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Goat Rodeo Capital Founders Discuss Investment Strategy, Upcoming Fund – Forbes

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Carlton Fowler, the co-founder and managing partner of venture capital firm Goat Rodeo Capital, doesn’t like to take himself too seriously.

A photo of Fowler dressed in a Hugh Hefner-style smoking robe and holding a bottle of Miller High Life was my introduction to the marketer turned money manager. But don’t let the cozy comfort wear fool you: He doesn’t mess around when it comes to placing bets on up-and-coming beverage and cannabis ventures.

Fowler and business partner James Pelligrini worked together at E. & J. Gallo Winery before launching the first Goat Rodeo fund in mid-2019. Since, the pair has made more than a half-dozen investments into early-stage companies.

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“Our hard and fast rule is that you won’t see us investing in brand only,” Fowler said of Goat Rodeo’s thesis. “There needs to be something in there. Ideally that’s a piece of true IP, either liquid or package, or a unique go-to-market model that bypasses one of the tiers.”

Goat Rodeo’s portfolio includes investments in emerging beverages such as DRNXMYTH, which makes cold-pressed RTD craft cocktails that are sold directly to consumers, and One Hope Wine, a Napa Valley winery that has a multilevel marketing twist to its business model.

Meanwhile, in the cannabis space, Goat Rodeo has backed Vertosa, a leading cannabis technology company that is helping pioneer an emerging category of THC and CBD-infused drinks.

I recently caught up with Fowler and Pelligrini to learn more about their investment strategy, and to understand what they look for in potential partners. We also discussed what’s on the horizon for Goat Rodeo in 2021.

Our conversation has been condensed and lightly edited for clarity.

Chris Furnari: How did you go from working at a wine and spirits company to investing in them?

Carlton Fowler: We were working in the spirits division for E. & J. Gallo and were largely responsible for building out their new brands. Over the course of like five years, we put out a bunch of successful products, and as we were going through that process, we realized we were building a team to maximize value for a large supplier. So we started thinking about what would happen if you had a blank sheet of paper. What kind of systems would you build and how would you go to market if there weren’t any legacy aspects of a major supplier. That drove us to start a consultancy and eventually raise a fund to start putting a lot of the things that we’d learned and dreamed up into practice.

Furnari: Where are you guys sourcing capital for your investments?

Fowler: There are a lot of high-net-worth individuals who are interested in this space. We provide diversification as well as industry insider insights. We understand how stuff should go to market and how to unlock a lot of value. The other primary source of capital comes from family offices. We feel we can be some of the smartest money in the space and drive really good valuations as a function of that.

Furnari: And you’re mostly participating in seed investment rounds?

Fowler: Primarily. And to some degree it’s a function of circumstance. We wanted to write meaningful checks and have enough of a corporate governance role, which almost forced us to participate in seed rounds. As the fund went along, however, we found that our counsel was so useful to the CEOs and the board that companies as far along as a series C would approach us and make us massive discount offers just to get our counsel. They didn’t need our capital; they wanted our point of view.

Furnari: And how large was your first fund?

Fowler: When you include the follow-on vehicles, it was around $9 million.

Furnari: You’ve got a pretty diverse portfolio of investments, everything from a direct-to-consumer wine brand, to a nonalcoholic lemon water and even a cannabis tech play. You must see dozens of pitch decks. How do you determine where to invest?

Fowler: We’ve seen enough new product launches to know how incredibly capital intensive they are. Our hard and fast rule is that you won’t see us investing in brand only. There needs to be something in there. Ideally that’s a piece of true IP, either liquid or package, or a unique go-to-market model that bypasses one of the tiers. Take Vertosa — we believe in cannabis beverage and the “share of buzz” thesis, but Vertosa isn’t any one B2C company. It’s a bet that will rise as cannabis beverage rises because of its IP. Take One Wine Company — that business doesn’t require distribution through the traditional wholesale tier at all. In fact, it’s trying to become the Amway of wines and move to market that way. Take DRNXMYTH — there’s an actual patent on that package, which allows us to generate enough demand digitally that we’ve been successful minimizing the role of the middle tier. That’s our overall thesis. How do you get to market more efficiently without primarily using the middle tier and the on-premise.

Furnari: What’s next for Goat Rodeo Capital?

Fowler: We are targeting $30 million or more for fund II, and we have two anchor investors that have come forward with eight-figure checks. We’re still very bullish on cannabis, but Goat Rodeo Fund II will not include cannabis. We’ll either continue to build special purpose vehicles or raise a separate fund. We want to keep those streams separate.

