SPEAKER_00: Angel is brought to you by NetSuite from Oracle, the only system you need to run your business. Go to netsuite.com slash angel to get your free guide called Crushing the Five Barriers to Growth.

SPEAKER_02: Hey, everybody. Welcome to Angel, the podcast. I'm your host, Jason Calacanis. And this is the

SPEAKER_04: podcast where we talk to investors, early stage investors. Now, some of them are running incubators like my guest today. Others are angel investors. Some have small angel funds, and some are even venture capitalists, but they all operate in what we would call early stage investing, which means day zero to day 1,000. The first three years of a company, as far as I'm concerned, is the early stage. Now, what do I do? As an angel investor, I invest in 30, 40 companies a year. And I do it with a fund and with jasonssyndicate.com, which if you're an accredited

SPEAKER_02: investor, you can go there and sign up. And you can see the angel investments I'm making and potentially join us as we invest in companies. It's a lot of fun. Read the book, angelthebook.com. That's a book I wrote about my experience investing in 150 companies, the lessons I learned, hitting six

SPEAKER_07: unicorns in 125 investments. Now, my guest today is Pete Flint, and he not only is an investor now with NFX and running an incubator that has just great buzz, and it's relatively new, but I met him

SPEAKER_08: when he was the CEO of Trulia, a unicorn. I believe you hit unicorn status, did you?

SPEAKER_04: At least, yeah. Yeah. Which was sold to Zillow. Tremendous. Did Trulia go public and then got

SPEAKER_09: bought by Zillow? Yeah. So we went public in 2012 and then acquired or merged, stock for stock merger with Zillow in 2015 for three and a half billion. Amazing. Congratulations. And we met

SPEAKER_13: because we were both Sequoia CEOs. We met at some dinner sometime long ago. But I want to go a little further back. Normally on this program, we get right into angel investing, but I want to just get a little history from you because you also worked on a web 1.0 company, which I was in love with when I was a journalist in the 90s called lastminute.com. Correct. Am I correct? Yeah. Now, you weren't the founder of Last Minute. You joined the management team. What was your role at

SPEAKER_09: lastminute.com? So, yeah, lastminute.com, a fascinating web 1.0 company. Explain the concept of this

SPEAKER_17: business and why it was such a juggernaut and so inspiring to people in the early days.

SPEAKER_09: Yeah. So lastminute.com started in 1998, 20 years ago this year in London. Yep. And the basic idea, which was like this empowering nature of the internet, was taking this unused inventory, whether that's flights, hotels, theater tickets, restaurant bookings that was essentially unsold at the last minute, putting that onto the internet, some opaque pricing, but certainly discounted pricing, enabling people to take advantage of these last minute breaks, last minute hotels, last minute flights. And it was, um, you know, an iconic internet company at the time. So we went, so I joined, so I used to work with Brent at a previous, he was the founder, he was the founder, Brent Hoberman,

SPEAKER_19: Brent and Martha. Wait, wait, you worked at an internet company before that in 1998. What was that

SPEAKER_09: company? So it was a small internet company. It was, uh, it's essentially a JV between, um, British Telecom and News Corp or News International. So it's basically the access of trying to be the air well of Europe. Wow. So it was basically the connectivity of British Telecom. So this is what, 95, 96? So 97. So it was like, I graduated 97. It was my first job. Incredible.

David Friedberg: So you're right there at the dial up stage of the internet.

SPEAKER_09: Yeah, pretty much. So absolutely. No, this is definitely, so I've, my, and then the internet company before that in 96 was a company called Delphi creative, which was like this tiny internet studio. So literally this was like my, um, so my foreign to the internet was, I was, I took a job while I was at university at JP Morgan, because I was like, I was like, do I want to become Oxford

SPEAKER_27: or something? Oxford. Yes. I can guess. So you know how I knew that? Your accent and you're successful.

SPEAKER_29: Okay. Well, is that the number one school in the UK? Oxford? I mean, Oxford and Cambridge are perceived to be. Which one's better in your opinion? Oxford. Of course. Of course. No, which one's harder to get into? Would it be like Harvard versus Stanford? Would that be a fair comparison? Cambridge versus Oxford?

SPEAKER_31: Well, I think they're a little bit like, I mean, it's like different things for different, you know,

SPEAKER_09: different subjects. So like Oxford is good at other, some things and, um, and Imperial is very good for the software computer science. But the, um, you know, anyway, for me, it was like, I went to get into the

SPEAKER_35: internet. Um, and, uh, I wrote to every internet company in 96 of which there were 32, um, and one gave me a job as Delphi that kind of became line one. And then anyway, I met Brent at line one and then, um, and then when he started last minute in 98, I joined him as first employee. It was such a

SPEAKER_38: great concept. I just loved it. Like it was predating Groupon, which was like group buying, but it was,

SPEAKER_08: it became a phenomenon in Europe because I think young people would on a Thursday or Friday be like, let's go to Ibiza. Let's go to Berlin for a hundred dollars, for $50, for $25 a night,

SPEAKER_09: whatever. It was a, I mean, literally a phenomenon. So we, so we started in 98, went public in March, March the 12th, 2000. And you'll remember that was the peak of the NASDAQ. So we raised like

SPEAKER_23: 200 million, like, and literally two months later, the NASDAQ went from 5,000 to 1500.

SPEAKER_09: Oh, and it was like, I mean, literally the price of the peaks that went down immediately, but it was like, I was in charge of growth. It wasn't called growth then, but it was like, that was my job. Yeah. And it was just a remarkable experience in terms of how to build an internet company. We did so many things, right? So many things wrong. Yeah. Um, and I think, you know, as I think about kind of folks that I looked at back now, it's like, is people have been in that kind of like, um, early hyper growth experience, not necessarily the founder, but kind of seen that experience, which is just like super, super valuable for me. So the company would raise a bunch of money in 2000, navigated the dot-com collapse. And then as a travel company that had the, the, the, the travel collapse that came after September 11th, acquired a bunch of businesses. I left in 2003 to move to the U S and then the company was acquired in 2005 for over a billion dollars. Um, wow. Uh, by Travelocity. So yeah. So that's amazing. So you went from the travel space

SPEAKER_04: into real estate and truly a, was the business model. I mean, it was the most beautiful app in

SPEAKER_08: the real, real estate space. I always told you that I thought you made the most beautiful one and you were really early on the mobile tip. So I think you beat everybody to mobile and it was a

SPEAKER_52: lead gen business. That was the primary kind of use case. So you printed money every time somebody went to look at a house, you got 25 or 50 bucks from a broker who won the lead. That was the main

SPEAKER_09: business model. I mean, that's so the, so the original concept was that, uh, so I didn't know anything about real estate, but I moved to the Bay area in 2003 and soon after trying to find somewhere to live and you, and you get a quick education, you get a quick education. They're the only way to access information is by speaking to a real estate agent. And we all know, we love to be kind of

SPEAKER_35: empowered and in the driver's seat. And like, I said, where is the app to like, to help you kind of find this information. So the, the original premise was how do we have the most comprehensive information about real estate combined with the most beautiful user experience

SPEAKER_09: to help people navigate. And then we'd monetize through like all we could see all this like print advertising, which like billions in newspaper classifieds that's clearly going to follow the audience. So that, I mean, it was kind of a simple kind of business idea back then, but that timing perfect kind of impeccable that was, that was the sort of like, um, uh, the good

SPEAKER_60: 40 plus a whole bunch of execution and growth and product innovation as investors. We like

SPEAKER_07: to ask the question, why now you've learned this now cause you're investing. What was the why now for Trulio? When you look back on it, what was the why now? Why did that business

SPEAKER_13: work at that moment in time?

SPEAKER_35: So, so two things principally. So one was the availability of structured data or search capability.

SPEAKER_09: So we, so we conceived of the business, um, just around the time when Google would go in

SPEAKER_35: public. Right. And it was just like Google was this phenomenal ability to kind of aggregate and find unstructured data and essentially structure it. And so we built a, a vertical search engine, essentially for real estate. Um, and so then they, and plus the data fees were coming out. So there was this availability structure data. The other piece was the, you know, post.com

SPEAKER_09: collapse, the massive availability of broadband. Right. So like pictures, pictures and maps.

SPEAKER_35: Right. And so like, and so we, so we were, it's remarkable to think, but we were pretty much the first real estate listing site with maps nationwide, which was like kind of like, and we turned a 1d experience into 2d and enable people to navigate this. And so that, and that was like, this is an amazing experience that you could like previously stuff. You'd,

SPEAKER_09: you'd go through newspapers or you go through, um, yeah. Clipping stuff and making your own

David Friedberg: like spreadsheet of like where these locations were. And yeah. So that suddenly you had this

SPEAKER_09: breakthrough consumer experience, both the news experience as well as in content. So that,

SPEAKER_35: you know, we started off, it's a marketplace business. So we started off on the consumer side, as well as aggregating all this content. And so the, the time, but the timing thing is interesting because it's, we started in that time. So we, we launched at the perfect time. But then as you, as you know, it's like we launched at the peak of the housing market. So in the, in the 2005, 2006 period, the house prices peaked, sales transaction peaked. And we were kind of, since that point that the transaction slid down. So, and then obviously in 2008, the, the, um, housing clouds, which was precipitated by the financial classes, precipitated by the housing

SPEAKER_70: cloud. Everything changed.

