SPEAKER_00: okay everybody it's time for another ask an angel myself and zach coleus are going to answer your questions both on the investor side of the table and the founder side of the table everything in between we talk about parada we talk about the j curve we talk about founders getting fired getting screwed by downstream investors when zach's on the program it's fast-paced and it's

SPEAKER_02: absolutely candid insightful important knowledge for founders and for investors we keep it very

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SPEAKER_09: welcome to another episode of ask an angel with jacal and zach coleus zach welcome back to the program

SPEAKER_11: always a pleasure sir great to see you great to see you as well how's your summer going

SPEAKER_15: oh you know just living a douchebag vc life good solid couple months in europe which was awesome oh

SPEAKER_16: nice taking advantage of that remote work lifestyle let's start there that's part of that job let's

SPEAKER_18: start there zach um vcs and investors have always always taken advantage of the remote lifestyle calling into board meetings you know taking six weeks in the summer to go to italy taking six weeks to go skiing but now everybody's doing that um to this day so what are you seeing on the remote work front in terms of startups uh early stage and even the more robust ones in your portfolio and how

SPEAKER_20: they're dealing with either hybrid going back to work or staying remote what are you seeing anecdotally

SPEAKER_22: across my portfolio it's almost entirely fully remote um with this like let's get together on

SPEAKER_24: a regular cadence as a group um and let's have little pods that get together if and when it makes sense but in general remote and it's really like what what i talk to them about a lot is i'm like look you know when in the early days of the manufacturing sort of era it was figuring out how to make basically like thousands of people work together at scale that enabled you know those companies like forward to win and in this world it's how do you figure out how to make somebody who's currently in italy hanging out productive and make sure that they're not slacking off how do you manage your people at scale how do you manage morale how do you manage information flows how do you how do you do that correctly and there's like a bunch of really cool companies out there git lab does some really interesting stuff about how to operate a remote i mean they've been doing that for years that have really kind of perfected the best in class around this and i think every company in

SPEAKER_27: the world now has to figure out how to do that or where they're going to lose yeah it turns

SPEAKER_18: out information workers the best ones they're essentially i don't want to say spoiled but they've adapted to remote work for some of them it's a non-starter they would leave a job uh if they were forced to come back as we saw with apple forced some people to come back some people said yeah not not for me i'm going to go find another gig so if you want to keep your people uh knowledge workers i think you're going to have to meet them where they are uh now let's unpack one thing how do you make sure people are actually productive because you know it's one thing to have 10 employees and team members you can just talk to each one every day you can see them in slack but how does that scale and and what are the challenges people are finding in terms of people slacking off because we all know anecdotally we talk to our friends and there's always one friend at your circle who's like yeah i'm putting in two hours a day three hours a day everybody kind of laughs about it um and who knows maybe they're like the most effective sales executive in the world and they can book two sales in three hours a day and go skiing or you know mount a bike whatever their bag is and maybe other sales people work eight hours a day to close two sales so as managers do we actually have to care that that

SPEAKER_29: person is not doing four when maybe they could how do you think about that or how are your founders

SPEAKER_31: thinking about that as well i mean i've always thought that there's just such a performative aspect

SPEAKER_24: to going into the office it never made any sense yeah like it's like everyone has to be together and everybody has to be able to see everyone else theoretically working and like you know it's just dumb um and you know it was great for lazy management but at the end of the day like management has always always been the same which is like you need to track the performance of your employees against their against their objectives you need to to engage with them and help them when they're not doing as well and you need to reward them when they're doing great and that doesn't really change whether it's remote or in person it's just it was lazy and easy to look over and say oh they're at their desk that means they're doing their job like whereas now you can't do that but like when they were at their desk we know they weren't doing their job on a regular basis and so like a good manager would would be able to ensure they were getting their job done and you know crappy manager would be lazy about so i i think this just is going to reward great management and it's going to punish those who were just kind of like clocking it in letting their employees just sit at their desks so i think it's good because startups are all about that right like management it's all about great management and

SPEAKER_02: you manage this is really challenging for some managers i agree uh even myself i've had to look

SPEAKER_00: in the mirror deeply and say am i giving clear enough instructions to people what success looks like and am i myself time managing myself my to-do list etc so i think all managers have to reflect and all founders have to reflect and say okay how do we manage our people because you're right the easy hack was okay it's 9 30 it's 10 how many people are here okay it's 6 7 pm how many people are still here i did a good job when in fact there are other ways to look at good jobs which is setting you know what what are the key results we need to see here in this business right what are the what's our cadence for our product what are when our product release is happening and then what i've started doing is everybody sharing their calendar i share my calendar with my management team they know like they're calling me if i'm not on a call you know they know my calendar as the founder ceo now if people if everybody shares their calendar then we can actually see what people are doing and i think time blocking is becoming you know the thing i've added to all my companies and if you're not time blocking as an individual you're probably not optimizing yourself and so put on your calendar like hey this hour is when i'm going to you know clear out my inbox this hour is when i'm going to

SPEAKER_18: do my calls with my direct reports whatever it is and then all of a sudden and i'm not saying fill up your calendar zach for the sake of theater or performance right we're back to performative so you don't want a performative uh calendar you want an effective calendar something that is saying you know what these are the important things what are the one two three important things i need to get done today and then reflecting that to the rest of the team and making sure your calendar is in sync with the with the goals and you're always going to have a little bit of leakage you can have some people who abuse

SPEAKER_43: the system and you're going to have some people who do a great job um but really i mean what does

SPEAKER_18: this mean in terms of the operations of startups and the scaling of them i guess is my next question for you because there are some people who believe you're going to build a better product when five or six people are in a room together what do you think of that counter argument you know five or six people in a room if you have a direct competitor uh salute men from you know snowflake who's got you know a boiler room going and five or six product people in a room grinding it out what if you're up against a maniac like that does this still apply i think you always have to start with first principles in

SPEAKER_24: this which is the first the first step is recruitment like if you can't recruit great people like anyone who says hey uh inferior people in a room are going to be great people remote i'm going to

SPEAKER_46: laugh at them like i just like great people are always the most important thing you can do and so

SPEAKER_47: you go out and you find the best people you can find and if you can put all those people in a room because they're all nearby each other or they want to be in a room together because they all believe that that's the right way to work together great i do believe that's more powerful if if they're all

SPEAKER_24: centered in a similar location they don't have long commutes they don't have family lives that require them to basically like you know work remote because they have to take care of other issues um great but i don't think that's true anymore i think that people who argue that oh we can get the best people in the world to all work in the same city is i think it's i think it's just i think it's i think it's a hypnosis that of of of delusion like and it's great i love that they want to go argue

SPEAKER_47: that on twitter because people people especially people who are sort of retrograde conservatives love to be like oh yeah we're gonna stay the way it always was they always do that reflexively yeah so like it's it's normal for them to do it in this case as well but like if i was going to build the best x company in the world 99 of the time the best people are scattered all over the world and i want those

SPEAKER_26: people rather than like trying to fit it yeah this is like a great point as well if you're trying to

SPEAKER_02: fill a sales position waiting for somebody who lives in austin or miami or you know san jose to show up yeah could or to move and now you're talking about three six nine months hiring the

SPEAKER_18: next best available person globally now you're looking at four to eight weeks and so if speed is the driver of uh you know performance for companies well you know especially for startups that speed

SPEAKER_00: could be all the difference in the world you know if you can get three sales executives online you know in the next 60 days versus somebody else is going to take a year i think we know who's going to win that battle here is a chart um i'm not sure who castle is but they're tracking uh you know office

SPEAKER_43: occupancy uh and oh yeah it's just showing you know when if we look at the 100 pre-pandemic you

SPEAKER_24: know it's slowly coming back and we'll we'll hit 50 percent but it'll be a permanent remote access

SPEAKER_35: company they like they have the technology that facilitates like keying in the doors so they have

SPEAKER_52: like the real data at scale got it makes total sense yeah i think directionally it makes sense and

SPEAKER_18: uh you know there are going to be exceptions here if you're building you know rocket ships or cars

SPEAKER_00: or you work on the ipad team and you're doing physical design yeah of course you got to be in the same room if you're managing the server farms and you have to rack and stack stuff like yeah of course you got to be in the data center some amount of time or somebody does so uh but this is also great for this really does advantage startups the early stage ones because they've now eliminated something from their to-do list which was find an office space get coffee get somebody to clean the office space get insurance for the office space deal with parking deal with people uh you're having an office

SPEAKER_18: manager all those costs were you know for an early stage chart even if they went the we work route you know they were spending just 6k a month or something you're still talking about 100 grand so you can swap that out and get a developer right you can get another sales executive

SPEAKER_24: uh which i have a company uh that's like crushing it right now they're called upflex and they've aggregated all the co-working spaces in the world we work plus 5 000 other ones and literally like on demand you get access on a daily basis to any co-working space of whatever city you're in and so enterprises will license that for their employees and so they're like oh we've got 10 people in milwaukee who all work from home but they want to get together this week and go into a space for the week and you know push button and it's all done manage all the security and all the

SPEAKER_68: compliance that happens and it's interesting is it flex up flex um you can do it as an individual

SPEAKER_24: you can get access for yourself or like i travel a lot so it's great i can push a button get a like world-class co-working space in any city of the world almost um is it subscription or it's just on demand like it's like hotel tonight so you can do on demand but mostly they really are they're really crushing it selling into these big enterprises because what the enterprises want is they're like okay i want to put 10 people in a room but i can't have them from security perspective going and working in a random starbucks and i want to have visibility into that utilization and what's cool is that they're now getting all this really powerful data because they're seeing

SPEAKER_47: where people are coming together and how they're interacting and like all over the world and it's like it's so fun to watch that because it really you're seeing this change in working behaviors which is still very young like even in the last call it six to nine months you've seen really interesting

SPEAKER_24: developments in the way people are coming together as groups and utilizing space together um and i i think we're at the very early innings of this like i i the work the remote work trend is one of the

SPEAKER_47: biggest most powerful most interesting trends we will probably see in our lifetimes like it's just so

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SPEAKER_02: and go use that code so they know we sent you yeah it does seem that the uh management teams now that people i think i don't want to trigger anybody here but people basically are not talking about covid 90 plus percent of people are not scared of covet anymore have opted to not wear masks so if you're

