SPEAKER_00: On today's episode, we have two amazing talks from Jason's Angel Summit, which he hosted earlier this week in Napa Valley. First up, DoorDash co-founder Stanley Tang sits down with Jason for a fireside chat. He tells DoorDash's amazing founding story, explains how they mostly avoided ZERP distractions, and more. Then, Jason hosts a panel focused on first-time fund managers, with Sophia Amoruso of TrustFund, Paige Finn Doherty of Behind Genius Ventures, and Kelly Fontaine of Sendana Capital. Stick with us. This Week in Startups is brought to you by Embroker's Startup Insurance Program helps startups secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off of traditional insurance today at Embroker.com slash twist. While you're there, get an extra 10% off using offer code TWIST. LinkedIn Marketing. To redeem a free $100 LinkedIn ad credit and launch your first campaign, go to linkedin.com slash thisweekinstartups. And Squarespace. Turn your idea into a new website. Go to squarespace.com slash twist for a free trial. When you're ready to launch, use offer code TWIST to save 10% off your first purchase of a website or domain.

SPEAKER_02: Next up, a real treat. We have the co-founder and chief product officer of DoorDash.

SPEAKER_04: How many people have DoorDashed this month? Raise your hand. Jesus, whole audience. How many people have, be honest now, have DoubleDashed? Have you ever DoubleDashed? Sickos. DoubleDashing. DoubleDashing. It's enough. You get one restaurant, it's enough. You don't need to pick from two. You're going to be doing a TripleDash soon. It's ridiculous. My daughters want a TripleDash for dessert. I have three of them. One wants boba. One wants ice cream. Other one wants cookies. It's enough. It's enough, Stanley. At this point, I don't know if I've won more money from you in poker or you've won more money from me in DoorDash views. It's probably about right.

SPEAKER_07: I mean, I'm just giving what people want.

SPEAKER_08: Exactly. Stanley and I became friends because he has a passion for poker as well. You may have seen him on some of the online poker games.

SPEAKER_10: But I wanted to specifically have an entrepreneur here at the end to talk a little bit about the three cycles that you've operated DoorDash under. You started in, was it 2013?

SPEAKER_11: Yeah, 2013.

SPEAKER_12: 2013 as a landing page for one Indian restaurant, I believe it was.

SPEAKER_13: Yeah, something like that. Yeah. We had like eight restaurants on a landing page called, it was called PaloAltodelivery.com.

SPEAKER_15: So it was really a big vision at that point.

SPEAKER_16: Yeah. I mean, I can go into the story. Do you want me to? Yeah, please. So, I mean, so we started 2013, and I'll get to the PaloAltodelivery bit later.

SPEAKER_13: But I mean, it's funny because we really weren't trying to do a startup. It was literally one of those typical Stanford dorm room class projects. We weren't trying to do a startup or even a food company or delivery company. The, I think, I think me and I met my co-founders, Andy and Tony, through, I met, Andy was in my freshman year dorm. And then Tony, we met through a, one of those project-based classes at Stanford. And the, the idea we were sort of working on for this class was software for small business. And I remember at the time, the kind of the hot startup or the hot thing everyone was doing back then was like social apps, Snapchat, things like that. Like everyone's very focused on sort of the, the digital world, but no one was really focused on the, the physical world. Like, so what about like the, the mom and pop shops, the local, the, the, the local businesses, you know, the, none of these people were using software and, and, and Tony, uh, he just wrapped up a internship at square. So this kind of, this idea of software for small business was very fresh on his mind. Uh, you know, I've, I've kind of built, you know, when I was in high school, I used to build a lot of websites for small business owners kind of for fun. Um, and, and so, so this was kind of an area. Like we were just talking about it, like, you know, maybe, maybe we can work on something here. Um, but of course, none of us have, you know, we're all, all college students. None of us have worked at a small business before. So, or, or ran a small business before. So the, so, so, so the way, the, the way, the, the way we kind of approached this was why don't we just start talking to a lot of these business owners? Like, why don't we just go, you know, after class, we'll just go down to Palo Alto, go down university Avenue. And literally we'll just go door to door. We just walk in and say, Hey, we're a couple of Stanford students working on a class project. We'd love to just sit down and interview you and try to understand what your day-to-day life is like. What are some of the challenges you were facing? Um, and see if there are any unique insights we could get out of that. And, and we-

SPEAKER_19: They told you if you order $30 worth of food, you can sit, if not get the heck out. Did you get any no's? I guess in Palo Alto, you get a, people love Stanford students.

SPEAKER_16: I think the, the Stanford student class project, uh, trick worked almost all, every time. Yeah.

SPEAKER_13: And, and we always try to go, you know, between two and 4 PM when, and when it wasn't busy. So yeah, we talked to pretty much every business in Alto Mountain View, uh, San Mateo. I mean, these, these were restaurants, retailers, flower shops, furniture, uh, stores, you, you name it. And I remember one day we walked into this macaroon store in Palo Alto, uh, on university Avenue, uh, if you haven't been, it's, it's this place called Chantal Guiong. They have great macaroons. Uh, and I remember I walked in, uh, sat down and, uh, Chloe, who was the manager of the store at the time, greeted us, we started talking, uh, and I remember in the middle of our conversation, she had to go take a phone call real quick. Uh, she came back a couple of minutes later, she brought this really thick booklet with her, uh, open it up, started writing some stuff down and we asked her, oh, what was, what was that phone call about? And she said, oh, it was someone, uh, placing an order for macaroons, uh, for one of their office parties and they wanted it delivered. Uh, and, uh, but the problem is, you know, I, you know, I had to turn that order down because, you know, I don't have the capacity to fulfill it. And I asked her, oh, interesting. Like, so, so how often does this happen? Do you get, uh, these requests all the time? And she said, yeah, this happens all the time. And she started showing her this book label, which just turns out was her, um, what do you call her order? Uh, bookkeeping, right? Like a book of all her orders. She, she has from the previous month and she started showing her, showing me all the orders she's gone that were delivery requests that, um, and majority of them she had to turn away. Um, and I started and which was, you know, again, like super strange, like, why would you turn down business? Um, you know, it's, and, and, and, and, and, and, and as I started talking to Chloe and she said, well, actually I don't want to turn them down. I wished there was a solution out, out there, but unfortunately, like, uh, you know, you think about it, like, like, like as a, as a small business owner, if I have a delivery request that comes in, uh, I pretty much have one of two choices. Um, like first is I could do it myself, which is what ends up happening 99% of the time. Um, and, but that means I have to, it takes time, uh, uh, it means it's, it's, it's taking time away from the store. Like I have to go do it myself. So unless it's like a huge catering order or, or, or, or something massive, it's not really worth my time. Uh, all the alternative is I can use one of these, you know, third party delivery services.

