SPEAKER_00: We are back with the final episode of this series, the angel series that we do. And we've had so many great three cycle investors and entrepreneurs on this, they've imparted so much wisdom. And today I'm joined by friend of the pod in front of our firm, Jenny left court, she is from freestyle capital, we have a great discussion about venture capitalists and which business models have a bias towards and avoiding hype cycles, and really nailing non consensus bets. I think that was probably the highlight of this discussion for me. And this podcast is really a way for me to catch up with people who I think are really smart or new founders who want to change the world. That's the excuse I do this podcast just to hang out and talk to smart people and today's episode is no different. She wound up investing very early in companies that you may have heard of like better up and discord, you know, companies worth billions of dollars, 10s of billions of dollars. So we chop it up for an hour. And I came to the conclusion at the end, she needs to come on every year and just share this wisdom. And just a small programming note here, these three cycle investors, people with a lot of wisdom, wisdom, they've been really great for the show, I've gotten tremendous feedback from you, the audience, in terms of having people on who worked through the last two, three, four cycles in the case of Andy Ratcliffe. So if you have anybody who you know, who's been working through three cycles, who's been vibrant and dogged, go ahead and have them email producers at this week in startups.com or email us and just tip us off. Okay, it's going to be a great show. Stick with us.

SPEAKER_02: This week in startups is brought to you by prenuvo. Catch health conditions before they become crises with the prenuvo full body MRI scan. Get $300 off at prenuvo.com slash twist. LinkedIn jobs. A business is only as strong as its people and every hire matters. Post your first job for free at linkedin.com slash angel. And Miro helps take ideas from in your head to out there in the world with its ability to democratize collaboration and input. Sign up for free at Miro.com slash startups.

SPEAKER_07: Okay, everybody. Welcome back to this week in startups is our angel series. We do series of 10 episodes where we talk to capital allocators, angel investors, venture capitalists, seed funds. And this time around, we thought, Hmm, we're going through this boom, bust cycle again here in the technology industry. Who's got some battle scars? Who's got some deep knowledge of what happens in a boom, bust cycle? So we look for people who had lived through, say, 20 2008, the great financial crisis, the dot com era. And we've even had some people say,

SPEAKER_00: people who live through the 87 boom, bust cycle. And even we discovered there was an 83 video game bus cycle in Silicon Valley. So there's been a number of these and friend of the pod Jenny left court is here. She's from free style capital. We co invest in a lot of companies together. And she started investing in startups 25 years ago. She's a GP at freestyle, as I mentioned, and she was the co founder of all raise, which is an amazing organization that I think has had a dramatic impact. Welcome back.

SPEAKER_07: Welcome back to the program. Jenny. How are you? I'm doing great. Thanks for having me. All raise that started seven, eight years ago, I think I was gonna say five or six years ago, six. Yeah. Yeah. And the mission was to get more women into venture capital. How has that gone? Because I remember when I started 12 years ago, as a scout for Sequoia, the number of women in positions of check writing. Yeah, it was a very small number. And you were one of them alienly.

SPEAKER_18: You know, Mary Meeker. I mean, it was it was such a small number that you could actually just say the first names of the women in the industry who had check writing ability. How has that changed in the last six years since always?

SPEAKER_20: Yeah, so I'll first start with all raises mission is to diversify tech period. So it isn't just in the check writers. There's also in the percentage of VC funding that goes to women is pathetic and to people of color. I mean, it's abysmal, abysmal. So we sort of looked at the world and said, Well, there are two parts to this, right? There's the check writer part. And there's all the data that supports that when firms have women at the sort of decision making part of the table, they actually do support more diverse teams. And so we felt like, well, okay, one area that we could really make a difference would be getting more women check writers, more decision makers at these firms. And that went incredibly well. I don't have the latest data in front of me, but that grew a ton in the last like five or six years. On the flip side, the percentage of venture capital that went to female founded teams, or even people of color, which we also track, hasn't really budged. And so, you know, I could almost take up too much time talking about the theories as to why. So hopefully, in time, that will change. But I don't think that the influx of capital going to startups, especially later stage startups during COVID, I think also really hurt that number.

SPEAKER_07: This is a very, it's a very subtle point. That you know, it's you really have to parse these numbers because you have a lagging effect. Exactly. Later stage companies raise just very, very large sums of money $100 million round, even $1 billion round to $500 million round. And that one round that one $500 million round could be an entire quarter of seed investments, you know, at $2 million, you know, it could be 250 of those. So we really do need to, in order to see the change, you've got to look at the seed rounds, the angel rounds, what's coming out of accelerators, I think in the short term, and then long term, obviously, we want to see parity there.

SPEAKER_20: Totally agree. And just to tell you, that's a really hard data point to find, because so many of us, I don't know about you, but so many times when we invest at seed, we don't announce for a long time. So we kept on trying to watch that number, because to your point, that's the that's the percentage that matters, that sort of dictates the future, but it's a really hard number to get.

SPEAKER_07: It's a hard number to get. And then anecdotally, though, I can tell you, we see many, many, many more diverse founders, women, people of color, underrepresented, broadly speaking, in the early stage at accelerators, and just more people who are starting companies. So this is a change that's going to take decades, I think, to, to kind of get the crank going, because it's, like we said, the large amounts of money come to the later stage companies. And that means, you would need to look at the number of deals, not the dollars to really get a more accurate representation of what's happening, I think. And so when I see those numbers, a 1% or 2%, it's terrible. But the thing that gives me the green shoots of hope is just watching the number of female co founders of venture firms, too. I mean, that's been a real bright spot, you know, Aileen Lee doing cowboy ventures. Yeah. And yourself with freestyle, like,

SPEAKER_20: there's so many women who have started their own firms, running firms have very, you know, high power positions at key firms, it's changed a lot. And I will, I give a lot of credit to the leaders, right, like the Sequoias of the world, and reasons who sort of said, Hey, this is important, and they became modern. And then you couldn't be the firm that now had, you know, five white dudes.

SPEAKER_37: It's just, or it's way harder to say competitive, because the founders actually care, the founders want diversity.

SPEAKER_07: Yeah, I think that's exactly right. And it just seems out of touch when people go to a web page of partners. And it's like you said, five white dudes from Stanford, or, you know, HBS, or wherever they have to come from.

SPEAKER_40: Not that there's anything wrong with white dudes, inherently, but the percentage is a little bit off.

SPEAKER_20: What those guys do is then they take all the executive assistants, and they mix them in so that the partners in the case, so that at least the picture looks a little bit more diverse. But anyone who clicks in.

SPEAKER_43: Let's put everybody alphabetically on the team page. Exactly.

SPEAKER_07: And let's call everybody a partner, even if they're a researcher or an analyst, or they run the PR. I mean, it's, gosh, it's hard not to be cynical. But that was a pretty, that's the height of cynicism, is to just give everybody the same title at your venture firm.

SPEAKER_46: I mean, it's still going on today, just so you know. Yeah, I'm watching it.

SPEAKER_07: I mean, the good news, though, I mean, if you look at diversity in the industry, even at the large companies, the people running companies, you see many female CEOs, and you see many people of color, I mean, specifically Indians running Microsoft, Google, etc, Twitter for a time period. So it's not like the change is not possible, but it is slow. The one thing I give our industry credit for, I think, is tracking the numbers, and at least being transparent about it, or, you know, transparent to the extent you can, I guess. Yeah.

SPEAKER_50: And so it feels, I don't know, what do you think? What would you give the industry if you're giving a letter grade?

SPEAKER_20: I think an industry that really prides itself on being a meritocracy and analytical has been really, really slow to appreciate the data. And I think there are a lot of super smart, analytical, data-oriented people who have looked at the data and said, that's bulls**t, right? And that took years to get over. And I think, so I give us a B-minded. I mean, some get an A and some get an F. But overall? Overall, B. The last five years? B. Okay, I was going to say B, yeah. And I will say that, unfortunately, I know that you're looking for the silver lining. I am too. I'm always looking for the good news and like the seed companies and being more diverse, etc. But the truth is that a white man just raises capital way better than people of color or women, period. And why is that? There's just a ton of unconscious bias in the valley, right? And the valley, even though the valley is now spread, it's still a little insular. So I think it will just take time.