SPEAKER_76: part of the five percent you know tell lorenz i'm sorry you know other people who you know there's a number of people on social media who want to keep this alive but it's it's over for everybody else

SPEAKER_46: like look i i think people who have autoimmune disorders and who are who have significant like significant chronic disease like i think they have a legitimate reason to be really unhappy about

SPEAKER_35: what's happening they're just unfortunately they represent a small percentage of the population and their claim is not strong enough to get us all to change our behaviors it's just not going to work

SPEAKER_83: like good luck to them but it's not going to work i think that's the pragmatic fair way to explain this which is really sorry if you have this you know terrible yeah it's terrible but there are other

SPEAKER_00: people who've had this all along who can't get a cold in the winter and therefore they don't go on the subway in the winter or any other place they could catch a cold right they have to be vigilant um and i think we normalize masks actually so if i see somebody in a mask i don't like feel bad for them or something yeah if you want to wear a mask on a plane going forward because you don't want to get sick because you got your kids theater rehearsal this weekend sure why not

SPEAKER_43: i mean i i might actually consider wearing masks on like long over you know hall trips or something

SPEAKER_88: like that just for you know an extra layer of protection of getting sick or something i'm

SPEAKER_24: surprised that we haven't seen really good positive airflow masks like becoming more normalized like what i used to do i used to remodel old houses when i was a kid yeah and so we would have these like for like working with asbestos or working with really nasty stuff we'd have these masks that would literally like blow filtered air that would go through this really high high powered hepa filter blow filtered air in and then was really like you never really had to worry about like what you were breathing because it was always going to that giant filter i'm surprised you know we don't see that more normalized kind of like uh what is it bane in the spider-man movies whoever's wearing that yeah

SPEAKER_94: oh yes the batman yeah yeah the suffering in your portfolio will be legendary

SPEAKER_97: i love bane he's like one of my favorite guys i would love to go for sushi with bane or something oh the

SPEAKER_18: omo casa that'd be fun that'd be done it'd be great uh so other aspects of this that are working

SPEAKER_00: even that work particularly well seem to be professional development um you know using that as a reason to get together i have started doing this with my team so in june we got to get or may we got together we did professional development for our investment team i'm going to do it for inside next just getting some people together and saying hey let's spend a half day talking about why we do what we do the best practices but writing stuff down uh and the tools are the next piece so i think that's i uh one of the things i'm realizing is the people who shine in remote work are the ones who can maintain and write best practices and share them with the

SPEAKER_18: rest of the team and train the rest of the team this to me is a person who was underappreciated in you know office culture but now is becoming a critical piece if you can write in your coda your notion whatever your jam is uh in terms of your internal wiki if you can write the the training document the best practices document this is how we do what we do here's the faq all that good stuff when you write that stuff down and you move to this right first culture then when new people join and people they're wondering like how do we do this you just send them the link and they read it and they can you say hey post a comment if you got a question but and here's the history of the page what else are you seeing in terms of people who might have been people or practices that might have been underappreciated in the real world uh you know and in person that now remote is rewarding

SPEAKER_36: so one of the companies that i i work with uh it's called twine um and they just launched

SPEAKER_24: uh on zoom and what they do is they facilitate really uh fast networking sessions across a team so you can take 100 people load them and just twine and basically enable really quick breakout rooms high quality breakout rooms between individuals and like a bunch of metrics and you know the best

SPEAKER_47: sort of networkers in the old days were the people that got together and got coffee together and they're constantly reaching out to people in their office and outside their office to like figure out how to get together with them on a regular basis kind of like the vc job and now i think with tools like twine

SPEAKER_24: i think you can have these sort of like ways to kind of constantly get people to remember that they have these co-workers and give them a little bit of time together and give them the ability to engage with each other um and i think that's going to be the sort of like the best networkers of the next generation are going to be the people who figure out how to do that really well um so basically i'm

SPEAKER_00: looking at the website here for twine.nyc if you want to go check it out yourself it's basically

SPEAKER_02: like trying to recreate the water cooler movement moments so they um and i've seen like a bunch of

SPEAKER_00: like little integrations and you know um apps in the slap directory for this but they're using slack as well for this which is hey we're going to figure out how to randomly put people together hey what's your favorite ice cream or tell me about uh you know your hobbies kind of thing and that builds fabric and hopefully that fabric then when you're working together as a team will keep you uh more in sync this is why vcs would do all this kumbaya nonsense and like if you wanted to like work at a vc firm i remember like i don't know you know tony conrad or these you know the was it tony uh you know like the true ventures guys would go on these like long walks with their founders and stuff like that you know everybody's got to go for a walk they got to go for a hike whatever it is um and it's just like okay uh a little too much uh kumbaya for me but it is nice to know yeah people got

SPEAKER_43: kids what they do um and this kind of stuff seems um yeah really um well designed and for five bucks a user per month 60 bucks a year if you have 10 employees and you spent 600 bucks on this who cares like i mean that's what you would spend on one dinner so it's one of the things i love about

SPEAKER_01: sas software if you're in a remote startup you need to sign up for notion we use it every day we love it we run the whole company off of it we have some amazing internal tools we built a database inside of notion of all the startups that we interact with it's basically our deal flow crm notion is not just like a wiki it has all of these database functions that i wasn't even aware of and my team keeps surprising me with better and better features one of them is you can just mention somebody or you can remind yourself and set a reminder in the document so if i'm writing notes on a startup that i met with i could say hey tell me to reach out to the startup again on this date in six months

SPEAKER_113: whatever hundreds of thousands of teams worldwide are already using notion and more and more often

SPEAKER_01: i'm seeing people use notion to share their company updates it's really just changed everything for our company and it will change everything for your company notion.so and use the promo code twist to get 250 off their annual plan 250 bucks that could be a couple of months free if you're growing your startup and if you want to send me your pitch in a notion document just add jason calacanis.com to it and i will go read your pitch and who knows maybe i'll call it out here on the pod but that's a great way to get investors is to just share a notion page with them with your deal memo all right everybody let's get back to the show and thanks to notion you guys and gals over there

SPEAKER_53: everybody notion is doing a great job let me ask a question about the downturn yeah yeah we got a

SPEAKER_43: downturn right now we're ripping yeah um many different angles we could take here the first one i want to take with you is do you think we're going to see people canceling um and reviewing their sas

SPEAKER_119: bills and saying okay i'm subscribed to 12 sas pieces of sas software maybe i cut these four and i make it work with these eight yeah maybe i work with the bundle i go to the microsoft bundle where i don't have to pay for slack i get teams built in maybe you know i use notion or coda and i get rid of google docs or whatever i'm paying for google docs is pretty cheap but you know people are going to start looking at you know there's okr software you can do your okrs in notion or coda or you could just use i have one very large company and they were going to use one of the okr softwares and they're like it's really expensive for the number of employees we have i'm using a google sheet i'm like is that sustainable they're like feels like it so i was like okay whatever you want to do

SPEAKER_18: what are your thoughts on the sat on sas software will we see some retreat in sas spending yeah

SPEAKER_22: absolutely so i have a portfolio company called vendor uh which helps manage sas subscriptions and um

SPEAKER_24: yeah the data is pretty clear on this one people are very quickly like well like at the end of the day like i think people were spending like drunken sailors for the last five years because raising more money was so trivial and one of the places that money got spent was in software and you had it across or you'd have people signing up for all sorts of different random software that they weren't tracking and they weren't managing and didn't it wasn't really organized and you know the old it guardians of this spend kind of were put to the wayside which is good because they were kind of in the way for a long time but now i think there's a re-rationalization of that like let's go back let's look at let's look at where we are let's look at what's happening and let's manage this

SPEAKER_02: this spend out the door vendor is vendr.com is that vendor um so basically looking at how they do it if you've got under a million dollars uh in sas spend they charge you 36 000 which would be almost four percent if you have one to five million they charge you 80 and if you have 5 million plus they charge 120 but they're looking at everything you're spending and then they're going to give you

SPEAKER_46: advice to manage that they'll save you that on day one like literally like it doesn't matter there's i i don't i imagine i wonder if they should have this case study but i imagine there's probably never

SPEAKER_24: been a customer who doesn't save more than they spend with vendor like because one thing that's really cool is they can give you best in class pricing so they can go in to all of your vendors and

SPEAKER_47: say oh uh guess what we know that you charge this to all these other customers that look just like this company guess what you have to pay them that now too and so best in class pricing in and of

SPEAKER_24: itself really it brings the leverage away from basically the the vendor and brings it back to the customers they get to aggregate and i think that's just so powerful um all right yeah there's

SPEAKER_52: a bunch of different ways to manage that so let's take the next angle and for the people who are in the youtube room youtube.com this weekend we're going to take your questions next so get a couple of good questions in for zach and i hard ones uh yeah and just give us a thumbs up we got 150 people of you 150 of you watching 31 thumbs up yesterday we gave away two of the this week in startups heated ember mugs if we get to 100 thumbs up we'll send you one and we'll send one to you zach too so you can keep your coffee warm now it really is a cool product um it's really sharp with

SPEAKER_119: the logo on it i'm not but it's like my favorite um it's my favorite gadget of the last year these ember

SPEAKER_138: mugs you must you must really love it because you're to hawk something that you don't have a

SPEAKER_18: little bit of a taste exactly exactly the good news is we have swag.com as a sponsor and they make

SPEAKER_119: them so swag.com and you can go make your own for your company um but uh yeah we'll figure out a way to get paid at some point ember uh will uh will will they should be a sponsor they should become a

SPEAKER_43: sponsor they should i mean listen we sell out the show you know every year so i'm not too worried

SPEAKER_141: about it i think we'll be fine extra special sponsor you know even more and uh yeah yeah

SPEAKER_119: let's get these questions going uh from the audience i want to ask you another question about the down market now that we're warmed up yeah uh okay we've been talking about hey take the medicine for six months we've been advising folks you got to have more runway deals are going to occur at a lower valuation and so first our founders if you had 10 founders how many of your 10 founders have actually taken the medicine and reduced costs and been thoughtful about runway out of 10 on average how many have done a great job of accepting the reality and making the changes they need to make and then

SPEAKER_18: how many you know fall into the other bucket of not making enough change and maybe sticking their head

