Founder Evaluation: Leadership, Transparency, and Venture Risk

In this episode of Leadership Quotient, Lindsay Guzowski, CEO of the Crucible, speaks with Heath Naquin, Senior Vice President of Innovation and New Ventures at University City Science Center, about the realities of venture investing, the importance of pattern recognition, and why leadership today requires continuous learning and adaptability. Drawing from a nonlinear career path spanning startups, real estate investing, venture ecosystem development, and global fund creation, Heath shares lessons learned from both successes and failures. He explains why venture capital is fundamentally about risk management, how investors assess founder teams beyond the pitch deck, and why transparency, coachability, and capital efficiency matter more than ever in today’s market. The conversation also explores the impact of AI on leadership and business building, including how modern founders can dramatically accelerate product development while still relying on human judgment, creativity, and experiential insight to navigate uncertainty.

Transcript

SPEAKER_02 0:00

Welcome to Leadership Quotient, a podcast by The Crucible, where we explore how leadership teams and investor-backed companies are built, aligned, and scaled for impact. I'm your host, Lindsay Gazowski, and in each episode, we'll talk with the people shaping value behind the scenes, from operating partners to investors to advisors to C-suite executives, about what it really takes to drive performance through leadership. On today's episode of the Leadership Quotion Podcast, I chat with Heath Naquin, Senior Vice President of Innovation and New Ventures at University City Science Center about why VC is more about money management than investing. Lifelong learning is the key to success, and experientially derived pattern recognition as a risk reduction tool. Heath, welcome to leadership quotient. To get started, I'd love to hear a little bit about how you got into the venture and PE space. Your background's a little nonlinear compared to some others that may have uh uh definitely nonlinear, uh without a doubt.

SPEAKER_00 1:17

Uh no, no, uh, no doubt about that. Uh happy to talk about that. Uh so definitely come from a regular background. I um originally from South Louisiana and sort of first generation. Um eventually became first generation, I guess. I had a stutter step or two along the way, uh, like actually going to college, good education, etc. Um, but you know, I dropped out of college um early on. Uh that's when I first figured out, found out about what the heck venture was. And this is 30, 30 years ago now. Yeah, more than 30 now, unfortunately. Um uh because we were creating, we created a startup, and these days it's like, oh, cool, but 30 years ago was not the most in vogue thing, and we didn't call them angel investors then. We called them rich dudes, you know. So, I mean, it was just a very different world then. Uh, so did successfully raise funding uh for that first company, and that company did get acquired in it by another company that got uh venture backing. So I got to see some of the inner workings of all that a little bit then, which was pretty fascinating, really. Um and then you know, dot com happened for those that are watching that don't remember dot com. You have to go back in about 25 years, but that was yet another bubble that we seem doomed to repeat mistakes. So um the tech world dried up again then. Uh so I had to pivot career-wise. So I was sort of marching towards sort of tech and venture, maybe I'll get there, and then that just went away, right? So I spent about the next five years actually um building a real estate investment group. I mean, you call it now, um, but you know, just bit by bit. Uh did have several team members that I recruited and worked for me, what have you. Uh, and then around 2005, decided to get out of that because I was getting burnout and also somewhat concerned about another potential bubble. Because if anybody else remembers, you know, 2005, 2006, mortgage crisis happened around 2008. Uh, yet another bubble that happened. So uh fortunately that time I got out of at the right time, so that was good, uh, and decided to go back to school. Uh, so did go back because I was still trying to meander back into that sort of tech venture space. And I was like, man, I'm you know, everybody's talked to. I mean, the traditional path is go get an MBA, go spend a couple years at Goldman, you know, get your investment banking background, then you you you basically spend do your 80 hours a week, you know, just you know, working hard at a firm, and then eventually you you make it in, right? Uh so I decided not to get NBA because everybody else had one. Uh, got a master's in science and tech commercialization, was at UT Austin, and then there uh really started working more on the applied innovation systems space originally, of which capital, of course, is a key component of that.

SPEAKER_01 4:24

Right.