James Pelligrini: One of our competitive advantages in that traditional funds typically have some morality clause. It turns out that a lot of high-net-worth individuals have clauses in their contracts around where they can invest their capital. In the past, we’ve had people who are interested in the fund, but couldn’t participate because of its exposure to cannabis. So, I think we will primarily look at alcoholic beverage, and larger traditional beverage. There will also be a portion of this that will be earmarked for nonalcoholic alternative beverages.

Furnari: And where do you see the alcohol alternative category going?

Fowler: I think people want to reevaluate the role of alcohol in their lives. And I think the short-term — and kind of obvious — win is something like Seedlip. It solves a problem for some of the tiers. The distributor can sell it for a very good margin, and the on- and off-premise accounts can sell it for a very good margin. If you solve some problems for some people in the value chain you’re going to do well. But I don’t know if that product fully solves the problem for the end user. We tend to get a lot more excited about something that fulfills the consumer’s alcohol occasion but isn’t a direct analog. An example would be Hoplark HopTea. Not only do you see people rigorously replacing their beer occasions with it, but they’re also replacing the coffee occasion, and the afternoon pick-me-up occasion with it. It’s an entirely new category that also handles the alcohol occasion. That’s something that can probably grow much bigger over time and has a bigger total addressable market.

Furnari: What about cannabis drinks?

Fowler: I can’t tell you how many times we start a cannabis beverage pitch — whether it’s CBD or THC — by establishing that cannabis beverage is going to be a “thing.” We stipulate that over time, the incremental consumer market is going to be potentially larger than the base consumer. None of that will impress us, now tell us how you’re going to actually be an alcohol replacement. Show us your distribution plan that is going to get you into 10,000 accounts. And I would say a vast majority of them, the pitch stops at that water’s edge. We’ve been in this distribution system for a long time. Why don’t you tell us how you’re gonna master it.

Furnari: So what’s the Goat Rodeo name all about?

Fowler: It’s chaos behind the scenes at every startup. It doesn’t seem like it because they are putting on a face for the rest of the world, but it is a goat rodeo behind the scenes. We tend to be really good at helping herd the goats, advising founders on what they should focus on and what they shouldn’t care about.

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Amazon completes $4B Anthropic investment to advance generative AI – About Amazon

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Amazon concludes $4 billion investment in Anthropic.

Customers of all sizes and industries are using Claude on Amazon Bedrock to reimagine user experiences, reinvent their businesses, and accelerate their generative AI journeys.

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The work Amazon and Anthropic are doing together to bring the most advanced generative artificial intelligence (generative AI) technologies to customers worldwide is only beginning. As part of a strategic collaborative agreement, we and Anthropic announced that Anthropic is using Amazon Web Services (AWS) as its primary cloud provider for mission critical workloads, including safety research and future foundation model development. Anthropic will use AWS Trainium and Inferentia chips to build, train, and deploy its future models and has made a long-term commitment to provide AWS customers around the world with access to future generations of its foundation models on Amazon Bedrock, AWS’s fully managed service that provides secure, easy access to the industry’s widest choice of high-performing, fully managed foundation models (FMs), along with the most compelling set of features (including best-in-class retrieval augmented generation, guardrails, model evaluation, and AI-powered agents) that help customers build highly-capable, cost-effective, low latency generative AI applications.

Earlier this month, we announced access to the most powerful Anthropic AI models on Amazon Bedrock. The Claude 3 family of models demonstrate advanced intelligence, near-human levels of responsiveness, improved steerability and accuracy, and new vision capabilities. Industry benchmarks show that Claude 3 Opus, the most intelligent of the model family, has set a new standard, outperforming other models available today—including OpenAI’s GPT-4—in the areas of reasoning, math, and coding.

“We have a notable history with Anthropic, together helping organizations of all sizes around the world to deploy advanced generative artificial intelligence applications across their organizations,” said Dr. Swami Sivasubramanian, vice president of Data and AI at AWS. “Anthropic’s visionary work with generative AI, most recently the introduction of its state-of-the art Claude 3 family of models, combined with Amazon’s best-in-class infrastructure like AWS Tranium and managed services like Amazon Bedrock further unlocks exciting opportunities for customers to quickly, securely, and responsibly innovate with generative AI. Generative AI is poised to be the most transformational technology of our time, and we believe our strategic collaboration with Anthropic will further improve our customers’ experiences, and look forward to what’s next.”