SPEAKER_71: When you go through your second crash, what did you know from the first crash that informed

SPEAKER_07: how you should run truly? In other words, you watched last minute raise money right before.

SPEAKER_08: And if they hadn't raised that money, they would have been out of business for sure. Yeah. And then you watched them weather the storm, get through it and get to a billion. So you must've said, Hey, I'm a pilot. Founders are pilots who went through the turbulence, the worst you could go through lightning storm, turbulence over the mountains, over the Rockies. What, what did you learn going into that? And how did you navigate it? Were you more calm?

SPEAKER_79: Or is it still absolutely terrorizing? Uh, I don't mean to cause any PTSD by the way.

SPEAKER_81: I'm having a little bit myself. It looks like you've got a little PTSD there.

SPEAKER_09: We've all been through them. Like, you know, every business is like, has this kind of crisis moment.

SPEAKER_35: So I think there's, I mean, we had a culture of frugality from the beginning and like, you know, uh, investing in real estate companies in 2006 was a bit like investing in, you know, taxi or ride sharing companies in whatever, 2009, 2010. It's like there, it was extremely unsexy. So we didn't, we didn't have, we'd raised some money, but we were incredibly frugal. I think there's sort of like, um, you know, firstly, you need to think about like, what is a long-term trajectory of this industry? And, you know, it was pretty clear back in 2001 that like people didn't want to fly near term. People didn't want to go in hotels near term, but ultimately they are absolutely going to fly.

SPEAKER_85: They're absolutely going to stay in hotels. And so how do you, how do you take advantage of this, this opportunity? Like let's not waste this opportunity. So the other piece.

SPEAKER_86: So in every crisis there is an, in fact, an opportunity.

SPEAKER_85: Oh, the great Churchill quote is like, you know, seize the opportunity around, around the crisis.

SPEAKER_35: So we, so we, but that's hard to do because you are like deer in headlights. I don't know whether you went to the Sequoia, like, Oh yeah, no, that was, they were like, rest in peace. Good times. Buckle down, everybody.

SPEAKER_31: It was a frightening time. So it's, so one is just having this sort of long-term view.

SPEAKER_09: Actually like this is, and this is a time to date market share.

SPEAKER_35: If you have the capability to do that, the second critical thing is around culture. And I think that the, you know, we had built a firm culture, a strong culture prior to that. And I think that's, is that trust in each other, trust in the kind of the leadership, trust in the model, the collective teamwork to kind of, to navigate this stuff and, and do it together. Was that, that, you know, there's no way you can kind of get through this stuff without like that culture and that team to do that. And those, and those things we'd kind of built that foundation for the beginning. There's, you know, there's a million kind of tactical things, but like, you know, being thoughtful about timing, aggressive around market share. We knew that like, you know, analogy I was telling the troops back in 2008, 2009 was that like, you know, the massive web 1.0 travel companies, Expedia, Priceline, Booking.com, you know, were, were built in the 2001, 2002, 2003 timeframe. Everyone else kind of created, but they kind of their chief scale. So what happened for us was that we, we kind of navigated this, this period and we, you know, we had to pivot business model, whole bunch of other things and then came out incredibly strong.

SPEAKER_44: Yeah. And both times you weathered an 80% decline in the market, which is when you think of it, just unbelievable.

SPEAKER_09: But it's, it's, it's, it's like, I mean, that's a contraire view of investing, right?

SPEAKER_35: Those are the, it's clearly the worst time to, you know, to perceived to be the worst time to get involved in online real estate companies in 2009 or get in online travel companies in 2002.

SPEAKER_85: But looking back, it was like absolutely the right time.

SPEAKER_04: All right. When we get back from this quick break, we'll do a quick segue into your investing career after you've navigated successfully through two amazing exits with Trulia and last minute. And we'll talk about why you decided to go into investing and join and or create, you created NFX, right? Or they recruited you. A bit of both.

SPEAKER_98: A bit of both.

SPEAKER_04: When we get back on Angel, the podcast.

SPEAKER_13: Okay, everybody, let's talk about something important. The top barriers to your growth, to the growth of your startup. Well, an Inc 5000 survey tackled this very topic, the top barriers to growth. And here are those top barriers. Number one, it takes finance too long to close the books. We've all been there. Two, the company is too slow to launch new products. We've all been there as well. Three, hiring and keeping good people. We all know that's difficult. And number four, managing cash. Very hard. And number five, too many disconnected systems. We're all struggling through this. And finally, it's hard to get a full picture of your biz. Yes, that's what Inc 5000 learned when they did their survey of the top barriers to growth. And because people have outgrown their business and financial management systems, they are facing these very six issues. That's why QuickBooks and spreadsheets might be fine to start, but eventually it starts taking two, three, four times as much work to get answers for your business. And those answers aren't always correct. They're outdated. They're incomplete. And you should know that the number one system for growing companies is NetSuite for Oracle. So when you outgrow all this QuickBooks and spreadsheets and disparate systems, and you want to really get your company to the next level, you need NetSuite from Oracle. NetSuite is the one system that tracks and manages revenue, cash flow, HR, inventory projects, and even e-commerce for every industry. Now you can run your business from a dashboard on your phone. That's why thousands of companies use NetSuite. It's the only system you need to run your business. So here's your call to action. Go to NetSuite.com slash Angel. NetSuite.com slash Angel and get your free guide. And that guide is called Crushing the Five Barriers to Growth. That's NetSuite.com slash Angel, NetSuite, S-U-I-T-E.com slash Angel. The only system you're going to need to run your business.

SPEAKER_08: Thank you so much to NetSuite from Oracle for partnering with us on Angel Season 2. Thanks again to the team at NetSuite. Okay, let's get back to this amazing episode.

SPEAKER_02: Welcome back to Angel the Podcast. You can visit us, angelpodcast.com, or you can search for Angel in your preferred podcasting app,

SPEAKER_08: whether that's Spotify, iTunes, or Overcast. And when you type in Angel and you search for it, you will find a bunch of podcasts by religious people who believe that angels are among us. That's not what this podcast is about. This podcast is about angel investing. So you probably want to type Angel Calacanis. But we do get a lot of people, for the people who are listening right now, who thought they were going to get a religious podcast, praise Jesus. I'm sending all the angels to you. My guest today is Pete Flint, and he is a serial entrepreneur who is now doing investing. About, I don't know, a year or two ago, I became aware of NFX. People kept saying NFX Guild. They kept saying there's an incubator or an accelerator or an fund. Clarify for us, what is NFX? Because I know you have two partners or three partners in this thing. Yeah. And when I saw you go over there, I had heard the buzz about it, and I didn't know what it was. I didn't recognize the other partners. But I saw you go over there and said, hey, this must be legit. Yeah. What is NFX? Why did you join and or found it?

SPEAKER_09: Yeah. So NFX today, we're a $150 million seed fund. So we just announced our seed fund back a couple of months ago, end of November, early December. And our focus is investing in so-called network effect companies.

SPEAKER_35: Okay. What does that mean?

SPEAKER_105: Define network effect companies.

SPEAKER_35: So essentially, a network effect company is one where, with each additional user, it makes the product better for every other user. Got it. So there's sort of classic examples. We know, obviously, Uber, Airbnb, and my domain, last minute, is essentially a travel marketplace. Yeah. Trulia is essentially a real estate marketplace. We also think about platforms, data network effects, a whole bunch of different companies that sort of exhibit this property from B2B to B2C. So our thesis is to invest in network effect businesses. The kind of, I'm so fortunate to work with two incredible partners. One is James Currier. Yeah. James is based in Silicon Valley with me. He's got this amazing background, both an entrepreneur, as well as an investor advisor. He's founded a number of companies that have been very, very successful. He's an advisor and he's sort of a growth whisperer to an amazing number of people, an investor in companies like Lyft and Poshmark and DoorDash and Howes and many others. Amazing. And then Gigi Levi Weiss is based in Israel, but he's back and forth a couple of times a quarter.

SPEAKER_110: So you're actively investing in Israel as well or most of the US?

SPEAKER_35: We are.

SPEAKER_19: Absolutely, yeah. But those aren't network effect type companies. They're not known for marketplace. They're known more for enabling tech. Is that right?

SPEAKER_09: Yeah, certainly some truth in that. We have a very broad sort of aperture around like how we think about network effects. Got it. So let's take Waze, for instance. Sure.

SPEAKER_35: Waze is an Israeli company. Incredible. The more people use Waze, the better it gets.

SPEAKER_113: And like, you know, every Uber or Lyft driver pretty much uses that. Absolutely.

SPEAKER_114: I mean, if you think about network effects, one of the amazing things that people, I think,

SPEAKER_02: don't actually understand about a network effect is that every time somebody joins, it potentially makes every other person's use of that product considerably better. So the way to think about that is if you and I had a fax machine, we can each fax one person.

SPEAKER_117: Yeah.

SPEAKER_02: There's two connections, yours to me, mine to yours. But we had a third person. Yeah. Now both you and I can hit that person up. Exactly. The fourth person comes in. Oh my God. All of a sudden fax machines become valuable. Yeah.

SPEAKER_08: And certainly with Lyft, with the drivers or Uber with drivers, Airbnb with hosts, you start adding more hosts. There's more transactions that can occur.

SPEAKER_114: There's more customers. More customers equals more money for those hosts means they invest more money.

