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SPEAKER_01: Hey, everybody. Continuing our welcome back. Welcome back.

SPEAKER_02: Everybody who's been on This Week in Startups, who has failed and succeeded, is coming back on the program. And today, Jessica Ma, who is the CEO and co-founder of In De Niro, is going to talk about being

SPEAKER_03: on the program in 2010. Yes, three years and 11 months to the date, she comes back on the program, talks about her failure, and talks about her triumphant success with the same company. Putting hundreds of thousands of dollars of her own money on the line, and just coming back from the brink of death.

SPEAKER_04: It's a great comeback story, and it's part of our Welcome Back series. Stick with us. You're going to love it.

SPEAKER_06: Hey, everybody.

SPEAKER_09: Welcome to This Week in Startups.

SPEAKER_14: It's me, your boy, Jason Calacanis. You can follow me on Twitter at Jason.

SPEAKER_02: You can follow the show at TWI Startups. And if you're first time tuning in, we've been doing this show for about five years. Where the hell have you been? Every week, we talk to founders about building companies, knowing full well that 70% of startups fail just in a brutal chemical fire. It's a disaster. It's painful. And today will be no different. Today on the program, we have another one of our Welcome Back segments. We'll probably play that Welcome Back Carter song a little bit, and then we'll get banned

SPEAKER_17: on YouTube for it. But anyway, I've been doing this so long that I now have people who've been on the show

SPEAKER_02: who've literally grown up on the show. Now that I live in San Francisco, people stop me on the street, and they say, when I was in school, and I'm like, oh, really? What college did you go to? They're like, oh, no, no, high school. I'm like, oh, my God. You watch the show when you're in high school? I'm like, yeah, now I'm at Y Cometa. Now I'm at Techstars. Yeah, no, I'm on AngelList. I'm becoming an old man in the industry, and all these young pups are like growing up on the show, which is fantastic for me. It's great for my ego.

SPEAKER_03: I walk around San Francisco. People come up and say, I love the DHH episode. I love the Sock episode. I love Tony Conrad. I love Tony Hsieh, Mark Cuban, Evan Williams, David Sachs.

SPEAKER_02: I say, which time? What episode number? It's amazing. It's great that so many people are getting so much value. But let me tell you something. Don't be weird. So if you see me in a cafe or in a bar in San Francisco, don't sit next to me for an hour

SPEAKER_18: and pretend like you don't know, and then be looking over like, is that Jason? Just come over and be like, hey, what's up? High five. Just put your hand up and be like, hey, this one in startups. Just be like, hey, Sock, just yell the name of whoever your favorite guest was, and I'll just yell it back, hey, what's up? Boom.

SPEAKER_19: We do a little fist bump or high five, but just, you know, that's the basic ground rules. Now that I'm in San Francisco, I'd like to put out the ground rules of interacting with me on the street. Just come up and say hi. You know what I'm saying? Yeah. Just be normal. Well, welcome back to the program. Thank you very much. Great to be back here. Jessica Ma is with In De Niro, and you were on the show. I'll just play a little B-roll here while we're sitting here. Sure. And here we are, our younger selves in October 27th of 2010, and I guess this was like a Shark Tank episode, which back in the day, people would pitch me, and I was all bitter back then because they had asked me to be on Shark Tank, and then they stopped calling. So they literally called me like two or three times, like, oh my God, we want to have you on the new show called Shark Tank. I'm like, what's that Shark Tank? Is that like, I said, it sounds just like Dragon's Den in London. Like, oh, you know Dragon's Den? I'm like, yeah. I met all those guys when I was over there. You would have been perfect for that.

SPEAKER_17: And they're like, you'll be perfect for Shark Tank. Yeah. And they call me, I get me all excited, and then they stop calling. And I'm like, what do I do here? I don't have an agent or something to call and check in. So it was very weird. I was like, should I call them? And you know, it's like, I called, or I had my assistant call and be like, hey, you know, Jason just wanted to check in and he hadn't heard from you. And they never called. I was like, wow, that's so weird for like Mark Burnett's people to be calling me and like sweating me. Well, it's all right. You do it yourself. I do it myself now. It's all good. And people don't know this, but I am in secret negotiations right now for a reality television show. Sick. I've actually taped it. Not that, like the promo. Okay.

SPEAKER_03: And I'm going to be meeting with Les Moonves and ABC and NBC. I'm going on a whole tour.

SPEAKER_28: If it works out, I will watch that. That sounds incredibly appealing. Wouldn't you watch that?

SPEAKER_29: I would probably watch that. Probably. It'll just be so entertaining. Yeah.

SPEAKER_32: It'll probably be okay. Anyway, listen, I think it's a 10% chance it's going to happen, but I just want to prepare

SPEAKER_04: everybody about how insufferable I will be if I'm on network television. If you think I'm insufferable now, can you imagine? So here you are.

SPEAKER_34: Look how young you are. You're still young. How old were you four years ago? God. So I was 20 years.

SPEAKER_36: Look at yourself. You're 20 years old there. I'm 24 now. I am so old in the tech world. I know. It's over for you, Jessica.

SPEAKER_04: It is. All right. So let's talk about your company. Enough about me and my show and all this stuff, nonsense, and how to interact with me on the street. God, that sounds so obnoxious. No, it just, you know, it gets weird when people know who you are and then they won't

SPEAKER_36: say hello. That's funny. I said hello to you once.

SPEAKER_43: Yeah. And I was like, hey. On the street. In Austin. Yeah. Oh.

SPEAKER_46: We were both probably really drunk and. Yeah. I was, if it was Austin during South by, I was probably pretty.

SPEAKER_19: Well, the other thing is too, like, I can't remember.

SPEAKER_49: I'm losing my memory because it's done so many shows and I'm like, hey, nice to meet you. I'm Jason. You're like, oh, hi, I'm Jessica. I was on the show for 20 minutes.

SPEAKER_52: I'm like, oh, I'm supposed to remember that. Yeah. Like four years ago, obviously you remember me.

SPEAKER_19: Exactly. So four years ago, you're on the show and you're telling me about your. Y Combinator company. Yeah.

SPEAKER_18: And so what was the original idea of the company and what's changed in four years? Because you've gone through, like we just did a show with Mattermark. Okay. And they've done a huge pivot.

SPEAKER_17: So tell me about what your business was and what it became. Sure.

SPEAKER_57: So four years ago, the idea was let's build a company that will help small businesses visualize their money online. Let's be like a mint.com for businesses. Yeah. At the time, mint sold for a lot of money. So it was a really sexy pitch. Right. People really liked that. Yeah.

SPEAKER_62: But it didn't really pan out. So I basically spent two years of my life working on that. I raised all this funding. I got all this press and we weren't generating revenue. The company wasn't really growing its user count. The retention wasn't really good. So I had to phase that out. I had to shut down that product, shut down that business.

SPEAKER_64: What was it that didn't work about that business, do you think?

SPEAKER_29: I think it just wasn't a real painkiller.

SPEAKER_57: It was a vitamin. It's a nice to have. If you're a small business owner, you're so worried about your survival. You're so worried about growing your company that seeing how well your money looks isn't really a top priority for you.

SPEAKER_67: You need something actionable like customers or reducing expenses or hiring people.

SPEAKER_62: Exactly. Exactly. Something that will actually make an impact.

SPEAKER_68: So you learned something, though. I mean, in failure, there's always a lesson. Yes. And what was the big lesson for you when in De Niro 1.0 hit the wall?

SPEAKER_71: A lot. I mean, the biggest lesson there, though, was focus on something that people actually really care about.

