SPEAKER_00: hey everybody hey everybody welcome to another episode of this week in startups my friend dave

SPEAKER_01: samuel is on the program today he's launching his new fund uh for freestyle vc freestyle has invested in companies that you may have heard of airtable patreon intercom and we're going to talk

SPEAKER_00: a little bit about how your fund size dictates your strategy and giving feedback to founders especially the no and how do you say no we're going to pass on your company dave had some great

Jason Calacanis: thoughts on that yeah it's a good conversation but first it is monday and there is breaking news the

SPEAKER_05: massive sec disclosure this morning that uh my pal elon bought 9.2 percent of twitter two weeks ago uh you might have just you know he was shopping and he just decided to pick up some milk and some twitter so uh we'll uh we'll take a look and discuss if he is going to become an activist shareholder or

SPEAKER_07: not i'm just laughing because the or not seems so unlikely so we're gonna we're gonna break all

SPEAKER_08: that down it's gonna be a great show so stick with us this week in startups is brought to you by masterworks is the first company allowing investors exposure into the blue chip artwork asset class twist listeners can skip the 30 000 person wait list by going to masterworks.io and using promo code twist our crowd helps you invest early in pre-ipo companies alongside professional vcs if you're interested in investing you can join our crowd for free at o u r c r o w d dot com slash twist and i trust capital did you know that you can invest in crypto through your retirement account and still get the same tax advantages as a traditional ira visit i trust dot capital slash twist to start

SPEAKER_09: investing today to that news sec regulatory filings this morning monday as we're recording this have revealed that elon musk has taken a 9.2 stake in twitter the stock is up 28 today i think that it was determined that that 9.2 stake was worth close to three billion dollars was that right yeah it's about

SPEAKER_13: right 40 the companies that's trading at 40 billion today that's after it went up about 28 or so so if you take a third off it was probably trading at around 30 and that's when he bought his 9.2 percent which would be 2.7 billion or something in that range all right back in the envelope math boom i just

SPEAKER_09: that was a test i was just testing jason and he passed so musk evidently purchased the shares on march march 14th becoming twitter's largest individual shareholder what we now know as a real result of this disclosure is that recently when he was tweeting does twitter need to be better is it

SPEAKER_16: adhering to free speech principles do we need to start a competitor he had already evidently purchased

SPEAKER_18: these shares yeah uh so floating a trial balloon seeing what people thought and uh making the savvy

SPEAKER_13: purchase i think it's a savvy purchase uh because twitter has gone sideways in terms of as a stock and most would argue as a company in terms of growth the only real growth they had over the past five six years i think was the trump bump you know like every other media or social network uh they got a huge bump when trump you know became president uh for better or worse in my mind worse

David Friedberg: much worse uh so maybe a savvy purchase because i would say arguably there's few people who are as

SPEAKER_13: good at twitter as elon obviously through having 70 uh million members i think he gets it and you know

SPEAKER_05: not to make myself anything about the story but i was literally there when we convinced elon to open his twitter account myself and bill lee were encouraging him really so this is all your fault

SPEAKER_27: i i don't want to i don't want to again myself part of this story but i mean i'm just saying no you

SPEAKER_28: said if you drop a bomb like that you're gonna hold you responsible elon said it on another podcast he

SPEAKER_13: was either on joe rogan or something and he was like yeah bill or maybe it was when he did like freedom and he said oh yeah bill lee and jake how you know were like encouraging me to do it um because he thought it was kind of silly uh but you know he's got a silly sense of humor and

SPEAKER_29: he's done really he he really understands the medium and who better to run it than a power user who is great at entrepreneurship this is going to make more people want to work at twitter more people are going to obviously want to own the stock if elon's doing it and if you look at product velocity i'm just looking at it like unemotionally just if benioff because mark benioff your member wanted to

SPEAKER_33: buy it as part of salesforce he wound up buying slack so if you know bill gates or microsoft or who's a

SPEAKER_34: good buyer for a company well somebody who uses the product and who understands the product is a good

SPEAKER_29: person to buy the company because they're going to wake up every day and say hey these are the things that i think should be better about the product right what is it that you think that elon

SPEAKER_38: musk wants as a result of this state that's going to make twitter better yeah i i don't know uh i

SPEAKER_13: haven't talked to him about it to be totally honest uh but i mean based on what he said he said free speech and that it's the de facto town square so you know having more free speech on the platform i think

SPEAKER_09: what does that mean yeah i don't know um right you know it's a private company purely i don't know that this is an emotional if it is unemotional i think it's unemotional on the back end right that there's savviness that is not the same as what's being said on twitter which is like i want this to be more free speech which i always put quotes mark quote marks around because that's not what free speech is like right from a first amendment perspective what well it's a private company right we've had this discussion right so what is the end goal as a i mean he's he has successfully made a bunch of money by announcing or having the sec announced that he's right so if it's just a pump

SPEAKER_13: and a profit taking then there's that better better to focus on tesla to if you want to make money or spacex right those are huge those are much better opportunities than a social network what is the business opportunity here i think he loves the product i honestly think that that's what it is he loves the product and cares about it and thinks it's important in terms of the world and you know as the big communication town square i mean and that's what he said right it's important uh and i guess the you know the instances of free speech that are not being allowed on the platform would be the question and i don't know what those are i think probably the free speech around

SPEAKER_29: covet comes to mind like you weren't allowed to talk about the masks or masks not working or

SPEAKER_38: certain topics i think that's true i think you weren't allowed to disseminate disinformation about

SPEAKER_56: them at scale well and then you weren't allowed to disseminate disinformation and this but the

SPEAKER_13: who disseminated some amount of you know disinformation as fauci said listen i'm not like i'm not a conspiracy theorist but he said like don't buy the masks you know and so i think that a lot of people feel like an open discussion rather than the who being the and i'm saying this is my position necessarily right i think there is definitely an important discussion to have around who gets to pick what discussions happen on youtube or twitter and i guess people said during the co

