SPEAKER_00: Distribution provided by CloudSigma, the cloud that adapts to you. Visit CloudSigma.com slash ThisWeekIn for a free $200 credit.

SPEAKER_01: Today's episode of This Week in Startups is brought to you by GoToMeeting. Sign up for GoToMeeting and use the promo code START to receive your free trial. And by SourceBits.

SPEAKER_04: Visit SourceBits.com to begin your mobile app development journey.

SPEAKER_03: Hey, everybody. Hey, everybody. I'm Jason Calacanis, and this is This Week in Startups.

SPEAKER_05: Today, finally, Mike Jones, serial entrepreneur, former president of MySpace, and, of course, the co-founder of the Science Incubator Accelerator type situation here in Los Angeles.

SPEAKER_06: One of the most successful entrepreneurs I know. Really considered a guy.

SPEAKER_07: We're going to learn a lot today, so stick with us.

SPEAKER_11: Hey, everybody. Hey, everybody. It's This Week in Startups, the show where you learn about entrepreneurship, starting companies, making a dent in the universe, making products that are better than the products that came before it, delighting users.

SPEAKER_06: And today on the program we have a good friend of mine, Mike Jones. He's a serial entrepreneur. He did Userplane. He did MySpace. He did Savo, and he's doing the Accelerator Incubator Science, which is just tearing it up here in Los Angeles. It's the best of the Accelerators down here, and they've got some great companies coming out of it. We're going to hear all about starting companies, marketing, e-commerce, paid conversion, just entrepreneurship in general. So it's going to be a very, very intricate and awesome discussion. But first, this show could not happen without the support of amazing, amazing partners. And we select partners for the program pretty simply. If I believe in their product and I know I can trust them, then I can read an advertisement for them. I can tell you about their service. But if I don't believe in them, we turn them down.

SPEAKER_17: And we've turned down a bunch of people who want to advertise on the program. The program's sold out for like months in advance. It's a very successful program. What can I say, you know? It's done very well. A hundred thousand people watching every episode. I'm very proud of that. And so what that means is I can have great people like Sourcebits on the program.

SPEAKER_06: And Sourcebits is a great company. I met these folks, I don't know, about a year ago, because they were building Sequoia Capital, which is the investor in my company. They were invested in by Sequoia, and they built their website. And they do great work, mobile work mainly, for people like Hershey's and Coke and GE. And they're just design-led engineering, really good stuff. And if you're falling behind on your mobile efforts, whether it's mobile web or apps, it's really dangerous for you right now, because the entire industry, and by industry I mean user base, the entire user base is moving to mobile. And just look at yourself. How many times have you taken out your mobile phone and done a task while you're sitting just feet away from your computer or your iPad? Or use your iPad instead of your computer. I'm shopping. I'm parked, waiting for my wife to get out of the store, and I'm shopping on Amazon. I have a very weird moment like that. Anyway, mobile's taking over. These guys and gals over there, they make the best mobile apps. And actually, here's one of them right now. Let me pull it up. They made this like, it looks like the Tiger Woods golf game to me, and just gorgeous. Wait a second. I just way overshot the pin. But this is just an example of how gorgeous their work is. And I can just go into practice mode here. Let me double the size of this. It's an iPhone app, but I'm using it on my iPad. Really great app. Easy to use. Gorgeous. And they're just technically, you know, it's not just understanding in mobile how to technically do something. You have to have the design right, and you have to understand the medium. And these folks do, and they've done a great job. So if you want to meet with them, just email SourceBits at This Weekend, SourceBits, B-I-T-S, at ThisWeekend.com, and you'll get a meeting with them. And if you take a meeting with them, you'll also get a 15-minute meeting with me. And if you wind up using them to build your mobile apps, you'll get to be on This Weekend Startups for 15 minutes. So that's like that product integration we do, and it's working out really well. So if you want to thank them for producing and supporting the production of independent media like This Weekend Startups, just say thank you at SourceBits on your Twitter account. And I thank you, SourceBits, for allowing me to do great interviews with people like Mike Jones. Welcome to the program, finally. Yep, thanks for having me.

SPEAKER_17: Right into the microphone there, buddy. Got it. And so, I guess we met 2005, 2006.

SPEAKER_06: We had both sold our companies to AOL in the same six-month period, maybe. That's right. That's part of the John Miller.

SPEAKER_18: You were kind of the first of a wave of acquisitions. We were. You guys kind of kicked it off.

SPEAKER_06: Yeah, like smaller acquisitions of smaller companies. So that company that you sold was Userplane. What was Userplane?

SPEAKER_19: It was a communications platform that we built where we actually kind of integrated our own technologies into sites like MySpace. And we serviced a lot of the dating and social networking community at that time. And then also had a really, really large kind of free product we built with a giant ad network behind it.

SPEAKER_21: Got it. And that was chat.

David Friedberg: You could just put chat on your site. It was chat, instant messaging, kind of a live presence component.

SPEAKER_19: And, I mean, at scale, we were dealing with, you know, millions of concurrent users every day. And so we had a really, really big kind of communications platform we had built. And we were doing over a billion ads a day at the point of us selling to AOL, which is a big network.

SPEAKER_06: Was that, that was a, that wasn't your first company, though? You had done.

SPEAKER_19: No, I had done a few companies beforehand. They were kind of more in the kind of agency space where I had different design and technology agencies that I kind of built and sold over the years. Right. And Userplane was the beginning of us actually creating software products that we actually were looking to kind of scale.

SPEAKER_07: As an entrepreneur, what's the difference between running one of those service agency type businesses and being a product company?

SPEAKER_30: Well, I mean, at the end of the day, in services companies, you're rarely building high quality value at the end of the day, right?

SPEAKER_19: You're, you're, you're performing work for companies and you might be billing very, very strong revenue. And you might be able to finding a lot of profitability, but you're not creating something in the long run that has really, really high value at the end of the road. And so I, I loved services businesses because I was able to dive and learn from all these different companies you work with. I mean, it was a fantastic time to do that, but I hated it from the standpoint that services businesses acquired by companies like WPP or traditional agencies just weren't selling for really, really big multiples because they weren't creating scalable, long-term, high enterprise value businesses.

SPEAKER_34: So if you had a business doing a million dollars a year in revenue, they might buy it for two or three times that amount?

SPEAKER_17: Yes, exactly.

SPEAKER_06: So you've, you spent all this time, but really, if you had made an internet company that had a million in revenue, you might get 20, 30 times. Yeah.

SPEAKER_40: I mean, and, and just like you and I both saw at that point within AOL kind of redefining their strategy, they're paying a lot for kind of strategy redefining companies that would come in and help invigorate what AOL was at that point.

SPEAKER_07: Yeah, weblogs, they use your play, and these are all 30, 40 million dollar acquisitions, according to sources. And these were small companies, five, 10,000 companies.

SPEAKER_45: How many people were you?

SPEAKER_44: I think we're probably eight at the point of getting acquired.

SPEAKER_45: Right, right.

SPEAKER_34: And these were, in terms of multiples, some of the biggest multiples paid. That's right. Very small companies, but it worked out pretty well for AOL, it seems.

SPEAKER_19: Yeah, I think that's right. Well, I think weblogs specifically redefined AOL's overall content strategy that held on past John's time there.

SPEAKER_06: Yeah, and to this point, I guess, now with TechCrunch and other things, Huffington Post. And so you stayed at AOL as an SVP for two or three years.

SPEAKER_47: Yeah, two years.

SPEAKER_48: Two years. I left after a year. I pulled the parachute. But did you stay past John Miller's?

SPEAKER_40: I did.

SPEAKER_19: I mean, John ended up leaving AOL within a few months of me starting. So that I was there during the kind of Ron and Randy time period. I was involved on the periphery of the Bebo acquisition that I ended up having a little bit of kind of a challenge with management around.

SPEAKER_30: And then eventually kind of came to the conclusion that it was time to move on.

SPEAKER_50: These guys, Ron and Randy, were hated inside of AOL.

SPEAKER_35: I think they had made a lot of controversial decisions that boiled people's blood a little bit.

SPEAKER_17: Yeah. The rank and file hated them.

SPEAKER_06: And the guy, Randy Falco, was known for not using email. Oh, that's fine. I remember reading a story that he didn't use email. Yeah.

SPEAKER_07: Why do you think it is, leaving them aside, why do you think it is that sometimes these publicly traded companies put people in charge who are not product people?

SPEAKER_30: That's a good question. I mean, I think in AOL's case, there's the, there's kind of, there's, I think, three ways you can look at the senior leadership there.

SPEAKER_32: There's people being placed in for, at that point, for Time Warner's desires. Right? There's people being placed in for the public's need. And there's people being placed in for the employee's need. Right? I think at that point, Time Warner had some very specific things they wanted to do with that asset class. And they looked at Ron and Randy as ways to do that, whether they were successful or not.

SPEAKER_19: But I don't think it was being put in place because the market looked at it as the right decision, or even at the internal staff looked at it as the right decision.

SPEAKER_17: Right. So they made the decision to get, and it was probably because they wanted to spin that company out. Probably. And clean it up. That's right. And cut a lot of headcounts. That's right.

SPEAKER_19: And Ron was an internal, kind of, Time Warner guy. And Randy was a known big COO, kind of media exec. And they looked at that as a really strong combination to put together.

SPEAKER_06: But ultimately, it wound up with one of the most disastrous acquisitions in the history of technology, Bebo, for $650 million.