SPEAKER_09: And ultimately what this provides is defensibility. So we've gone back and looked at all the billion dollar plus companies over the last, since the

SPEAKER_35: origins of the internet 20 plus years and seen that 70% of the value that's being created by technology companies comes from companies that have a strong core network effect. So we, we know the names. Sure. Google. Whether it's Facebook or Google as ad network fundamentally where they're monetized. So like once, and once you're like in and start and scale a network affair business, you realize there is no other type of businesses that's as interesting or as valuable as a network affair business. Ultimately because they create winner take most or winner take all. Yeah.

SPEAKER_08: Winner take most seems to be what we're seeing these days. Usually there's like a duopoly or three people involves chopping it up. The first one gets 60, 70% like Facebook, Twitter and Snapchat get 10% each or something of social networks and we're done.

SPEAKER_35: I mean, it very much depends on the type of network. Yeah. So we've, we define 13 different types of network effect and so, and built playbooks for each of them. So the, I mean, the tighter, the, the sort of, the more defensible the network effect is, the higher the, uh, the market share. So let's just take ride sharing. So it's certainly in, in the Bay area, it's a duopoly right now. Um, and that's because there's an asymptotic network effect.

SPEAKER_85: As long as it's. Assymmatotic. Assymmatotic. Assymmatotic. Assymmatoting.

SPEAKER_08: Um, okay, hold on a second. I don't have a dictionary handy here. I mean, we're wearing Jackie's going to put the definition to explain to us what Assymmatomic means.

SPEAKER_85: So Assymmatoting. Assymmatoting.

SPEAKER_08: Assymmatoting. I didn't go to for up here.

SPEAKER_124: I didn't go to Oxford. I'll be honest. You gotta tell me, define this word.

SPEAKER_35: So essentially what it means is that like you do, you and I don't care. As long as the pickup time is three minutes or less. Ah. Commoditize. So there's a commodity type business. Well, there's a necessary scale. Ah. But then like, I mean, the definition of a network effect is that as each incremental user makes it better for every other user. That is true up until a point. Right. And that point for most people is three minutes in, in the. Wait time. So as you think about something like Airbnb, that is a network effect business, but it's actually not, it's, it's really become more, um, in many people's eyes, almost a monopoly for that type of it. Sure. Because of the lack of commoditization of that product and the multi-tenant lack of multi-tenanting. Yeah. After on the supply side. So you, so we're, you know, we're incredibly deep in these types of network effect business, both as operators and as investors. And so, you know, our, our view is that we think that this is the most interesting type of company to invest in. And we're kind of, you know, multi category, multi industry. What about Amazon?

SPEAKER_132: This is one of the biggest companies, but they have a small percentage of overall commerce,

SPEAKER_02: a decent percentage of online commerce, but they certainly haven't been winner take all,

SPEAKER_04: but they've become huge. Is that a network effect business in your mind? I think it's, so it's interesting.

SPEAKER_110: The shopping side of it, put aside Amazon web services, but the shopping, you and I buying.

SPEAKER_31: So Amazon absolutely didn't start as a network effect business. Right.

SPEAKER_09: So there's this, you know, it's defensibility was principally through brand as a first move advantage to scale through the distribution piece.

SPEAKER_35: But what they added on, you know, during the kind of the, you know, several years after the launch was the marketplace and network effect side of that business. And you think of, you know, everything from this data network effects from the recommendation engine and the reviews down to the, down to the marketplace, you know, where they've with third parties can sell parties selling. And so they've, they've, the initial entry point was, was not a network effect business. And now this gallery, absolutely a network effect. And their defensibilities are monstrous now from scale to brand to embedding in all these systems. And then obviously network effect, which we think is the most interesting cause it's, it's frankly the cheapest to, to get going.

SPEAKER_08: I wonder how you think about the data thesis of investing, like whoever has the most data. Cause network effect is something we've all been sort of watching over the last couple of years. Okay. You get it net marketplaces, network effects is a good place to, to fish for startups and to build great businesses. But now we're having a whole group of people are saying, you know, it's the data. And in Amazon's case, they can study the data of what's being sold and say, you know what, we should make a camera bag. And so my camera bags, an Amazon camera bag, Amazon basics. Yeah. And they've gone to, I think something like 1500 skews that are Amazon basics now from just like a hundred, like the cable. So what do you think of data businesses like Facebook putting aside their network effect being potentially another thesis for investing? So do you look at that lens of the power of data for sure?

SPEAKER_31: So we, we, so we look deeply at data network effects and so data network effects. I like combining both. Exactly. So there's, so data network effects.

SPEAKER_35: So we, and I think there's like, I mean, lots of said about the incumbency advantage around data network effects and AI businesses. So like, so how is it possible that you can ever build a next generation kind of, let's say travel company because all Expedia and Booker.com have all this data. And I think the, the kind of interesting thing is like some of the, some of this data is as used the same language as before as asymptoting that you don't just like in Yelp reviews, like after the 50th review of a restaurant. Like I don't need the 50 first, I've got a sense of it. So that, so some of this data is asymptoting. The other piece is that the data is often not the right data to solve the problems. So take self-driving cars. It's like, it may be awesome that Tesla has all this data, but it doesn't have the LIDAR data around it. So there's the data network effects and self-driving cars. And the, the more data you have, the safer it is, the safer it is, the more distribution there is, hence the more data, but are you getting the right kind of data?

SPEAKER_09: So, um, it's a like, you know, we're, we're pretty sort of, um, technical and, and kind of deep in this network of it.

SPEAKER_35: And we think that that's, you know, that the ad job is to spot network effect businesses before there's like a true network, um, opportunity.

SPEAKER_85: And it will also help them to scale that.

SPEAKER_145: So, uh, why did you decide to stop being an entrepreneur and to start being an investor? I'm curious, people have different reasons to do this.

SPEAKER_13: You're rich. You've got a lot of money, man. You took to cook a company public. You don't need any more money, right? Like why do this?

SPEAKER_31: So, uh, I mean, you know, this, like you've, you've kind of been, you've been starting companies, you've been investing companies.

SPEAKER_35: This is the greatest thrill you could possibly have while working is unfrigging believable. So I, so I, you know, I came out of 10 years at Trulia. Um, and, uh, you know, I sort of forced, or maybe my wife forced me to take a year off and like, okay, let's just like calm down. And what was that year like for you? Well, I had my second kid then. So, uh, so I was changing diapers and like, lovely, but what I, you know, what happened was I dropped my daughter for school and then, and then, um, meet with entrepreneurs, you know, literally from kind of 10 to a five. Um, and it was, and I, and I was sort of testing out this idea of being an investor. I spent a little bit of time at a, at a sort of VC back in 2004.

SPEAKER_155: Oh, it was like a venture partner or something like loose affiliation.

SPEAKER_35: Yeah. While I was at Stanford, um, at grad school. So I was like, and it was like, it wasn't the right time for me then, but this was just like, you know, the greatest impact you can have.

SPEAKER_158: Were you part of the Sequoia Scouts program?

SPEAKER_113: I was not, no, I kind of already had liquidity when they were like, um, and you were like, I don't need to be part of that.

SPEAKER_156: Um, did they ask you, did you pass? They did ask me, but it wasn't like, I already had sort of.

SPEAKER_162: So getting a hundred K or 50 K or 25 K from then to invest wasn't necessary.

SPEAKER_35: We were, yeah, we, I'd already taken truly a public by that point. So it wasn't like, um, so when you're meeting with all these founders and they're telling you, Hey, here's how I'm going to change the world. And he said, but it, so, so what I found, so I started angel investing and it's, and it's like, it's incredible. And it's like, you know, a number of very successful entry investments as well as, um, you know, incredible fun dealing with entrepreneurs, but I actually found it quite unsatisfactory in that it's a, you know, I've, I've found professionally that, um, working with teams of smart people in solving massive problems is the most rewarding thing. And for me teaming up with James and Giggy is just sort of incredibly valuable. It amplifies my good ideas. Yeah. It sort of like it changes and, and sort of like, uh, evolves my bad ideas and it's, uh, it's just more fun working with, um, with other great people. So that was my kind of, I wanted to be part of a team sport as opposed to an individual. So angel was good. It was a way to kind of test my learning on my own money. But I wanted to, you know, what we think about what we're building right now is really much more of an institution that we're trying to. Okay.

SPEAKER_85: How can we turn a kind of interest and experience in, in investing into a much bigger platform?

David Friedberg: Yeah. Speaking of platforms, I logged into something at NFX, it went into my Gmail and figured out who I knew and how many jumps I was from everybody.

SPEAKER_08: And I was like, Oh my God, I don't know if I want to do this because it's going to result in my email box getting a lot of, uh, emails, but I'm in the business of getting emails.

SPEAKER_04: So what is this product that you created?

SPEAKER_02: Cause I don't know if it's for me as in, you know, super router angel, or if it's for new investors or it's for founders, what is this product called? And is it just a little experiment?

SPEAKER_171: Yeah. So we launched a service you're referring to signal signal. So signal.nfx.com.

SPEAKER_35: So this is a, this is a product we've been working on for last year or so, which is essentially solving the problem that, you know, very, very well, which is the warm introduction problem, which is like you probably like me gets, get thousands of emails a year from entrepreneurs who are looking to get capital. Yeah. And having a warm introduction is the best way as a filter to say, well, that's kind of interesting. Okay. If this person thinks it's interesting, that's a great filter. Um, and we were finding, and we built this product initially for ourselves. So with the problem, what we found was that kind of, we were spent literally hours every day making warm introductions. So we built a software to, to, to solve that problem. Um, so what it does is essentially like, um, entrepreneurs. Entrepreneurs and investors log in with their Gmail. It figures out kind of who they know and the strength of that connection, not just like.