SPEAKER_29: during covid we'll let the who decide right like that'll they'll be the benchmark and like do we trust the who i don't know who are they funded by you know are they i mean i have some of those

SPEAKER_09: questions i probably disagree with others i guess my fundamental question is um is it okay that elon

SPEAKER_07: musk maybe just has the money to decide for us well i mean it's but one of like is that what's next because i because again none of this is about free speech like as a first amendment right or

SPEAKER_13: exactly right like so zuckerberg also gets to make these decisions and so what's free about that from

SPEAKER_64: uh you know i mean again none of this is the first amendment to be clear but i'm just saying like

SPEAKER_65: well that's right the line of free speech should be asking questions about this always everybody

SPEAKER_13: should be asking who controls this stuff before elon bought nine percent of twitter and you know zuckerberg has you know the much bigger footprint by a factor of what 10. i think you know that that's the real if you want to look at who has control over the social media square facebook and that group is ten times bigger i think nine times bigger than twitter so you know this is an issue that's already existed and for private companies they get whoever's running the company and here at nine percent ownership you don't actually run the company so who gets to decide where the free speech line is i guess is ultimately the ceo of the company in the board and with facebook they have board control so mark zuckerberg unilaterally has control in this case i would say at nine percent you have influence and maybe you'll have one of 12 board seats i don't know how many board seats twitter has right now but

SPEAKER_15: that there is a really interesting sort of business uh aspect to this which is that i mean there are

SPEAKER_09: lots of interesting business aspects to it but one of them is that twitter does not have board control in the same way and that's been that's why they had to you know make those changes with jack dorsey because of the activist investors yep on the board like they're very they're almost like a dow in the sense that they're very vulnerable to a takeover by a major shareholder they don't have super like you know the ceo doesn't have like jack doesn't have super voting majority probably better said would be

SPEAKER_29: they don't have the super majority so you don't have a god king queen over here making all the decisions right uh but it's also not a takeover candidate where you can do a hostile takeover

SPEAKER_13: because it's got proper governance so it i guess the the real the assessment i would make is they have proper governance at twitter where no one board member can have too much influence and i think the influence that the activist investors owned like probably over 10 as a group and they just said we want a full-time ceo uh but that took six years probably so maybe you know did they then did they then sell

SPEAKER_09: because now according to bloomberg at least elon musk is the single largest shareholder but maybe that is not what not counting like a group of activists investors elliott management owned four to five

SPEAKER_29: percent evident right and then they also had yeah but they had also gotten other one or two percent

SPEAKER_13: holders to join their voting block which is you know how proper governance works actually at its best is you get groups of people saying hey this thing is underperforming we'll take a four percent stake and then try to convince the one to four percent stakeholders to join our vision of what the company should be and how it should be run like maybe this thing should have a full-time ceo which i think was their their position and they eventually won that but again it took five six years and jack they actually didn't vote jack out he resigned so they kind of forced his hand and i think made it uncomfortable for him so that just shows how proper governance works like the united states governance it takes time and it's messy largest shareholder is an interesting headline minor shareholder is the reality here like very minor shareholder with no super voting like you have nine percent of the votes like yeah it's not like you can come in and say like give us an edit button i think you can be like

SPEAKER_00: maybe i'll buy more like maybe i guess that could be the you know the future of it so who knows

SPEAKER_34: the stock market is a little crazy right now some think the ipo window is closing while others think it's a great time to invest opinions are all over the place well now you can diversify with an asset that is historically uncorrelated with the stock market of course i'm talking about blue chip art i know what you're saying jake how am i supposed to buy a multi-million dollar painting if i'm not rich well let me tell you a little bit about masterworks this is a brilliant company i know the founder i try to invest in it well masterworks is an investment platform that securitizes multi-million dollar paintings and then sells them to any investor and you can buy shares in the painting so according to masterworks research over the last 25 years returns from contemporary art have outpaced the smp by 164 when i wanted to add a basquiat to my portfolio did i go buy one at an auction of course not i don't know what i'm doing i just bought some shares in masterworks and it's a true story i own a piece of a basquiat and i've always loved that artist's work and now i have my own little piece so it's kind of fun and i think it's going to be a great investment so if you want to join more than 360 000 active members you can get priority access and skip the waitlist at masterworks.io slash twist that's right cut the line at masterworks.io slash twist today and make sure you read all the important reg a disclosures at masterworks.io cd uh but i i do think it's great that somebody cares

SPEAKER_29: enough independent of me being friends with me i think it's great that you know an influential

SPEAKER_13: person cares so much about a product or a platform to invest in it right like i'd like to see other

SPEAKER_00: people do this like what if bill gates really liked something and he i really would not like to

SPEAKER_09: see other people do this no because the number of people who can do this is vanishingly small so like if you i mean you're assuming that he's doing this because he loves it i mean that's like maybe the

SPEAKER_99: reason right i don't know but what if he doesn't love it what if it's like a peter teal move here

SPEAKER_102: like i'm just going to come because what is the peter teal move like a gawker move i don't i don't like

SPEAKER_09: how this product has treated me i'm i don't like how it's treated my friends i'm not happy with you know what i perceive to be censorship of these opinions and feelings and thoughts and whatever so i'm going to come in here with 9.2 percent and i may not be able to demand an edit button but i can certainly commit a lot of sabotage yeah no i don't think that's what i don't think people would put

SPEAKER_13: three billion dollars on the line to sabotage something i think it's more enthusiasm for the product and thinking it's an important thing so i mean the devil's in the details we'll see what happens over the coming years we won't know we're mind reading now i mean right i think you know the

