Managing Director, McCune Capital
New York, New York
Jason Cahill (MBA 2014) had survived seven years in the Army Special Forces and two trips to Afghanistan only to find himself muddling through a career as an IT consultant. His then-girlfriend (now wife) encouraged him to go back to school for his MBA. With a strong technical background, Cahill was drawn to Carnegie Mellon’s innovative culture, bringing him alongside world-class computer scientists.
While at the Tepper School, Cahill developed the idea for Traansmission, a mobile platform for truck drivers to connect with shippers, to minimize the number of drives made without freight. After just a couple years, Cahill sold Traansmission to ShipLync, an on-demand freight company.
While he was soliciting investors for Traansmission, Cahill had the opportunity to meet other founders he was fascinated with — several of them with Pittsburgh-based businesses. He began making some angel investments and was immediately drawn to the world of seed-stage start-ups. That’s when he decided to raise funding to launch his own venture capital firm.
McCune Capital invests in early-stage ventures, primarily at the intersection of “analog industries”— for example, transportation or agriculture — and high-tech innovations. “I love finding solutions that can bring efficiency to traditionally slow-moving industries,” Cahill said.
What is your elevator pitch?
As a Special Forces veteran, I adapted diligence, strategy, and hard work to succeed on the battlefield. Now armed with a financial education and entrepreneurial experience, I started McCune Capital. The focus is investing at the intersection of new technology and older industries.
What is your philosophy behind investing?
I look at each company through four lenses: problem, solution, market, and team.
What problem are you solving? Do I care? Is it actually a problem? Dave [Mawhinney, Associate Teaching Professor of Entrepreneurship, Executive Director of the Swartz Center for Entrepreneurship] and others have ingrained in my speech pattern: “Is it a painkiller, or is it a vitamin?” I’m not looking for Tinder for dogs. I want to solve real problems.
Does the solution you’ve implemented actually solve the problem? Surprisingly, I meet companies all the time that might say the problem they want to solve is that bicycling in Pittsburgh is dangerous, and they say, “Here’s an inflatable raft.” How does that solve the problem? It doesn’t.
Is the market large enough to sustain a billion-dollar company? What changes in the market allow you to grow quickly? What stays the same to sustain your growth? What sales channel partners do you have?
Because I’m typically investing at the really early stage — of the 12 investments I’ve done, I think 11 were pre-revenue when I wrote the check — I can’t do any kind of financial risk-adjusted return calculations, so I really lean in on the team as a proxy. If the team has a million bucks, they could probably hire whomever they need. But if they have zero dollars, are they able to attract top-shelf talent?
I look for rock star, world-class teams solving real problems in large markets.
Does anything keep you up at night?
Early-stage investment is risky. Am I being as helpful to my companies as I can be? Am I giving 110 percent in connecting them to capital and market opportunities, and mentoring where I can? If they say they’re struggling to hire a systems engineer, am I doing everything I can? Did I make that 12th phone call? Did I make that 15th connection?
If you’re worth $800 million, and you give me a $10 million check, now you’re worth $790 million. I haven’t changed your life at all. And then if I make a five-X return, now your 10 went to 50, and you’re worth $850 million. I still haven’t really changed your life. So there has to be something more that I’m offering to my own investors.
My value proposition, my differentiator, is that I’m going to add more value than anyone else you’re going to talk to. I have deeper connections. I have deeper insights. I enlisted in the Army at 19 years old and came out a combat Special Forces veteran — I say that just to convey that I’m driven. More than anything else, I want to make sure that I can deliver value.
How has Carnegie Mellon shaped your view as an investor?
I will go to events where I’ll talk with investor peers — people who are largely the same financial size and investor network size — and notice that they tend to invest emotionally. They shouldn’t. But because Tepper is such a data-focused school, I’ve really tried to make everything data.
I will do a weighted factor analysis with the four corners of my investment philosophy: problem, solution, market, team. It’s mostly about team first, followed by market size. The problem factor is binary: If you’re not solving a problem, I’m not going to look any further. That way, at the end of the year, if I miss on a deal that becomes a really great deal, I can look any of my investors in the eye and say, “Here are the things I look for. Here’s why I said no.” So I think that from an academic perspective, one of the themes instilled early and often was the pithy response of “Show your work.” If you have a different answer than I do, that’s OK, as long as you can walk me through what you did and how you got there.
Pivotal players who get included in the thank-you speech?
I have nine advisers who have views across different sectors and topics. They really round out my weaknesses. I want to be the dumbest person in the room. If I am looking at the pre-investment stage, what are the things I need to get smarter about to know if this is real? At post-investment, what are the things that I need my network to really flesh out and make more viable?
I have experts in artificial intelligence or machine learning. The theme to my advisory group is, if I were to Gartner quartile all the things that I’m not so great at, they fill in the quadrants for me. So you’re not going to see a lot of strategy, marketing, or operations people in my advisory group, because those are the things I feel pretty strong on.
What kinds of ventures succeed?
If you were to look across industries at what makes them all succeed, I’ve often found humility is key. I have 11 active companies. I’ll reach out to them for bits of information from time to time. I can almost line up what I get back with the financial performance. My top three or four companies — my “leading horses” — are thoughtful in the answers they give back. They’re very proactive and transparent with me. Clear, concise communication is a thread that I look for.
You also have to be very comfortable being wrong most of the time. People who have spent a large portion of time in an industry oftentimes struggle with that, because you’re paid to always be right, and I’m telling you I want you to be wrong. But I want you to be able to move quickly beyond being wrong into something else. Being wrong isn’t the solution; it’s realizing you’re wrong and moving somewhere else.
