SPEAKER_00: On today's show, we have a fireside conversation between Jason, Altimeter's Brad Gerstner, and Mubadala's head of ventures, Ibrahim Adjami. The conversation took place at Hub 71 in Abu Dhabi. Stick with us. This Week in Startups is brought to you by Squarespace. Turn your idea into a new website. Go to squarespace.com slash twist for a free trial. When you're ready to launch, use offer code twist to save 10% off your first purchase of a website or domain. Trovada. Starting up is hard. Trovada makes managing cash easy. Start automating your cash management at trovada.io slash twist. Use code twist for 30% off one full year of premium features like AI forecasting. And OpenPhone brings your team's business calls, texts, and contacts into one delightful app that works anywhere. Get 20% off your first six months at openphone.com slash twist.

SPEAKER_03: Welcome to Abu Dhabi. How are you guys feeling? You just arrived?

SPEAKER_04: Incredible to be here. I mean, I said the lobby over at the Four Seasons is I felt like I was on Sand Hill Road in Silicon Valley. It's like we couldn't get out because we saw so many friends over there. So it's great to be here. Thanks for having us. And I couldn't believe when we walked in here. Quite the energy in the room. So it pumps us up.

SPEAKER_08: Yeah, I got stopped four times in 90 seconds from the elevators to meeting him with people from Silicon Valley. And I see a lot of friends in the room. So it's absolutely fantastic. It was exhausting to get here. I slept three hours, three times. But I just drank two espressos

SPEAKER_10: with two sugars each. So I'm ready to go to a couple of red eyes, right? Yeah. Very good.

SPEAKER_12: Welcome. Yeah, thanks for hosting to have you guys. Welcome everybody to hub 71. And gentlemen, welcome to hub 71. We'll talk a lot about that. We have a lot to cover today. But let me just do a very quick introduction here. Two very, very special individuals. It's sort of a, you know, a sweet moment for me is in 2016 when we started going to Silicon Valley. And, you know, when we launched our ventures business as Mubadla, you know, one day I'd hope that, hey, I'm going to meet

SPEAKER_14: these two guys. You know, these guys are heroes. So now you come visit us in Abu Dhabi. So it's a very

SPEAKER_12: special moment. So Brad, Brad, Brad Gershner is the founder of Altimeter, one of the leading venture capital firms around the world. You started this in 2008, and invested in companies, you know, Snowflake, Meta, and many, many other companies, which we're going to get into. And Jason, Jason Calacanis is a very well known author, investor, and obviously, very well known for the various shows that you host, including the all in and this weekend startups. And you're also known to be one

SPEAKER_14: of Elon's sort of inner circle guys. Is that correct? It's very interesting when your friend becomes the

SPEAKER_08: most famous person in the world. And because when Elon and I met, he didn't have SpaceX or Tesla. And we used to go to parties in LA, and I would introduce them to people. And it's Oh, hey, Jake, how are you

SPEAKER_17: doing? Can I take a stop? Hey, what is your friend doing? And I said, Oh, he's working on a rocket ship

David Friedberg: company. And person in Hollywood would say, Do you fund movies? And he'd say no. And they said, Nice

SPEAKER_08: meeting you. And they walk away. So it's quite funny. But you know, Elon's a tremendous entrepreneur. And it's great to be his friend and to watch what he's done a lot of meaningful work. And I think a lot of lessons for entrepreneurs. What he's done over 20 years with these companies really shows what

SPEAKER_20: compounding innovation and iteration does. Everybody wants to get rich quick. Everybody wants to, you know, find the shortcut and be famous. And what they don't see is 60 70 80 90 hours a week, year after year, and solving problems every day. And it's more pain and suffering than I think a lot of people

SPEAKER_21: anticipate, but it's worth it. And he's just a great inspiration, I think for a lot of entrepreneurs. And it's just good time as a friend. Yeah, thank you for that. So we're going to start with, we're

SPEAKER_15: going to start with the state. I want to start with especially for founders. So the initial conversation will be targeted towards founders. And obviously, the state of technology industry today

SPEAKER_12: is is going through a correction is going through a shift recalibration and reset, you can call it whatever you want to call it, whatever you want to call it. Let's start with you, Brad. You've been quite vocal around companies living under constraints, being more efficient, being more creative. How did we get here? And and what's your perspective on what founders really need to do in

SPEAKER_29: the world we operate in today? Well, it's great to be here. Thanks for having us. In 2016. You're

SPEAKER_31: right. I didn't think of my bottle as a force in venture capital. And now it's really exciting to see this room and just exciting to see your voice in Silicon Valley. This is the third major kind of correction that I've lived through. Jason, I lived through 99 2000 2008 2009. And now this one, each of

SPEAKER_32: them was a financial reset, not a tech reset. They were financial reset. And the reason I say that is because the secular curve anybody in Silicon Valley in 2001, knew the internet was going to change

SPEAKER_31: everything. But the financial markets were struggling. Anybody in Silicon Valley 2008 2009 knew that this iPhone was going to change everything that cloud computing was going to that secular curve was as steep as ever. But we had a financial market reset. And that's what we're going through again. Today, I

SPEAKER_32: actually get excited during these resets, because what it does is it makes our job easier. During periods of excess liquidity, free money, two bad things happen. Number one, we fund too many companies,

SPEAKER_33: because capital races in, you compete away the natural profits. So for example, in ride sharing, we you know, Bill Gurley talked about capital as a weapon of economic destruction. So the first mover doesn't get first mover advantages, because you have 10 people who get funded to follow. And they all destroy the economics of the industry for a decade. And so it makes the founders job a lot harder. So this period of scarcity, I think is really healthy for both venture capitalists, but also for founders. Because the founders who are really willing to grind it out, the founders who are the most light, you know, the Travis's and the Elon's of the world that are going to grind it out for that decade that aren't looking to get rich quick, that are going to build things that matter in the

SPEAKER_32: world that move humanity forward. Those are the founders who don't go away in 2009 and 2010. They

SPEAKER_33: didn't disappear in 2001. I mean, Elon founded these companies in the wake of the financial reset in 2000

SPEAKER_32: and 2001. So I get excited because I know when I see founders in the wake of a financial reset,

SPEAKER_33: they're the ones who are really, you know, they're in it to win it, they're going to grind it out. I would just, I would end on this and then pass the ball to Jcow. There's no lack of enthusiasm in Silicon Valley. I tweeted a couple of weeks ago, at the end of 2022, I think there were over 1000 unicorns in the world. And I said, 100% of them will do a down round. So 1000 out of 1000 companies will be priced down. And I got a lot of feedback. Oh my gosh, this is the end of times. And I said, why is that so unusual? The stock market, every single tech company in the stock market went down. So why wouldn't every company valued over a billion dollars go down? And the worst part is that 500 to

SPEAKER_32: 600 of those companies weren't great companies to begin with and should have never been valued there. So they'll probably do a down round and may never get back to prior peaks. But a couple hundred of

SPEAKER_33: those will do their normal down 30 or 40% just because the cost of money has gone from zero to 5%. And when that happens, they'll go on to higher highs to build bigger things. So don't let that as a founder, slow you down. In fact, you should be enthusiastic in this moment. It may be a little

SPEAKER_32: bit harder. When I raised money, I did my first trade, we're a public and a VC firm, November 1st, 2008. There wasn't a soul on the planet who wanted to start an investing firm on November 1st, 2008. But it was great because I had no competitors. I think for founders, this is the best of time.

SPEAKER_42: J.K.L. maybe for you, who are the founders during these times that can actually make it through? J.K.L. What is the soul of that founder? What does that founder do and behave like during these difficult times? J.K.L. Sure.

SPEAKER_08: J.K.L. Yeah, I think what we lived through at the peak there was a bit of a delusion.