SPEAKER_36: peter teal story was one of like being outed in vengeance uh for being outed and you know having and shut it and then shutting down free speech as a result so dusty green puts it the right way i

SPEAKER_09: think in the chat which is is this a hostile takeover or a liberation and i guess we will not

SPEAKER_13: know until we know i mean it's twitter is sideways uh and so having elon involved i think

SPEAKER_04: you know if he does stay if he if he does stay involved and engage i think it would

David Friedberg: it's been sideways in terms of like pro i mean they have increased the product velocity but as a

SPEAKER_13: company they haven't grown it's been very modest growth when compared to contemporaries they've always trailed all other internet companies i think they're trading still at a fraction of their peak valuation i think they probably hit 50 60 70 billion at some point i'm trying to remember what the peak was so just as a business it's been a slow growth i mean it hasn't declined which is good um but it certainly hasn't grown or they haven't solved like the anonymous problem and the bots problem so i think there's like a lot of simple problems they haven't been able to get their hands around like why can't

SPEAKER_29: they handle bots in these anonymous accounts and harassment they should be able to do better on that

SPEAKER_15: i think because every time they try to handle it someone says they're suppressing free speech i don't

SPEAKER_09: know well i mean i think i mean there are a lot of issues with twitter i think we have seen more product velocity since jack dorsey left like it's possible that it could have been the split focus ceo all this time we don't know um i mean i think it's i think all of those things are true it's a little

Jason Calacanis: strong to say that it's sideways as a business when we have seen spaces we have seen twitter blue like

SPEAKER_119: there has been innovation yeah the last year has been yeah the last year has been great they have

SPEAKER_09: seems like the only thing people are really mad about is like booting trump and i mean the ongoing i mean to be fair anonymous harassment the trolling the bots like it all really it really is issues that are legitimate and drive people away from the platform all kinds of people away from the

Jason Calacanis: platform that's true content moderation is really hard i think the bot issue is because the everybody

SPEAKER_13: who's been ceo is scared to block the bots because it would make growth look yes stunted and so you know i think that's an that's something where a board member who is a patient board member who says yeah you know i know we're going to take a short-term hit because of bots going away and it will look like growth is muted but it's not real growth anyway so let's just you know yeah uh pause here so yeah twitter's revenue that was an interesting chart twitter's revenue has you know grown slowly um you know since you know in the shadow of facebook's um you know it that may not look slow but if you were to put that growth uh next to facebook's it would be dwarfed uh or google's and then you know if you had user growth up there um it's been slow and steady uh and then who knows what the bot problem is so

SPEAKER_29: um i don't think it has much to do with trump i mean i always felt i don't know how you feel about trump but like you know if he was going to i felt like trump as the president needed to be allowed to be on social media and then when he did january 6 it was acute and there was a chance that people could get hurt so he kind of gave them the golden opportunity to take him off the platform and then for what period of time you know like i think facebook gave it to their board their outside board to make a ruling

SPEAKER_02: i think the outside board kicked it back to them so like hola yeah so many topics i think are wrapped up in this one topic i think trump's the worst human being on the planet like yeah i've been very clear

SPEAKER_05: like this person's a sociopath he would give himself a third you know he would become the god king and he literally tried january 6 to overturn an election i believe all that is true sorry if you

SPEAKER_29: don't uh but uh you know there is a reasonable amount of time to give somebody a suspension on these things and then let them back on and then ban them again i i think that's probably where i would have landed like a two-year ban a four-year ban something like that but then if he was if he did actually if january 6 commission finds out he didn't cite the violence then i think you could make it permanent right um yeah that's the hardest issue in the world it's the hardest issue in the world

SPEAKER_09: like unquestionably like i agree with everything you said it's still the hardest issue in the world because how do you ever decide that and how do you and and do you want a private company to decide okay the danger's over now right like no no america's doing fine these divisions aren't continuing we're not seeing a massive increasing partisan divide it's totally a good time to let trump back on like

SPEAKER_16: those are not there are a lot of questions about whether those should be the call yeah and people are making a ceo of a private company to make you know people are making a big jump that this has something

SPEAKER_13: to do with trump i don't think it does at all uh i don't think this is like buy this and put trump

SPEAKER_29: back on i don't think that there's some like direct line here i think people are i just think

SPEAKER_09: fundamentally like i don't like the idea that somebody can come in that that a small small group of people with an extreme point of view can come in and be like i don't like how this business is running right like i don't like the fact that the sec has to review my tweets i don't like the fact that i can't that people can't just spread all the disinformation they want so i'm going to buy a massive stake and and who knows what like a minor state yeah a massive stake on a relative level i

SPEAKER_29: mean he's got a much bigger stake in the other companies so i mean in terms of public in terms of influence he's going to have minor influence at this level i think there is no universe in which

SPEAKER_09: elon musk has minor influence on anything well i mean he does have a lot of fans 70 million

SPEAKER_56: but i'm just saying on a governance basis just the reality is nine percent does not mean you get

SPEAKER_13: to pick what happens right it means sure it means like if even if you wanted to remove the ceo and you would have to build a block and it would take years so it's i think people are probably

SPEAKER_29: overestimating exactly how much control i mean influence is different i do agree with that yeah yeah i'm just talking about influence i mean i think about this whole free speech issue i don't know how you feel about this as somebody we're both liberals i think i'm some people say i'm libertarian i i try not to define myself i try to be common sense but i guess i'm somewhere between moderate and libertarian um and you're definitely uh uh more liberal than i am but only slightly we

SPEAKER_155: used to be the party you registered independent okay great yeah so i mean anyway yes but the tool