SPEAKER_58: Was it only $650?

SPEAKER_06: Only $650. And according to my sources, the next highest bidder was $300 million, or $250.

SPEAKER_21: That sounds about right to me. And that sounds about right.

SPEAKER_60: Project Buckingham, as I remember it was called.

SPEAKER_21: It was called Project Buckingham to buy this. Exactly.

SPEAKER_06: How does an asset like that happen? I also heard that Randy hadn't met the founders until the day it was closed.

SPEAKER_19: That doesn't necessarily surprise me. But I think, you know, the lore around that was that there was a moment where Jeff Bukas and Ron Grant were at an event in Europe where Joanne Bradfield was kind of going over Bebo's strategy at this mixing of kind of high-quality video content and entertainment with this kind of community approach.

SPEAKER_32: And Time Warner had a lot of interest in it and kind of set Ron on a path. And I think at the end of the day, Time Warner, there was even a quote by Bukas at one point that kind of inferred, look, look, Time Warner is a big company.

SPEAKER_19: We make a lot of money and we're going to make some big acquisitions and sometimes we might overpay and sometimes that's going to be okay. So he made a very broad statement. I'm not going to, I don't remember it verbatim. But it kind of, you know, basically to look from our perspective, it was a lot of money, but it's going to be fine and it's going to wash under the rug at the end of the day. Yeah. Yeah.

SPEAKER_06: They came forward to make big mistakes with that. And if you look at something like Google, you know, everybody thought at the time one point six five billion dollars for YouTube with a huge lawsuit over its head. That's right. Was a huge mistake for them to pull the trigger on.

SPEAKER_30: Yeah. And I think YouTube's going to show to be an incredible strategy for Google in the long run.

SPEAKER_19: But it went very deep into the hole before it's going to dig its way out. It continues to go deeper into that financial hole. But it is a game changer for Google and something that's going to definitely impact the cable. Hundreds of millions of users. Exactly.

SPEAKER_07: I mean, is that the best acquisition you can remember in the Internet space?

SPEAKER_32: I think it'll be one of the most transformative from the perspective that YouTube now or Google is now going to be able to, in essence, kind of suck budgets out of traditional media spend on television, which their CPMs are so much more ridiculously high than what we deal with. Right. I mean, I spend time with TV producers walking me through the economics of their shows. And when they look at the economics of our content that we might create that might have premium or banner advertising, they laugh. Their statement would be, why are you even bothering creating this? Because a great individual show can do so much more as far as magnitude of volume of advertising revenue than we can do, that their perspective was like it's a complete waste of your time. So I think if Google can bridge their way from kind of the lower CPM, lower monetization elements of the web,

SPEAKER_19: into higher CPM brand advertising elements of television, that's a really, really big game changer for Google.

SPEAKER_31: Yeah.

SPEAKER_07: And after you sold UserPlane, you did Savo for a little while. That's right. Private Equity Fund. What was that business? And did it work or did it have moderate success? How do you look back on that one?

SPEAKER_19: Sure. So I had a relationship with the Private Equity Fund and I'd help them acquire a company and then sell it. And they had another acquired company that happened to be called Moxie Media at the time that had gone through a lot of kind of distressed transformation.

SPEAKER_32: And it was a kind of search-oriented business that leveraged paid search. It was a very specific, unique partnership with Yahoo.

SPEAKER_19: And we wanted to build a content company around it. And so I set up an LA office. I remotely managed the Canadian operation and we built a content company around it. And about roughly a year in was when the kind of MySpace opportunity came to my doorstep. I looked at the state of Savo and it was at a very, very clean path.

SPEAKER_35: And at that point, we were already in M&A discussions. And so I jumped over to MySpace and then Savo sold shortly thereafter.

SPEAKER_06: So let's talk about the MySpace opportunity. Yeah. This was a declining asset that was up against Facebook. At the time when you took on the challenge, what were the numbers like in terms of uniques? I believe MySpace was still ahead in terms of overall uniques and page views.

SPEAKER_19: That's right. There was a very, very small gap at that point between Facebook and MySpace. It was within 60 days of Facebook eclipsing MySpace on kind of all levels of metrics beyond revenue at that point. And we obviously we knew. I mean, there was no doubt there was a major problem.

SPEAKER_32: I don't think that MySpace as an organization had behaved as if there was a major problem. I think MySpace had behaved as if there wasn't a really, really big problem.

SPEAKER_77: So a little bit of denial.

SPEAKER_19: A little bit, maybe. And I mean, I think a little bit that was encouraged by a really aggressive growth strategy that had been laid out in front of them that included a lot of international territories, a lot of investment into MySpace as an asset.

SPEAKER_28: And I think that the staff and, you know, overall News Corp, we needed to do a real kind of come to Jesus moment and determine like what was the future of this asset, knowing that Facebook was coming up so quickly on MySpace's heels.

SPEAKER_07: Right. And so you were brought in to turn it around, to stop the bleeding. What was the, you know, what was your instruction on coming on board? What was your thinking? Did you think you could turn it around?

SPEAKER_40: Right.

SPEAKER_32: Well, when we were brought in, I'd think that turning around often has to do with stopping the bleeding, right? Right. Because they kind of go hand to hand. I don't think that there's a, I think in News Corp's case or any large investors base, they're willing to throw money into something that's working really well, but they obviously become very concerned when they're throwing money in something that isn't working. So turning it around and stopping the bleeding is kind of in, you know, connected.

SPEAKER_19: I came in, I think, because as just a professional like you that had been in the space for a long time and looking to stay in the space for a very long time, I really wanted to understand like what was it like to work with large, you know, distressed assets that were having massive declines, which in case MySpace was.

SPEAKER_32: You know, I'm an L.A. guy and my network's here in L.A. And so it was very, it was a great place for me because I could bring a lot of team with me to kind of take on this challenge. Deep relationship with John Miller, who was head of digital.

SPEAKER_84: Right, formerly CEO of AOL.

SPEAKER_32: And I think just like all bullheaded, you know, entrepreneurs, I totally believe that it was turn aroundable. And frankly, I kind of still do. I think that at the end of the day, it wasn't turn aroundable relative to my strategy that we collectively agreed to.

SPEAKER_19: And there's other strategic options that can also make it a valuable long-term asset. But we didn't choose that path. We choose a different path.

SPEAKER_06: How much of it was, and this is just from things I hear on the outside, technical debt. And what I mean by that or the industry means by that term, technical debt.

SPEAKER_17: There were a lot of technical problems that just needed to be, I mean, the entire site needed to be rewritten. That's right. It was written in .NET or ColdFusion or something crazy. Yeah.

SPEAKER_06: ASP, if I remember correctly. And it just technically had grown so big, but didn't have great infrastructure. Yeah.

SPEAKER_19: Is that true? Well, I guess here's the question. If MySpace as a website loaded faster for you, were you then not going to use Facebook? Probably not. Right? I mean, you moved to Facebook because your friends moved to Facebook. It had a real identity. It created more value for you. And because of that real identity, it created a different experience with very true content around it. Right? Where MySpace was born with a DNA of kind of masked, false, handle-oriented identity.

SPEAKER_32: Right? So right off the beginning, those are two very different systems. The technical debt...

SPEAKER_90: Why are they two different systems? Explain that to the audience.

SPEAKER_30: I guess because at the end of the day, if you're holding...

SPEAKER_32: If you're trying to replicate a real-life social graph, you have to base it on real identity. And once you're based on real identity, you create accountability between people and their friends and their users where they actually are putting in meaningful content. They're not just necessarily spamming or oversharing. They're creating actually a meaningful experience there. If you're doing it in a system where you're using handles, which is kind of like a much older school, almost gamified, dating-oriented structure, you're typically creating new relationships with people that have kind of internet friends. Not real friends. They're internet friends. And their internet friends, they might project someone who they want to be, not necessarily who they are. And you see this in online dating all the time. I love long walks on the beach, and here's my handle. And you're like, maybe not so much. And so MySpace was born initially out of the concept of a protected handled identity. That was also from the time that MySpace was started. Because when MySpace started on the heels of all the other networks that had come before, Six Degrees, Friendster, et cetera, the concept of doing a real-name social network was highly controversial. I mean, I don't think they could have pulled off MySpace with a real-name social network.

SPEAKER_19: So MySpace created a handle-oriented social network because the climate at the time forced it to, whereas Facebook created a real-life social network, obviously based on the Harvard book graph, et cetera.

SPEAKER_06: So that simple feature you think is the defining differentiator between the two services.

SPEAKER_40: Yes. I think those seeds planted grow very, very different fruit.

SPEAKER_07: And what about Twitter then? Because you have Twitter, you have, it's almost like a hybrid.

SPEAKER_96: There are some people who are handles. That's right. And then there are some people who are verified. That's right. That's right.

SPEAKER_19: And I think it lends a bit of a question. Yeah. I mean, it's a different, it's obviously a very natural, different system than Twitter is from Facebook. Facebook or MySpace. But it's certainly not based on real identity the way Facebook is. Yeah.

SPEAKER_32: And granted also the Facebook page structure is no longer based on real identity. Now that's based on at some point aspirational identity or communities.

SPEAKER_103: Right.

SPEAKER_19: That's also very different.

SPEAKER_103: What do you mean by that?

SPEAKER_19: Well, so like right now we're seeing a large swell within Facebook pages that are kind of content oriented. Yeah.