Global organizations of all sizes, across virtually every industry, are already using Amazon Bedrock to build their generative AI applications with Anthropic’s Claude AI. They include ADP, Amdocs, Bridgewater Associates, Broadridge, CelcomDigi, Clariant, Cloudera, Dana-Farber Cancer Institute, Degas Ltd., Delta Air Lines, Druva, Enverus, Genesys, Genomics England, GoDaddy, Happy Fox, Intuit, KT, LivTech, Lonely Planet, LexisNexis Legal & Professional, M1 Finance, Netsmart, Nexxiot, Parsyl, Perplexity AI, Pfizer, the PGA TOUR, Proto Hologram, Ricoh USA, Rocket Companies, and Siemens.

To further help speed the adoption of advanced generative AI technologies, AWS, Anthropic, and Accenture recently announced that they are coming together to help organizations—especially those in highly-regulated industries including healthcare, public sector, banking, and insurance—responsibly adopt and scale generative AI solutions. Through this collaboration, organizations will gain access to best-in-class models from Anthropic, a broad set of capabilities only available on Amazon Bedrock, and industry expertise from Accenture, Anthropic, and AWS to help them build and scale generative AI applications that are customized for their specific use cases.

Deepening our commitment to advancing generative AI, today we have an update on the announcement we made to invest up to $4 billion in Anthropic for a minority ownership position in the company. Last September, we made an initial investment of $1.25 billion. Today, we made our additional $2.75 billion investment, bringing our total investment in Anthropic to $4 billion. To learn more about the broader strategic collaboration between Amazon and Anthropic, of which this investment is one part, check out the stories below:

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Amazon doubles down on Anthropic, completing its planned $4B investment – TechCrunch

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Amazon invested a further $2.75 billion in growing AI power Anthropic on Wednesday, following through on the option it left open last September. The $1.25 billion it invested at the time must be producing results, or perhaps they’ve realized that there are no other horses available to back.

The September deal put $1.25 billion into the company in exchange for a minority stake, and certain tit-for-tat agreements like Anthropic continuing to use AWS for its extensive computation needs.

Amazon reportedly had until the end of the first quarter to decide whether to increase its investment to a maximum of $4 billion, and here we are just before the deadline, and the company has decided to throw in the maximum amount.

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Anthropic’s AI models are one of very few that compete at the highest levels of capability (however you define it) yet are available at scale for enterprises to deploy internally or in user-facing applications. OpenAI’s GPT series and Google’s Gemini are the others up there, but upstarts like Mistral may soon threaten that fragile triumvirate.

Lacking the capability to develop adequate models on their own for whatever reason, companies like Amazon and Microsoft have had to act vicariously through others, primarily OpenAI and Anthropic. The two have reaped immense benefits by allying with one or the other of these moneyed rivals, and as yet have not seen many downsides.

What we can take from Amazon’s decision to invest the maximum after (one must assume) getting a pretty close look at how they make the AI sausage over there is, really, pretty scant.

It makes too much strategic sense for these companies, which possess enormous war chests saved up for exactly this purpose (outspending rivals when they can’t out-innovate them), to pour cash into the AI sector. Right now the AI world is a bit like a roulette table, with OpenAI and Anthropic representing black and red. No one really knows where the ball will land, least of all the companies that couldn’t predict or create this technology themselves. But if your bitter enemy puts their chips down on red, it only makes sense for you to bet on black.

Especially if you can bet on black at a discount — which is what Amazon got here, since it could invest at Anthropic’s September valuation, which is most certainly lower than it is today.

That said, if things were looking sketchy over there — the way they must have looked at Inflection before Microsoft pounced on it — Amazon could have backed out or just invested less than the full supplemental $2.75 billion. But that might have sent a confusing signal no one wants getting out there, least of all existing multibillion-dollar investors.

We know Anthropic has a plan, and this year we’ll find out what Amazon, Apple, Microsoft and other multinational interests think they can do to monetize this supposedly revolutionary technology.

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Canada to tighten foreign investment rules for AI, other sectors

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Canada will require foreign companies to warn the government in advance before making investments or acquisitions in artificial intelligence, quantum computing and space technology, Bloomberg News reported on Tuesday, citing an interview with Innovation Minister Francois-Philippe Champagne.

The move will aid the government in conducting a national-security review before transactions get too far advanced and would-be investors may be restricted in their access to target companies’ user data or other property while the inquiry is taking place, the report said.


Click to play video: 'Canadians concerned about risk of AI generated fraud'
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Canadians concerned about risk of AI generated fraud

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The tougher rules will also apply to investments in critical minerals and potentially other sectors, Champagne said to Bloomberg.

Earlier this month, Champagne said Canada will crack down on foreign investment in the interactive digital media sector to stop state-sponsored actors from endangering national security.

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