David Friedberg: J.K.L. One of the magical things about Silicon Valley is that it's a milestone-based funding system. J.K.L. And so you get friends and family who give you money. It makes it very difficult to go home for the holidays if you lose it, right? And then you go to an accelerator, perhaps, and then you raise a seed round, $25,000, $50,000, $100,000 at a time. And each step along the way, you have to prove something. And what happened during this peak was people became so good, and it's partially my fault with the podcasts, teaching people how to pitch and teaching people how startups work, that people became better at pitching investors than selling customers and building products. At the end of the day, what we do as founders is we build products that delight customers, that solve a problem for them. There's only three things that matter, and I'm training a bunch of young investors at my firm. Team, product, customers. Everything else is not important. But during peaks, that's when people get distracted. They put get raised too much money, they start doing five projects, and then the founders start creating funds, and they're investing on the side. And you're like, wait a second, I thought you were a founder. No, no, no, I've also got my own fund. It just got crazy. So to answer your question, focus. Relentless focus. When you don't know what to do as a founder, when you're scared, when you're staying up at night, when you're panicking, when you've got three months of runway, 10 weeks, eight weeks, and you have that pit of your stomach, and you feel sick, and you can't sleep, and you're staring at the ceiling. That's when you go talk to your customers. That's when you get your team together over the weekend and say, I talked to our customers, let's build this feature, and let's test it. So that's what I look for in founders. I want people who are obsessed about the product and the customers and have what we call internally product velocity. That's how we make our decisions to pick the founders, we meet with them. And then maybe four or five weeks into the process, we meet with them again, and we look at the product, we don't tell them we're doing it. But we looked at what we look at what's changed in the product, we go look at the App Store and see if they updated their app. One company updated it twice, one didn't update it. So it really is about whoever can move at the

SPEAKER_20: and have that product velocity, small teams, and filled with builders. Not just idea people. People come to me all the time and want to talk about ideas. And they say, Oh, I got so many millions of ideas. And they said, Oh, yeah, I did too. Last night, I had a dream. Every night, we all dream and have 100 ideas. It means nothing. Your ideas mean nothing. Your execution is the only thing that matters. If you can tell from the podcast lately,

SPEAKER_48: we've been doubling and tripling down on Founder University to launch. In fact, it's basically the future of our venture capital firm. And that's awesome, because I'm working with a couple of hundred early stage founders really early and getting to see what tools they use. You know what tool they show up with most? They show up with Squarespace, they put up their first website instantly, quickly with Squarespace, and it's beautiful. And it makes them look like a million bucks. The thing you may not be aware of is that Squarespace beyond the beautiful templates that make your company look like a million bucks and that work on mobile. It's not just a pretty website. It is a powerful e-commerce platform now. And they have member areas. What's a member area? You know, people like to sell content now and premium content. It's a big business. Well, they have that built in to Squarespace and they don't take, you know, double digit percentages of your revenue like those other platforms do. And they also have appointment scheduling. So, you know, if you're doing a business where you're a consultant, you want to charge for your time, well, you have scheduling built into it as well. And this is the brilliance of Squarespace. It's going to look beautiful as you know. So here's what I want you to do. Just head to squarespace.com slash twist for a free trial. When you're ready to launch, use the offer code twist. You save an extra 10% off your first purchase of a website or a domain. We love you, Squarespace. You know how it is. When you're a technologist, everybody in your family, your friends, your circle, your network come to you and say, Hey, I got to get a website up. Can you find me a developer, a designer, a product manager? And you just say, you know what? Yes, I can find you all that and more at squarespace.com slash twist.

SPEAKER_12: I'm going to unlayer that a bit. Then maybe you both can jump on that, but this is specifically for founders here in the region. I want to unlayer this concept of product being the soul of the company. It's all about the product. And I know that, you know, David Sachs also talks about that on the pod where he says, you know, when I want to see founders pitching me, I don't want to look at a deck. I just want to go through a product demo. And when you look for founders, when you evaluate founders, how do you identify a good product from an average product? Are you able to see that early on? And maybe you can tie it to some of the stuff that you've looked at, like Snowflake, or you've invested

SPEAKER_14: in some of the outliers that have sort of made huge returns for you.

SPEAKER_53: Yeah. And I think hearing from Jason and I, because I think we have complementary,

SPEAKER_31: but adjacent approaches, right? So at Altimeter, I was, I had started three companies in starting in 1999. I helped start General Catalyst in 99. And I needed David Fialco, one of the founders of General Catalyst said, you know, you, you need to help me put together the first company, our launch company. And if that doesn't work, then this fund's not going to work. And so we had an idea for an early online travel business, search business that we ultimately sold to Barry Diller in 2001. And my observation 99, 2000 was this is a power law business. The internet's going to be huge.

SPEAKER_32: All we need to do is invest in search and e-commerce. So we're very thematic driven. We talk about super cycles. So I study the super cycle and say, if we get the super cycle right, then it's easier to find the companies, right? Because if you know, like organizing all the world's information in search is going to be a valuable toll booth, right? Then I want to go find the people who are doing that the best. Or, you know, when you saw this mobile device, or when you saw these devices for the first time, and we knew that those icons were all going to be extraordinarily valuable. So the world had been organized around 10 blue links between 2000 and 2010. And then you saw that and you said blue links are going to turn into icons. So Instagram and Facebook and ByteDance, TikTok, and all the companies that came out of that. For us, the cloud was something that we knew

SPEAKER_33: would be more performant, more secure, and was the natural evolution of where software was going to go and how it was going to be delivered. And so we're a little early in 2012. But so Snowflake,

SPEAKER_32: just as a canonical example, the largest market in all of software in 2000 was databases. It was a

SPEAKER_33: trillion dollars of enterprise value. And it made sense because it was the primordial, it was a primal component that gave rise to all of software. And so if it was worth a trillion, if data was worth a trillion in the year 2000, what would it be worth 10 years later, when data is doubling every two to three years? So as the world was moving into the cloud, we said we want to own the things that are re-architecting the data architecture into the cloud. And it wasn't just Snowflake. It was also MongoDB and, you know, companies that were enabling the move to the cloud like Twilio and Okta. And so we've invested, as you know, and are still investing in what we call the modern data stack. So data is the oxygen, or the fuel that runs AI, then we're only 10% or 15% of the way into capturing all of this data, removing friction from this data. And so once we know that, we went out and we said, Okay, who's doing this the

SPEAKER_32: best, we found the founding team, you know, there are only five people who had worked on the kernel at Oracle, we found two of those folks, they've been working on an idea. And so for us, two people

SPEAKER_33: walking in off the street with an idea and a good product isn't enough. I need to know it's an end market that is really big, has a lot of tailwinds behind it, the super cycles heading in that direction. Because if the super cycle is behind you, then even if you're number two, or number three, or number

SPEAKER_32: four, you can still win pretty big, where as you can have an incredible product, but if the world is

SPEAKER_58: not moving in that direction, it's very hard to overcome those currents. Is that how you look at

SPEAKER_17: things, Jason? No, completely different. And I think it's because of the stages we work in.

SPEAKER_61: Yeah, you're on this, you're sort of zero to one.

SPEAKER_08: Yes, we are the first investors, we have a program called Foundry University, where we give people their first $25,000 to incorporate, we have launch accelerator, we give them 100,000. And then we'll seed invest 250k to $2 million. So we own about 10% of the company. But along those three investment milestones, you know, we're looking at the craftsmanship, and the thoughtfulness in each of the features. And so as but one example, when Travis was showing me Uber, we were having a conversation about it. And the cab icon that was moving on the map, as if the person was drifting

David Friedberg: the car, you know, when they drift cars, they go sideways, because the designer never thought to turn the icon and make two icons, one going this way, one going that way, one going north, one going south. And I said to him, I said, You know, you could change any time he goes, I know about this. It's on the roadmap. It's incredibly frustrating. I told them seven times, it's going to be out next week. And his obsession on each of those details, and then Travis, and I would have these long conversations about tipping. I'm from Brooklyn. And in Brooklyn, everybody gets tipped. People who aren't you wouldn't think get tipped get tipped, but your garbage man gets tipped, or you tip the person who installs your phone, like it's just like a Brooklyn thing. And I said, You have to let me tip. And he said, No, no, it's too much friction. We want you to get in and out of the car, we want you to know the price, we're just going to give them a better rate, and they don't have to worry about tipping. And I would argue with him about this, like, Hey, how about if I hold the button,

SPEAKER_08: and then it gives me a secret way to give a tip. And he's like, No, it's about friction, we want to reduce the number of steps. And you just saw that level of obsession. But the truth is that that early stage,

David Friedberg: I could lie and tell you like, Oh, I can see it. And I lied to myself for a long time, I thought I could look in a founder's eyes, and I could figure it out. Right. And it was just that when I started investing was 2008 2009, I started in the down market. So when I hit three out of the first seven

SPEAKER_63: companies were unicorns, I thought, Well, I'm a genius, I can pick one, two, okay, unicorn,

SPEAKER_64: three unicorn, unicorn. I am great at my job. It wasn't that it was just that there was only seven

David Friedberg: people starting companies, you had to be like a lunatic to start a company in 2008 2009. That's

SPEAKER_20: the moment right now. So the absolute relentless focus that I'm seeing now, I'm investing more money now in more companies this year than I ever have in my career in the down market, because I'm seeing incredibly focused teams were obsessed with product. But it's the ideas that sometimes confound us the most, that are the ones that break out and induce a market to exist. So what do you mean by that confounders the most? What does that? So if you were to when Airbnb and Uber started pitching people,

