SPEAKER_00: it's funny this is very common with crypto right actually a sort of funny story a friend's company which is a crypto company and he didn't know the identity of one of his co-founders they had been working together for a really long time the real name did not know the real name of that person David Friedberg: you were the hippo 33 yeah it would be like z dog and yeah exactly yeah we don't know SPEAKER_06: how old we are genders location nothing nothing social security numbers nothing we're just SPEAKER_00: anonymous handles this became a problem later because this company actually ended up doing quite well and you know obviously the vcs wanted to know who these people were and that that's where it really came to head this week in startups is brought to you by SPEAKER_10: squarespace turn your idea into a new website go to squarespace.com 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 northwest registered agent will form your company fast give you the documents you need to open a business bank account and more visit northwest registered agent dot com slash twist to get a 60 discount on your next llc and linkedin jobs a business is only as strong as its people and every hire matters post your first job for free at linkedin.com slash twist welcome back to this SPEAKER_13: week's liquidity podcast with me today i have elizabeth yin co-founder and general partner at hustle fund a pre-seed fund that invests in software companies elizabeth co-founded ad tech company launch bit which was acquired in 2014 and has a portfolio of 800 startups next we have mr zach coleus managing partner of coleus capital zach is a four-time entrepreneur now c investor in b2b companies zach was an early investor in mercury hello sign cruise and branch metrics uh the hoodie that zach has on today and of course uh with us we have jason calicanis jcal world's greatest moderator and c investor in eight unicorns vests at the seed stage including uber com robin hood thumbtack and others and i'm your host david weisberg co-founder of 10x capital and host of the 10x capital podcast today we have three topics on the docket uh fund sizes how they've changed in the past year whether smaller funds outperform larger ones and whether sf in the bay area is back and then we'll finish up with asking each of our gps to tell us about their last three investments and the rationale behind them so with no further ado let's get right into it venture funds are growing uh in size despite the slow market the wall street journal reported this week that the median venture fund raised in 2023 jumped from 26 million in 2022 to 37.4 million in 2023 that median size is a high for the past decade while the median size has increased the total amount raised by venture funds has actually decreased 62 percent to 66.9 billion dollars year over year with just 474 funds closed last year or roughly a third of the number of funds closed in 2022 meanwhile the median time is going up and has increased an average of 15 months per close for fun zach what do you think of this new venture market SPEAKER_16: i think the headline number is wrong like i don't think it you know an incremental change in fund size is what we should be talking about it's it's an incredibly brutal time to be raising capital like a 62 drop in in venture capital that's a massive number and um if you're out trying to raise a fund right now it's it's very challenging um thankfully i'm glad i don't have to do it uh at the moment but um a lot of my friends who are have been reporting that you know lps are definitely not in a freely giving mode um and it's it's i think it's going to stay that way for a while i haven't i'm SPEAKER_18: not seeing any changes on the horizon and and zach you've had friends that have succeeded and friends that have not succeeded in raising the last year what's differentiated the the haves versus the have SPEAKER_15: nots well there's a real flight to quality right now a lot of lps are are really concerned about SPEAKER_16: sort of the marks in venture you know but during the zurb era money was free companies marked up i mean literally every six months i mean it was the any idiot with a checkbook in this job looked like a genius like we all just like the easiest job i've ever had and so a lot of these funds are sitting on positions that you know are marked at incredibly high numbers billions and billions of dollars on paper when they don't reflect the reality of um the underlying asset and so a lot SPEAKER_25: of lps are are really concerned about that and so because you know lps aren't rewarded for success but they're definitely punished for for failure a lot of them are looking to to allocate largely to well-known SPEAKER_16: established managers who've been around for a long time and that means the big funds with big ir teams big marketing dollars are able to hoover up a lot of the dollars and a lot of the smaller SPEAKER_25: newer funds are are really struggling even though the returns historically have been actually inverted big old funds don't do as well as small young phones but a lot of the lps they're not they're SPEAKER_16: not rewarded for for success they're just punished for failure jason what are you saying you're fundraising SPEAKER_18: right now in this difficult market what are you seeing in terms of feedback from lps yeah um i would SPEAKER_29: say about 80 percent of the uh lps that we meet with and i've done over 100 meetings for launch fund for you can read the deal memo launch.co memo i'm raising with that 506 uh c public raise so i can publicly state that i'm raising a fund it's a really innovative way to do it because people might contact you who you know you wouldn't normally have gotten to uh and there's a lot of retail investors uh qualified purchasers and accredited who want to participate in venture capital who haven't before so that was a nice advantage for us since we have a lot of public uh facing products like this podcast SPEAKER_36: this weekend startups all in my twitter following so putting that aside i'd say 80 of them full 80 said we would love to meet with you fan of the pod just so you know we are not investing in 2023 or 2024 SPEAKER_29: we are pencils down we need to deal with our denominator problem uh in other words venture SPEAKER_34: capital is making up a higher percentage of our overall portfolio therefore we have to get it from 25 percent down to 10 percent where it belongs right because public equities went down so as a percentage SPEAKER_29: of funds a percentage of their overall portfolio venture was too high and then a lot of them are SPEAKER_36: waiting for returns they may have gotten a little bit frisky as lps or they may have been pushed by their existing uh venture fund commitments to uh re-up quicker in other words a venture firm instead of taking four years to deploy a fund did it in two during the zerp era therefore they came back for fund six fund seven fund eight and they launched a growth fund and they launched a crypto fund and they launched a scout fund and they launched this fund and a late stage fund and maybe those lps said you know what i don't want to lose my relationship with this brand name fund so i'm gonna do 10 million in this crypto fund even though i don't really want to or i'm gonna put 25 million into this late stage fund but what i really want is the series a fund and so you put all that together a lot of you know lps if they're working at large endowments institutions fund to funds are basically saying we need to figure out what just happened we need to get an exit from this and then we will be able to figure out where we want to go it's almost as if you know you're flying a plane and you hit like a giant storm are you worried about what happens after the storm or do you need to aviate right SPEAKER_34: now through that storm i think they're probably in the last half of that process or last third of that process but they're not through it yet uh which is to say you know a lot of folks are happy to meet SPEAKER_37: uh and are not adding any new names and then i've also had folks say hey listen can i be candid with you jaco i don't know if i'm going to be here at this uh company you know i may not have a job but do SPEAKER_34: you know any other places i could work this these are lps who are representing pools of capital and so the entire industry is getting fit when you see people getting laid off at startups you see SPEAKER_37: people getting laid off at big companies that's also happening at venture capital firms that are on pause or have shut down and lps uh the good news is as the market comes back interest rates come down and people get exits the cycle starts anew and they'll there'll be more hope uh but i'll be done with my fundraising process on may 1st because you do usually have a timeline for this of uh in our case 18 months um we really spent more like 9 to 12 months doing it we had just filed the paperwork SPEAKER_29: before and started the process slowly it's a long way of saying a lot of contemporaries i talked to like zach said have given up on their fundraising and are not raising their fund and uh just managing SPEAKER_37: uh these are gps are just managing their existing portfolios and trying to get the most out of their SPEAKER_29: performance there so that's probably overall healthy for the ecosystem and i think maybe in 2025 SPEAKER_37: we'll see people start making new relationships or maybe in the second half of 2024 we'll see people SPEAKER_51: making new relationships with lps i'm curious what elizabeth is saying i think it's really important SPEAKER_00: to bifurcate the lp market a bit you know you've got the institutionals the endowments the pension funds and then you've got the angels the family offices and folks like that and i think that emerging fund managers just even in a great market in general have a very very hard time getting money from institutionals and so you've got a fund one a fund two or fund three i think institutionals generally want a lot of data um but that's just not there by definition and so for most emerging fund managers they're chasing after the family offices and high net worths anyway and i think it's a slightly different story for that group of people i have a few