SPEAKER_32: Where you can subscribe to people or a community talking about X or a magazine publishing Y. Right. Well, it's very big questions saying, well, previously I went to Facebook to interact with my friends. And now I'm going to Facebook and I'm getting content in that feed. And what does that mean to me? Right. Right. And how does that change the way I reflect on the Facebook? And suddenly that opens up the ability for something like Path to come along. Right. Where Path is, oh no, double verified, you know, you know. Relationships. Synchronous relationships. Whereas Facebook made the choice to go to asynchronous relationships.

SPEAKER_106: And what you mean by that is in plain English.

SPEAKER_32: Meaning that asynchronous and that I can kind of friend you on Facebook in essence and see your content, but you don't see mine. Right. And that was a big change for them. Right. Right. Whereas in the same thing on Twitter, I can follow you, but you don't have to see my content. Right. Right. Whereas with Path, double verification. I have to friend you, you friend me.

SPEAKER_19: Synchronous relationship. Now we have access to each other's content.

SPEAKER_07: And you use Path?

SPEAKER_19: I do use Path.

SPEAKER_07: And what do you use it for? And why you use it, you find yourself using it differently than Facebook. How?

SPEAKER_32: Well, so not, I'm not a normal user. This is, you're not a normal user in these systems. Right. But overall, my, my Facebook friend graph has become so large, right. That even with Facebook's edge rank, it's hard for me to sort through and find quality, personal content among my friends. Right. My friends that are publishing on Path show great personal content on Path. I now don't accept every friend request on Path the way that we all used to do it on Facebook. I want a curated true friend list on Path, therefore I'm very restrictive on who I have access to.

SPEAKER_06: And the system restricts you because it has a 150 limit.

SPEAKER_19: That's right too. Exactly.

SPEAKER_06: Which I ran into multiple times now. That's right. I'm getting slaughtered on that.

SPEAKER_45: Yeah. So you share pictures of your kids on Path, but not on Facebook. That's right. That's right.

SPEAKER_117: What does that mean for Facebook's future?

SPEAKER_19: Well, so I still, Facebook, Facebook's still a very meaningful part of my everyday, you know, digital life.

SPEAKER_91: What's the number one reason you use it, would you say? I think entertainment. Entertainment. Yeah, entertainment.

SPEAKER_119: It entertains you to go down the feed and read news stories your friends are talking about.

SPEAKER_19: Exactly. Things that people are sharing, hilarious photos, stories from the weekend, links that are trending. Time wasting. It's, you know, it's entertainment. Yeah. Whatever you, however you want to just define that.

SPEAKER_120: Diversionary. Sure.

SPEAKER_19: It doesn't serve a critical utility right now.

SPEAKER_120: Ah.

SPEAKER_19: Right now, because I don't use Facebook for core messaging, right? I do use Facebook as my Facebook Connect centralized login, so that's a very core utility to my Facebook experience. Right. But overall, my consumption there is entertainment based.

SPEAKER_07: Interesting. So that means if some other entertaining system came along that was better, you might use that.

SPEAKER_19: I might use Facebook less, but because I rely on their Connect infrastructure so deeply,

SPEAKER_35: hard to ever divorce myself from that.

SPEAKER_06: Yeah, well, I tried, and I couldn't because of the divorce.

SPEAKER_35: I remember us talking about that.

SPEAKER_06: Yeah, it's very hard to actually try to log in with many services as an angel investor

SPEAKER_124: that you couldn't even look at unless you had a Facebook login.

SPEAKER_19: And the benefits to Facebook Connect integration are so great at this point that if you really

SPEAKER_32: enable Connect appropriately, you can find more growth than any other traffic source that I've ever seen. Yeah. So the same way that originally when you and I were doing startups, call it five years ago, we might talk about SEO, seven, 10, whatever. You know, SEO was critical. Now at this point, my statement is like, we don't talk about SEO, right? We talk about social integration. And social integration really means Facebook for us, right? How deeply can you get inside the Facebook Graph and do innovative things that get your content and your, you know, apps going viral within the Facebook ecosystem? And when we get it right, it just pays off in spades. All right.

SPEAKER_06: So when we get back from commercial, I want you to tell me an example of that and how you got it right. And then also talk about the accelerator that you started. Sure. To use a term. I don't know what term you like to use. And how many companies you funded. I think it's getting close to 10. Sure. Closer to 10 than five.

SPEAKER_86: Well, maybe closer, maybe higher. Maybe higher.

SPEAKER_06: We'll hear about that right after. We talk about GoToMeeting, hey, GoToMeeting is my go-to solution. This is what I use for every meeting I do. It works flawlessly. You guys know that I'm a big fan of the service. We use it here for when we're doing teleconferencing. There's an old school word for you. When we're doing video conferencing, because they have HD faces and we have all these HD cameras now. So we will send the people HD cameras, the Logitech HD camera I particularly like. And it works on Mac, PC, iPad, everything with a free app. And when you send the link to somebody, it just works. Other systems, it takes forever for these meetings to start. When I have a GoToMeeting, it starts on time. That's the most critical thing for me when I'm starting one of these meetings. And the HD faces feature, boy, does that work great. And you can start a 30-day trial by going to GoToMeeting.com. And click the Try It Free button. When you click the Try It Free button, put in the promo code START, S-T-A-R-T, S-T-A-R-T. I use it all week long, multiple meetings a week. It's the only thing I use because it's stable and rock solid.

SPEAKER_17: And I can switch who is the presenter. That's very important to me. You can both edit the same document at the same time or any application. Not just like a Google Doc, which you can share without GoToMeeting. But I could use Word. I could use any application and share it back and forth, back and forth. And that really works well. Because somebody will say, oh, I have a couple of things on my browser I want to show you. And say, oh, OK. I have a PowerPoint I want to show you. Then they'll say, oh, I have a keynote I want to show you. And we go back and forth sharing who is in charge of the presentation.

SPEAKER_06: And the chat room works really well. It just works. And it's rock solid. And if you use a service that is not rock solid, it's going to reflect poorly on you. And I don't let other people set up conferences like this for me. It just pisses me off to no end when these things don't start on time. People have a meeting scheduled right after yours and one right before it. If you waste 10, 20 minutes trying to set this thing up, you're an idiot.

SPEAKER_17: I mean, just one click, it starts. Use the promo code start. Go to GoToMeeting. And thank them at GoToMeeting on your Twitter account. Use GoToMeeting, I bet. I do. It's a great service. You've been using it for a while, I bet.

SPEAKER_130: Yeah.

SPEAKER_17: A very long time. See, that's the thing. If you're a serious business person, you want a solution.

SPEAKER_130: It's unavoidable.

SPEAKER_06: Yes. It's so solid that you have to use it. And why would you take any chances with anything else? Okay. So MySpace just absolutely plummets and they wind up selling it. You were a great soldier. I mean, you stayed through everything and really were loyal to John.

SPEAKER_19: I committed them that we would get the asset either turned around or sold. And so when we determined it wasn't going to be turned around, we got it sold.

SPEAKER_06: So that's great. You go out looking. I think you did the right thing there. And then you say, I got a blank slate.

SPEAKER_119: What do I do next?

SPEAKER_133: Yeah. I think that I, you know, I have a venture partnership with Russia Canyon.

SPEAKER_32: So I'm familiar with what the VC kind of world looks like. I wanted to be more operational than a pure venture capitalist. And I, at that point had gotten so addicted to the kind of pace of having a lot of resources, a lot of things to play with within a large organization, which I had at MySpace. I wanted a system where I could come up with a lot of ideas and work with a lot of people,

SPEAKER_19: a lot of senior people to kind of develop, you know, next generation companies. A big fan of Idealab back in the day. Bill Gross' company. Incredible. And Betaworks. Right.

SPEAKER_32: And it felt like, the other thing I witnessed inside News Corp is that, and inside AOL or Time Warner is that, you know, when you have large media entities that have big distribution relationships, they can de-risk a lot of ventures. Right? Because they come up with an idea and they already know how they're going to sell it, how they're going to monetize it, who it's going to be distributed to, how it goes worldwide, et cetera. So my thought was, gosh, you know, it would be fantastic if we had this kind of incubator where we had our own kind of mega distribution platform. And then as we invested and founded companies, we could then put it within the system. Right? And the system could then take out the risk of initial customer acquisition, et cetera.

SPEAKER_19: And so that was the premise behind science. And so science to date, you know, we started in roughly November. We kind of moved into our offices in January. We have about kind of 12 companies that we've either found or kind of co-founded with different entrepreneurs. And then we've also done a bunch of kind of individual small investments as well. And we've raised a lot of money, not only for us, but also for the companies we've founded. And we've also... You guys raised, according to the industry, 10? We raised around 10.

SPEAKER_05: Yeah, around 10. Exactly. So that's... It's a big number if you were raising a first round for a company. But for a venture fund, that would be tiny. That's right. Or for a angel fund, even. It'd be probably like an angel fund. Yeah. A small angel fund. Sure. That's right. And so you have some common infrastructure?

SPEAKER_144: We do.