SPEAKER_155: Yeah. How many emails have we gone back and forth?

SPEAKER_35: Yeah. We don't read the emails. We don't know kind of what they're talking about. We just like, and in the database, it figures out the sort of strength of connections between people to, to solve the problem. Like, oh, if you want to speak to Rolaf at Sequoia, well, is it like Pete or is it Jason? Who's the best person to make that introduction? Right. Was he on your board? He was not on my board. Right.

SPEAKER_182: Exactly.

SPEAKER_35: So there you go. But I, but I know him, but you, you probably have a tight relationship with him. So perhaps. Yeah. Um, so that it figures out kind of who makes a warm instruction. So it's a software problem, a software tool that's solving this problem for entrepreneurs. Got it. Good for investors. It's good for entrepreneurs. And this is like, I mean, so why are we doing this?

SPEAKER_184: Like why are we kind of, why are we building software?

SPEAKER_35: Building software. So one is like, we bought it for ourselves, but it's a network effect business. It's network effect product. So the more people that use it, the better it gets. So we open it up to everyone to get them to use it. Yeah. Two is that we are a collaborative investor. So we're like, we, you know, we're a seed stage investors, you know, seed rounds are typically collaborative, you bring in other people. And it's like, and so we wanted a tool that we could like figure out, okay, we can work with other people. Sure. To, to navigate this three is like, you know, in our heart with software entrepreneurs, we like building products. Yeah.

SPEAKER_186: You look at the world through a software lens.

SPEAKER_35: Exactly. And we see a problem and this is more broadly, we'd look at venture capital. We think this is like kind of an antiquated industry in the same way that software is transforming everything else. You know, we think that ultimately software will transform venture in a, in a kind of meaningful way. It's not, it's not necessarily to replace, you know, the general partner, although that, you know, that may happen at some point.

SPEAKER_06: Well, it might replace 20% of augment 20%. So you're really making partners bionic when you think about it. It's sort of like a cyborg kind of thing.

SPEAKER_35: That's exactly how we think about it. Like how can we, and it's also like, and we, and we think about, we think about different levels. So we think about one is like, we want to build software to help us become bionic and help us to be more successful. Two is want to build software to help our portfolio companies to be better at what they do. You know, there's, and that's beyond just a simple form. And three is like, unfortunately we can only touch like 90. So we can only touch 1% of the people that we want to work with.

SPEAKER_113: So how do we build software to help everyone? It's interesting.

David Friedberg: We all come to it with what we know. You're a software, you know, a software people, you build software and me as a media person,

SPEAKER_04: I built a podcast, write a book and have an event, right? Like it's like, all of these things are potential ways to solve some of the same problems and getting to know people.

David Friedberg: What's the average check size that NFX likes to write. Is there an average check size?

SPEAKER_35: Yeah. So we invest, um, I guess the sort of tip it we've done, we've been up and running for almost six months that we've done about, um, eight transactions right now.

SPEAKER_31: They're all stealth. We haven't kind of announced anything right now, but like you've done eight investments. Yeah. Fascinating.

SPEAKER_110: I didn't get one email from you about any of these. Well, don't you want to have the world's greatest angel investor in any of these deals?

SPEAKER_08: I keep saying that someday it's going to be true.

SPEAKER_198: Uh, but what, what's the story here? How come I haven't got any emails yet?

SPEAKER_200: So, uh, so. You took the whole round? No, we didn't take the whole round, but like we don't, we don't, you know, you only reached out when, when the podcast, so we need to spend more time together.

David Friedberg: Exactly. So this is the thing that we've at angel investing really is about is understanding each

SPEAKER_08: other and what, how you invest.

SPEAKER_170: It's one of the reasons I started this podcast is we understand what we're looking for and what target zones. Yeah. So what is a chip table check size?

SPEAKER_35: Can you have 150 million off on 500 to a million? So the majority of deals we've done is one to 2 million bucks. Oh, okay. So this is a serious check, right? Yeah. So we typically as one to 2 million bucks, um, which has been the majority of the deals that we've done, we've done, so ownership is sort of 10 to 15%. Right.

SPEAKER_189: Cause you're investing in companies with six to $12 million valuations. I would guess 15 million of that kind of neighborhood.

SPEAKER_35: Yeah. So these are bigger seed rounds typically. So we, I mean, we, we span from kind of pre C to a, but like vast majority of stuff we've done is at the seed stage.

SPEAKER_189: And interestingly, the seed stuff would have been the series a when you and I were coming

SPEAKER_35: up.

David Friedberg: Oh yeah, for sure. $3 million around. That was a series a 10 years ago.

SPEAKER_35: Yeah. Yeah. The truly a series a was 2.4 million on a 10 million post. Yeah. Not even that, but it's like. Nine million post. Oh yeah.

SPEAKER_23: Around that figure. Yeah. It would have been like for 20% of the company or 30% of the company. Yeah. Now truly would have gotten what?

SPEAKER_207: Uh, I don't know. For 20% of the company. Probably like a, what's a 90, 90 million series now.

SPEAKER_103: It was one of those, wasn't it? Oh yeah. Yeah. It's crazy. It's crazy. Uh, I don't know, but like. You take a board seat?

SPEAKER_07: Because that's a pretty significant. If you own 10, 15%, do you think there should be boards? Do you, are you pricing the rounds? Two questions.

SPEAKER_171: So we, so we certainly are pricing the rounds in the majority of cases, but not cases.

SPEAKER_13: Why are you pricing the rounds? Explain to people why you think this is a good practice.

SPEAKER_09: Well, I think it's, so you, what you see is that the overhang of the debt, when companies

SPEAKER_35: are raising kind of multiple debt rounds, the overhang and complexity of that is, is bad from a dilution perspective from the entrepreneur, but creates this sort of ambiguity and lack of, um, willingness to step up from an investor to say, we're committed to this company. And so we're, you know, we've done a lot of, you know, as a group, we've done 300 investments. So we like, we're pretty high conviction when we, when we want to invest. And so that means like, let's do the round, let's price the round, let's make it.

SPEAKER_07: So you lead and price and you say, Hey, listen, we'll do this, but we want it to be a price round. Yeah. And do entrepreneurs fight you on that or no?

SPEAKER_215: They're just like, we're just happy to get you on the team.

SPEAKER_09: Like, I mean, there's a sense of like, they, they, I think pretty uniquely because the operational experience we kind of bring, they kind of like, okay, we want, we want

SPEAKER_35: NFX on board to help us to scale this business. And then we don't, we don't, um, we act like board members and we set up board meetings and we are kind of incredibly engaged in the company. Yeah. We don't typically take board seats at the initial investment. Got it. Although as we kind of like either sort of scale our ownership and get to know each other, then we would, we would head down that path. We like, we sort of think board, board participations are two way street as well. If like, if we're adding value and they're adding, you know, they're finding that, you know, that, that the relationship is going well, then it will head in that natural direction.

David Friedberg: Yeah. And you have a bunch of people who are unwilling to take board seats or unwilling to price these rounds. So I feel like it's creating a bit of chaos.

SPEAKER_171: I think that's, I mean, that was our observation. So we had a similar one.

David Friedberg: It's just chaos out there.

SPEAKER_35: Yeah. There needs to be someone to step up and say, like, okay, this is, we're going to get behind this company. We're going to speak to the entrepreneur. We speak to the entrepreneurs typically weekly where we, where we're spending an hour, certainly the beginning of the relationship. And now, uh, with the entrepreneur talking through everything, we help them set up board meetings. We give them kind of access to our broader community of founders to help to share different information, whole bunch of different content, which, um, helps them to kind of ultimately have a fast start when they're, when they're getting going. There's a, you know, there's a bunch of, we think there's a bunch of content out there, which is available. But, you know, we, we talked about the sort of, you know, NFX guild, the guild piece of NFX, essentially this community of founders, which help each other. So like, so when you and I first met at Sequoia dinner was essentially like a private group of portfolio companies that is sharing the secret kind of tactics.

SPEAKER_227: Yeah. And you and I were like talking SEO and mobile. And what about this new iPhone? So this, so the really cool stuff, the app store came out is the really cool stuff is

SPEAKER_35: not published, but it's shared between portfolio companies. And so we try and facilitate that.

SPEAKER_13: And it will be published typically 18 months after it's important. Exactly. Yeah.

SPEAKER_04: So it's always trailing by the time somebody writes it as a medium post, that's like the 18th person to use the technique, which means the techniques probably been burned out

SPEAKER_215: by then if you're getting it at that point.

SPEAKER_85: Exactly. So it's like the bleeding age stuff happens founder to founder. So we try and facilitate that.

SPEAKER_234: What qualities do you personally be leaving aside your partners, but just you look for in a founder, what do you think is important?

SPEAKER_35: So, so three things. So one is persistence. Hmm. You know, this is a, like, you know, Trulia took a decade from founding to exit. Yeah. Um, persistence. And we'd love to back kind of founders that become, you know, that will be the CEO of the

SPEAKER_184: company through kind of been in beginning.

SPEAKER_07: How do you know if the founder is persistent when there's only six months or 18 months of data? Is it just a sense you get from talking to them that they're never going to give up?

