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SPEAKER_03: Hey, everybody. Welcome to This Week in Startup. We're doing Ask Jason again with my boy, Zach Coleus, who is an angel investor who grinds it out just like me every day of his life, finding great companies to invest in.

SPEAKER_04: Welcome back to Ask Jason and Zach.

SPEAKER_05: Edgar on YouTube. Can you give chicken and egg problem solutions in marketplaces? Example, OpenTable getting into restaurants first by providing a solution. Once embedded, they got their customer and wheel going.

SPEAKER_04: He's referencing, of course, how OpenTable gave people a, essentially like an iPad, even before iPads, but a touchscreen, which you've all seen when you went to restaurants in the before times. And they would have a floor plan of the restaurant and the host or hostess would go beep, beep, boop, boop. And you'd see them hitting a bunch of tables and clicking something. And then they placed you in the table and then they knew when you left. So they knew, you know, all these great metrics on how many people were at the table, how many turnovers they did, you know, what time, what's the average time at a table, what was the time, what was the check at each table, you get the idea. And then, of course, you could book a table on OpenTable and they took a dollar per seat.

SPEAKER_07: Doesn't seem like a lot, but in a place that's $25 per customer in terms of spend, that dollar, if there was $5 in profits, wound up being 20% of the profits, leading to a little bit of problems. But, Zach, when you're starting a marketplace, what's a way to get around the chicken and the egg, the supply and the demand?

SPEAKER_10: You know, my favorite thinker on marketplaces is probably Sarah Tavill over at Benchmark. Yes. She's just written a tremendous amount of great stuff online.

SPEAKER_12: I recommend reading everything that she's written. And she really talks a lot about really identifying what she calls the white hot center of a marketplace, which is like really zeroing in on kind of like back to what you were saying earlier is that that group of people who have this just passionate need on both sides of the equation to really make that transaction happen. And figuring out how to basically start at that point and then slowly or rapidly, depending on how the market adapts forward. But like rolling out from there. And I think a lot of the marketplaces that I see, they struggle because they go in and try to boil the ocean on day one, as opposed to really zeroing in on where's that delta between what you can provide and what the customers, you know, what the customers need want. And just nailing that, because I think that that's just it's everything in marketplaces, because it's really about getting that flywheel spinning. And then they just spin off all of this great referral activity as a result.

SPEAKER_04: So very simple. And by the way, Sarah Tavill was on Angel season four, episode four. So if you type in Sarah Tavill, Angel podcast, you'll find that one. But, you know, the other thing is, obviously, as Zach is talking about, you could say, hey, we're going to do just as geo or we're going to do just this product. So, you know, masterworks.io does art. But adjacent to art might be, you know, you know, some million dollar Ferrari or 15 million dollar McLaren car. There's no reason masterworks.io, a great company, couldn't go into the adjacencies later. But if you start with just art, at least you know your ideal customer profile and you know the supply. Whereas you're not trying to supply both cars and art at the same time. So you can limit by the, you know, the product in the marketplace, or you can limit by geography. You can also limit by cost. There's so many vectors where you could narrow the focus to then make the flywheel go, right? So Airbnb is a perfect example. They kept telling them, do boats, do airplanes, do lawnmowers, do experiences. And they just did experiences in like year six or seven. They waited. They waited because there was so much critical mass to have. The other thing is you can buy supply. Really, supply you can buy. You can buy supply. Supply you can buy. You want to, you know, launch your own Uber competitor, you know, in Brooklyn. You go to Brooklyn Car Service Companies. You say, hey, we would like to have you on our app. We'll give you the phones. We'll give you the app. And we'll pay you and the driver 25% on top of whatever the ride is to be our base of users. Or we'll guarantee you a minimum. Substack is doing this. They just admitted, which I, you know, I kind of asked them and everybody denied it. And then Substack just came out. I guess they didn't want to give their, they didn't want to give their secret away. But they were paying advances for the first year to riders to get the big name riders. So you can assume Glenn Greenwald or maybe the guy from New York Magazine. I forgot his name right now. It was the guy from New York Magazine who was making people feel unsafe because he's right

SPEAKER_05: wing. I forgot his name. They drove him out of New York Magazine. He's also a gay man, which was also, I found fascinating. They figured out a way that he could make them feel uncomfortable because he's a conservative. Anyway, they then said, we'll pay you.

SPEAKER_04: Andrew Sullivan. Andrew Sullivan, thank you. They would pay you and then they would feed, they would recoup 90% of the subscriptions coming in. And then in year two, it flips. So I guess after you've paid back your debt, your advance, like a record label, the next year you get 90% and they take 10%. What a brilliant move by Substack to get the flywheel going. Incentives matter. Okay. And people are going to follow the leaders.

SPEAKER_05: Obviously, if Casey Newton's going to do it, if Eric Newcomer is going to do it, if Glenn Greenwald's going to do it, you get the idea.

SPEAKER_04: Eventually, it just works. Okay, here we go. Justice, the MBA on YouTube says, any tips on family and friends round, especially from

SPEAKER_24: non-accredited family investors, what will the agreement look like and how do you go about it? Thoughts, Zach?

SPEAKER_10: Never, never, never, ever, ever, ever take money from people who are not accredited investors. There you go.