SPEAKER_63: Listen, everybody, you've heard me talk about PreNuvo a ton of times on This Week in Startups and All In. What is PreNuvo? It is a full-body advanced MRI scan, okay? They're able to detect cancerous tumors at stage one and about 500 other conditions. It takes less than 60 minutes. And unlike other screening mechanisms, PreNuvo does not use radiation or contrast, making it a safe preventative screening tool. It's proactive healthcare rather than reactive. Now you're saying, J-Cal, why should I trust you on this? Because I did it! And it was amazing. It's very easy. If you're a little claustrophobic, nothing to worry about. You can get a little pill if you want to, you know, take something to relax. Or you just put on Netflix like I did and you watch Glass Onion. And all of a sudden, the hour is over before you know it. And just in a couple of days, you're going to get back your results. They have given life-saving diagnoses to 1 in 20 people, 5%. Many of these diagnoses occur in asymptomatic patients. That means people who aren't showing anything, okay? 95% of the cancers found are at stage one, where treatment is much easier and much more likely to be successful. Don't I know it? I have two parents who are cancer survivors. I wish this technology had existed 20 years ago. You can get $300 off at prenuvo.com slash twist. If your city isn't on the list yet, the $300 credit will still apply for when PreNuvo opens in your area. So get yourself taken care of today. That's $300 off your PreNuvo scan at prenuvo.com slash twist.

SPEAKER_35: Let's talk about bias in terms of a bias towards, we'll leave race and gender out of it for a moment,

SPEAKER_07: but the bias towards certain types of companies. There are certain types of companies that have really strong signal historically. You've been at this for twice as long as I have. What are the business models that you've seen through multiple cycles are just tried and true that venture capitalists, when they see them, they see this business model in a business, this way of making revenue, this type of gross margin, they just go, you know what?

SPEAKER_00: This is something that could happen, you know, a 25X, a 50X, a 100X, what venture capitalists need in order to return their funds. So what are the business models that are just evergreen, tried and true?

SPEAKER_20: Well, I guess, I mean, the businesses that can scale and make money, which sounds like the most, you know, generic response I could give. But as you know, every time a business, every time a business works and gets hot, then everyone goes to create the Uber of X, the WeWork of Y, you know what I mean? And so it's like, it's a little silly to some extent. And so I think that there isn't a business model that always works, but that most of us, most VCs are looking for business models that as you scale, as you grow, the business gets easier, right? Has network effects versus it gets harder. And so I think that's what most of us are looking for, but that could take many different shapes.

SPEAKER_07: And what are the examples of like things that it never gets easier and things it gets much easier with the network effects in your in your experience,

SPEAKER_10: things you've seen with your own eyes? Yeah.

SPEAKER_20: Well, okay. So I'll take a portfolio company of ours, a better app, which, you know, started out providing executive coaching to the enterprise. And in the beginning, you have a really good group of sort of coaches, right? And then you get the enterprise and you start to, to, to coach. Well, the bigger you get, the more you get more people signed up and having their employees get coached in all the different varieties of way that they coach, right? Because there's like the up and comers, the people in the field that, you know, they've all different types. Then you attract more and more of the best coaches because they want to be there to, to, to work with the best companies. And then you start to really get the best of all these different verticals that you can cover that you could never do if you were small. So now fast forward, any company looking at better app or what Lexi calls ankle biters, better app is such a far better product and a better proposition because they've gotten bigger. So it's easier for them to, to close an account than it would have been to close their first account.

SPEAKER_12: Got it.

SPEAKER_07: So when you've refined the product, you get that product market fit. You've got a bunch of people using it.

SPEAKER_26: Uh, the next incremental customer, it's easier to sign them up. The cost of signing up a new customer goes way down.

SPEAKER_20: That and because you have the best talent, the best coaches wanting to work for you, you actually have a better product, which is why it gets easier, you know, and they're, they're the, the, the, the beautiful virtuous cycle begins. So, yeah, I think all back to your question of what business models work is when that flywheel really kicks in, even in better app, if you're B2B or in their case, B2B to C, there's typically a way that like when you get one side of it working, it, it sort of, sort of greases the wheel on the other side.

SPEAKER_81: Yeah, and in that case, if you're doing executive coaching, you got the best coaches, uh, it's kind of like Uber having the shortest wait time or Airbnb having the most choice and the most options in Paris or Tokyo, wherever it happens to be.

SPEAKER_07: Each marketplace has some driver in the case of better up. It's the quality of the coach in case of Uber versus Lyft. It was the wait time in the case of Airbnb versus Vrbo or other things.

SPEAKER_00: It would be probably the inventory and the quality of, uh, that inventory.

SPEAKER_07: Let's talk about what doesn't work because in this hot market, we saw things that don't work, get tons of money thrown at them. Uh, and it was pretty obvious. Like you're taking a high market, a high margin marketplace, let's say like better up or. Airbnb or Uber or DoorDash. These are marketplaces out there.

SPEAKER_86: Well, better up is not a marketplace, but carry on.

SPEAKER_07: Yeah. Uh, okay. The, the coaches work full time for them or it's asset. Yeah.

SPEAKER_20: So they, they, they, well, I don't know if they, I don't know if they all work full time, but the point is that enterprise lines up with better up, better up then understands, okay, what are the needs of your people? What types of coaches do they need? What level are they? And then they give people options, but I guess it's similar, but you're not, you're not saying, oh, I'm going to go find a coach. And I see a whole marketplace of coaches. Got it. Um, it's a little bit more of a service. Yeah. Full service.

SPEAKER_93: Yeah.

SPEAKER_92: A little, a little white glove. Uh, yeah.

SPEAKER_35: It's a, and so the models that don't work, let's, let's go to those because we saw a lot of, and we'll put a, I'm going to put web three.

SPEAKER_07: Cause that was kind of a weird thing that occurred, but just low margin businesses that are slow, hard to crank.

SPEAKER_00: Some of those, a lot of those got funding and, uh, it seems to cause a little bit of indigestion in the system, uh, you know, and maybe a little hand wringing kind of hard to, to work out.

SPEAKER_07: So what are some of the business models that maybe you would be less attracted to freestyle would be less attracted to, uh, and that are going to have a harder time getting money. And then you are seed to series a investors, correct? Correct. So you're, you're going to take a lot more risks than B and C level investors who are just looking for, you know, a certain growth over three years or something. Yeah.

SPEAKER_20: Yeah. I think the thing that doesn't work that people kind of forgot about were either negative, you know, uh, margins, right? Uh, uh, uh, negative unit economics, sort of like we'll have a loss leader here and one day we'll figure out how to make money. I think that those never work. And so I'm a big believer in whatever you're going to start with, do the hard thing first, not later. And I think a lot of people got the, just went running and got a lot of funding to, we got this thing. We're not going to charge much for it now. We're just want to like get it using. And then one day we'll figure out how to make money. And I think it's very rare that those work out. Sometimes they do, but I think it's a lot harder. Um, and then I think the biggest problem has been anytime you have six startups trying to solve the same problem who all get funded. It's kind of a recipe that no one's really going to make it. So I don't know if you remember, call it six years ago, there was the pharmacy, you know, your pharmacy on demand, right? And you can click the button, they would come. And I must, I met with so many of them at the same time that some, two had the same name, right? Like it was that crazy and they all got funding. And now maybe there's one or two of them, but it's never pretty. It's a little bit of a race to the bottom. So I think you also have to look, we VCs and the entrepreneur has to look at the whole macro environment. And kind of realize, like, if there are six of us starting, sometimes the founder gets attached, like, but mine is different because mine has this feature. And it's like, they could build that feature, too. You're on a coarse collision, right? Like you will collide and, and you all are getting funded and you're all knocking on the same doors of either the consumer or the people you need to partner with. Yeah. And typically it does not fare well.