emerging fund manager friends who actually closed their funds pretty quickly and it was because they went after the right family offices and angel investors who just really loved their thesis so i think it is possible to get a fund done it may not be a large fund but you know for the new fund managers going after that group if they have their story together and it sounds differentiated i think that that's possible in this market SPEAKER_56: if your landing page looks terrible i'm out i'm going to just bounce it's 2024 there are no more excuses for an ugly website 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get 10 off your first purchase of a website or domain at SPEAKER_17: squarespace.com twist next up so do smaller funds outperform larger funds one factor to consider is SPEAKER_13: that even though larger funds as you guys mentioned have a brand advantage smaller funds historically have actually outperformed especially if you account for dpi which is cash return back to lps by cutting out the data in 2015. according to prequin small venture funds from 1969 to 2015 a 46 year time period had a 20 percent irr while funds size 400 million to billion had a 7.2 percent irr with that number going even further down to 2.4 percent for funds over 1 billion dollars keep in mind this data does not include the bull market of 2015 to 2021. zach what do you think accounts for smaller funds out SPEAKER_25: performance against larger funds oh i mean it's it's so much easier to deploy a small amount of capital than it is a large amount of capital um i mean if you think about it the more capital you deploy the more you make and so the better operators historically have raised larger and larger funds over the years and it's almost like you hit a peter principle you raise a bigger fund then you actually are able to deploy effectively and then you get wiped out but until then you're always trying to raise more and more capital and so as those experienced vcs raise bigger funds they all come into SPEAKER_16: competition with each other and fight over allocation and ownership of the best companies SPEAKER_25: because historically it's it's usually pretty straightforward you see a you know once uber SPEAKER_16: started taking off you know any vc worth their worth their uh worth their vc vests knew what was SPEAKER_25: happening and uh came running and suddenly it became an incredibly competitive round for every single round um and that makes it very very challenging because what happens in those competitive rounds is the other vcs bid up the price and so unlike when you know like any of the three of us are looking at a deal and nobody knows about them and the valuations are dirt cheap and it's not a competitive round we get a lot of ownership for a little bit of money and we get to see a great return once it becomes a proper well-known vc company that increased valuation and that increased competition really drive down drives down returns and you can't deploy a billion dollar fund 500k at a time whereas the three of us do SPEAKER_64: that all day long can you double click on the vc math so let's talk about fund size and then check SPEAKER_25: sizes into companies could you break it down for the audience sure um so if you think about let's say you have a 100 million dollars you want to deploy so let's say it's one person who's deploying that capital um you know in a good year you can probably deploy a single person could probably deploy 20 SPEAKER_16: million dollars uh at the early stage so if you're doing precedency maybe a little bit a you can you can write checks anywhere between a couple hundred k to a few million and you can put 20 million out the SPEAKER_25: door um and that's like a full-time job you're going to spend five years deploying that 100 million dollars and uh that's going to be your fund now if you want to go do that for a billion dollars um you have to basically like 5x 10x uh actually 10x uh the check size and so now instead of writing smaller checks you suddenly are writing much much larger checks because there's just each deal requires meeting the founders spending time with them doing diligence winning the competition deploying the capital helping the companies afterwards these are all time time consumptive activities there's just SPEAKER_19: only so much that a single person can do in a year and so check sizes are a function of the fund SPEAKER_63: and you're not just deploying in a vacuum you're deploying it when you're deploying 10 20 million dollar checks you start to brush up against the sequoias and the benchmarks of the world SPEAKER_25: yeah or the tigers or the soft banks or i mean you know there's i mean even the the ontario teachers pension fund will show up and write checks i mean there is a lot of people who want access to venture because historically we've driven incredibly amazing returns and so all of that capital floods in but they tend to flood in at the stage that a company becomes well known and at the stage that the metrics shift from being qualitative to being quantitative which means instead of saying here this is why this company is amazing based on what i'm saying you can show month over month growth rates as soon as you have month over month growth rates any monkey can extend the line there will be a large number of players who will show up and compete for that SPEAKER_13: deal and jason what about your portfolio construction you have one of the most unique portfolio Chamath Palihapitiya: constructions can you can you take us through it yeah so uh just to add to what zach says uh you know sort of pointed out here you do as the company becomes more established and more predictable SPEAKER_36: it's easier to place a bet and then the company becomes more valuable it's easier to push more money into it you've got a billion dollar fund and you're trying to put let's say 30 names into that fund uh well that means it's 30 million a name or so and how do you put 30 million into a company that's valued at 10 20 or 30 million dollars you can't buy 100 of the shares you know most founders want to dilute SPEAKER_71: 10 or 20 so then you're left you know deploying 2 million 3 million 4 million into that deal if you're deploying 3 million that's 333 deals in a billion dollar fund it's just not possible SPEAKER_29: uh for a a venture firm it is possible for uh somebody who has programs like y combinator 500 startups tech stars or launch and what we're doing with founder university so we're trying to have SPEAKER_36: enough of a base of companies that we can hit unicorns early early in the life of uh startups maybe you could predict that one in 100 one in 50 perhaps and then we're trying to identify in that portfolio like brian singerman does at founders fund which one of those is the winner and deploy half our capital in the fund into the top 20 companies out of the 300 we'll have so if we have 300 names from our SPEAKER_37: programs in a fund and that's say 50 million dollars the last 50 we want to go into the top 15 names uh from that fund and that would obviously be 3 million per company but maybe even we'll reserve 10 or 20 million for the top company so 10 20 of our fund might go into the top company and that's really portfolio management uh and that's why so many people are trying to get to the early stage because you have better returns but it's hard to do the early stage because you have to manage many more relationships and you have to meet many more companies that's hard and that's what the three of us do on the phone on the call here uh on the zoom we do those and it's exhausting and it means we're not SPEAKER_74: taking 12 weeks off a year to go on vacation so elizabeth you have one of the most unique structures SPEAKER_64: and hustle fun and you have a structure that i used to do as an angel starting with a small check SPEAKER_18: tell me a little bit about your structure and how has that led to alpha in your phone sure so actually SPEAKER_00: it's a bit akin to jason's model as well although he gets wonderful economics with the accelerator and i think that you know we we don't know like everyone else who's going to be the winner when we meet them right there's no data there's no revenue it's two people in a garage so i think if you're going to invest at pre-seed almost by definition unless you want to chuck it up to luck you have to put a lot of bets and so we're investing a small amount of money into a lot of companies that's about 50 000 or so into each company and we do about a hundred investments a year and some of those will go on to do incredibly well and so you know we work with the companies and on occasion about 20 of the time we'll invest a lot more of the capital so we have a pretty 80 20 model in that about 20 of our companies will get about 80 of our capital and so that's kind of how we think about venture as well but i think you know if i were to kind of tie up why running a smaller fund in some sense is easier than a larger fund it's twofold one is even if you have a company that isn't going to SPEAKER_81: be a unicorn or a decacorn or whatever you want to call it you can still actually get 50x or 100x out SPEAKER_00: of a great company if you come in early enough and that's something that larger funds cannot invest in because they can by definition only be investing at the later stages with these larger amounts of capital nobody's going to write a 10 million dollar pre-seed check or probably shouldn't SPEAKER_86: and so as such then as a smaller fund you can be putting in these smaller checks into these companies SPEAKER_00: at a very early stage and still make strong multiples i think it is much harder than on the flip side for a large fund to then get a high multiple when you're coming in at let's say series b like the number of companies that will 100x from the series b point onwards is pretty small and then that's where you get the dogfight of everybody fighting for those companies and so that's sort of the the hard part about being a large fund you have to not only identify those high multiple companies at the series b and you have to win that deal versus a small fund there's so many more that will go on to do well if you get in early enough you know i i can't even think of when we competed