SPEAKER_62: And so the long story short is we raised all this money. We got all this press. We got all these users. It didn't work out. So we laid off our staff. He, like, went to us.

SPEAKER_73: How many people did you lay off? Like eight people. And you did it yourself.

SPEAKER_62: It wasn't that many. It was a small team.

SPEAKER_02: I know, but you did it yourself. Yes. What was that like? Because you're 22 years old. I got to imagine that's got to be a little rattling to go in and just tell eight people, like, hey, guess what?

SPEAKER_79: You no longer work for me. I gave them a month to get a new job. Right. So that's good. You gave them a month's salary. You did a classy thing.

SPEAKER_57: Yeah. So I told them, look, it's not really going anywhere. I really know we believed in this, but you got to find a new job.

SPEAKER_62: So they'd all go off, find their new thing. And meanwhile, I would go back home and try to figure out how are we going to get out of this mess? How are we going to build something that will actually make money? Because I try to raise a bridge around, you know, this bridge around thing people talk about. It's impossible. It's the kiss of death if you're raising a bridge around.

SPEAKER_65: So never raise a bridge around. Explain to the audience who has never heard of a bridge around what that means. So you raise like a certain amount of money.

SPEAKER_62: In my case, I raised $1.2 million. Right. And I had spent pretty much all of it. And now I need like at least a few hundred grand to like keep my company floating so I could get my company to the next milestone so I could raise more money. But the problem is if you're not doing well, no one wants to give you a penny.

SPEAKER_18: Right. You've basically proven that you can't get it done. Exactly.

SPEAKER_02: So it's like you gave me the money, I built a product, I put it in market, and it failed. Yep. And so the investors who you had already, they just were like, listen, it failed, shut it down, and I get a tax write-off? Or did they tell you to keep going? Or what was the reaction?

SPEAKER_18: Because you told me the reaction with your employees. I'm assuming none of them were like, F you. No, no, no. They were all like, hey. I'm still on very good terms with them. Yeah, because you did it classy and you gave them plenty of notice. Yep.

SPEAKER_19: Now what about the investors? How do you tell the people who gave the 20-year-old Jessica $1.2 million that has been burned in a pile of ash now? Yep.

SPEAKER_90: How do you tell them like, hey, I have a bunch of ashes over here where your money used to be?

SPEAKER_62: Well, I told them, look, I'm going to figure this out. We're going to get out of this somehow. But you know where they're thinking. They're like, so Jessica, are you just going to do a talent acquisition? Are you going to try to wind this down, start a new company? What's the plan here? Right. Everyone wants to know what the plan is. Right. Obviously, as the founder, you hardly have a plan at that point. You don't have a business, so there's no plan. Other than try to come up with something that's going to make money.

SPEAKER_57: So I think I mentioned this in private. I put in some extra money myself. So we put in a few hundred grand to essentially jumpstart the business again. Of your own money.

SPEAKER_65: Yeah, of our own money. So what's very interesting about this to me is you could have closed up shop.

SPEAKER_02: Yes. Started with a new cap table. Yes. Washed out that 1.2 million. Yes.

SPEAKER_68: And just put your own to a 300,000 in De Niro 2.0 and called it De Niro Lee.

SPEAKER_02: Or De Niro stir. Or whatever. Clever name. Because there was nothing really of value in the assets from what it seems. But you decided you would double down with your own money.

SPEAKER_62: Right. Well, the problem is if you do that, you're going to destroy your reputation. These investors, sure, they kind of bet on the business. They kind of bet on the product. But really, they're betting on the entrepreneur. They say, I'm putting this money into you, Jessica.

SPEAKER_102: Right.

SPEAKER_62: And to recap the company would just, wouldn't be the right thing.

SPEAKER_17: You were kind of a wonder kid in that you were very young going into Y Combinator. Were you the youngest at the time at 20 or amongst? Amongst the younger ones. Because I think there had been a 19-year-old or something. And now there's a 17-year-old as a record. Yeah. So at that time, you were amongst the youngest. You were also a female founder at the time. I'm the youngest female YC founder. Okay. So a bunch of check boxes. Yes.

SPEAKER_18: And you raised a bunch of money. And it was super promising. And you got a ton of press.

SPEAKER_02: What was it like to fail for you on an emotional basis after everybody had pumped you up as being this huge successful person? Did it crush you or did it make you angry? How did you feel?

SPEAKER_04: Because a lot of founders who are watching the program are going to experience exactly what you felt. What was it like in the worst hour?

SPEAKER_62: It feels horrible because, yeah, you have all these expectations and you're thinking a lot of things. Like, why me? Like, as if you're cursed. Like, this shouldn't have happened to me. I should have succeeded. Right. It felt unfair.

SPEAKER_57: Yeah. It's completely unfair. You think to yourself, like, why did this happen to me? But really, it's just completely self-inflicted. All this pain you caused on yourself. And then... You opted into the pain. You decided to be an entrepreneur. Exactly.

SPEAKER_62: And you knew those risks coming in. But having the press and having the promise, you start to buy into it yourself. Your own psyche says, I'm a hotshot. Right. I got this covered. When really, you don't. Wow. So, it's humbling.

SPEAKER_67: So, we're all frauds. We're all frauds. I mean, it's basically... And you had a lot of friends, I guess, in 2010 who had tremendous success. I did.

SPEAKER_17: Who were the biggest successes in your contemporaries in that class? Stripe. Wow. Stripe Homejoy. Stripe and Homejoy.

SPEAKER_67: Just two of those businesses are worth a billion dollars each, probably. I know. It's ridiculous. And you're sitting there going, I was as lauded as them. And I...

SPEAKER_41: I worked just as hard. I worked just as hard.

SPEAKER_57: Y Combinator, I went to the front. I sat there to listen. I worked harder than them. I worked my weekends. I worked my butt off. Why am I not as successful? All right.

SPEAKER_126: So, when we get back from commercial break, we'll hear about how Jessica rebooted and grabbed success from the jaws of defeat on this week in startups. Stick with us.

SPEAKER_02: Hey, everybody. Let me take a moment to thank my friends at Citrix ShareFile because we are all

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SPEAKER_32: This Week in Startups and the startups that are on it. Okay, let's get back to this amazing episode.

SPEAKER_126: All right, welcome back, everybody. It's This Week in Startups. I'm at Jason on Twitter and you can follow the show at TWISTartups on Insta and Twitter. Insta is Instagram. That's what the kids call it, Insta. Today on the program, for the second time in four years, Jessica Ma. She is the CEO and co-founder of In De Niro, the youngest female founder in the history of Y Combinator, the most elite startup incubator accelerator. Run by my friend Sam Allman now, previously by Paul Graham. And her company, In De Niro, was trying to be a mint of accounting for small businesses so

SPEAKER_02: they could visualize how their businesses were doing. It didn't work. She blew $1.2 million.

SPEAKER_19: But then you came up with an idea that actually has now worked and you actually have revenue and the company has been saved. Yes. Spoiler alert. We built it up in the first 10 minutes or 11 minutes, but spoiler alert, you figured it out. So tell us, what is the new business? I'm pulling it up here on my screen when you speak. And how did you come to this business? So what is it and how did you come to it?

SPEAKER_62: Okay. Well, from the first rendition of In De Niro, the biggest feedback we got from people was, why can't you just follow my taxes for me? I want to press a button, I'll pay you money, follow my taxes for me, do my accounting for me. Why should I do all this work? Why should I hire a bookkeeper to do it? Why should I hire a tax accountant to do this? And that's when I thought, this is genius. I'll just charge you a few hundred dollars a month and I'll take care of all of it for you. And obviously, bookkeepers are thinking, eh, this is stupid.