SPEAKER_24: in the sand the only companies that are sticking their heads in the sand are the ones that raise giant rounds right at the end of taking a fortune they couldn't well they could they've gotten more runway and they're you know i think there was a bit of a head fake during kobe like when kobe hit you know a lot of us me especially was like hey guys get ready this could be really bad be prepared and by the way this is a great time to lay off your underperformers and to like you know really bring things back in line because like raising money could get very difficult for the next couple years

David Friedberg: yeah and then obviously the fed was like yoink haha here's more money go for it here's a ton of stimulus and everybody's gonna be more effective because you can't go out yeah it was a huge

SPEAKER_47: head fake productivity and sales went up yeah and so some of my companies did lay off during that period and they were fast and they were aggressive and they regretted it um and so yeah of course right

SPEAKER_154: like uh you know i think in retrospect um uh they could have kept those people on yeah because the

SPEAKER_83: growth was there but now this could be the opposite situation there's no question because there's who's

SPEAKER_47: gonna save us here like at the end of the day when you print trillions of dollars and you hand them up for free out of helicopters i mean pvp loans and like all that like it it will boost the economy

SPEAKER_24: that's how that works but that is not gonna happen here and at the end of the day like in a best case scenario inflation comes back aggressively which i doubt and um uh things kind of normalize again but we aren't back to the boom times that we were in when money was given away for free and so i think all these companies were operating under a free money environment and that's gone um and you just have

SPEAKER_02: to you know they're gonna have to change and got it so the majority seven eight out of ten i would say have taken the advice and taken the medicine then maybe people who can afford not to haven't

SPEAKER_24: if you had to put a number the majority of the companies are raising flat rounds uh to to make sure they extend their runway they're lowering their costs and they're preparing for a multi-year slowdown in

SPEAKER_02: in venture have you seen an uptick in people saying we're going to go into an m a process

SPEAKER_24: we're going to start the wind down process i have not my companies are not at that stage on average um we don't we don't really have any that are that are really in trouble at this point they're you know they're they're all well positioned to raise more capital but and that's because why why is that unique to your portfolio in your selection of my portfolio i you know i'm a relatively conservative investor and that like i i don't swing for the crazy like let's bet it all on black and hope we get there i'm i'm much more on like you know i get involved when there's real revenue a real real runway real products a real business and so it's you can dial your growth or your survivability relatively easily in that sort of environment like we my portfolio generates almost 700 million in

SPEAKER_47: annual revenue now so there's like real meat on that those bones and so like it's relatively easy

SPEAKER_162: for my companies to say okay let's dial back um so as an angel investor as an early stage investor

Chamath Palihapitiya: yeah if you invest in companies that have products in market with some revenue yeah they are much

SPEAKER_02: closer to default alive as paul graham would say and if you are super risk-taking and or you're

SPEAKER_00: running an accelerator where they're pre-product market pre-product launch pre-customers pre-revenue okay you're going to have a lot more of these uh slowdowns at least for instance like one example

SPEAKER_46: that we saw a lot of uh over the last couple years is you had negative gross margin companies so

SPEAKER_24: companies that were like you know the 15-minute delivery companies they would literally bring a

SPEAKER_47: product to your door and it would cost them more money they would make and the argument that a lot of people were making was oh at scale this gets solved at which point these become very profitable companies but until then we're going to lose a lot of money and i always looked at that and i was like yeah there's so many more ways to invest in companies that are making money on day one yeah they make money on each product they sell on why would i go play in that world where at the point that the macro turns i'm dead um now some people made a lot of money doing that

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SPEAKER_02: because like greater fool theory in crypto or other places or pokemon cards there has to be somebody who values this asset that doesn't generate revenue yeah uh or profits more than you and this is why all the companies whether it's dory dash uber lyft etc have said uh airbnb okay you know we're gonna move to pro the profitability phase here and you know a lot of those folks joker getter go puff great services really interesting it turns out like if your bet was you know what it's we lose money when we do one uh when the when the person takes one bag of groceries out to delivery we break even when they

SPEAKER_00: have two per ride and when they do the third you know they can carry three bags when they take their e-bike out to delivery then we make money it's like well how often is that third scenario going to

SPEAKER_119: happen yeah and that's the efficiency that some people diluted themselves into and then when you're talking about sas software or some of the companies in your portfolio you mentioned they make money on the first transaction right yeah they make money easily on the first transaction now does that mean

SPEAKER_00: uber or lyft should get rid of uber pool or lyft line as a way to you know increase the number of drivers on the road and break even on that probably not like i think those things could exist to just keep the network effects going and you could make money on x and you know food and on black but on black cars but you really got to think this through and be thoughtful about it i think and so it's very

SPEAKER_01: important for angels to understand zach's betting strategy it's one i do with the syndicate.com i don't like syndicating companies that are that do not have products in market and do not have revenue because i i kind of train young angels you know don't try to invest in pre-product market fit companies or pre-launch companies when you're starting out because it's gonna be hard for you to identify what signal do you use how charismatic the founder is like it's pretty hard to guess unless you've worked with the founder before and they have a track record now that you can make a bet on that's easy but that's easy but the most of them don't so you know unless you have a vehicle like an accelerator like i have or founder university now what why are you making that bet because you

SPEAKER_43: need to make that bet at what like two million dollar valuation three million dollar valuation you can't make those pre-product market bets at 10 million can you well you can i mean you know when

SPEAKER_35: i'm a mod when i've been a mod in mercury uh that was you know literally a mods like i'm going to start a bank and i was like god i don't know anything about banks like but you're mod i love you you're

SPEAKER_185: you're a machine based it on a founder knowledge oh yeah yeah that was so that's the exception that's a

SPEAKER_35: caveat yeah yeah if i've known a founder for a long time i will bet on them purely based on who they

SPEAKER_24: are um but i have to have seen them at work like m particle you know uh you know the the uh mike cats

SPEAKER_47: runs m particle one of the best entrepreneurs i've ever worked with like he's the kind of guy where like he goes starts a company i'm like here you go here's free money or jack chow started pace and he was like like literally this is a good example so we were on a clubhouse room back when clubhouse was

SPEAKER_35: uh a thing a thing and um uh it was me and jack chow and a bunch of young entrepreneurs listening

SPEAKER_47: to us talk about raising money and i was like hey if jack chow ever raises money i will give him money in a heartbeat because he was you know the head of product at a firm and pinterest and like he's just og og and uh he literally calls me the next day he's like hey are you serious about that i was like yes i'm in for a million bucks i don't care what you do done here's the money and then but i was like guess what i know you're going to call me back in the day and be like uh so then of course like like a day later he calls me back he's like well max election wants his piece and brianne wants her piece and tish wants his piece and i'm like i knew that was going to happen and then and then literally like a month later he calls up he's like well we're doing another round sequoia is going to lead but there's no room for anybody else i'm like like it's so painful i wish the best entrepreneurs

SPEAKER_138: would just let me take all the money and not let anyone else in but that's just unfortunately

SPEAKER_02: that's how you know this is one of the hard things about the business we're in is you know some of the elite founders can dictate terms yeah and they have existing relationships so the chances of ev williams you know you getting in on the next ev williams or you know jack dorsey startup are zero yeah because they're going to put their own money in first then when they raise

SPEAKER_00: a series a at a hundred yeah they're going to go to a small list of trusted folks who they want on their board and they probably don't want to announce the round they probably don't want to

SPEAKER_18: circulate it so it's hard right and so you got to you know take a decade to get on those lists let's

SPEAKER_01: take some uh i will say in my portfolio i've had about a half dozen companies and we're talking about over 300 companies now um who were let's say from the accelerator zone didn't clear market or cleared

SPEAKER_00: mark with modest you know raises in a seed round never got product market fit but they were able to exist on the bridge round every six to nine months and i think the perpetual bridge yeah you know hey we're literally going to put a section of the bridge out every six nine months for you that's gone that's gone unless you've got some you know benefactor who really has an affinity for you i would assume that the never-ending bridges are gone you get one bridge maybe from your existing investors

SPEAKER_43: and it's going to be modest so plan accordingly founders yeah yeah we're i've seen that right now

SPEAKER_203: we have a number of companies who are raising what we're going to be very healthy bridges like

SPEAKER_47: tons of runway like like great and the demand from existing investors and new investors is like 60 70 80 down so like they'll you know they'll raise enough money to stay alive but they're going to

SPEAKER_24: have to like basically they can't be back in the go-go let's throw money at random stuff days they're going to have to like they're going to have to cut costs and they're going to have to be more careful

SPEAKER_43: about how they grow because free money is gone the free money is gone and i think people's betting strategy has changed so we you and i like to play the cards once in a while um i probably i want to start another poker game like we should maybe you and i should just start one because i have my loft i got the poker table i got the dealer so in the city we should have a little maybe are you playing plo now or no oh sure yeah maybe we got like a little low stakes plo game for the fun of it just to break people's brains a little bit easy easy peasy so um one of the things i noticed was one of the betting strategies we were all watching sequoia or founders fund plow money into their winners so people said oh yeah you own five percent try to get to 10 you own 10 get to 15 you own 15 maybe you can get to 20 or 25 you can do some crazy old school venture bet you know like tom perkins did in the old days you know or you know uh you know whatever sequoia partner did in the 80s to get to you know 30 ownership in a company right they used to get to 40 ownership in a company sometimes that betting strategy has now been removed from the market based on what you're saying the idea that you can go to your existing investment like oh you know you don't need to go to market let's

SPEAKER_00: do an internal round you know the whatsapp strategy that works so well for sequoia don valentine

SPEAKER_43: strategy with cisco and you know atari and other places where they just build huge positions i think

SPEAKER_214: that's off the table now and maybe it was overused like we're i mean i mean i'm actively doing that now so for my under what circumstance do you do it well when the company's clearly winning when they're

SPEAKER_24: well established and i just want to own more and more and more of that what would that look like in

SPEAKER_101: terms of revenue growth year over year or performance uh it depends on the stage but

SPEAKER_51: sas company a consumer company a marketplace company what would it look like in that series a

SPEAKER_24: early stage you know three plus x growth gets everybody super excited um you know if you're growing over 3x a year people are going to get really fired up but for me mostly it has less to do with growth rates in the later stages and more to do with market position relative to competitors so for instance like one of one of my companies is um very well established in sort of the sort of smb smaller space and they've got 1.6 million developers use their products and they're they're just like they own that their docs are the best and their tools are the best and the pricing is the best and like if you're a small developer you use this product it's like game over and there's a big company that owns the enterprise class and that for me is a no-brainer like i love that business and i want to own as much of that as i can get um you know but it really comes down to to you know to trying to figure out who your winners are and being thoughtful whereas you're right a couple years ago