SPEAKER_07: I mean, when there is an under, overfunded situation like that, it does become a race to the bottom in terms of the margins. We see it in consumer hardware all the time. Dropcam was such a great company. We had a company we had invested in this sort of like internet camera space. And then, you know, now you open up Amazon, you can buy three cameras for $99. Totally. From some, you know, manufacturer that you've never heard the name of. Be careful, we might have security problems. But, yeah, the margin just gets sucked out of businesses so, so quickly.

SPEAKER_00: If you're running a startup right now, this is the best possible time to find amazing talent. We all know what's going on. We all read the headlines.

SPEAKER_63: Thousands, tens of thousands of incredibly talented tech workers. They became free agents in 2022, and they are out there waiting for you. And you want to be certain you're getting the most qualified candidates. You need to use LinkedIn jobs. Here's why. It's really simple. All the best people are on LinkedIn, obviously. They have 875 million users, almost a billion. They're going to get there very soon. And you've seen that purple hiring frame around people's profile pictures? That exists so that people know, hey, you're looking for talent. So when you're interacting on LinkedIn, people are browsing your profile. You're posting comments. Maybe you're posting some updates. Everybody knows, hey, let me talk to Jcal. He's hiring. And here's the best part. If you go to linkedin.com slash angel, you'll get your first job posting for free. We've hired some of the best people on my team at launch and inside. On LinkedIn, you're going to engage with better candidates faster. Let me say that again. Better candidates faster. So go post your job for free at linkedin.com slash angel.

SPEAKER_110: That's linkedin.com slash angel to post your first job for free. Terms and conditions do apply.

SPEAKER_35: Yeah. Wow. Betterup's been quite an investment for you. You did the seed round. We did. Yeah. Back of the math here.

SPEAKER_07: $7.9 million valuation is what we see online. And that company is worth $4 or $5 billion at the last valuation. Is that correct? Yeah. That is correct. Yeah. I mean, I'm no genius at math, but that's about 600x, Jenny.

SPEAKER_20: It's good. Now, remember, we invest along the way. So, you know, you have to take your multiples.

SPEAKER_113: But yeah, it's been a little bit of dilution is what you're saying. Maybe, perhaps. Maybe only 100x.

SPEAKER_20: No, no. It's a wonderful investment. And one of my favorite, if I can tell you a story about BetterUp, is that, and it kind of gets to in this wave, which I thought we were in a bubble when I first started at Freestyle to then realize, no, we're not even close, right? It's like, I was a little bit like this guy, a chicken little, but this guy is falling when I first started. But we can go back to that. But I don't chase heat. I don't like heat. I don't like that we're taking in term sheets next week. Are you in? Are you out? That kind of thing. VCs in general don't like when human beings are involved. And here with the coach, there's a human being. Now, Alexi and Eddie knew how they were going to scale the business and how they were going to scale the product. And they would get closer to software type margins, but it would never be the 90% margins, right? And VCs didn't like it. And they didn't see what was coming in terms of the macro trends. And so when we seeded it, there wasn't... I didn't... Someone asked me, how'd you win that deal? I was like, I was the only man standing with an offer.

SPEAKER_118: Plus man standing. It's a wonderful, wonderful approach. Last human standing.

SPEAKER_35: Interestingly, it says something about non-consensus bets.

SPEAKER_07: Maybe you could explain non-consensus to people who are listening and why that is such a powerful determinant of success as an investor.

SPEAKER_20: Yeah. So non-consensus bets are great because when it's obvious, you have a bunch of us trying to get in and typically they get overfunded at the wrong price, which is like almost starting the race at a very, very bad place. And we can get into how, through the three cycles, I've seen what overcapitalization or the wrong valuations can do to companies and to founders. And so when you see an opportunity, we as VCs or a founder, that is not obvious. It means you don't have six other companies getting funded, doing the same thing at the same time. It means that your valuation is probably right. You get to keep your head down, focus on the business. And typically those do really well. Sort of like, to your point, it's non-consensus. People didn't see it coming. It works wildly well. And you've got sort of a way head start. And I never even knew the term when I started, but I was going non-consensus, more out of ignorance to be totally real. Well, so I gave you the better up story, but my first investment at Freestyle was in a company called Narvar. It was another one that no VCs, every VC had passed. Now, I didn't know as a VC that we're supposed to talk about our deals with other VCs, right? So I'm a brand new VC. I love Narvar. I love Ahmed, who's building Narvar. I do a ton of due diligence on it. Like, I really know my stuff. I know this space. And I give him a term sheet, give him terms. And then we always have others join us in the rounds. And I go to build the syndicate and everyone's like, oh, yeah, I passed. That's a feature. Oh, yeah, I passed. That's a feature.

SPEAKER_125: I was like, it's a feature now, but like, look at what's coming, whatever. It was a really hard syndicate.

SPEAKER_07: It's not what Narvar is. I mean, I know what it is, but maybe what it was originally. And you're kind of alluding to, hey, it was kind of a feature.

SPEAKER_26: People could dismiss it. But then it grew into more of a platform and a more robust product. So maybe what was it when you invested? And then what does it become?

SPEAKER_20: What it was when I invested is actually what it is. It's just all founders. You have to start at some place, right? So the vision was and is that the post-purchase experience when you buy things online matters as much as the pre-purchase experience. And so if I so if you go back 10 years, when I would go to buy things online, I would like not know if I Amazon told you exactly when it was coming, right? But it showed at Apple, but others, you didn't know when it was coming. You didn't know what the returns were going to be like. Sometimes they were so annoying. Sometimes they were super easy. And so as a working mom of three, I started to build like my blacklist in the house. Like we're not buying from Nike because I'd have a little kid saying, when my back, when is my backpack coming? And I'm like, I don't know, I guess in five to eight business days, you know, where Amazon, you know, exactly when it was going to be there. So Ahmed, who had worked at Apple and had worked at Walmart, basically knew that like my experience was everyone's experience and that the post-purchase matters. If you treat the consumer as beautifully as you did, you know, as they walk through the beautiful door, like after they purchased, don't just send them into a brick wall that says, here's your UPS tracker number. Good luck to you. But actually told you exactly when it was coming, made it easy to return. They had the data to know if it wasn't delivered so that the retailer could say, hey, due to the snowstorm, it's going to be late. Here's a $10 credit or whatever it may be. So he knew the power of the post-purchase experience and he had the data to support that. And he knew that every retailer would have to be great at it, but no retailer would be able to keep up with Amazon and Apple in doing it. So he decided I'm going to build the post-purchase platform for every retailer and let them go be competitive in their core competency, not this. And so we integrated, you know, with hundreds, maybe now it's up to thousands. I don't even know. It's global of the carriers. And so now as a consumer, by the way, you have an experience where you're told exactly when your package is coming and you're never confused. You don't have to go to UPS, FedEx, wherever it may be.

SPEAKER_07: It's amazing how well it works now because I had this experience and I can tell by looking at their website, the Narva website. Yeah. And I can tell from the design and the UX that, you know, many merchants use this to tell

SPEAKER_00: you, hey, track your package and that's complicated stuff to go to get to do all that as an e-commerce

SPEAKER_26: platform would be, I don't know, months of developer time. And here you can just drop it in with a third party tool.

SPEAKER_133: Yeah.

SPEAKER_20: Super, super hard. So he started with the tracking feature, which is the feature knowing he'd have returns, knowing he'd have data and it would be that post-purchase would be big. So I think that's what I talked about. People said, like, that's a cute feature. It's like, yeah, you start with something, but it's really needed and it grows. And another thing back to when you talk about models, one of my personal favorite models in BetterUp and Narva are both fitness is what I call B2B2C. So you have a consumer or in BetterUp's case, an employee who has a lot of power over the B, the business, who has big budget and needs, their life depends on or their business depends on making their consumer happy. Yep. That's when I have a really good time because I like B2B sales way more than the CAC to LTV grind. But I really like a consumer experience that is a game-changing experience.