SPEAKER_19: So we have, you know, we have kind of optional use technology stacks that different companies that we come across or bring into the fold can use. We also have our own kind of audience platform that basically is how we kind of generate a lot of users. And then we also have a very kind of recommended operational platform. And science itself has a large staff. And we have 16 people that are kind of divisional between operations and strategy and customer acquisition and asset management. And then we have now this portfolio of more or less venture-backed businesses that are off, you know, with great CEOs, with boards that are off kind of building their long-term value. And we stay, you know, intimately connected on a day-by-day basis, often very operational

SPEAKER_110: with the companies to make sure that they continue to stay successful.

SPEAKER_06: And at what point do you cut the apron strings, as it were? Is it they get their A round and now, okay, we'll be on the board. But when do you get off the board? When do you, you know, have less of an interest in the company? How does it work?

SPEAKER_19: I mean, we, you know, my guess is we'll probably be on the board for the lifetime of the business because we're large equity holders within the companies.

SPEAKER_119: Because you found that you own 10, 20, 30% of the companies? Substantial.

SPEAKER_19: We own substantial equity, right? Right. I think that we, you know, I think that different companies have, we have different levels of involvement.

SPEAKER_32: So if the business model is set, we have a senior team and they're showing the right traction, we're great. We'll step back to a board role.

SPEAKER_19: But we do still maintain, honestly, daily monitoring on all critical metrics for every single company that we get involved in. And we also have direct kind of investor relations discussions with all the different investors that are involved in our businesses. If a company is having a challenge, regardless of their financing stage, we're going to get involved and we're going to see what we can do to help. We have internal recruiting. We have internal strategy. We have unique access to deals and platforms, et cetera.

SPEAKER_32: So we want to get involved and make sure these companies are very successful. So unlike a venture firm, which is somewhat of a blunt object in that they have kind

SPEAKER_19: of board level control over specific critical hires and obviously a certain level of financial

SPEAKER_32: control, they don't have operational involvement, right? We are a fully enabled operational team.

SPEAKER_07: Because they're not qualified or they don't want to. They're not staffed. They're not staffed and they don't frankly want to get to that level because it would screw up their ability to go on vacation for 12 weeks a year.

SPEAKER_30: Well, certain venture firms like Andreessen Horitz at this point have quite a few operational people they're bringing into their fold.

SPEAKER_19: Okay.

SPEAKER_07: So they're becoming a little bit more like science or beta works themselves.

SPEAKER_19: Sure. Sure. Now they were before us. So at this point you could probably say that we're closer to them. But at the end of the day they're taking the position of having resources for entrepreneurs

SPEAKER_32: that can be operational versus resources that are kind of mentorship or recommendation oriented, right? Right. And then also very few venture firms maintain the level of not only involvement but visibility that we do. We really want deep visibility into the companies. And that allows us to be in market talking about our deals and talking about our companies

SPEAKER_110: and making sure that they get excited.

SPEAKER_07: So you're logging in every day to Google Analytics or AdSense or whatever it is to

SPEAKER_45: look at key metrics. Yes. And the companies don't feel that's over the top because you're such a large equity holder. Well, yeah.

SPEAKER_40: And we were there from the very, very beginning with them. Right. So we understand what good days look like and bad days.

SPEAKER_32: And hopefully the companies feel supported by us, not annoyed by us that we're involved. And we have a very strong list of kind of tactical recommendations that we give to those companies. They can use the tactics or not. But I'll tell you, like, you know, some of our companies, I can send a tactic recommendation out to their team. Within 24 hours they implemented it. And within 48 hours they've seen growth.

David Friedberg: Right. And so really fast iterations.

SPEAKER_06: So the way you avoid being an annoying big brother type is by actually giving good advice and not being a jerk on the bad days. I think that's fair.

SPEAKER_40: I mean, it's the same as if you're ever managing just a large senior staff.

SPEAKER_19: Right. Managing large senior teams, you have to have a very level of diplomacy on how you work with them. Right. And you have to understand each individual senior team members of what their kind of hangups are and their strengths and weaknesses. At the end of the day, I'm an active board member. Right. And I'm active on a lot of boards. And I have deep personal relationships with the CEO. So I understand their strengths and weaknesses. And hopefully we play to their strengths.

SPEAKER_159: Is the venture business dying? You hear this headline all the time. Venture business is dying.

SPEAKER_06: Most venture firms don't return better than the market. Or bonds in most venture firms are effective. Yeah. And the statistics seem to back this up. You know, it's like there's 10 or 20, maybe there's 15 venture firms that, you know,

SPEAKER_17: really have a great return. And the rest, it seems like they're living off of their management fees.

SPEAKER_19: Sure. I mean, I don't think the venture market is dying.

SPEAKER_32: I think that the venture funding is becoming a bit more concentrated than it has been in the past.

SPEAKER_19: And that, you know, it's probably about larger pools at more successful venture firms with deeper track records than it is about a whole bunch of different venture firms. Right. Let's hope to God that the venture market isn't dying. I mean, we rely on venture. Startups rely on venture. Like, without venture and without debt, there's not an economy for startups.

SPEAKER_17: Okay. So let's say it's not dying, right? Because that's hyperbolic. It's changing. Yeah.

SPEAKER_06: But it's definitely, there's something changing in it. I guess what a better way might be to say is it's broken in some ways. There are pieces of it that are broken. Like if a large number of the funds are not returning positively, what's broken in that segment?

SPEAKER_32: Well, I mean, if they're not picking well, or there's a large number of mutual funds that

David Friedberg: also aren't returning. And I, are we saying mutual funds are, I mean, there's a large, I think people are saying mutual funds are broken. Maybe.

SPEAKER_167: I mean, you can also. I think the economy is broken.

David Friedberg: We're all screwed. And the large, large amount of financial planners that aren't returning, you know. Yeah. That's broken too. That's right. Exactly. So the problem. And real estate. Exactly. It's all broken. Bonds. So are we just saying the markets, right?

SPEAKER_170: I think the point is saying that.

SPEAKER_172: Wait a second. I think we just figured it out, Mike. The market is broken. It's a different problem, right?

SPEAKER_05: I'd say that. Do you think that since we're going there, we might as well go off on a little tangent here. The audience is probably nodding their heads. If you look at each of these asset classes. Yes.

SPEAKER_174: And say venture has got, people are saying venture is fundamentally broken. And bonds are not returning anymore. And treasuries are not returning anymore. And the market's not returning anymore. Right. And mutual funds are not returning anymore. Yeah. And real estate's not returning anymore. Is there some underlying issue that we should all be panicked about? And the whole world's going to collapse and come to an end?

Chamath Palihapitiya: Yes. It's a good question. Okay. I thought you said yes. No. Yes, it's a good question. So it all depends on your perspective of time.

SPEAKER_40: All right.

SPEAKER_32: And so my dad's a financial planner, so I grew up in a world of financial planning. Yep.

David Friedberg: And honestly, if you look at, for instance, I have a very general portfolio, the way that I invest my money. Yeah. Some bonds, some equities. Sure. Just very standard allocations.

SPEAKER_32: Yeah. And at the end of the day, the last six months don't look so broken. The last six years, kind of broken. Yeah. And there's a few bad years and there's a few good years. At the end of the day, it just depends on how far you zoom out your microscope. Right. If you look at the lifetime of the market, you'd say, oh, we're generally heading in the right direction. If you look at the last three years or two years or a specific year in the last seven years, you might be panicked. Right. So it all depends on your perspective. Right. If you're 65 and looking to retire in the next five years, you're screwed. You might be in a very big... If you're young and you have a long time to invest that money, you're not. Right. I think it's very similar as venture. Venture has taken a beating a little bit over the last few years. Certainly, the high-flying stocks of the last six months that are not so high-flying now create a very big damper on top of big returns from big funds. And what's funny is, six months ago, you and I might have said, look, if you weren't a fund involved in Twitter, Zynga, or Facebook, oh, you're going to have a hard time raising a fund because those guys are all win. And now what you might say is, God, those funds that were involved in Twitter, Zynga,

David Friedberg: they're going to have a hard time. Right. Completely change.

SPEAKER_182: Right. Things change quickly.

SPEAKER_45: What's going on in those cases? We look at Facebook, Zynga, and Groupon. Yeah. Let's take those three, because those are the three highest profiles. Sure. They're getting demolished. Sure. Is there something fundamentally wrong with those businesses?

SPEAKER_91: Or was there something else at play? Well, I'll tell you. You know, one... Why are people so down on them?

SPEAKER_32: It's a good question. I'll say it from two perspectives. One is that, from my perspective as being somebody that's deep inside the industry and uses tools like Facebook and uses tools like Groupon, I don't play that many games in Zynga, but as far as those two tools go to me, they're very important to my companies. Right. Facebook and Groupon are very important to our businesses and they support a lot of our businesses because of the traffic and the way that their platform works.

SPEAKER_185: So it feels like they're very real to you.

SPEAKER_32: I think they're very, very real. Now, here's the problem. I understand that because I'm in the depths of the minds with our teams on how we interact with these applications, right? The problem is, how does a hedge fund manager get their mind around what Facebook means to startups or what Groupon means to retailers? It's a tough message to translate. No chance. They have no chance. Right. So I'd say that one problem we have is we're developing more and more complicated platforms of technology that are very difficult to bring to the market and get everyone to understand.

SPEAKER_06: Right. What about Groupon? I mean, it seems to me that they have changed retail and created a brand that is incredibly loved on a global basis. Mm-hmm. Is that business going to exist 20 years from now? Well, I mean... Facebook, 100% chance it's here 20 years from now?