to get into a company perhaps in 2021 and we couldn't get in with our 50k check one thing to think about here SPEAKER_89: elizabeth i think zach is when you look at this if you could deliver the beta the average of the Chamath Palihapitiya: data you just showed you would be an extra incredibly the beta of early stage right of seed stage SPEAKER_36: uh you would be an incredibly successful fund when you're inventor you're trying to get the alpha you're trying to beat right and so is there a firm that could capture the beta of seed stage investing why combinator ourselves elizabeth's fund we're all trying to do that and then it's can you scale it up and not have the performance collapse and i think we probably know of some venture you know SPEAKER_91: uh accelerators etc that maybe went too wide accepted a lower quality of uh startup or teams that maybe weren't as strong because they were filling seats and trying to make too many bets and elizabeth i think you probably could speak to that of you know maybe having seen it um and and how you SPEAKER_34: avoid that doing 100 investments per year because we're doing the exact same 100 new investments and SPEAKER_37: then maybe 50 you know additional follow-ons 25 to 50 follow-ons of the existing portfolio so maybe you SPEAKER_00: could talk about your experience there yeah i mean we've seen accelerator programs all of us who have gone up to whatever a thousand companies a batch and then come back down right because i think finding that sweet spot of where you should be before you lose quality is kind of a song and dance like if you see your model working where let's say every 100 bets you make you have at least one if not multiple unicorns and you should keep on adding another set of 100 to invest in up until a certain point where you don't see that anymore then you're just kind of throwing your money after bad and i think that you know part of that is dictated by brand uh y combinator certainly has a strong brand but you've even seen them rise in the number of positions they've had and then pair it back down and then certainly other accelerator programs who may not be as well known you've seen some of them expand and then they they just cannot get that quality anymore and then at a certain point actually if your quality really degrades then that causes other problems like if you can't get that back under control then other vcs won't look at your companies anymore they stop going to your demo days people are not excited about it and then that's just a downward spiral because it means you get worse and worse quality every batch as well so it is a really challenging problem and um you know i i think actually kudos to you jason for you know sort of maintaining i don't know what you call it that discipline around expansion or thinking about expansion uh in a smart way because we we've just seen so many accelerators kind of rise and fall so SPEAKER_36: to speak i'm going to name it right here on the pod the accelerator doom loop you do too many because you get a little too frisky there's a lot of people out there who want to start companies we we now have 20 000 applications for funding per year we invest net net net in a hundred new startups a year so when i look at our deal flow coming in which is about half of y commoners i think um gary said he gets 45 000 now 40 45 000 applications so we're kind of right behind them they accept one percent i think they do 450 startups a year still 200 something per bat and we do a fraction of that we do 25 of what they do we're 50 basis points of application pool they're one percent that kind of i think is the right number now let's say you get you know you're a new program and you only get 2 000 people applying and you accept SPEAKER_34: 200 now you're accepting 10 and probably somewhere between one and two and three percent is where SPEAKER_91: the doom loop starts and i think elizabeth you described it people come to a demo day and they're like okay there's six companies in this one demo day that are knockoffs of whatever startups doing great airbnb robin hood you know uh instagram there's there's six uh apps for group planning of trips right we all see that one there's six applications or there's six startups trying to do um you know split a bill or you know whatever the most common things we see right zach are and so i SPEAKER_37: think that's when the doom loop starts so it's it's you really do need to take it seriously to be a curator of companies what i've tried to do elizabeth um is increase the number of applications and keep it SPEAKER_91: steady how many we're investing in so we went since all in got very popular last three years from maybe SPEAKER_37: 8 000 applications to 20 so it almost tripled two and a half times but we kept the number of SPEAKER_29: investments the same which means solo founders we are very very rarely invested having solo founders at SPEAKER_37: our um in our programs and then second we were looking for somebody on the team that founding team to have be writing code being an actual developer tech lead not somebody who wrote code 20 years ago and manages an outsource team somebody actually writing code so hard-fought lessons but as the number of applicants goes up you can be more selective which i think is the name of the game and i think that rough SPEAKER_00: acceptance percentage really resonates with me as well i think from my time at 500 startups and then also at hustle fun just to share some of our numbers we see about a thousand applications a month so 12 000 across the year and we'll take about a hundred in the year so i think you do want to be sort of under that one percent number obviously just a rule of thumb who knows what the rough quality is of the applications but i think if you're above that then it starts to get a little SPEAKER_29: bit dicey exactly you have uh thoughts on you know number of applicants and your pool and and how you because you you have a you have your own personal network where people bring you whisper to SPEAKER_16: you startups yeah yeah yeah you all work a lot harder than i do um i can't imagine looking at 20 000 or even 2 000 applications yeah all my deal flow comes from my network and uh generally i find that the deal quality between people i know founders that i've i've known for a long time which is i think the vast majority of my my investments and then friends who send me stuff it's a much smaller number of deals and it's a lot easier to parse through that um it's uh yeah you work too hard SPEAKER_29: over there in other words your network does the sort for you so they they take out 90 percent SPEAKER_111: your friends aren't going to send you something that they're not investing in oh yeah no so yeah or that's really not quality right your friends aren't sending you low quality stuff i SPEAKER_25: would yeah even though i asked i'm generally i'd say send me anything um that has a competent SPEAKER_121: founder generally people are very very selective of the sort of stuff that they send through SPEAKER_18: zach what are your first pass when you when you get an introduction what are you looking for to decide whether you want to dig deeper um it's complicated there's a lot of moving pieces to SPEAKER_25: that but the first thing is like if i know the founder generally you know it's a different filter but if i don't know the founder it's i'm looking for things that are new which is really hard there's very few new things in the world and so and there's so many companies that i've seen 10 20 30 50 iterations SPEAKER_16: of and that makes a really easy filter probably 90 of the stuff i see is just not interesting um the secondary is stuff that i'm actually smart in turns out i'm not i'm kind of dumb in a lot of spaces SPEAKER_25: so you know i'm not i'm not particularly good in consumer uh i don't have any ability in bio i i'm not a crypto guy i don't do chips i try to do don't do any hardware so there's a bunch of sort of negative filters that i can get rid of there very very rapidly in fact it's usually the number one way i bow out of a deal which is like sorry i'm an idiot in your space i can't be helpful here um and then the third one really is like about insight like usually there's a secret to the business some some insights that the founder has has found could come in many different vectors but SPEAKER_127: that's that's the one area i spent a lot of time trying to find starting a business used to be a pain SPEAKER_59: you needed a lawyer there were fees it was a mess now with northwest registered agent it only takes 10 clicks and 10 minutes northwest provides everything you need to start and maintain your business every llc corporation or non-profit at northwest forms comes equipped with registered agent service a business address a website and hosting email a phone number and this is all covered by northwest privacy by default again your full business identity will be live in 10 minutes and in 10 clicks so here's your call to action for 39 plus state fees they'll form your llc corporation or non-profit and launch your business in just minutes visit northwestregisteredagent.com twist today that's northwestregisteredagent.com twist today what about you elizabeth you guys have a quantitative SPEAKER_12: way to to filter out startups so what do you look for from a quantitative aspect yeah so we actually SPEAKER_00: have automated uh rejections as a first pass so about 50 of our applicant pool gets an automated email response and then of the remaining 50 we do go through it but then we do have you know templated responses basically just very quickly at first glance of the idea is this differentiated so echoing zach's thoughts on this i think differentiation is so important i think even just from a quantitative perspective if you're in a very crowded space your cac is going to go up like if you have to beat out all these people for the same customers then that's just really challenging because you're gonna have to spend a lot of money on that not to mention the double whammy is it's also harder to fundraise because every investor has a horse in the race and so you have a limited pool of people you can raise money from so that double whammy just makes it really hard it's nuts to say it can't