SPEAKER_12: The problem is not if it's good for them. It is good for them. But if something bad happens, then lawsuits are going to make your life miserable and you should never do it. Not to mention friends and family. The way I always deal with that is I basically say to folks, look, if you want to invest in what I'm doing, great, but just assume you're going to lose it. And after I lose it, I'm probably going to do it in a dumb way. So if you still are okay with me losing all your money in a dumb way, then maybe we should do this, but really probably we shouldn't. Because your friendships and your family, the relationships are so much more valuable than what they're going to be able to give you in terms of capital. So taking money from them is just really painful.

SPEAKER_03: If you're very, if you feel like you have product market fit and you think there's going

SPEAKER_04: to be a huge winner and you want to do a mitzvah for them and you could say, I'm going to create an SPV for a couple of my family members. I'm not going to take any carry on it. I'm going to put it on the side over here.

SPEAKER_05: You can start an SPV with your attorneys or you could do it with a shore fund management, which we're investors in and they do our back end for the syndicate.

SPEAKER_04: Or Angelus doesn't provide this. I don't think. Does their bellwether, they do on bell?

SPEAKER_33: They do now have a set up your own SPV and bring your own investor sort of solution. Okay.

SPEAKER_04: So even Angelus too can do it. And so there's many ways to do it. It's talking about 10K in cost. So you could theoretically, you know, tell them I'm going to cap you each at 5K.

SPEAKER_07: So now the downside, you could still get to do it, obviously. It's pretty challenging. Your attorneys will be best to advise you on this. But if they're not accredited, and even if they are accredited, you could say, I'm setting up a 250K, you know, SPV. A friend of mine did this in his company. And he told all his friends, I'm letting 20 of my friends in here for, you know, on average 10 to 15K, would you like 10 or 15K? Or I think it might even be for him. He just said, you can each take 25K and it was 500. So he just said, and this is available to you. And these were all accredited friends, you know, poker buddies. And we all were just like, yeah, free money. We put the 25K in and came back and gave us 150. So you could do something like that. It's just an approach where you, they don't have to worry about signing it. You don't have to worry about them being too up in your business, you know, so you could also make the investment yourself on behalf of your parents or something like that. Or you could carve out some shares, put them in a trust. So you got to talk to your attorneys, but Zach's right. I mean, do you want to ruin Thanksgiving? Do you want people to have a problem at Hanukkah? You know, whatever holiday you love, do you really want, you know, that to happen at your holiday party? Maybe you do. Maybe you want to cancel holidays. It's miserable. So in that case, if you don't want to talk to your family, by all means, have them invest in your startup and get back zero and then relationship over. Let's go to the next question here. If you were 30 years old with 150K to invest, how would you invest it if you want to be an angel investor and lived in an area where you do not have a network? Whoa, a couple of qualifiers here. 30 years old with 150K to invest. Okay, so that's pretty good. You're not a kid, but you're not too old. You're getting investing early. That's great. It's doubled every seven years. You know, it's pretty good. How would you invest it if you want to be an angel investor? Okay, that's the key part of the sentence, Zach. If you want to be an angel investor, but they don't have a network. So those are the two key factors there, I think. We have four factors. What do you think, Zach?

SPEAKER_10: You know, I've always said that AngelList is really an awesome solution for folks who don't have access to deal flow themselves and they really want to be able to write small

SPEAKER_12: checks. You know, you can go on there and, you know, all of my deals, I set my minimum at $1,000 and you can just basically write, you know, a lot of checks into a lot of deals and you can start to develop that pattern recognition of what works and what doesn't. And you can really build that track record. And the thing is, is that in angel investing, it's not a one year, two year, three year time horizon. Like it's, you know, it's going to be a decade of hard work before you basically are at a position where one, you've seen the returns that will enable you to understand how good you are. Two, you learned all the hard, brutal lessons that are part of the game. And then three, you can really start to figure out how to like refine your craft and become, you know, good at this. So if you think about 150K, you know, that's, you know, 10 to 20 checks a year at $1,000 a check. A decade later, hopefully you're going to be in a great place. And AngelList works well for that. You couldn't do that if you went direct and there's really no other way to do it besides

SPEAKER_38: AngelList or your syndicate.

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SPEAKER_04: O-U-R-C-R-O-W-D dot com slash twist. Basically, you know, I'll just give you the list right now of platforms that, you know, I think have solid deal flow. AngelList, TheSyndicate.com, OurCrowd.com slash twist, partner of this program, but also has solid deal flow. So, republic.co, SeedInvest, that's my list. Not adding anybody, not taking anybody away. Those are the five I think you can read deal flow, you can read deal memos on all day long and get really smart. And if they have a minimum of 10K or 5K per deal, make a relationship with the principal, you know, whoever the lead is of that syndicate or who's the sponsor of those deals and say, I'm just getting starting out. I started out, I'd like to put in 5K instead of 25 or 10, or I'd like to put in 2K instead

SPEAKER_07: of 5. We have people, we have, usually most of our deals at TheSyndicate.com are 2K each as the minimum, which I think is the lowest in the industry. And sometimes people even say, like, can I put 1K in? And I'm like, you know, like, you've got $25 in wire fees or whatever. So, but okay, if we have the room, we'll let you do it. And for a while, we put it at 5K. And then I just found that it was throttling people's ability to do a lot of deals, Zach. And so I was like, you know what, I want to see people succeed. And I would much rather have 250 people put in 3K each, put 750K in, then watch, you know, whatever it is, 10 people put in 75, and less people participate, less people are helping. And it's a bigger crater when, as is the case, 60, 70, 80% of the time, a startup goes to zero. If you lose 3K on one startup, who cares? Like, if you're an accredited investor, seriously, who cares?