SPEAKER_38: every company was a winner because they would all get marked up and made us look also brilliant like because everything i got marked up we were like well if the valuation goes up people were taking

SPEAKER_02: that as a proxy that the business was doing well yeah and now we find out that some people just had

SPEAKER_00: very large chip stacks they needed to put money to work and maybe they weren't being as thoughtful as you and i are where you're saying hey is this 3x we know everybody's coming to the table my new move is okay i know everybody comes to the table for the 3x yeah show me the 2x that's you know got the inconsistent performance but still trending in the right direction but needs a little more gunpowder

SPEAKER_119: to kind of win the war so they're a little underutilized they're missing some key people but i kind of like the we're we're trending towards figuring it out but we have a lot to figure out that's when i like to come in and slide in my extra million yeah yeah because then you're you're taking a little more risk but not too crazy you got a lot of outs yeah yeah yeah i'm i'm

SPEAKER_01: comfortable with that scenario let's talk about first-time fund managers in a moment i want to take a question from the audience first nick so let's pull up our first question morty asks how do you think about competition big incumbents and other startups competing in the same market or solving the same problem at the early stages of a company okay great question we do get this one a lot how do you zach

SPEAKER_02: uh counsel startups that are going into a competitive market and can you think of one off the top of your

SPEAKER_24: head um so i generally don't like uh competitive markets like because when i think about it like

SPEAKER_35: i like i look back at sort of the competitive markets that like an ad tech when i when i was on or

SPEAKER_47: you really have to as an investor you have to be one of the smartest people in the room it's like when you go to the yc demo day and you look across the room and there's a thousand investors and you watch

SPEAKER_24: a pitch and you're like am i the smartest person in the room about this so it's a autonomous car no is it a new uh saas software for um building whatever no um and and and when i'm the smartest person in the room about that so it's an ad tech company and uh some idiot from abu dhabi marks it up

SPEAKER_43: 10x i'm like good yeah good luck with some dentist is like yeah five i mean that was when i knew like the yc demo day was they really stacked that audience because i was like what do you do it's

SPEAKER_00: like uh i might somebody was really young they're like yeah my dad's a dentist and i'm going to be an angel investor and i read your book i was like oh that's awesome so your dad's giving you money to invest is like yeah i was like great awesome and i'm like well i mean you know yeah it's going to be hard for the first 10 investments and maybe they figure it out over time so competition if you're going into a space that's already been won and you're trying to win and compete against google search if you're trying to compete against google's ad network youtube's ad network facebook's ad network it's going to be a you're going to need to have a significantly better product and then one has to ask with 10 000 engineers working on whatever product it is at that company is there a chance that you're you're you magically figured out something on the

SPEAKER_101: roadmap it is possible google did beat 11 previous search engines just not probable is that i

SPEAKER_35: think what we're talking about here i think i think it all comes down to differentiation like so if you if you were to take the 11 search engines that google was competing against there they are

SPEAKER_47: search engines yes but like at the core search is a delivery of a product and the question is is how did they go about delivering that product and what what did they use to deliver that so yeah they all kind of played in a relatively similar sort of technology vector and google was saying we're going to do something totally different that that will result in a better outcome if we can get it to

SPEAKER_24: scale and it was and it was very early on like when you looked at google's technology it was slow and janky but it worked better and so i think multiple times better two or three times better way better yeah way better so um i think that that argument actually works if you're going to go to go into a

SPEAKER_47: competitive space it's like we are doing something fundamentally different at some part of the stack that leads to a 10x better outcome for the actual end customer then like we maybe can have a conversation about why that might work but like if you're like oh well we're gonna we're just smarter than them we work harder than them or we're like anything that sounds any bit incremental i'm just

SPEAKER_02: like yeah i'm not smart enough incrementalism is not going to change consumer behavior or business behavior people are creatures of habit if you love your bmw you're just going to keep buying bmws yeah

SPEAKER_00: now if a tesla comes along and bmw doesn't have self-driving and it you know autopilot it doesn't have a battery and you feel the absolute you know uh delight of driving a tesla yeah you might change

SPEAKER_241: but you're not changing for an audi the bmw person's not going to an audi the audi's not going to a bmw because they they're incrementally better so that is the issue i think morty it's a great question

SPEAKER_43: um and you know there there are vectors that you can go at things you know the the slack was not the first group chat app plenty of other you know hip chat existed irc existed people were using all kinds of solutions for that i think slack just made one that had a great user interface was much simpler and had great apis so if you look at why they won it's probably those reasons if you look at notion and coda wiki software existed but if you compare coda and notion to what yeah and actually google had like some sort of wiki thing what was it called sites or projects or something they had some wiki style knowledge base and there were tons of knowledge based companies in fact just notion and coda made it so beautiful that people uh adopted them so i think user interface can be the thing that makes you win sometimes simplifying a product um it's pretty incredible but yeah great

SPEAKER_01: question and the other thing is you know that whatever the attack vector is it could be verticals you know somebody creates something for a specific group of people that wants something different uh that could work as well so we saw that with hello sign where they were broadly useful for

SPEAKER_24: digital signatures and docu sign was like focused on the enterprise and and really focused on all the enterprise needs and then but there was a number of really good startups who said okay let's go focus in on real estate and let's go focus in on a very particular use case and build all the technology around what those people need in that vertical and they did astonishingly well um and so it's really differentiation is is everything like if you can't if you can't really cleanly argue why you're really

SPEAKER_248: really different in some vector you're not going to make it young and bankrupt asks what are the top

SPEAKER_01: young bankrupt okay what are the top buzzwords you're staying away from as investors right now so i'll expand it from buzzwords but i guess themes verticals business models what are you saying those words

SPEAKER_38: if you bring buzzwords to me i run i hate buzzwords they're just so lazy it is lazy when people can't

SPEAKER_01: explain stuff in basic english but let's go to verticals for me it's d to c direct to consumer i love direct consumer products um and i guess an offshoot of that would be consumer electronics i love gadgets i talk about gadgets all the time here on this being startups i talk about direct consumer all the time i love a lot of direct consumer but if you were to look at those two categories direct to consumer and you look at gadgets consumer electronics both of those are a race to the bottom both of those are

SPEAKER_43: low margin both of those cost a ton of money so i have really become less likely uh maybe even

SPEAKER_101: completely moving away from ever investing in direct to consumer and consumer hardware now a consumer or a

SPEAKER_01: business hardware solution that enables a subscription i'm okay with so i think i'm not an investor in

SPEAKER_43: something like whoop but i looked at whoop and it was like 40 or 50 bucks a month and i was like yeah not for me for 600 i just want to buy my fitbit or my apple watch and never have to worry about the subscription but i do understand why whoop did that because whoops gotta make the money on a subscription um and so maybe they have a smaller audience but if you can buy a a tracker and a heart rate monitor on amazon for 50 bucks and going down or a camera on you can buy cameras now for 25 on amazon like security cameras it's just really sucks to be in the direct to consumer gadget business so that that for me is the buzzword or i'll just expand it to theme or business model that i hate one time hardware sales hate hate hate hardware enabled sas i have a great company density.io that's just crushing it and so uh and even cafe x moved to a subscription and now they're actually by selling the units to people at a profit and having a subscription they have a viable business now so uh that's what i'm staying away from anything like as a theme or a business model that you know over the years you've just said not for me i mean

SPEAKER_254: you know i've been a crypto hater since it was nothing uh crypto web 3 like that whole yeah it's

SPEAKER_24: funny like i literally like anytime i see like an email uh coming in from you know somebody pitching that says crypto web 3 i'm just like i don't even respond i just hit archive i'm like read my user

SPEAKER_138: manual if you knew anything about me my user manual is all over my twitter it says i don't invest in that and they still send me that stuff and i'm just like nope nope nope like yeah yeah it's it's hard

SPEAKER_01: with the crypto stuff because i do see sometimes smart people and i see enthusiasm so you're like

SPEAKER_02: oh smart person super enthusiastic about it they drank the kool-aid okay entrepreneurs are weird they

SPEAKER_01: get passionate about things they change the world i want to believe that yeah but then i look at you know what their behavior is showing and everything is around the next grift the next coin offering the next nft drop and none of it's with the fundamental technology or delighting customers it's all about how do we extract more investment essentially through these proxies for investment that aren't shares in a company and to me it's just like i mean i just i hate to do it but

SPEAKER_261: i'm just like i just the red flags are everywhere for me and i just can't i can't deal with it i mean

SPEAKER_241: sometimes i even get this like i get it i get two red flags in an email and i'm just like no no no i

David Friedberg: don't want to do it i mean your product's not launched and your valuation's 100 million how am i supposed to reconcile that as it goes against every tenant of investing for me yeah where i'm trying to

SPEAKER_00: where i'm trying to determine is this product real yeah and so it's very easy for me to archive those

SPEAKER_01: emails as well and if my team takes one of those calls i just tell them you know put in our crm system when the founder said they would launch yeah and then ping them two weeks before launch yeah and

SPEAKER_43: actually can one of my producers make a note of that i want to make sure that that's actually the best practice internally so rachel make a note check in with the investment team for today's call and make sure two weeks before they launch check in with them hey you told us you're going to launch on this date wondering if you're still planning on launching on that date um because then that

SPEAKER_00: shows we're super proactive that we're anticipating launch date that's great and i got to tell you nine out of ten times they don't hit the launch date and oh yeah five out of ten times when you check

SPEAKER_43: in with founders they've pivoted yeah we're not doing that business i shut that business down you know so it's just is there anything anything under the web3 umbrella that has just tickled you a little bit just a little feather tickle on your neck exactly anything that just made you go oh

SPEAKER_36: one of the smartest people i know in the world is starting a web3 company and i i told him look i'm

SPEAKER_283: investing in you i'll invest in you no matter what you do antonio yes he's been public about it uh and

SPEAKER_36: uh i'm i'm he will he will uh potentially prove me wrong i bet on him yeah yeah it's easy bet to make

SPEAKER_119: also the entertaining bet too the only thing that i really like i gotta be honest there were like two things i thought i wish somebody would work on this and then i said it publicly here for years and nobody's actually made any progress the first thing was i liked the digital rights management around nfts or digital objects where i know stock photography is like a big deal yeah um or stock images you know all that kind of stuff so somebody started a platform where i could take 10 photos from my you know camera roll i put them onto a photo sharing getty kind of site and i say here's the