be done but i don't really love those dynamics if that's what it is out of the gates you know not knowing anything else about the market the space the founders etc so we pass a lot on crowded spaces and then i think once we kind of get down to all right what is it that we're looking for um highly differentiated ideas people with an insight in those spaces and that's kind of where we'll make the bet and we do just a lot of this in you know sort of quick 30 seconds at a time like just based on the deck etc we'll do one interview and then we will make the investment if it if it's interesting i think SPEAKER_29: it's such a good thread to pull on which is is this new if you're coming in like i because of the robin hood investment the com investment and the uber investment being such breakouts that are in pop SPEAKER_36: culture what happens as an investor and and i know zach and elizabeth you have this with some of your lead things people say oh i'm gonna build something that's right adjacent to that so i'm doing robin hood but for women uh but for latin america but for you know this care i'm doing uber but for alcohol i'm doing uber but for you know literally i had two different pitches for uber adjacencies which were one you can bring your dog with you and two for kids and i thought well those are great ideas and i just had dar on this week in startups where he said and i had this inside information for over a SPEAKER_34: decade anything that's adjacent when we add it we're starting with a hundred million credit card active accounts or maybe it's 200 million now i'm not sure how many active they had the last quarter so if dogs is a market and and having dog friendly cars you're just going to see when you open up uber SPEAKER_36: a dog in a car and it's okay why would i download another app for something so niche and so yeah SPEAKER_37: you it has to be something new if it's going to be an outlier and the truth is if we were to look at the total number of applicants elizabeth said 12 i had said 20 and uh gary has said 45 you put those SPEAKER_91: three numbers together you get 70 000 or something then you dedupe them you're probably at 50 000 i'm SPEAKER_34: guessing right so if there's 50 000 people this year with an idea in the seed stage or an mvp or an actual SPEAKER_36: product launched and a team somewhat formed how many of those actually become unicorns every year well we can look at aileen lee's data in her unicorn report it's a you know a couple dozen SPEAKER_91: right so then the number of unicorns if it was three dozen would be 36 out of the denominator of 50 60 000 we actually we actually know it's one in 2000 right so it might be a one in 2000 of these application pools are actually destined to become unicorns and you just have to hit a couple of SPEAKER_37: those so then you're sorting i guess elizabeth and uh zach becomes how good is your sort to find those SPEAKER_122: three dozen unicorns that are created each year we'll find out yeah so speaking of sorting uh next SPEAKER_13: topic is the bay area is the bay area officially back according to pitch book q4 2023 bay area startups raised over 12 and a half billion dollars versus la's 4.6 billion and new york's 3.8 billion in the year 2023 as a whole bay area startups raised a total of 63 billion dollars equivalent to more than the next 10 markets put together jason you wrote in angel back in 2017 that serious angel investors had to live in san francisco has your view changed on this well the three of us live in the bay area SPEAKER_56: uh so we're three for three here i will say the greatest companies are formed here um and the SPEAKER_36: greatest founders do come here why density it's a it's that simple and i have broken the news to my SPEAKER_111: team we're coming back to in person so we have a 21 person investment team and there are three of us in SPEAKER_36: the bay area right now and maybe one or two in new york and so as a company you know first level sorting our research and our associates uh we have researchers analysts and associates in our stack of um team members those can they can work from home because they're doing zoom calls but i'm doing something called founder fridays every friday myself and jackie who runs programs are getting together with the founders and we're building programming for all fridays and then i said to my team on tuesdays we're SPEAKER_29: going to be the other day so tuesday fridays we're going to be back in the office or back at one of our legal partners or tech partners who have an event space and we're going to just start doing things in SPEAKER_36: person why would we do things in person founders are asking for it the top founders are asking for more face time with us and then two our investors are here and they're back in the bay area more and more often and we want to put them in front of those investors can meet face to face if you meet face to face with an investor i think your chances of getting funding if you meet with them here in the valley SPEAKER_111: i think they go up five to ten x um because you know they can then you know if you meet with elizabeth in person zach in person after doing a couple of you know they can get a really good read on you and SPEAKER_29: tell if you're serious or not and so i i am uh i believe deeply putting san francisco aside i think the wider bay area is going to come back massively this year massively um i think also gary is telling SPEAKER_94: founders he wants the yc founders in like a couple of weeks during the program as well um so yeah SPEAKER_13: people are coming back and zach you're you're nodding your head which date does it take to get in an in-person with you how many zoom calls uh do you go on before you get an in-person SPEAKER_16: oh sometimes i'll do it on the first one um you know i think i think a lot of people have shifted to zoom for the first and sometimes second meetings just because at least for me i find it a lot easier to tell somebody that i'm not going to do a deal when they don't have to shluck their way over to hang out with me they don't have to you know spend a lot of time and energy and so five minutes into it i can be like look i'm not smart enough in this category here's why um and i can move on they can SPEAKER_150: move on it saves everyone a lot of time and energy i agree with what jason's saying um you know san SPEAKER_62: francisco is still a hot mess and um it's better than it was 12 months ago but it's still SPEAKER_16: very problematic city on many different levels uh the stupidity of our political class is is SPEAKER_152: is unparalleled in the same way san francisco is literally one of the most unparalleled cities on many levels the stupidity of the people who run the city is unparalleled but the bay area itself SPEAKER_16: i mean the density is just incredible the number of startup founders engineers business development people hr people marketing people i mean designers that you can't go anywhere else in the world and get anything close to that and so if you want to build a world-class company and you want to scale rapidly there there's nowhere that is better than being here um hands down and elizabeth you you live SPEAKER_13: in the bay area but you have a bit of a contrarian view on this you've invested on six different SPEAKER_64: continents and you guys cast a wide net tell me about your philosophy and how hustle fund goes about SPEAKER_08: investing so many continents sure so we do all of our calls over video conference and so i there are SPEAKER_00: a lot of founders i have invested in whom i have never met in person and roughly speaking the breakdown of our investments is about a third a third a third so a third san francisco bay area a third broader us and a third international so i do think actually just from a problem perspective it doesn't make sense for most of our companies to move to the bay area if you're solving xyz problem in bangladesh you probably shouldn't be moving here it typically doesn't make sense but i would agree with all that's been said that the networks and the density and the knowledge actually is very much tied up here so i do think there's value in a lot of founders at least spending some time here even if it doesn't make sense for you to move here personally because the level of ambition that a lot of founders have around here is very high and when you see peers who are at that caliber or higher than you it makes you work harder and it makes you understand what good looks like i think in addition it makes it easier to hire people or surround yourself with people who have done it before or who know what good looks like or what pitfalls you could come across and the bay area is pretty unique in that regard i think you know if i had to pick a number two place it would probably be new york is on its heels and has good density as well and you can make the argument about new york being a great place to move to as well but i think the san francisco bay area is special in that regard that being said you know i think then if you're aware of the issues that you'll have when you're not building in the bay area but you're building somewhere else i think you can solve for some of these problems especially with the rise of remote work i think it's a lot harder to understand what good looks like but you can surround yourself with remote advisors who can help you interview or hire people you can hire people outside of your town these days before you know five years ago if you could only find one product designer in your small town like that was a problem now you can go to the global networks and try to find somebody really great so i think some of these things are being solved for and you don't necessarily have to build SPEAKER_56: your company here to just put some numbers behind that we when we saw our application pool was uh 50 mvp pre-launch um founders like so of those 20 000 elizabeth like half of them were like in some SPEAKER_111: cases maybe 25 were not yet incorporated and then another 25 were incorporated but they hadn't launched a product we came up with this founder university concept a pre-accelerator we call it and now that's become you know pretty big for us over 2 000 applications to the last one and we accepted 240 teams