law, marketing and education.
Outside of being an investor, Brown enjoys staying connected with his alma mater. He currently serves on the board of the Financial Markets Institute and on the advisory board of the Michigan State University Research Foundation.
More information on upcoming events in the 2022–23 Pung Speaker Series, as well as information on past events, is available at the Full-Time MBA program page.