SPEAKER_24: And at the time, you know, you, you would think like, you know, delivery is not a new thing. Like you, you would think, you know, with like UPS FedEx, they've been around 50 years,

SPEAKER_13: like you, you would have thought, uh, it would be an option. Yeah, there would be not. Like, I'm sure there's like a UPS version that can do a five mile delivery or a three mile delivery. And it turns out actually there were, and, and they're kind of these, uh, these old school services, um, we looked into it, uh, and you, you are typically these courier services, very old school, no technology, everything was operated with pen and paper, uh, and they typically are very expensive, uh, not very efficient. I think the average, their average delivery fees is probably like a hundred dollars to do like a three hour delivery, uh, not really designed for kind of local commerce, you know, typically they're designed more for legal documents, medical supplies, things, things like that. So again, like, you know, like if you're going to pay a hundred dollars for a delivery, but the macro itself is only $50 that, that the economics just doesn't, doesn't make sense. Um, and, and, and, and, and then we started, you know, talking to other business owners and we kind of heard the same thing from, it was like this flower shop. We heard the same thing from, uh, a coffee shop. And of course we heard this from a bunch of restaurant, uh, owners, and that was kind of when the light bulb started ticking. And so, well, maybe instead of building software for the small business owners, what have we built, um, use software and applied it to building a more efficient local delivery service that was designed for local commerce designed for kind of the, the, the kind of the like consumer goods, uh, and offer that to rush or sorry, not rush, offer that to, to, to the business owner. It's almost like a delivery kind of delivery as a service. Like maybe that's actually the piece of like quote unquote software that these business owners were looking for and that's what we should work on. Uh, so kind of the, kind of our, you know, our, our, you know, the, the light bulb moment kind of turned on and, you know, we kind of got, got to work. Uh, but except there's just one problem we have, who are we to offer these delivery service service? Like we don't, we're just three college students. You know, we, we didn't, uh, we had one car between the three of us.

SPEAKER_16: Credit cards. Was it working? No, and, and sorry, I said cars. Oh, cars. Yeah, one car. So we, it's like, we, we can't go out and, well, and, and also credit card and, and it's like, so where are we going to get the delivery drivers and the trucks and the infrastructure? Or it's not like we can just start offering this, the service.

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SPEAKER_16: So we decided, okay, you know, we can't run, we can't operate it.

SPEAKER_13: We, we, we don't have the, the, the resources to build a delivery service, but what we can do instead is why don't we run an experiments and, and this is where we, where the policy delivery comes in. So we, you know, the, the experiment was basically what we wanted to validate was, is there actually a customer demand for something like this? Well, maybe it turns out there's no delivery service because actually besides a couple offices wanting macaroons, maybe turns out people don't want delivery. Um, and that's why no one's no one built it. And it has, that seems to be a kind of a pretty logical, um, kind of premise. Uh, so, so, so we kind of wanted to, uh, validate, okay. Like, well, do people actually want, do customers actually want delivery? And, and once we can validate, okay, the customers want delivery, then we can go back to the local businesses and kind of figure something out. Um, and you know, that part, we, honestly, we haven't really thought through at the time, you know, it was really, okay, let's try to validate this first part, uh, first. So what we decided to do was, okay, like, let's pick one thing to focus on to deliver. What is it? Restaurants seem pretty obvious because you know, people are used to, you know, pizza

SPEAKER_41: delivery, Chinese food delivery pickup in Palo Alto pickup was a still a business.

SPEAKER_13: Exactly, exactly. And, and also the other thing was the reason why I picked restaurants was also we thought, okay, like restaurants, probably one of the hardest categories to nail when it comes to delivery because if you think about it, uh, it's the, the, you know, the food is, you know, it's perishable. It has to be instant has media. So the idea is people are hungry, hungry. Exactly.

SPEAKER_24: So the idea is if you can build something that works for food delivery, then you should be

SPEAKER_13: able to build something that's works for anything.

SPEAKER_45: Dry cleaning. Exactly. Groceries, whatever, shaving cream.

SPEAKER_13: Yeah. Cause you're starting with the hardest thing to nail perishable. It's an important insight.

SPEAKER_46: Yeah.

SPEAKER_13: Yeah. So, but we, so, so, so decided, okay, let's, let's, let's do this. Let's, let's, let's run this quick experiment. So what we did was we went ahead, found a bunch of restaurants. We liked in Palo Alto, we found eight of them, uh, none of them offer delivery, of course. Uh, and you know, we kind of found their menus, put into these PDFs, uh, linked it to them on this website and, and it's literally just a static page has no functionality. And all I said was, if you want to order delivery from these eight restaurants, call this phone number. And it was basically a Google voice number. We set up that ran our cell cell phone. Uh, we, you know, we, it probably took us two hours to make that website. It's, it's probably one of the ugliest websites I've ever made in my life. The, the, the idea was, okay, let's put this website out there.

SPEAKER_49: Put a menu on it. Yeah. And see people. And a form. Yeah.

SPEAKER_13: Yeah. See, actually there wasn't even a form. It was just a phone number. Yeah. So, and this idea was like, okay, see if people will start calling his phone number. If people called in, we'll just make a note of it. And we'll just explain to him, oh, this is just a class project. We're doing research. We're going to gather.

SPEAKER_53: We just frustrate the hell out of users to understand user demand. Exactly. Exactly.

SPEAKER_16: And, and, and, and, and, and I guess I like, we, we didn't even bother coming up with a name. So we decided, well, what, what should we name this?

SPEAKER_24: Well, let's just name it palatodelivery.com.

SPEAKER_56: It's not like this is going to go anywhere.

SPEAKER_55: You guys hadn't taken any marketing classes at that point, clearly. But great SEO.

SPEAKER_10: I see this with a lot of Palo Alto students are like website domain name dash available.com. It's like the name.

SPEAKER_16: Exactly. Yeah. But it turns out it was, it was actually great SEO because, boom, because we, I remember

SPEAKER_13: we launched this website out. We built, I remember it was a Saturday afternoon. Uh, we, we, we wrapped up about 4 PM, went back to our dorm rooms. Uh, we haven't told anyone, honestly, like we, we kind of just forgot about it. And, and, uh, an hour and a half in all of a sudden, a phone rang, uh, we picked up. This, this person said, oh, I came across your website, palatodelivery.com. Honestly, to this day, I have no idea how he found our website because we have not told

SPEAKER_16: a single person about it. Uh, so he literally must have typed in palatodelivery.com or Google picked it up. I, I have no idea how, but he called in and, and he said, Hey, I'm, I'm hungry. So I website, uh, and I want to place the delivery order. I remember his, his exact order. He wanted, uh, shrimp, pad Thai and egg rolls, uh, from this place called Bangkok cuisine, which unfortunately I think closed during COVID.

SPEAKER_61: Did you upsell him on the Vietnamese coffee? Cause that's a big margin item. Uh, well. You could have upset him on the macaroons on the way back too.

SPEAKER_16: That's true. That's true. That's true. Well, originally we were supposed to tell him, well, this is not a real surface, but

SPEAKER_63: you said, fuck it.

SPEAKER_16: Well, I think, I think what ended up happening was we, I think we're all around the phone and then said, well, I'm not going to be the one to tell this hungry person. This is not real. So are you going to do it? And it's like, well, Andy, you're going to know, and he's like, I'm not going to do it. So what we said, oh, well, screw it. Why don't we just do this delivery? It's just, it's just one delivery. It's not a big deal. Well, we'll, we'll drive to the restaurant ourselves. We'll place a pickup order, like with, with the restaurant and deliver it.

SPEAKER_66: Just to fast forward last quarter, they did 512 million deliveries.

SPEAKER_68: That was pretty much the starters.

SPEAKER_16: And that was, that was the start of Paul to delivery January 12th, 2013.

SPEAKER_08: Um, and now it's really amazing about this is, uh, pretty great story. Um, and one of the things I wanted to talk about is just this product market journey that you went on was very basic.