SPEAKER_137: Yeah. If you can tap both of those things, you've got the businesses paying for the consumers

SPEAKER_00: to have a better experience. It's easy to sell into businesses. Yep. A number of decision makers, and if you can delight consumers, man, it's going to make the product super sticky. I mean, I just had this experience with, I bought a helmet to go skiing and when I went to Japan and it was like this POC helmet, it's the best helmet you can get. And their post-purchase experience was, I was like, when is it going to get here? And they're like, auto-responded, we get a lot of customer support. Please do not reply to customer support. Please be patient and don't hit reply or else it will further delay you.

SPEAKER_07: And I'm like, you're blaming me for asking you for a date. And I'm just like, trying to get some basic information or I'll pay for better shipping. Tell me what date it's going to get here.

David Friedberg: And it is really interesting how there's so much room for improvement.

SPEAKER_20: If you had a choice, if you had a choice, maybe that helmet's super special, but if you have a choice, you're going to bring your business elsewhere. I know when I got in a return line once, I don't know, eight years ago, and I couldn't just drop my package and run. I was like, and I'll never buy from them again. So when the retailers are losing business and they don't even know it because people like you were like, I'm not going to buy that helmet from them again.

SPEAKER_12: And entry price matters. You had mentioned that when a category is overfunded as opposed to underappreciated.

SPEAKER_00: And sometimes the best investments are the underappreciated ones because you have more time, they're less distracted. As you said, you can get it at a price that matters. So talk about the economics of being a seed fund, the optimal size of the fund itself, how

SPEAKER_35: many bets you place in that fund, and then how entry price plays into that.

SPEAKER_20: Yeah, so I would say that now we're at $130 million fund. Now, the only reason we increased it from 100 to 130 was because check sizes were getting so much bigger in the crazy days that we didn't want to, our LPs don't, no LPs appreciate you going back to market sooner. So we wanted to make sure that we stayed on our two-year pace, and so we increased it to 130. But putting that aside, called $100 million fund, we typically would write a check for call it $2-ish million, give or take, and we'd make about 26 of those investments. Now, we reserve a good amount. I think we reserve about $2 to every dollar in the ground so that we can follow on with the A, follow on with the B. If it gets much bigger, we also have an opportunity fund and we'll fund, you know, like BetterUp, we got to participate because there was a room. There's not always access or room. In some of our best companies, we got to double down, triple down, et cetera, with an opportunity fund. And that's been amazing. And so entry price matters. I mean, obviously, the real thing that matters is it being wildly successful. And we all know that. And so we all can convince ourselves, this is the one, right? And if you keep doing the, this is the one, and you're paying, you know, $50 million for the seed round, your math will not work. But so entry price does matter because you do get some that are 2x or 3x, and that could be underwater if you got in at the wrong price. But the truth is, I could have paid triple for BetterUp and it still would be a great investment. It's just we don't always have the crystal ball to know which ones are going to be those. So we will break our rules, our own rules, occasionally when we think we're facing one of those. But for the most part, we pray, we stayed pretty disciplined, even during the crazy times, we definitely got up, you couldn't avoid it, or you wouldn't play. But, you know, that was a game on the field.

SPEAKER_149: But we never got too wrapped up in the craziness. And I'm very happy.

SPEAKER_00: Your average check size is 2 or 3 million when you do the seed round. 2 or 3 million, yeah. And so you're going to put 30, 25 bets in $50 million. If one of those bets goes, you know, 10x, that only returns 20% of the fund. You need to have a bet go 100x and return 2 or 300 to have a 2x fund, which is kind of table stakes in our business, right?

SPEAKER_21: Yeah. I always thought of 3x as being the table stakes, but yes.

SPEAKER_07: Yeah. I mean, to be good. I mean, 2x to stay in, to even be, have LPs want to fund your future funds.

SPEAKER_00: And so it is really, people forget how hard this is for venture capitalists.

SPEAKER_20: Super hard. It's super hard. When I was a founder, which I know we're going to go back to those days of yore, but when I was a founder, I had zero understanding or appreciation with what the VCs were up against. And I would say, what do you mean this market isn't big enough? It's huge. It's $4 billion. And it's like, not knowing that they were playing at markets way bigger than that. Yeah. And understanding that, you know, you're looking for a multi-billion dollar exit. And if the market is 4 billion and it doesn't show signs of growing, that's not huge. So it's just really interesting. I don't think that most founders really, at least I didn't, understood sort of power law. And they are looking for unlimited upside, the ability for it to be the one that can return

SPEAKER_127: the fund.

SPEAKER_00: And this is the criticism, I think. And it does tie back to diversity in tech, I think, to a certain extent, because we are

SPEAKER_07: looking for businesses that are in the most elite, grossing and growing businesses, violently growing, incredible margins that hit this power law.

SPEAKER_00: One investment pays for the entire fund. Maybe 90% of the returns in a fund comes from the top investment or 95 comes from the top two. Right. And that means there's a naive concept out there, or maybe it's not naive, that you could run a venture capital firm with, you know, instead of having 20 of your 25 bets be non-material and one or two be 95%, that you could have all 25 or 15 of the 25 return 5X. And it's a, it's a better way to go slow capital. In fact, there are some people who have tried to do, I think Bryce tried to do this with Indie VC, like, hey, we're going to go slow, we're going to try to, and I think he wound up giving up on it, it didn't work. What are your thoughts on that criticism of VC that we go for the too violent return the two, you know, the power laws impact on what we do?

SPEAKER_31: Is that, is there anything valid there? Or is it just a naive take on the reality of business?

SPEAKER_20: I think it's the reality of the business. And the truth is, as a VC, I don't treat them differently, right? Like at seed, I help every founder as best as I can to help them be successful. And to some extent, which ones kind of go to the moon and which ones don't in time, it's way more on the founder or the market or the timing, you know, name, name your favorites. But, um, so I don't think that we're doing harm by wanting to know that every investment we make has the ability to be, you know, massive. And that's, that's the, that's the game we're in, right? That's the, that is the, the playbook that we have and we have LPs and that's what they're hoping that we do. And I guess I got wisdom early on when I became a VC that if you're ever looking for that downside protection, like this one feels safe, you're kind of hosed because nothing is safe. Anything you're starting is factually hard. You might as well have the benefit to know if you figure it out, it could be massive because to be sort of have the ceiling capped and know it's really hard, but think, oh, but I could always sell it for 50 million. That's not going to do anyone any favors because you don't get to control that. And so I think that you're better off sort of swinging for the fences and then seeing what, what comes, but I don't think we're doing harm. It's not the way that I work and the way, you know, my partner works. I think most of us is we support our founders completely at seed and get them and beyond, but like, we're not, we're not determining like, oh, Hey Jason, I don't think yours is cutting it. So I'm done talking to you, we cause no harm. We try to help everyone.

SPEAKER_149: But the reality of the math is that, yeah, that your top performers really kind of make or break you.

SPEAKER_00: And it, it is, I think what's great about the industry is that people are swinging for the fences and they're trying to make things that change the world. So on the margins, sure. You could critique too many people going after the same vertical. Uh, but sometimes a vertical is important like AI today. So when you look at this AI craze, that suddenly happened after GPT three and 3.5 and now four have been released. We just went through this web three crypto for me, I'm sure gonna like craziness.

SPEAKER_07: Uh, and I kind of avoided that one. Uh, I had some investments in the space, um, mostly ones that pivoted into it. Uh, and that now interestingly are pivoting out of it. Some come to AI, uh, which is kind of interesting. Um, what are your thoughts on comparing the web three hype to what is now the AI hype or these, uh, are these, uh, they're analogous in that they're hypes and they're taking

SPEAKER_00: everybody's, uh, thought space and it's got a lot of founders and we don't dictate what founders are interested in, but founders are super interested, uh, in this space. All of a sudden, is it real?

SPEAKER_26: Is this time gonna be something that has dramatic impact on the way society works? Or is it gonna be fizzle out like web three did?

