My firstminute | David Sacks, PayPal, Yammer, Craft Ventures

What makes a great entrepreneur turn into a great investor? 

David Sacks started his career in the ‘PayPal Mafia’ as one of the company’s earliest members as COO and product lead. During his time as COO in 2001, payment volume grew from 0 to $3.5 billion per year and revenue saw equally tremendous growth from 0 to $100 million. 

After a stint as a film producer on Thank You For Smoking which was nominated for Best Picture at the 2006 Golden Globes, David founded and was CEO of Yammer, the first Enterprise Social Network. Yammer pioneered bottom-up SaaS by adapting consumer tactics for enterprise sales. In July 2012, it was acquired by Microsoft for $1.2 billion as a core part of its cloud/social strategy.

Throughout his career, he was always an avid angel investor. After leaving Yammer, he turned his investing into a new venture with the creation of Craft Ventures. The fund is an early-stage and growth fund based in San Francisco. 

This episode from 2020 follows David’s career and his journey from entrepreneur to investor. We cover the lessons he’s learned along the way and his advice to entrepreneurs and investors. 

Transcript

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So. Yeah. Got it.

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I will say hello.

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Hello to everyone who's joined.

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Very nice to see everyone you've got. You've got L.A.

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and Stockholm.

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I'm here and myself being in Stockholm.

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For those who haven't met my name, Spencer Crawley.

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I'm co-founder of First Minutes and website is thrilled to have David here.

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I think that everyone here knows David

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but or knows of David, but obviously

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founding CEO of PayPal

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followed by Yammer, followed by Zenefits CEO

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and now obviously founding VP of Craft Ventures.

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David, thank you so much for being here.

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We really, really appreciate it.

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I am looking forward to covering lots of ground, but just so you know who

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your audience is, David, we have a mixture of early stage entrepreneurs.

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Latest stage entrepreneurs and venture capitalists and the

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of anyone who hasn't been to my first minute before the

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the concept of my first minute was actually born in lockdown.

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And it was to garner insight from brilliant people such as David,

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both about that early days and the kind of the first minute concept,

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but really about what they're thinking

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about today and and to learn from them and hear from them.

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And we've had lots of David's friends from from legal sector Max Levchin

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to Kevin Hart to Peter Fenton and various others, as well as some

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other folks such as Tony Blair and and David Bonderman and Jeff Immelt.

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So we're thrilled to have. David, thank you for joining.

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And I think, David, that,

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you know, the maybe the three areas I'd love to

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to kind of explore today are I'd love to start with Kraft

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because I feel it's it's front and center.

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You're I would love to

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then look at product because I think you're really seen

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as one of the leading product minds globally

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and then talk about talent and what that means to you.

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But maybe just to kick off with with Kraft,

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you're sort of your first minute in venture.

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So to speak.

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And in 2017, when you launched Kraft, why did you

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why did you decide to launch a venture fund? What was that?

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What was the genesis there?

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Yeah, the.

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Well, great to be with you.

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The genesis was, you know, I've been doing angel investing

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for almost 20 years while I was, you know, founding and operating companies.

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And by 2017, I kind of got to a point where I didn't want to found

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and run companies anymore.

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But I still love startups and work with founders and

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being on the cutting edge new technology.

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And so

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I decided, you know, to

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to basically raise a fund so I could write bigger checks and lead rounds.

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And, you know, that was the the transition that we made.

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Was the obvious to one to take LP money.

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You would have had your pick of any LP's out there but was that

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was there a moment where you thought I might just keep this as a, as a,

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you know, my own personal money or why take external cash?

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Well, that's what I was doing before, was just investing my own money.

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And I mean, it went on pretty well.

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I think I invested in something like 20 unicorns as a

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as a, as an individual investor.

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And Pitchbook in 2017 came out with its

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like ratings of like unicorn investors.

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And, you know, it was a bunch of like

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Silicon Valley firms and then I was just there as an individual

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and I was like, well, you know, if I'm like beating entire

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firms of people, maybe this, you know, maybe it's not that hard.

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Maybe I should set up a fund to do this.

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For those not in the know some of those angel tickets that David's

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referring to Airbnb and Uber and Twitter and Slack and Space

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X, Palantir, Facebooks and what not and not a bad lineup of of investments.

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But was it was it the was there

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a fundraise process as such or was it really okay?

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I'm David Sachs.

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You know me

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line up in the queue patiently or what was the fundraise for craft like?

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Yeah, I mean, it still took a few months.

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I had I put together a track record, which I hadn't done before because,

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you know, when you're investing your own money,

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you don't need to like calculate an IRR.

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So yeah, we put, put a track record together.

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I recruited a few people to the team.

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I did it with sort of the co-founding GP was a friend of mine named Bill Lee,

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who was also a very successful angel investor

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who had successfully founded two companies and led them to exits.

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And then after that Jeff floor,

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who had been the founder of StubHub, joined as well.

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And so we started to craft this identity for craft,

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no pun intended,

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of being a firm that, you know, where all the chips

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had been successful founders before and had led their companies to exits.

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And hopefully that puts us in a position that a better position to give advice

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because we've been in the shoes of the founder, you know, before.