SPEAKER_10: You talk to customers, you found a pain point, you observed, you didn't come into it and say, I know better than them. Um, you put up an experiment and the experiment showed you, I think the big lesson for founders is, you know, when you have strong product market fit. The, you will get market pull and market pull arrived, uh, in, and obviously Uber Lyft and some other companies started to show, Hey, on demand was the thing.

SPEAKER_08: I want to fast forward to the era of excess and just tons of money being dropped into the space. I saw it up close and personal with Uber.

SPEAKER_10: Obviously you guys experienced it. It'd be, it went into such a, a velocity and a global scale for your business. Maybe you can talk about the peak insanity of the growth at door dash. And then we could segue into the age of austerity and how the market has changed its demand. So when you were, but three students looking for seed funding, just having some customers was great. And you were forced to grow at ungodly rates, unnatural rates. And then the market was like, you know what, uh, show us that you can make this profitable and you had to shift gears yet again. So let's do the second act and the third act together.

SPEAKER_72: Yeah. Um, Pete crazy.

SPEAKER_13: Well, it's funny because for a very long time, we actually couldn't raise money. Like, like, I think I remember between 2015 and 2018, when everything started, you know, Uber was going crazy, like all these funds, he started coming in, we weren't actually one of the beneficiaries of it. Like we, um, you know, we, we struggled to raise money.

SPEAKER_75: Why did they tell you they didn't want to give you money?

SPEAKER_16: Um, that, that's a, that's a good question. Um, I guess you have to ask investors that, but, but I think, I think, I think, but, but

SPEAKER_13: I think, I think really, I think people were not used to this idea of investing in kind of operationally intensive businesses, like, it wasn't like a SAS company or like a social app or digital app.

SPEAKER_77: It didn't fit the mold.

SPEAKER_13: Yeah. It's like, you're, it's like, it's like, you know, like I remember, um, you know, uh, well, actually, I don't know if I want to share the story, but the sentiment was sure it would

SPEAKER_78: take the names out.

SPEAKER_13: Yeah. Yeah. So I remember like there was an investor that, you know, that, that said, oh, well, why you guys are like three super smart Stanford students. You know, why are you guys working on this? Like, like, like food delivery business, you know, like operationally intensive, like a real world business when you can just go work on something like you, when you can build like

SPEAKER_80: next Google, like it's like applying like high margin software, you know, only, um, business, not an invalid question.

SPEAKER_13: Uh, and what was your answer? Um, I mean, for us, like, I think it's, well, I mean, going back to kind of like how we kind of work through this kind of this phase is, you know, I think because we, um, the first five, six years we couldn't raise money, you know, we were forced to stay super lean. And, and, and I think, and I, whenever people ask me, well, what's the word actually super power, you know, it's our ability to execute and our, you know, maniacal focus on like unit economics, operational excellence. Um, and how do we get that operational access? Well, it wasn't through, um, you know, it wasn't because, you know, we decided one day, uh, we're just like great operators because we were forced to. Constraint. Exactly. Constraints breed in, in, in, in creativity. And between 2016, 2018, that was when I felt DoorDash was a company was built because we

SPEAKER_24: didn't have the money. Uh, so we did not have the luxury to go out and just, you know, you know, just burn.

SPEAKER_13: Money and acquire customers and lose money on every order. Like we had to do, we had to get, we had to get to unit economics, profitable. Like we had to just go.

SPEAKER_86: You did that, but then Uber came into the market with Uber Eats.

SPEAKER_10: Postmates got super funded, I believe. And every Instacart, which is not exactly a direct competitor, but they also got hyper, uh, funded that hyper funding environment forced your hand.

SPEAKER_88: You had to play a different game at the poker table, correct?

SPEAKER_16: So, so once, so, so, so, and then when the soft bank round did come in, in 2018, late

SPEAKER_13: 2018, then all the work we did between 2015 and 2018 sort of paid off because now we were just, uh, structurally, we were just much more efficient than our competitors. Like we had better unit economics. Uh, we had better product, better quality, uh, you know, much more efficient. Um, you know, you know, driver, um, kind of that works more, more efficient, like customer acquisition, everything was just more efficient.

SPEAKER_80: So then when we did have the capital to kind of accelerate this, you know, we were just able to grow so much faster because you were thoughtful about exactly when you're selling

SPEAKER_36: to B2B buyers, you really need for your pitch to reach decision makers. It's great. If you meet some people who are going to use your product. Okay, great. But you can get those anywhere. Decision makers, the people who can take their credit card out. Those are called decision makers and they're, they're upper level executives, right? The problem is where do you find high level folks? They like to hide, but there is one place that they love to hang out. And I can tell you, cause I am a high level decision maker myself. I live on LinkedIn. Why do I live on LinkedIn? Cause I'm constantly trying to find talent or reach important people and important people use LinkedIn. You know, I've been saying this for a long time. LinkedIn would hit a billion users. They're at 930 million members right now. And there are 180 million of those senior level folks and 10 million of the C level executives. Okay. Those people make the purchasing decisions. They are the ones who will cancel software or approve software. They'll cancel a trip. They'll approve a trip, every expense. Well, LinkedIn ads is the most efficient way for you to reach the decision makers. No other platform in the world can offer these kinds of eyeballs. Business equals LinkedIn. LinkedIn equals business. Business equals LinkedIn. LinkedIn equals business. It's that simple. So how about I just give you a hundred bucks right now to test your first ad campaign? That's right. Go to linkedin.com slash this week in startups, linkedin.com. You got that in your auto populate in your browser. Then just type this week in startup to claim your hundred dollar credit terms and conditions

SPEAKER_93: apply because they're giving you a hundy.

SPEAKER_04: Were you put under pressure though to spend hard, to go faster, build market share, grow the top line?

SPEAKER_10: Did you feel that kind of weight from that giant amount of cash just weighing on the company? And, and how do you as founders say, Hey, this is not what got us here.

SPEAKER_13: Yeah.

SPEAKER_86: You know, let's stick to our knitting. Let's keep our discipline.

SPEAKER_13: Yeah. I think, I think that was one thing. Um, I guess our board member, Alfred Lynn from Sequoia did a really good job. Keep us in check was cause cause he, he went through, he also kind of went through the same experience with Zappos kind of low, almost ran out, almost went out of business, kind

SPEAKER_24: of low margin. So he kind of lived through that experience. And so, so, so for him, you know, even, you know, when we did raise the big round, he

SPEAKER_13: always, you know, kept us in check and, and, and, and said, Hey, like you, we, you know, it's important to continue to stay super efficient.

SPEAKER_24: Like he was obsessed with like our, like the, the, the, like he would go line by line into our financial statements and our unit economics and just question everything and, and, and just

SPEAKER_13: make sure I like, look, it's, it's real, it's, it's, you know, once you, you know, go down the route of, of, of, of, of, of kind of, of excess is really hard to turn the ship.

SPEAKER_24: It's not like you spend a lot, if you just burn a lot of money and then at the end, it's like, okay, and I'm going to be lean now. Like it doesn't really. The culture gets completely broken. And, and I think, I think, you know, and, and so I think having, you know, setting those

SPEAKER_13: constraints ourselves, yes, just because we raised, you know, 500 million or a billion doesn't mean we have to go spend a billion, right?