SPEAKER_34: i i'm trying to remember but freedom of speech uh was a liberal tenant and the republicans were the ones complaining about it all the time and and then now it's like wait a second now the liberals are the elites and they're anti-free speech and the republicans are pro-speech speech and they're the party of the working class like that really what is happening right it's it's i what is happening to the parties that we they don't stand for what they were stood for just 10 years ago yeah like should everybody should be for freedom of speech and then there should be ramifications you know in these sections and these online platforms like i you know some people can

SPEAKER_29: run them as walled gardens and with real names i chose rail names for inside.com's new social network because i was just like i don't want to deal with spam so i'll have less members less content but better signal you have to use your real name period yeah you know and it's like will it work i mean it

SPEAKER_15: worked for linkedin and facebook and there might there might be less engagement i mean you know i think

SPEAKER_09: some of this is about growth hacking too and cheap engagement and it's not about free about speech at all exactly i don't know it's just it's a mess hey it's time for another our crowd deal of

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SPEAKER_09: reading those deal memos trust me it's like we're we're now into a potentially nine hour discussion and we have a guest wait we have a wonderful interview we're just waiting in real life and also a wonderful

Jason Calacanis: interview to get to uh dave samuel who just raised 130 million dollars for freestyle fund six coming up

SPEAKER_176: next add an edit button elon can we get the edit button and twitter can i get the edit button just

SPEAKER_180: show the previous version of the tweet as long as you're at it just give me an edit button can i get an edit but i'm paying for blue this is my thing do you play for twitter blue or no no i keep me to

SPEAKER_29: sign up and then i never have time yeah there's no there's no real compelling reason to do it other than to sort your buttons at the bottom like this is where like you know like elon's product brain is going to really help like he might actually have some product suggestions that might actually

SPEAKER_38: be good i mean i'm endlessly curious endlessly curious to see the simulation is still happening

SPEAKER_184: it's definitely a simulation it's still unfolding it's for sure it's a simulation all right let's

SPEAKER_05: enjoy the dave samuel interview everywhere this is again i don't like to talk about uh my friends too much on the program but i had no choice in this case to it's going to be entertaining at the very

SPEAKER_187: least yes you want the line today on the program molly we're having one of my older friends in the industry uh co-founder and general partner of freestyle vc dave samuel is with us again it's his sixth appearance here on twist this includes an interview i did with him years ago uh and uh he's helped me on four pitch sessions giving great feedback to entrepreneurs you can watch his first appearance

SPEAKER_113: episode 768 back in 2017 and he's here today uh on the um announcement that freestyle has closed their sixth fund welcome back to the program dave thank you thanks jason you guys are so organized organized we're pretty organized uh this is your sixth fund uh things have gone great for freestyle everybody knows you were an entrepreneur and you sold your music startup to aol back in the day chamath palihapitiya my bestie worked for you uh i think for a moment in time how is that i just want to start with that for a moment uh tell me your first the first time you remember meeting chamath and hiring him for his job working for you in bd i believe yes it was still called spinner at the time right

SPEAKER_201: spinner i don't know if you guys remember winamp and winning yes of course yes yes school so one of the first mp3 players founded by justin a 19 year old kid um for both you know honestly my memory with chamath was actually at the felt playing poker with him and just you know i actually remember doing that more than necessarily business and you in dallas no well playing poker actually at my house in 2000 in the year 2000 and so that was really my first memory that i really have yes we hired him but i don't you know i don't exactly remember all the business things but i do remember his aggressiveness at the table and i think jason you know that yeah and still very you know it was he was super aggressive back when he didn't have a lot of money and now or no money he has a lot of money and he's

SPEAKER_212: still aggressive so maybe there's some correlation there i think so wow yeah when that was pretty

SPEAKER_113: crazy sitting on that one like damn it's been a long ride it's been a long ride um you know i think the thing that's notable is you've done extremely well for yourself and it would be very easy for you to retire uh or maybe you know hand off the firm but you're incredibly hands-on and uh with jenny your partner uh you have chosen to raise the similar size fund as you've done previously and stick to your knitting talk to me about your intentionality of raising this specific size fund i believe it was 130 million yeah and why you think it's important to have a thesis on the amount of money you raise and the

SPEAKER_201: size of your fund great question um i first go with i think both you and i love startups and so it's just what what i love doing and so when you go back to 2010 when um we were raising fund one there was a lot of education about what is the seed fund they used to actually be called micro funds back in the day and our pitch deck actually had to educate lps about it because they were familiar with the 300 750 million sandhill road funds and so we had a lot of education and now you jump forward to to fund six we still like the ability to have large multiples on the smaller funds and so also the benefit of having a smaller fund is we work with younger startups which is jason that's what you do with launch i mean you work right at the beginning and that's i think you know that's where i love to play if it was all about money i think as you know i we would raise a much larger fund we'd have much larger uh management fees etc but jenny and i love playing in the seed vertical and i'll just say one other thing which you mentioned about is every time you raise a fund you're kind of you know signing up for a seven to ten year run and so jenny and i each time kind of have like you know our wedding vows just saying you know what okay here we go you know we we sit down and make sure we're ready to sign up for another seven

SPEAKER_15: years and i love what i do well you know it's interesting because even the huge funds we're now seeing

SPEAKER_09: find more and more and more and more ways to go earlier like do you feel like that thesis just gets validated over and over not only because it's really fun like you said but also because it is

SPEAKER_224: sort of maybe where the money is i do you know definitely we're seeing um you know the large funds

SPEAKER_201: raise seed funds honestly my gut is that like their main focus is being able to back the truck up and put in tens of millions if not hundreds of millions and so my gut is they don't really have the infrastructure or the experience to focus on seed so you know the last 12 years i've focused on putting money in when it's a team of two to five maybe two to ten people and that's where my experience has been for the last 12 years and even as jason said we were both fortunate to sell our kind of our first companies to aol yeah and uh and then i actually started a company called crackle that we sold to sony and so you know i think we like being um entrepreneurs turned investors and i think that