David Friedberg: the first thing people said about Airbnb was you're gonna stay on, I'm gonna stay on your couch. Um, so you're like, but what if you're a serial killer? And they were like, Oh, um, yeah, yeah, no, because you have a rating system. I'm like, Oh, really? Serial killers are not going to game the rating system? Like, do you not know nothing about? Did you ever see Silence of the Lambs? Hannibal Lecter? He's very charming, he would get five stars. And so people couldn't understand Uber. And when I pitched it to people, I brought about 20 angels together in a room like this. And I had Travis pitch them three of us invested and 18 didn't I see those same 18 people. I know all of them. And they come up every time. Oh, my God. Five million $5 million valuation, you told me to invest and I didn't. And the thing is, it was an illogical idea that people would get in a random person's car. And many people at that point in Silicon Valley did not want to be in the hardware business. And they said, We don't want to be in that business. And one VC, I'll never forget, he said, Jake, how I will take the whole round, just convince Travis and Garrett to not create a marketplace, have them make software and sell it to cab companies. And I looked at the person that was

SPEAKER_17: like, wow, this person is incredibly successful. And so stupid, like, the cab companies are the

David Friedberg: problem in this, we have to remove the cab companies, and then lower the prices and make it more accessible. And I said to them, because I didn't, that was coming up in my career, I didn't want to insult them. I said, Well, that's a great idea. Yeah, totally talk to Travis. And then I thought about and I was like, I'm never going to tell Travis this because it's so embarrassing for

SPEAKER_20: this person. And so over time, I stopped worrying about my ability to understand the customers in the product. My job is to support the founder and to look for that product velocity, look for incredible product design, and an obsession to every little detail. I had one of the early Teslas. And I was driving with Elon in the car. And we were on the highway and was making a whistling noise. And I kid you not, he started raising in the window up and down on the Model X pushing the glass. And then he said, just pull over over here. And I was going to my house, I pulled over, got out, took a picture of it, and getting on the phone. Like he was literally in the car doing product stuff about this gap in the window. And that's real obsession. Yeah. And if you don't have that, what it means for you as a founder is that either you're not cut out to be a founder, she quit, or you haven't found the right idea that you're passionate enough about. But if you don't bring that level of passion, that should tell you, you're doing the wrong idea. Yeah, move on to the next idea. Or you should go find somebody who has that level of obsession work for them. And just be incredibly skilled at helping them realize a dream or you can work, you know, I don't know what the equivalent of the postal service here is. But

SPEAKER_82: you know, you can work at the post office or something or at Starbucks where you don't need to have

SPEAKER_20: that obsession. Yeah, but it requires unbelievable sacrifice, your sanity, your relationships, you have to be willing to sacrifice it is a dogged competition. Lest you think everybody is going to succeed, I can tell you 80 or 90% of you who start companies will fail and it will be brutal. And you will feel sick in your stomach. And all you have to do is get up and do it three or four times and you will be successful. But be prepared because Uber was Travis's third company. He got sued for a

David Friedberg: quarter trillion dollars in the first one, his scour, he created Napster, but for movies, he got sued

SPEAKER_17: for $250 billion by the movie industry when he's 22. Then he did red swoosh, which was like a CDN, but he was too early and he sold it and it was like a $20 million sale. And then he did Uber, you have to be prepared for pain and suffering and obsession and sacrifice. And what happened for the last five years was there were a group of people who were playing the role of founder. They wanted all of the accoutrement. They wanted to be famous. They wanted to say they were a founder. They wanted to have the pitch deck. They wanted to raise the money. They wanted to watch their valuation go up. But they were

David Friedberg: actors. Yeah. And now it's time for the real deal. Because if you want to raise money now, you better have a great product. The benchmark has gone up 10x 100x to get 10% of the valuation.

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SPEAKER_12: mental and emotional flexibility to sort of pivot and change. And, you know, I remember a year ago, you know, I was, I was here speaking to a couple of people and, you know, we took a point of view that Facebook or i.e. Meta was, was finished. Company is over. It's lost its game. It's lost its leadership. And, and for you, Brad, tell us the story. You wrote this letter to the CEO, to Mark Zuckerberg, and, and it was contrarian at a time. Like, you know, you said, Hey, you need to start doing one, two, three, four. And it, and it looks like he listened. Either he listened or he was planning on it and things have changed, but tell us a little bit about your, your deep belief that, that this is what he needed to do. And if he did that, this company was, was still a very, very important special

SPEAKER_31: company. You know, one of the things I love most about Silicon Valley is it's a real community.

SPEAKER_99: Um, I mean, we've been there for two decades and, um, we know all of Mark's senior team and,

SPEAKER_33: you know, we know Mark and, um, it was really around the poker table and our dinner tables where we had been having a conversation for two years about the downside of zero rates and free money, the age of excess. Like what did it lead to? And if you just looked at the raw number of employees

SPEAKER_31: at Google, at Facebook, Facebook went from 40,000 employees to 80,000 employees in two years, Google went from a hundred thousand to 190,000 employees. And everybody that we talked to said,

SPEAKER_33: it's slowed down. We're not releasing products. It's no fun to work there. Um, and it showed in the numbers. And I think that there was also a lot of dislocation around IDFA and a lot of things happening in the world that specifically were hurting meta. And so if we telescoped out, there are two choices you can make as a public market investor. I had first invested in meta and Mark knew this in 2012, the company had gone public, the transition Mark had famously made an, uh, his app in HTML five, and it didn't work. And investors concluded that they wouldn't be able to monetize mobile the way they monetize desktop. And the stock broke $20 a share. And the cover of Barron's was

SPEAKER_106: that Facebook is finished. Um, but we knew talking to all the people who were working there that he's

SPEAKER_33: working on a native app. I knew marketers that were using it in the sandbox and how well it worked. And it just stood to reason that an infinite scroll, right. Where I could entertain myself like television was going to work better on mobile than it did on desktop because I get up and leave my desk, but I don't leave my supercomputer. Right. It stays with me. So I wasn't a flyby investor. I'd invested for a long time. We were talking about the downside of the age of excess. And so, um, one of the downsides is you do too much, you invest too much, you hire too many people. And at Meta that manifested itself in a 10 year project where they plan to spend more money than the U S government spent on the Apollo project that put Meta on the moon. And nobody really even understood exactly what it was, including Mark. And yet staring them in the face was probably the biggest goldmine, the biggest opportunity that we've seen in our investment careers, which was AI.

SPEAKER_106: And this was a company I had been talking to them about four or five years because we were early

SPEAKER_33: investors. We had back Yamming at ByteDance. And I remember Yamming sitting in our conference room and I said, how are you going to build, you know, an entertainment feed in China without a social network? And he said, Brad, AI is way more powerful than a social network. And so that was

SPEAKER_106: really the conversation with Mark that the core business needed to get fit and focused that he

SPEAKER_33: should double down on AI and he should just quarantine invest 5 billion a year, which is still an insane amount of money on Metaverse instead of 15 or 20. Then when I, I sent the letter to Mark, I'd been talking, here's the thing. He's 38 years old. He doesn't have to listen to me or talk to me or any other investor, but the brilliance of Mark Zuckerberg is he's infinitely curious. He's mentally flexible. He's in the building. Larry and Sergey are not in the building. Mark is in the building. He cares deeply about the product. And so when I took him through this alternative vision, I said, this isn't about stock price. You don't care about stock price, but what you do care about is working with the smartest people in the world on the most important things in the world to move humanity forward. And he's like, yes. And I said, this path won't get you there. Here's the path to get you there. And so I would like to think that we made a small impact. But when we discussed it on the pod, or we discussed on CNBC, I said, this is an open letter to all of us, to all of Silicon Valley. We've all become unfit.

SPEAKER_108: Working from home, we convinced ourselves that it was as productive as working in the office. It wasn't being in the office, working long nights, pizza boxes, you know, that is how stuff really gets done.

SPEAKER_33: It's where the energy. So I thought that, you know, it'd be, you know, it was important for them, but I thought it was even more important to tell, send that message to, to everybody. And it was really the message that we had been discussing around the poker table. So I wouldn't, I don't

SPEAKER_08: have a lot of pride of authorship around it. You should, I think it was really good timing. And it was brave of you to do actually, I give you a lot of credit for it. Because you saw it, arguably a year before, I think a lot of people saw it, and you said it, you know, a year before a lot of people were willing to say it. The truth is, like, great products are typically made by small teams.