SPEAKER_20: Well, I guess my take is that anytime there's a new technology that really changes how experiences can, can exist, it is real. And that if you go back once again, back to the late nineties, everything was.com. Right. And the internet was real, like amazing businesses got built then, but there was so much junk getting funded because it put.com at the end of its name. So fast forward to today, I don't think AI is a vertical. I think it is a technology that makes it easier for certain experiences to be delivered, but the application matters. So everything just adds tagging on. Now we have AI, now we have AI. It's like saying, now I have HTML. It's like, good for you. What are you going to do with it? And so I do think that there's a lot of interesting things with ChatGPT and AI, where maybe before your margins would have not been good enough because you didn't have that technology. But now with this technology, you can deliver an amazing experience or service or whatever it is because it's built on that. But I don't like when people are chasing tech instead of chasing the applications of what tech will deliver, right? So back to your Uber, like, you know, mobile enabled it, but it's not like everyone went around saying mobile, mobile, but yes, like this amazing experience is now going to be delivered because there's this technology that enables it. But I don't like when people just are chasing the tech and looking for a problem.

SPEAKER_35: We did see that in mobile, actually. At the same time that Uber came out, you had mobile, social, local, and everybody was like,

SPEAKER_07: hey, Foursware, Goala, which we were investors in, and a lot of ideas around, hey, if we turn this GPS on on the phone, what could we do? And in some cases, it was incredible and game changing.

SPEAKER_00: In other cases, it was like, yeah, maybe people don't need to know where I am. If I want to share my location with people, that's a very narrow kind of use case that we see now with families, maybe, you know, sharing their locations on, you know, on by default on iPhones and Android phones, but it never became like there was an Instagram or Facebook of sharing location.

SPEAKER_07: There was a little blip, though. Do you remember when people used to check in on Foursquare and how much fun it was? Oh, totally, totally. You know where people were?

SPEAKER_04: I wonder if that comes back at some point where the check-in was so much fun.

SPEAKER_20: I think that would be a positive thing to come back. But back to your point, if anyone had come and pitched you and said, like, and I had seen pitches like this, well, now with mobile, you can do this thing on mobile. It's like, well, tell me why that's better. What's a better experience? Is it going to be faster? Is it going to be easier? Is it going to be more fun? But I think founders need to be sort of focused on the value proposition to whoever your stakeholder is and be focused on that. And ideally, technology is the thing that unless you're really in deep tech investing, which we're not, but ideally, the tech is what enables something that never existed before. Either you can do it now because it can be affordable, or you can do it better, or it can be more fun, whatever it may be. But if you're just doing it because there's this tech, so I'm going to apply that tech to this thing, it's .com all over again. It's Web3 all over again. I would see certain things for Web3.

SPEAKER_146: I'm like, okay, but why does that benefit that person? Because it's Web3.

SPEAKER_175: I'm like, so great, it's Web3, but what does that enable?

SPEAKER_00: The other thing that was so frustrating about the Web3 founders and the space, generally speaking, was most of the time they never got the product to market. So even if they did have a convincing argument that this was going to be the game changer and there was user value, for seed investors, I don't know about you, I like to see the MVP. I like to see a customer's using it. I like to play with it and talk about how that product is designed. And with the Web3 stuff, they never seem to, they got the tokens out. But they secured the bag for sure.

SPEAKER_18: They sold the tokens, they sold the NFTs, but I never really saw the products that these tokens were supposed to enable. And that was super frustrating.

Jason Calacanis: Yeah, I'm going to skip on the Web3. It was a blip in time.

SPEAKER_20: And who knows, I think there are real people who know their stuff who are still believers. And I do think that something interesting will come from it, but I don't think that it was for all us tourists to play with. Let's put it that way.

SPEAKER_58: And I don't think the consumer was there. So if the consumer is not there, it doesn't really, I don't think it ultimately is ready.

SPEAKER_18: It seemed the only consumer use case was gambling, like literally speculation, or if you prefer

SPEAKER_00: speculation. The only one I really thought would stick around, and it has, was store of value. I mean, people are still talking about, hey, Bitcoin's a great way if you are in a fiat

SPEAKER_18: that you don't trust, whether it's the US dollar today, or, you know, Venezuelan dollars yesterday, like, oh, you could put a little bit in Bitcoin, and maybe it's not correlated with your local currency.

SPEAKER_106: I loved getting that whiteboard out, having three or four people in a room jamming, and modeling out, you know, important things when we were building businesses, venture funds, products. And you know what, we kind of lost that in remote, didn't we? Well, here's a tool that'll bring that magic back. It's called Miro. It's spelled M-I-R-O. Miro is so much more than a simple digital whiteboard.

SPEAKER_00: When you think Miro, think zero to one. Building your startup from scratch needs input from everybody on the team, and Miro democratizes collaboration and inputs. But it's really visual collaboration that has really evolved to tap into what the power is when we're all working from home or remotely, which is asynchronous, right? We can all collaborate on our own time. We can collaborate at the same time, planning, researching, brainstorming, designing, feedback cycles, all of that. Faster inputs equals faster outcomes. It's very simple. And the velocity of your product and your business model and the internal growth of your company is how you actually beat the bigger companies. Miro is zero to one. It's going to do it faster for you. And here's the best part. Miro has a community of power users that build thousands of world-class templates. You can go see all of those templates and start on second or third base, right? So you don't have to sit there with a blank sheet and go, hmm, what should I do? You just go to Miro.com, M-I-R-O.com slash Miroverse, M-I-R-O-V-E-R-S-E. So here's your call to action. Go sign up for Miro for free at M-I-R-O.com slash startups. That's Miro.com slash startups to sign up for free. You were an angel in Discord.

SPEAKER_185: How did that come about? That seems to be an incredible bet. I mean, you bet on a chat room. I did that on the other side. Wow. That takes some conviction.

SPEAKER_18: Very easy. I say that in a joking way because I bet on a meditation app, you know, like, oh, you bet on a stock trading app.

SPEAKER_187: Like, there's always something more than just the generic description of it. So what was the something in Discord that you saw that led you place that conviction bet?

SPEAKER_20: Yeah, so the real answer. So if I wanted to pretend that I'm all super smart and great, I would give you one answer. But now I'm going to go real and tell you that I was an LP in an incubator or accelerator called Studio 9 Plus. Hammer and Chisel, now called Discord, came out of that. So Studio 9 Plus. So I had shares through them. And then when it came time, Greylock did the next round. And they had ProRata, but they didn't have the money for it. So they put it out to us LPs. And I basically was like, I know nothing about gaming. I still know nothing about gaming. But I got to see their numbers and their use and everything. And I mean, it was the most beautiful deck I'd ever seen in terms of real data, not projections, but was really happening. And I was just like, this is too good to not participate in. And another thing back to angel investing that I learned was that if you have a really strong lead, your odds of success are far greater than just like working your own network and doing your own diligence. So like every time I kind of was able to put a check along someone super strong, it was also very good. So I was able to throw a check in. So that was a pure access deal. It's not like I knew my stuff or met with the founder three times or, you know, had that was not contrarian. I tried to put in more. Unfortunately, I got part of my check returned to me. Like it was an overset. Oh, yeah. I was like, and when it returned, this is going to be a very expensive return check. And it is, but, um, but I think it goes back to access, right? Of like access is a lot of, uh, what happens later, which I think explains a lot of the sins

SPEAKER_154: that happened over the past few years by the later stage folks where we explain that. Yeah.

SPEAKER_00: Cause this is a very subtle point. You had access early on to a hot deal because you were an LP and a fund and they were syndicating it. And, you know, you knew somebody who had inside information. We trade on inside information in private companies, not in public ones. It's allowed in public. It's not allowed in public. It's how privates are done. You get introduced to something, uh, but that is considered social signal, maybe, or social proof, I guess, but social proof can get you in trouble. And it did get some people into trouble in this last boom, uh, and then bust explain what

SPEAKER_196: happened and what the mistake there was.

SPEAKER_141: Yeah.