SPEAKER_57: That's what my job is. Right. And investors would say, eh, sounds like a service business.

SPEAKER_62: Right. So you have all these people who are wondering, how will this actually work? Right. So the thesis is, we could do all of that better than accountants, cheaper than accountants, more reliably than accountants, and we could have software power all of it, or at least most of it. So it's going to be like an enterprise, SaaS type of business. And so I've been working on that for a little over two years now. And?

SPEAKER_57: And it's great because now we have millions in revenue, you know, borderline cashflow positive. You could be cashflow if you wanted to. If I wanted to.

SPEAKER_67: You lay off two people, you're cashflow positive, you're investing in the business, you're not. Exactly. So you're right there. It's a choice.

SPEAKER_143: It's a choice. Yeah.

SPEAKER_67: So it's amazing.

SPEAKER_02: You built this beautiful interface for people, but what they really needed was somebody to just do the down and dirty work and get their accounting done and get their taxes filed.

SPEAKER_67: It's almost like you underestimated how incompetent small businesses were at just keeping their books. Yeah, completely, completely so. And they, when they would sign up for the previous version, Engineer 1.0, did the graphs

SPEAKER_02: not turn out well because they didn't have good books?

SPEAKER_62: We got that feedback a lot. People would say, I hate looking at Indonera because my business is so horrible. Right.

SPEAKER_65: It was really that they just had everything classified wrong or something in their accounting software? The data was wrong. The business wasn't a real business.

SPEAKER_71: A lot of those original users were just toying around.

SPEAKER_62: They're like a sole proprietor, like an eBay seller. They're not like a real business. Now our customers run real businesses. They have real employees, real revenue. They're real businesses now.

SPEAKER_65: And they're paying you a monthly reoccurring fee.

SPEAKER_17: That's correct.

SPEAKER_68: So what was the business model of Indonera 1.0?

SPEAKER_53: Was it that you would like get credit card fees when you got a bounty on somebody signing up for a credit card or something like Minted?

SPEAKER_57: That was part of it. The other thought was a certain portion will pay for a pro offering. So they're going to pay us, say, $20 a month, similar to what you pay QuickBooks online.

SPEAKER_62: But it's really hard to build a really big business on $20 a month.

SPEAKER_52: Yeah. It's really hard.

SPEAKER_56: And so your now average customer pays what? Our average customer pays between $500 and $1,000 a month.

SPEAKER_18: So now your client engagements went from $240 a year, one out of 100 customers or something,

SPEAKER_19: possibly, to $700, $800 a month, $10,000 a year for 100%. Yeah. There's nobody using the system for free because you have to pay an accountant.

SPEAKER_36: Right. Absolutely. What do they? Yeah, go ahead. Yeah, there's so many ways to build a business, right?

SPEAKER_62: You could say, I want to have thousands or millions of users and I'm okay making little or no money on most of them. Or you could say, I'm going to monetize every single customer and they're all going to pay lots of money. And, you know, at first I really wanted to go the attractive path, which is get lots of users. And that is a path. That is the more popular path here in Silicon Valley, I feel.

SPEAKER_155: It is, because why do you think?

SPEAKER_62: Because it's more attractive. It's a better story to say I have millions of users. It's, you know, more compelling to think I have a business that every business will use, that will touch every single person.

Chamath Palihapitiya: But now you have clients paying, what's the max of clients paying you every month? Thousands of dollars, right? Five, $6,000 a month. Wow.

SPEAKER_02: So you have people paying you $50,000 a year to do their accounting and you do it more efficiently, so there's more profit margin, I guess. And they're stoked to have like an easier system than hiring a local yokel. Exactly.

SPEAKER_56: That's the value proposition.

SPEAKER_62: Yep. And so I pitched the one-stop shop. You don't need to hire a bookkeeper. You don't need to hire a tax person. And then I also pitched the fact that it scales with the business. Because if you get a bookkeeper, what if they go on vacation? Oh my God.

SPEAKER_61: You're screwed.

SPEAKER_02: I've been through this so many times. And what do the bookkeepers think coming to work for you versus being independent contractors or like having their own shingle up or working for their own accounting, small accounting firm in their town? Is it a better lifestyle for them or is it the same?

SPEAKER_56: What? Well, the problem is that most of them wouldn't even qualify to work at my company.

SPEAKER_62: They're just not that good. So I tried to interview them. And then I realized this is not the model. We need to have really highly intelligent customer success managers running our accounts. So people who know about accounting, but really like they know how to just take care of a customer. The bookkeepers, a lot of them just don't know how to make customers happy. So all these things we thought we were going to do, like hire bookkeepers, we realized that's just the wrong approach. You got to completely rethink everything.

SPEAKER_163: So how do you rethink that? You're saying the people who manage the new clients are more like account reps or they're accountants who are acting as account reps.

SPEAKER_02: And then you're having like freelancers do the actual bookkeeping. How does it work?

SPEAKER_80: Yeah, it's more, it's a lot closer to that. The thing is that In-N-A-R is highly technology enabled.

SPEAKER_62: So QuickBooks, their incentive is to help bookkeepers rack up their hourly rate, right? Because the more hours the bookkeeper works, the more money you're going to pay a bookkeeper. Right. Whereas for me, it's a flat rate.

SPEAKER_57: So my incentive is to make my software as powerful as possible. Interesting.

SPEAKER_79: So that as little work needs to be done as possible. To accomplish the task. Exactly.

SPEAKER_02: It's interesting because I have been on QuickBooks now for decades, like literally over 10 years in three or four different companies. And now it's in the cloud and it's just like a pain in the ass. And I always thought to myself, like, every year or two, I have to upgrade it for $500 or $1,000.

SPEAKER_04: I don't know what I'm getting. It's like the software is old and clunky. Yeah.

SPEAKER_171: And you've built your own accounting software, but you only, you don't sell it to anybody else. You just use it for yourself.

SPEAKER_29: It's the secret sauce. Right. So why give it out? Exactly.

SPEAKER_57: Well, I actually started there. I gave it to everyone.

SPEAKER_173: Hmm.

SPEAKER_57: But it's really hard to build a business that way. Accountants didn't really love it.

SPEAKER_177: And so looking at it here, it's very basic. You can see it on the screen here, by the way. Yeah. So for people who are watching, it's like a dashboard.

SPEAKER_126: You see the transactions and the flag transactions, and here's my Lyft, and here's my Uber, and my Elance escrow, and my Visa, my Intuit payments, and my Zen payroll card and everything, my

SPEAKER_02: invoices, my analytics, my payroll, everything just in one place. And I guess I can send money from it, too. So I wonder, like, getting emboldened like this to actually provide the service in the real world, what influenced or inspired you to sort of say, like, well, I'll just take on actually providing the service?

SPEAKER_57: Um, I think I just look at all these complex businesses, like, you look at Uber, you look at TaskRabbit, you look at Odesk, and you're thinking, wow, they have a real human component.

SPEAKER_62: So at first, I actually thought, I'm not going to do any of this work. I'm going to essentially set up my customers with in-and-air certified accountants, and I'll take, like, a 20% cut, like how Uber takes 20% from their drivers. But then by doing that, we were having trouble because these accountants that we were recommending to our customers, they couldn't sell themselves. And they wanted all these features that, you know, weren't really a great fit for our customers. It was just, you know, it was just, it was just workflow related. And then we realized, let's just do it ourselves. We could do it better, faster.