SPEAKER_00 4:24

Um, within that, that's where I really got exposed to sort of like the angel community, uh venture community around Texas, and actually globally at that point. Um uh started participating with a couple different angel groups, what have you, at the time. A couple different system funds were created. The state had a venture fund, so it was all circling around all that sort of thing. Um fast forward another five, well, 10 years really. Um, went into another organization, uh, helped launch of well, it was a specialty vehicle, but essentially a venture fund there. Uh, that we would we made investments out of that. Um, also along the way, somehow got connected with the European Investment Fund and helped create venture fund their model for creating new venture funds in other countries. And so then I'm really standing up new funds globally and we're connecting them in with the US venture ecosystem, etc. Um, don't ask me how that happened. I was like, I was shocked that it I'm like, really? Okay, I guess we'll have to figure that out. So um anyway, um, and as a result, along that timeline, then I started getting started getting into investing myself. Uh, and so I've done the angel investing thing. I've been an LP in a number of, I still am an LP in a number of funds. And then um, you know, still today, uh, we have a number of different capital initiatives at the science center that I oversee. So still just in that space. Now, if you ask me how I got here from all that, I have no real clue. I I gotta be honest with you. Uh, if I had to give those listening a little bit of maybe a tip, if you will, if you're going down this nonlinear path, um and I'll just give a caveat. There are easier ways to do it than the nonlinear path, but just having said that, um, I would take uh into account that there's no real wrong or right way. It's really about collecting data and using those life experiences to inform and just just collecting those experiences for you as an individual so that then you can, and eventually, you know, if you have enough data, you can start doing some value-added pattern recognition. And then that starts getting into risk reduction in the venture world. And then that, you know, that that's sort of all those assimilated experiences can actually port over in a different way. Because at the end of the day, in in the venture world, you're trying to identify risk and you're trying to solve for that. Uh, everybody talks about the money angle, and yeah, that's true, but it's really about risk, risk identification, mitigation with tied to money, right? So that's that's sort of just pointing that out there for those listening.

SPEAKER_02 7:10

Well, and I think that that's a really important point that people think of venture and they think of people investing in potential unicorns and great ideas and all of those components. And that's a small part of it, but a lot of it is really understanding can this idea come to fruition in a commercially viable way with the team that wants to bring it there.

SPEAKER_00 7:36

Yep.

SPEAKER_02 7:37

And it's a lot of components there that you're really looking to see what's my downside, not just what my upside looks like.

SPEAKER_00 7:44

Well, well, and I talk about this quite often. I mean, maybe this is an aside for this podcast, but I think just to level set, and I actually have to teach this in a course later today. As a matter of fact, so the the the reality is venture, I mean, or and look, venture PE, angel invest name, whatever, uh, when you start talking about money moving towards new ventures, wherever it comes from, especially when you get into organized venture and PE, you're talking about money management more than investing. And people get hung up on the investing side, but the GPs and those leading those funds are are they're beholden to their investors. So it's no different than like a mutual fund. I mean, like if your mutual fund is going to do really, really badly, you're gonna move your money. Same thing happens with an LP and a venture fund. So I I try and sort of shift the conversation around venture from oh, find unicorn. No, yes, of course they need to find a unicorn because that's how the economics work to make the fund produce. But that is essentially you're talking about money management, and that's where the risk side comes in and the risk mitigation comes in. Uh, so just for those listening, just put that lens on when next time we talk to a venture group. Uh, like what risk are you presenting to them? And how do you mitigate that risk in your profile as you're approaching that venture group? So just a tidbit on that.

SPEAKER_02 9:15

Yeah, that's absolutely critical in understanding how you as an entrepreneur are presenting a risk profile, not just a brilliant idea.