SPEAKER_35: I think so certainly it's trying to look back in their past. What are the kind of like, have they approached things? What are the adversities they face? How, how are they, how driven are they? Yeah. Truly driven. Right. To, to change the world. And, you know, and it's also about making sure that there's a passion to the problem that we're trying to solve. So driven and passion.

SPEAKER_239: Yeah.

SPEAKER_35: But there's just, you know, persistence and that can show up, whether that's like, they're a chess champion or they're an athlete or they're like, they've done something remarkable that gives them the persistence to go, or they've, you know, recorded 800 blog posts. Like there's, there's a like a, or a podcast is like, um, um, so certainly that persistence. Next there's this, um, what is this unique insight around the market or unique technology capability, unique founder fit this often, you know, to get sunny and network effect businesses. There's like, how do you solve one side of the, the chicken and egg problem? How do you kind of like, how do you get this thing going? How do you turn like, you know, fuel into fire? Right. Um, and, and, and what is that insight, that capability? Um, so that could be an idea.

SPEAKER_245: It could be an insight. It could just be some strength they have.

David Friedberg: Like they just know how to onboard drivers or get, you know, it seems to me like the Airbnb people just really knew how to like build a listing page. Like they knew to go take the photos, even though they didn't have photography.

SPEAKER_211: Like, you know, we need better photos. Let's go take some photos.

SPEAKER_09: And the sense of this is a, you know, design led. Yeah.

SPEAKER_35: Um, and PR, you know, they were able to kind of the insight around that and scrappiness. And then the third piece is like, is not just good at building product, but good at building company.

SPEAKER_249: Hmm.

SPEAKER_35: And, you know, there are so many founders that kind of like, you know, hit a wall at a certain point, whether they like, you know, then they're not, they don't want to scale or they can't scale and just a thoughtfulness around company building. Yeah. Because it's like, it doesn't, doesn't matter how good your product is. If you, if you're not able to build an amazing company around that. Yeah. Then you're ultimately not going to be successful.

David Friedberg: So Reed Hastings comes to mind, like they got the product right, but he just also seemed to be obsessed with the product that is Netflix. Yeah.

SPEAKER_13: Yeah. Who do you look at that? You say, wow, that person is just obsessed with the product. That is their company. You have a good example of that where you go, wow, this person really works on the features inside the company.

SPEAKER_254: Tony Shay from Zappos comes to mind too. He was a real culture obsessed person. Yeah.

SPEAKER_09: I think, you know, I, you know, the, you know, one of the most exceptional kind of like, uh, CEOs is obviously Jeff Wiener from LinkedIn and that, and I, and I, you know, I don't know

SPEAKER_35: the kind of inner workings, but my, my sense is that the kind of, you know, Reed is obviously a legendary products for us. Yes. And the genius behind LinkedIn, you know, recreated the product, but Jeff created the company. That's right. And it's like, and the, the work that Jeff did behind the scenes, um, um, to kind of evolve that into what it is today is, is, um, is kind of remarkable. Like in our, you know, the, in, in kind of the, you know, some of my angel investments that I've made. So there's former truly employees like Sammy, who co-founded true with me, he's building an

SPEAKER_113: amazing culture within Virta health, which is diet, you know, diabetes. Oh, really?

SPEAKER_89: That's that one of NF X's or yours? That's one of my angel investments. And how is he taking on diabetes? Is he doing with software?

SPEAKER_266: Is he doing with hardware?

SPEAKER_35: So it's primarily software. Um, but it's a, just the clinical trials around that and diet and training and nutrition is such a hard space.

David Friedberg: I just had a company called open listings on, uh, which is trying to do like, um, the red

SPEAKER_04: fin approach to real estate, you know, giving back some of the commission. Uh, and I was just thinking, God, people who go into healthcare, real estate construction,

SPEAKER_13: education or education, music, like these categories are, they need technology so bad, but they just

SPEAKER_08: fight against it. Is it advisable to go into those categories or do you look at them and say insurmountable? Obviously for real estate, you didn't, but education, construction, music, you think

SPEAKER_31: like, uh, too hard. I mean, there's certainly there are categories which is super hard.

SPEAKER_35: So clearly like, you know, music and travel are kind of like ones which are kind of pretty saturated at various different points or sort of challenges from the industry structure. Um, I mean, I think what, like the high level view is I use this phrase called the technology tsunami. So this notion that you kind of see this like unstoppable wave of technology coming in. And it's like, it's picked up the low lying areas. Yeah. So like it's picked up media. Yeah. You know, communication, you know, travel is being sort of transformed and it's moving into higher ground, into higher ground relentlessly. Yeah. And so it is inevitable that it's now kind of transforming transportation. Yeah.

SPEAKER_08: That was a hard one. I remember introducing Uber to people and they're 19 out of 21 or 22 people. I think it was three people said, yes, me, Sian and first round. And so everybody else was like, you want to, one person, you want to be in that dirty business

SPEAKER_13: with those people? And I was like, kind of a little racist, but okay. What do you mean by those people? Like cab drivers, like these are just unintelligent foreigners. I just, it's going to be, your life is going to be dealing with cab drivers. And I was like, okay, that's slightly racist or kind of racist, but I understand you,

SPEAKER_07: you don't want to be in a business where there's a car accident. That was kind of their point. They're like, why don't we just make software is what they said. Why don't we just make software for cab companies?

SPEAKER_09: But I think you, so you start, so clearly it's like massively changed in the last six, seven years. So it's like, and then obviously in kind of real estate, which is a regulated industry.

SPEAKER_35: Yeah. A bunch of kind of a FinTech and regulation changes, but it's like you've seen companies

SPEAKER_85: like WeWork or, you know, Zillow Group's now a $10 billion company and Airbnb is like, it's changing the nature of space. Yeah.

SPEAKER_266: Hospitality, real estate. They're starting to flip.

SPEAKER_85: Healthcare is like, Oh, that's going to be the big one. Is inevitable. And then, you know, in multiple different ways.

SPEAKER_35: So not just in terms of like building apps to help you kind of track your steps. Yeah. But it's, it's, that would be the low hanging fruit.

SPEAKER_286: It's like, yeah, just $99 Fitbit.

SPEAKER_35: But it's, you know, we've invested in synthetic biology and CRISPR companies.

SPEAKER_287: And so, which, what are they doing?

SPEAKER_35: What category? So it's, so it's, so it's in CRISPR specifically. So it's like, so it's interesting how you see these chemistry becomes digital. Yeah. And as we think about it at NFX, how you see these, um, you know, the techniques that are applied in the software era, which is principally network effects. Yeah. Um, are going to be applied also into the, into the biology arena. So like genetics and synthetic biology.

SPEAKER_85: Yeah.

SPEAKER_114: We're all going to have the same dog our whole lives. Like Barbara Streisand. They should be like, Oh, before your dog dies, make another one.

SPEAKER_85: Yeah.

SPEAKER_35: And agriculture, I'm an angel investor in plenty, which raised hundreds of millions from SoftBank. And it's, um, you know, vertical farming and, and agriculture is another incredible.

SPEAKER_04: So somewhere in a city, there'll be a, eventually a 50 story building, like something out of Gattaca or some crazy sci-fi movie with vertical farms.

SPEAKER_09: Well, there's a plenty. It's like, it's exactly what they're doing, which is like turning and they have, I forget

SPEAKER_35: the number, but it's unlike a hundred to one in terms of space efficiency and what they're

SPEAKER_294: in terms of the acreage. Exactly. Cause you've got vertical acreage.

SPEAKER_35: Yeah. And it's like, it's a software company that happens to be in like, um, have they built

SPEAKER_296: units?

SPEAKER_35: Yeah.

SPEAKER_296: What's the tallest unit? How many floors?

SPEAKER_35: Uh, I didn't know exactly, but it's not, it's, you know, there's a sort of midsize, but it's, um, I mean, it's just, it's just the whole thing is that you're starting to use these software techniques, whether that's kind of machine learning, whether it's computer

SPEAKER_85: vision, whether that's kind of automated process start to change all these different elements of our society.

SPEAKER_114: Here's what I think is going to happen. All these garages, you know, being a real estate person yourself, like the, they would

SPEAKER_13: force people to make a certain number of parking spots, like one-to-one or one per bedroom is crazy. Yeah.

SPEAKER_02: And so when we get to self-driving and car ownership in cities is like, you're going to be penalized for a big time. Like if you want to put a car in a city already in London, the congestion tax, you get charged what?

SPEAKER_304: 20 pounds to go into the city during something crazy like that might be 50 pounds.

SPEAKER_13: I don't know. It's absurd. Like only these jerk off bankers do it, uh, in London. And we need that here in Soma. So all these internet people with their cars don't drive into like second and market. It's crazy. But we could reclaim these huge garages in the center of New York, in the center of Paris, in the center of San Francisco and make them into farms or convert them into apartments. Yeah. Yeah.

SPEAKER_35: We desperately need housing. It's, it's, uh, it's inevitable. I think, I mean, like I am, I have this, you know, some people have this sort of dystopian view of the, of the dystopian view of the future. But it's, I'm incredibly optimistic about our cities. Cause you can start to see, like we were just talking about, you know, I bike around the city these days and like,

SPEAKER_309: Yeah. The jump bikes in San Francisco took over in a month. I know.

SPEAKER_35: It's amazing. And so you can imagine, you know, world where there's like, there's no sort of crazy drivers in the city. They're all kind of like pretty safe, tame computers that are driving around. And like, and you get the sides of these streets are going to disappear, which are currently where parked cars are. I think it's, it's a remarkable, we live to 200 as well.