and we'll invest in 30 of those companies so it'll be again you know one and a half percent SPEAKER_89: one percent uh investment rate but i'm looking at the numbers here and i just asked this number as we come because i told people two weeks ago i decided we're coming back to in person and that's SPEAKER_36: how i make decisions at the firm if my gut tells me this is an advantage we're doing it i just immediately implement it and i told them starting fridays and they're like this friday i'm like can you be in an office this friday then yes if you can't be in the office friday then it'll be next friday uh 21 san francisco bay area already for a remote program this program is designed to be remote but 21 that we've identified already and we don't have all the data clean yet are in the bay area new york second with five percent london 2.5 percent los angeles two percent you know so it in toronto five percent so uh that was interesting the uae two percent i think because i've been there you know SPEAKER_37: um and so there's and then teams are forming we had multiple teams who had co-founders i don't know if you guys have had this experience when they came in for the kickoff for founding university cohort seven um a number of them had met their co-founders in person for the first time so let's just pause SPEAKER_34: for a second here not only are people making investments without ever meeting in person people are forming companies working together for a year these people had worked together for a year elizabeth and there were three of them they had not met each other in person they had been working together for SPEAKER_37: a year and they had founded a company together and coming to founding university and then they met each other for the first time they didn't know what they looked like in person they didn't know their SPEAKER_00: personalities i believe that i believe that i mean the pandemic spurred on so much of that behavior right because you couldn't for a while meet in person but then i think people just SPEAKER_37: latched on and stuck with it it's so efficient i need a designer i want this ux designer as my co-founder i need a developer co-founder i'm an idea salesperson okay zach how do i put the super SPEAKER_74: team together well i got two b but one's in uae one's in toronto one's in san francisco let's go SPEAKER_00: it's funny this is very common with crypto right actually a sort of funny story a friend's company which is a crypto company he had a similar situation and he didn't know the identity of one of his co-founders they had been working together for a really long time the real name of that person David Friedberg: you were the hippo 33 yeah it would be like z dog and yeah exactly yeah we don't know how old we are SPEAKER_06: genders location nothing nothing security numbers nothing we're just anonymous handles this became a SPEAKER_00: problem later because this company actually ended up doing quite well and you know obviously the vcs wanted to know who these people were and that that's where it really came to head but they went SPEAKER_84: through several years of very fast growth without anybody really knowing each other i bet you one SPEAKER_89: of them was working at google full-time you know on payments or something and like was doing this as SPEAKER_00: their side hustle speaking of hustle probably i'm not an investor in this company but this is just what SPEAKER_150: my friend told me it's not surprising that so many of these crypto companies suddenly have a large amount of their funds disappear through mysterious hacks um you hire anonymous people and then SPEAKER_16: suddenly all of your funds disappear who's surprised exactly surprise yeah all right if you want to build SPEAKER_59: a great company you're going to need a great team i always tell people this you get a great team together you build a great product and you delight your users it's as simple as that and if you want to hire a great team you're going to need to find them where are they they're on linkedin jobs linkedin has over 1 billion users so that means it is the largest professional network in the world by far and you can land both active and passive job seekers on linkedin jobs because some people they might have a great job and then linkedin introduces your opportunity to them and you get one of those passive job seekers of course you have the active ones there too who are looking for the right match and your company is awesome so why don't you go post a job right now linkedin also knows that small businesses are wearing so many hats right now and you might not have the time and resources to devote to hiring so let linkedin automate all of that for you go post an open role on linkedin that puts the purple hiring ring on your profile that start and then what you do is you start posting some interesting content about you how you think do some blog posts maybe talk about the news talk about new products or what it's like to work at your company and then watch qualified candidates roll in and a lot of those will be from your network your friends friends of friends and friends of their friends and guess what SPEAKER_177: first job listings on us post your first job for free linkedin.com twist linkedin.com twist to post SPEAKER_13: your first job for free terms and conditions do apply so moving on you guys referenced the the unicorn list uh alien lee of cowboy ventures has released her follow-up to her massively popular unicorn club report 10 years ago from 2013 to 2023 the time of the last report the number of unicorns has gone up 14 times one four going from 39 to 532 of which 78 of them are now enterprise companies while unicorn status has increased liquidity has actually decreased as of today 93 of unicorns are private and have yet to return capital to investors this represents an exit rate of only seven percent which is dramatically down from an exit rate of 66 in 2013. zach do you think these funds will turn to secondaries or how are they SPEAKER_25: going to return capital to lps i mean the fundamental problem is that there was a beautiful little arbitrage SPEAKER_16: in ventureland for a little while where lps were willing to pay two percent management fees on multi-billion dollar late stage funds pre-ipo um and so managers suddenly had a pretty big incentive to go scoop up that money get paid a giant fee stream and then deploy them into these companies um and so what you saw was a real massive over acceleration of capital into late stage uh pre-ipo companies even when they weren't ready for it even when they didn't deserve it but the managers really didn't care um i mean if you look at some of these funds you know managing tens of billions of dollars getting two percent a year no matter what i mean it's a pretty beautiful little hack um but unfortunately it didn't work out well for the market and so you got a lot of companies that raised it billion dollar valuations on a couple million dollars in revenue and those are not real companies they're they're they got a long way to go to be worth a billion dollars by any stretch of the imagination so right now the market is all SPEAKER_25: about working through that figuring out which of those companies need to be shut down which ones need to be merged which ones can actually grow out of it and um we're going through that workout process now SPEAKER_152: but um god bless those people who who got those two percent fee streams on multi-billion dollar funds SPEAKER_111: good for them i'll tell you what's fantastic about not having those streams and all three of us have SPEAKER_56: smaller funds so we we cannot offer huge salaries to people who work for us we cannot take a huge salary ourselves we have to live for the carry now when you have to live for the carry how is your behavior going to change how is your incentive change well if you're getting two and a half percent SPEAKER_36: forget about two two and a half some of these people getting three percent a year on a billion now you got you know 23 25 30 million coming in now you've stacked three funds on top of each other because you got a crypto one you know so you may have two or three billion dollars let's say you have three billion dollars across multiple funds overlapping at two and a half percent a year get 75 million SPEAKER_34: that's why you see venture firms with unbelievably gorgeous prime real estate in san francisco in london and in new york city and you're like how do they have four people working in an office that cost a hundred thousand dollars a month in rent with a sick view and then they bring founders there and it's just lp money burning and they get to offer people a million dollar salary or three or four hundred SPEAKER_36: thousand dollars salaries yeah plus carry who is that going to attract you know you might say it's going SPEAKER_34: to attract people who are hungry and you know or are top shelf i find you have a greater chance of finding somebody who's a late stage career person a late stage venture capitalist who doesn't need money who wants a cush job who wants to you know get this three or four hundred thousand dollars right SPEAKER_91: they're not hungry enough uh and they might be optimizing for other things in life like safety and SPEAKER_37: security and not upside right and so i don't know i i i worry myself if we were to have too big of a funds the entitlement that starts coming from that right and so i kind of like being scrappy and living SPEAKER_12: for the uh carry and elizabeth you've been through many market cycles with 500 startups and hustle fund SPEAKER_63: and a fundraising trail has expectations around dpi change over the last decade well i think it depends SPEAKER_00: on the lp right well i think it comes back to incentives which is you know what jason is mentioning but there are incentives on the lp side as well if you're at an institution a lot of the folks working at institutions are incentivized to continue to have high irr and these in many ways can be fake numbers in that it's on paper markups and the reason that they have to do this is your principal or whomever isn't going to stay at that firm until there's liquidity so how do you give that person a bonus well you give that person a bonus based