David Friedberg: And when you have so much money, what people were doing was they were getting office space, and employees, based on two years out, where did we think we're going to be in two years, and it, what happened was, there were people who were just at offices saying, I'm working on nothing, but I'm getting paid so much. And this is a money printing machine. What they didn't realize was, it was actually slowing them down. And they had managers managing managers. And anybody who's worked in a big organization knows, when you have too many managers, you know, it's just becomes a quick way to drive out people who actually do great work, who don't need a ton of direction. Now, this has led to

SPEAKER_118: what I think, well, and you didn't ask this question, but it's the natural follow up. So sorry, as a moderator, I have to go with the next question, which is, what is I've listened to a lot

SPEAKER_119: of your podcasts. So I, a lot of this is learning from you. The follow up is, well, what impact is AI

SPEAKER_17: going to have? And so when we were watching this AI thing happen, I just told the people at our companies, make your default homepage, ChatGPT, or Bard or Poe from Cora, whatever, whichever one you

David Friedberg: want, the sandbox or playground, if you're a developer, and just take, make a list of everything you do every day, and try doing it in ChatGPT, or one of these other services. And what we quickly found was 10, 20, 30% of everybody's job could be done in these tools already, or some approximation of them, some people was as high as 50. So what we're going to see, I predict in Silicon Valley is smaller teams are going to get more done. And so then you worry, Oh, my God, are we going to lose all the jobs in the world? Well, no, unless you think that the number of problems that we have to solve as a species humanity, that we're almost done with it? How many people think that we're almost done solving all the problems in our lives? Raise your hand if you think we're almost done? Exactly. There's so much more left to do. So if let's just assume, and I just had Brian Chesky from Airbnb, Aaron Levy from box, and Reid Hoffman, who just started a new AI company from LinkedIn on the podcast this week at startups, in the same three days, I interviewed them on the same days, and I asked them the same question, what percentage are people, you know, by the end of this year, 2023, how much more efficient are they going to be with the tools at the pace we're going? And have you ever seen a pace like this uniformly, they said, it depends on the position. But I think 2030 or 40%, all three, all four of us had the same answer, because we're all using it every day. Now, in addition to that, people are on hiring freezes. If you're a young person who's working from home, you've never spent any time with the founders or the CEO of the company, the leadership, you are in a very dangerous place right now. Because you can take your 10 person team, if you can get 30% more efficient, that means you have a 13 person team at the end of the year. Next year, maybe you get 40%, you know, more efficient, now you get another three or four people without adding to headcount. So what's going to happen in Silicon Valley? And for capital allocators is what I think about, because that's my job. Now, we can fund companies for a much lower number. And when I started in the industry, you would raise $3 million. And you'd spend two years, sometimes as little as a year, buying servers, racking them, putting them in a co-location facility, getting an office space, and your product would come out in month 18. Because of cloud computing, and because of the development of software, three people have a product up and running, you know, in a hackathon on a weekend and have 10 customers, that's going to go even faster. And roadmaps will get done quicker, which means the long tail of software is going to really be viable. You know, somebody might have a very niche product. And three people will get it to $25 million in revenue, we're going to start seeing companies, I will tell you right now, in the next five years, there will be many stories of three people, 123, three, really talented bionic people using chat GPT, and other technologies, and they will make 10 or 20 or $30 million $10 million in revenue per employee, the great companies

SPEAKER_08: make 500 to 1.5 million right now, that's going to 10x. And that's what's got me excited about

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SPEAKER_133: cost so head to openphone.com twist to start your free trial and get 20% off. So let's talk about AI

SPEAKER_42: let's talk about AI you know that you've both said that this is probably the most significant value

SPEAKER_12: creation opportunity of our lifetime so deconstruct that force and and obviously listen you have a room here and you're in you're in the UAE um how do we look at this potentially for our founders for our economies for our societies is there's an opportunity for us to go build 100 billion dollar companies

SPEAKER_140: from here from Abu Dhabi yes um absolutely i it's the most exciting i've you know we've been lucky enough to do this for 25 years but let me just let's all telescope out for a second the history of humanity

SPEAKER_99: has been pretty miserable for 99 of humanity most humans in their lifetime did not see a single

SPEAKER_33: invention the cycle time on invention was slower than the life was long and yet we're living through these massive you know uh earth-shattering inventions that build on one another and so you know AI could not exist without the internet mobile couldn't have existed without the internet it couldn't have AI could not have existed without the cloud because these are information data gathering devices these are why we have the data the cloud is what makes the data frictionless that's what runs the AI machine in 2015 in 2015 i was at a dinner with bill gates and he said and bill's an optimist on humanity read his annual letters at the end of every year uh the gates annual letter and it will really pump you up about all that we we do

SPEAKER_99: because it's been it's really been entrepreneurs and invention that has moved humanity forward governments

SPEAKER_33: create the conditions to allow innovation to occur but it's founders and funders working in that system that actually are doing the innovation and so when i think about AI what what gates said at that dinner is he said you know humans make decisions with limited information right so we gather and for most of

SPEAKER_99: humanity it was a single person's data that they held in their head and the single processing power of your brain and you gathered it over your lifetime and then you died and we started all over again now we're collecting and maintaining all the data all the words ever spoken by all of humanity and we're building

SPEAKER_33: supercomputers large enough to augment human intelligence so this is not like we're not going to talk about AI in five years any differently than we we don't talk about internet companies anymore or mobile companies anymore augmented intelligence is going to be the very fabric of everything of all

SPEAKER_99: businesses if you are not leveraging the power of machines to help humans make better decisions today

SPEAKER_33: right i think about where chat gpt is today like it feels like it's a 10x improvement but if you talk to sam or you talk to reid hoffman or you talk to you know the folks at deep mind this is the beginning

SPEAKER_99: of the beginning for the rest of your careers this is what we're going to be investing against this is the moment we've all waited for because this is the moment that has a maximum leverage for

SPEAKER_33: humanity for all societies so we live on a on a globe today where the average human conditions across the globe have never been better children surviving childbirth you know uh length of lives lived average gdp uh you know per human on the planet etc and i think this is going to to drive us all forward yes there will be questions we have to answer like purpose productivity if we can all do so much more with less where will people derive purpose right what happens to jobs what happens to jobs and you're

SPEAKER_14: already seeing that you you're talking about that what happens to you know jobs if this really becomes

SPEAKER_106: real and i think you know i'll let i know jake has talked about this on the pod what i would say is

SPEAKER_33: first every wave of dislocation starting with the industrial revolution right moving from hunter gatherer to agrarian agrarian to industrial revolution industrial revolution to information age we've always panicked about what's going to happen to jobs but to jason's point there's so much left to do the bigger thing is the nature of the jobs to be done post-world war ii we had a lot of people who had to rebuild the planet in a very industrial manufacturing intensive way most of those jobs will

SPEAKER_148: disappear and so we're going to have different types of jobs um jaco why don't why don't you roll with

SPEAKER_08: it from there the good news um i think is if you embrace this technology in the first inning uh baseball

David Friedberg: metaphor kind of like this is year one of the app store uh is how to think about it you're not too late just because you don't work at open ai and you haven't been doing this for five years this is kind of like steve jobs holds up the first iphone and then six months later he released the app store that's kind of where we're at right now so your timing is perfect if you use it but i remember when i came into the industry and i used to do network engineering and i would set up computers and networks for companies uh in i.t there were some boomers who didn't want a pc on their desk and they said oh give

SPEAKER_20: it to my secretary okay well your secretary has one but you can have one too and we have this microsoft office and you can do all these spreadsheets and documents and they're like get email and just print it out for me those people refuse to move on with the paradigm and there's a saying um in psychology about paradigms paradigms don't die people do so there'll be a group of people who do not embrace

David Friedberg: this technology and they will die and then all that will be left is people who do embrace it the the amazing thing is two or three of the hardest jobs in the world where we are the most constrained are data science and developers and coders with this new technology uh does anybody here speak english raise your hand if you speak english anybody okay everybody great congratulations you're all developers uh you just don't know it yet in the coming months i didn't say years i said months you will be talking to a computer and it will be writing code for you and you will be a developer it's now but mo how many people here are not developers and are writing coding chat gpt okay like oh well actually more than i suspected so that's kind of the mind-blowing part the idea of coding and programming in something other than english will seem silly

SPEAKER_68: in a couple of years of course you would just talk to the computer and tell it in english what you want

SPEAKER_20: why would you write code uh just like the idea that when i was coming up in the industry we would open