SPEAKER_70: So I know Peter's working on it.

SPEAKER_269: We'll get our, we need to get a blood boy. Maybe we could split a blood boy. Cause I can't afford a full blood boy, but we could split one.

SPEAKER_311: That'd be a great time sharing a blood for people who don't know. There was this rumor that Peter was having transfusions. And then on Silicon Valley, they called it a blood boy where the guy who's kind of the CEO of Google, which they call Hooli on the Silicon Valley show was getting transfusions from like a young athletic.

SPEAKER_07: But it seems like logical that we will, I mean, we've already extended life far beyond what we're, our genetics are supposed to do. They're going to figure this out. Unfortunately, I think we're going to miss it. I think we're going to get, what do you think? We get 10 extra years on average or our kids get 20.

SPEAKER_315: We get five, our kids get 10. I think it will.

SPEAKER_35: I mean, there's a sort of, I forget the term, but there's a kind of a point at which life expectancy increases faster than aging. Right. And it becomes a singularity of sense.

SPEAKER_317: That's not us. I actually think it might be.

SPEAKER_35: Really?

SPEAKER_317: I think, I mean, you know, we're in our forties. Yeah.

SPEAKER_35: Mid, late forties.

SPEAKER_317: You're 45.

SPEAKER_35: 40. Thank you. 43.

SPEAKER_319: Okay.

SPEAKER_35: I'm 47. So I actually think it will happen. I think, you know, the nature of, I mean, just this notion of kind of like, you know, exponential thinking in the sense that you, you under, you kind of like overestimate in the kind of near term, but underestimate in the midterm. Right. I, this and all this stuff is turning from chemical to digital. Yeah. Yeah.

SPEAKER_04: Explain to people what the CRISPR is for people who don't know, cause this is kind of mind blowing for people. Just, can you explain it in a. On the spot.

SPEAKER_97: Well, I mean the CRISPR allows you to modify the. Yeah.

SPEAKER_35: So CRISPR is a protein. Yeah. Essentially. And then there's, um, various different costs cost nine cost 13, which enable you to reprogram. Right. Um, genetic material. Incredible. Which is like, and it's a science, which is like, you know, been around the last couple

SPEAKER_09: of years is quite contentious because the whole kind of pattern fight between kind of Berkeley and in the board Institute. And it's, um, uh, but essentially the sort of the, the capabilities around that on the

SPEAKER_35: kind of near term, allow you to, you know, perception to kind of change genetic makeup of materials, which is like transformational. Um, and so it could.

SPEAKER_334: Everybody's going to have beautiful blue eyes.

SPEAKER_08: I guess. Nobody's going to have brown or black eyes anymore. I mean, it's literally what it's going to be able to do at some point. Right. People should be able to do.

SPEAKER_35: There's a lot of sort of ethical kind of, um, stuff that would need to be figured out,

SPEAKER_39: but it's like, I mean, you know, the amount of sort of genetic diseases and other things that could impact is like.

David Friedberg: Yeah. No. Can you imagine if you have like, I have a family member with cystic fibrosis, which is just, you know, really serious, serious disease impacts a small number of people

SPEAKER_04: in a very big way. And most people don't live past 20 sadly.

SPEAKER_13: We, the same way some plagues and diseases we were able to eradicate, we might be able to eradicate genetic diseases or postpone them.

SPEAKER_09: Or if you think back to like, you know, in the, you know, people created sort of genetic

SPEAKER_35: variations by treating them to kind of a, you know, radiation roses and like all those variation was kind of hit by sort of different chemicals and different, um, different radiation and created sort of different varieties that way. Like it's incredibly sort of cruel and primitive to do it that way. And this technology enables to do that in a whole range of different agriculture and obviously

SPEAKER_09: human biology and, uh, areas, which is, which is kind of, which is completely remarkable.

SPEAKER_189: And it was pretty crazy. I went to Monsanto at one point, they had a couple of entrepreneurs and investors out.

David Friedberg: And I was like, yeah, you know, most hated company in the world doing some of the most interesting things in the world. I got to check this out for myself. And it was quite interesting because they're like, well, here's what we're doing. We're making wheat with thicker husks. I'm like, why are you making thicker husks? Well, because you have these bugs that can eat the husk and then they wipe out the crops. So we just make a thicker cross and a shorter stock. And now we've genetically, you know, and it's like, that doesn't seem so bad to me. Like, is GMO bad necessarily, or is it good? I mean, people have a very, I think a lot of these like lefty organic people are just

SPEAKER_04: immediately dismissing the concept of using science, but we were using science for hundreds

SPEAKER_08: of years to cross beat animals and, you know, make certain dog types and, you know, you know, make certain plant types by, you know, fertilizing tall ones.

SPEAKER_09: But I think what we're seeing is that this is a, like a change in Silicon Valley right now, but like, so I think you look back over like 20, 30 years ago and a lot of the, you

SPEAKER_35: know, you go back to the kind of like Google days of like two Stanford PhDs with a patented algorithm was the hottest thing in Silicon Valley. Right. And then you go into like 2008, 2009, like post the sort of the smartphone launch, it like to kind of design students with a really cool app. Right. And it would like explain the world. And now it's going back to that kind of like, you know, it's engineer driven and it's hard tech. It's, it's, and it's engineers, not only are kind of building sort of very unique IP, but it's also surrounding themselves with thoughtful people to navigate whether it's regulated industries, whether it's tough go to market problems, whether it's tough scaling manufacturing things they're trying to figure out. And it's a, it's a sort of weird time, as you know, the, the kind of like the, the sort of oceanfront for, for investing is extremely wide, but all these different kind of credible, different kind of industries that is, that is impacting. Yeah. And the science behind it is, is incredibly deep and complex. Yeah.

SPEAKER_08: We see in the New York times story, like Silicon Valley's over, everybody's leaving. And that with the exception of the real estate problem, one of you saw the story in the New York times where they're like, Oh my God, Peter Thiel's leaving. This person's leaving. It's over. And I just thought about it. I was like, feels like we're in the second inning or third inning to me. It does not feel like it's over. I mean, certainly San Francisco as a city is completely mismanaged and absolutely a disaster. And the Bay Area is real estate situation.

SPEAKER_07: As you know, being the CEO founder of truly like that's a disaster as well. But the creativity and the boldness of ideas here. I don't know if it's ever been at such a high level.

SPEAKER_09: Yeah. I don't think it's certainly not over. I think that, you know, sort of, you know, we're obviously students of network effects,

SPEAKER_35: the network effect of Silicon Valley with this combination of capital. Culture and talent is, is breathtaking. It is unbelievable. And it's like, you know, while kind of there may be ideas and there may be scaling that happens outside of Silicon Valley. This is the best place in the world, certainly in the Western world to start to build a world changing company.

David Friedberg: How do you think about valuation at the early stage? Do you look at deals and go, ah, you're asking for 15 million. It's really an $8 million company. Or do you subscribe to the, listen, if it's a great company, six, eight, 15. It doesn't matter. Cause the question I get a lot by new angel investors.

SPEAKER_358: How do I know if the valuation is too high?

SPEAKER_35: Well, we, we've forced ourselves to be very, or we, we sort of by nature, pretty disciplined on valuations. I think we, we found that it's, um, you know, obviously there's like a, a group of companies that have massively inflated valuations at the early stage, which creates downstream problems for them.

David Friedberg: If you have too high evaluation in the early stage, why would it create a problem in the

SPEAKER_35: later stage? So, I mean, the big challenge is in terms of attracting further later stage investors. So clearly if you're raising kind of like 6 million at a kind of like, um, uh, 20 million post as a seed round, unless you're able to make enough traction to raise the a, um, at a kind of a high valuation, you're going to have, you're going to face problems. So it's, so it's clearly they are, um, you know, we, we subscribe very much to kind of a sense of small amounts of capital, early, modest valuations to help the scale the company. Right.

SPEAKER_366: Six to 10 million. That range seems normal. In terms of valuation.

SPEAKER_35: Yeah. In terms of seed. I mean, it's a, it's a, you know, every company is different. There's some companies that require a little bit more capital to prove, to create proof points to get to the A. Yeah.

SPEAKER_146: I'm in that situation with cafe X right now, which is, it's a hardware driven company. Right. And real estate, you know, there's like, there are a couple of factors here that you have to put a little more money in.

SPEAKER_163: Yeah.

SPEAKER_35: But I think it's, it's, um, I mean, there's a, it's often quite easy to attract, um, small angel investments via a note. Um, and you can, you know, raise with sort of credible entrepreneurs raise substantial amounts of money, but then there's like, no one really wants to step up to the A. Yeah. Pretty good. Cause they, they haven't seen enough kind of traction.

David Friedberg: Yeah. And they have too many choices, right? Like the series A people seem to be looking at 25 companies in the last month that have

SPEAKER_04: a million to $2 million in ARR. Yeah. How do they pick? They don't, they just wait to see which one hits four. Yeah. That's a big problem, isn't it?

SPEAKER_35: Yeah. It's, it's a, you know, part of our observation around raising the fund has been that, you know, there is this sort of spectrum of choices between, you know, whether it's the kind of like big seeds, small seeds, pre seeds, A is like, there's a, in this area, there's clearly a kind of gap. Yeah. There's both a gap of kind of willing people to, people willing to step up and to invest

SPEAKER_85: into, and to support them as well as a, um, uh, kind of a range of different choices where we can invest.