SPEAKER_00 9:27

Correct. Yep. It's it's often, you know, it's it's it sounds almost like silly to say, and everybody's will probably roll their eyes. I mean, I even roll my eyes sometimes at it, but at the end of the day, most venture teams will say, hey, I'd rather back a team that presents low risk with a slightly less good idea, quote unquote, than a really knockout idea with a questionable team. And because are like, well, that sounds stupid. I mean, why don't you just get the best idea? And you know, and I often hear from founders like, well, they don't understand. My idea is really the best one. I'm like, hey, no argument. That's fine. Uh, you're smarter than I am, I get it. But ultimately, things will go wrong in business. They are gonna go wrong. And but back to that risk side, and that's where you can collect data and pattern recognize when things will go wrong, and they will, which team can navigate that and pivot appropriately under those conditions versus a great idea that's built on a hope and a prayer that's charted towards everything miraculously working perfectly for that exit. Because that's that's that's not real. That the it's all gonna go wrong if you can serve meander their way through. That's real, right? And that's where that sort of viewpoint that people hear about comes from, just to put it out there.

SPEAKER_02 10:50

And making sure that the team works cohesively together. Of course. I've seen a number of companies where brilliant idea, solid founders individually and together, they can't bring the idea to fruition because they can't work together.

SPEAKER_00 11:06

Well, yeah. I mean, the team dynamics are are critical. I mean, and it's one thing when you're maybe coming out of grad school and all you and all your buddies hang out, and everybody has a nice, really cool chief something card, and they it feels good, and you get the big check, a demo day, and it all sounds good. But when it's time to work business and actually execute, sometimes that team is not necessarily the right team at that moment. And oftentimes, while we're talking about the the capital stack and the capital continuum, that team, that executive team, including the CEO, by the way, will often have to shift at different phases of capital based on needs. And as leaders, understanding when you are the right leader and when you are not the right leader at that point in the company's evolution is also a really difficult pill to swallow, but also a real thing to be thinking about.

SPEAKER_02 12:00

So, how do you assess for that when you're thinking about investing, mentoring, helping to nurture businesses?

SPEAKER_00 12:10

I mean, it it depends. I mean, there's all kinds of this back to pattern recognition because I've seen all kinds of stuff. And I mean, not I don't want to say stereotype, but there's enough patterns, you're the red flag start going up. You're like, whoa, hold on, this might go a little sideways. So um, you know, when we at least for me and in some of the groups I work with, when we start looking at assessing the team, and it's gonna sound a little silly, but we start looking at our what are the details behind the company that the team has put together and what that means, and it has literally has nothing to do with the science at that point, because you're looking at the business wrapper as an investment opportunity, assuming that, and of course you have to do diligence in science, but let's let's get to the bottom of the company side first, right? Yeah, and with that, uh, if you start looking at like here's one that's I mean, uniformly, I see this all the time. All right, well, let me see your deal room and then let me I'll go immediately to one. Everybody's gonna guess when we go to the finances and actually don't look at that till last because I think that's all made up anyway. Um, I I go to let me see your legal documents and your founder agreements. And oftentimes that's not there or it's not well buttoned up. The team is like, oh no, we've just been working together for seven years, we'll work it out. And I'm like, well, that that sort of speaks to a lack of business maturity in some way, which causes, and it means there's some cracks that are probably floating around in there. That also means there's probably some sloppiness in research or IP or what have you. And usually if I follow that first breadcrumb and it almost always tracks down those lines, and that's where it can start falling apart because it's not about the legal documents itself, not really. It's about, I mean, well, it is, if you don't have them, that's a problem. But if if the founding team has not viewed the importance of that for the continuity of the business long term, that raises concern, right? And so uh that that's just one example of how you can sort of start assessing that. And the other piece of it is honestly, uh coachability a little bit, uh openness to new ideas. Doesn't mean I'm always right. I'm I know I'm not, but at least, you know, hey, can we talk about this for a minute? Uh transparent communication is critically important. And I'll give another example that I see is a mistake that happens quite often. You know, a lot of founders, they all want to send their investor updates, and they're it's basically turns into a brag sheet. I'm like, you're you're you're talking about all the amazing things you did. Uh, you went to the three more accelerators, cool. Um, you got another grant, cool. Um you have some new partnerships, that's all great. Great to see, but they're not talking about the real problems and their milestones. They don't want to admit them because they prefer putting on a show. They're not talking about what they need, and they're not being honest about like, hey, I have a critical gap. Investors, friends, advisors, whatever, help me fill this gap, right? And if if you just look at the investor, I mean, I get at this point hundreds of investor updates type things, uh, whether I'm invested or not, from a number of companies. And the ones that are sort of what I call brag sheets, I sort of start being suspicious of that after a time. Of course, I want to hear the good news, but if there's never any any bad news, I'm like, what's going on? On the converse, those that are very short and sweet and say, like, this is our milestones we have to hit in the next quarter, these are the gaps that we have, any ideas, I will actually try and weigh in and help. Because I'm like, man, I appreciate your being honest and transparent. Uh, so the playing hide the ball and what's really going on with the business is usually not a good policy. So that's just something that to mention. And then the final piece is you sort of got to be able to work together for a while. So, like, just for those founders in the room, I mean, an investor that's writing you a check is thinking about like, I'm gonna have to deal with this person for at least 10 years. I mean, so think about it like, okay, you went to you went on a dinner date, um, you got to decide in that first date whether you're gonna spend 10 years with that person or not. I mean, that's a lot of pressure, number one. But number two, it's a very real thing, right? So you have to there has to be some kind of doesn't mean you need to be best buddies, but at least you can envision being each other's orbit for a long period of time. And sometimes that's not the case, you know.