SPEAKER_20: And I guess I don't even write it off to social proof as much as everyone started to understand that if you were early in a deal that assuming success, right? Almost like treat it like a lottery ticket. So take the later stage folks. If they got in earlier, then if the company is doing well and they get to watch, they can plow more capital into it. And so people started to kind of overpay almost like a lottery ticket. Like I want to get in all these companies and whoever then pops, I'll be the one there that has the, the relationship, the access, the parata rights name, your favorite way to get in and I'll be able to put more capital to work. So you saw so many companies raising so much money earlier at high valuations because the players wanted to get in earlier and we're willing to pay kind of the next rounds price. Like I'm going to assume you're going to do that really well for the next year or two. So I'm going to pay you now, I'll give you the valuation now that you would get in two years. And so I think that caused a lot of problems. I think a lot of founders are going to have trouble right now, sort of getting out of the cap table they're in with either high valuations or sometimes I believe, and this starts once again from early days in the dot-com days, like too much capital too early can wreak havoc. And so I think we have a lot of companies that are looking for product market fit, have a ton of capital, I don't have a viable business and everyone's just kind of looking at everything and trying to find, trying to find something.

SPEAKER_199: Let's not back that, yeah, because you're, you're correct in that you had these later stage

SPEAKER_00: or public market investors looking at the activity and saying, yeah, I'll buy an option here on this company, I think it's a great way to put it. Uh, and they were given credit for work, not done. Now your point is you give people credit for work, not done. They're sitting there with this giant treasury. It doesn't help product market fit. So let's unpack that. Why doesn't having $50 million in a bank account help a founder and their team of 50 or team of a hundred get to product market fit?

SPEAKER_99: Yeah.

SPEAKER_20: I mean, my take on it is obviously having a lot of capital, if you really treat it as a treasury and I was a founder back in the late nineties who had a ton of money. And when the dot-com bust happened, we were loaded with capital and that, that I think that's why the company is still alive today. So I'm not against having capital. If you know how to park it and understand we don't really have a business yet, let's keep a tight budget and figure things out so that then we can put fuel on the fire. Once we get a fire going, what sometimes founders do is they don't have the fire started, but they're trying to turn up the heat and they're taking capital and they're hiring more people and more people and more people, but they don't yet have it. And they're almost distracted. So now you're having meeting upon meeting upon meeting, but you never got the, you never got the fire going. And so now you're big, you're bloated and you're kind of masking the fact that you don't really have product market fit and you're a bigger, clunkier organization trying to find it, which is, as we all know, way harder. So I think the founders who raised a lot, uh, when, when it was coming around and kind of coming around for free, who then said, okay, now it's tougher times now, like, let's deal with reality. Let's, let's park all that cash. Let's cut our burn rate. Let's find it. Sometimes you just have to survive. Sometimes you have to find it, whatever it may be. And then it's almost like, like a poker game, right? It's like, when I got a hot hand, then I go in, but she just ante up big for every single hand. We don't even have anything. You're going to end up running out of chips. And so I think that's why it's important.

SPEAKER_58: I think some founders, um, get distracted by the fact that they don't have it.

SPEAKER_20: And so my, our early, so Kleiner Perkins invested in my first company, that's weddingchannel.com. Um, and we had a lot of capital when the dot com bust happened and he was really clear of like, you know, stop, find your, find your market, find a business model that's scalable and viable. And then we can spend into that. But he encouraged us. We ended up doing a 50, 50 merger with another company. It was like a complete sort of completed the puzzle, but like, is there another model that you want? But like, basically don't spend capital on something that, you know, isn't working. So we didn't have to cut, but you'd be insane to not right size your business. And so during this time, fast forward, I hate to say it, but like 30 years, whatever it is, um, I'm watching. Yeah.

SPEAKER_125: I'm watching that's kind of you, but I think it is more 30, but anyway, I'm watching 25 before the bust or 20 after the bust.

SPEAKER_20: I'm in 99, but anyway, yeah, 25, so, um, but some of our founders are like, no, I'm good because I have the capital. I still have two years runway. It's like, no, the goal isn't two years runway. The goal is to not burn capital on a business model you don't yet believe in and have the capital to use when you do. And so I think some founders got the memo real quick and were super smart. And some were just a little bit, I don't know, like they didn't like that. The game had changed. And, um, you know, if, if they're rocking and rolling, it's a wonderful time to be putting capital, you know, to work, I mean, it's magnificent, but if you don't have it,

SPEAKER_21: you're better off saving it. So I'm sorry, that was a long winded.

Chamath Palihapitiya: No, no, I think it's a great overview of it. It is distracting.

SPEAKER_00: Just to recap here. It's very distracting to founders to have that money sitting there. And then if you're pouring, um, we talk about the fire analogy. I like that a lot because, you know, you, to start a fire, you need kindling, you need small logs, you need small little winds to get to a point where you have nice hot embers, and then you can start putting the big logs on. If you just have a couple of little sparks there and you throw a giant log on it, all you're going to do is just put the fire out. Like, or if you try to take kerosene and you just get a big log and you pour some kerosene on it and you light it, it's just going to go up in a puff of smoke real fast and that is not going to create the hot coals that you need. And you need to have those hot coals. And I, I always,

SPEAKER_20: and you're hiring and managing all these people that you're sending out into the woods to go find more wood, more wood, but there's nothing to put the wood on

SPEAKER_212: top of because there's no fire.

SPEAKER_00: There's, there's no, they're there. And this is where I tell people like, get the first 100 super dedicated people who love this product and look at each one of them as a piece of coal. And if you get a hundred of those pieces of coal, like one piece of coal, just sitting there on your, you know, on a, on a platform, you to put a piece of coal there, just around the ground, you and I standing around the one piece of coal, you don't feel anything. And then it gets to 10, maybe you start to feel it. You put a hundred pieces of coal on the ground and we sit around it from a foot away, we're going to feel that heat. So there's something about this, like hot coals and just slowly building it up. And then you didn't get a hundred hot coals that you put a blog on it, man. It's going to just go up, you get that fire raging that's Airbnb or Uber opening in their hundredth market. They get to their 200th market. If people are like, oh, you're finally here. I have the app. It doesn't work in my market. And the first day, you know, 10,000 door dash orders come in or Airbnb becomes legal in, you know, whatever Kyoto.

SPEAKER_211: And all of a sudden the floodgates open and people are flying there and the flights are full. It really is.

SPEAKER_216: It's a big difference.

SPEAKER_20: Well, the thing that Doug McKenzie was my partner at Kleiner Perkins. And when we were in the early days, we'd have meetings with him and we'd say, oh, and here's our new logo or here's PR.

SPEAKER_218: Here's, and he was, he basically was like, shut the up. Like what is going to make, or am I allowed to curse on your podcast? Yeah. Why not? Yeah. Yeah.

SPEAKER_219: I mean, we'll believe it.

SPEAKER_218: You're talking about wedding channel.com.

SPEAKER_221: Wedding channel.com. Yeah.

SPEAKER_20: Which aggregated the gift registries of all the retailers. And it was back in like, you know, Amazon had come and it was like, what will people buy online? And, you know, kids back then, not a lot. They needed to know exactly what they were getting. So Jason, if you registered for that buzz, I don't need to go to the store and see it. I would, it's the right price. You want it. I click it. I buy it. So we aggregated the gift registries of these major retailers so that the gift buyers could then see all the gifts buy and click and buy. Um, and so we would go to Doug with a meeting and we'd give him the update on stuff. And he was like, stop it. There's one thing that makes or breaks your business. And that's signing the retailers. Where are you with this one? This one, this one. And he's like, never come in here and talk about the stuff that keeps you busy. That makes you feel productive. It keeps your eye off the prize of like, what is going to make or break your business. And so he was so good. And I do that now. I do it a little nicer, but no, I love Doug McKenzie, but I do it. In a kind way, but founders sometimes get caught up in the busy, uh, work, the things that make them feel like, check, I had a good day. I got this done in this sun. And sometimes the really hard fire starters, you are the thing, the things you have to obsess on are hard and you can't always move them. And so sometimes that's almost like something that people want to not look at.

SPEAKER_224: And so just keeping founders really focused in the early days on the few things that are going to make or break you.

SPEAKER_81: Yeah, I mean, obviously speaking at conferences and hiring a bunch of people and rebuilding your

SPEAKER_225: website and getting press and going to the tech conference, all this stuff are false wins.

SPEAKER_226: It's just busy work. Yeah.