SPEAKER_113: brings a lot to the table yeah and it the larger funds creating seed funds are pursuing a strategy i think that's what i'm seeing in the market where they'll participate in the seed round but they may not participate in the company uh mentoring and the management of it so sure they've got this you know 100 million or 500 million dollar fund for seed and they're putting in 500k or 1k checks but then they're going to somebody like dave or us and saying hey you guys join the board we're not taking board seats right we don't we don't have the time to do this it's an option where they can buy three percent five percent of the company and then later on try to put in 20 million and get to 10 ownership so yeah i think it's a little bit of that and in a way that's not a bad thing because a lot of times the rounds could use an incremental 500k or million dollar check correct yes yeah i mean the other thing

SPEAKER_228: is jason as you think about the sequoia scout fund i mean this was going way back it's like getting a

SPEAKER_201: foot in the door and getting the information early on you know i think it i believe that to be a valid

SPEAKER_113: um you know really valid decision listen pretty much everybody knows someone who has invested in crypto at this point and lots of people have exposures to different tokens themselves but did you

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SPEAKER_113: tell me you know if you're looking at what happened over the last five years where valuations went crazy governance went away perhaps some discipline on the part of capital allocators and even maybe some discipline on the part of founders was uh less emphasized where are we today and what lessons do you have from this crazy five-year bull it was let's face it it was a bull run since 2008 so we're actually looking at a bull run that lasted 13 years and is now over for tech so the bull run for tech lasted 13 years that was an incredible run but what lessons do you have for other capital allocators and that you've reminded yourself of and then what do you have for the people on the other side of the table the founders who maybe are now getting whipsawed hey spend money as fast as you can the next round

SPEAKER_239: we'll raise it in 6 to 12 months and every round it gets easier to raise at a higher valuation

SPEAKER_201: uh let's see well first i'll just talk about kind of the seed market so um you know 10 years we called it seed and then you know the seed as you know is kind of moved up to really the two to five million dollar raise and now you have the notion of a pre-seed uh so you know that's just in my in my view just kind of different words of kind of you know similar structures and i think probably the biggest thing that we give advice to our portfolio companies is let's not get over our skis and so as you talk about there's a lot of late stage capital that is coming into the space i think you know tiger global has been understandably like seemingly the fastest to put money to work and it really is amazing the machine that they've put together and i think that you know the thing that we suggest to our founders is let's just be thoughtful about the amount of capital that you're bringing in and what's the you know the the preference stack that you're adding to uh you know to the calculation and just be you know be careful about that the other thing that i'll say which is beneficial for the early stage investors and the founders is your ability to take money off the table and this didn't exist this did not exist 10 years ago but i think you're probably familiar with jason um that founders many times sometimes at the a many times at the b or the c are able to take some money off the table and i think that's a very

SPEAKER_15: uh great thing the main time is just just to clarify for our audience you're talking about their ability to sell some shares privately realize some liquidity and then keep rolling yes and the benefit for everybody

SPEAKER_201: is that the entrepreneur is like okay i can buy a house i've got like you know i've got something steady and then you can go you know you can go for the the home run and so also for seed funds we're also able because we've been in the company for a long time we're able to take some money off the table so i think that's you know a beneficial um structure i think yes last year was dizzying the pace a pitch would come in and if you didn't turn around within like 72 hours it was like you know the deal was gone and so thankfully come this last quarter i think probably the biggest thing that jenny and i have enjoyed is it's just kind of slowed down slightly actually it's probably so down honestly probably by maybe yeah i'll go with significantly two weeks four weeks to close around no it really it's back to a month to close around yeah yeah it's it's super nice because it was at a fevered pitch and when you make it's difficult to make decisions that quick because of timing so you know valuations have definitely crept up but the biggest challenge for the last year was like you hear the pitch and you've got to get back super fast and it's just difficult to do due diligence that fast

SPEAKER_09: are you worried about uh follow-on like are you worried about these seed companies and what they're going to mature into in terms of mid-state i mean it sort of feels like for one thing it feels like there's a barbell in investing it's either seed or like massive funds who just have to park a ton of capital maybe that's just in the climate space because that's a conversation i've been having

Jason Calacanis: a lot lately um but i wonder what you're starting to think about follow-on even if you yourself are being more responsible in how you're deploying at this early stage i you know i think one of the

SPEAKER_201: things that freestyle has been very good at is helping um our founders go from the c to the a and so you know obviously each stage is important but getting you know getting that c to the a is understandably important for us um and important for the startup uh and so um my comments about that are just to talk about freestyle structure we do about a deal a month we're going to lead this leader co-lead the seed and our focus is really during the first year life cycle of the company and then the important thing is basically of course finding the the series a investor we have the ability to continue to pro take prorata and invest in that company but we call it the baton handoff so our ability to hand the baton to the next series a investor is an important uh you know is an important stage and so um we've actually i'll just talk about two deals um that kind of tie back with sar from crv i don't know if star has been on here but if he's not you should you should have been on sure um and so

SPEAKER_113: wait who is he and what is crv i'm sorry charles river ventures boston-based firm that now is based out here uh and sar ger is a vc who works there gotcha who had uh yeah i think he toiled away for

SPEAKER_239: a while and then he hit he hit something it just took him a little while what was the big win for him

SPEAKER_201: i forgot now it will come to me well uh well so our two two of our biggest unrealized gains are air table and patreon and we um basically can't you know handed the baton uh you know obviously at each of those companies jack is the ceo of patreon and how we as the ceo of air table i mean obviously they're the ones running it but we were um you know really helpful of handing that baton to the next stage investor and in this case you know the entry into crv was uh was sar and we've just been

SPEAKER_263: really lucky with that uh let's talk i want to double click on the secondary options one thing i'm