SPEAKER_24: Like, like you, it's like, it's like, if you're, you know, if you're, if you're, you're, if

SPEAKER_13: you're spending all the money to subsidize and there's a result, you have negative unit economics, but you're getting a lot of growth. That's very different than, um, you know, if you have positive growth and, or positive unit economics, but then you're spending that money for maybe geography expansion, or you're spending it on customer acquisition, where, you know, you're, you, you know, what your payback period is like, it's like not every dollar burned is like the same, right?

SPEAKER_24: Like there are more, some, there are more efficient ways to, to, to burn the same dollar.

SPEAKER_08: Talk about the whipsaw of the pandemic because things shut down.

SPEAKER_10: Restaurants weren't allowed to open their doors. Then society had to decide, well, people need to, at least if they're going to be

SPEAKER_08: locked in their homes against their will, or in some cases, I guess, opting into being locked at home, uh, we're going to at least have to let restaurant workers go to work. That was kind of interesting. Uh, and delivery started up again and it created, uh, I guess a boon for the company. So take us through just for a minute, the crazy, a minute or two, the crazy 2020 year that you had.

SPEAKER_13: Yeah, it was, it was, um, yeah, COVID, it was definitely, it was a pretty unique moment for us. I mean, like, we honestly didn't really know what to expect. Like, is it, you know, our people, you know, you know, like everything's shutting down. Like, is that going to impact us? Uh, well, and it turns out like the exact opposite happened and, you know, things like, like, it's like, we like growth started, like the growth rate started accelerating, which is not common, right? Like as, as, as you get bigger and bigger, you know, typically your growth rate slows down. But during COVID, it kind of just, you know, yeah, I remember like every week, like it was like a record week and it was just, it was just a lot to just even keep up. It's like, well, all of a sudden, like, you know, like, well, um, you gotta start thinking about, uh, well, you know, like we, we had to like, like, roll out all these new features around, like, you know, distributing like PPE to all of our dashers. Like, how do we get, how do we, how do we get that rolled out? Uh, you know, we, you know, consumers now are asking for contactless. Yeah. Leave on doorstep. Yeah.

SPEAKER_114: You basically have to write new software in real time.

SPEAKER_13: In real time. And then for the, for the merchants, you know, like, I think one thing we did, uh, you know, because all of a sudden, like a hundred percent of their sales were coming through delivery. You know, one thing we did, I think we were the only player that this was, we decided, okay, like we're going to reduce our, our commission, our cut from the restaurant. So the way our business works is we take a fee from the consumer, the delivery fee, and then a commission from the restaurants. Um, the delivery fee sort of pays for the drivers and then our door dashes margin is sort of the commission. Uh, we decided, well, you know, like if, if restaurants are going through tough times, like we should also help take some of that, um, burden off their shoulders. So we kind of slashed everyone's commission by 50% across the board. Uh, you know, which, you know, in the short term costed us a lot of money, but we felt

SPEAKER_67: like it was the right thing to do long term.

SPEAKER_08: I remember there were a bunch of businesses like Taishoken, my favorite ramen place in San Mateo. And I talked to Yoshi who runs it and he's like, nah, I, we, we don't do delivery. Our, our, our food is not good for delivery. I want people to experience it here, the Suki man, dipping noodles. He, he had very particular, um, and rightfully so, cause it's the best in the world.

SPEAKER_10: And I said, you know, you gotta figure it out. You know, I think this could be incredible for you. I would order it and you know, he was like, no, never. And then COVID happened and now he's got this incredible delivery business.

SPEAKER_04: And so I guess a bunch of people who never believed remote work or remote

SPEAKER_120: ramen could work now believe that it can.

SPEAKER_16: Yeah. It was definitely an accelerant, right?

SPEAKER_13: COVID kind of made merchants realize kind of the importance of having a kind of a, what I call like, I guess like an online or e-commerce strategy, right? And then the crop applies to restaurants and also just any local business. I mean, I think before COVID, like, I'm like less than like 20% of, or maybe even less have, have, of, of, of small business businesses had like an online presence. And that number has obviously jumped significantly higher now. And, and door dash is a great platform to help enable that transition.

SPEAKER_67: And that's kind of the position we set ourselves up as, you know, in terms of, um, helping the, the, the merchants and local businesses.

SPEAKER_08: Tell me a little bit, as we wrap up here about how the, uh, virtual kitchen, the cloud kitchen, uh, not specifically Travis's company cloud kitchen, but that whole movement. And you can talk specifically about his company feel like as well. Um, but just how does the whole cloud kitchen movement, how is that now accelerated your business? Um, because it's pretty extraordinary to be able to see certain brands pop up in multiple cities. I was watching star bird chicken. I really enjoyed the chicken and, uh, what's that great salad.

SPEAKER_120: Yeah. I don't know about that, but, um, I liked the fried chicken, but yeah, well, the fried chicken

SPEAKER_08: with the salad, they do have, I have had that. It's pretty, it's a great way to ruin your, the healthiness of a South.

SPEAKER_10: And I agree, um, but I'm like, oh, now I'm in New York and I'm at my hotel and I have a choice door dash star bird or Uber eight star bird, whichever, um, and, uh, or do I order

SPEAKER_08: this shitty food from the hotel at 11 o'clock at night? It's an obvious decision. Uh, so talk about that.

SPEAKER_13: Yeah. I think something we always believed early on, you know, as, as we, as, once, you know, as delivery became a bigger, bigger thing, uh, was, was kind of this bifurcation of experience and convenience, like, like, you know, like before, you know, I kind of the virtual kitchens came on and I think we're still in that transition. I don't think we're there yet, but I think the way kind of delivery came along to the restaurant and the local business world was, was kind of a bolted on experience. Like it was kind of hacked on like the, the same place where you sit down and dine in is also the same place where a driver goes, picks up the food. And, and if you think about it, that doesn't really make sense, right? Like if you start from first principles, because well, a, you know, the, the, the dashers are

SPEAKER_24: sort of like these restaurants are not set up to take this many dashers and not laid out in a way where, um, you know, like it's efficient for drivers to come in and out, you know, you're disrupting the dining experience.

SPEAKER_13: Uh, and secondly, which is probably more important factors, you know, typically like these restaurants are located in like the most expensive real estate of part of the, of the university. Exactly. Right. Like, but if you're ordering delivery, like, do you care if your food's coming from university? Yeah. So, so I think, I think it was really this idea of like, well, as the, as delivery becomes a bigger and bigger thing, like you, you start seeing these, the, this bifurcation where if you want an experience, like you want a great date night on a, on a, on a, on a Friday, uh, you go, you go to, you go to a restaurant. Like if you want to, um, experience what the, the, I don't know, the, what the latest, I guess,

SPEAKER_24: Apple vision headset, you go into an Apple store to experience it, but if you want convenience, you just need food delivered to your house. It's just, you know, right away.

SPEAKER_13: Kids are screaming. Right. Right. Um, then, then it should come from a different place, right? Like a, like a warehouse or, or a, or a virtual or what, what they call ghost kitchens or ghost convenience stores, which we're, um, making a big push, it's, it's, it's, it's, which we call dash marks, um, you know, like, like, like there's, there's no reason why these two things should be in the same place. They should be separated. And I think, I think that's kind of the trend you're, you start seeing.

SPEAKER_24: And that's why you're, you're seeing all these platforms emerge, right? Like cloud kitchens, et cetera, that are helping, uh, again, helping these merchants and these local retailers navigate through this transition. It's all part of this bigger trend of this kind of post COVID world where how to, how do merchants, uh, adopt kind of an e-commerce strategy? How do they move into this kind of convenience world?