SPEAKER_71: We'll make your customers happier. And I think that's when the light bulb really hit me.

SPEAKER_64: So it really is like rethinking how people pay for accounting because you have said, like,

SPEAKER_02: oh, we're not just going to charge you hourly for like a bookkeeper. We're just going to give you a flat rate every month. Yeah. So you can actually predict how does that flat rate equal, or is it less than or greater

SPEAKER_04: than what people were paying for an hourly bookkeeper? So are people, do people's, in short, do people have better service at the same price or better

SPEAKER_187: service at a better price, at a higher price or lower price? I mean, what does it net out to be at the end of the day?

SPEAKER_62: The goal is to make it as similar as possible. So you add up what you're paying a bookkeeper, you add up what you're going to pay a tax professional, you add up what you pay for all this software, QuickBooks, your reimbursement, expense management software, your invoicing software, you add up all these costs. I want to come in a little under that and do a better job at it.

SPEAKER_02: And less management overhead for the business owner. Exactly. So instead of having to spend 10 hours a month on this, maybe they could spend two or three. So what does that cost on average for like a small business, like under 100 people?

SPEAKER_79: Are they spending $5,000 a year, $10,000 a year on all this nonsense? Yeah, usually between $5,000 and $10,000 if you're a small under 10 employee business. Interesting. And what about, are startups your target or is it more like mom and pop local businesses?

SPEAKER_62: I'd say like we prefer service businesses that are growing. So if you're like a mom and pop restaurant and you're not really growing, you're going to pinch your pennies and do your accounting in the back room, right? But if you are really trying to look to grow your business, you actually care to get your accounting, right?

SPEAKER_57: So yeah.

SPEAKER_198: All right. When we get back from this commercial break, I want to talk about all these notes piling up in the class of 2010, 2011, 2012, 2013 of Y Combinator companies and Techstars companies

SPEAKER_04: and how you wind up all those notes and bridges and everything and actually do a price round

SPEAKER_02: or clean up that whole mess because you must have had all these extensions on your convertible notes and it was something that everybody predicted would happen. And in your case, I think it did. So when we get back, consolidating convertible notes on this week of startups.

SPEAKER_200: Ah, Wistia.

SPEAKER_126: Wistia is a great service.

SPEAKER_02: It's basically a business-to-business video hosting platform that also does analytics, that also has killer features. So if you want to do video properly, like we do here at This Week in Startups or we do at the launch festival, you're going to want to control 100% of the experience. What that means is you want to know the size and you want to have the metrics and you don't

SPEAKER_19: want ads or other clutter or promotions or other people's logos on your videos. You want to control 100% of that so you look like a professional. Well, there's two ways to do that. One is you can use Wistia, pay a modest fee. That's frankly, I think, too low. But anyway, they're going to charge what they want to charge. That's their choice. If they want to just give you a great deal, I'm going to let Wistia do that. Or you can try to do it yourself and put up servers and have to deal with technicians that have all kinds of problems when things go down. Wistia is easy to use. MailChimp, Moz, Blank Label, and Twist uses it. They have 50,000 customers on this beautiful, simple, elegant-to-use platform. And they have amazing analytics that I use all the time. And they can capture email addresses, which is what I love. Before, after, during video plays, you can say, hey, give me your email address. So imagine if you had a law firm and you're saying, hey, here's how you do our services, whatever, join us, whatever. Put your email in here if you want to get a white paper, right? Or you're doing any other kind of lead gen. I'm a real estate broker. Here's a tour of the house. Put in your email address if you would like to have us set up a meeting for you to go visit the house and do a tour, right? Or, hey, we're renting WeWork and we're renting office space. You're watching the video. It says, hey, put your email in here to get updates on events at the WeWork facility in San

SPEAKER_02: Francisco, all kinds of great ideas. And they have support. So if you need help, you know, if you're using a free service, you get what you pay for and you're not going to get any help. If you need help and you need support, you can get that from Wistia. Wistia is amazing. Go to wistia.com slash twist and have an amazing experience. Yes, wistia.com slash twist. The first three videos are free. No credit card is required. It's awesome. Go check it out. And let's get back to this amazing program, which I hope you're watching on our Wistia player, which we tweet and we use at thisweekinstartups.com. So we only have people who are partners on this program if we use the product ourselves and I personally endorse it. Wistia is brilliant.

SPEAKER_18: I can personally endorse it and put my name, Jason Calacanis' name, on Wistia and say, this is a great product.

SPEAKER_02: In fact, Wistia is like a supremely awesome product.

SPEAKER_04: It makes me look good to tell you about it. You're going to love me for telling you about it. All right, let's get back to the program.

SPEAKER_02: All right, everybody. Welcome back to this week in startups. Thanks to my friends at WeWork, wework.com. It's a great place to work.

SPEAKER_126: They're also in New York, Boston, San Francisco, DC, Seattle, Los Angeles, and coming soon to Chicago, London, DC, and Israel. They are an awesome place to work. It's really affordable. Hey, desks as a service, just like Jessica is doing accounting as a service.

SPEAKER_19: It's getting so easy to be a startup. It's like desk as a service, software as a service, accounting as a service, transportation as a service. Like at some point, everything's just going to be done. That's the point.

SPEAKER_187: It's going to be like WALL-E. We're just all going to float around and then just be like, here's your two, or you ever see Idiocracy? Yeah. That's my favorite film. I can't believe that. Nobody has seen Idiocracy. Is it Idiocracy? How do you pronounce it? I think so. I think it's Idiocracy. It's basically Mike Judge, who did Beavis and Butthead, just commenting on like where society will be in a hundred years. And it's hysterical, but they actually, you know, they actually try, they wouldn't like release it in theaters or they tried to like kill the film because it was so anti-corporate that they felt it might resonate with people and create like a movement. So the studios killed it. It's really weird. But anyway, well, like WALL-E where they're all going around getting like tubes of food.

SPEAKER_126: All right. So when we left our hero, Jessica Ma of In De Niro, she had saved her business with the, you know, accounting as a service, as it were, but you had a mess of a cap table

SPEAKER_02: or corporate structure or with all these notes, what do you do when the note runs out after two years?

SPEAKER_62: In our case, I raised a small series A, I call it a series A, but I basically got my

SPEAKER_57: company to a point where I was able to say, hey, we have a real business now. We're like doing half a million in revenue. So let's- Half a million a year.

SPEAKER_65: Yeah. On a run rate, which is whatever that is, 40K a month. Yeah. So that's where we were.

SPEAKER_62: So I called up some guys and I'm like, let's raise a small A round. I got to convert these notes over. And that's what we did. But I kind of thought that when I first started the company, just in case my company would

SPEAKER_57: go through this type of event, which I put like a 1% probability to obviously. Right. Because, you know, I'm optimistic. Right. So I thought in that 1% case, let me give myself a three-year term on my convertible note. Ah. Very unique. So I was able to resolve that within.

SPEAKER_29: Two and a half years.

SPEAKER_79: So how did you come to think of that, putting a three-year term? Were you just like, hey, it's two. Why don't we make it three? I think I had an angel investor mention that. Really? Yeah.

SPEAKER_221: They're like, hey, put them at three, just in case you have a little extra time to figure this out.

SPEAKER_62: Yeah. And I've had friends who said that at the expiration, they've asked some of their angel investors to extend. And they'd say, no, I want my money back. I hear about this all the time.