SPEAKER_04: Like, you can afford it. And if you have 10 and you lose all 30K, again, who cares? You're an accredited investor, you can afford it. But if you get to 20, you need to, what do you think, Zach? If you were just doing deals on AngelList and The Syndicate and the other sites I talked about, if you were talking to a brother or sister or mom or dad, cousin, whatever, somebody you really cared about, Bestie, how many deals would you tell them to try to get to in order to have a reasonable chance of hitting an outlier? Now, I'm not saying Stripe or Uber outlier, but it could be a billion-dollar outcome. You know, in other words, 100X.

SPEAKER_53: Yeah.

SPEAKER_04: How many deals do you think you got to hit?

SPEAKER_53: I think 100.

SPEAKER_55: You think I get 100 to have an outlier? Wow.

SPEAKER_56: Look, I think at the end of the day, this is a game where all the money gets made

SPEAKER_12: by a relatively small number of companies that are the outliers. If you look at the entire history of venture capital, there's just a handful of companies that make all the money. So we got Uber, we got Google, we have Zoom, we have, I guess, Snowflake now, we have eBay. Down that list, that list is not that long. And the thing is, is that in that scenario, the goal is, is put as many checks in as many companies as you can. And if you get one of those, it more than makes up for everything you missed. Like if you think about, if you think about the Uber example as a good example. If I went to you and said, okay, Jason, here's the deal. You can invest one penny per deal. And then every penny, I'm going to give you back 2,500 pennies or however, whatever the return was. I don't remember what the Uber return was. 5,000 X. It's a big number, right? Yeah. So, I'm going to give you 5,000 pennies back for every penny you invest. What's your strategy going to be? You're going to take those pennies. You're going to put them all over the fucking place. Because the goal is to find that one that returned you 5,000 more, and then you can do it again. And it's like, you're literally not necessarily spraying and praying, but pretty damn close to it.

SPEAKER_04: Yeah, I mean, I always tell people, I think 20, 30 is the minimum, and 50 is a good number. Zach's here telling you 100. I've heard people say 10. I think, you know, it's largely a function of what your personal experience has been. My personal experience has been, you know, with what I consider elite deal flow that I have, I hit something that does really well every 30 investments. So, okay, here we are. Or maybe even 50. So, it's a good visualization for you might be a roulette wheel, where, as we're talking about, you know, spreading a bunch of chips around. But instead of paying off, I don't know what hitting an individual number is at roulette. Do you know off the top of your head? What that is?

SPEAKER_05: Okay.

SPEAKER_65: I don't play negative EV games. Exactly. So, well, it's not negative EV if you do my Meringal system, where I just double my bet

SPEAKER_04: every time, as we've talked about. You just have to be willing to put everything on the line and face the risk of ruin, and you'll be fine. None of my researchers and none of my chat room folks can tell me what it is. Nobody can tell me what a roulette wheel plays. I'm opening right now. It's a Google search. Come on.

SPEAKER_73: I got three researchers. I got 100 people, 135 of you in the YouTube chat room. Roulette rule. Nobody knows you.

SPEAKER_76: Red pays one to one. Even one to one to one. The straight, a single number is 35 to one.

SPEAKER_03: Okay. So, here we go. 35 to one. Yeah. That's about right, what you were saying earlier. Exactly. And you wrote the book on this. Yes.

SPEAKER_04: Now imagine, instead of 35 or 37 to one, whatever you're looking at, now imagine you add a zero to that, and winning paid off 370 to one.

SPEAKER_80: Yeah.

SPEAKER_04: Then you would want to place a lot of bets, and you would be totally comfortable with losing over and over and over again.

SPEAKER_07: If you're betting a 37 to one odd, you are shocked if you do hit it. Yeah. It's not red versus black. And if you hit it versus black. And if you hit it versus black.

SPEAKER_81: Yeah.

SPEAKER_05: But if you got paid 350, you know, you're like, whoa. But, you know, it's kind of, I love playing roulette.

SPEAKER_07: When I'm waiting for friends to play poker, I sit at the roulette table. I get 500, I get a thou, and I play my little game. My little game is, I like to bet certain numbers. I put a little splashy cashy around.

SPEAKER_04: And then, if I start to get low on my stack and I haven't hit a couple big winners, I'll just take the entire 500, 1,000, and I put it on black.

SPEAKER_03: Lose. Then I double it. Now my 500 is 1,000. I put it on black. I lose 2,000. I lose 4,000. I lose. Then I put 8,000. The floor manager comes, says, that's your last bet, sir. And then I have to pride that I hit it.

SPEAKER_48: Every single time I've done this system, I have walked away either even or a winner. That doesn't mean you will, but I am a degenerate.

SPEAKER_86: There is a cap on the table for a reason. There's a reason there's a $10,000 cap on most roulette tables, because some idiot like

SPEAKER_05: me does this. The most I've lost in a row was seven. No, six. And I won on the seventh. That was a little nerve-wracking. Okay. Can't believe it's so much fun. All right. Here's from Kevin. As a solo technical founder, when, I like that you're technical, Kevin. That's good. Better to be a solo technical founder than a solo idea founder.

SPEAKER_07: When should I approach investors?

SPEAKER_04: Right before a soft launch, during alpha, whatever that is, I am worried that I might spend too much time building solo when I could get help with seed money. Okay. Good question. When would you approach?

SPEAKER_90: When do you think, Zach? If you were a technical founder?

SPEAKER_91: The answer is it depends on what you're doing.