on these paper markups growing and so it creates a weird set of incentives in that well paper markups don't necessarily lead to positive successful high markups uh in the end of dpi right and so i think that what you see then is the really patient capital let's say the angels or the family offices where it's their own money they don't care about all the fake stuff that happens in between they care about the dpi in the end if they are very savvy they know that okay if this firm has a drop box it'll go ipo in 15 years from seed to exit and that'll be nice and i'll just wait and get that actual cash but if you are managing a firm's money then it could be very different and so as such those people may be not patient because that's how they get bonus this SPEAKER_57: year so it really it depends a lot on the lp so speaking of efficiency another trend we've seen in SPEAKER_64: the past 10 years is the decline of capital efficiency enterprise companies which previously had a capital efficiency of 26x have now gone down to 7x by the same unicorn report elizabeth you SPEAKER_12: mentioned off camera that you think a lot of great companies will come out of the zerp area what leads SPEAKER_00: you to believe this not out of the zerp era from now onwards and i think a lot of it is because i think these come in cycles so capital efficiency is a result of how much money you're giving companies if you give a company a ton of money i guarantee you they'll find a way to spend all that money if you give a company very little money there are going to be a number of founders who will make it work and having started my own company in late 2008 and early 2009 when it was very hard to raise money we couldn't raise any money for a long time and so many of my friends also couldn't you learn to be really efficient if you wanted to be a founder and you had to make it work and so i think what we're going to see here is people who are truly serious about building a startup won't mind that they can't raise money now because their goal is to build their company not to focus on fundraising and then they'll learn to be very capital efficient at the end of the day founders are capital allocators not just vcs and so they'll figure out how to really stretch their dollar and then as we grow into a bull market and they get access to more capital they'll be able to take a lot of these capital efficient learnings and then really just apply it well when they do have access to cash it's much better to grow into a bull market than to go the other way around uh from a bull market into a bear market in my opinion SPEAKER_66: so i think this is going to be a great era yeah one of the biggest drivers of the lack of capital SPEAKER_25: efficiency is just competition and so what you saw is there's just so many me too vc funds and there's only usually one or two great companies in any particular category but that the me too vc funds they still have to deploy the capital and so you saw them funding numerous unnecessary competitors for every segment and so in any segment you'll see all these new competitors and what happens is those competitors really drive up the cost of doing business so they'll go in they'll buy the same keywords they'll buy the same advertising targets they'll sponsor the same conferences they'll try to hire the same sales people and they'll spend a lot of money in the market which effectively drives up your cac and they'll create a lot of feature fud which drives up the cost of engineering you have to build things for competitive reasons not because the customers actually want it they'll constantly be attempting to poach your employees they create a lot of pressure and that pressure effectively drives down returns for everybody because you have all these me too companies basically in their competing SPEAKER_16: away returns um and so the zirp era really is really disruptive destructive for for capital returns and destructive for efficiency and now i i totally agree with elizabeth the next couple years it's the the inverse of that like my best companies like it's funny like almost all my companies come SPEAKER_25: summer 22 they hit a wall almost across the board you know close to 80 names in my portfolio it was like boom like like growth just stopped and then over the intervening 12 months from 22 to last summer they went through a real rebuilding period there was a lot of work done around downsizing around re-normalizing on much more efficient modes of customer acquisition around thinking about a plan that could actually be achieved without burning a ton of capital and the best ones come last summer suddenly reignited and they're growing like crazy again and um even with a lot less cash and even with a lot less you know vc support because the other thing that happened is a lot of their competitors just disappeared and so i think we're going to see some really great returns coming out of this vintage SPEAKER_16: um and uh i'm excited about that yeah and i think it's important to understand this chart if SPEAKER_56: we pull it up again this average capital efficiency is taking the valuation of a company and dividing SPEAKER_71: it by the amount of capital they raise so when you look at consumer in 2013 they're saying in 2013 the valuation was 11 times 11 x what they raised so if you raised a million your company was worth 11 SPEAKER_36: million if you raised 10 million your company was worth 110 million if you raised a billion your company's worth 11 billion um and that dropped almost in half and then you look at enterprise it was 26 times so if you raised a million your company was for every million you raised you were worth let's SPEAKER_91: say 26 or 27 uh million was your valuation in 2023 it dropped to like eight and what this mean it means is i think if i'm interpreting this chart correctly in 2023 if you raised a million your company's worth SPEAKER_36: seven million in other words the seven x uh on average it's not very efficient the efficiency dropped by 80 percent in one case enterprise and consumer it dropped in half and so uh this goes back to what bill gurley was saying uh capital as a weapon and so i think elizabeth you brought up competition uh in cac or maybe zach you did i think you both brought it up actually that's actually what's happening here is you know somebody gave you know lyft a ton of money and uber a ton of money postmates a ton of money doordash a ton of money and or we work a ton of money and other uh SPEAKER_91: folks you know start raising a ton of money for co-working spaces and what happens they use capital SPEAKER_34: as a weapon to see who's the last person standing and then whoever's the last person standing has to immediately slam on the brakes before they fly off the cliff and then everybody else flies off the cliff so imagine racing towards a cliff this is like the ultimate game of chicken like who can go fastest SPEAKER_37: to the cliff and who can break fast before everybody else just flames out and you know it's a strategy but it's super unhealthy and yeah i'm glad i'm not uh living as the person who has to put that series d in or e because that seems like a really scary bet to make you're like i'm gonna put a hundred million dollars into this company and hope a magical bridge appears at the end of the at the edge of the grand canyon and this or that this car sprouts wings and just flies i mean it happened in the case of airbnb doordash and uber and coinbase but it may not happen in everybody's case it didn't SPEAKER_122: happen and we were so that's for sure so speaking of making decisions we're gonna do a quick portfolio SPEAKER_13: check of all all the vcs uh we're gonna look under the hood and look at what what uh elizabeth zach and jason are doing let's start with you zach what are your last three investments and tell us a quick SPEAKER_89: rationale behind those investments oh let's do one let's do a round robin style it'd be more entertaining still round robin yeah just keep going around in the circle yeah um so i i had a really slow SPEAKER_25: last year 23 incredibly low slow capital deployment actually the slowest year i've had in uh nearly a decade of doing this um but but there's three new companies that got in um that i'm excited about uh number one uh a company called shovels.ai so they basically use ai for parsing SPEAKER_16: really messy government data sets um and they're starting with building permits and so they're able to basically give you an api to access all the building permit data across the country and so if you SPEAKER_25: want to figure out which contractors get their jobs done on time they can tell you that and what you want to know how many building permits got uh given out in san francisco they can tell you that i can tell you it's not very many um basically they're pretty cool uh pretty cool data set uh so if you're if you're working with government data in particular building building permit contract data very very SPEAKER_111: valuable well and that data without ai you wouldn't have the ability to process it affordably as that like it was just too expensive and look at what they're able to charge if you're if you want the permits you get thousand dollars a month contractors paying eight hundred forty nine dollars a month if you bundle it up to three thousand a month these are nice juicy contracts ten twenty thirty thousand SPEAKER_29: a month and i bet you the people who are buying these uh get a customer out of it i love this company SPEAKER_204: wow well done that's great and the founder amazing it's uh how did you meet them oh i've known the SPEAKER_206: founder for more than a decade got it literally most of my deals are founders i've known for a long time SPEAKER_00: yeah elizabeth what do you got let's go to yours i'll go with anadro so anadro is started by um a couple of founders who are serial founders one of them back before one of them previously sold his company to zendesk for a very successful exit so they've been around the block before and they're looking at what i'd call like sort of the new age energy space so they work with landlords um to help them essentially create an it's a new utility company to help landlords actually even sell electricity to their to their tenants and they