David Friedberg: the computer up and we would put in a network interface card a nick card and we would put in extra memory chips and we take out the hard drive and put a new bigger one and when you filled it up like all of that got extracted away and it departments didn't have to do that it was in the cloud you had more memory than you needed and it all just worked and then data science like i was i have the chat gpt um feature now i don't know if anybody else is in the plugins or whatever but you could upload a csv file any spreadsheet or whatever and then you just tell it tell me about this file and it's like well it has these columns and those are zip codes and the houses of prices and how many rooms they are when it was sold and then you say what trends can you tell me about this and it analyzes it and tells you the trends and then you say can you put those in graphs and it puts it in graphs and i was giving a talk to um one of the rosewood hotel groups um like the one over here they had 150 executives this is just last week and i was showing them some of this stuff and i said is anybody here on the management team the data scientist and they all point they're like justin's the data scientist and i showed it to justin and i looked at it and i said how many of these requests do you have from other people in the room he's like months i was like they could all do it themselves now and everybody's like oh poor justin i said no now justin does not have to have an annoying conversation with you about the most basic data stuff you can come to him with your questions that are now the questions he's asking and he can have a really high level discussion with you about your data we don't know what these things are going to uh be able to teach us when we put them

SPEAKER_160: on these huge data sets as as brad was saying before data is the new oil uh you guys have some experience with it oil right and data like so the metaphor it's like massive amounts of value we're

David Friedberg: going to talk about that yeah and and i think just being able to set up these auto gpts and the auto gpts is really mind-blowing you say to the gpt uh you're a sales person uh you're selling this product go ahead and uh every day look for new customers and send them a welcome email and ask them to book a demo and you're going to set this persona loose and you're just going to watch it work and then say if people tell you they're not interested um don't try to sell that person and ask them if they know somebody else in the organization who that you should talk to and it's going to just learn every day how to sell and then the salesperson is going to have like five sales people working for

SPEAKER_163: them but they're all going to be digital it's going to get weird um but it's going to be awesome what's

SPEAKER_139: going to happen to the look at from from the from the investor lens um you have an entire software

SPEAKER_12: industry at least some of the best software companies that have 99 gross margins or 90 gross margins

SPEAKER_139: what happens to an entire software industry as this new technology how do you how do you think about

SPEAKER_32: the implication of that i think that everything is suspect until proven otherwise um i think

SPEAKER_33: there was a period over the last five years where everybody treated as all software is created equal and we would say oh it's got 10 million in arr give it a 10x multiple or 15x multiple as though it was all the same thing which it never was right a database is a hell of a lot more important is mission critical um and is very different than dog walking application software right and yet in the age of excess everything was treated as though it was mission critical what you're going to discover in the age of ai is what is really mission critical and what is not and so what i would argue is the modern data stack the things that are making ai work better the confluence and snowflakes and mongos and you know postgres and you know all of these things in the first instance become more valuable not less valuable databricks i mean you see the amount of activity and the acceleration going on in these businesses but there are a lot of workflow application software low moats where chad gpt will just do it better in very short order wipes them out and listen capitalism is about creative destruction look at netscape netscape existed as a business for you know five seven years and arguably was one of the most important companies in the history of capitalism right so if you're working on something that's really important it may not live forever it may not be the only thing that you do as a founder right it doesn't mean that it doesn't have a noble purpose if it's part of the building blocks that moves us all forward i think what if if i was a founder and i have been several times what i wanted to know is even if this thing doesn't work out financially am i going to be proud of the impact that i got up and i grounded out every day on with this team will i be able to look the team in the eye at the end of the day and say i'm really happy that we did that together and that they feel great about having made that contribution to the technology ecosystem that we all live in so yes i think there's going to be a lot of software that gets displaced i don't think that's particularly a bad thing because there's a lot of inefficient software in the world you know the margins are going

David Friedberg: to be incredible like i said before like the three-person company making 30 million dollars but every time one of these platform shifts happen every single vertical has to be redefended so when you know the mobile phone came out facebook wasn't guaranteed that they were going to win mobile and they almost lost it and microsoft they did miss mobile nobody has a windows phone right now we have android or you have ios they missed it yeah so every single time you can you can lose

SPEAKER_17: that war cloud computing the same thing there were many client server companies they didn't make the

David Friedberg: jump they got replaced slack came in or salesforce came in and and back to creative destruction that's what's going to be awesome for capital allocators late stage capital allocators are going to have a hard time because the companies are not going to be as capital intensive so if you're allocating that last round or two of funding they may not need it and i think the hiring freeze at these large companies is going to be a five-year phenomenon that's interesting i don't think we're hiring people at

SPEAKER_176: facebook there'll be specific positions of course but it could be three four five years before they

SPEAKER_177: start hiring again let's just free let's shift the capital allocators you want to say something right

SPEAKER_99: you have something 10 blue links right that was the defining metaphor for more than a decade is dead that was a terrible way to do information retrieval it was a waypoint it was the best we

SPEAKER_33: could do at a moment in time but i queried you know i wanted to find out a yoga schedule and now they

SPEAKER_108: give me 10 bad blue links that i have to search through i don't want to search through them i just want the answer just give me the answer what's the schedule that's the world we're moving into and even

SPEAKER_33: larry page in 2005 when i said larry is this is good is this as good as we will be able to do he said no in the future we will answer the question but for you before you even ask it right and that's that's

SPEAKER_15: the direction we're heading in i want to spend a little bit of time on on i want to shift now to listen we are you spoke about the silicon valley community and it's a special community it's a vibrant

SPEAKER_12: community and it doesn't exist without the investors the vcs and the capital allocators play an important role in that community so we we have spent the past 10 years um also incubating and enabling a venture capital ecosystem here and we have we have some uh seed managers and and emerging managers and some growth investors in the room um let's talk a little bit about that and you and maybe we can start with you touched on it earlier which is uh curiosity can you be an exceptional investor

SPEAKER_167: without the sort of endless burning curiosity inside of you and link that to sort of the altimeter

SPEAKER_183: story please right i mean if they exist i don't know them um and i think there's a lot of different

SPEAKER_99: ways to invest and i think there are a lot of ways to lose money investing um but i think the calling of investing to be great in this craft right you look at jason he was a journalist you look at mike moritz

SPEAKER_33: he was an investigative journalist i was a lawyer i was trained how to analyze you know an obscure set of facts and make sense out of it like what we do where did the all in podcast come out of you have a group of us that get together every thursday we have dinner we talk about all the issues right of the day we play poker but really what it is is trying to understand the world around us and if you didn't pay us if we didn't get the opportunity to invest we'd still get up every morning we'd read everything we possibly could and we'd try to make sense out of the world and try to figure out the things that could move the world forward and i think that's the red thread that connects all of us and that's our interest doesn't stop at politics or history or finance or investing um it's it's all of the above and so when i think about this region i think about the capital allocators that you pulled together just the way we've connected right on twitter through podcasts the world is shrinking and you know it may still be a long flight to get here that's gonna change too that's gonna change too thanks to elon but the world is really shrinking because you and i can text back and forth um or see what each other is posting on twitter or have a conversation and all of a sudden the relevance of this region and its impact from an investing perspective from a founding perspective can be hugely disproportionate to the size of the region in the same way listen silicon valley was an unlikely story why silicon valley right but those ecosystems take nurturing and then they build on themselves and so i think there are a lot of places around the world where they've tried those things but they were missing some of the ingredients and they gave up too early um but it is going to happen in this part of the world you know jason and i were talking on the way over you know he should start a launch incubator over here he should do one you know maybe in singapore there you know this is a global phenomenon and ai is going to make it that much easier for founders and capital allocators to do

SPEAKER_196: what we do all over the planet what makes a launch a successful incubator accelerator what makes you

SPEAKER_08: kind of a very special seed investor yeah i was delighted um when i got into um investing because of

SPEAKER_17: how lazy the venture capitalists were um these people take months off a year they make one bet every six months and um they think they're better than the founders largely and smarter and i came into it as

David Friedberg: a founder and formerly a journalist and um i just looked at it and i said well what made me win in those other areas was um you know how hard i worked and i realized the more founders i met with and listen to and ask questions to the smarter i got and then i started a podcast called this week in startups that was once a week and then it became twice a week and then it became three four or five and then six days a week and i said i'm going to stop going to lunch and i'm just going to talk to founders on this podcast every day and i took that philosophy and built out an 18 person investment company we have 15 000 people reach out to us and i start at the top of my inbox and i reply to whoever emailed me in the last five minutes first so at least some number of people get this crazy experience like oh my god is that really you jay cow and i'm yeah of course it's me and i will write back to them you know hey that's a really interesting idea i hope you pursue it and then it turned out that there were a lot of people who wanted to be founders but they didn't know how to start and there was y combinator tech stars and my firm launch accelerator we all do the same thing we have a hundred thousand dollars to people a hundred twenty five thousand dollars for six or seven percent and we spent 12 or 16 weeks with them helping them you know really try to get product market fit and raise money but i realized there was a step before that where people were thinking about building a company but they needed to get excited and they needed to have um you know a little bit of a push and we started something

SPEAKER_08: called founder university we've now had 900 people go through that program and it's a 12-week course