SPEAKER_12: And I think the easy answer is that you should be talking to people at every stage of that process, right? Like if you should reach out to people who you know, or that if you don't know, you can start building relationships. You drop them a note and you say, look, this is what I'm doing. What do you think? And you're always looking for is feedback and investors can be a great source of feedback. What I'd like to say is one of the best ways to think about it is that you start with, when you start with investors, you kind of have, in the beginning, you have the people who know you. And so that's a good source of feedback. If you go to someone who knows you and say, hey, I'm doing this thing, what do you think? Would you invest in this? Maybe if they're not excited, then maybe they think you suck. And so that's good feedback. You should get that early. Another area is people who are experts in the space. So if you're building something in ad tech, you go to people who are in ad tech and you say, hey, what do you think about this idea? The feedback they give you can be incredibly valuable. And so I would start talking to investors as early as you can. Just don't waste too much time doing it. Investors generally, in my experience, tends to be very binary. Either you talk to them and they all want to invest, or you talk to a bunch of them and none of them want to invest. And you can beat a dead horse in that second category for a long time and waste a ton of time. And so the way I think about it is if you go to investors and you don't get a really good interest relatively quickly, you should probably just figure out how to go back to the drawing

SPEAKER_97: board, either change your approach, move the ball forward a little bit more, or do something to basically change that dynamic so that when you go back, you're in a better position.

SPEAKER_05: 100% agree. Ask for advice, get funding. Ask for funding, get advice is a saying we have out here.

SPEAKER_04: And it's largely true. If you are a developer and you've built an MVP and you've got a couple of people using it, yeah, there's a lot of investors who like to look at products early. Now, there are some investors like myself who will look at products and then tell you, but we're looking for you to have a little bit of traction when we invest because we want to be able to hand it off to a seed fund or a venture firm to do a large seed or even a Series A. But we still like to meet with you early. So, and then some venture firms have a rule, we'll just meet with anybody who comes in through a trusted source. Doesn't even matter if it's just an idea.

SPEAKER_07: When the market's hot like this, though, you're up against, and you have to be realistic. I don't know, Zach, how you feel about this, but people seem to be absolutely clueless as

SPEAKER_04: to what the state of the market is. If the state of the market is that we have, you know, a hundred people in our email box this month who have, you know, 10 to 100,000 a month in revenue and they're growing 20% a month, we're going to start with those. And the last thing we're going to do is take a meeting with an idea person or an MVP. If we have other deal flow to prioritize, that has more traction. So it is zero sum in this industry in terms of meetings, if your performance is so far behind the average performance or the elite performance. Am I right, Zach?

SPEAKER_99: Yeah, exactly correct.

SPEAKER_07: Yeah. So you have to be a, this is market dependent. I would say 15 years ago, if you had an idea, you could get a meeting with a venture capital as a receipt fund, certainly. Today, trying to get meetings with an idea or a mock-up, it just doesn't happen. I mean, in back in the day, in the 80s, they would meet with Stanford students and say, you know, or people coming out of Stanford and say, what did you, what was your research? You know, what did you do when you're at Stanford or MIT? You'd explain what you did. And they said, well, what ideas do you have for a business? Or we have some ideas for a business. Do you want to brainstorm something? So they would even brainstorm with smart people. That's how few people wanted to be entrepreneurs in the 80s in technology. Now you can build, you know, an MVP and a weekend with your friends and get funded, you know, the next week or get accepted to an accelerator.

SPEAKER_41: In the past, selling your business was miserable. We all know that. Months of negotiation, legal fees, and sometimes you'd have to watch the new owners just trash the business. You spent all those years building. And I have so many acquisition stories, I can tell you. I mean, even when I sold Weblogs Inc. and I had 100 blogs, they kept consolidating them and consolidating them down until now there's only two left in Gadget and Autoblog. And I just heard they're going to consolidate those down into Yahoo. It's so painful for me to look back and watch all of that stuff get ripped apart. Well, now there's Tiny. I had Tiny's co-founder, Andrew Wilkinson, on episode 1174 back in February, where he described their amazing new approach, Warren Buffett style, if you will, to acquisitions. He's buying stuff up. He's doing this incredible roll-up. Andrew and his team started Tiny to become the buyer they wish they could have sold to. Somebody who's fair. Somebody who's fast. And, of course, founder-friendly. If you're looking for a new home for your internet business, they'll respond in a day or two, make an offer within seven days, and close a straightforward deal in about 30 days. Tiny, T-I-N-Y, partners with founders to give them quick, straightforward exits that protect their team and culture. Get in touch with tinycapital.com, and they'll let you know within a couple of days if they

SPEAKER_103: want to buy your business. And for how much? You've got nothing to lose. Go ahead and visit tinycapital.com slash this week.

SPEAKER_05: Can you talk about Reg CF and crowdfunding laws? Starting on March 15th, as we know, companies raising capital under Reg CF may file to raise up to $5 million. That's up from the previous $1,070,000. It's a 5x increase. And, obviously, we know Gumroad closed $5 million in one day at $100 million cap with $10 million in revenue and $1 million in profit. So, it's a real business. I mean, this is not like an idea. This is a $10 million business. But they got 10 times revenue. And I guess if they had a million, they got 100 times plus times EBITDA. And Sahil Lavingia was on episode 1188, by the way, just for those people who want to

SPEAKER_106: know, and just recently on.

SPEAKER_107: What are your thoughts on this rule change?