David Friedberg: Really? Yeah. I wonder like what, because I had this happen once too. And I was like, well, I don't necessarily want my money back, but I also don't want to extend the note. Can we just convert? And the founder didn't want to convert. And I was like, well, I really don't want to like keep the note going, but I'm not going to be a jerk about it either.

SPEAKER_02: And I wound up not signing the extension, mainly because I forgot another thing about it. But I was also like, I don't really feel like signing an extension, but I guess I get dragged along with everybody else and I'm not going to complain about it. But it's kind of unfair to the investors too, to be dragged on forever. I think they should just, I guess that's the new thing with these safe documents. Yep. So explain that to the audience who doesn't know.

SPEAKER_62: I mean, the safe documents are, they're basically an alternative to the convertible note. So you don't have this stupid interest rate and the fact that it's not going to turn to equity at some point, it's this limbo land of having debt versus equity on the convertible note structure, right? Right. So I think the safe alternative is nice, but it's something we haven't been doing for a long time. Like Y Combinator, Incubator that I went through, they set this up and I think over time we'll get more people looking at this, but it's still kind of new.

SPEAKER_142: Yeah.

SPEAKER_02: So at a predetermined valuation, everything converts at a date. So it's like, oh, if we get to this 36 months or 30 months, we've all agreed that we're just going to convert at 8 million, which I think is kind of unfair to the investor because what if the company is in shambles and the valuation is more like five or four? Now you're converting at this like crazy optimistic valuation because let's face it, the notes

SPEAKER_17: are optimistic with the fallback of a 20% discount. That's true.

SPEAKER_57: But the thing is we should focus on the companies that are actually growing and don't have these problems. Like these companies, a lot of them are just going to fail anyway. They should die. I mean, that is, but you saved yours. So you're like the counter example. Right. But I also had the foresight to have three-year terms. I didn't have this problem. And I also had money to pump into the business to save it.

SPEAKER_62: So you have all these other things that we were able to deal with before even getting to this point.

SPEAKER_67: And so you raised a small a, who'd you raise from?

SPEAKER_17: And then just some VC firm or like angels who? Yeah.

SPEAKER_02: I just raised from some angels. And now what? The business is almost profitable. You got a couple million in revenue. Does that mean you're going to do like a proper A or a B? How much did you raise in the A?

SPEAKER_171: I raised like million 0.5. Right. So now you're 2.8 million into the business or something under 3 million. You got a couple million in revenue. Yeah.

SPEAKER_57: So you're pretty solid shape. Yeah. I mean, there's so many choices. Like I could say, let's just go profitable. That is one option and not one I'm going to choose. I could raise a little more money or I could go for a more proper institutional round.

SPEAKER_29: So those are just a few of my choices. So having more choices is better for an entrepreneur. Yeah.

SPEAKER_187: So you've kind of set yourself up for success by saying like, I'm going to get this business as close to profitable. Like you could have been a little bit more aggressive on the spend and grown faster, but

SPEAKER_19: you said, let's just try to have more optionality. Yes, essentially. Is that the right decision?

SPEAKER_07: Because if you had more revenue, maybe it's easier to get those institutions, the big VCs more interested because you'd see them higher growth.

SPEAKER_62: But then also you have companies like ours where there's a greater amount of complexity. Like we're trying to build this moat around our castle and it just takes a little more time to build that app. Right. Like accounting and tax, it's not that simple. It's not like press a button and then like a taxi shows up to your door.

SPEAKER_29: It's like, accounting and taxes are really complicated.

SPEAKER_52: There are a lot more forms than taking a cab. Yeah. For sure. Although you do have taxi regulations.

SPEAKER_56: I mean, Uber and Lyft have run into their share of regulation. And they're dealing with it later on in the life cycle of their business. Yeah. It's not like you can punt on some of these issues because people's taxes are at stake.

SPEAKER_18: Exactly. You're going to wind up going to jail if you file them wrong. Exactly. Yeah. The mistake with cabs is you get a ticket.

SPEAKER_52: The mistake with in De Niro and accounting is the IRS comes and puts you in jail. Yeah. It's kind of crappy.

SPEAKER_49: It's kind of high stakes. You have huge legal bills with this business? Like, do you have to like really have a lot of insurance and legal bills to make sure it's tightened up?

SPEAKER_57: Um, I have some insurance to cover all that, but no, the legal bills aren't too crazy and just hire people who know what they're doing. How many people now you have in the company?

SPEAKER_62: Sure. I have 25 in San Francisco. I have 45 in a Philippines office. Oh, wow. So Manila. Yep. Manila, Makati city, financial district.

SPEAKER_57: Have you gone? I'm going on Friday again.

SPEAKER_242: Again?

SPEAKER_65: I've been there like four times now.

SPEAKER_02: What's it like to, um, hire a bunch of remote, you know, accountants like that and manage them and how much do they wind up getting paid? How do you make that choice of Manila?

SPEAKER_57: Yeah, it's great.

SPEAKER_62: Um, well, I actually had a guy at in there who's Filipino and we wanted to open up an office somewhere else. Um, and he, he grew up there. His parents are still there.

SPEAKER_57: So I thought, perfect. Let's send him over there. He can see mom and dad. Yep. And the Philippines, everyone there speaks English. You have direct flights from SFO.

SPEAKER_245: Just a few small perks.

SPEAKER_68: Yeah. And people who are accountants there get paid $2 an hour, $3 an hour compared to here?

SPEAKER_02: Um, yeah, that. Something like that. Because I remember when we did Mahalo, we were trying some editorial writers over there and it didn't actually work because they had English as a second language, but it was like a dollar or two an hour for just like a non-technical editorial worker.

SPEAKER_79: For an accountant, yeah, you're looking at $3 an hour. $3 an hour. So that's compared to an accountant here. A good bookkeeper here is $20 to $30.

SPEAKER_65: Yeah.

SPEAKER_62: But the point wasn't just to do accounting. The point was we want to actually automate a lot of this stuff. We want to be software enabled. Right. So anything we do, we want to have a plan to automate it at some point in the future. And we're going to stack rank all these small things we need to automate over time.

SPEAKER_18: What does that mean to stack rank? Explain that to somebody who's like a new entrepreneur.

SPEAKER_62: I mean, the central idea here is think about accounting, think about taxes and all the billions of small things you have to do. Right. You could automate every single thing, but some items take more time and cost the company more money to do. So the things that are more expensive and costly for us to do, we will do first. And we have a team out there, an engineering team that can go over to the accountant, watch them do work and say, I could automate that for you. So they are in the same office.

SPEAKER_61: So I have 15 people on my tech team out there.

SPEAKER_29: How are the developers out there? Not bad. Not bad? It's really difficult to make that work, but we've been pretty successful with it so far.

SPEAKER_131: Because you have a founder who's there or an employee who's there, who's from there. Right. That must greatly help it.

SPEAKER_62: Well, I also think that the founding DNA of the team, like the CEO, CTO, they have to be really sharp in computer science, like my background's in computer science. But if I went to like, you know, study business, I wouldn't have the confidence to do this.

SPEAKER_03: And so where do you think you get massive gains in terms of like automation in accounting?

SPEAKER_67: Is it just putting in the expenses and categorizing them or what?

SPEAKER_122: I don't think you could really say there's one thing. It's just a lot of small things.

SPEAKER_07: So what are some of the top ones that you're like, oh my God, this has been really successful. Like we know it's from Uber, so we know it's transportation, so it automatically gets categorized and you just build some like logic there.

SPEAKER_62: I mean, that's a low hanging fruit.