SPEAKER_10: Right. I mean, it's, you, you might have somebody who's Danny Meyer or some famous chef who wants to have some sub brand that goes into a hundred cities, but you also might have the next, you know, Danny Meyer who wants to create the next shake shack emerge. We won't tip our cards here, but we're going to be working on something kind of fun.

SPEAKER_128: That that's, that's true. We are. Yeah.

SPEAKER_16: But, but that, yeah, it's all, it's all part of that, that, that trend.

SPEAKER_13: And I think, and I think that's, that's really, that, that to me is really, really exciting. And we, and we want door dash to be, it's just, it's just going to be one of many companies

SPEAKER_24: that's going to help enable that transition.

SPEAKER_61: All right. Give it up for Stanley for being so honest and awesome. Thank you.

SPEAKER_132: Listen, we have been doubling and tripling down on Founder University here at launch.

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SPEAKER_137: Uh, Sophia Amorosa is a serial entrepreneur, uh, event host, podcaster, author, and, uh, her fund is trust fund, a full disclosure. I'm an LP and her fund page Doherty is behind genius ventures. Did I help you your fund? I didn't. Not yet. Not yet. Not yet. Not yet. I do one new fund a year, just small checks to build relationships.

SPEAKER_08: So who knows, maybe 20, 24, uh, we'll work together. And then Kelly Fontaine is with, uh, how do you pronounce your firms? Send, send Donna, uh, which is a fund of funds. Maybe you could tell us a little bit about what send Donna does. Uh, I know Michael's here, uh, from send Donna, but maybe you could explain how a fund to fund

SPEAKER_137: works and how you pick managers to start.

SPEAKER_142: So send Donna capital is a fund of funds founded by Michael Kim.

SPEAKER_143: Um, he started in 2010 to solely focus on pre-seed and seed funds back then. It wasn't really a thing where there's like 20. Um, so we raise our own capital from foundations, endowments, family offices, and then we choose to invest in pre-seed and seed funds.

SPEAKER_08: And as we heard in the earlier panel, it's hard for them to do these small checks. So I'm assuming people like Hewlett or USC or other folks who want to get access to this, they'll pay you a fee. Essentially you get part of the carry, you get part of the management fees. How does it work in terms of, we charge our own economics. Um, so how does that work? And then how does that affect decision-making? Yeah.

SPEAKER_143: Um, so yes, we charge a management fee and carried interest on our performance. We think that's the best alignment of interest is the carried interest. So it works that, you know, essentially our, our LPs are getting the fees and carry from the underlying funds and then our economics applied on top. Um, but our first fund is two X distributed net and over four X net. So the performance is there if you choose correctly. And so we really focus on portfolio construction, um, and fund sizing for underlying managers.

SPEAKER_137: And what a fund of funds typically charge. Cause we know funds are typically two and 20. That's the standard. What is there, is there a standard for fund of funds?

SPEAKER_143: It depends. Some don't charge carry. Um, some just charge management fees on the underlying fund size.

SPEAKER_155: Um, but I think again, the best alignment of interest is carry. And I would say 10% is pretty typical. 10%.

SPEAKER_156: So if, uh, if a LP does choose to do this or an endowment, let's say they are paying maybe

SPEAKER_08: 30% carry net net, but there don't have to manage all of those smaller relationships and do that vetting. You abstract all of that for them.

SPEAKER_155: Correct. And again, our, our first fund is better than most venture funds on a look through basis.

SPEAKER_149: Yeah. So that, and how do funds make that decision? How do endowments make that decision?

SPEAKER_10: Do they choose to go with a fund of funds only typically, or do your investors typically

SPEAKER_160: do fund of funds and do some directs? And then does that create any kind of tension and how do you manage it?

SPEAKER_153: It's a, it's a combination. Um, you have large foundations and endowments who are not, who need to write a $50 million

SPEAKER_143: check. So they're not going to write a $50 million check to a $50 million fund. Our median pre-seed fund is $50 million. So, um, they won't do it, but they'll do the funds when they graduate from what we focus on. Then we have other foundations and endowments who are looking to build out a direct portfolio. So we work with them and introduce them and share all of our investment memos, research network, and they go directly into the funds as well. So it depends on the foundation endowment. Um, I'd say there's not as many foundation endowments who love to do first time funds.

SPEAKER_154: Um, and so.

SPEAKER_137: So, yeah, uh, and, and I sort of speculated on that a little bit in the previous panel, but why is it, why do they not want to do that?

SPEAKER_143: You know, that that's hard. Cause even David Swenson said, you know, it's intuition and going back to Mars. Um, if you're looking for this track record, then you've missed the earliest funds. And there's venture there's research that says funds one through three outperform. And you, we can debate on why that is. Is it the fund size? Is it you fish the low hanging fruit fruit in your network? Is it the timing? Is it the conviction? We can debate on why first time funds outperform, but, um, there's research to prove it.

SPEAKER_168: But, you know, I think, you know,

SPEAKER_170: What does your intuition tell you? A lot of, because they have something to prove high energy, not rich.

SPEAKER_168: I mean, if a founder, if a found hungry, yes, uh, there's a lot of the hungry and hunger and drive.

SPEAKER_143: But I do think, um, if you're a founder and you're leaving a company with a stable salary to start a job, it's the same thing as a GP starting the fund. Um, they're taking the risk and the bet on themselves. And they'd have that whole heart that the timing is right, that they've built their career to this point that they can do it. And so it's this opportune time. And Samantha mentioned finding, you know, Australia. So they find niches where their experience and their networks is the right time.

SPEAKER_159: And again, it's Goldilocks.

SPEAKER_173: There's a self-selection process there.

SPEAKER_08: If they're deciding to take that path to do the incredibly hard thing of starting a fund, they're probably high performers or insane or have something to prove, chip on their shoulder, not yet rich or not calling in rich.

SPEAKER_175: All of those things. Yes.

SPEAKER_170: Calling in rich is the joke instead of calling in sick. Let's start, I guess, Paige with, you have a question.

SPEAKER_178: Okay. What do you look for in a fund manager?

SPEAKER_179: I feel like for everybody in the room, who's maybe thinking about starting a fund at some point, that's something we would want to know. It's like, how do you evaluate a fund manager? Is that okay?

SPEAKER_183: Yeah. I mean, you're a great moderator too.

SPEAKER_186: I've already, I seem to be a theme today.

SPEAKER_187: From the world's great moderator to number three.

SPEAKER_188: So it was a soft now, but I need to know exactly. I mean, so asking for a friend, asking for a friend.

SPEAKER_143: LPs look at, um, you know, if you fit their portfolio, you're not going to go and convince an LP that doesn't invest in emerging managers to invest in a first time fund. So if an LP does invest in first time funds, um, it's really is the thesis, is the ecosystem, the broader picture of where your networks are. Does that fit? And then you get to the discernible edges. And the discernible edges really focus on what do you do as a fund manager? You have to source, pick when and support, right? And so back to the Mars presentation of yesterday of the rational thinking versus intuition, the rational thinking can help you with the sourcing and figuring out somebody's networks. And the support you can diligence, you can talk to founders, talk to the ecosystem, but it really is the picking that you have to have an intuition on. Um, I mean, you can have somewhat of a track record, but then is that repeatable?