SPEAKER_00: rights i want to sell the rights to this i want to sell the rights to 80 of the monetization of this picture of lake tahoe to an investor for a hundred dollars and then i want 20 of however it's monetized in the future yeah and then i as an investor could go onto the site and say i just want to or even as like getty could say i just want to own these 20 images because we don't have any images of you know lake tahoe or this you know people using a electric surfboard on lake tahoe okay great so now we got 10 pictures of zuck using an electric thing yeah and okay i bought the i bought the zuckerberg picture

SPEAKER_18: or whatever somebody got a paparazzi shot that would be kind of cool to me because i could see that

SPEAKER_119: marketplace developing and growing in weird ways and just people told me oh yeah there's 20 of them and they were yes there were 20 white papers everybody had the same idea nobody actually built it yeah

SPEAKER_295: it's a fundamental problem in web three is that nobody builds nobody finishes their products yeah i don't know we'll see we'll see one of my companies just uh kind of became tangentially involved in

SPEAKER_24: in the web 3 world which is a company called entropy so they use computer vision and uh ai to

SPEAKER_35: basically identify fraudulent physical goods so using a cell phone you can basically like take a gucci purse and it says oh take a picture here take a picture here take a picture here from this seam and then because they've got this huge database of images of real purses and fake purses

SPEAKER_24: they can tell you with really high certainty that that is a um a real or fake purse that's called entropy e-n-t-h-u-r i can't spell great idea yeah but the cool thing that they did which is super

SPEAKER_47: powerful is they now have built a technology where they can create a fingerprint literally a unique fingerprint of any physical object so basically a pair of nikes comes off the assembly line wow and they take basically using a high power camera they take an image of a certain spot on the nikes and now they have a basically a hash they can attach to the nft that goes with those nikes and then the owner of those nikes can be like okay they were manufactured on this date in this place and then when you sell those nikes anyone with a cell phone can basically take a picture of that spot they get the same hash they can compare it against the nft and say oh this is literally this physical product and it basically enables nike to basically say look if your nike's that you're buying don't have an nft attached to them they're fake so if you're louis vuitton every person now will have an nft attached

Chamath Palihapitiya: to it they will say this is a real nft a real you think about this use case it's providence right you want to make sure and there's there's somebody who's a customer you know gucci and louis vuitton they

SPEAKER_00: have a vested interest in paying for this product consumers get it for free you got an enterprise

SPEAKER_119: customer who's going to say yeah every time one of these things goes off the line we're going to take a picture of it and it's serial number and we're going to put it in the nft we're going to put it in the database and now you have high-res phones yeah it seems like a perfect case now does it need to be an nft of course it doesn't it could just be in a database yeah but it doesn't hurt that it's published as an nft because there'll probably be close to zero cost to that yeah

SPEAKER_24: exactly so i mean they maybe it's like use this to power if you're an nft company and you want to add this to your capabilities you can use their technology it's called brig the the product that they have that does this uh brig um or if you're louis vuitton you can do it on your own blockchain if you want to or you can do it on your own centralized database it doesn't really matter yeah so so i'm i

SPEAKER_254: get sucked into this world whether i like it or not but um but yeah i get sucked into it as well but

SPEAKER_43: i mean it's like as those kids are doing the startups innate but it has an ico it has a coin yeah it's a six

SPEAKER_180: yeah i like that that's good i mean it just uh i stole that joke from rachel well done rachel which is gonna be my new uh gen x my new millennial uh gen z poster uh thanks for producer rachel but

SPEAKER_119: i mean stock x could be a uh could be a customer of this software i also do like the nfts for um membership in clubs and that to me makes a lot of sense as well especially because then you could freely trade them so i wanted to create uh a poker room like a poker club and so i want to create my own and we talked about this soho house yeah yeah yeah yeah and so i wanted to create my own poker club yeah where you could buy a membership for 10k and then you know we try to get i don't know 200 people to buy it and then we have 2 million bucks we set up a 500k space yeah maybe have a 250k a year operating budget doesn't have to be a crazy space it could be a 2 000 square foot space we buy it hopefully pay the mortgage whatever and then everybody's got a share yeah or maybe it's not a share because then we'd have to only have accredited but they have a membership the memberships

SPEAKER_01: last i don't know five years or 10 years so we come up with some time limit on the membership and then at that point you do a smart contract to sell or whatever and then if if it's going to get sold somebody could buy the share you could sell it first to the back to the group or somebody in the group and then after that you can sell it to somebody else but the majority they have to have 10 people support that person's membership or something yeah all those kind of smart contracts

SPEAKER_101: out there just working could be really interesting you know um unless somebody tries to do a hostile takeover and then all of a sudden it'd be better as a central thing i'm not smart enough to play in

SPEAKER_24: this world i just everyone everyone people start going down this rabbit hole i'm just like yeah it sounds super awesome good luck i'll make my money over here on simple stuff yeah i mean i saw

SPEAKER_01: kevin rose is doing his own club and then gary vanderchuk uh did a club fry fish club in new york they raised i had the founder on here they raised like 15 or 20 million wow fly fish club yeah frying fish fly fish whatever it is and then there's somebody doing it um producers if you can pull it up somebody's doing it san francisco by the sales force so worst timing ever but it's some

SPEAKER_325: sort of true they're so screwed right now it's like uh talk about zombie apocalypse i want to drop 10k on

SPEAKER_218: an nft to own a piece of you know soho house no uh in soma no no no i don't know if those people

SPEAKER_24: live here anymore sorry it's the city has literally managed to just take the gun out shoot itself in both feet and then literally just shoot yourself in the head i mean i don't know if you saw london

SPEAKER_00: breed was like we have to build back downtown i'm like oh my god you you guys went to war with the tech industry for five or ten years you blame them for everything yeah they left yeah and now

SPEAKER_119: you want to break bread with them because they left like yeah this is like the crazy ex-girlfriend who's like i know i lit your house on fire and killed your puppy yeah exactly i want to i want

SPEAKER_337: to get back together and it's like yeah yeah you killed my puppy yeah you literally my apartment on fire yes you you shot my car off the you drove my car into the bay yeah no i don't want to be back

SPEAKER_339: with you no it's so bad it's so bad it's so bad but it's i mean yeah i do like that we have a new da so congratulations and she seems to be taking the job seriously i'm rooting for her yeah right now

SPEAKER_00: i mean she did i mean you did notice she cleared out all the public defenders who were in who were

SPEAKER_92: infiltrated the da's office which if you were to write a novel oh my god all day with this we

SPEAKER_35: should stop because we're just gonna we're gonna we're gonna just like spin each other up ranting

SPEAKER_163: about san francisco and that's not what we're supposed to talk about angel right i do think

SPEAKER_00: though it does matter like it would be really good i mean okay let's look at that as an investment sure

SPEAKER_43: okay you you're looking at san francisco as an investment yeah short how close to the bottom are we you're still shorting it sure oh we haven't even gotten so short as well oh yeah think about this so

SPEAKER_47: all the commercial real estate in downtown san francisco like we just showed in the earliest graph is like probably 30 30 that's like 30 30 occupancy right now all of those buildings are going to go bankrupt all of them and the tax base that supports that all of that is going to basically just grind down and it's a long slow process it doesn't happen overnight and the city the city

SPEAKER_218: city because leases are what on average those big leases are five years on average yeah they're

SPEAKER_92: long long-term leases and but they slowly they slowly come off and so those buildings are going to go bankrupt the city has a 14 billion dollar budget that it just literally just blows money on 20 000 trash cans they're like literally like literally the city is now placing trash cans around

SPEAKER_35: that cost 20 000 because it's had so much money they can do so many stupid things and and it takes time for

SPEAKER_00: that every yeah and then if you think about it like operating like a startup this is the startup

SPEAKER_01: that won't recognize that things have changed like they literally will not take the medicine and say

SPEAKER_43: okay nobody wants to come here yeah i i had a i had one of the venues we love to use beautiful venue

SPEAKER_01: um inside of the mall on market street uh bespoke i think it's a beautiful beautiful venue

SPEAKER_00: loves using it the incredible team over there and they're like hey jay cal remember you used to do this stuff i was like even i with as much uh charisma as well as i could design an event even i cannot

SPEAKER_241: get people to come to san francis flight of san francisco why would you get them to come to napa yeah i might get them to come to palo alto yeah but i'm not getting them to set foot in san

SPEAKER_119: francisco you guys screwed it yeah like and i'm really sorry but i literally told them if you gave me the space for free yeah i couldn't make it work yeah like literally if you gave me a hundred thousand dollars worth of free space in av i still would say no yeah that's how bad it is so bad and i don't

SPEAKER_366: think that's how bad it is yeah miami yeah people go everybody's like yeah oh you're doing something

SPEAKER_265: in miami i'll go yeah and i'm like do you want to know what it is they're like no i just want to go to miami yeah totally or austin or new york or or anywhere or la i mean at least too but yeah you know

SPEAKER_119: what yeah it depends on the area of la but people might might go to la yeah um all right so in breaking news it looks like london breed is releasing an ico coin she's going to be doing dollar sign s f grow and san francisco is going to grow again i'm still short san francisco i agree short it's

SPEAKER_43: going to take super short they're not allowing the the building of units and soma has five years of circling the the trash can i was talking to somebody who works in finance and their their company makes them come in three days a week yeah he said i was like what's going on with the traffic he's like well it's really interesting traffic is not as dead as you think it would be and he was

SPEAKER_119: talking about cars and i was like wait i don't understand it's it's a ghost town he's like it's still a ghost town but anybody who goes to the ghost town drives yeah so there were a lot of people who would take bar but now nobody wants to get on bar it's too dangerous they're scared for

SPEAKER_43: their lives so they don't want to get attacked by a junkie on the bart sorry to use the term but let's call it what it is like these are people who are addicted to very powerful drugs and are not thinking clearly yeah and you just can't run a competitive city in that regard so yes i'm still

SPEAKER_01: short okay let's take another question here um so yeah so i do like the nft as i'm still liking smart contracts still liking nft still liking the marketplace business you know but a lot of work left happened let's take another question how much dilution after seed rounds turns into a red flag what's the lowest founder equity before it becomes problematic i'll just i'm going to clarify the question to make it easier for you to answer what's the lowest founder equity that you would