SPEAKER_12: I think it's great for startups. You know, a new source of capital that comes from, you know, a different group of investors is always awesome. I think if you're an investor in a Reg CF, I think you need to be very careful, because you really need to figure out who is setting the price and the terms. And do they have sufficient skin in the game that you feel like they are taking risk with you and that you trust them to have done the research and diligence? You know, so, for instance, like if you go into an AngelList deal, let's say you look at like one of our, you know, our syndicates. Both you and I basically spend a lot more time digging in, doing the diligence, checking the references, figuring out is this a good investment? We have market experience about what basically the current sort of state of pricing is and where we think the next investors are interested in what sort of deals. And like, there's a whole bunch that goes into that process. But like, if I had, you know, a couple hundred other random Reg CF guys investing alongside me and no one had done the diligence, I would be terrified. Like, somebody's got to go in and do the hard work. This, it's like for every deal I do, there's, you know, there's a lot of work that goes into basically that one and all the deals that I ended up saying no to.

SPEAKER_05: This is the key thing we want to get across to everybody with equity crowdfunding platforms.

SPEAKER_04: The platform does diligence. They prepare the deal memo. But remember, that's a platform. There is no Zach or Jason in this formula to then, you know, go on and, you know, do the diligence for you. And this is going to be a challenge. So just be careful, please. When you do these to do your own research and diligence. I do think, you know, there's a follow-up question out here, you know, which is like,

SPEAKER_07: how does it change the landscape?

SPEAKER_04: I do think non-traditional companies that are not venture scale are the major beneficiary here. Because equity crowdfunding, you know, people might invest for affinity. They want to be associated with a project. They might invest because they want to see that project exist in the world like Kickstarter and Indiegogo people do. So they're just voting with their dollars. And their concept of return might be, if I get my money back or my money back times two or three, I'm stoked. Because I just have the affinity and I want to be involved in this. So I think there, be cognizant of the fact that a lot of times people who go to the equity platforms didn't clear market with venture capitalists or syndicates, and then they went and this is the funding of last resorts. Now, I'm not saying that to be mean, but that is a pattern we see, correct, Zach?

SPEAKER_118: Yep, absolutely.

SPEAKER_04: And it took, I think, now six or seven years for the syndicates to be considered equals to seed funds and venture capitalists. And even in a hot market like this, I sometimes, myself, will have a hard time convincing a founder to take the six weeks to do a syndicate deal and to do a webinar and to send updates when they're like, well, I could just give this to a venture firm and be done now.

SPEAKER_120: So I really want you, J-Cow, but it's going to take six weeks. And I'm like, oh, God, bummer.

SPEAKER_07: And I have to convince them, you know, not too often, but, you know, it has happened.

SPEAKER_121: So anyway, it's kind of cool that there's more people participating. And as long as they're not going to get hurt and they're only investing what they can afford to lose, I'm all for it. Just like you can go to, I have no problem with you going and playing in the world series of poker or playing blackjack, mazel tov, if you want to bet on sports, go for it.

SPEAKER_04: If you want to bet on startups, go for it. Just please don't face the risk of ruin. Only bet, and I'm using the word bet for a reason, not invest. Only bet, only gamble on startups or crypto or actual real world wagering what you can afford

SPEAKER_24: to lose.

SPEAKER_90: Yeah.

SPEAKER_127: I think that's sage advice.

SPEAKER_90: There you go.

SPEAKER_05: So here we go. This is from YouTube. Jeff. Does building a product that could potentially be replicated by any big tech company matter?

SPEAKER_104: Should it be a small or large consideration for a startup? And if it's a concern, what helps to mitigate this issue? Great question. Go ahead, Zach. You take it first.

SPEAKER_12: I think, you know, 10, 15 years ago, there was a common sort of VC trope of, you know, what would happen if Google does this? What would happen if Facebook does this? But I think if you look at sort of any of the big platforms, their ability to copy is very constrained. Like they can copy some things sometimes, but they generally do a worse job at it. And it's, you know, they've only got so much strategic focus area to put their energies into. And usually it's less than five things. And one usually is their core business. Two is their regulators. Three is their existing users. So maybe they can do some other things, but it's really, really challenging. So of all the things to worry about, the big companies coming in and copying you is at the very bottom of my list. Now that said, one provides a little bit at here is if you're building on top of their platform, the opposite is true, which is like, for instance, if you're building on top of somebody's ad platform, the job of the PM in that ad platform, like their job is to literally look at all the companies that are building on top of their platform, copy what you're building, give it away for free to all their existing users, and just to drive your margin to zero.

SPEAKER_15: So like, if you're building on a platform, just you will get totally copied and ripped off.

SPEAKER_05: Here's the interesting thing that I like to remind entrepreneurs, the big company, sure,

SPEAKER_04: they have distribution, they have a lot of talented people, but little projects get treated like little projects inside their companies until the founder, God, king, or queen decides it's not. So, audio spaces, great example in terms of this year, and so is Zoom. If you look at Clubhouse, Twitter built their Clubhouse competitor, coexister, clone, whatever you want to call it, in record time. This happens sometimes. What does that do? It validates Clubhouse even more as the independent pure play, which then makes everybody, you know, get attracted to the sector even more, both investors, users, advertisers, etc. And when Facebook and Instagram and Snapchat and 20 other competitors, you know, go to market