SPEAKER_155: But so I would say there's intuition and rational, but it's those four things that we spend a lot of time and a lot of time with founders and co-investors and the perceived reputation in the industry.

SPEAKER_137: So Paige, tell me about your fund when you started it and then your process for raising funds. And then Sophia, we'll go to you.

SPEAKER_170: You're doing a public raise like I am. And we'll talk about the public raising. Did you choose to do public raising as well?

SPEAKER_198: I actually didn't do a public raise. So I'm 506B and I can talk about like, if you're thinking about starting a fund, there's a delineation between raising in public through a 506C fund, which Sophia and Jason have both done. And then a 506B fundraise, which I've done while building in public, which has, comes with certain regulatory like lines that I've spent a lot of time with lawyers going through, um, in specific.

SPEAKER_200: But yeah. Um, so I started my fund when I was 22 in 2021. Uh, I got into venture because I was binge

SPEAKER_203: watching Silicon Valley and I was like, this is the best job ever. How do I do this? Um, and that's

SPEAKER_04: a fiction based show. Just so it's a level set here. It's not a documentary despite it's yeah.

SPEAKER_200: Well, yeah, it was funny. I thought it was like, it was so like hilarious and outlandish and now I watch it and I'm like, this is kind of my day to day in like a weird way. Um, but I just like, I fell in love with venture and the opportunity to support and pick amazing founders, building the future that I wanted to see for myself for like the next generation. Um, and then as I was going along in my journey of learning about venture, I thought it was really opaque. So I started building all these resources on Twitter, helping other people break into venture. Um, I was working in an early stage startup by day. And then by night I worked on a children's book called seed to harvest that explains venture capital and 40 pages and a lot of colorful illustrations done by my brother. Um, so my first fund was $5 million fund invested in 27 precedence seed stage companies. Uh, 12 of those raised fall in financing. I'm pretty heavily involved in introducing founders to downstream capital. Um, and our LP base is quite strategic in that sense. A lot of founding partners. Um, and then my second fund, which I launched late last year, actually, uh, send on a capital is our anchor. So I'm excited to be on stage with Kelly today. Um, but yeah, that's, that's kind of like how I got into venture and a bit about the firm. And I focused a lot on like, what are the demographic shifts that are happening within my generation and what are the different like softwares or connected hardwares that enable that to be democratized to a broader group of people. Did it turn out making that piece of content

SPEAKER_211: in this children's book about venture capital, uh, which is just such an amazing clever idea.

SPEAKER_10: Thank you, um, for doing that. That's when I discovered you on Twitter. Um, did that turn out to be like the wedge strategy that got you attention and then social media then had people say, Oh, well, if you're starting a fund, maybe I'll put 25 or 50 K in. Yeah. I mean, I, I think like

SPEAKER_200: for any of you raising a fund, like our first fund was like 1700 cold calls. And I was like DMing

SPEAKER_216: everyone who followed me on Twitter, like, Hey, you said 1700. Yeah. 1700. Yes. Yeah. We have 120

SPEAKER_200: LPs in our first fund. So I think like, if you're raising a fund it, it will, it will be hard. It gets, uh, easier along the way. And then it gets more challenging in some ways, but, um, yeah, that children's book actually led me, I set up this community number, uh, where I could like text out updates, uh, for the book. And that's how I met the first founder that I invested in. Uh, his name's Kai Han. He's the founder of a company called pallet, which is community job board infrastructure. Um, I, it's great. I, and I, I remember like being on the phone with him and just being like, holy shit, like this is the founder that I need my name on this cap table. And then after that, I asked him for allocation. Um, and then I think I asked on Twitter, like what, uh, syndicate platforms I could use. They ended up using Assure. I think you'd made a recommendation about Assure around that time. Sorry about that. Um, and so can't win them all. Yeah. Yeah. And ended up, uh, investing in his company as my first investment, we ended up doubling down through the first fund and he's an LP in our second fund. So that's been a really cool full circle moment, but yeah, the book directly led me to meeting the first founder that I invested in. Sophia, tell us a little bit about

SPEAKER_08: the origin story of trust fund. I know you had done some angel investing, obviously you're an

SPEAKER_10: entrepreneur and people love operators as investors, but why'd you decide to start a fund now?

SPEAKER_225: So I've started a company. I don't know. I won't do that. Like introduction thing. Cause there's like, you know, we've talked enough about it on this week in startups. Um, so I've been angel investing

SPEAKER_227: for mostly the last four years. I invested in first dibs in like 2012 or something like that. But, um,

SPEAKER_179: yeah, over 20 companies at all stages, all sectors, not trying to do a fund zero, just really enjoy working with founders. Um, and after I built my second, I guess, venture back company realized I don't like building companies. I really like being in the weeds. I don't want to hire executives to do the stuff that I enjoy doing. And it feels much better to harvest what it is that I've learned building massive companies and flailing and, you know, messing up and falling on a public stage and all of the above. Um, just to kind of, I guess, use the word harvest again, everything that I've learned for them, which is just like, I would do it for free, but you know, I can hustle advisory shares and roll them into the fund. So, um, so I went on a listening tour in 20, I guess last year. Um, and just like talk to a bunch of early fun man, like emerging fund managers. And pretty much everyone gave me the caveat. That's like, you never stop fundraising. You're not like spending time with founders. It's like miserable. You never, even when you close your fund, you're just, you always, you're fundraising for fun too. And I was like, Jesus Christ. But everything I've ever, everything I've ever done, like I've been thrown a bunch of, I'm just like stubborn. And so I'm like, well,

SPEAKER_227: maybe it won't, maybe, maybe I'm special. Yeah. It'd be different. No, I don't know. I mean, maybe a little bit, but, um, I decided to do it anyway. You know, I decided to do a $5 million fund,

SPEAKER_179: um, and raise in public last year. I just kind of went out and quietly emailed my network and you're one of those people and Mark Andreessen and Chris Dixon and all these awesome guys, um, signed up Jeremy Liu to be LPs because I had met them in like 2012 when I was fundraising for nasty gal. So I've had, you know, relationships for like, I don't know how, I don't, people are asking like how I met you. Do you know how I met you? Yeah. Like 10 years ago, we've like played poker at CES and like, whatever. Um, so that's like, that's pretty awesome to have those guys show up. Cause I've actually pitched Andreessen in the room for a company and been turned down, which is still one of the proudest moments of my career. Um, just getting in that room, I guess. Um, so decided to go out with a $5 million fund and just like, okay, I'm going to raise in public. Like I had raised a little bit at the end of last year, heard about this 506 C thing. And I think Ryan Hoover at weekend fun and a few other folks had done this and done it really well and published a lot of content about how they did it. And he's also an LP and a friend. So I was able to ping him and ask a bunch of questions about how this worked and just like, I don't know, went to tech crunch and was like, Hey, I'm doing this fund. I want to tell you about it. And maybe I'll do something interesting. And I'll let people who, anyone who's an accredited investor apply to invest in the fund because, you know, typically you can only have 99 LPs in a fund. Um, I have a parallel fund where I can have like, 2000 qualified purchasers, which are like super rich people. And then accredited investors, I can have like 249. Yeah. Um, up to $10 million, up to $10 million. Um, and so I made this really

SPEAKER_245: does solve the cold start problem. Doesn't it? Yeah. And it created so much groundswell.