David Friedberg: It's definitely, I think the opportunity for folks like us to do these, I do 250 to a million

SPEAKER_13: dollar checks. You do one to two, but it just seems like everybody left this space. Everybody's like, yeah, I'll just go later and put more money to work, raise a bigger fund, get bigger fees. And it's like, that's not what these young promising companies need. So I think they're missing. I think it's our opportunity because they're missing the chance to own 10% or 15% of a company

SPEAKER_132: for a very small dollar amount when they're nascent.

SPEAKER_09: Well, I think it's, I mean, there's, there's both the, for us is both the sort of, you know,

SPEAKER_35: we think this is the, um, the gap in the market and the opportunity, but it's also like, you know, we've been in companies of various different stages. This is the most interesting time in a company. The product market fit stage is the most interesting. I love that stage too.

SPEAKER_44: Why is it so fascinating to you?

SPEAKER_35: It's, I mean, it's clearly the most formative time. It's like, you've got this kind of founder product fit combined with this product market. Fit. Yeah. And it is a, you know, it is when you start to see it, it's happening. It's like lightning in a bottle and it's like incredibly, um, nuanced and challenging to necessarily find that. And it's, and it's, and you see just like, I'm, I'm, there's a, there's a founder I'm invested in. Um, and he's texting me kind of like every three hours because there's some insight that he's had. And we, we spend.

SPEAKER_381: It's like Zeus throwing a lightning bolt down. It's like, by the way, the gods have just said yes.

SPEAKER_35: And he's been working on this stuff for kind of months and months and months and months. And like in the last week, he's had three sort of transactions. And it's just this, like, you can see that this is like, um, the energy and the kind of momentum is like, he's got it. So he's in this groove and he's like, okay, now I can like execute. And that's amazing. And that's so formative.

David Friedberg: It is. And it was amazing to see what the jump bikes, which we were all sitting there for years,

SPEAKER_04: watching electric bicycles in China, also Norway and Germany started to get the bug to a certain extent for these bicycles and electric bicycles. You saw it in Denmark. And I was just sitting there going, I wonder if Americans are going to go for this because they don't ride scooters, but in Europe, everybody's on a scooter, you know, like an electric scooter. I'm sorry, a motor scooter, like, um, a Vespa.

SPEAKER_13: You go to China, you see like a hundred Vespas at a red light. It's crazy. And then 200 bikes behind them. And I was just wondering, when is this ever going to happen? And scoot networks here with the Vespas didn't really break out. It did okay. Yeah. But now for some reason, these bicycles, electric bicycles seem to be winning the day. Yeah. When you look at that, what, what do you think the difference is? Why does one catch on and one doesn't? Is there some science there that you've, or some insight you have as to when this lightning in a bottle happens?

SPEAKER_35: So I think, so typically we, we see it happen in the combination of three things. So one is technological, two is cultural, um, and the other is economic. So like, so technology. So let's take these jump bikes is like, you know, it's a combination of essentially mobile app, electric, um, uh, and electric enabling them to kind of provide this sort of mobility solution. It's really the battery.

SPEAKER_395: Yeah.

David Friedberg: The battery is kind of like, if it wasn't for, if it wasn't for phones, the batteries and Teslas and bikes wouldn't be so dense and amazing.

SPEAKER_35: So this technology breakthrough kind of both in the consumer battery and the kind of e-bike. Yeah. Then there's cultural. I think there's like, you know, there's a sense that actually like, you know, cycling is like, Hey, it's a pretty damn efficient way to get around. Yeah. And like, it's sort of good for the environment and it's pretty good for your health.

SPEAKER_398: Yeah.

SPEAKER_35: Um, so it feels good culturally. And then the third is kind of economic in the sense that there is like, you know, certainly I kind of bike around the city in the sense that there is, it's, it's cheaper than kind of like stuck in traffic and it's like, say it's about the same time. So you've got, so I look for these like technology catalysts, societal catalysts and economic catalysts. And when you get all three of them. Yeah. Wow. Like, I mean, like take Airbnb. This is like, you know, technology economics, certainly kind of coming out of the kind of Yeah.

SPEAKER_213: I can rent a two bedroom for 209 instead of staying in a hotel with a one bed for 309. Yeah.

SPEAKER_35: People want to, people want to save money as well as they want to make money out of there. And that's that sort of catalyst. Yeah. The sense of trust of like the internet is like, okay, I don't know who this stranger is, but there's enough kind of like, that's the innovation that I think most people say,

SPEAKER_07: I think you hit it Pete. Most people can't put their finger on that one because it doesn't exist as GPS or batteries.

SPEAKER_13: What that one is, is reputation systems. Yeah. So because everybody understood the Yelp reputation system or the Facebook one or follower accounts, whatever, uh, or trip advisor, whatever. Now they say, oh, well, if there's a rating system in reviews, which is a technological innovation and a cultural one, you know, if 18 people have stayed here and give it to five stars. And the one person who complained the host replied and explained, Hey, listen, you know, here, here's what happened.

SPEAKER_215: The heater broke. It was my fault. We gave them a credit. They're still angry. People understand that. Yeah.

SPEAKER_35: And the court, that cultural breakthrough is like, you know, you see like old school investors like, well, that's never going to work. But then you speak to kind of like millennial, um, users and like, you know, obviously I trust that way more than some sort of trouble guide on the, in the kind of bookshop. It's exactly right.

SPEAKER_97: They're like, why would I trust some hotel for my safety?

SPEAKER_08: I mean, I much rather trust this person who owns the home was letting me sleep on their guest house. It's safer than a hotel.

SPEAKER_35: And this, and you know, these, when you think about these catalysts, certainly cultural and technological, they're moving so fast right now.

SPEAKER_70: And so that, you know, clearly that creates the opportunity.

SPEAKER_145: You feel old now, like where your thoughts, uh, as a generation X person like myself,

David Friedberg: that our thoughts get in the way of our ability to invest in this new crop of ideas. Do you feel that sometimes you have an example where you said like, I would never do this. I would never Snapchat myself all day long and make 50 videos. But I understand that millennials grew up with cameras and phones and they have a different

SPEAKER_04: idea about socialization. So they would make 50 videos a day. I'm not a narcissist maniac. I'm not going to do that. Do you find yourself hitting those moments?

SPEAKER_163: Um, you know, I, I certainly did like, I, you know, I was like, like laser focused on

SPEAKER_35: like running a public company. Yeah. And like, you, you have a set, you, you become conditioned in that environment to actually like, okay, I know this kind of vertical extremely well, and this is the business model and I like, and I cannot deviate from this. And so, uh, and then over the, I think I've kind of had to reprogram my brain. Yes. Being this sort of like deep kind of industry, sort of an operational expert into this broad kind of cultural and technology expert and covering all these things. And you end up kind of being a lot more sort of, um, prepared and open-minded around stuff in a way that you kind of perhaps, perhaps wouldn't be. And I think you are, you become, I used to be more dismissive of this, of these things than I am today because you really, you realize that, you know, it's not about kind of necessarily what you would do as an individual, but you actually like, if this was to happen, then I can believe that that will be a very big, a very big thing.

David Friedberg: I tell people you have to unlearn what you have learned. You must unlearn what you've learned because it may not apply anymore.

SPEAKER_13: And just because you wouldn't stay in an Airbnb and you wouldn't rent out your guest house as a 50 year old or a 40 year old, that does not mean that a 20 year old who could never afford to go to Japan or Paris is not going to take the opportunity to go there for the

SPEAKER_08: first time and stay there for 10 days for the price it would have cost to go to Florida. They want to be more adventurous and it's an easy, like if, yeah, I'll stand somebody's couch for 50, 60 bucks or in their guest bedroom rather than not go to Paris. Yeah. It's an easy decision for a young person to make, but you would never see that. I would never see that. You'd be like, why would you try to save a hundred dollars to stay on a serial killer's

SPEAKER_427: bed?

SPEAKER_428: Yeah. In the house, right? Like it makes no sense to us.

SPEAKER_35: Yeah. No, I think it's, um, so that I've, you know, there's, and this is changing different, particularly kind of financial services, healthcare kind of, you know, real estate industries where you kind of have these preconceived notions around. Yeah. Okay. I don't have a mortgage to do that.

SPEAKER_85: Yeah.

SPEAKER_114: Maybe you don't. Or of course I need to have health insurance or maybe never allocate that.

David Friedberg: But so then, uh, I will take it that you're buying every ICO you can, because you don't want to be, uh, so close-minded and stuck in your ways that you're buying tokens and Chuck

SPEAKER_13: E. Cheese tokens instead of equity. These eight deals you've done are all ICOs or, uh, we've invested in some crypto stuff.

SPEAKER_35: An ICO or equity in the company? Uh, these ones, it's a sort of mixture. So it's, um, I mean, we don't sort of have any, I mean, the good thing about a new fund is that we kind of like pretty, we, we saw the ICO thing coming and we were able to structure ourselves. What did you think of that ICO stuff?

SPEAKER_07: When you see these tokens and people raising $10 million with no product. Yeah.

SPEAKER_09: I mean, clearly there is like this sort of, um, there is some concern around it, but I, and

SPEAKER_35: there is a huge amount of very, very, um, I just like low quality. These are, these are opportunistic entrepreneurs who are trying to kind of, you know, raise money from people because they can, not because those people should invest. So there's a lot of, I mean, it's a wild west and a lot of cowboys out there. So, but that said, there are a few highly legitimate, um, and very credible, um, ICOs out there that that we think we, which we think are kind of interesting. So.