SPEAKER_32: Yeah. Well, I mean, if you look at... 99%? Call it ValPack, right? Yeah. Which were the company that put coupons inside your mail. Yes, of course. I mean, that's existed for quite a while and just changed hands recently again. Right. I mean, at the end of the day, coupons have been around for a long time. Groupons will probably be around for a long time. It's a tool that retailers need to understand how to use so they don't harm themselves through over-discounting, et cetera. But that's part of just being a responsible business owner. Right. Groupon or some iteration of Groupon, I think, is going to be here for a very long time. And is there a really big surprise if I had come to you and said, email-based coupons?

SPEAKER_19: You'd be like, oh, yeah. Totally get it. Completely should work. Right. They implemented that to the end of the greatest fantastic.

SPEAKER_07: I mean, is that the lesson there? They took an idea that was incredibly obvious and they just went really, really...

SPEAKER_32: I think it's one aspect, yeah. I mean, it's funny, right? It's hard to imagine. When you look at the technology behind a Facebook, you say, oh, that's a technology company. Right. When you look at the technology behind Groupon, you almost want to say it's an operational business.

SPEAKER_198: It's a sales company.

SPEAKER_32: It's a sales company. Right. I mean, it's hard to send that much email. Don't get me wrong. And there's a lot of technology around that.

SPEAKER_19: You're going to work with the right consumers. Yeah. And that's really, I think, their magic.

SPEAKER_21: Right. When you look back at entrepreneurship, you're 20 years in, I think, to your career. Sure.

SPEAKER_114: What is the fundamental nature of entrepreneurs that makes them succeed?

SPEAKER_19: The fundamental nature...

SPEAKER_204: When you look at the great ones, when you look at the...

SPEAKER_19: Well, the great ones are all the biggest dreamers, right? I mean, entrepreneurs have to be dreamers in their hearts. And they have to be willing to create the world that they dream about. Yeah.

SPEAKER_32: And they need to be able to be blinded to the naysayers and say they can't create that dream. And they need to be intelligent enough to know when to take advice from people that can't help them versus the people that are going to deter them from accomplishing that dream.

SPEAKER_206: So visionary.

SPEAKER_208: I think visionary is a big step. Stubborn. Stubborn, yeah.

SPEAKER_69: Bullheaded, actually. And willing to take advice. I think those are... Open to advice. That's right.

SPEAKER_19: I mean, in my early 20s of entrepreneurship, I didn't want advice. Yeah. Who wants advice? Who wants advice? If I could talk to myself 20 years ago, I would definitely recommend that I should be surrounding myself with experts and sucking every piece of knowledge out of their brain. Right. And I didn't do that. And it turned for me when a moment... I talked to a friend of mine and I went to University of Oregon. It's a great school. It's not a fancy school.

SPEAKER_32: And I asked my friend and he said, I love... I said, what school did you go to? He goes, I went to this school. And he goes, but I really went to Harvard like seven times. I'm like, why? He goes, because I hired seven Harvard grads. Ah, very good. And his statement was that he actually puts the diplomas of his staff in his office. Huh. And so he really took this approach of saying like, look, I am the aggregation of the knowledge of the people that work with me. Yeah. And so that's really a deep understanding of hiring people that are smarter than you and taking

SPEAKER_22: their advice and letting them really run within your organization. I wasn't that good at that, you know, at an early age.

SPEAKER_03: And you've gotten better at that. And in fact, your business is predicated on that.

SPEAKER_45: That's right. That's right. You built a business predicated on your earlier weakness. That's right.

SPEAKER_19: Exactly. Surrounding myself with people that are experts in their own fields and letting them just be the best that they can be. Yeah.

SPEAKER_06: How do you, with the current business, Science, how do you select which companies to work with and what is the deal? We know the deal for, you know, if you go to Techstars or go to Y Combinator. Yeah. They put in 25 or 50 or something like that and they get six or 10%.

SPEAKER_214: Yeah.

SPEAKER_32: What's the science deal? Sure. Well, the way we select the companies is we do a ton of market research.

SPEAKER_19: We look at our asset base and seeing what we can leverage. We look for unfair advantages on how we can launch things and make sure that they're successful. We match it up with talent that we know is in the market. And in most cases, you have to realize the companies we're building are companies that we're

SPEAKER_32: kind of coming up with blank slate and then we're hiring or we're kind of co-founding

SPEAKER_19: the business with an external staff that's coming into science, right?

SPEAKER_182: So you have your team comes up with an idea. You or Peter or your brain trust says, hey, you know, dogs and pets are a big market

SPEAKER_150: or kids are a big market. Kids' clothing is a huge market. That's right. How do we disrupt that?

SPEAKER_19: That's right. And some of the earlier companies, so like Whittle Bee or Dog Makey or Dollar Shave Club, they really had, or even EventUp, they had those kind of concepts to start with or they were already far down the line. And so we had a little bit of a different way that we worked with them versus the more

SPEAKER_32: recent companies are often, the company didn't exist before. We prototyped it internally. We started getting up and running. So it's changed a little bit over the last nine months. Right. As far as the deal structure goes, it's all across the board. We look at capital requirements, how much money we put in, because in most cases, we're first dollars into these businesses and we typically don't put a cap. We just want to see the business succeed. So we'll just continually fund the business however it needs to get funded.

SPEAKER_19: Right. We look at how soon we're going to raise money for it, what the cap table looks like, the level of involvement, the maturity of the team, how much of the team we're going to have to compliment. Yeah. But there's nothing standard.

SPEAKER_32: Right. There's not an application process. There's not a time cycle.

SPEAKER_30: It's us finding businesses that we want to see built, finding teams to match into those slots and building these big businesses.

SPEAKER_06: So the challenge, as it was explained to me in your business and Betaworks, is that because you guys are originating the ideas and that Bill Gross, in fact, had this idea, this challenge as well, because you're originating the idea and putting a management team in place, you're not going to get the A-level entrepreneurs. You're going to get some version of the B team. Is that true or not? I think it's untrue.

SPEAKER_19: And I think that, you know, when I look at the classification of the entrepreneurs that we have inside science, I really put them in two buckets. We have the young and upcoming, you know, ready to fight the world entrepreneurs, which we just give a lot of fire and fuel to, right?

SPEAKER_32: The second is we have the, I'm an ex SVP out of big company. I'm tired of big companies. I don't want to go to a two person startup, but I'd like to do something early where I have equity. And I love those two, right? Senior staff that know how to scale companies.

SPEAKER_228: So in a way you're a hack for those people who previously didn't have the risk tolerance for a startup.

SPEAKER_32: That's right. And that's, and I love those staff. Those are easy people to work with. They know how to scale businesses and they expect large growth because they've done it

Chamath Palihapitiya: before.

SPEAKER_45: But do they not have the drive and fire of that previous group that you love so much?

SPEAKER_110: I mean, I've worked with a lot of people in big companies that have a lot of drive and fire.

SPEAKER_230: But they're just muted by the big companies.

SPEAKER_19: Sure. Or maybe once you take, yeah, once you take the handcuffs off and give them a lot of leeway, they're going to suddenly grow faster.

SPEAKER_06: It's a bit of a hack because they say that entrepreneurship is a young man's game, young human's game, to not use sexist language. Is that true, entrepreneurship outside of the science model?

SPEAKER_174: Is it a young person's game?

SPEAKER_19: I guess the standpoint that, the reason why someone might say that, right, is the can you survive off of ramen statement? Right. Or what about, what about health insurance? Or, oh my God, will you have a job a year from now? Mortgage payment. Exactly.

SPEAKER_32: I think, you know, quality A grade players, at the end of the day, they can jump into something. We'll find lots of ways to get them paid. I don't want them starving on ramen. I don't think that's a motivator. I'd rather have them not worried about money and have them focus on building the business than them worrying about their rent check. So I think that's just an unhealthy way to start. Not that, you know, necessity isn't the mother of invention, but I think there's other ways to motivate people to do great things. And at the end of the day, if the startup doesn't work, it's an A grade player. They're going to find a great job after that worst case. And if not, we'll grab them and we'll put them into another deal. Right. So for us, we feel like we have a really good way to work with senior A grade talent or the up and coming, you know, fire in the belly entrepreneur. And I think we see great results out of both. And at the end of the day, some of the companies that we work with, they don't need that scrappy young founder. They need a scaled senior leader. And some of the companies we're working with need the scrappy young founder, right? Not all businesses are the same.

SPEAKER_68: How do you know which one the business needs? Is there some way to tell?

SPEAKER_32: Well, I mean, we've worked with enough people that I think we have a gut check on it. And typically we do a lot of, well, okay, one is in certain cases when the business model is fairly known and we understand how it's going to grow, we want a scaled leader that knows how to scale the company.

SPEAKER_45: So e-commerce, subscription business or whatever. Sure.

SPEAKER_32: Whatever. Whatever predictability we have around the month. A SaaS business.

SPEAKER_19: Right. If we're going to jump into something completely new and it's going to be a data play around social, that's going to create a new experience for X, Y, and Z audience. And we're going into literally like, you know, black, you know, dark territory. Yeah. I like explorers at that moment.

SPEAKER_34: Ah, that's interesting. Yeah. And in a way, if you think about that, they never send like, they wouldn't send the guy

SPEAKER_07: with three kids on certain missions in the military historically. That's right. They'd be like, this person is going to be thinking about their kids. That's right. When they're climbing up the side of that mountain. That's right. So let's give them a scaled operation.