One of our most solid success stories, not only from a financial standpoint, but also how quickly they’re growing, is Smarter Sorting. They’ve been able to attract and hire great talent. The first pitch was a great example of tenacity. This is February of 2017. There’s a foot and a half of snow on the ground. Chris Ripley, the CEO, parks his truck on the sidewalk and pushes their prototype two blocks through the snow. The elevator is out in the building, so the team has to carry it up the escalator. But none of that fazed them. He got in there, wiped the snow off his face, and said, “Where do we begin?”
What key piece of information gets overlooked when getting started?
As CEO of Traansmission, my thought was that every hire I bring in should be exponentially smarter than me. Otherwise, I’m just going to push them out of the way and do it myself.
I think in the corporate world, oftentimes the boss feels threatened by direct reports who are smarter than they are, or who think outside of the box, whereas a truly thoughtful, mindful CEO realizes if he or she hires a director of sales, that person had better be amazing at sales, because if they’re so-so, why did you hire that person in the first place? It has to be bigger than just you. This is laying the foundation for a very successful venture. Your ego cannot get in the way.
What was the “aha” moment?
My stepsister was in the trucking industry for 12 years in driver retention. When I was a consultant, she would say things like “Stop making rich people richer. Help people like these salt-of-the-earth truck drivers.”
She told me that one of every four or five trucks would drive empty. I pushed back: There’s no way. That doesn’t make sense. When I was at Tepper I thought if, in fact, one in five trucks is actually empty, there has to be a method to find freight to put in the back of them.
Pittsburgh is strategically positioned near the Pennsylvania Turnpike and I-70. I would go out to truck stops and ask three basic questions: Do you have a smartphone? Do you have the authority to make your own decisions about what freight to pick up and drop off? If someone were to send you an opportunity, would you ever consider it, or is it a bridge too far? I had maybe 500 of these conversations.
Over time, we got a much larger set of industry data. We found out that one in five trucks nationwide drives empty, and in the New York City metro area, it’s actually about 38 percent. It’s mostly because there are one-way flows of goods, so if a truck full of bicycles goes from Chicago to Brooklyn, it drives back some distance empty before it finds another load.
How did the business school help shape your first company?
Really early on, I was sitting in a marketing class, and we were looking at a case study. The professor said we do cases to synthesize what would happen in the real world. I naively raised my hand and said, “Instead of synthesizing something from the 1980s, can’t we do something from today?” She asked if I had anything in mind, and I brought up Traansmission.
I ended up using my idea in four or five classes, which got me a lot more excited about my MBA, because I’m not doing homework just for the sake of homework. I’m literally building up my business. All of my classmates who were on my project teams ended up at McKinsey, Amazon, BCG, and Bain, so I literally got brilliant leaders of industry to help me build the idea before they graduated.
I would say I was — and continue to be — very liberal with reaching out to the alumni database, which I don’t think enough people do. I built a filter set for 10 companies I wanted to get an introduction with. I found as many Tepper and Carnegie Mellon people connected to those companies as I could, and I just reached out.
I would say probably 70 percent of the people I talked to would respond back. I think because Carnegie Mellon is a small, tight-knit community, I’m much more willing to help other people, and I think people have been much more helpful to me.
My mantra now is “Always take a first meeting; rarely take a second meeting,” because you simply never know where the conversation will head. It could be a dud; it could be not worth the effort. Or it could be amazing, and shame on me for ever doubting it.
How about growth?
I was lucky in that after Tepper, I hired a great co-founder, and we were accepted into the New York-based Entrepreneurs Roundtable Accelerator, and so our network of partners and mentors grew exponentially. We came out of that with a healthy set of customers and some seed funding, and we grew from there.
Some of our anchor customers were Blue Bottle Coffee and Blue Apron. It seemed that the food space made the most sense. For example, when you cut a piece of broccoli, it’s technically dead. Your job is to get it in the hands of the consumer faster. By exploiting the extra space that’s on existing trucks, you don’t have to wait until your regular Tuesday truck comes; you can push it out whenever space becomes available.
The greatest success really came from referrals on the truck driver side. We charge nothing to the truck driver, and so they’re incentivized to spread the word, because the more shipping customers who use it, the more often they are going to get freight.
How did the acquisition come about?
In late 2016, we had hit a growth plateau. We found our niche with fresh and frozen food, and we were growing rapidly. But when we were going to approach the larger distributors like Nestle and Heinz, their sell cycle was just way too slow for us to be effective in.
With sort of fortuitous timing, John at ERA reached out: “How are you doing? One of our partners is actually a private equity group in D.C., and they reached out to us specifically about you.” ShipLync does deep ocean shipping and tracking, so they wanted to bolt us on into their on-shore portfolio.
What “big ideas” would you like to pursue next?
The basic premise of our energy grid now is that it’s very hub and spoke: You have a big, centralized energy generation center — whether it’s coal or nuclear or something else, it doesn’t really matter — and it gets pushed over transmission lines down to your house. So I’m keen on exploring big ideas in energy like microgrids and distributed energy.
With microgrids, there may be 100 homes in your neighborhood, and 50 of them have metered geothermal in the basement, solar on the roof, wind in the back — some combination where all of the energy for the local needs are generated by local residents. So if you generated $10 of energy and used $8 of energy, where does that $2 go? Who accounts for it? Who tracks it? I’ve seen a couple companies who are doing interesting things in that space.