David Friedberg: and it was going to be free but then when it was free we'd have people would just quit so i came up with an idea i said it's 500 to come it's 12 weeks and if each week you fill out a form and tell us your progress on your startup which takes five minutes we'll give you back the 500 in week 12. 94 of people complete the program now uh stripe is not happy because we're charging a hundred thousand and charging back a hundred thousand so to the colson brothers i'm sorry about that but the funny thing about it is we realized that a lot of these people didn't have a rich aunt or uncle they weren't independently wealthy and we said how could we help you and they said well we just need some money to get our servers and to you know incorporate so i just told my team when the weekly reports come in look at whoever has the most product traction and every week just give like four or five of them twenty five thousand dollars and a note at a million dollar valuation and will be their rich aunt or uncle who puts them in business we've done like 30 of those and so now i'm scaling that up and then scaling up the accelerator and we have a philosophy internally which is never underestimate anyone because my lord i have seen so many awkward people products people who couldn't pitch people who shook or they had dirty shoes or they were sweating or body odor just not ready for prime time entrepreneurs who then became uh billionaires i i see it all the time yeah where you start is not where you finish and everybody anybody here ever was anybody here ever a teenager is anybody ever a teenager like was it awkward like every first time founder i meet it's awkward for them they don't know what a cap table is they don't know what a convertible note is so don't write them off right away and people write people off far too quickly oh you didn't go to stanford i was at a great i had a great benefit my dad was a bartender my mom was a nurse and then i came into silicon valley i started a magazine and when i started my magazine in the 90s all of a sudden i realized oh these people are desperate for attention to be on the cover of my magazine oh i have total control over them i can just pick who's on the cover of the magazine and then i realized wait a second where else is power located the power to write the first check is incredibly powerful and the power to introduce that person to 10 other people and say i wrote them a 25k check why don't you do it and and the first check is the hardest the next nine are easy and so that's why i made it you know my life's mission to be that first check and right now i'm on

SPEAKER_118: track to do a hundred this year and next year will be 200 i'm going to work for 10 more years if i hit those 2 000 if i can be the first check into 2 000 companies which is my new goal for the next 10 years

SPEAKER_68: i'll become the greatest investor in the history of angel investors in silicon valley because nobody's ever done it there's only one other person who's done it y combinator and is the world's greatest

David Friedberg: moderate yes but i mean it really is that requires curiosity this is what if you people are not willing to take the chance of the risk yes and the job is to pick risk and the job is to meet with

SPEAKER_156: people when they're awkward and they don't know exactly what they're doing and take a point of view and make a decision be courageous yeah these venture capitalists are cowards and lazy yeah that's the

David Friedberg: reason i've become successful is because i like to take risk and i like to work that's it you just if you're a capital allocator and you're in here make more bets and be more supportive of the founders naval said something to me when we were both starting out as angel investors 12 years ago and he has he was doing something called venture deals and i was doing open angel for him we were

SPEAKER_17: both trying to just get people together to angel invest he hadn't started angelus yet and he said

David Friedberg: do you know why we're winning and i said no naval i don't know why are we winning and he said because

SPEAKER_156: we're in a competition who can be to see who can be the most helpful and we are being much more helpful than the vcs the angels and the and the these seed funds are being more helpful and it i the genius of

David Friedberg: naval stuck with me and that's all i do i wake up every day and just say can we be more helpful to

SPEAKER_218: founders than everybody else yeah you wake up thinking about what do what am i doing today to help that founder to enable that to increase the probability of success that's our job so so

SPEAKER_12: brad for you what's your advice to uh fund managers here in the room and and in the region um you know about building culture as an investment firm and and defining the soul of an investment firm how have you

SPEAKER_29: done an altimeter i mean you just heard a great culture that jcal drives for us it's a lot of time

SPEAKER_33: to think you know and and and do less so our cultural north star is essentialism the art of doing less better and i think when i look around at venture capitalists they actually do too much they want to believe and every founder who walks in has a good pitch and they end up with a random assortment of investments now if you're doing that in the angel stage where jcal is i think it's perfectly appropriate because as he said who am i to judge right i just want to see product velocity you know i'm not going to judge whether it's going to be airbnb or uber i think when you're investing in series b c and d there is information right and the problem is if you spend 10 years on a journey that is the size of the prize at the end of the day is 50 million or 100 million outcome that may

SPEAKER_32: be a fantastic lifestyle business for the founder but that was a terrible venture investment yeah okay

SPEAKER_106: and so for us we think a lot about size of the prize we want to work on things that could be the most

SPEAKER_32: most iconic most impactful things that we can possibly be working on because our scarce resource is our

SPEAKER_33: time you know it became in vogue over the last couple years you know altimeter has made 80 venture investments over the last decade now we've been lucky enough those have included you know things like leading the series b and zillow or ita software or snowflake or mongo or twilio or byte dance you know we've had some great investments but we haven't made that many which means if i make if i spend a lot of time making investments that end up consuming all of my time but none of them end up impactful then the opportunity cost of those investments is sky high so i think once you're outside of the angel stage

SPEAKER_106: and if bill gurley were here benchmark had this strategy for years i would say we take a very similar strategy a stage later but it's you know it's measuring twice and cutting once right it's being

SPEAKER_33: very delicate you're entering into a a marriage a relationship with this founder for a decade right another thing i say to my team if this founder relies on us to succeed then we chose the wrong

SPEAKER_32: founder our job is to increase the probability of success not to create the success it's a um you know

SPEAKER_106: i i would just say in terms of that culture really know who you are know the strategy that you want to execute don't drift in the strategy get up every day outwork you know uh everybody else in executing that strategy and i think you know several different styles can win but that's ours i think it's really

David Friedberg: well said um and there are distinct differences in stages you have to realize that i i went to a hotel called the amman hotel if you stayed at one of these very nice i mean but like compared to a normal hotel it's kind of mind-blowing and i stayed at it when i was in tokyo when they translated my book and i was on book tour and i was just taken by this service level that i had never seen before and you know i've been everywhere in the world i just never seen anything like it and i designed my firm around the around the philosophy of never underestimate anyone but also of realizing that we are in the service business and that's i think what people forget when you're a capital allocator you're really a partner and you're a service to these founders and so i told everybody on my team if a founder emails us or calls us i don't care if you're in the movies i don't care if you're on vacation i don't care if it's sunday or saturday you can walk out of the movie theater and call the founder on the phone if they texted you and there's something wrong the movie whatever marvel movie you're in it'll be on disney plus in a couple of weeks leave the theater and when they tell you oh am i disturbing you say no i always have time for you and when there's a hard discussion call them on the phone or text them say is now a good time to talk so i had to retrain my team i said stop booking phone calls get the founder's cell phone number have it in your phone text them when they email you and they say there's a problem or there's an issue where they have a question i want you to text them and say is now a good time for a call or should we set something up and they say nine times i think yeah i have everybody's phone number i will call founders randomly and i'll just call them and say hey it's jacow just wanted to check in on you how's the business going they're like nobody ever does that and i stole that because doug leone at sequoia when i was a founder would randomly call me

SPEAKER_63: and i would have a heart attack doug leone like the most legendary venture capitalist like in history and i'd see it on my phone i'm like oh breathe do i answer on the first ring or do i wait for the third and i i just decided answer as quick as possible because it's doug leone i just answered mr leone

David Friedberg: how can i be of service he's like oh i was talking to somebody about you and i was wondering um how do

SPEAKER_68: you um get good domain names i noticed you buy great domain names and i'm like well i have a strategy for that i knew you did um would you talk to my uh brian he's with this um bread and bed and breakfast thing we're investing in and he has questions about buying the domain name is it what domain name is it

SPEAKER_155: he said air or bnb it's or maybe they want airbnb i don't know it was like sure he's like okay hold on

David Friedberg: a second and hi it's brian i'm like doug hands on the phone again this is a conversation i had 10 years ago with the airbnb founders and i think it's you have to really decide that you're going to be of service and then be relentless about it having a theme or a thesis that's all good having a culture a philosophy remember you're in a competition to be the most helpful you can be and when people fail that's when they need you the most so i actually give a pre-speech to founders and i will say to them hey we're putting this money in and i just want to let you know like when we put this million dollars in it was half million dollars seven eight nine times out of ten the company's going to fail statistically now i think you're going to be in the 10 or i wouldn't make the investment but um there'll be a time when you feel so sick to your stomach that you will be embarrassed to tell your team how bad things are and you'll be scared to death to tell your investors and the board because you'll be afraid they'll fire you and you'll be afraid your employees will quit i said that's when you call me because i've seen it all call me because all of these companies are about to flip over be distant disrupted whether it's facebook or tesla or you know any company even the smallest one they could all have a near-death experience and one saturday a founder