SPEAKER_217: Yeah. Let's send the 19 year old guys with no kids. That's right. So they're not thinking about their kids and their wife. That's right. When they're storming the castle.

SPEAKER_242: That's right. The more.

SPEAKER_217: Whether that's right or wrong as a decision making process.

SPEAKER_40: Well. The more mature entrepreneur that we're bringing in. Yeah.

SPEAKER_19: That may as previously kind of a senior grade staffer. Yeah. At the end of the day, they want to see big outcomes, big returns. They want to drive growth. Right. So they're very motivated. Whereas the young explorer may want to just define something completely new in the world. Right. And not be as financially focused, but really be focused on development and creation and ideation, et cetera. Right.

SPEAKER_06: Different mission. Interesting. What are the ones you're most proud of? I know you're proud of all your children. I'm proud of all of them. Yeah.

SPEAKER_07: Which one would you, which, you said you have about 15 or so now?

SPEAKER_110: Something like that. Yeah. It just depends on what you classify as a company.

SPEAKER_07: All right. Well, you have at least 10 companies. Sure. Yeah. And then you probably got five or six projects. That's right.

SPEAKER_45: Let's say, so call it 15. Sure.

SPEAKER_250: Which two or three have had the most objective success? Well, I'll just. Fundraising, scale, number of employees. That's a good question. And we'll start there and then you can talk about your other favorites.

SPEAKER_19: Gosh. Yeah, exactly.

SPEAKER_32: Well, I'll just go, I'll go in from a diameter radius from this physical office. How's that?

SPEAKER_254: That makes it simpler. Wow. That's totally objective. Whittlebee's around the corner. Whittlebee's around the corner.

SPEAKER_65: Whittlebee's in this office. Whittlebee's co-renting space. Yes. The subletting space. Right. So Whittlebee, Sean Percival, epic, you know, epic entrepreneur.

SPEAKER_255: Horrible employee, epic entrepreneur.

SPEAKER_256: Worked for you. Worked for Nizar. Worked for me.

SPEAKER_255: Right. He got the trifecta. He's like, you got one boss who was insane. Another boss who was insane in another way. Another boss who was too nice.

SPEAKER_40: Who knows? So he, you know, he started Whittlebee Kids Clothing Company and it's just doing fantastically

SPEAKER_32: well. Right. And I mean, from the, from him and his staff packing boxes full of these like curated kids

David Friedberg: clothes out of our office to having this mega, have you seen his warehouse? I haven't seen the warehouse. You have to go check it out. Like it just, I mean, well, and you'll pick up some clothes. Yeah, exactly. I heard he just, he swags everybody out. Oh yeah.

SPEAKER_32: Well, he's got like, you know, half a million pieces of kids clothes inside that office at this point. Um, so he, it's incredible business. And he just, he, you know, every time that I feel like gross slowing, it's like the next day I log in, I'm like, Oh, or not like Sean finds a way to grow stuff, which is just fantastic. And so we, we love that one. We think that's doing great. Um, from here, you know, And they did an A round. That's right. He didn't, he did an A round and, uh, and no doubt that he's gonna, he's gonna have to raise more money. I mean, it's gonna be a big scale business. Yeah.

SPEAKER_261: Yeah. And after that, any other ones?

SPEAKER_32: Uh, let's see. Diameter from here. Uh, EventUp is probably the next closest to here, which is basically a marketplace for,

David Friedberg: in essence, you know, kind of professional great events. Brilliant. Great idea.

SPEAKER_262: It's great. Airbnb for events. Event spaces. Yep. So you're having a wedding. Yep.

SPEAKER_40: Yeah. Or a corporate sales office, et cetera. They just, uh, they raised money from LightBank. They brought on some ex Groupon people that are running their sales. They have incredible sales team in Chicago now.

SPEAKER_19: You know, Tony Adams, again, kind of a legacy internet guy, understands SEO. I think, you know, he sent me some note this week and that's like, oh, search, you know,

SPEAKER_32: something events in Google, he's like the top four results. So he's just like, he's killing it. Right. Um, so we're excited about that. Um, you know, one that you're familiar with is dog vacay.

SPEAKER_264: Yeah.

SPEAKER_32: Those guys seem to be doing pretty well too. Yeah. And so great, you know, husband and wife team had opened up their home to babysit people's dogs. Yep. Found that there was a business there and opened up, in essence, what's Airbnb for dogs. Right.

SPEAKER_159: And, um, and you bought a juice company or a cleanse company.

SPEAKER_32: Well, we haven't, we haven't announced that and the deal is not closed, but, uh, but we are doing some stuff.

SPEAKER_265: I take it back. There's a rumor about that.

SPEAKER_32: There's a rumor. Yeah. We're, we're close on it. I mean, we, we like the kind of weight loss juice cleanse, press juices kind of business.

SPEAKER_266: Press juicery is doing pretty well out here. Yeah. So obviously it's not press juicery. Is that going to be a fad though?

SPEAKER_32: I don't think so. Uh, it, it, it, if it's a fad, it'll be a 10 year fad, I think. Oh, I think it'll be a slow fad. Right.

SPEAKER_267: Fad that turns into a trend. You'll see. That turns into a sustainable business.

SPEAKER_32: I mean, in a world where you would say is dieting a fad, like dieting is certainly not a fad. Unfortunately, dieting for most of the world now is every day. Yeah. There are fad diets.

SPEAKER_217: Yeah. There are fad diets. That's right. But dieting is not a fad.

SPEAKER_31: That's right. That's exactly right. And you have to really be able to, and also a lot of things seem to start as fads. That's right. Or they appear as fads to us. Yeah. But then they become so permanent.

SPEAKER_150: Yeah. That they become, you know, a sustainable part of life. That's right.

SPEAKER_30: Like real businesses. So we like, we like juice. The juice business is really, really interesting. Highly competitive, but, but compelling.

SPEAKER_34: Um, and so this is just year one of the business. That's right.

SPEAKER_90: So in five years, what statements will be true if you've succeeded in your mission?

SPEAKER_19: That's a good question. Uh, I think we'll, you know, certainly within five years, we'll have a series of international

SPEAKER_32: offices that'll be helping us syndicate these U.S. based businesses abroad. Ah.

SPEAKER_249: So it'll be in essence kind of. So you're going to Samwar the Samwars.

SPEAKER_154: Well, we'll, we'll, we'll do Samwar tech, you know, tactics on our own companies. Right.

SPEAKER_07: You'll be, you'll be preempting the Samwar garbage. That's right. I mean, you hate that, right? When you see them just knock off pixel by pixel as an entrepreneur, be honest, it just makes you sick.

SPEAKER_32: As a business person, I, I, I, I reserve opinion on copying because a lot of people copy. Copy is one. What I would say is that.

SPEAKER_97: Pixel by pixel photocopying. I'm talking about here. I'd say that that's, that's a questionable tactic.

SPEAKER_32: Right. But. Probably illegal. I don't think Samwar brothers would ever claim to be the great originators, originators of ideas. Right. I understand they're garbage. And they are incredible at operations. Probably the best in the world. Yeah.

David Friedberg: I mean, think about this. Is there any other group, you know, that can simultaneously launch a single business on like 18 different continents? Wait, there's only seven continents.

SPEAKER_275: Oh, sorry. 18 countries.

David Friedberg: 18 countries.

SPEAKER_276: Yes. Yeah. I think they're the only one. No, there is nobody. I know who could do it on 18 countries. That'd be incredible.

David Friedberg: The ones on Mars. No, 18 countries. It is a... I don't think AOR or Yahoo could have the grade of multi-country launch.

SPEAKER_278: Google could.

SPEAKER_32: Google probably. They did with YouTube. Okay. Fair enough.

Chamath Palihapitiya: They're the only one.

SPEAKER_32: Isn't that crazy? It is kind of crazy. It's crazy. The Samar Brothers have probably the best distribution pipeline I've ever seen. Do you know those guys? I don't know those guys. I know people around them and I've talked around them a lot.

SPEAKER_50: I've never met them. You would never speak with them and tell them anything of your plans because they would

SPEAKER_32: just steal it. Unfortunately, they probably already know all my plans is my guess.

SPEAKER_07: Yeah. They're probably hacked into your email. Who knows? I have a question from the chat room. If Mike had to choose between... I'm reading it in real time.

SPEAKER_17: Young, hungry... Mm-hmm. Oh, you've got to type faster. I'm going to have to make up the rest of the country.

SPEAKER_250: Entrepreneurs versus old and experienced, which one would he pick?

SPEAKER_65: Well, again, I think it just depends on the business. Yeah, you answered that. It depends on the business.

David Friedberg: Yeah, I mean, I'll tell you that older-skilled entrepreneurs are often easier to manage than younger guys.

SPEAKER_05: Right. The younger guys are not just like you were younger and they wouldn't...

SPEAKER_113: That's right.

SPEAKER_208: Bull-headed. Yeah.

SPEAKER_06: That's right. I would have been horrible to manage. Right. Does that mean you have a risk of those older ones not really pushing far ahead into the

SPEAKER_30: vision? That's a question. Yeah. That's a question. The question is if the business comes across problems, are they at a point where they can kind of quickly iterate, et cetera?

SPEAKER_19: I will say that so far our kind of more senior-grade talent that's come in to run companies that

SPEAKER_216: we're involved in has shown a vast ability to quickly grow businesses and iterate. So I've been really pleasantly surprised by that.