SPEAKER_07: with their audio, casual audio products, there'll be five winners, probably six winners, but it will probably only reinforce Clubhouse as the pure play leader in the space. That being said, you know, there are times when a really dogged competitor and a dogged big company can beat up a small company, but it usually results only in the company getting beat up, becoming worth more money. Snapchat was supposedly going to be killed by Instagram, Facebook, LinkedIn, Twitter, and everybody copying the stories feature. Snapchat is at an all-time high, I believe, and they have surged. It may not be in our public consciousness as much, and certainly they don't serve as much stories as everybody else, but they're doing great as a business. If you have this loser attitude that you can't compete and you're afraid of big companies, remember, Zoom came out and just walloped Skype, Cisco, Google Hangouts, and every other product in between. Slack came out and beat Yammer and every other chat product and IRC and free products. So there is always room for somebody to do something elite, superhuman comes to mind, ah, yum yum in my portfolio, Notion to Google Docs, Airtable to Google Sheets, and Google Sheets to Excel. There is always room for more innovation. Take this out of your mind. This is loser think. Don't think like a loser. All right.

SPEAKER_76: Dude, you're starting to sound like those MLM guys. I am, I am, I am, oh my gosh. You've been spending too much time listening to those guys.

SPEAKER_120: I know, I know, I'm getting all fired up, trying to get people, I'm turning into a motivational

Chamath Palihapitiya: speaker. Listen, let me just go back to myself. I'm terrified, I'm terrified.

SPEAKER_03: I'm going to go back. Thank you for calling me out. I'm going to go back to my normal Brooklyn. Listen, don't be a schmuck. Just build the fucking thing. Stop worrying so much. All right, here's my JT.

SPEAKER_02: If you are thinking about what you can't do, then how are you going to do anything? Tom Cruise doesn't think about who's going to be in Mission Impossible. He thinks about making every mission possible. I'm starting to talk in these like, you know, NLP. I'm neuro-linguistically programming the audience of This Week in Startups to win and to send me $2,000 in Bitcoin. I know you're taking that Bitcoin, JT. I got the receipts. I got the receipts, JT.

SPEAKER_146: One of the people, allegedly, who you asked to ship Bitcoin to them, they sent me the screenshots. I have the receipts, JT.

SPEAKER_149: I love it. You're creating a beef. I don't know if it's true.

SPEAKER_07: I don't know if it's true that you're asking Clubhouse members to ship you Bitcoin. But I have some screenshots that are allegedly from you asking people to ship you Bitcoin.

SPEAKER_151: Oh, that's fucked up.

SPEAKER_07: This is what somebody told me, Zach, is that those Clubhouse rooms and those MLM rooms are running 24 hours a day, you know. And what they're doing is they make everybody who's involved in this a moderator. They all get all these followers. Then what they do is somebody told me they're converting one person an hour at $2,000 an hour. So that means every 24 hours, these guys allegedly could be potentially grifting 50K a day off the platform. Printing money. And they're basically printing money.

SPEAKER_121: And people are falling for, you know, 2K at a time. I find it hard to believe.

SPEAKER_27: Allegedly. That sounds difficult. Like, I think a lot of the users in this room are fake users. That's what I heard, too, is that it's like three-card Monty. Yeah, yeah. You create a bunch of fake users, make the room seem big.

SPEAKER_10: Yeah.

SPEAKER_05: Well, also, I think what's happening is they're bringing up people who are part of the act.

SPEAKER_04: In other words, they're Confederates. And so the Confederates, the spies, come up and they're like, JT, I have a question for you. And then JT answers, oh, my God, JT, it's the best advice. I totally unlocked everything. Or, JT, you gave me advice last week, blah, blah, blah. Or whoever, Brad. And they're basically, this is what somebody told me, it's alleged. So when we go to our depositions, I said alleged 18 times, but allegedly, there are stooges. And they're stumbling for them.

SPEAKER_03: And somebody said that's what they do in the real world, too. In the audience, at these coaching events, they have plants in the audience, I'm told.

SPEAKER_163: Yeah. Of course.

SPEAKER_03: Of course. It sounds reasonable to me.

SPEAKER_05: Oh, and yeah, you know what's even crazier?

SPEAKER_04: They do this follow, yeah, they do that follow scam, where they ask everybody to follow each other. They say it's a reciprocal follow. But when you follow somebody, it tells all your friends you're being followed. So they basically worked out the algorithm.

SPEAKER_07: But I think they're all going to get kicked off, because I think enough people will complain who feel that it's questionable, or maybe it is questionable. And once you get enough people complaining, the platforms tend to ban your account for life. So I'm not saying you should report people en masse.

SPEAKER_101: But I'm not saying that if you saw somebody doing something you think was suspect, you shouldn't. If you see something, say something. Click the report button, say something.

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SPEAKER_04: your first purchase.

SPEAKER_05: How many users does a social app need to be, have to be at, to be on your radar? Great question. See Vidaya on YouTube. For you, Zach, how many, let's, let's make it more specific.

SPEAKER_173: How many daily users in a social app do you need to see for you to go? That's interesting.

SPEAKER_32: I'm a complete idiot in social. Okay. I have, I have no ability to do that math.

SPEAKER_04: Okay. I can answer the question then. I am less concerned about the number of users as opposed to the engagement of those users and the growth of those users. And do they come back? So let's pause for a second and explain this for people who are not in the industry. You have a hundred people using Twitter a day in the early days. Because what I want to know is cohort wise of the people who downloaded and installed it this week, how many of them came back in 10 weeks? In other words, how valuable was the service? If only two people came back, that could be problematic. But if two thirds came back, that could be inspiring. Then not only how many people are using it every day, but what's the average session like? And as I said, in another related question, how often do the top 10% of users use the app? Because that's kind of who you're building the app for is that top 20%, let's say. And what's their behavior like? So just the number in isolation might not be that valuable. And every business has a different monetization component. If you were to type in a Google search for mesophilioma and do it in two seconds and click a link,

SPEAKER_07: you just made YouTube, I'm sorry, Google, I believe like 50 or $100.