SPEAKER_17: called me and i said hey how you doing i'm going to make up a name john and he said i'm not good and i

David Friedberg: said okay tell me everything and he said i'm in the bathroom my kids are in the car my wife's in the car i'm supposed to go to the farmer's market the company's gonna fail my cto just quit i said okay where are you exactly and he said i'm in the shower i just vomited i just puked because i i i'm gonna fail i said if you fail uh at this company i will back your next company because you take it so seriously and you're so hard working yeah go hang out with your family and then if you're around later let's

SPEAKER_17: talk enjoy your family let's have brunch tomorrow if this one we shut it down and or we sell it then you just take a year off and i'll back the next one sure enough that's exactly what wound up happening

David Friedberg: but you know founders there's a lot of shame in failure and if you are going to make this region work you have to be able to preemptively let everybody know we understand that failure is part of the process you cannot have uber you cannot have snowflake you cannot have tesla you are not doing the job correctly if 70 80 or 90 of the companies succeed you want 90 to fail and you want the founders to wrap it up take the tax loss and then get back up and start again and do the next one but that's counter to how our minds work and the power law you know the 80 20 the pareto principle defines capital allocators career in every fund there'll be one or two names sometimes three that make up 98 of returns right and no investor knows which one that is until year five or six of the fund

SPEAKER_244: so you have to come to it with incredible humility i think i think that point about normalizing failure

SPEAKER_99: is critically important among both allocators and founders but it's also important to realize

SPEAKER_33: that taking money and deploying money is a huge responsibility so how you fail right is really

SPEAKER_99: important and over the last five years i saw people raise an ungodly amount of money right and they were

SPEAKER_33: taking money off the table they had never turned a profit they were taking 50 million dollars off the table you would see them on instagram all over the place partying they thought partying and cocktail parties was a proxy for working hard and those founders when they torch that money right because at the end of the day that money comes from children's hospitals from university endowments from government pensions that are paying for teachers and firefighters and police officers if they torch that money that i'm representing as a fiduciary and they do it irresponsibly i'm not going to be there the next time jacal i'm going to be there every time when they grind it out and by the way the other piece of that is you don't have to grind it out to the bitter end right i see founders overstay their welcome sometimes right if you raised 30 million dollars i did at my last company called room 77 was a hotel search engine and rich barton was on my board the founder of expedia and the founder of zillow and i said to rich rich we we haven't cracked the code we've got 30 million bucks in the bank we haven't cracked the code on how to win over the consumer the competitive landscape has changed against us google has now introduced this six-pack like there's no way to compete against them and i think i can sell the business to google and i can make sure that i get this 30 million back to the people who entrusted me with it given that the facts have changed and i said that's what i think we should do and that's exactly what we did we sold the business to google it became google hotel finder and we returned capital to the investors you know and some people may have said you didn't go for it you should have been more bold etc but i do think there is that line as a founder knowing when you've really tried everything you know and responsibly landing the plane in a way that allows you to do the

SPEAKER_106: next thing um you know so it's a it i agree that i'm anxious to back them again but unfortunately i have seen a lot of behavior over the course of last several years that i wouldn't put in the category

SPEAKER_15: of responsible or backable let's do this let's open it up for some q a uh just uh you know make sure we we hear out some questions i know there's a lot of people that have questions so i'm gonna spend about uh not more than 10 minutes and maybe we'll take uh uh you know two or three questions all

SPEAKER_253: right let's take one question here hey guys thanks for taking the time um i actually have a question that

SPEAKER_255: that is valid for any and all of you um you know i guess you all invested in uh remote companies um during the pandemic coming out of it ibrim i saw a tweet from you i think last week about validating remote is dead or something along those lines um what is when you speak to your founders your portfolio founders today that maybe started remote native or that are remote what are you telling them in terms of team management are you telling them hey we need you guys to get an office especially those like us that you know have teams around the world is it hey you know bring everyone together locate teams maybe sales um together physically i don't know create pods would love to have kind of your insight on what what you tell your your founders today well i don't think there's one size fits all

SPEAKER_33: um so i think there are remote native organizations that design their engineering teams from scratch to be remote um and work very effectively but most of the companies that i see were not designed remote native and are still working remote and i think that's a huge mistake and even if you are remote

SPEAKER_32: native i see those organizations trying to find energy right by putting pods together in different locations certain days of the week etc in terms of all organizations that were not designed remote

SPEAKER_33: including the conversations we've had with meta and google and others the companies that were most resistant to come back to the office um as we saw in silicon valley all of them have now thrown in the towel they all realized that engineering and general worker productivity is at least 50 percent higher it's the magical energy in the in-between moments it's the water cooler chat where you come up with an idea to crack a problem that you wouldn't have otherwise had and so i would say you have to just look in the mirror and be really honest about the nature of the organization that you've designed and if it's working brilliantly and you think you're out competing all your competitors and your remote your design remote native then i would say that can be a source of competitive advantage uh but if it's not then i

SPEAKER_32: think figuring out ways to get back in the office sooner is important jaco yeah it's um it's going to be a

SPEAKER_08: really interesting test over the next year or two to see the companies that decide to have an in-office culture and they're whiteboarding stuff together and they have that energy um if they beat the remote

David Friedberg: companies remote companies can hire anybody from anywhere they don't have to relocate that person so they can hire faster but then the abuse that's in the system people working two jobs etc you know losing the intangible moments um i am going back to an office myself i made that decision i told the 18 people in our investment company they're all grandfathered in but i will not hire another remote worker um if they're like a remote worker there'll probably be chat gpt there'll be like an automated persona in chat gpt working i want to get more people into a space i'm actually going to build a space like this with the fourth fund that we're doing at launch to have a physical presence in silicon valley that's how much i believe in people being in the room and the collisions that occur from really intelligent people who just ordered in some sushi and they're there at eight or nine o'clock at night and somebody has a brilliant idea and they can't wait to talk about it and start building it so i think for young people especially if i was a young person starting my career wherever the ceo and founders were i would be next to them i would live five blocks from the office in the smallest crummiest apartment and i would this is how i built my career i came in an hour before my boss and i wouldn't leave until my boss left the office that boss i had 30 years ago is the president of lunch today and i and i learned that lesson from him he said if you want to be successful mike savino said look to your left look to your right come in an hour before that person and stay an hour after them and never leave before your boss and we just set a really hard-working culture now it doesn't mean you have to sacrifice or not spend time with your families commuting sucks we all realize that um people have kids so there can be exceptions in flexibility and i think americans maybe were too inflexible and then too much remote and there's going to be a balance i think americans should take the whole month of august off like europeans do and just enjoy like a really good mental break maybe work half days whatever remote but you need to

SPEAKER_266: have that like in person time culture culture listen to uh the podcast a couple weeks ago

SPEAKER_268: where jason was down at the launch of starship do not underestimate as humans also on this difficult

SPEAKER_99: journey just what it feels like to be in the same room with these people in the trench with these people and then to be there to watch the proverbial launch the feeling because i can't guarantee financial success out of a startup but the pride and the good feeling as a human to bust your ass on something with a group dedicated to a mission and then be there and launch it together i get so excited with my team

SPEAKER_32: every day and it's crazy to me to think not being able to experience those highs and even the lows and

SPEAKER_273: do it together as a team hey um thank you for being here first of all giving us all this amazing

SPEAKER_275: information brought jason brahim uh welcome to the middle east as well hopefully the next silicon valley uh with your help too um quick question for jason and maybe you can also add in however you'd like you spoke about product velocity and how you analyze when you're investing in early stage startups i want to ask you what measures or what um what's the most critical factor for you when you're analyzing the product velocity for early stage startups i'd like to know more about that and do you use ai within when you