SPEAKER_229: Well, what about women in tech?

SPEAKER_07: You know, we have a lot of discussion of entrepreneurship amongst women. Have you seen any change in the trend? Are there more women applying? That's right. And as an accelerator, do you feel you have like some extra obligation to have more women

SPEAKER_76: founders or do you feel you just got to pick the best ones and fund the best ones?

SPEAKER_32: Well, as an incubator and as a responsible custodian of investment, I look at just I want the best talent, right? Right.

SPEAKER_19: And it happens to be that we do actually have quite a few female CEOs in science, which is just awesome. Right. But they're there not because they're female.

SPEAKER_30: They're there because they're A-grade players that are just killing it with our businesses. So we love that.

SPEAKER_07: Do you do extra recruiting to find more female entrepreneurs? Do you find yourself taking more meetings with female entrepreneurs because you want to

SPEAKER_228: try to have diversity? Or has it just happened organically?

SPEAKER_40: Exactly.

SPEAKER_19: You know, by the time that people end up on my doorstep, they've gone through our recruiter, et cetera. And so in most cases, I'd say that I receive the talent that comes in through the door that's been pre-qualified into my office. I love female entrepreneurship. My mom was a really hardcore female entrepreneur. And so I always love, you know, I love to support that. Absolutely. Just as I love to support minorities in entrepreneurship. But at the end of the day, I'm looking for A-grade talent. If we have A-grade players that are, I don't really care their gender or ethnicity.

SPEAKER_06: Is that one of the reasons, because you guys are recruiting senior vice presidents, there might be actually a lot of women in those positions. Probably true. And who haven't really actually aspired or taken the chance to go be an entrepreneur since maybe the game was a little rigged against them previously. That's probably true. So maybe since you're picking from that pool of SVPs, you probably get, and you said you have a recruiter. You have a recruiter full-time who just brings your talent?

SPEAKER_299: That's right. And just like, I want to talk to them?

SPEAKER_32: Yeah. Yeah. We do a lot of reaching out to people that we love. And that recruiter also works for the company.

SPEAKER_19: So when the company is like, oh my gosh, I need a new senior buyer, CTO, traffic acquisition specialist, then it goes through our recruiter.

SPEAKER_45: So it's like, hey, just come by for lunch and meet Mike and Peter. Exactly. Yeah. Very like, no specific agenda, just get to know each other.

SPEAKER_19: When we come across people that we think are kind of C-level candidates, we want to just constantly have them on our radar.

SPEAKER_32: Because we always have a list of concepts that we're exploring and that we need to match up with the right person. And their passions and skills.

SPEAKER_301: That's right.

SPEAKER_32: And they have to love it. Right? So we have a concept that Ryan Sitt, who's one of our kind of most tactical kind of asset developers inside science. He's been with me for the last three or four companies. He's been incubating this idea for a long time, a lot of research into it. He identified an incredible female CTO that he hired on two weeks ago to work on it.

SPEAKER_19: And then he met just this person came in the door that incredible pedigree and resume around the space. Perfect fit. And we'll give him a CEO offer this week. Wow.

SPEAKER_159: Yeah. So how many deals do you think you're going to do a year? And how far does 10 million take you? If you've done 15 projects already, that sounds like you blew through half the money.

SPEAKER_19: Well, we've raised 26 million in addition to the 10. Oh, you did? That goes across the portfolio, not to science, but into the individual companies.

SPEAKER_97: So 10 million is science, the company, which has equity and everything. Then there's a $26 million sidecar fund.

SPEAKER_30: No, it's not a sidecar fund. Those are individual investments in individual companies.

SPEAKER_97: Oh, I see. So there's $26 million invested into those. That's right. So, but how far out does 10 million take an incubator?

SPEAKER_32: Well, so the other funny part of it is that part of our platform businesses are actually very profitable.

SPEAKER_306: Oh, so you charge the startups for the usage of those or something?

SPEAKER_19: No. So we have certain companies that we've developed internally that we haven't taken investment externally for, that we've solely funded, that contributes back to covering part of the science overhead.

SPEAKER_266: Got it. Yeah.

SPEAKER_45: So those ones, what you would think would be the ones that angel investors would really want to get to. What's funny is that the nature... So do you have a single... Do you have a signaling problem? No. Like if you don't put them out for funding, that means you really think they're super valuable.

SPEAKER_150: You want to keep the equity.

SPEAKER_40: No, it means that they're more marketing platform oriented. Oh, I see. And at the end of the day, they're probably less feasible for straight investing. Oh, they're service businesses. Sure.

SPEAKER_19: That's right.

SPEAKER_217: But they started the conversation.

SPEAKER_19: Sure. Kind of. They're more audience generation businesses. Got it.

SPEAKER_217: So they're not contract shops. You guys know that black art. That's the word on the street is that you guys know how to get traffic.

SPEAKER_06: We're really good at that. How does traffic get generated? I mean, obviously people know Google. Sure.

SPEAKER_299: They know social. Yeah.

SPEAKER_199: And they know Facebook ads. What's going on?

SPEAKER_32: Well, I'd say that, you know, at the end of the day, the way I would look at the traffic world is that, you know, in the landscape of where consumers spend time, there's going to be a bunch of big pools of people, right? There's a pool of people inside of Google. There's a pool of people inside of Craigslist, like eBay, Pinterest, Facebook, Twitter. There's these big pools of people, right? And so you have to find ways to interact with those pools, right? And so you might use Google and do SEO or SEM. And you might do Facebook ads. And you might do Twitter advertising or however. So we find very specific ways to build teams that dive into how to interact with those pools. Got it. How do you interact with the Craigslist pool? There's lots of them.

SPEAKER_19: I mean, well, read the story behind the Airbnb group. Ah, right. They're very public stories about Airbnb interacting with Craigslist. Yeah.

SPEAKER_182: That's right. Where they made the tool to help the homes post. Sure. Got it.

SPEAKER_19: And so I think we look at that as part of the science responsibilities.

SPEAKER_32: That we, as a company, want to build distribution venues. Those venues are typically matched up to large pools of traffic that we can enable. And then we want to guide that traffic to the startups that we build or that we partner with.

SPEAKER_317: And you're very heavy on the commerce side.

SPEAKER_19: We're very heavy on the commerce side. Why is that? I guess because we're really good at it. Yeah.

SPEAKER_318: And what do you like about that versus advertising? It's fairly binary.

SPEAKER_19: It either works or it doesn't work. And if it works, it typically has a large enough lifetime user value that you can immediately scale it quickly, which is nice. What I don't like about it is it typically requires a lot of capital. So you have to be very efficient at raising money, which, of course, Peter Pham is very efficient at raising money. Right. But, you know, it's a fairly binary outcome. Whereas if we were trying content and banner ads and collecting pennies or dimes on banner ad impressions, that's a long road. You know that road. It's brutal. It's a brutal road.

SPEAKER_322: It's a brutal long road.

SPEAKER_32: So I like things that involve credit cards from users. It doesn't have to be. It could be subscription. It could be data access. It could be monthly fees. It could be commerce. But I like things that have real value associated.

SPEAKER_19: I don't feel like I'm the lucky enough guy to build the next 50 million user, Pinterest, Twitter, social platform. Instagram.

SPEAKER_32: I know a lot about that. I know so much about that that I don't think I would do it. Because it's such a crapshoot. Well, yeah, exactly. I mean, for every Pinterest or Twitter, the bodies are infinite. There's thousands. Thousands.

SPEAKER_326: Tens of thousands.

SPEAKER_34: And then when it comes to commerce, it may be only a single or double, not a home run initially.

SPEAKER_32: But you're pretty much guaranteed on getting on base. That's true. Well, listen, revenue cures a lot of ills on startups.

SPEAKER_30: The next wave of e-commerce startups have not seen exits yet. So it's a big question mark. Fab. No exit yet. Huge valuation. Guilt Group.

SPEAKER_208: No exit yet.

SPEAKER_229: Groupon. Semi-exit. Sure. Shoe-dazzle. Shoe-dazzle.

SPEAKER_32: No exit. Intelligent Beauty. Just fab. So there's a lot of stuff happening.

SPEAKER_332: Hope look at an exit.

SPEAKER_32: Sure.

SPEAKER_246: Okay.

SPEAKER_103: There you go. There's one. That's right. Yeah. And that was by a desperate retailer.

SPEAKER_32: They were a retailer in need of online strategy.

SPEAKER_182: Right. Which to me sounds like it wasn't necessarily like Amazon or Google buying the business. Sure.

SPEAKER_19: Well, realize that you're going to get higher valuations from people that need to buy into strategic avenues. Correct. Like we did with AOL. That's right. Exactly right.

SPEAKER_335: They needed a bridge into premium content. Overpay.

SPEAKER_250: Yeah. Overpay a little bit. That's right. Hey, so for a young entrepreneur to get into science, what would be the two or three things

SPEAKER_06: you'd tell them they need to bring to you guys? What would increase their chances of getting a meeting, getting a meeting and maybe even closing

SPEAKER_07: a deal, joining the accelerator?

SPEAKER_40: Well, I mean, I think it's, first off is we want to play to people's, you know, best absolute

SPEAKER_32: strengths. So if that means that they're a hardcore developer and they want to work on some incredible projects, that's, they can come in and talk to us, right?