SPEAKER_02 16:40

Yeah, I think that people often come into these relationships, and especially as the entrepreneur, thinking, okay, great, they're gonna invest in me, and then I'm gonna show them what I can do when it really is a back and forth and it needs to be a partnership that enriches both sides.

SPEAKER_00 16:57

Of course, of course. Same with like um, and and then you're right, it's like, okay, just give me uh I I heard it earlier today. Uh, can you introduce me to an investor? I'm like, I can. I am, I mean, but that doesn't mean I will, because I don't think that would be a constructive conversation for either of you, right? Oh, I mean, and it's not a pro it wasn't appropriate for our fund, but I was like, uh, sorry, I based on this conversation, we're probably not gonna be a fifth or so other folks in my network either. Um, because to your point, it was like, let me just show you what I can do. I'm like that we need to talk about strategically how this is gonna work, right? So that's just again, pattern recognition is one of those things that comes through after a long period of time.

SPEAKER_02 17:43

Yeah, it's actually we have an explicit um element within the Crucible report, which is pattern recognition, because we found that that predicts success to an outsized degree relative to everything else. If you can identify patterns and understand the practical application of said patterns, you're far ahead of a lot of executives, even brilliant people that work in this space.

SPEAKER_00 18:09

That uh I will say, like in the age of AI, and you know, and just talking about that. Um, I mean, hey, you can find out great and super smart sounding information on AI stuff these days, it will not solve for the pattern recognition for when things go wrong. And that's where that that lived experience really comes back through.

SPEAKER_02 18:34

So talking on that aspect, where do you see leadership needs changing as the technological landscape continues to evolve?

SPEAKER_00 18:45

Right. So I mean, when we talk about leadership, as you know, I mean that's a very macro term, right? Right. Um I think I'm gonna avoid the impacts of AI on you know team management, things like that. That's gonna I'm gonna park that over here for right now. But for the individual leaders themselves, I think what I'm what I'm noticing more is especially with AI, everything floating around, it's like, okay, great. The leaders have to one, in my opinion, be willing to be lifelong learners. I mean they have to learn constantly. So as we see the pace of technology change and tools change, I mean, it's it's every every quarter, it's like, oh, everything's changed again. It's all changed again, right? And that's fine. But that means you're as leaders, you have to be willing to not get set in your ways. You have to be willing to learn and experiment and constantly be testing how you can use some of those tools for your benefit within your existing process without blowing everything up that you've already built, right? I mean, so it's this whole thing, right? But it's really about that lifelong learner thing. Another thing I'll add, which I'm starting to notice, which sounds sort of silly, maybe it's my bias. You know, it again, this sort of comes from um non-linear, I guess it's a nonlinear pathway, really, because then you're starting to see this even play out with like coding, because I mean, you don't need computer engineers quite as much anymore. Not but they're not important. It's like, I mean, you're literally like, well, we don't need to need to hire a couple engineers, we'll just have the AI code the stuff. You more importantly, what is the strategic implication of that build? And more importantly, how's that tied together with your business model? So that leads for leaders being willing to be really creative and have those critical thinking skills that allow them to sort of test and probe and and and be nimble while they're using the and and and learning about these different tools. At least that's what what my opinion is. I'll I'll I'll give it an example in practice. So a lot of the stuff that we look at is in medtech, right?