SPEAKER_43: invest in a seed round or a vc would invest in a series a for let's just say it's a solo founder or two founders combined equity so in a seed round for a minimum minimum for founders if they don't own

SPEAKER_47: at least 65 percent of the business i start getting worried because what happens is

SPEAKER_35: is let's say they own like they come into the sea they own 60 of the business and let's say we raise 20 percent so they take 20 dilution on that 60 so they lose 12 points so now they're at 48

SPEAKER_47: going into the series a what's going to happen when the series a occurs is the new lead investor is going to look at that and be like oh the next investor is going to be unhappy as well so i need to re-up these founders today so i'm going to create a new instead of a 15 option pool i'm going to make a 25 option pool um and then i'm going to give basically let's call it five or eight points to the founders to re-up them so that i don't get diluted in the exact same way by the later investors behind me got it and so the more dilution you have in that early stage the new investor is going to either say is going to i'm going to do the same thing and i've had to do that where i'm like okay

SPEAKER_24: i need i need you to be re-upped or basically like i'm going to get screwed over by the next investor and so that and then i'm screwing the investors who came before me and everybody gets all pissed off and it becomes a really messy messy situation because you don't want the founders to quit if the founders

SPEAKER_01: start getting you know let's call it under 20 percentage you have two founders they're under 40 collectively they're under 30 collectively it's it's fine for them to be at you know 20 30 at the

SPEAKER_00: ipo 10 great if it's you know that's what larry and sir you're at what 11 percentage or something zuck at 20 that's fine at the ipo but you really don't want to get down to low single digits at the

SPEAKER_43: ipo or you know i would say at the seed i would agree got to be over 50 percent uh at a minimum for the seed round and then at the series a yeah you're probably going to want to be 40 50 percent at a minimum here's a follow-up question should the uh equity grant that's given to uh you know maybe

SPEAKER_119: give the founders a fighting chance here should that occur during financings or should it occur at

SPEAKER_43: a board meeting because the thing i found that i don't like is uh investors using yeah the top off

SPEAKER_47: as a way to win the deal yeah yeah yeah the only way you as an investor can make sure that that

SPEAKER_24: doesn't happen is you have to make sure that there's a competitive financing you've got to make sure that there are other investors at the table so that that those folks can basically bring good offers

SPEAKER_398: and hopefully you have good relationships with them so they don't screw you over um but yeah josie

SPEAKER_01: martinez asks as an angel writing small checks one to three k how to best navigate due diligence without being overbearing or annoying great question at one of the three k you don't get

SPEAKER_217: to ask questions like you're along for the ride you're just placing it back whatever materials they

SPEAKER_404: have prepared and you get to make your decision accordingly um yeah i don't i don't think that

SPEAKER_24: anyone really gets to start asking for new materials or new diligence questions unless they're investing at least 10 of the round so whatever the round size is unless you're a 10 or plus check like you don't get to ask for like you can ask questions to the founder if you you ever you get to talk to them like obviously ask whatever questions you want but you can't be like i need you to do x um because like when that happens and i'm leading the round i just tell the founder i'm like nah tell them to go pound sand i'll take their piece like because i just don't have yeah i don't have time for

SPEAKER_43: people who waste boundary time yeah so you have to be realistic if it's a million dollar round and

SPEAKER_00: you're putting in you know 1k you're not even one percent of the round you don't want to slow the founder down and now if you're part of a syndicate zack syndicate my syndicate any syndicate or some group that's investing you can always ask the lead and read the lead zeal memo and what they're

SPEAKER_119: thinking is but again you know i would say your diligence could be using the product your diligence could be looking at reviews of the product and your diligence could be asking questions but you're basically using your syndicate lead you're using the other people who are putting in the 250k checks the million dollar checks you're using them as a proxy for your diligence and if you're not comfortable with that totally understand you want to do first-hand diligence that's great but you can't you can't we can't have a hundred people asking 10 questions each and asking to see bank balances and you know legal documents so you're relying on good faith uh when you're making small checks and everybody else's diligence i think it's a pretty good rule 10 of the round you can ask new questions sure you're putting in a hundred of k six-figure investment it's not chump change of a million dollar round great you're putting in 100k to a 25 million dollar round okay now that 100k is in the same position we just don't

SPEAKER_43: slow everybody down we got to move fast here um and it's risk capital you know you're taking a risk

SPEAKER_02: here so you can't blend it in what what kind of diligence do you find is the most effective for you and when you're doing a large portion of the round what do you focus on with your team

SPEAKER_404: in terms of diligence uh well team is me so okay uh i team and singular um uh you know my favorite uh

SPEAKER_47: hack is i ask for all the updates i've ever written um because wow what a great hack because updates like have been such i mean if there's any indication of like the companies that are most successful in my portfolio it's the ones that write great updates and then the ones that i don't get updates from

SPEAKER_24: almost invariably have a lot of trouble um yeah and that's that's that's the best that for me is

SPEAKER_00: like i look for that always if things are going well you write updates things aren't going well you try to fix it and then write an update you know travis used to send regular updates about uber you know alex would send updates about com why wouldn't they sometimes the update was like we grew 72 quarter over quarter yeah the end yeah that's cool that's all you need to send and that's good yeah i mean i literally just had a ceo take over a company from the founder they sent an update with no numbers

SPEAKER_01: no charts in it you know their personal bio everything they've done in their career and it was like oh my lord and i just wrote them back this morning and i said listen congrats on the new job here's what we need and actually this would be interesting i'm going to read you what i said to a founder this will be like a first library i'm not going to say the founder's name but this is my writing so i'm entitled to do it let's see so here's what i said great first update but a bit heavy on the text and no real metrics yeah i'm candid i got a big you know seven figure investment in this please send us for q2 and going forward number one monthly revenue spend and burn in a chart and a table for the year so folks can see the trend please include quarterly performance for the past eight quarters again so folks can see the trend yeah three please include our target for the

SPEAKER_02: quarter and year and how we are trending toward it four head count five cash in the bank at a specific

SPEAKER_119: date and runway based on that yeah very simple five bullet points there now if you're running the company properly you have number one the monthly revenue and spend yeah your account just give it to

SPEAKER_241: you yeah number two you have quarterly because you do board meetings and you have to show that at the board meeting number three you should have targets if you don't have targets and you're a series a company like what are we doing here like if you're an accelerator but you know you don't have

SPEAKER_119: customers yet maybe you don't have targets headcount if you don't know your account you should be able to get that in 10 seconds and then cash in the bank at a specific date you just open up your bank of america or wells fargo whatever your jam is and you take a look yeah yeah runway you look at your last three months burn you average it now you know your runway this is simple stuff folks now the update i got i kid you not was over a thousand words so a thousand words but didn't include any of that and that makes you terrified as an investor so that's the other thing as a founder you do need to know when you're scaring the out of your investors and that long long email without any numbers means things are screwed in the mind of an investor we could be wrong yeah but that's what we're thinking yeah because if you're gonna spend that time writing that email

SPEAKER_24: that's time you're not spending growing the business talking to customers working with your team

SPEAKER_35: and so like there better be there better be a really good reason why you spent all that time

Chamath Palihapitiya: writing all that stuff and why are the numbers not in here yeah number one you don't know them

SPEAKER_00: oh my god you don't know them we have a huge problem number two they're disastrous yeah okay they're disastrous isn't that the time to tell us so we can help yeah totally so if it is the second

SPEAKER_01: say question so if it's the first oh my god you're not qualified to run the company we need to get you help you know coo whatever number two if you're not sharing it with us because you're ashamed i understand that gut reaction you want to make it better just tell us because we might be able to tell you how to make it better because it's not our first time at the rodeo yeah so really founders please take this in you know if you're if you're not telling the investors we are now in our head than playing out every scenario just like zach and i if we're in a poker hand and zach and i are playing heads up and the board's got two hearts you know and there's no straight on the

SPEAKER_241: board and zach's raising and i'm raising okay i'm going well i've got a set and i've got top set

SPEAKER_265: he's got the middle set i hope i'm on a good draw here or he's on a flush draw okay and are we running it twice like we're now handicapping each other's hands and i'm going okay i guess i got to get all my

SPEAKER_119: money in here yeah you know and when we're trying to level each other we're trying to figure it out we do this for a living with the investments so when that update comes in know that zach and i are saying why did the founder not include the numbers yeah is it bad do they not know them

SPEAKER_43: do they need more support and so yeah you gotta your updates have to be tight and tight is right all right this is a great question how do you know if you're good at investing i'm investing my own money one to six k been at it three years a lot of companies are doing very well but it's all paper money is it just patience what a great question eric weiner how would you assess yourself in year

SPEAKER_119: three which if we do know the j curve and i'll ask my team to pull up a uh just do a google search

SPEAKER_43: for angel and j curve or pull up the angel university slide with it um there's a j curve in

SPEAKER_01: there the j curve says you start investing money your portfolio will be underwater in years two three

SPEAKER_43: that's the j curve but how do you know you know in that specific sophomore junior year

SPEAKER_24: if you're any good at this i mean i think the short answer is is it you you don't even if um everything is going up into the right and everything is marked up and you've had like i had a billion dollar exit 12 months after i started uh that meant nothing there was not an indication that i was good or smart or knew what i was doing and even now i look at my portfolio and you know the the meat of the portfolio is a number of companies where i have large ownership stakes and they become very large

SPEAKER_47: businesses but like they're still not cashed out they haven't gone public yet we haven't um we haven't taken them to the level where they turn into real money so even eight years into it i'm like i'm it's pretty clear that i'm on the right trajectory i like on the trajectory level i'm very good at it but

SPEAKER_404: until i return you know five plus x to my to my um five ten x to my my lps um i don't know we'll see

SPEAKER_01: here's what i would look at eric just to give you some signals now the j curve will bring it up here you start investing you put this money to work pull up the j curve uh the j cal curve again you have management fees you're deploying capital there's not enough time for the rounds to go up so you see here the initial commitment is you know the bar and you have management fees you're investing you know you sometimes business is shut down so you take those losses early and that means your portfolio by definition is under water if you were to invest in uh let's see he says he's invested in uh he's been

SPEAKER_43: at it three years he's putting that we don't have the total number that eric has invested but i'm going to just say let's say eric's invested in 10 companies so that's enough to have a little