SPEAKER_19: If it's a marketer that understands something that we don't understand about online marketing, we're eager to be surprised, right? Like when we find people that are smarter than us relative to different tactics used, we would bring them in immediately. And then I think when it comes to CEOs, we're looking for great people that have fire in the belly to build incredible businesses and are very passionate about some specific sector

SPEAKER_32: that hopefully lines up with sectors that we're interested in.

SPEAKER_227: So passionate in a sector, but also domain expertise, tactic expertise. That's a big plus.

SPEAKER_91: You like people with skills. We like skills a lot.

SPEAKER_45: Not just, oh, I got a lot of fire in my belly. This thing's going to change the world. Yeah. If it doesn't have the skills, it rings false to you?

SPEAKER_32: Well, no, if you have something that doesn't have skills, but they're willing to learn, it's fine.

SPEAKER_19: You know, I mean, honestly, one of our top CEOs right now, I would say had very little skills relative to the business that she's running. And she runs one of the most interesting businesses, I think, that we're working on. And it was all learned. Which one is that? It's one we actually haven't talked about yet. Oh, really? Yeah. Oh. What's the genre? It's just, you know, the genre is incredible.

SPEAKER_30: It's just incredible.

Chamath Palihapitiya: I get no information. I'm trying to get like one scoop out of you. No, that one we can't get.

SPEAKER_91: I threw it up with the juice thing.

Chamath Palihapitiya: I may have to...

SPEAKER_250: No, it's fine. I think there's been buzz about it.

SPEAKER_30: Yeah, yeah. We've been experimenting with it for quite a while.

SPEAKER_250: Oh, very good. Yeah. Well, this has been great. We could talk for hours, but congratulations on a really amazing portfolio in under a year.

SPEAKER_06: Thanks. Yeah. Yeah. Yeah.

SPEAKER_05: Yeah. Yeah. It's a really awesome, sexy video. And I met the guy and I thought, well, that's interesting. Yeah. Why is that? Is that business important? I mean, is it going to go beyond shaving or...?

SPEAKER_19: I think, I would imagine it will go beyond shaving. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Guys who shave. Yeah. Yeah. I mean, it's huge revenue numbers. Developing a direct-to-consumer strategy, which we love, with a unique product.

SPEAKER_32: You know, with really strong virality and natural kind of social, social referrals. What do you think they spent on that video?

SPEAKER_112: 10 grand?

SPEAKER_32: 20 grand? Nothing, I assume, yeah. Five or 10 grand? Yeah.

SPEAKER_112: I assume it's pretty low. And it was incredible.

SPEAKER_32: It just took on a total phenomenon.

SPEAKER_19: And that's really just, I mean, that's a quality of that founder, right? That founder had a vision and he was formally trained in some comedy and then understood virality and understand marketing really effectively.

SPEAKER_360: And one video could just get that message across.

SPEAKER_19: Yeah. I think we've never seen a tactic like that grow at that pace and create the kind of results that he did.

SPEAKER_17: Hard to replicate. Hard to replicate. Maybe impossible to replicate that. Maybe I'll try. It's better to be buying traffic and converting it to that phone. Yeah.

SPEAKER_19: The Orabrush guys have done well with video and e-commerce.

SPEAKER_361: Which guys? Orabrush.

SPEAKER_17: What is that Orabrush? Oh yeah, I saw those guys.

SPEAKER_19: Yeah, yeah, yeah. Yeah. So they've done, they've been one of the other interesting kind of YouTube phenomenons around video.

SPEAKER_17: Oh, Blendtec too with the blender. Okay. I believe that. Yeah, will it blend? Yeah. That's right. There's a lot of Blendtec blenders with that.

SPEAKER_362: Yep.

SPEAKER_299: I bet that's right. If anybody wants to follow Mike Jones on Twitter, you can do so very easily. Yeah. At M Jones.

SPEAKER_06: And typically, I'm sure on your site it has had a contact you guys. Yeah. Lots of contact stuff. Reach out anytime. And it's great to have you on the show.

SPEAKER_250: Yeah. And congratulations. Also, you're on, oh wow, you're an angel invested in cloud. I passed on that like an idiot.

SPEAKER_43: Well, I passed on the first round. I came in at like the very edge, at the very beginning of the second round.

SPEAKER_216: Yeah.

SPEAKER_340: I've been in that round and I'm such an idiot because I just didn't get it and now I get

SPEAKER_216: it. Yeah.

SPEAKER_17: Now I get it too. It's impressive. Look, if you want to get a list of the top 500 people in New York who like wine, they

SPEAKER_246: can give it to you. Yeah. Influence marketing is really important, actually.

SPEAKER_31: What's going to happen? Is Twitter going to shut that business down you think? I don't think so. Twitter's got to buy it.

SPEAKER_17: Twitter or Facebook. I think Twitter should buy it. Yeah. Twitter should just buy it now. But if Twitter blocks them, oh no, you know what? Twitter can't block them because people are logging in or authenticating. That's probably true. That's right.

SPEAKER_246: Twitter could block them, but yeah.

SPEAKER_150: Twitter could block them, but not block me logging in.

SPEAKER_19: I think Twitter's actually about to come out with a wave of interesting things. I think it's going to be an interesting year for Twitter. Really?

SPEAKER_150: Yeah. Well, the advertising stuff seems pretty compelling. Yeah. Did you read that they can sell your followers? I didn't realize that.

SPEAKER_07: Yeah. They can sell. They don't say exactly your followers, but they sell the... You can put in at mjones and at jason and at peterfam and then get a group of people Oh, that's fascinating. in our orbit.

SPEAKER_217: Sure. So without selling our lists, which would seem very distasteful, they sell people who are fans of that. That's right. They're targeting off of... Which is people favorited. Yeah. That makes sense. So if they favorited our stuff or they retweeted it or they replied, so they're selling the top 20% of your followers. That's right.

SPEAKER_32: Two advertisers. Well, it's like at the end of the day, if you followed Kim Kardashian because you liked her shoes and you were a new shoe company, you should be able to target the followers

SPEAKER_110: of Kim Kardashian.

SPEAKER_05: But doesn't it seem really wrong to you that Shoe Dazzle and Kim build up this huge list and then Skechers could then go say, I want the Shoe Dazzle list? Well, it's...

SPEAKER_32: I want Shoe Dazzle-y people like Kim? Does it seem right or wrong that Twitter was a big portion of them building up Shoe Dazzle as a business of which Twitter never saw any revenue or equity back in Shoe Dazzle?

SPEAKER_239: It just feels distasteful to sell somebody's follower list to me. I think they're going to have a huge backlash. Huge.

SPEAKER_217: It's possible. I mean, it's one thing to sell a keyword search where you're going to search Google. I have nothing to do with that as Kim Kardashian. Right. But to sell the list... Is that true?

SPEAKER_32: Like if you go to... If you go to... Well, think about this. With Facebook, if you like Fab, then you... If you're starting a competitor to Fab, then you could target people that also like Fab. Yeah. So then you could say, well, Fab should have revenue on that because Fab built the Fab brand.

SPEAKER_17: It does seem wrong to me. It seems some way wrong. Like they shouldn't be able to target... Like why would... Then why am I building up this list? But I guess it's so incestuous, it doesn't matter. That's right.

SPEAKER_40: Well, remember, these are free tools.

SPEAKER_184: They're free tools, so therefore they can do whatever they want. That's right.

SPEAKER_19: I mean, if Fab, you know, how to compensate Twitter or Facebook for every user signed up that Twitter and save Facebook referrals because of the viral channels that Fab, that Twitter and Facebook provided, that would... Fab could never afford that, right? Or a commission. That's right.

SPEAKER_06: Or a commission. Yeah, they just put an affiliate link on every Amazon link. That's right.

SPEAKER_91: They'd be within their right to do that. That's right. I could say any traffic that leaves Twitter or Facebook... And certain platforms do do that. They have, yeah. That's right. Pinterest does that, I think.

SPEAKER_19: No. One more experimented with it, I think.

SPEAKER_103: One more did?

SPEAKER_19: No. At one point, Pinterest, we believe, was experimenting with... Yeah. Taking that...

SPEAKER_103: Yeah. Skimlinks.

SPEAKER_379: Skimlinks. Skimlinks.

SPEAKER_06: Interesting. All right. Listen. Mike Jones, continued success. And if you are an aspiring entrepreneur or a senior vice president at a company who hates their life, job, boss, co-workers, mission, daily existence, this is the person to talk about it. You've totally hacked it. I think it's brilliant, by the way. Thanks, thanks. I really think that grabbing those SVPs who are just underappreciated, underutilized and have no real upside other than the steadiness of the job, you've provided the steadiness and reduced the risk.

SPEAKER_91: That's right. And it really is the antidote for people saying it's a young man's game. I agree. I agree.

SPEAKER_299: Well done, Mike. I'm very impressed. And thank you, hey. Thank you, at Sourcebits. And thank you, at GoToMeeting. And if you enjoyed this discussion, really, you have them to thank.

SPEAKER_06: Thank you, at GoToMeeting. And thank you, at Sourcebits. We really couldn't provide free content like this. And God, I mean, there's like five or six people who work on this program. It's a lot of work to do this. And I couldn't do it without you guys. Thank you so much.

SPEAKER_90: You can follow at ScienceInc to follow all the great stuff coming out of Science. We'll see you next time on This Week in Startups.

SPEAKER_382: Bye-bye.