SPEAKER_125: That's like the obvious first place to start. That's as far as I can get, my brain. The kid from Brooklyn. So what, you take the thing with the transportation and you put it in the category?

SPEAKER_65: But yeah, like accounting's got way more to it.

SPEAKER_62: Like I have to produce your tax return for you somehow. And you know, this information has to come from somewhere. Right. I have to like do a bank rec for you. I have to like do all this other stuff to make sure that I'm getting your data in properly. And yeah, it's just not easy.

SPEAKER_14: How come QuickBooks hasn't developed like QuickBooks plus a bookkeeper kind of solution?

SPEAKER_29: Because bookkeepers and accountants are 90% of their business. Ah. Right. So the incentives aren't really aligned there.

SPEAKER_02: Right. They're getting bookkeepers to buy the software on behalf of clients.

SPEAKER_17: So they're almost like value-added resellers. Do they give a kickback to the bookkeepers when they sell it? I wonder if they make 50 bucks every time they sell a copy. No, they just get a discount. Oh, they just get a discount?

SPEAKER_57: So the bookkeeper could charge on the invoice $150 for QuickBooks and just really they only paid $120.

SPEAKER_56: So they could do that.

SPEAKER_17: So you're talking before about hitting breakeven or raising an institution around. Okay. Yeah.

SPEAKER_02: What do you, how does a founder in your position decide to do that? Because the, let's say, face it, the industry is red hot right now. Like the last time the industry was this red hot, you're 24, it was 99. So you were nine years old in 1999, I think. Yeah. So the last time it was this hot was 1999, you're nine, 10 years old. Like it's liquid hot right now. I mean, you can raise money, like gargantuan amounts of money. What you're thinking there, do you say, wow, are you watching Zen, Zenefits crush it? They were in the Sunday New York Times. Like you have Zen Payroll, a bunch of people who are contemporaries of yours crushing it, raising huge mega rounds. Are you thinking, I got to make a mega round to make a big play here or I got to be conservative and not get caught up in case the market crashes like it did in 99 and 2008? How do you think about that?

SPEAKER_262: Yeah.

SPEAKER_62: I mean, at first I, that really bothered me at first because you read the news and you're thinking, wow, like my buddies are raising all this money and now they get to hire all these people and, you know, now I don't think it bothers me anymore.

SPEAKER_29: So you're not keeping up with them. You don't. I'm not here to keep up with the Joneses.

SPEAKER_62: I'm here to build a real business that will outlast every single person here and any up and down market. Right. So the way I, I don't think about myself as going conservative. If I were conservative, I'd just be perpetually profitable.

SPEAKER_57: Right. But I think of this as just trying to, you know, I'm playing, I'm being a moderate growth company. Moderate growth. Moderate.

SPEAKER_02: You think that's the play today in 2014. Moderate growth and moderate growth means you lose a little bit of money every month, but you're intelligently losing it. Exactly.

SPEAKER_62: And over time, over a five, 10 year period, you know, this will be a monster business. It's not going to be monster in a year or two years, but over time, the business will

SPEAKER_57: compound on itself and it will grow and grow and grow and it will not go bankrupt and it will not have all these other problems or laying people off or having these other bigger growth challenges.

SPEAKER_14: So hitting the gas really hard could be a mistake because if you hit it that hard, you

SPEAKER_19: could overgrow, run out of money again and be left laying people off and having all kinds of problems. So you got a little scar tissue there now.

SPEAKER_62: I have a little scar tissue there, but I don't think that's the point. I think I've realized that for this business, for accounting and tax, it is not something

SPEAKER_57: you want to massively accelerate or have that VC pressure to do at least, you know, until I'm doing tens or hundreds of millions of dollars. I think it's better to be a moderate growth company in this regard. Because you got to get it right. You got to get it right.

SPEAKER_29: And even then the growth is still a great, even then the company I know will be worth lots.

SPEAKER_19: So I think that's very savvy because people get very obsessed with growth. And listen, I'm invested in a couple of high growth companies like Thumbtack, Uber, and then I watch others that are, you know, chugging along and doing it a little bit slower. Um, and both can work, but boy, if you go off the rails and you go too hard and too fast and it's in something like education, um, or taxes or like where people could actually

SPEAKER_02: have serious ramifications, like you don't, you want to actually be careful. You don't want to go from like, you know, X number of students in a school to X squared because it's just kids' education is on the line. You got to go a little bit slower in pace.

SPEAKER_62: But even then, you know, I'm going through my numbers and I'm trying to hire all these people I want to hire.

SPEAKER_57: And even then, like the way we're growing, like we still have extra leftover cash. So it's not like I could spend $10 million up front.

SPEAKER_65: Right. You'd be, you'd be burning it inefficiently.

SPEAKER_79: It's not an intelligent way to do it. I'd have to go out of my way to spend that much money. So running the business here in San Francisco, let me ask you about that because it's getting

SPEAKER_02: ridiculously expensive to operate here, to, to live here even. Yeah. So with $3,500 a month, one bedroom apartments in San Francisco, it's getting more and more

SPEAKER_126: difficult. Yeah. People have to have $42,000 in net income to pay their rent, which means they need to get

SPEAKER_02: to, I mean, they have to go to Oakland or somewhere south or east in Richmond or something. So are you going to move the business out of here? Or you keep it here, or you go to Phoenix because you have this business. Like I know Yelp has all their sales agents making $30,000. Yeah. That's what I read. Yeah. That's true. In Scottsdale. Yeah. And so people are like, oh my God, Yelp is a San Francisco company. But I think there's more Yelp employees in Scottsdale than here. Tony Hsieh moved Zappos there for the same reason. You seem to me to be very similar to those businesses.

SPEAKER_57: Well, except I completely left the country.

SPEAKER_29: That's true. I went to the Philippines. Yeah. For some portion of it. For a huge portion of it. Yeah. I mean, 45 people on my staff are out there compared to the 25 here.

SPEAKER_62: So you can just keep going that way, you think? I think we're definitely going to go that way. I mean, I'm going to hire another 20, 30 people there in the next 12 months at the very least. And the majority of them are going to be engineers.

SPEAKER_65: Let me ask you a frank question. Sure.

SPEAKER_02: The people there, do they work harder and do they want it more than Americans?

SPEAKER_04: Because we had Michael Moritz say, like, listen, the Alibaba IPO, Michael Moritz from Sequoia fame, just the Chinese are going to run over a lot of the Americans because they want it more.

SPEAKER_19: They're harder working than Americans are today. And Americans, obviously, are much harder working than people in France. I mean, people in France would admit that they have a much better lifestyle and people in France probably work slightly harder than people in Italy.

SPEAKER_18: So what do you think when you go over there and you see it firsthand, do they want it more and are they going to win and crush the United States?

SPEAKER_19: Like in terms of the future, you know, 50 years from now, you and I are sitting here and your 54th anniversary on the show, you know, and I'm 96 at that point or something and you're, how old will you be at that time? You'll be like 74.

SPEAKER_36: What will it be like?

SPEAKER_62: Well, I still think America is going to be great. I don't think that China is going to crush us anytime soon, if ever. With that said, our workers in the Philippines, I know they really want it. Like they're, well, these engineers are willing to work harder. This is a vast generalization, by the way.

SPEAKER_57: Yeah, which is great. That's what I'm looking for. They are willing to work harder than a lot of their engineer counterparts here in San Francisco.

SPEAKER_62: And part of that is because they just don't have it as good out there. Like there aren't other great tech startups that give great perks who pay over market out there. Whereas here, you know, you're an engineer, you hate your startup, just leave and go to another startup. Right.