SPEAKER_189: Do you think you could actually stomach buying tokens and not equity as an investor?

SPEAKER_35: Yeah. You could. Yeah. I can't, but it's like, you know, I think it's, um, I would need to see the token in use

SPEAKER_13: for six months or a year before I would ever want to buy tokens with no protective provisions, no equity. It makes no sense to me that a large venture. I heard there's rumors that large venture capital firms were buying the telegram ICO. And I was like, how can you take a retirement or an endowment's money and buy tokens that

SPEAKER_440: are not even being used in the world and not own equity, have no protective provisions. To me seems very troubling.

SPEAKER_35: Well, here we are. This is your old school kind of point of view on these things, which is like, and I think

SPEAKER_85: there is, I mean, I, I do believe that the blockchain and cryptocurrencies have the potential to dramatically change our financial systems.

SPEAKER_35: And it's like, you know, I w I was speaking at Stanford the other day and like asking them what the kind of, what the, you know, what the students are kind of into. And unsurprisingly, crypto blockchain in the same way that you and I grew up and like the internet, the internet, and we could like program HTML. Like, um, it was just like.

SPEAKER_286: People told us internet would never be anything.

SPEAKER_35: Yeah.

SPEAKER_113: It was native to kind of us. And I think the native language, certainly in the computer science department is around blockchain.

David Friedberg: The only difference was I think in that era, we knew what we were using.

SPEAKER_04: Like you said, we could code HTML pages.

SPEAKER_132: We were using HTML editors and I see these people doing crypto and they don't understand the underlying asset, what they're buying, who they're buying it from.

SPEAKER_35: Well, that's the investor club. Yeah. The, the investors are like looking at that, but I think the, you know, the wave of talent coming in is, is, it is remarkable. Yeah. It is absolutely remarkable. And what, what's happening right now is that the, the kind of the value of the aggregate value of some of the projects is kind of up here in terms of financial value. Yeah. But the kind of like economic value creation is down here. Yeah. 1%. We've seen this before, right? Yeah. In the internet and like, and so the same thing kind of happened, but it's like, it's got to flip. Well, it's, we, so one of two things will happen. Like either the value is created or catch up to the, to the economic value in the ecosystem, or the prices will come down.

SPEAKER_402: Prices have come down 50%, 90%, 90% in ICOs, 50% in crypto. Yeah. Maybe we're in, maybe we're soaking in it right now.

SPEAKER_09: But I think, you know, long-term we're, you know, I'm a, I'm a big believer. And I think it's, and it will come in as sort of perhaps the less obvious way is a little

SPEAKER_85: bit like it did in the internet. Yeah.

SPEAKER_215: Like who would have guessed Amazon would have been the winner. It's like the guy selling books. That's the winner. That's the guy who built the cloud computing infrastructure.

SPEAKER_449: Let's see the, well, I don't know, you, you, you know, like who saw that coming?

SPEAKER_85: Certainly the cloud infrastructure. You couldn't see that coming. No. Um, but certainly the kind of biggest retailer, maybe you could, it was like, um, it was a

SPEAKER_269: little like, he's really going to compete with Walmart. It was like, yeah, shipping's too expensive. Yeah.

SPEAKER_35: But it's time and time again, the incumbents basically, um, uh, you know, get overturned by the, the, um, the emerging, I think it's, what is sort of, what is sort of interesting is also around the globalization of this. Like, you know, we spend like, we kind of like the nature of our partnership. We have one Brit, one Israeli and one American. And so we're like naturally kind of like tuned to kind of, to take the best of Silicon Valley, but also kind of expose ourselves to global thinking.

SPEAKER_85: And it's, um, we think often a lot of the most interesting innovations that are happening. In the, in the blockchain are happening outside the U S and it's going to be fascinating what

SPEAKER_35: happens in regulation. Yeah. In the SEC with related, does this kind of create a fertile environment? Right. For this innovation is clearly a massive opportunity of innovation. Yeah. Or does it diminish it and it's, and it spreads into other parts of the world.

SPEAKER_458: This to me seems like the, this is the real conundrum we're in.

SPEAKER_08: There's obviously these ICOs or the majority of them are incompetent and or frauds just by the fact that one study said 60% of them have gone dark in only 12 months.

SPEAKER_07: Yeah. Like funded startups don't go dark in 12 months. It may take them two or three years to go dark, but 60% don't go dark in the first year.

SPEAKER_08: So there is a massive amount of fraud and an even larger amount of incompetence. I think everybody who, even people who are the biggest crypto heads agree in the ICO space. So clearly there's fraud and the SEC needs to protect people, but there's clearly a massive

SPEAKER_13: opportunity for distributed systems to have a financial incentive like this is incredible. Absolutely incredible. So if we enforce the rules, we drive them to places that are unregulated.

SPEAKER_08: There's unregulated people, whether it's Puerto Rico is now going to have a crypto. Brock Pierce is building some, uh, crypto Nirvana. And then I think Taiwan is building one. There's Zug in Switzerland. Yeah. And they're all, and Peter Thiel is going to build an island. And there's going to be all these places where we can go and not pay taxes or not check if somebody's an accredited investor.

SPEAKER_09: Yeah. I mean, I think for really to create economic value, it has to be sort of supported by,

SPEAKER_35: um, you know, governments in, in kind of meaningful ways. Otherwise it's just not, there's not going to be enough economic value will become the kind of like, it won't be adopted. It won't be, you know, part of the, um, currency or infrastructure, but it's a, um, I think

SPEAKER_09: it's, it's, it's basically it's out. Yeah.

SPEAKER_35: But like, you know, it is the, you know, the, the genies out of the bottle. So sure. The technology cannot be disinvented.

SPEAKER_09: No.

SPEAKER_35: And so it can be regulated. It can be regulated and it can be kind of, um, illegal. It can be made. Yeah. Well, China will. It's a solution to it.

SPEAKER_02: It's not a solution, but it is what people in China do. I mean, they banned VPNs and they banned Twitter and Facebook. So it can happen.

SPEAKER_35: It certainly can happen. But I think it's, I, I'm very bullish on it as a kind of, as a technology and infrastructure. It's like, it's going to be the wild west for a little bit, certainly a few more years, but it's, you're starting to see highly credible entrepreneurs. Yes. Highly technical, um, founders. Yep. Get involved. Executives are kind of like in this ecosystem. I mean, you're starting to see what Silicon Valley does best, which is the kind of innovation plus the execution come in to build these ultimately world changing organizations.

SPEAKER_344: All right. Let's recap. It's been 75 million minutes with Pete Flint from NFX guild.

David Friedberg: And by the way, if you didn't know, that's stands for network effects. You can visit them at nfx.com, a three letter domain name. Wow. You guys definitely. That's not cheap.

SPEAKER_472: Early.

David Friedberg: Got early. nfx.com. Uh, and what did we learn today? They write one to $2 million checks, uh, reasonable valuations. They like to price the rounds. They look for founders who are resilient and, uh, won't give up into fatigable and, uh, believes

SPEAKER_13: in crypto and survived two unbelievable crashes and built during the down market.

David Friedberg: I think that's such an important part because the mark, we're in the second largest, longest bull market. I think since world war two.

SPEAKER_35: It's going to happen. It's going to be great for entrepreneurs.

SPEAKER_13: Fantastic for entrepreneurs. Then there won't be as many companies and getting a meeting with guys like us won't be as hard and gals. Like it's going to be easier to get meetings, easier to get capital. The valuations go down, but the opportunity will go up.

SPEAKER_04: Absolutely. Building a down market. Yeah. Yeah. All my great investments. Yeah. Down market.

SPEAKER_478: Yeah.

SPEAKER_08: Google, Facebook, Uber built in down market. The opportunity. Exactly. It's been too long. We haven't seen each other in a while. Congrats. And I'll look forward to getting the next eight deals. I'm always looking to get a little piece of that. All right. I need to get a little piece of that captain to save Jake, how a little slicey poo. All right, everybody. Uh, thank you. I'm the producer, Jackie. Uh, and, uh, thanks to everybody for supporting season two of angel, the podcast. It really helps if you go to iTunes and write a review because my mom reads every one. You can then tweet that review to me, take a screenshot, tweet it to me at Jason, and I will retweet you and, uh, give you a thumbs up and a fist bump. Go ahead and write a review on iTunes and follow us, et cetera, yada, yada, angel podcast.com. And if you haven't read the book already, please go buy the book. It's a great deal. If I do say so books are ridiculous. 16 bucks, 10 bucks. You get all this knowledge. Uh, and if you want to angel invest, or at least see what I'm angel investing in, uh, read the book first, make small bets. That's always the advice I have year one, no rush, make small bets. And a lot of companies don't spend more than 10% of your chip stack in year one. Learn. Right.

SPEAKER_79: You weren't writing million dollar checks the first year, right? 25, 50, a hundred. Okay. Yeah. Scale from there. Take your time. It's no rush. Learn. It's the third. As far as I'm concerned, we're in the fourth inning of Silicon Valley. The best is yet to come.

SPEAKER_486: I think. I think so.

SPEAKER_08: All right. On that note, uh, thank you again, Pete Flint, follow him, Pete Flint on Twitter. And if you're doing a network effect driven business, this is the person you want on your team.