David Friedberg: analyze uh the early stage we are i'll go take it in reverse we're not using ai yet but we have a project underway to do that we have been recording all of our introductory calls with founders we do 3 000 per year we have all those videos we just started running transcripts on all those videos and summaries and the next step will be to look at that data on a rolling basis and see if those companies raised money from certain firms so we're going to take last year's companies and we're going to say did any of these in crunch base or pitch book whatever database raise we of the companies which ones raised the most money and did any of them raised from these 10 firms that we would consider like really strong signal and then did we invest or not and then how did we miss it so that project's underway and we have the data from last year 2022 that we'll use to do it um in terms of product velocity um most companies don't have it and the companies that have two or three co-founders with two or three builders are the ones that do have it so any kind of product velocity is great any kind of metrics on the users and a thoughtful discussion of is this a real metric or not and so what investors will do is you'll give them a bunch of metrics if you have them and we know if you're giving us real metrics or fake metrics so we'll see letters of intent we call them internally or in the industry letters of nothing because they mean nothing um we will see cumulative users cumulative signups and they always go up into the right it's very strange when you add today's number to yesterday's it goes up so the charts always look great but the more accurate number is how many daily active users weekly active users monthly active users on a rolling seven day basis so you want that intellectual honesty the truth shall make you free like you want to have that really intellectual discussion and don't be ashamed of it being spiky or you're kind of lost and you're triangulating a lot of founders get caught in a trap that they don't want to share information with the investors because it's not up and to the right the opportunity for us to invest is that you haven't figured out yet if you did figure it out then some hedge fund not hedge fund some you know mutual fund would be buying netflix based on its churn or whatever and some allocation but if you're buying netflix in the early days you're buying it because they haven't figured it out yet and the valuation is only five or ten or twenty million dollars if you have figured out then you can add a zero or two so own the metrics only imperfection be frustrated with how embarrassing you think your startup is but that constant improvement and we when you send updates to investors and it has you want to start up competition and you know other nonsense and cumulative users we we kind of know because the ones that actually have the goods are like we launched these three features we turn these two off and we have these three paying customers and these two churned and here's where we source them and it's very granular and it's small little wins that we go oh you you source three customers from some conference are there any more conferences like that yeah there's 20 conferences we can go to in the next year and if we can get five at each we'll have 100 customers great let's go do that so that's what that intellectual honesty and rigor is about all right one more

SPEAKER_279: i'm in my early 20s and i built two companies one of them failed and the second one i'm trying to build and i raised my first capital at the age of 19 from Bangladesh which is never possible so i come from a place where um the gdp or the monthly income of a person is around 100 or 120 but i raised 50k usd but here's the problem uh when i go to investors and i say hey give me money i come from Bangladesh i'm not from silicon valley and i study at NYUAD and people are like okay you come from Bangladesh you you live in UAE and you are not from USA you are not ready for money you still go to school so if you think of if you're on your early 20s you have seen a lot of startups who who have who have built startups at university or schools what were the traits of those founders who really got successful at their late 20s or at their late 30s thank you one of the things i love about what we all do

SPEAKER_31: is i came from nothing my dad tried to start a company uh 1978 and it failed and there was no there there wasn't such a thing as venture capital he borrowed money from a bank he mortgaged our house he mortgaged the car and when his business failed we lost the house right he lost his health it was a

SPEAKER_32: it was a grind like that's what i that's what i grew up with so for me risk like i think about risk

SPEAKER_33: today we're here talking about raising venture capital if you raise venture capital in silicon valley and

SPEAKER_32: it doesn't work out but you act responsibly you don't lose anything in fact you gain a lot you learned a lot from the process you gained a lot of like reputation and experience you know and that's the beauty of that system imagine that system people give you money if you lose it your life's not

SPEAKER_33: over for my dad he lost everything and so when i have young folks come in from stanford i tell them you've already hit the lottery you're here right you're getting capital that doesn't have recourse you're not risking your family or your house and so i think it's a beautiful thing that somebody in bangladesh or anywhere else on the planet don't think that you're being held back because of where you're from because jason doesn't care and i don't care the only thing we care about is is the founder going to do what it takes are they working on something that's noble and big do they have the energy the

SPEAKER_32: passion the courage the tenacity to grind through and to achieve and if they don't will they act responsibly on the along the way are they a person of high integrity do they have high you know good

SPEAKER_33: values etc um and so you know in many ways i think a silicon valley is like this great meritocracy and you know it you know certainly will benefit from more global diversity in places like this

SPEAKER_106: and as i was saying earlier you know like us being here us communicating on what somebody jacal

SPEAKER_33: mentioned you know if you don't have somebody's text then you're not servicing them well enough i totally agree right like we hit each other on whatsapp because i want immediate communication and so um my advice whether you're starting a company you know in you know in bangladesh is hustle your ass

SPEAKER_106: to a place like this stand up have the courage make your case don't think just because you get a no

SPEAKER_108: doesn't mean it's because of where you're from or what school you went to look in the mirror and say

SPEAKER_33: maybe it's because my idea is not great maybe it's because my product velocity is not great right are there other things that be self-aware and self-reflective about the things that you can control control those things i promise you if you're great you will have venture capitalists beating your door down to give you money because at the end of the day they're motivated by finding right the next mark zuckerberg

SPEAKER_106: the next elon musk i mean silica valley is full of people like elon musk who were not born anywhere you know uh you know in the us and didn't necessarily go to all the right schools

SPEAKER_82: be relentless which you clearly are and you can also step back about two inches from the microphone

SPEAKER_17: it's just a little microphone tip but be relentless and then which is what brad told you and then just to summarize it after being relentless you have to be so good that they can't ignore you

David Friedberg: so you're relentless obviously and then maybe you're okay maybe the design of your products a five out of ten be relentless every day a little bit better compounding every day make the product a little better learn something new yourself be relentless and be so good that they cannot ignore you you

SPEAKER_289: understand they can't stop you the only person who can stop you is you all right one more one more

SPEAKER_293: um one more final question and then we're gonna wrap it up she's all right i feel really bad she's

SPEAKER_298: had her hand up for all time um thank you i appreciate it kind of following a similar theme just to preface i lead violet ventures the fastest growing student startup community in the uae and we spend

SPEAKER_300: a lot of time thinking about what founders who've been trained here educated here and building here need so what is your advice for new builders in emerging markets that are kind of paving ecosystems they don't necessarily have the pulse or the maturity of the silicon valley investors but it's growing and it's building do you think that time should be allocated to understanding case studies progress from other markets or should that time be spent into like heads down tunnel vision focusing on understanding your specific emerging market to the detail and the core and not focusing on anything else

SPEAKER_298: like building a VC firm an investment firm uh by the ventures it's more like um inspiring young founders to understand that entrepreneurship is an option you want you want to build a startup community

David Friedberg: yes so that's what we're building yeah i've done this many times um just um get people together entrepreneurs in a room buy a bunch of food put them around a table and then watch what happens like it's really just about networking and getting them together and then of course you can go to take them to other startup communities and meet people um but the power of there being a place for people to get together on a regular basis and share what they're working on is so powerful and you saw this in other genres in the 60s musicians started writing songs and bob dylan and bruce springsteen they all built on each other you have had this happen with writers poets artists architects when when they're all in proximity to each other and they start competing and sharing uh everything starts going in the right direction so networking events and co-working together and little groups like that really work and then if you check out what we're doing with founder university founder dot university and you email me jason at calacanis.com i'll invite you to come to it we have 250 people and we made an agenda here's 12 weeks of learning and we just bring people together and then we let them go into zoom rooms

SPEAKER_20: and do breakout rooms and they make lifelong friends so it's very lonely to be an entrepreneur so what you're doing is so critical for the ecosystem here it might be the most critical thing more important than money just getting those people into a room together and sharing a meal and talking to each other is so powerful because two of their companies will fail and one will succeed and the people from

SPEAKER_118: those two companies will join that company we see that happen all the time in silicon valley so i think what you're doing is very powerful and important keep at it i would just finish by saying i think

SPEAKER_268: it's such a cheat today that there's so much information online i mean the the podcasts just in and around startups you know whether it's this week you know it's startups the all-in pod obviously the stuff that jason's doing but also acquired um which is a great podcast that goes deep in terms of startup companies and their startup journeys and and many others listen to them right uh study them

SPEAKER_31: study what the great ones you know great entrepreneurs have done what are those patterns what are the communities that came together then the the other thing i would say is i think there's still a self-imposed

SPEAKER_32: insularity around the world like oh i'm in china and therefore like i'm going to focus on china and china investors or i'm in the uae like i i think that you never had that approach you were always like hey i follow you on twitter what do you think about this and i just think that you know put yourself out there right email he just invited you you know come over to napa he's putting on a great event in a few weeks um you know with an incredible group of folks who are speaking and you know build that network outside of this place and have global ambitions right just because one is starting their company

SPEAKER_57: here there's not a founder right back in silicon valley who says i'm building a silicon valley

SPEAKER_32: company they all they all have global ambitions and and so should founders and so should capital

SPEAKER_12: allocators in this part of the world you know in addition to um obviously thanking the two of you for uh for coming here uh we also want to thank you for you know the impact and the good that you do for the industry a lot of us here learn from you we follow you um i thank you brad for reaching out and and connecting it just shows you know the kind of people and uh and human beings that you are we feel in the region you know we feel like this is our moment we've been waiting for this for a very very long time and and i hope that you can feel and you will tell from these two or three days here that we don't want to lose that opportunity we want to make a difference we want to build some very important companies and you know we want to be like you we want to be one day go to silicon

SPEAKER_14: valley and and host the panel and talk about all the great things we do so um it means a lot to us that you've come here so thank you for that