SPEAKER_100: You can just literally leave and give no notice and just go to the next one the next day. Exactly. And nobody bats an eye at it anymore.

SPEAKER_61: Yeah.

SPEAKER_135: It happens every day out here. But they know they have it good. So they're going to work for it.

SPEAKER_67: Yeah. It's very interesting.

SPEAKER_02: I think Americans have to really think deeply about what got us here and if it will get us there. You know, like I think this Alibaba IPO is the start of something major because I was talking to Chamath from Social Capital Partnership about it. And he said, you know, Jason, more than anything, what this does is every young Chinese entrepreneur is thinking, I don't need to go there. I don't need to deal with H-1B bullshit. I can just stay here and I can build the next Alibaba here. Why do I need to go to the United States? Why do I need to go to Canada and try to figure out how to get from Canada to, you know, it's very interesting.

SPEAKER_240: I think this is a sea change.

SPEAKER_57: But still, you know, I'm Chinese. I know a lot of my family there. They know that America is still superior in all these other ways. Yeah.

SPEAKER_65: It just feels like this is the end of the empire. I don't know.

SPEAKER_79: I don't think so. I love America. I think we're just getting started. Yeah. Still, we're only 200 years old, but it just does it.

SPEAKER_18: The Alibaba thing has made me pause. Yeah. What do you think of it? What's the reaction from your Chinese relatives and how do they look at it? This is like the big topic of discussion in China, is it not? Yeah, that there's a Google.

SPEAKER_33: And Jack Ma, same last name as China.

SPEAKER_18: Yeah.

SPEAKER_29: Is he M.A. and you're M.A.H. though? Yeah, but it's the same. It's the same name? It's the same real last name in China. Ah. So maybe I'm actually just a little bit. Your cousin? Maybe. I hope so.

SPEAKER_02: Yeah. The valuations will then just trend right to each other. I just think it's like you look at Alibaba and the scale of it. Yeah. And the fact that they really don't need to be in a, they didn't need to do it here and they did it their way. Like a lot of their businesses are not copycat businesses. I mean, Alipay, which was spun out, like that's pretty much PayPal, but it's kind of an interesting company in all those different ways. And you've got to wonder if they're going to start buying companies here and deciding like, hey, that's a good market. Why don't we operate there? But theirs is a protectionist market, which we can't go to.

SPEAKER_57: I know. It's a little scary, but I think everyone's still a little crazier about it than they need to be.

SPEAKER_02: Yeah, we could use a little competition kicking our ass because I think Europe just has failed so miserably to do anything interesting. Yeah. With their regulations and just the...

SPEAKER_79: It's kind of dull.

SPEAKER_57: It's kind of disappointing in my opinion. Europe. Yeah. How so? No, just like all these like crazy Libra laws.

SPEAKER_65: It makes it really difficult to do business. And, you know, why be there?

SPEAKER_18: It's almost like people are now just passing up Europe. I feel like Europe's turning into Epcot Center for Americans in the world. It's like, it's a very cute place. You can go like to go to Italy and go see the Italy Pavilion. Yeah. And then you can go to the Paris Pavilion and you can go to the Barcelona Pavilion. I mean, there's no business going on there. No, no, it's just like a bunch of buildings and food. And, you know, some people are going to dance in the middle of the streets and you can see some, you know, statues and you're done.

SPEAKER_307: Yeah.

SPEAKER_18: But there's no commerce going on over there. And they're just becoming less and less relevant, except for the Germans. But generally speaking, and then maybe the Scandinavian countries.

SPEAKER_62: Yeah, people are a lot more bullish on Asia.

SPEAKER_135: For sure. For sure.

SPEAKER_62: But the point here is that, you know, we should just be rethinking the obvious. Like, we shouldn't just take for granted, all right, we have to hire our entire team here in San Francisco. Right. Like, we can go to Phoenix. We can go to China. We can hire people in the Philippines or whatever. We don't need to just take this for granted. Or we don't need to, like, raising big money from institutionals. It's like this, like, people just get high on this.

SPEAKER_176: Are you getting a lot of offers on that? Like, to do, like, the big institutional round?

Chamath Palihapitiya: I get people asking about that all the time. And would it not make sense, though, to take the money and just sit on it?

SPEAKER_02: Or they just get pissed off at you for doing that?

SPEAKER_62: Well, I think it's just for my model and for my business. I can't spend it fast enough.

SPEAKER_04: Right. But you could sit on a lot of money and not worry about the next 9-11 or financial crisis.

SPEAKER_57: Or I could just raise $5 or $6 or $7 million instead and still have the same effect.

SPEAKER_62: Like, the difference between $5, $6, $7 versus $10, $12 million, it's, like, not huge if you're generating revenue. If you're not... That's true.

SPEAKER_69: If you're not generating revenue, you're screwed. And are these businesses, if the economy collapses again, what happened?

SPEAKER_02: You must have studied this. When the economy collapsed in 2008, if that happens to you, and I guess it will happen again, sadly, like, we have these, like, moments. Yeah, it always does. What impact would that have had on your business, do you think? Well... Did a lot of those businesses go under or no?

SPEAKER_62: I think a lot of them will have to cut back, but I don't think they're going to go under.

SPEAKER_56: Right. So they'll call you and be like, hey, can I get a 30% break? We'd probably proactively offer something if the market changed like that.

SPEAKER_62: But look at every single industry.

SPEAKER_57: Look at entertainment.

SPEAKER_62: People don't need entertainment when the economy sucks. Like, look at restaurants, look at dining, look at all these other industries.

SPEAKER_56: Outdoor billboard advertising. Like, there's certain things people are... It's very easy for people to cut back on. Exactly. But filing your taxes during your accounting, you still kind of need that.

SPEAKER_328: Yeah, you still kind of need to file taxes, I think.

SPEAKER_71: Exactly. So the amount people will cut back will be drastically less here than compared to all of our other counterparts.

SPEAKER_53: How do you feel as an entrepreneur now that you've been through the sort of like ups and downs? Like, do you wake up every day and just feel like you understand it a little bit more?

SPEAKER_171: Do you feel kind of like super confident? How do you feel now when you kind of get to the office in the morning, as it were? Yeah, I feel humbled.

SPEAKER_109: Yeah? Yeah, for sure.

SPEAKER_57: Like, I wake up in my nice apartment, walk across the street to my office, and I'm like, holy crap, I'm still standing.

SPEAKER_333: I could be dead right now.

SPEAKER_57: I could. But more than that, like, now I actually feel confident that we're going to grow the company. Whereas before, I felt I had this arrogance to me. I thought, we're going to take over the world. But I didn't really have anything to back that up. I didn't have the substance. I didn't have the true conviction. It was just a fallacy I created in my own mind.

SPEAKER_29: So it's very different. It's a humble confidence. Right.

SPEAKER_02: But it's interesting, because I do see it a lot with Y Combinator companies in particular, because I think there's a disservice that happens, not by Y Combinator, by the nature of Y Combinator's success. You have Dropbox and Airbnb and whatever come out of, you know, one place, and everybody automatically says, like, oh, you're the next Drew Houston. Oh, you're the next Airbnb, et cetera. Yeah. And so the amount of pressure put on it and the amount of confidence, almost like Harvard or like some Ivy League school where you get accepted, and now you're supposed to be happy and smart and brilliant. And all the Harvard people I know, did you go to Harvard? No. I don't, you know, Harvard people, right? Like, they're the most, like, wacky people I know because they're like, I got picked for Harvard. Doesn't that mean I'm supposed to be like the most smart person in the world?