SPEAKER_02 21:00

Right.

SPEAKER_00 21:01

And so historically, um, you go you're getting ready to do, and this was a digital health type thing. So you have all kinds of compliance and regulatory issues that go in with the digital health app. And it's like, oh man, and we have all these sinks that have to happen with different systems. I mean, there's privacy concerns, there's hip hop, I mean, all the things. And it used to be when you're building, you could have a prototype thing, but when you were doing the real build, I mean, we're talking a year to 18 months, a couple million bucks. I mean, at least, at least, you know, just to get that ready to interface with like a health system or something like that, right? And now, and the these days, I one of the companies we talked to, they they literally raised based on that plan because that that was that was the normal, right? So I talked to them about maybe about six months ago. Uh, because they did their raise last year, I guess, uh, around probably around Q two, Q three. And they come came to me a couple of weeks ago and said, All right, we're ready. I'm like, well, you're uh about a year ahead of schedule, but that's awesome. What's going on? And how did you do it? And so, with some of the new tools that came out that are able to do AI coding builds compliantly with that, they were able to get the build done. And by the way, it cost like a third of what they thought it was gonna cost. And they they were coming to us saying, Well, we're gonna re-jigger because we were able to do this build and now we're gonna redeploy this money into BizDev, getting new contract. I mean, which makes sense, it's great.

SPEAKER_01 22:36

Yeah.

SPEAKER_00 22:37

Uh, and we were like, well, that's awesome. But if the founder would have just kept the blinders on, said, nope, this is our plan, we're just gonna do it. And I see other people still doing that. They're they're not being capital efficient, the money's not moving, or rather, the the project is hitting regular roadmaps. That that's what I sort of mean, like being able to be a learner, uh, quickly assess and adopt and figure out ways to sort of shortchange, or not shortchange, but shorten the development cycle, especially if you're in that sort of space with some of the tools that are out there. And if and I give kudos to the founder, I'm like, yeah, that's awesome. I mean, you figured out a way to do this that makes the money that we're investing go way further towards commercial milestones. And that's really what it's about, right? So back to that whole risk and all those things, right? So um, that was just an example that might be helpful in thinking about the application of some of the things I said. So I just want to put that out there.

SPEAKER_02 23:34

Well, and it also gives you more confidence if you need to do a follow-on round to see we we know that our capital is gonna be used efficaciously and oh yeah, that that person calls and says I need a bridge round.

SPEAKER_00 23:46

I'm like, okay, we'll we'll figure something out.

SPEAKER_02 23:48

Sure.

SPEAKER_00 23:49

Because now I already got to see it in action about how they approach that. And absolutely 100%. 100%.

SPEAKER_02 23:56

So I want to go back to you know, Heath as a 19 or 20 year old doing that's a bad time.

SPEAKER_00 24:04

Bad time, go ahead.

SPEAKER_02 24:05

During your first startup. What mistakes did you make that most shaped how you were able to pivot into a better leader?

unknown 24:18

Oh god.