SPEAKER_05: Because that is what the ambulance chasing, you know, class action lawsuit people pay for each one of those clicks.

SPEAKER_07: Now, if you were to spend three seconds on Instagram, they can make $0. Because you didn't even stay on long enough to see an ad, let alone click on it.

SPEAKER_04: So in different business models, engagement gets valued different ways. And you just have to be aware of that. If you're going to buy a VOD movie for $30, and the platform gets 30% of that. They made nine bucks when you made that decision. They made nine bucks for that one minute decision for you to buy a film. But if you watch YouTube videos for nine minutes, they may get two ads and they'll make seven cents or one cent. So just keep in mind, it's not just the engagement, it's also the business model. But I'll just say, if you're growing 5% week over week, I'm interested. 5% week over week. You had 100 people this week, you had 105 next week. And the week after, you got 112. You know, you just keep doing that math. Over 5%, there's something going right. Now, God forbid, it's 10% week over week. Now something's going fabulously right. You're doubling every seven or so weeks, as opposed to every 14 weeks.

SPEAKER_05: So that's what I'm looking at. Anything you want to add there, Zach? I heard you chime in there.

SPEAKER_180: No.

SPEAKER_121: Let's do two more.

SPEAKER_180: I just got edumacated. I love it.

SPEAKER_121: Just, you know, how to think about the consumer space.

SPEAKER_182: Just what to send you. Now, if I see anything like that in social, just send it on through. And when in doubt, send it through.

SPEAKER_36: And by the way, we give 10% carry share if you are the first person to introduce us to a company that you've met with and that we wind up investing in. So that's pretty good.

SPEAKER_121: It would be like seven figures if you introduced me to Uber, Robinhood, or Com. So keep that in mind, folks. It could happen.

SPEAKER_10: Here we go. Oh, God, I wouldn't be dumb enough to not do the deals myself. Exactly.

SPEAKER_36: Well, this is for civilians who, you know, might run into a company and their friend, they get to wet their beak. Everybody should wet their beak.

SPEAKER_187: Wet their beak.

SPEAKER_36: Bernie Seabold asks on YouTube,

SPEAKER_05: I'm about to graduate college. Congratulations. Okay. And have so many career options. All right, slow down, Captain. Yeah.

SPEAKER_188: Look at this guy. That's cool. That's great. God bless you. Okay, Bert. All right. I have so many career options. Okay, we've got it. Good.

SPEAKER_189: It's lucky. Maybe he worked hard. Maybe he's been cranking.

SPEAKER_107: All right, here we go. I know where this is going. If you were in my shoes, what industry would you go into? And what would your five to 10 plan be?

SPEAKER_121: Okay.

SPEAKER_04: Let's help Benny figure out all the different options. he has, Zach. You know this is going to lead to Benny asking for a job working for Zach, but okay.

SPEAKER_194: I don't hire people, so that's easy.

SPEAKER_04: Maybe Benny.

David Friedberg: You know, Benny's in strong demand to you. You might want to reconsider your position, Zach. Yeah, I know. I'm looking for a research. He's a hot commodity.

SPEAKER_200: I'm looking for four researchers right now. Two at inside. Really? I really would.

SPEAKER_201: Jason's tiring. Yeah, if you want to make 60 grand and break into the game,

SPEAKER_202: that's a pretty good gig. You know my email. That's the way to do it.

SPEAKER_201: I wish I had broken in with you in the beginning. I would have been educated from day one. He would have been educated when I was trying to figure it out.

SPEAKER_205: Yeah. He would have been learning for somebody who knew jack shit. All right, here we go.

SPEAKER_05: Yeah, we got together. We could have learned. Absolutely. Listen, you know, that's the great thing about our industry. I tell people, imagine they threw you in a giant living room

SPEAKER_04: where there's a light switch, and it was completely pitch dark.

SPEAKER_207: That's our job. We just feel around until we happen to hit a light switch. Then the light comes on. We look like geniuses. Except we're neck deep in mud.

SPEAKER_208: Yes. And there's like crocodiles biting at us constantly. Yes. But there's giant gold nuggets. Somewhere. Like just kind of floating around. You turn the light off, there's like an alligator right next to your head.

SPEAKER_213: Hello. Oops. Turn the light off. Turn the light off. Right?

SPEAKER_65: All right, what do we give this guy for advice? Benny's doing so great. He doesn't need advice. But what should you just plan? How should you think about a career?

SPEAKER_12: The easiest answer is find the thing that you wake up in the morning

SPEAKER_76: and you enjoy doing and that doesn't feel like work and go do that. Doesn't fucking matter what you do.

SPEAKER_65: As long as you wake up every day happy, you're good to go. All right, Benny. So we've narrowed down your career choices, Benny,

SPEAKER_03: to playing Call of Duty or Fortnite and smoking cannabis. So either you should work for a cannabis company or Fortnite.

SPEAKER_05: One of those two. And if you could make a crossover cannabis for gamers, you would have those two circles. No, here's what I'm going to tell you. I might invest in that. That'd be a good idea. Oh, wow. Cannabis for gamers. Cannabis for gamers.