SPEAKER_179: So I announced that only tech crunch picked it up and I talked about it on my socials or whatever. And I got a thousand applications from people between two and 20 K and over six and a half million dollars in people who were applying to be LPs in the fund. And there was a big air table. I was like, how could you be helpful? Is it's an opportunity to like, you know, for a broader set of LPs to evangelize the product, send deal flow, possibly help and have a variety of domain expertise that they can contribute to the portfolio companies. Even their teams can possibly beta test stuff that my founders are doing. Um, and so that was really exciting and I don't, I still don't have a hundred LPs. I'm still kind of, and I'm almost, I've like, I have like five committed, but I'm almost closed up, which is pretty cool. Yeah. Um, and I've written three checks. I don't know. I mean, I could keep going,

SPEAKER_08: but no, it's absolutely fantastic. If you think about the previous way to do this, you would have like a benchmark or a Sequoia, you know, they, they've had, you know, six or nine LPs of, you know, 20 K each, 20 million each. And that was their first funds. And this was not democratized in any way.

SPEAKER_10: And you just have to, I guess, build relationships now with all of these people

SPEAKER_120: to a certain extent, I guess some of them just want to put the check in.

SPEAKER_225: And I mean, for a $2,000 check, I'm like really clear that like, you're going to get information that everyone else gets. You don't get special information. You're going to get quarterly

SPEAKER_179: updates. Yeah. You might get free stuff for, you know, early access to the companies we're working with. Um, but like, here's what you don't get. Like, I can't have coffee with everybody. My job is to invest your money. Like that's an email that goes out before they write a check. Right. Cause I, I literally can't, I don't want to disappoint people. So I try to be like

SPEAKER_08: level set really clear upfront. Yeah. Yeah. So Kelly, let's, let's talk a little bit about what you think of this. Um, you're, you're seeing a lot more startups, uh, startup funds. Let's call them these five, 10, $50 million funds. This didn't exist. I think when Michael started his fund of funds,

SPEAKER_260: right? So now you have many more choices. Is that correct in terms of early stage funds?

SPEAKER_143: Yeah. So we did, um, to, to make our lives more difficult or, uh, we started a nano fund. So we started anchoring sub $20 million funds. We added it as a product. Um, we rolled it into our current fund. Um, but we think, you know, I know the LP said something different on stage, but it really is fund size and venture returns is really about portfolio construction and appropriate fund size. And so the small funds just haven't outsized chance of returning multiples of capital. And so we think it's a great opportunity for performance. And so, um, we've always 90%, 95% of our capital has gone into fund one or two, like we started all relationships at the beginning. Um, so that isn't new, but we just

SPEAKER_262: saw again, more were subsized. And so we've put a direct focus there. How do you sort through so many

SPEAKER_10: of these new funds and a lot of them seem like side hustles. So maybe it's become too easy to start a fund.

SPEAKER_176: Maybe people are doing it for fun or for status and maybe they don't know what they're doing.

SPEAKER_143: Yeah. I think 2021 was tourist founders and tourist managers. Um, and I, I think, you know, you get a good sense of why they're doing it. If you talk about, we really focus on a narrative when we talk to people. So what is your background? What have you accomplished in your career and why are you doing this now? Um, and you get a really good sense of what their drive is. Do they like the early stage? Right. Or is this, you know, we focus only on pre-seed and seeds. We do it even with core bigger funds. Like what is your focus? You want to be an AUM gatherer. You, you don't care about, you know, the early stage. We want somebody passionate about helping the companies. Um, because again, that, that goes back to the best referencing and sourcing you can get is from other founders. So we spend a lot of time, the GP market fit, just as you would look at a founder, why are they starting

SPEAKER_155: this company? Is this truly a passion? Are they doing this for, because it's cool to be an entrepreneur?

SPEAKER_270: We do the same thing.

SPEAKER_08: Do they have to be full time? It seems to me like the concept of having a part-time venture fund is, is kind of strange. So how do you think about the side hustle specifically and people doing it while they're running a company? This has become a point of contention for a lot of VCs.

SPEAKER_10: We're investing in your company, but now you're starting a side hustle fund to compete with us as investors. And does everybody have to have a podcast, a fund and a startup? I mean, it's

David Friedberg: at a conference, it's asking for a friend, do they have to do all of these things or can they just shut up and do one really well? Jason, when are you starting a company?

SPEAKER_275: I have inside.com. Yeah. So yeah, still, you need it simultaneously.

David Friedberg: Uh, yeah, it's, but it's, it's a serious question because it can become overwhelming.

SPEAKER_143: Yeah. I think a current operator, I think one of the knocks and like, we, we love operators, right? We love people who have been in the weeds and can be empathetic and know the journey. But I think one of the knocks is your, your products and tooling and understanding gets dated, right? Because with AI, like what, what tools are you using now? Um, and so being current and in the market, you get different deal flow because you're one of them, you're a peer and your knowledge is current. Um, but should you be leading deals? And probably not most founders that have had success are angel investing. So if it's a small fund and a step up and it's just writing a little bit larger checks, I think it works. Um, but I think if you're trying to lead deals, that's not, that's a different

SPEAKER_280: beast. Is the thesis of a fund of funds that you'll keep going with the manager indefinitely, or there is a

SPEAKER_08: graduation point. And do you hit that often? And then also, are you looking to maybe look deeper into what they're investing in and have the opportunity to direct invest into those? A lot of the sovereign wealth funds or endowments or family offices are like, Hey, we want to be in an early stage fund like yours, Jake, but Hey, what's the opportunity for us to meet the companies? And then maybe we can

SPEAKER_10: invest in their series B, how long do you keep investing, et cetera. So do you do the follow on investing in portfolio companies of your fund to fund? Okay. So there's two questions there,

SPEAKER_143: the churn of the portfolio and then the direct investing. Um, so portfolio churn, I think most fund of funds raise on the sandhill names and they keep the roster. That's never been the way we invest.

SPEAKER_155: We want a fresh roster. We want to know what's going on in the earliest stages, capture the alpha. Um, so we do have churn. Um, I would say that we view ourselves as a lead investor, like a VC views themselves. And so we do monthly calls with our managers. We have a Slack channel. We do, we bring in a monthly expert and the monthly calls are one-on-one. And so it's for them to come to us if they're thinking about hiring a partner or if they're thinking about, uh, parada decisions, reserves, follow anything about fund management, we want to be a resource to them. But through those calls, we hear about companies that are tracking really well, that they want to boast about, uh, companies that are having a hard time they need help with, and we capture all of that in our database. So we do have a very small direct fund, but we don't want the tail to wag the dog, meaning we don't want to choose a manager because we're going to get direct deal flow. So we also have strategic LPs that want the follow on or to lead the next rounds. And so that is general Atlantic, Tiger and Sequoia capital are actually invested in our fund. And so we will highlight companies

SPEAKER_174: to them. So you become an early warning system for, you know, Hey, here's some stuff that could

SPEAKER_10: be interesting to take a look at. Correct. Yeah. What's your best advice, um, to the, to fund

SPEAKER_08: managers on the table in terms of what's important to do every day and to just do really well, because you must see some patterns emerge of where new fund managers kind of drift and get distracted and don't

SPEAKER_284: succeed. And then you must see, you know, some patterns of what results in outsized, you know, long-term growth of funds and multiple funds and outlier returns. So things to avoid, things to focus on.