SPEAKER_00 24:20

I don't know which which mistake I didn't make, uh, but um I made them all, I think. Um it's gonna be a much longer podcast. So we had to go all my 19, 20, 21-year-old mistakes. Anyway, um I think it's a lot easier now because I mean, hell, I mean, my first cell phone still had batteries we had to change out. You know, I mean, this is we're talking a whole different world at the time. But um I wish I would have known more and about how to really test for market uh and spend a lot more time on that front. I wish I would have understood more about the legal side of things and the complexities that go into that. Uh I go back to the founder agreement thing, because I mean we didn't do that, we screwed that up and we all got sort of burned in it, you know, bumbling, even though it was a relatively good outcome. So I'm like, yeah, well, okay, lesson learned on that one. Um the uh and back to the complexities of money, like I'll tell it's a sort of funny story. Like, yeah, we raised money, and at the time it was, oh my god, we raised a hundred grand. I mean, that was a huge deal back then, huge deal. That first hundred grand, right? Um, and then but the investor rightfully so said, Well, you can't use it to pay yourself, you have to go hire a computer engineer. We're like, what? You know, so uh so understanding the milestones that are necessary, what the money use was for for the ask would have been really good, right? And it's it's all this really goes, these are just like exam, a few mistakes, but it goes back to some of the stuff I said before, like, you know, hey, look, spend the time. Yes, you have lawyers for stuff, I get it, but spend the time understanding those legal issues. I mean, because you as a founder or CEO, your job is to know enough to be able to work with legal counsel or finance people, what have you. Doesn't mean you have to be the expert, but you at least need to not know enough to be dangerous, right? This is where those nonlinear collected experiences can actually help a lot. Um, so uh that those are just a few of the things that I would wish I would have known more than. And and actually since then, I spent a lot of time trying to figure more about legal and how money move. I mean, just because I'm like, well, I don't want to fall back on that in that realm again. And then also with people that I work with, I'm trying to point out to them, like, hey, you know, just being a leader, I'm like, hey, you know, just be aware of the implications for some of this. Here's some stuff, resources, some things you might want to look at, uh, just so that we're all talking from the same playing field, so to speak, you know. So hopefully that's a helpful example.

SPEAKER_02 27:07

Absolutely. Um, any last advice for people that are leading businesses today that are trying to break through their inflection points.

SPEAKER_00 27:20

So the the best um, especially for those that are looking to raise venture money of some kind, uh yes, you have to hit to the next value inflection point. I totally get that. My best advice is to focus really double down and focus on your business from a capital efficiency lens. And think about it uh ideally before you take money, but but even if you've taken money, think about it from a capital efficiency side. Think about it from a is every is every dollar I'm spending moving me towards that next value of flexible point, and how can I get there faster and cheaper, right? So the reality is despite what you leave, like at least in the early stage capital, there is not a lot of early stage capital floating around right now. It's just not, especially like in the space I'm in. And the the criteria is super hard, right? I mean, it's it's it's not easy to get money to unlock. Um the days of just fun money and crazy money floating around and raising on uncapped safes and all that, all that doesn't that that's long gone. And and rightfully so, I think. So at least what we preach uh on our side is really focus on the capital efficiency lens, make sure you've pressure tested your plan, you know, and try and forecast as much as possible all the ways things are going to go wrong rather than try and focus on all the hopeful promises of how it can go right. Not that you don't want to achieve a good outcome, of course you do. But if you can talk to an investor with confidence, and whenever I ask, like what happens when this goes down, like, well, we thought about that, and that would be bad. That's a way better response than, oh, that won't happen. We have the best advisors in X. I'm like, okay, well, that's not that that's not my question, right? So be thinking about what, you know, and just do a little forecasting for the game theory geeks out there, you know, do a little bit of modeling on things about what what it means to if something goes sideways and be thoughtful.

SPEAKER_02 29:35

I think that advice resonates whether you're talking about startups or you're talking about established businesses. It at any level, that advice is going to apply.

SPEAKER_00 29:46

Yeah, I mean, it's just this is the world. I mean, it's just what it is.

SPEAKER_02 29:57

And that wraps up another inspiring episode of Leadership Quotient. I appreciate Heath's clear, experience-backed perspective in our conversation. To our listeners, if you found this conversation valuable, be sure to subscribe to Leadership Quotient wherever you get your podcasts. You can also learn more about The Crucible and how we're helping investor-backed companies align leadership teams for scale at thecrucible.com. We'll see you next time for more real conversations on leadership, talent, and value creation.