SPEAKER_00: Your count really matters is the customer, the product. So what do you find yourself pushing founders back towards and saying, Hey, congratulations on your speaking gig and winning this startup competition. But let's talk about this. What is this in that sentence?

SPEAKER_133: It's typically sales, right? It's typically, I mean, cause I, I, I do do consumer, but I'd say 70% is probably B2B.

SPEAKER_20: And so if people are not buying your product and using your product and wanting more of your product, you probably don't need to be talking at various things. Now I do love, so I have a mantra called purpose before action. And if you know, if you're surgical in what you're doing, like you're doing PR because you know that that's going to be read by the people you're trying to sell to, and it makes a big difference. Great. It will impact your conversion rate. But when you just do things, cause you think you're supposed to do them because everyone is doing them. So I'm doing PR. It's like, why, what, what are you announcing? Who's going to care? What is it doing for you? And so if you're going to talk at something, if you're talking where all your potential customers are wonderful, if you're just talking, cause it feels good. And you were asked and you fly and you spend three days to talk at something that doesn't move the needle for your business. You're missing the point. So I think being really, you know, I go back to my earlier founder days, we were heads down and then, yeah, we did PR. We did a lot of PR. We were like the.com poster children for whatever reason, but like we did it cause it helped the consumer side of the business. You know, I was on, me and my partner were on Oprah. It almost crashed our servers. And then every time there was a rerun of the show, it almost crashed our servers. That was worth it. So it's like doing the things that, you know, your people, your business initiatives will like, you'll move the needle. So I think what really matters is early on, and we do this deciding which are the metrics, not KPIs and start getting all like big company when you haven't figured things out. But there's usually a few things that are going to make or break you to get to that next milestone, know what they are, and just be maniacally focused on making them happen if that, and then you speak at something or you do PR or whatever it is, then you're doing it in service to that purpose.

SPEAKER_00: I think being thoughtful and thinking about what the impact of your next action is going to be is something that sometimes people get in the startup game and they're, they're so good at punch lists and ripping through a punch list. They're become reactive and you know, their day gets filled with slack messages and email as opposed to, Hey, what actually is going to drive this business? What, what is the purpose of this business? What are our customer who are our customers and how do we delight them? When you're making a decision, uh, about placing a check, uh, in today's market 2023, what is,

SPEAKER_07: cause now we have a little more time. Uh, you said before, you don't like this, like high pressure. You have 48 hours. I, I hate it. It's just like, that's not the way I operate. If people come to me with that, I'm like, great to meet you.

SPEAKER_00: Let's have a discussion, get to know each other. You can close your round and I'll just come into the next. Yeah. And that seems to diffuse the sort of high pressure tactic in, in a lot of cases for me, probably three out of four times, people will be like, Oh no, we'll hold you a piece. We'll take your time, take all the time you need. So that tactic of high pressure, just for founders with great investors, it's not going to work. Now they're either going to skip the round, um, or they're going to be turned off to be honest,

Jason Calacanis: but, or, or they got married real fast to someone that if they had done their homework,

SPEAKER_20: the founders did their homework, they would have realized was not a good fit for them and not saying they're bad to be seen, but there's all types of different fit. And so when founders move too quickly, advice I always give is like, you're kind of getting married, but you can't get divorced. So like you, you, the founder really want to know who you're going to be working with.

David Friedberg: So keep everyone moving, but it's such a hard process to get divorced.

SPEAKER_00: I have seen it happen and I've had it happen, uh, twice in 350 investments where I told the founder, Hey, listen, we're not seeing eye to eye here. And it was typically because there was something in both cases, I would say, I'll make an amalgamation here that I was not, I'll just say ethically cool with, I'll leave it at that where I literally two out of 350 investments, uh, one, every 175, I said, you know, maybe I shouldn't be an investor, I should sell my shares, uh, because I'm uncomfortable with the situation.

David Friedberg: And, uh, both times money got wired back.

SPEAKER_224: So, and were they later when they got wired back or was it early still?

SPEAKER_150: Still, I would say like series a ish timeframe. Yeah.

SPEAKER_155: I was still early. Well, reverse that for a second. If they wanted you gone, would you have left peace?

SPEAKER_20: So meaning if they said, Hey Jason, that happened, but that's what I'm saying. So I would, when I said, be careful who you get married, you can't get divorced. The founder can't typically shake us.

SPEAKER_00: Right. Yeah. Cause if it's, if it's, if they tried to get rid of you and you thought it was going to be a good investment, you'd be like, no, I'll just hold my shares. Yeah. I mean, I'm trying to think if that actually happened, you know, the thing I've gotten myself, um, in trouble with, I would say over the last couple of years is I believe in just kind of the way I grew up as a Sequoia founder and having Doug Leone and Michael Moritz and rule off when he was early BC, like do it right.

SPEAKER_254: Yeah.

SPEAKER_00: Make a plan. And when I see no governance, I, I get a little concerned and I, I, I found, I found myself a, for a moment, second guess myself during this crazy bubble. I don't know if you had this happen where, when I said like, maybe, you know, we're at 500 K a million in revenue. I think it's time for board meetings. Let's just have four board meetings, one time a year. And some founders were like, nobody else is asking for that. And I'm like, yeah, but we have an option of a board seat. We own 12% of the company. This is a meaningful investment. How about one hour, four times a year? And they took it as, because I think they were trained by YC in some cases or other folks, that governance was not cool and that you had to control your investors and minimize their ability to have any control provisions or whatever. And it's like, well, the control versions are already in there. It's a Delaware company. I'm just saying like, well, let's meet four times a year to set goals and to see like formally, like that your accounting is tight and that you have what you need. And, you know, the pushback I got was, I would say not insignificant for a short period of time. And then the same companies in some cases are like, you were right. Board meetings have made me a better founder board meetings. And having a plan, like literally just a documented plan.

SPEAKER_187: Yeah. That's maybe a better founder.

SPEAKER_20: I'm a stickler. And so before I invest, I tell founders, here's how I work. And I don't have to be for everyone, but I, I'm so direct and transparent. And I feel like both sides have to know what they're getting into. So where I am is an interesting sort of in the middle where I'm fine not being, they're not being a board, meaning keeping it a founder board. And then I have the protective provisions because the truth is I would never vote against a founder and seed stage. I'd be one of three. So it doesn't really matter, but whether there's, and sometimes they say, no, we want a board and we want, and then if there is, then I'm on the board. But, um, but no matter what, it's irrelevant to me because my impact is not felt at the being on the board. So whether we have a board or it's just a founder board every six to eight weeks, we have a strategic meeting, same as a board meeting. And funny enough, I actually prefer strategic meetings versus board meetings, even though they're identical, literally it's the same document, um, except founders act more normal when it's a board meeting, they're like, you know, they have their 2 million of funding and they're like board meeting, there's my lawyer. And the minute it's like, no, no, we're just trying to get the fire started. Yeah.

SPEAKER_157: And just trying to get the calls and the kindling to, to, to make a little fire here. Yeah.

SPEAKER_20: Yeah. And so my, my pattern, and I feel so strongly about this is you set the goals, right? And they can be sometimes short if you don't really know, it can be longer, but you basically say, this is what I'm going to do on these three things. And then the next meeting, you say goal versus actual learning slash challenges, next steps, but it's a way to make sure that you're sort of holding yourself accountable. And because when a founder says to me, oh my God, best month ever, we got 10. I'm like, I don't know if we're sad or congratulating ourselves. What was our goal? Cause if our goal was a hundred and we got 10, uh-oh, let's try to figure this out. If our goal was five and we got 10, it's amazing. Should we go hire more people? So I often have to say, and founders are often reluctant to put the stake in the ground of what they're going to do in the future because they don't know. And I'm like, of course you don't know. You're not going to get a trophy if you hit it and you're not going to get fired if you don't. But it's just like, if you're pacing yourself in a marathon, you want to know how you're doing. Yeah. And you want to then be able to fix it. Like, uh-oh, better stop, you know, not stop as long or I better pick up my pace, like whatever that is, but you at least want the reality shining on you as you're trying to

SPEAKER_00: figure this out. Such great framing, Jenny, to shift it from, hey, you know, this is a board meeting. Oh my God, you know, everybody get nervous minutes, uh, prepare minutes, uh, to, hey, it's a strategy session, uh, and let's set some goals and, hey, this accountability every six to eight weeks is for you. It is for them. Yeah.