SPEAKER_168: I think discipline, I mean, knowing your lane, I think kind of 2021, nobody had a lane, but I do think the people that stayed in the lane, um, that's going to stand out. And I think, you know, understanding

SPEAKER_143: your lane and your, your strengths, right? If you're good at early stage, that's where you should be focused, not leading a series B or worrying about karate even in a B. I do think the thoughtfulness,

SPEAKER_155: I mean, that's a personal bias. I think that you can really see it with people when they're thoughtful and authentic, when they're so self-aware that they know their strengths, they know their weaknesses, and they're building to a north star. So, you know, I think Michael was an early investor and forerunner. She has been so thoughtful and methodical about how she's built that firm.

SPEAKER_143: We have Ali Partovia in our portfolio, Neo. He has been so thoughtful. He founded code.org with his brother. Then he founded Neo scholars. Then he launched a fund on top of it. Everything has been patient, methodical, and slow to build to the north star. And so I think it's just the discipline,

SPEAKER_291: patience, and thoughtfulness. Sophia, how are you dealing with, you've got a bit of celebrity,

SPEAKER_08: obviously, and you get a lot of inbound, but you have to say no now. And you have to say no to 99 out of 100 deals if you're going to be good at this. How are you dealing with, as an entrepreneur,

SPEAKER_293: a founder, somebody who is, you know, very optimistic, it's just constant barrage of having to

SPEAKER_179: say no to everybody? I've gotten really good at saying no, I think. You know, it's like, if there isn't, and I, you know, I've never really been a follower in my career, but as someone who's new at this job, I'm going to invest in people who are at least one degree away from somebody that I know. Ideally, somebody that I know is also investing or if they can't or aren't, it's because they write too big a checks or it's outside of their thesis. I'm not really looking for diamonds in the rough. I'm not looking for people with my story, the community college dropout who like didn't know and like raised money and bootstrapped and like whatever. Maybe if there's some wild advantage and they had some, you know, but it's like, I'm really looking for, for founders who, you know, ideally, like, I love second time founders. So I can just look at like a team slide and a deck and be like, now, you know, no, like, I don't, I don't need to take a flyer on someone with someone else's money. And I've got like a little, you know, it's like, I now have a much narrow narrow thesis. It's not a narrow thesis, but I'm not investing in consumer products. So it's so easy to be like, sorry, not no CPG, non alcoholic wine company. I mean, I did well with liquid death, but the other two CPG brands I did have like gone to, they're not zero, but they were small checks. But and I've marked them down. But yeah, I don't know. I'm I it's like a nice little script that's like, hi, I don't invest in this or it's outside of my thesis or, you know, I'm busy fundraising or I'm focused on this other thing. There's always some really polite way to say no. And often, I mean, you hope that someone is asking if you're if someone's sending you a deal, they're asking for you to opt in to the introduction. So it's much easier to just write that person and say like, thank you so much, please keep sending me deals. I don't think this one's right for me. And some people will just send you to be to like, prove that they're helpful. And that's just such a like, then you're just then it's just like some weird, it's not a it's like a weird expectation of a quid pro quo that I don't, I don't like the

SPEAKER_08: worst advice ever given to founders was when you get a no, ask that person to introduce you to three more people. Because now you've literally got a person who did not see an opportunity, sending you to three more people saying,

David Friedberg: there's no way I'm putting my money in this. But yeah, you can decode that. Yeah,

SPEAKER_309: because they want to seem helpful to the founder and they want to be that's not helpful to founders.

SPEAKER_312: I think it's different on the LP side, though, because I do think that there's certain things

SPEAKER_145: that won't fit us, like if you're Series A fund, if you do biotech, you know, it might not fit our

SPEAKER_143: thesis, or maybe we already have two FinTech funds, and we aren't doing another, right, but we can still

SPEAKER_145: introduce you to other LP. So I do think even the nose from LPs, it's different than founders. Totally agree with that. Thank you very much for doing that. I mean,

SPEAKER_08: Paige, tell us about how many people contact you a week for funding. And then, you know, with these small fund sizes, you don't have huge management fees, which means you don't have a huge staff in all likelihood. I was able to build a large staff off of the profits of this week in startups. Basically, I was like, well, I'll just take the profits and hire people to sort through all this deal flow. So like, literally, I was the management fees. And in the first fund, we had no management fees. Yeah. And on a $10 million fund, it's 200k a year. So it's not even enough to sustain the partner.

SPEAKER_280: Yeah. So talk a little bit about how you manage, how many people contact you and then how you manage that.

SPEAKER_198: Yeah, sure. I'll take the, I'll take the second part of the question first. So the, the question was like, how, how do you think about running a small fund in a way that's sustainable?

SPEAKER_200: So I think there's been like a lot of, there's been a lot more public writing on this. But front loading your management fees while keeping them still blended, like 2% over the 10 years is a really smart way to think about building a firm versus a fund. And so for us, like I front load like the first three years are 5% and then it steps down after that over the period of 10 years. And the way that I think about that is I want to build the firm, like through these different funds. And that enables me to hire a part-time like podcast editor, since I run a weekly podcast called seed to harvest. I also have a part-time investment analyst who works at a family office as his day job. And I think one of the reasons why I heard him was, as you were saying, I get like an increasing amount of inbound through, um, you know, being like a semi public figure on Twitter, which is, uh, and I think as Sophia was alluding to, I think like the longer that you invest, the more familiar you get with your own set of no's. So now it's like, okay, I look at a company, if it's not in the US or Canada, if it's not domiciled there to know if they're raising at a ridiculous valuation, it's not going to be a fit for us. I would say I'm very disciplined around ownership, which is something that like Kelly and I have talked about a lot. Um, but I want to get, you know, between one to three percent ownership in the companies I'm investing in, which is not tenable with a company that's going to be, you know, over 30 million posts. Um, and then beyond that, I look through as our portfolio has grown, are there any conflicts within our portfolios? Now I have 36 companies and I invest pretty heavily, especially in the creator tools space. There's usually some level of overlap, so it has to be a really unique value proposition. It doesn't conflict with existing portfolio companies or, and hopefully complements them in some way. Um, and then I, I think like beyond that, I think about investing from a very first principles approach. So after someone's passed those steps, I'll usually take a call with them. And as I'm on the call, I'm thinking through like the three different axes that I think about as a fund manager. So a very founder focused. So the first is, are they a compelling storyteller from a quantitative and qualitative perspective? Because this is important, whether you're selling to customers, whether you're raising capital, whether you're retaining employees based on an incredible, you know, shared fiction that building a company is. Um, the second is, do they have a strong mission? I think what I've seen from people of my generation is they want to work for a mission driven company that's really important and drives shared action. And the third, and, and I would argue one of the most important components of my investing work that I look at, um, is execution velocity. So I'm an engineer by training and I think about velocity is a vector being speed and direction. And so how, and I think this goes to like, if you think about like fund managers or founders not having a track record before, like I bet a lot of first time founders and I look at in their past, like how have they been able to decide a direction and then how quickly have they been able to iterate and move in that direction with what speed? Um, and I think those three components are things that I've identified in myself that have helped me become like relatively, I don't want to say successful because, uh, everything's still on paper, but, um, have been able to grow like quickly in this

SPEAKER_331: field. So I feel like I'm uniquely equipped to understand those characteristics. Amazing. Let's

SPEAKER_219: give it up for Sophia, Paige and Kelly. Well done. Thank you so much.