SPEAKER_177: And it's like, no, it just means you're the most smart on the SATs, I guess.

SPEAKER_262: That's kind of nice to go through this up and down cycle.

SPEAKER_57: Yeah. To go through that near death of almost running out of cash and having to lay off your employees, like, that's really rewarding when you reflect back on it. Yeah. You need a little distance. You do. But at the time, it's horrible. I mean, online, I have a few interviews I did when I was actually in the thick of it. And, like, I look at my own self in those videos and I'm thinking, oh, my God, that's crazy. Why? Because you just. Because I would actually be transparent about my problems in the thick of it. Because most entrepreneurs, you read about them in Forbes. Yeah. And they're like, all right, the next billionaire. And you think that was convenient of you to do. Yeah. Because if you weren't a successful person, you'd never do this press. Right. Whereas in my case, like, I had this video footage online when I was in the worst of times.

SPEAKER_62: Right. So, I'm actually pretty proud of that, in a way. I have that record.

SPEAKER_347: You do. And, you know, it's like, all this stuff, it builds up, like you're saying, your confidence,

SPEAKER_19: but not in an arrogant way, in a, God, there's things that are out of my control. And I got to just wake up and do the best I can. And the psychology of being an entrepreneur is so brutal.

SPEAKER_187: Because what I've always found is, if you tell your employees, hey, this is an incredibly

SPEAKER_18: fucked up situation, they get panicked and they quit because they don't want to lose their jobs or they're just in a state of panic. And then if you go to your board of investors and you're like, hey, by the way, everything's complete chaos, then they don't want to invest in you. So, you're left in this middle ground where it's like, who can I be honest with? And just tell them like, it's, I'm hopeful, but I'm kind of scared of these things. And I'm kind of worried about this. And, you know, maybe it's 60-40 right now.

SPEAKER_187: Like, what do you go to when you want to talk about like the reality of things?

SPEAKER_62: Yeah. I mean, back then it was kind of tough because I have 20 angel investors.

SPEAKER_57: So, I do this massive party round.

SPEAKER_352: Yeah.

SPEAKER_57: And in truth, there may be two or three of them who I'll go to and lay down everything. Because you can't do that with 20 people.

SPEAKER_62: You just, there's just not enough time in the day. Right. And yeah, like you just got to hope for that emotional support. Yeah. Like, you don't have that.

SPEAKER_14: Who's the best in that whole party round in terms of like helping you through all this? Who wound up being the most value-added angel, as it were?

SPEAKER_62: There were a few, but like one that stands out to me right now, it's like Alad Gil. Do you know Alad? No. He's this unknown investor. He's like very under the radar. And then this other guy, David Wu, he was that into it. And just go to them with everything. Every problem. And they'll just say, hey, this happens. Just chill out and figure it out. And they don't ask for their money back. Because that would just be horrible.

David Friedberg: Yeah. I mean, as an angel investor, like you're making so many bets that no one bet impacts you.

SPEAKER_02: So, to sweat it is kind of, I think it's unprofessional to sweat any one investment. What I do sweat is like a lack of communication or just like not honesty or not candidness.

SPEAKER_177: Like you need to be candid with each other. So, I have some people who like tell me they're out of money three weeks ago. And I'm like, you think you might want to tell me you're going to be out of money 10 weeks before you run out of money so I can do something. Now you're three weeks out. You have no money for payroll. What? That's horrible.

SPEAKER_336: Yeah. It literally happened. Like somebody called me. I'm like, they're like, we're selling the company. I'm like, to who? What? Huh? They're like, yeah. You know, we're all getting 60 cents on the dollar. I'm like, who did we talk to? They're like, well, one person approached us. I'm like, well, what about we could have shopped it to five more? Yeah.

SPEAKER_368: You always have to talk to your founders because they may know some, they may have some silver bullet for you.

SPEAKER_04: It does happen. I've introduced people and I've done those like Hail Mary passes and sometimes they connect. That's really awesome.

SPEAKER_18: Like Hail Marys exists for a reason. Like when people throw the ball in the end zone with a Hail Mary pass, it works.

SPEAKER_02: I mean, I don't know what the statistic is. Jackie, I mean, a water ring producer, Jackie can look it up, but I think a Hail Mary pass is good. Like in the NFL, like 8% of the time or 12% of the time.

SPEAKER_18: Like if you literally throw it in the end zone, it's like in poker. Like, you know, you could hit a four out or you can hit a two out or you can hit a one out or it's a, you know, whatever, a two or 3% chance you can hit them and you hit that.

SPEAKER_62: You know, it's the pride and the ego. They have, like these founders have so much pride that they don't want to admit that to

SPEAKER_71: their investors or to the public.

SPEAKER_373: Yeah. There's a lot of pressure put on. You know, I think a lot of these founders have a lot of pressure put on by the press. You got so much press. How much time did you spend on press in your early days? A lot. Yeah. Too much maybe. Way too much.

SPEAKER_57: But hey, now we're focused on substance, as all founders should always be.

SPEAKER_62: Right. And, you know, just got to keep a good head screwed on. Yeah. Just focus on what matters.

SPEAKER_378: Hey, and you're a female founder.

SPEAKER_380: Who cares? Who cares?

David Friedberg: Exactly. It's sort of like now I'm just getting tired of asking the question. It's like everybody's... It's the stupidest question ever. Isn't it? Like everybody's just like, oh God, female founders. I'm just like, you know, like four of the last 10 investments I did were female founders. And I, it never occurred to me they were female founders. It occurred to me that like Hand Up, Red Tricycle, and Red Clay, like these are all just exceptional businesses.

SPEAKER_177: Like founder, not Mattermark. I want to invest in Mattermark. That's a killer business. Like who cares if it's a female founder business? Yeah. It's changed a little bit, hasn't it, even in your four short years?

SPEAKER_62: Yeah. I think people don't care about it as much anymore. Now it's like kind of normal and accepted and it's good.

SPEAKER_177: Five to 10% success according to different sources for the Hail Mary pass. Which, by the way, a one in 20 or a one in 10 chance happens often. That happens often.

SPEAKER_07: If I had all the failed companies I've had, had a one in 10 chance of succeeding and have whatever, five more successful companies. Yeah.

SPEAKER_126: Throw the pass. That's great. All right. Listen, Jessica Ma, welcome back to the program and congratulations. It's so great to see you succeed like this after having such a rough time and it's really inspirational. Everybody go check out In De Niro and you have to, if you're doing accounting, give it a shot. And that's my absolute demand of you. Go to InDeNiro.com right now. I demand you fire your bookkeepers.

SPEAKER_383: I demand all my listeners fire their bookkeepers and go ahead.

SPEAKER_126: And, you know, do your thing. Go try it. It's only $500 a month. And, you know, right?

SPEAKER_58: That's where it starts at, $500 a month. Yeah.

SPEAKER_386: I think I'm going to do it for one of my companies. You should.

SPEAKER_18: I just moved up here and I have my accountants down there. My God, I hope they're not listening. But I'm just like, maybe I should give this a shot for one of my two companies because it's

SPEAKER_19: like, I think I spend much more than $6,000 on both of these things. And if I could do it for $6,000 and save a little money, pretty good. All right. We'll see you all next time on This Week in Star Wars. Bye-bye. Thanks. Bye-bye.

SPEAKER_388: Welcome back. Your dreams were your ticket out. Welcome back to that same old place that you laughed about.

SPEAKER_391: Well, the names have all changed since you... Welcome back to that same old place that you laughed about.