SPEAKER_225: It's for you to actually understand, you know, uh, what you set as a goal and just to remind

SPEAKER_00: you. And, and yeah, if we, if we're at 10% of our goal, what did we learn? Right.

SPEAKER_93: Or what do we want to do differently? Right. What do we want to do differently? How do we change the experiment? That's right. And so I guess in general, it's really this concept of, you can go forward as a founder

SPEAKER_20: and just try to do better every day. That's going to get you somewhere. But if you go backwards and say, okay, I want to be there at this time and you're working backwards and then you have your stakes in the ground. So, you know, and you're like, oh, I'm falling behind or, oh gosh, I'm ahead. It's way better. You always, I think you go further, faster, smarter, um, when you're working backwards versus

SPEAKER_149: just trying to do better every day.

SPEAKER_267: What are you looking for today in the market in terms of, you know, just, uh, you know,

SPEAKER_00: ideas and companies and stage, uh, and relationship, you know, when you take meetings, what's the ideal time for you to meet somebody and the ideal time for you to, you know, write a check.

SPEAKER_20: Um, I'm really open on when I meet founders. Sometimes I meet them at pre-seed and I don't do pre-seed. And so it's a great way to track and stay in touch and I get to see what they delivered. I really do like this a little, maybe old school, but I like to meet a founder and then be super excited about what they're doing and move quickly, not force quickly, but like do my diligence and kind of keep the momentum up and kind of take, I don't know, call it three weeks to decide this is investment that I'd like to make. And this is a person I'd like to, or people I'd like to work with. Um, and right now back to the ingestion in the market, I've been having a harder time, both Dave and I am finding things we're excited about because it feels like there's like traffic jams all over the place and to put another car in, especially when everyone's changing lanes, trying to find, you know, have the capital of trying to find product market fit. I either want to put something in that. I think leapfrogs everything else, which is great. Or I want to find a lane that people aren't in, or I'm going to just be patient and I'll just back to poker analogy, keep folding until I've got the right hand. But I think a lot of things right now are, uh, not as attractive to me, given the macro environment. And I'm not talking about public markets and being scared. We have a very fresh fund. You know, we raised, uh, you know, of the call it, I think this fund will probably have more like 30 investments out of, cause it's 130, it's larger, um, call it 30 investments we've made two or three. So we have years of capital to deploy. Um, so it's, and we're not worried about the capital. We're not worried about the big pub, you know, the public markets, but I am worried by how much is sort of in, you know, the traffic jammer, the ingestion. Um, so I want to believe that what we invest in has like a real shot of success.

SPEAKER_275: All right, Jenny Lefcourt, amazing, uh, force. You didn't even go into my past. I thought I was all prepared for today, I need to do a part two with you.

SPEAKER_284: You know what?

SPEAKER_285: I was not prepared for this conversation, I was prepared for 90s.

David Friedberg: Here's, here's what happens. You know, the conversation starts, I have the notes, but I listened to your answers and then I channel this and people say, oh, J Kyle, you're such a great interviewer. You're the world's greatest moderator, whatever. I'm like, I'm a listener, I listen to what you're saying. And then sometimes there's something really interesting that I know the audience.

SPEAKER_00: If I'm thinking like I'm an audience member with my AirPods in, I'm like, oh, the audience would probably want me to want to hear more about this piece, right? The, the strategy meeting versus the board meeting. And so I just double click on that. And if sometimes you start double clicking on that, choose your own adventure kind of situation.

SPEAKER_18: And then it becomes a conversation. And then all of a sudden you look up and an hour has gone by, which is what just happened.

SPEAKER_287: Got it. I'm totally okay with that. I just want you to know that I was way more, uh, in the mindset of what happened in 08.

SPEAKER_289: I was a founder in 08 and I was a founder in 01.

SPEAKER_00: I mean, it is, uh, the scar tissue is real, uh, and your insights on how to invest in these companies and how to run them is just fantastic. This has been an amazing hour.

SPEAKER_211: We'll have you back. Awesome. I love it. I love it. And we'll do another, another hour. And that's how the show works. We have great guests come on and, and you, and by the way, just as a quick, thank you here, as we wrap you, uh, when Jackie or one of my team members says, Hey, can you come give some time to founders? You are the first person to say, yep. I'm in, I'll help any way I can. And you give your time.

SPEAKER_00: And I always tell, uh, you know, new investors, uh, when they say, Hey, what's your advice to me? I'm like, well, you know how founders spell love T I M E.

SPEAKER_295: Yeah.

SPEAKER_189: So give them your time and attention. And you do that. And I, and I think that's why I love it.

SPEAKER_20: I mean, that's why I love what I do, right? Like getting to meet with smart, energetic, awesome founders and trying to like see them succeed and going back to like, when I was in business school before, you know, wedding channel.com, um, all these people were helping us out and we were confused. We're like, why are they, why are they helping us? It's like, oh, that's the valley. And so I got trained early that you just pay it forward all the time. And, you know, karma does its thing.

SPEAKER_00: I have to say, uh, that is the truth. You know, how many times in our careers does somebody say, I saw you speak at this. I saw you, I heard you on this podcast and I thought I would reach out. And then that winds up being your next big hit, it's, it really is goodwill. Uh, and it isn't, you know, our industry gets a lot of, um, uh, attacks now and again, because you know, outlier success, polarization of wealth impact on society. There's so many things that tech does, but the goodwill and how much people help each other, even on the sharp elbows here.

SPEAKER_18: And then again, when rounds are closing, just the general goodwill and how much people help each other, I think it's very unique to our industry.

SPEAKER_20: I think so. I think that our industry changed. And once again, going back through the cycles, each time I saw it change, but then go back to it sort of a little bit more of its core. And so I'm hopeful that like a little bit, the tourists will leave and like the people who are here and excited to really build and excited to do hard things will show up, um, and not be playing the role of hot VC or hot founder, but like actually trying to do good work. And so anyway, I think there's always, uh, whenever there's sort of, Hey, there's always going to be bad actors that come to town or not bad, but like not, not here for the real,

SPEAKER_00: no reason for us here for the best six weeks of the season. And exactly raining season happens or the flooding season. They're out. They're just like, yeah, I came for the best six weeks. I'm out.

SPEAKER_20: Uh, when dot com happened and we were growing like mad, we started getting resumes from resumes from like the CPG people and, and from Clorox and stuff.

SPEAKER_287: And I'm like, oh, like this is, this is, and then they left. Right. And so I think that there's going to be a lot of, they came and then they left.

SPEAKER_40: Yeah. Well, I mean, it's, it's hard work. You know, I think that's what we are now left with here post this whole party.

SPEAKER_18: Like the house got trashed and now we're sitting here, you talked about like, Oh my God, trying to find opportunities on you're like, Oh my God, I got to clean up this huge mess.

SPEAKER_00: People were spending too much money. You know, companies have too high evaluations. The boards are broken. This is broken. Like all this cleanup works is going to take three years. And I think 2022 was the first, I think 2023 was the second. I think we'll still be cleaning up the overhead and the mess in 2024.

SPEAKER_32: And then, you know, we were a part of the mess, all of us. Right. So it's not even like, oh, like, oh eight happened to us. If you will, this one, we did it.

SPEAKER_40: Well, I mean, listen, if the music's on, I'm going to get on the dad's floor. That's exactly right. That's exactly right. You know, if you turn the lights on. When the DJ's power plug gets pulled by the cops, I'm not going to dance.

SPEAKER_314: And all of us are like, okay, I'm not as drunk as he is though.

SPEAKER_315: That guy's passed out. I'm good.

SPEAKER_316: All right, Jenny. I'll see you next time. Thanks for having me, Jason. Bye-bye everybody. Good job.