SPEAKER_119: diversification i would rather see you at 20 let's say so let's put the number at 20. yeah you got 20 that means you got a good chance here you got stuff spread around and let's say you're

SPEAKER_01: only investing in companies that have products in marketing now and let's say half of them have revenue half don't but this they have half of them have products market okay let's say you get to your two or three here where you're at maybe three or four of the companies and let's say you put you know 5k into each so 20 times 5 100k all right you have four companies that went out of business they shut down they had seed funding it's year three they couldn't raise another round they couldn't they raised a bridge then they went out of business so you have negative 20 you can write those companies off now let's say three of the companies have raised up rounds and the other ones are still deploying and have some revenue but they haven't raised their next round very hard to know what's going on here you you know for sure that you have negative 20 so you're down to 80k of live investments the top three have raised up round so on paper they doubled in value so the 15 of those turned into 30 so you're plus 15 so you're at 95 on paper yeah how do you know you know well here's

SPEAKER_00: how you know um you don't but you can look for signals of you know is the revenue in those top

SPEAKER_119: companies growing zach said before i have 700 million in revenue for my investments zach is looking at his

SPEAKER_43: companies and just saying what's the revenue of the companies not the valuations the revenue so there's a proxy um you know just start looking at the revenue of the actual companies and know about power laws when this j curve here has that big spike towards the end that's representing one to three companies out of your yeah probably two companies out of your 20. so that's what you need to know is focus on the winners and what does their revenue look like to do a callback zach said earlier hey i like to plow more money into a company and i said well what's the the metric for that and he said 3x year over year revenue growth so that's what i would be looking for you got any three extras in there somebody had 200k this year they have 600k this year they had 600k last year they got 1.7 million this

SPEAKER_01: year that would be the early signs of winning but truth is you don't this is why vcs don't get fired uh but in their second or third funds when the chickens come home to roost in year 10. great question and eric replied he had 35 companies about 60k total so you'll know you'll know just uh

SPEAKER_00: stick with it and uh the more you can invest in like zach and i like to do of companies that have launched products and revenue the less zeros you're going to see so that would be a healthier portfolio now some people love to invest pre-product market fit i have some friends who do that god bless them the world needs them but my best advice when you're starting out is to play you know play the this is poker play good cards in position was the best advice i ever got any duke was like why are you playing 810 suited under the gun like are you really going to defend this position when you get a raise and a re-raise you're probably going to toss these cards so you just wasted that

SPEAKER_01: blind so just think that through play better cards play less cards play in position that's what we're talking about here anything to add to that that is great let's take another question from our amazing audience what's the best question we got right now zeb asks as a founder when should you

SPEAKER_02: provide pro rata to angels and when not okay so this is not from our side of the table this is in the

SPEAKER_272: founders i like the way you phrased the question zeb as a founder should you give pro rata to angels or

SPEAKER_47: not yeah so so i argue that you should you should giving pro rata you should only you should only ever agree to giving pro rata if you're forced to in best case scenario no one should ever have pro rata but basically you should as a founder you should have you should always have some amount of the allocation of the next round usually i would argue 10 or more that you get to allocate however you want to whoever's most useful and most helpful to you the company and i see this all the time where a new vc will come in and they'll say no no extra allocation for any of the existing investors and when that happens i send them an email i'm like look i've done this amount of work for this company i brought in this and director of engineering i brought in this salesperson and from now on i'm done i am

SPEAKER_92: no longer working for this business and you will get no more help from me and by the way i'm never going to send you another deal again and so so yeah you take you take a wartime stance oh yeah yeah like when you do that same here like if you cut me out of the room that i've been in from the beginning like let's go i'm you're dead to me and we're done swords out and let's go by the way this company and

SPEAKER_47: i i make sure the founders on the email like like i love you but like i no longer have an incentive to keep investing in the business my time and energy if i don't get to keep investing my capital and so like you and i think every founder should have the ability to reward the useful angels and if you're free riding like if they if you're an angel and you come on board you write a check and then you just

SPEAKER_40: you're done you're not helping at all well you shouldn't get any more allocation so i don't think it should be contractual pro rata i think it should be rewarded for earned earned pro rata i like i

SPEAKER_00: like your approach i think as a founder that's in your best interest um and for me as an investor

SPEAKER_01: i take a very simple approach we own over five percent we get a board observer seat we have pro rata we own over ten percent we get a full board seat that's basically where i've wound up with what i think is fair and i make it an option i'm unique as a early stage investor i know my value i know i could bring value to table and then every time i've had this come up where somebody tries to take away our board right or whatever or take away our pro rata i just get on

SPEAKER_00: the phone with them in fact i'm doing one of these calls today or tomorrow where some new investor you know they're putting in ten percent we own nine percent or eleven percent and they're like yeah we

SPEAKER_43: don't want them on the board they're you know whatever no prorata for them and then i just talk to them and i say exactly what you just discussed hey and i and i tell the founders this i actually give the founders a preemptive discussion about this hey know this when we get to the next round somebody might try to screw us if they screw us there's only one person left to screw that's you the founder we are in this together we're always going to have your back so therefore when people come to screw us you should fight for us because having us on your board having us as a major

SPEAKER_119: shareholder means we're going to fight for you and then every subsequent investor should be joining that philosophy we fight for each other so this the seed round lead and the series a fight together to

SPEAKER_43: find a series b who respects the series a and the c and then we all build consensus and i gotta tell you one of the beautiful things is looking at density or other wins calm everybody has been

SPEAKER_00: respectful and you know we you're able to have this great board dynamic where the seed investor the series a the series b and then people like oh we don't want to have too big of a board the lawyers

SPEAKER_119: come up with all these and the series a people come up with all these you know rules and it's like uh board can be seven it could be five doesn't matter but a board of five five where it's three from the series a or two from the series a you know is not as good actually as one from the series

SPEAKER_43: a one from the seed i would argue the seed investors who've been with the company longer

SPEAKER_01: might have a lot to add here so therefore like everybody chill out and think about the value i love your framing it's great framing who's providing value and give them the reward yeah and you know the no free rides is great now if you're an angel on the other side of the table if you're not a major investor you can try to get you're within your right to ask for pro rata but if you're under five percent or ten percent of the round should you really get it i like when they get it but you know i understand that they they really don't have the standing and then just have the debate on what a major investor is the major investor rights you know generally start at 25 of the round so if it's a million around 250 if it's a two million around 500 seems reasonable to me a 250k checks a lot of money so maybe it's 100k maybe it's 250k i think you really should you know negotiate that uh in good faith and i love your approach that anything

SPEAKER_24: to add to that oh the only thing i would say is that like it like if you can help the founder in the fundraise process like very early on help review the deck help with introductions to other

SPEAKER_47: investors help listen to the pitch and give them feedback um that keeps you in pole position to be useful as that round progresses and so one thing i will often do is when they're getting ready to raise the first thing i'll be like i'm in for a million bucks and it's on an email i'm gonna let you know right now and by the way you can tell all the new investors that i'm in at a million bucks already and so that helps them when they're going out fundraising because basically they know they're like hey i'm raising money and we already have zach he's in and these other investors are in and like so this is we're already going to be a competitive round and that helps in the process

SPEAKER_24: to make sure then i don't get screwed by the new investors um so ball control you're never going to

SPEAKER_47: have ball control the founder has ball control but if you're there ready to help them and support them

SPEAKER_01: in that process you're going to be in a much better spot all right tom s a question uh that's a really hard one have you ever advised a founder to leave the ceo role have you ever advised a founder that they should give up the ceo role i have had the discussion with a founder multiple times when either they were being pushed by a board or they were considering it themselves so i have had the conversation and i'm trying to think if my advice was ever to do it have you ever advised advised the

SPEAKER_218: founder to leave the ceo slot i've never had to proactively do it but i've had the conversation with people about i've not i've not what would it take for you to advise a founder that hey

SPEAKER_43: maybe the ceo slots not for you what would what we'd have to look like just incompetence um okay

SPEAKER_47: but i have i have told the companies that i've lost faith and i'm like just just let you know i no longer believe in the directions you're going and i don't believe that you're going to be able to achieve

SPEAKER_24: it that doesn't mean i'm right i i'm not i don't have my hands on the metal i don't have full visibility and everything that's going on i don't understand your space as well as you do it doesn't

SPEAKER_47: mean i'm right it does it does mean that i will no longer be investing in the business i'd be i'd be

SPEAKER_158: i have become a passive investor and i'm along for the ride um and so you'll be clear with them

SPEAKER_350: about that yeah that's yeah why do you do that for people who don't understand why you're

SPEAKER_294: taking the time to be that frank that candid with the founder why do you do that because i strongly

SPEAKER_24: believe in my view of where they're where they're at and what they're doing and where they're going and i'm like i don't think this is right and i'm now going to tell you how strongly i believe this and so that you can understand that when you take my opinion into your calculus because at the

SPEAKER_47: end of the day they're the ones making the decision they have more information than i do they're closer to the metal they they're gonna they have to make the best decision they can make and so me putting sort of my um my my stake in the ground there i think is helpful in that process

SPEAKER_01: and um when we had to do it a couple times ask them to buy you out in that situation or offer that like hey listen i don't want to be dead weight on the cap table if you want to buy me out in the

SPEAKER_24: next round that's what i have done that yeah i i have a round where it was david sachs uh was competing against another vc firm and uh the other vc firm was really came in with a bunch of like really silly ideas but they overpaid and i was like i was like look i think this is a big mistake uh i'm not participating in this round because i don't do like the direction these guys are going and i don't i don't think this makes i don't think it's a good idea uh and uh by the way if you want

SPEAKER_47: to buy me out i'm okay with that i think you should go with sax i think the direction he wants

SPEAKER_35: to go with you is better yep uh but they made the choice they made uh they didn't buy me out i'm along for the ride the company's doing well but uh they i think sax would have taken them further and faster

SPEAKER_473: but you know we'll see yeah i mean hard to say no to sax yeah it seems like i think the guy you want

SPEAKER_35: on on your team yeah this perfect company for him too all right he was literally personally going to join the board i was like what are you guys doing like that just doesn't make any sense

SPEAKER_176: to me yeah it's very rare to get a legendary guy on your board like that i it's kind of a hard one

SPEAKER_92: to turn down have you read um have you read the new uh book about paypal called the founders um i