SPEAKER_113: seeing is maybe some firms using uh an offer of secondary or maybe even topping off the founders

SPEAKER_239: with extra shares as a way to win a deal this to me seems like a bribe and seems like a really bad idea we are seeing it more and more what are your thoughts on when a vc says you know what i'm going

SPEAKER_113: to beat these other two vcs and i'm not going to do it based on my ability to help the company i'm going to just offer to give each of the founders five percent more of the cap table you know and it's going to happen before my money gets put in so i don't get impacted by it and they'll be able to take five million off the table each should these things be allowed to be combined or should for hygiene purposes maybe they be done after the investment so that everybody

SPEAKER_187: who's investing is investing in a pretty uh pure way what are your thoughts on this you know great

SPEAKER_201: question jason i guess my advice to any entrepreneur raising capital is it really is about the person that is most likely joining your board and i think as as you know as you guys interview folks to to join launch the way i look at a deal is 50 of the success of a deal is the team and 30 is the size of the market it's got to be a big market as as you guys know and then 20 is actually the product that they're showing today and the reason why the team is so important is as you know like you know you start this way your bourbon which was before instagram and then you know kevin like was like we'll do instagram what was the one before twitter the podcast one oh odio yeah you know odio and then you know twitter and so um sorry for the barking dog um but uh and so so basically many times and even i was talking to an entrepreneur last night i'm like mike i think that in this instance i really want you to think about taking the lower valuation for the board member that's going to join and so that's my advice like it's really like it comes down to the person joining the board and so yes we have seen the tactic of somebody saying hey you know we'll buy we'll buy some common from you and as i said like i've actually seen it in the a which was early um but in this case the person joining the board was chosen and so i just go back to people i think and i and i think that you know that's as i said when we're interviewing and hearing a pitch it's really like okay who is the ceo who's going to lead this

SPEAKER_272: because you're going to start this way and then you know you're going to have to navigate and so that's how we you know that's how we think about it don't panic at a pivot love it yeah do would you

SPEAKER_09: say that freestyle has a thesis i mean i'm looking at some of these big names from your portfolio and like you said there's air table and patreon snap docs intercom loop steezy like it feels like you are not solely sass you are in fact freestyling haha yeah i bet that you are you are correct um i would

SPEAKER_201: say right there in the name yeah you know i think it's one of the benefits of being early um so when you you know you go back to 2010 you know dating myself uh they were really just like you know first round capital baseline you had you know soft tech which became uncork you had um mike maples floodgate i mean there were just a few funds you know yeah first round capital um and so um i think that we've been fortunate to be around for a while and that's just the word generalist is not like a really nice term but honestly like we're gonna hear different pitches and the way that i like to think about it is can i personally be excited about being like you know kind of a co-founder of this company and so you know that's kind of how i think about it so like um you know jason and i did quite a unique deal called steezy and that's a you know a learn to dance platform and i've got four girls that are like all teenagers now and they're tick tocking and you know and i'm like you know what i think that building a platform that's unique to online dance is kind of interesting and so um you know that's kind of how we think about it i guess one other kind of important thing as we look at statistics of us being around for a while is you know i've been in tech dating myself since 95 that's when i launched spinner and so i you know i've just similar to jason have like a large network in tech and 80 of our deal flow comes in from friends within the industry so we've invested in 140 ceos over the last 12 years we get a lot of deal flow there and then of course the venture capital firms and just a lot of people that i know and so you know i think that's a great ecosystem to have a deal come in and this goes back to it's like a reference so somebody who's going to introduce me in the deal like they know that they're kind of kind of vouching for this company and so that's understandably like a leg up and i think as jason have probably mentioned many times to entrepreneurs it's like if you cannot come in the front door if you can come in the side door with like hey you should you

SPEAKER_231: know really listen to this understandably that's just you know a super big leg up yeah i mean the the

SPEAKER_113: the warm introduction um is everything in our industry and i think that's why curating a relationship and building a relationship with your existing investors is so critical if you're keeping your existing investors up to date uh and you're engaging them about the challenges of the business it's going to be easier for me to say to you hey here's steezy it's interesting or for you to say hey take a look at this company because we've built a level of trust with the founder and we're going to introduce the founder to somebody who you know they're going to i don't know uh just do a great job representing you as an investor it's let's talk about the difficult part of the job saying no

SPEAKER_187: how have you uh and you got a big heart uh you know i know that from just knowing you personally

SPEAKER_113: for two decades and you work really hard how do you deal with the fact that most startups do in fact fail and that as a seed fund you do not have the ability to fund everybody forever and you know when people do fail they the gut reaction is to go to their existing investors and saying hey we didn't get it done can you give me another six months can you give me another 12 months i need your help how do you deal with that very difficult um you know dynamic and part of the job when i started this

SPEAKER_201: um well first of all i think as an entrepreneur in many instances you're a yes person i mean you are you know getting out there um doing something new and you in many instances i consider a yes person and so when i started venture the way i actually started my fund was josh and i started it and we basically decided to put um 100k into 20 deals and so this was before like we were investing as freestyle but we only had our own capital and um we actually got this playbook from sacca from um anyway his lowercase sorry sorry his first fund which was only six million he um took a twitter and a few unrealized gains and actually put it into that fund and so josh and i did the same thing so basically we took our 20 deals put it in and on day one our lps already had a markup but the reason why i talk about before we started the fund is we wanted to see do we feel like we're good at it and the biggest one is that question that you just said jason is how do we feel comfortable saying no and so you know yes um it was difficult making that change and i think the main thing i do every time i say no is i talk a little bit about my own experience so when i was raising capital for spinner i had 40 no's and spinner as jason said was the first internet radio platform and many of the vcs were like why would i ever listen to music via the computer now this was back when there was a 14-4 modem so i mean it was early but you know people didn't see it and actually the first person to invest in me was very visionary and that visionary happens to be chris anderson the ceo of ted and so he gave me 700 he gave me 750k in 1997 and that actually turned into 20 million for him but anyway i just bring this up that i basically tell entrepreneurs guess what i had to knock on 40 doors to get the one yes and i know jason talks about that within launch and so it's top of funnel and the only additional thing that i try to do is give feedback to the entrepreneur so some instances i just say you know what this is a gut reaction and it's just not a match for me in other instances i say you know what i'm concerned that this is a feature not a product that's not a company maybe it's like you know what i'm concerned about the tam and so you know and so i basically i attempt when i say no to give them feedback and so