do this through a couple ways one is they partner with other folks in the ecosystem to do solar paneling on these uh homes and two they've built software to do energy matching or so you know nowadays there's all kinds of weird things happening in places like california peak times um you have you know net 3.0 which is like reducing the price of energy that you can sell back to the grid so they they basically try to optimize all right like what is the best usage and you know any excess energy from the solar paneling they actually run through bitcoin miners and sell the bitcoin to help with this so it's basically a fintech kind of play in energy how do you spell it SPEAKER_57: what's the url a-n-a-d-r-o i don't think they have a website but they do have a lot of customers still SPEAKER_89: yeah that's cool my god you know when we were going to do this i had so many companies i was SPEAKER_91: considering and it's really unfair to uh all of them that uh you know have to pick but i'm just going to pick some that i've been using um and this one podcast ai is just some of the fastest product velocity i've ever seen and so one of the things we look for as a firm uh is teams that can move fast uh and SPEAKER_29: you know get a lot of shots on goal and this product this podcast ai.com company was some of the fastest SPEAKER_91: iteration and what they did and since i'm in podcasting i understand it they will really do SPEAKER_34: transcripts generate chapters generate the metadata do ad reads figure out the viral moments create a podcast feed so if you think about you know anybody wanted to create a podcast if you want to create a SPEAKER_91: podcast like this one uh liquiditypod.com if i go to our new website um i was able to put up this website for this podcast and immediately it will do as you can see here the transcript and you can go through it and you can make clips it's just mind-blowing what ai could do for a podcast here and this has takes out about i would guess 15 hours per episode of post-production production uh for a SPEAKER_37: podcast even just doing the chapters here at the top which you can of course edit and so i'm really SPEAKER_89: in love with this company uh they went to our founding university our pre-accelerator they went SPEAKER_29: to our accelerator and then we did a direct investment in it and so i think that's super cool big fan and SPEAKER_64: customer jacal uh from one of your yeah your team uh introduced me and uh i think they charge 500 SPEAKER_111: bucks a month it was like they were had a 99 199 should stop with that just 500 bucks a month edward SPEAKER_223: is so good at shipping yes yeah yeah yeah he integrates immediately yeah i've never seen anything like SPEAKER_226: it so i'm very excited about this one go ahead zach from robin uh the next one is a company you SPEAKER_25: might know jason uh it's company at 23 it was gonna be called echo mark so um they're super cool so what they do is they create an invisible watermark on a document for every single document that uh a company produces let's say you create a press release for your earnings press release you keep it internally everyone's working on it and you you pass around the company to people who are working on it every single one of them will have a unique invisible watermark that's impossible to read with the naked eye but trivial to read using ai and so you'll be able to identify who got that document when they got that document and if they leak it let's say you link a document it gets posted you can figure out who got it um so i'm i'm super excited about this company and then you know you can imagine every government document every every sensor document in the world should have this at the core of their business um amazing team uh the leader is a guy out of microsoft troy who's like i mean he was like SPEAKER_16: just a all-star up there and uh i'm super bullish on this one my friends guy dayton was involved SPEAKER_111: in an itunes investor in echo mark.com you can go check it out and you remember the supreme court had roe v wade uh just the roe v wade decision being uh leaked and that would have just been caught SPEAKER_25: uh with that never gonna happen you you'll you will even if you took a picture of it like you couldn't you you couldn't leak a document uh if it's got echo mark on it so um lots of little tech SPEAKER_94: really really really bullish about that company yeah me too me too all right elizabeth you're up SPEAKER_52: cool i'll go with bruin health so bruin health is actually attacking the mental health space in a SPEAKER_00: slightly different way than perhaps many of the companies we've seen and um in particular you know as we all know mental health is a big problem in this country but a lot of people in a lot of physicians in internal medicine end up with these patients but they're ill-equipped to really deal with it you know internal medicine physicians are in high demand they're constantly running around dealing with literally everything and mental health is you know in its own sort of special bucket and and so what bruin health does is they actually are essentially a platform to help internal medicine physicians be able to better address their patients who have mental health needs and so this is um a tool that is you know covered by insurance in many cases but is you know in this case used by internal medicine physicians so i really like that that sales cycle it's a very different channel SPEAKER_89: than how a lot of other companies are attacking this yeah and it's this is what we look for as investors SPEAKER_111: something new right you know and this is a very hard nut to crack and sadly um this is an expanding SPEAKER_29: market the number of people with anxiety depression uh you know and and taking ssris and all this is exploding and doctors have to deal with this right so yeah kudos to you on this one i think it's um SPEAKER_111: really awesome we've had some success uh in our portfolio over time with consumer subscription apps uh and so steezy for dance fit bod for fitness musician for music tone based for music and calm for um mental health and uh equanimity sleeping and meditation and when we saw this one come to our accelerator we thought oh wow uh duolingo for cooking and so what zest does as an app and i love consumer apps is uh they've gamified learning how to uh become a great chef and so you learn the basics you take little um quizzes and SPEAKER_36: you do little duolingo style exercises but instead of you know doing this to learn a language it's to learn to cook for your family and what i love about this team is they did really great product discovery they took their time to find people who wanted to learn to cook or had learned to cook and they did all these SPEAKER_91: really great interviews with them uh and what they found was there was usually some incident that happened that made them want to be to learn to cook and it's a huge market um and they found that one of the reasons was to save money people were spending five hundred a thousand dollars ordering food SPEAKER_37: uh from doordash or uber eats another one was they wanted to get healthier and another one was they wanted more friends and they wanted more socialization they want to cook for people and have more SPEAKER_36: interaction with people these are not obvious uh you know consumer um justifications for learning to SPEAKER_111: cook and so when i saw them making progress i was like you know what this company is going to figure it out um and so we made a bet on it and it is um again back product velocity well-designed product i'd never seen anybody do this how do you learn to cook now you watch youtube videos you watch tick you buy a cookbook all of that is not actually the best way to do it having an app in front of you that's gamified like duolingo or tone bass or musician that's actually the best format it turns out people really do love to pay 60 bucks a year for an app that helps them solve a problem in their life so i'm really excited about zest zestamp.co zach you got another one yeah so the the last one on my SPEAKER_16: list is a company called bug zero bug zero dot com find bug zero dot com is the url and um this one's fun uh so if you're running enterprise software large scale you're running oracle you're running SPEAKER_25: big stuff um the bugs that those that come out of those software are often well known but actually relatively difficult to figure out when where how do they affect your particular version and so what they do is they keep track of all the enterprise software that you're running bring in all the bug reports from all the different software providers that you have and then provide you with a personalized clean view into what needs to be changed what needs to be updated what you need to pay attention to how you need to understand what's going on um in your software there uh it's a it's a real pain point SPEAKER_16: if you're operating uh at large scale and uh they have amazing traction and uh i'm very excited about SPEAKER_94: the team that is a cool product security is just such a great space huh like you people always going SPEAKER_246: to make money in security people need band-aids yeah so it's well executed elizabeth cool i'll go with SPEAKER_00: after work so at hustle and we run a lot of events you can go to go after work.com and you know as you can imagine in running events there are a lot of logistical challenges in finding the venue but not only finding the venue getting all the other stuff there everything from catering mics stages um sound equipment uh video all kinds of things dj etc and so after work actually you know frankly speaking the way that we ended up investing is actually we use the tool for ourselves and we were pretty amazed that actually it could search literally everywhere in the world and uh help us find a particular venue that we were looking for and i think in particular it takes out some of the little manual bits like if you find a venue normally through internet searching you have to write to them you have to email them get a quote and all this other stuff you can submit like 20 quotes pretty quickly with this just by clicking you know one click here and there and then as they add all this