SPEAKER_477: haven't read it yet but sax bought the rights to it for a movie and it's a good book and sax is

SPEAKER_480: oh you know what i'm reading right now he's like i wonder if he um if he uh to make sure that he got the hero uh card in there because he looks so good you know that's history is written by the victors

SPEAKER_76: exactly and for the people who underwrite it by the book right so it's kind of hard i don't know what happened there if you buy the movie rights of the book do you get a little extra shine in the book

SPEAKER_486: maybe because he looks like a genius all the way through that book i mean he is Gabriel playing

SPEAKER_339: david sax in the back um well it's interesting i'm reading a book called the power law which i

SPEAKER_101: am yeah i'm almost done with i recommend to everybody um it's a good listen it's got one of

SPEAKER_00: those like really professional folks i it basically goes through like the history of venture capital it feels like uh it wasn't primary research it feels like they took all of the existing books out there and they just made a nice package it's almost like a history channel like overview of the industry but it's a good one and it's very simple and it's very to the point and it really explains like chapter by chapter each of the uh seminal moments in the history of the valley you know kleiner with ellen pow but kleiner before that with tom perkins and his reign and it really goes into the dynamics of founders fund and how it was formed it goes into the facebook mashugana showing up in pajamas it's all rehash stuff i didn't find anything new in it for me there were a couple of stuff in the early days of venture that i was aware of

SPEAKER_43: but the fact that they streamed together in like 15 chapters each of the moments in history um was very reinforcing to me it was like somebody making an abstract on the history of venture

SPEAKER_00: capital and being like here's what you need to know these are the 15 important stories so it's kind of like a best of you know like one of those like you know what it reminded me of is like the 90s you

SPEAKER_43: know like vh1 does the 90s and it's like if you if you weren't there for it here's nirvana that's what you need to know about pearl jam but it's here smashing pumpkins and it's a it's a good book in that way uh so i recommend it to anybody who's starting off in in in vc as a as a as a good book to catch up and uh they do go into the whole formation of founders fund and the whole fight between moritz and sean parker and rule off coming in i haven't finished it somebody told me i mentioned towards the end um and they also go into the forming of y combinator which i knew but it was good to to sort of hear even more about it um and remember that moment in time i think they had a big impact

SPEAKER_101: they don't talk about angel list which i guess maybe you know they they kind of stopped talking about stuff in the 2010 range but i think angel list has had such a profound and syndicates has such a profound impact that's changing but they talk a lot about angels and super angels they talk a little

SPEAKER_43: bit about ron conway and his role in all of this um so i i think it's uh pretty great in terms of back to the original question of advisor the ceo so the reason i bring that up is because they talk a lot about removal of the ceo and that ended with larry and sergey that was like kind of the last time

SPEAKER_01: it happened and then founder's friend said we're going to let the founders as awkward as they are

SPEAKER_43: run these companies for me what would it take um malfeasance like doing something illegal yeah um

SPEAKER_00: i've had this situation a couple of times where you know founders would do something with the cap table that was like whoa that's maybe illegal and certainly delaware law would pounce on you like we're gonna all get sued situation and in those cases i do ask hey just please buy me out and get me off the cap table uh in one case i just said you know this company is now two years old you can buy me out at cash i put in yeah and i'll move on literally don't need to have a gain on it mazel tov i can put the money to work somewhere else and so i think that's what i try to do is if i really disagree

SPEAKER_01: you don't need me or i could become um i'll sell half my shares get me to under five percent don't need my board of service just semi-quarterly updates is what i ask and then i try to make

SPEAKER_43: that contractual that will get quarterly updates on the way out because you really do want people to

SPEAKER_01: live up to that expectation as we heard let's take a final question because here we are we got zach zach you're in the zone today really appreciate you coming here just drafting off of you bro you're

SPEAKER_92: always in the zone it's uh easiest for a living but you're a pro obviously that's it that's it that's

SPEAKER_01: it i just i enjoy our time together because it makes me a little mentally sharper thank you you're so generous let me let me ask you a question how long do you think the down market's going to be and what's your strategy as an investor as we go into let's just say the first two quarters were let's say if we are in fact in a recession we're close to it i think we all agree that that's the likely scenario so first half of the year two sequential quarters of either

SPEAKER_43: of down market in all likelihood we'll find out what q2 is crazy interest obviously a pullback late

SPEAKER_01: stage investors are gone what is zach coleus's strategy going into the next six months the second half of 2022 and then more importantly into 2023 what's your strategy so i have we're playing in a

SPEAKER_24: high stakes poker game yeah what's your strategy no i mean it's it's uh i've got a hundred million dollars of capital i gotta put to work that's awesome that's a very high stakes poker game that

SPEAKER_404: i play in yeah um yeah it's much higher stakes than i can afford to play with real money with my at least my my my cash flow um for now yeah we'll see it's uh so far you turn that 100 into 500 you

SPEAKER_510: get 20 of the game you know you could be sitting on 80 million so far i'm doing very well we'll see if

SPEAKER_15: it keeps going that way i gotta love this game i got a couple companies i want to see ipo and then uh

SPEAKER_512: but i'll be such a great feeling um let me tell you such a great feeling um um so i i think about

SPEAKER_47: life i think about all these things as a duality like um and and there's there's two approaches to

SPEAKER_24: this and they're both they're kind of kind of separate um from a macro perspective i i i feel

SPEAKER_47: like there is a ton of dumb stuff that got done over the last 10 years that is going to get wrung out as interest rates go up uh that's going to lead to a recession i i think it's like it's just so much like just silly expansion and just dumb investment that is going to lead to significant downturns

SPEAKER_24: globally so if you look at the chinese real estate market like i mean that they're going through

SPEAKER_47: that workout process and it's going to be long and slow and painful um when you have jamie diamond who i think is literally one of the smartest uh people in the world saying hey guys the pain is

SPEAKER_24: here it's coming i i listen to people like that and like when the best capital allocators in the world bezos and musk were selling uh at the end of last year i was watching that being like oh yeah sounds

SPEAKER_47: right um so so yeah i personally believe that like we have a lot more pain coming i just finished reading

SPEAKER_24: paul volker's book about sort of the late 70s and early 80s and like it was just really eye-opening to me the amount of pain uh that that they went through during that period and it's funny like you

SPEAKER_516: look at san francisco it's it's very which one is that changing fortunes it's called um uh keeping at it keeping at it um yeah good good good book uh and it's funny if you look at basically like san francisco

SPEAKER_47: it's very analogous to new york in the 60s new york and detroit in the 60s which is that it was like boom times everybody was rich and uh everyone was just building big buildings and everyone was just feeling how awesome they were the nifty 50 were on fire and so you ended up with this very progressive leadership in both of those cities that as the general market downturn in the coming into the 70s led to the hollowing out of both new york and detroit in a significant way uh i mean san francisco is following that to a t i mean absolutely to a t and so i i feel like we could have a lot of pain in front of us that said i'm an early stage investor and i look for companies that are doing new new things that like that it's not going into an established market they're trying to basically bring push a button we get a car level sort of like oh my god i want that immediately sort of new stuff and that's a 10-year play and so and it's rare for me to see those companies they don't come along very often and when i find them i'm going to back up the truck and buy as much of them as i can

SPEAKER_24: thankfully now at much lower prices than i would have had to pay you know a year or two later but i'm very very very scared about fall on capital two years ago a year ago there was no such thing as fall on capital risk everything was getting funded like you know across my portfolio i have over

SPEAKER_47: 60 businesses we only had one bankruptcy and that's because everything kept getting funded it's just like money money money money money and now yeah i'm scared of that i think we're going to see a significant number of these companies will raise a seed round and that will not be able to raise series a's and then we'll go out of business and so that is where i'm spending a lot of my time

SPEAKER_163: thinking about which is like can the fall on capital support these guys as they go forward because uh me or someone else because i'm not i'm not depending on the next investor yeah i have a similar

SPEAKER_43: strategy i'll probably deploy more capital uh or i'm hoping to deploy more capital into more deals uh in the coming year than i have ever done in my career and you know my thinking is the valuations will be reasonable once again and the number and the founders who are operating and able to get to

SPEAKER_119: you know their first customer not zero to one in the peter teal sense but zero to one in zero paid customers one paid customer that is a huge jump like getting somebody to put their credit card in huge jump if i can find those companies they've got the one paying customer two paying customers they got the five to fifteen million dollar valuation they've got the three to ten employees and i make that bet uh in a down market when other people don't want to i've got a founder who's resilient and clever enough resourceful enough so resourceful and resilient founders who have their product in market with a customer that's where i'm putting my energy and if you don't have a customer yet or you're still working on your product that's fine but i have some people who built a no code solution and got to five customers okay so they literally have no coding experience but they took bubble or web flow or notion plus zapier plus if this then that plus air table whatever glue they did and they duct taped something together and they delighted three customers i'm going to take that person yeah totally over the person who theatrically gives me the best pitch in the world yeah i just need people who can build and are resilient and resourceful because you're you're literally going out into the open ocean in a storm yeah i mean you're literally going into a maelstrom yeah and i need a macgyver out there on that boat yeah i need people who can look at the re the rations and say here's how we're going to ration this here's how we're going to get to the new world here's how we're going to survive we know how to get water from the sails we know how to kill seagulls yeah yeah i need you to survive if you don't got survival skills and you go try to do a shackleton type thing you're going to be on day two and you're going to be curled up in a ball on the lower deck

SPEAKER_241: asking for your mommy right and i i can't have those founders yeah i need the resourceful ones all

SPEAKER_01: right this has been amazing everybody follow uh zach on the social media zach coleus uh amazing job as always and he's pretty active on the twitter that's a great place to find him he likes to invest in companies like i do that have resourceful founders who build great products that have some amount of

SPEAKER_533: traction you know email us both yeah email us both if you got you know what we just described and uh

SPEAKER_01: you know we'll co-lead you around you got a sas company you got 25k in revenue that's that's

SPEAKER_43: that's the kill zone for zach and i right that's where we're coming in hot we're coming in hot with an offer so let's get a deal going here let's get a deal every time we do this we're trying to find a deal so email us what's your best email that you like to give out at coleus.bc okay and i'm jason calacanis.com uh email the two of us and say hey here's here's a jay-z deal get a jay-z deal going hashtag us jay-z deals all right we'll see you all next time on this week and stars bye bye zach thank you