SPEAKER_239: that isn't giving feedback though the chance that you're going to hurt their feelings and then they'll hold it against you for the next round there's a lot of people whose philosophy in our

SPEAKER_113: businesses sugarcoat everything everybody's unique snowflake in the world everybody gets a participation trophy and there's no upside for you to tell them the truth hey i think you got a feature not a not a company here you need to get a more fully featured product now the person's like well dave's being a jerk or dave hurt my feelings and then hey they break out they figure it out they pivot from odio to twitter or bourbon to instagram and now you're the guy who you know wasn't nice to them

SPEAKER_263: and they get revenge on you by not letting you in the next round some people do think like that yeah

SPEAKER_201: i actually i don't think it's not nice like i will i will say that like one of the biggest things that most entrepreneurs appreciate is when i say no i say it super fast and basically sometimes i feel bad but i basically do it on the 30 minute intro call and many times we're like you know what dave thank you for being quick with your decision because in many instances and happened with me raising capital is you're like you pitch and then you kind of wouldn't hear anything and there was no closure and i think as you know like i don't like to use the word lemmings but basically many vcs are lemmings so they're like okay i've heard the pitch i'm kind of in line but i'm not going to do anything until somebody else does something and so i think the ability to make a decision fast i think is is something that many entrepreneurs like dave thank you being efficient with our time your time thank you for the quick

SPEAKER_15: decision so that's how i think about it fantastic i wonder how you're so there's the saying no and

SPEAKER_09: then there's also i wonder how you approach an entrepreneur when you think that there's a good idea there but for example especially at our stage and right now the way the market's been how do you tell somebody like you're raising too much money right now you know this is too much money too soon your business isn't there yet like do you feel like it's your job to sort of say let's rethink this strategy so that we can get in or do you say all right this is enough red flag i'm moving on

SPEAKER_201: i think for the you know for the size of the raise i mean the way the main way i like to think about it is i want to make sure we get 18 months of runway and so and so it's really just trying to figure out what is 18 months of runway and so um the way i kind of talk about a seed fund is i want to be able to confirm that we're able to create a small fire we're able to create a small flywheel that gets going and demonstrating you know the product working retention and then really how does marketing work the main thing is basically having a small fire and then you raise your series a and you're able to make that fire bigger in many instances understanding from hiring um more employees but also getting marketing dollars to work uh and so you know when a deal comes to us i always say you know what's your target raise and even if somebody says they want to raise six i'll still hear this you know hear the story and basically um you know in most instances say hey you know i really like this but i think you should raise less and you know and then basically say you know this is the pitch and so and this goes back to what i said earlier like it's not all about the money it's really about the money and the help that you're getting and so beating my own drum i feel good about the help that i'm giving people and so in many instances i know that my capital is uh you know we're coming in at a lower valuation than other firms uh well listen dave continued success what's

SPEAKER_303: the best way for a founder who wants to pitch you other than you know finding an intermediary to get

SPEAKER_113: your attention you know in that cold email or this sliding into the dms or replying to you on twitter what grabs your attention specifically and makes you want to double click triple click and then eventually

SPEAKER_201: you know hit the reply key so i would say really two things um one is uh you know i think it's beneficial it's definitely beneficial that there's a little bit of a personalization at the top that the entrepreneur has done work and says oh i see yeah you know air table or the other you know intercom and or other things and so having some personalization demonstrating that the entrepreneur did work versus like emailing a blast of 100 vcs and then the second one is you really need to have the elevator pitch together and so if i get like if i get like an email that has like three pages honestly i'm not going to read it like i'm too busy i've got too many things coming in and so you really need to be able to explain what you're doing within a few sentences and so don't send me like yeah really like and you know jason you're super good at that and it's a focus that you have with your launch um accelerated program and so it's like that and then additionally i do think it's important to uh you know have a pitch deck as part of it really some people are like concerned about maybe like um i mean there used to be this notion of like signing an nda like that was old school you know a non-disclosure agreement i understand that doesn't exist anymore and like um i think it's important to have an elevator pitch and then also attach the deck because i'm going to do one two if i i'm like you know what this is interesting then i will look at the deck and then i can make a quick decision on whether to schedule that

SPEAKER_187: interest zoom yeah for me i just love uh when there's a chart and some traction if you have

SPEAKER_113: traction uh weekly a monthly a daily any kind of chart shows that you have some dexterity or traction and understanding of your own numbers i love a good product demo and i do think the short deck is a critically uh important way to get people on the hook you could have a deck that has proprietary information that's 30 or 40 slides that you do on a call right or in person but a 10 slide deck that basically visually represents what your website tells us and tells the story to a vc in a very efficient manner manner it it just shows you are meeting vcs where they are you you're you're kind of

SPEAKER_229: i also love when people send me a loom i don't know if you've gotten any of these where the founder actually walks to the deck to you personally this is like the height of customization so like hey dave