other stuff then it will become super powerful so i'm i'm really excited about that certainly from our SPEAKER_81: perspective as a customer um it will make our event planning a lot easier as well i love this idea this SPEAKER_111: is the type i'm i'm literally submitting a form here uh for one of our founder fridays and you you are correct we do a lot of events like you and it's not just finding a venue then you got to figure out food then you got to figure out av then you got to figure out the cost and do you have a projector all this kind of stuff so what a great idea this is and um i love the fact that it's automated you know a lot of people do this you're taking something elizabeth uh with after work that is you know SPEAKER_92: something like a sixty thousand dollar a year employee would do a party planner probably gets SPEAKER_36: paid fifty sixty seventy thousand oh yeah yeah and yeah so you know for them to they probably can do a couple of events a month so you just start dividing that number you know there's thousands of dollars probably per event that a party planner winds up costing even for a small event and if a person can do that without having to hire a party planner man that's saving what two or three thousand dollars SPEAKER_89: per event uh in extra cost um so i really do like i'm looking at these i'm like i gotta set up some uh SPEAKER_111: meetings here and then so i will show you another company so uh the all-in podcast had these fan meetups start and i was doing some famous for this week in startups and um uh the woman uh who was running the all-in meetups was using some ticketing platform it wasn't very good and i said you know i think there's a product here and we incubated this company and um you can go uh to this and create a series of local events so if you wanted to do hustle fund events in 10 cities you could do them in 10 cities put somebody in charge of each city right um so we're doing this founder friday thing and uh people can go and sign up for it we find local hosts and then people sign up for the event and they communicate SPEAKER_91: with each other so get rid of dot io it's kind of like tedx in a box you know tedx um you know the and so we are now figuring out well with a community of people um uh what do we want them to do what do we not want them to do and then how do we manage that these fan meetups um they occur anyway but they've just never been coordinated when you coordinate them they all of a sudden become a thing and you have five cities then 20 cities then 50 cities and so we'll see if it people make a little SPEAKER_37: mini business out of it but we're doing something called founder fridays and it's going to be this week in startup founder fridays you go to thisweekinstartups.com slash meetups and you'll get the information on it and we're just telling it's only founders can come so it's founders for founders and we're hoping in each city you have five to 10 maybe 15 20 founders get together on a friday and just chew the fat and talk about running companies that's enough like we don't need it to be 500 people in each city which want it to be a dozen and if founders get value from it we think that that's really special so i love and they charge a fee every month so turning and they've got podcast communities so all in this week in startups and my first million are all doing it and then um who's the guy who's got the don't die franchise brian johnson so this is this is the guy who's like spending a million dollars on his body to figure out oh yeah that guy i didn't know he has a community he started doing a community and because he did a run and all these people came to run with him like 50 people came on a five mile run with him or whatever he's doing and now he's got like 20 cities i mean you think about like his entire business might become don't die meetups and uh they're all occurring on february 17th at different times look at all these cities they've got lined up i mean it's everywhere and uh you know some have three people and the software allows you to sort of SPEAKER_111: um you know put somebody in charge and then the the email addresses of your community don't get SPEAKER_56: exposed so i think that was like a key thing for me like i don't want anybody using our community to sell stuff anyway these are great investments we have to put all these in the show notes jake l do you find SPEAKER_63: yourself dogfooding a lot of the companies you invest in is that one of your edges you know on SPEAKER_29: the consumer side of course um you know i just happened to pick these two because i did we did incubate SPEAKER_94: one and yeah um i'm into podcasting so i did pick the ones in our portfolio that i think are closest to my personal interest but uh we have tons of enterprise and other stuff in our portfolio as SPEAKER_06: well but i'm more interested actually in elizabeth and zach's companies here so um i may need some intros here to these companies i feel like i need to put a little uh bet in i love this one with the construction zach that's a yum yum right there i think elizabeth and i want to put a little before we SPEAKER_261: publish this i think i need to get my money into these companies before we hit publish on this SPEAKER_198: episode well on that note uh we could wrap uh this has been a phenomenal uh episode uh for elizabeth SPEAKER_64: yen co-founder and general partner of hustle fund zach coleus managing partner at coleus capital jason calicanis world's greatest moderator uh and founder of launch and this is david weisberg co-founder SPEAKER_59: of 10x capital signing off hey everybody i talked to a lot of founders here on this week in startups and as an investor and they tell me the same thing over and over again they want two things from me more face time and money they want me to invest in their companies and they want to spend time together so we've been working here on a new meetup program we call it founder fridays and founder fridays are an event by founders for founders this is an event that is hosted in cities by people like you if you're listening to this week in startups you're a founder so what are you going to do at founder fridays you're going to get together with other founders in your community it could be four or five of you it could be maybe up to 30 of you in a location pick a cafe pick a co-working space i like to go to a great mexican joint or maybe a dim sum restaurant you know you can do shared food have a couple of cocktails maybe you do it on a friday you get together and you host it now why is it important for founders to get together shouldn't you be at home just focusing shouldn't you be in the office just focusing on your startup well if you get together with other founders true founders who are in the arena building like you are you're going to get a lot of value from that because you can trade notes with that other founder about what's working at your startup and what's not working the truth is if you're facing a problem there are hundreds of founders out there who have probably solved it already and instead of you banging your head against the wall when you sit there and you talk to three or four founders you're having some dim sum you're you're splitting the quesadillas some fajitas somebody say oh you know what i had that same human resources problem oh i had that same technical problem oh i had that same marketing problem and they might tell you about a tool or a service that'll solve that problem for you this happens over and over and over again when i do founder fridays with our portfolio companies now we're going to give you that same experience but here's what i need you to do i need you to host this in your city so you're going to go to thisweekinstartups.com meetups that's it and you'll see a landing page where you can sign up and you can say i want to host in my city now your city may already be hosting so you can just join that person and what if you go to this event and you learn some go-to market strategy that 10x is your growth that might unlock funding or you might be talking to somebody and they say hey i'm a marketplace too i'm not a competitive marketplace your marketplace is for used cars my marketplace is for hair stylists whatever your jam is whatever you're working on but they give you some technique that you didn't know about to increase your supply side or get more demand in your marketplace and you 10x your business i see this happen all the time and founders are like mutants right and i'm like professor x here i'm trying to put on cerebro and find all the founder mutants in the world and then have you get together and do your own little meetup and here's what you're not going to have to deal with you're not going to SPEAKER_268: have to deal with a bunch of service providers trying to sell you software or services and you're SPEAKER_59: not going to have to sit through a bunch of passive speakers you can listen to this week in startups and get the greatest speakers in the world on your own time and you're not going to have to pay for a ticket to a conference or get on a plane or fly somewhere no this is about having an intimate experience with five ten maybe two dozen other founders in your city please go to thisweekinstartups.com meetups if you are a founder this is for founders by founders only if you are not a founder this event is not for you you can start your own meetup for lawyers accountants recruiters this is for founders by founders we vet everybody to make sure you're a founder and if you host it it's a non commercial event our first founder friday will start on february 2nd so please mark your calendars and we're going to do these on a rolling basis you can join an existing meetup if it's already occurring in your city or you and uh one or two other founders can start your own we're using a wonderful piece of software that we've invested in called river you can sign up for a river account just by going to thisweekinstartups.com meetups we've already got hosts and attendees lined up in san francisco new york city toronto los angeles las vegas london and even in india so this is your chance to connect and if you didn't hear your city name you can start your city go to thisweekinstartups.com facebook.com meetups