SPEAKER_224: We're workshopping here. We can figure out a way to make it, you know. I don't think you want to slow your reaction time down with some gummies. No, no, no.

SPEAKER_226: We need to speed it up.

SPEAKER_12: We need to figure out maybe maybe more peaceful. I have zen. If someone's trying to kill me, I can just like...

SPEAKER_04: Some world-class poker player told me that they started doing cannabis at the 10-hour tournaments because they found that they didn't get on tilt and it took the edge off.

SPEAKER_05: And I was like, do you fall asleep at the table? But I guess, you know, everybody's wired differently. Whatever. Your mileage may vary. Here's my advice for you, Benny. I'm going to give you the best advice of your life. I'm going to build off Zach. So you've got to pick something you're going to love doing every day. So there's your skills and then there's the vertical, right? So let's assume you've got a skill. You're a developer or you're a designer, UX person or you're a sales executive, something. You're an accountant, lawyer, whatever. You've got some base skill. And you can find a vertical you want to be in.

SPEAKER_04: So you love collectibles. You love video games. You love SaaS software, whatever it is you love. And you have the skill. We'll assume you have those two things. I want you to think about your first decade as placing three bets. Um, and it's swinging the bat three times, you know, three strikes kind of situation. Three, three, three pitches. You get to hit swing up.

SPEAKER_07: The first one is I want you to work for a startup so that you can get a ton of experience. The second is I want you to work for a big company so you can get a different type of experience. And the third is I want you to start your own company. Now, in terms of the order in which you do these, I would do number one and number two, it doesn't matter. You can work at a big company, get a bunch of experience, then go to a startup. We can go to a startup and then go to a big company. Probably doesn't matter all that much. At a big company, you're going to see what happens at scale, how inefficient it is, and they're going to specialize you. You're going to do one-tenth of one job. You'll be part of the UX or design division, which will be 10 people building the design of, you know, some product like, uh, you know, Twitter or whatever. Now, put yourself in a small company. They'll give you 10 jobs to do one person or five jobs for one person or three jobs for one person. So you'll be doing the design, the UX and the customer support. So you're going to get a lot more experience. You're going to be overwhelmed. You're going to be busting your ass. And what I want you to do in both of those jobs is go to whoever's running the company and say, I want to take on as much as you'll give me. I'll work any number of hours. If you need me for any project on the weekend, call me anytime, text me at night. I will pick up my phone and I really want to advance my career and I want to get where you are as quick as possible. So to the extent I can be helpful, do not be bashful about giving me more work to do. And if anybody drops the ball on any project, I would like to pick it up and I'll learn on my time, not yours. So if I don't know how to do, you know, mock-ups and to do wireframes, I'll figure it out on my time on the weekend. It, nobody says this to their boss. And if they did, the boss would immediately give them a raise and give them more work. But nobody does that because everybody's so soft and weak or meek when they're early in their careers that they're not ambitious enough. I'm going to tell you, Benny, to be ambitious and to say it and know you could transcribe what I said and you AB test that with your bosses and you tell, you come back to me and tell me how good that worked.

SPEAKER_121: Now, then the secret is after 10 years is to start your own company and have equity in the company or co-found a company or get some meaningful equity stake or some piece of the carry so that you can actually generate wealth. Good. Zach, do you have a follow-up question on behalf of Benny?

SPEAKER_234: Yeah. I think the, that was awesome.

SPEAKER_10: I think you should just do everything Jason said. The trick is to find a job where you can fail, which means you're learning so quickly and the,

SPEAKER_12: but the company that you're at is growing so quickly that it's okay that you fail over and over and over again, but you fail at harder and harder and harder problems. So every time you solve a problem, they throw you at a harder one and they're okay with you failing and just learn as fast as you possibly fucking can and you'll end up in a great place.

SPEAKER_04: All right, everybody. This has been Ask Jason and Zach. Thank you for tuning in live. Please follow our YouTube channel and you will get the random notice that we're going live

SPEAKER_05: or follow Zach Coleus on the Twitter. What's your Twitter handle again, Zach? Zach Coleus. That's Z-A-C-H-C-O-E-L-A-U-S. There you go.

SPEAKER_04: And we'll put it in the show notes as well. Zach, you are a mensch for doing this with me. I'm Jason on Twitter and the show is TWI Startups on Twitter and on Instagram. I'm Jason on Twitter and Instagram.

SPEAKER_109: No, Jason Statham and Jason Bateman. Stop emailing.

SPEAKER_03: Neither of you are getting me at Jason's. Hi, Bateman. I think you're hilarious. I love Ozark. You have range. Statham, you and I share a body type. A body type. A body type and increasingly a hairstyle. I'm going to be right behind you. And yeah, I appreciate both of you. I'm fans of both of you even. But neither of you, no matter how many cameos in your shows, will get the at Jason handle.

SPEAKER_19: Period. End of story. Enough Jason Bateman. Bam. No, I mean, Bateman is constant. I mean, it's. What the fuck?

SPEAKER_243: You're the richer, cooler Jason. I don't know about that. I think that Ozark, I think that Netflix money is.

SPEAKER_03: He's the star of Ozark. That's a great show. I mean, he's got the last season coming up. I think they gave him 10 million on that at least.

SPEAKER_244: Oh man, you make 10 million in a week. There's nothing.

SPEAKER_245: Well, man, it's not so far off than a couple of weeks of my career, I'll be honest. All right, here we go, everybody.

SPEAKER_243: We'll see you next time on This Week in Stardust. Bye-bye.