SPEAKER_113: i know you're in air table we're doing something similar we're making a word processor that's 10 times better than the existing word processors and it's you know if you use microsoft word or google docs you're going to love this let me show you grammarly right and you know like that is so savvy to take the time to do that because people if you're going to do 100 outreaches a year to investors or during each fundraising does it matter if it took one minute per or 10 minutes per it actually doesn't and the 10 minute ones are 10 times the effort but probably a hundred times as effective or more than generic so the founders don't realize what's happening on the other side of the inboxes where people are sending 2 000 word short stories about their life and we're like what what just it's pretty simple like what do you who is your customer and what do you solve for them what's the product

SPEAKER_310: who's the customer how do you make money yeah keep it simple folks all right listen well and i will

SPEAKER_201: just say two other additional things is i think a competitive landscape is super important because we as vcs we're getting lots and lots of deals and so you as the entrepreneur you understand your market understandably but i used to think like why would i list the competitors in the pitch deck but it's actually super important and typically the best one i think as you know is like you know the one with the x and the y you're up in the upper right and it just kind of demonstrates how you're sitting in the market and so i will just say like that one is important to me because it allows me to quickly understand okay who's venture backed in this area who are the big players that they're going to

SPEAKER_231: take uh real estate from so i just mentioned that one also yeah fantastic all right listen dave uh

SPEAKER_303: continued success you're one of the hard working honest great people in this industry it's good to know you and work with you on a couple of deals and please send our regards to your partner jenny and we'll have her on another episode she always does founder university for us and she is yes equally awesome and so a great firm for founders to consider when they're doing that 500 to 2 million dollar check yeah i think that's the sweet spot we're honestly we've gone a little

SPEAKER_201: bit upstream so basically we're typically between two to you know two to two to four

SPEAKER_319: two to four okay two to four not one to three two to four he's like whoa on the five can i get you two point five to five okay is that okay two to four can we go to four point two two two four four

SPEAKER_314: two two four four i just have one closing comment jason oh here we go well 10 years ago i was not

SPEAKER_263: putting on i'm not putting on a colored shirt if that's what you're asking i'm not first of all jason

SPEAKER_201: you know what i know i sent you this and this says it's black but you know it has your new logo so maybe i will wear that i will wear that in an episode i just have i have one comment which was 10 years ago i was hosting a dinner in las vegas and i remember you standing up unprompted and you had a great um comment about uh what freestyle does to support founders and i will return that because i appreciate your your hard work um educating and helping founders and sometimes i say jason why do you have to work so hard and you know what i know you love what you do so i appreciate that

SPEAKER_187: it's if you if for me it's just like going skiing or having a fine dinner like it's equally enjoyable to me to be here on the podcast as it is to be on the slopes and meeting with the founder i find just

SPEAKER_113: as joyful as having dinner with my friends so uh i agree you know it's one of the great things in life and it's a privilege let's be honest it is a privilege to be a capital allocator and to you know the worst interpretation is we get to you know uh make the decision on who the winners are and anoint them uh and i you know the the truth is we are lucky enough to place a bet and try to support people who are going to be successful with or without our money yeah and that's the humility i

SPEAKER_187: know you come to it with and i try to come to with it every day never get high on your own supply just because you got a hundred million dollars to deploy that's not privilege as much as it is um a responsibility you have a responsibility to deploy it intelligently for those lps and for society so you know take that for all these new people who are capital allocators out there yourself included molly like it's heady stuff sometimes and you really need to be thoughtful and collectively as an industry we need to be thoughtful about who we're deploying this capital to and for what reasons so it's top of mind for me right now having dealt with some really gnarly situations it's just very strange this you know this world we're in the entitlement sometimes the bad behavior and then you know uh all of that you know kind of fades when you see somebody really hit it and change the world with a great product or service that creates joy and so it really is like i don't want this into the oscars but i i i don't know about you i just feel like a great sense of privilege uh and responsibility really responsibility that i have this job yeah because it's it's it's really important that we get it right i don't know how you feel about it like ultimately this this profession well well i i guess

SPEAKER_201: i mean so i know you're a family man uh with kids and um i have five kids and you know i think we have family responsibility and then honestly we're a little bit older jason than many of these entrepreneurs we're investing in and so uh you know i think it's important that we um help educate them and and help them

SPEAKER_337: succeed similar to what we do as parents so you know i think it's just important i kind of tie that

SPEAKER_187: together yeah no i mean you have to navigate you know there are things that happen in every startup's life and once you've seen it happen a hundred times you're like by the way around that turn

SPEAKER_113: that's where you could you probably want to not speed and you probably want to be wearing your seatbelt and be a defensive driver you know it's like you're giving these it's like when you give the uh molly

SPEAKER_187: you're going to go through this right i don't know if you're giving the keys to your son yet but it's it's coming stop it never it's coming molly you're gonna have to hand the keys like this

SPEAKER_344: molly's gonna go like this she's you're gonna be having the self-driving cars is all i'm saying

SPEAKER_255: well the other benefit is understandably uber and lyft where basically we as parents are able

SPEAKER_10: to kind of delay that slightly uh that's what i said too i'm like i can't wait to get you a an uber

SPEAKER_347: account like yes let's go yeah all right everybody dave samuel dave samuel congratulations on the race

SPEAKER_351: thank you next time brother hey everyone producer nick here i want to tell you about the sas syndicate if you're a founder of a sas company with a product and market our investment team wants to talk to you head over to the syndicate.com slash sas s-a-a-s to apply to raise from the sas syndicate and you can join jason syndicate of over 9 000 accredited investors at the syndicate.com producer justin

SPEAKER_352: here no cool startup check out openscouting.com where anyone can refer a startup to our investment team here at launch even if you don't know the founder if you're the first to flag a company for us and we decide to invest you'll get 5k in cash or 10 of our carry hey everybody producer rachel here

SPEAKER_355: are you an early stage startup that has product and market some traction and are looking to raise at least five hundred thousand dollars apply today to remote demo day for your chance to pitch to over 9 000 investors in jason syndicate submit your application at remote demo day.com our next event

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