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Was it very obvious to you, David,

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that there was a complementarity and a fit with Jeff and Bill?

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Did you how did you assess who were the right partners for me?

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I known both them for a long time.

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And they really you know, like I said, they the

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I think the the thing that we were looking for was someone who'd been successful

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as an investor, as an angel investor, but also had success as a founder.

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And there aren't that many

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people on that list who then also want to, you know, become VCs.

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And so that that was sort of, you know, we were looking for.

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Got it.

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And the perspective that you came with

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to, as you say, you were prolific angel investor

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but 2017 you're launching you're putting your own name to a venture fund.

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When you looked at the VC world,

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in particular in the Valley, what were your what were your thoughts?

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What were your reflections?

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Did you see it

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as kind of an impenetrable group, or did you see it actually as given

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that you're familiar with most, if not all of the key players that it was

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there was space like how how did you what was your lens on venture

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in the Valley in 2017?

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It's I mean, I guess if if you're if you're asking, like,

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do I see a gap in the market and then try to fill it,

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it was less of that and and more of like

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an organic growth of, you know, what I was already doing as an angel investor.

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And I, you know, I had a running start, so to speak,

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because I was already an investor in something like 80 companies. And,

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you know, and so I think,

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you know, it, you know, obviously

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venture is a very competitive sort of market.

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I think the the gap that we saw,

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if there was a gap, was just the number of VCs who actually

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had operating experience under their belt, like meaningful

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operating experience, not just as like a VP or executive at a company,

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but actually having sat in the the founders CEO seat

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and therefore could be in a better position to advise

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a founder CEO on like all the things are likely to go through.

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And being I mean there obviously the the the

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reasonable number of founder

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led venture funds in the valley that you know that you that you know

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well do you do you have you found yourself in the last three years

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competing with friends in rounds whether whether that's, you know, Founders

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Fund or APC or EX-BORO or obvious or, you know, all the companies

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whose founders you backed early on in your career, is that

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what's that like as a dynamic?

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Are there a couple of without naming names? Of course.

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Are there a couple of funds

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you work mostly with and happy to compete with the rest?

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Or what's the what's the kind of ally dynamic?

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Yeah.

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So I haven't really

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found myself in the space of competing with friends too often or at all.

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I mean the reality is that the market is so big,

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there's so many companies being founded now that for

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and you know, and the fundraising process,

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as much as people would like to organize it into like a process,

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you know, a lot of the early stage fundraising is tend to be pretty ad hoc.

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And so the odds of coming up against,

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you know, so in your friends with you, they have to have the exact

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same interests as you.

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They've got to have the exact same relationship network

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and they've got to have the exact same timing for all those you know,

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all those things have to click in order to end up in competition.

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So generally speaking, I would say that it's less about competition

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and more about just establishing what what you yourself are interested in.

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And that's not to say some of our deals haven't been competitive, but

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but it's been

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less competitive than than maybe I would have expected.

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Okay. And you typically lead or co-lead.

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What what how would you position yourself in the market, particularly lead?

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I mean, we do kind of classic early stage venture seed, series A, Series B,

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you know, the sweet spot would be to lead a series around, but, but if we necessary

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say we're happy to do the series B and I think with respect to Seed

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because now there's like pre-seed seed, laid seed.

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I mean, I think we tend to want to do seed

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poster revenue.

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So we like, you know, we like to see the company cross

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the penny gap in terms of some

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some revenue that comes from some unaffiliated customer

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is, you know, is what we want to see, unless it's a founder

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who's ready in our network that we already know, you know,

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we want to be sort of I guess you call that late, late seed.

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The other thing we've done, I think, is

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is is defined is kind of focused over

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the last few years on on a couple of areas where we're very interested in RR

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and GMV businesses, which is to say B2B, SAS and marketplaces.

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And then even within B2B SAS, we we're very interested in bottom up SAS.

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So if you look at my blog, it's called Bottom Up.

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All the writing I do is really targeted at this area.

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Bottom up SAS it's that that that's

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what Yammer was was one of the first volume of SAS companies.

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And so, you know, like for me as a VC, I'm

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basically totally focused on on that area right now.

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And we're going to come right back to that because several of your pieces

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are rich in content that I'd love to come back on does

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just to finish on the craft as a as an entity.

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How does is that for the 70 plus entrepreneurs on the line?

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How does the process work?

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Is it is it one person championing a deal like to take us into their craft

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investment committee?

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What what's what's that?

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What's the process? It's

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it. If

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if one GP wants to do your deal, it'll, it'll get done.

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It's not decision making by committee

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that allows us to move very, very quickly.

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Basically one person really needs

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to fall in love with it and it's almost certainly going to get done.

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You know, we don't have to wait for, you know, if it's a Tuesday,

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we don't have to wait till the Monday partner meeting here the following week.

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We could write a term sheet that day.

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The team is very collaborative.

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We share where we're actually still using Yammer.

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We share everything in every deal, all the information

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we get shared in Yammer. And

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and so we work together as a team,

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but all it really takes us is one GP who wants to do the deal.

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Got it.

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And if Jeff and Bill are saying, David, this is crazy,

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this is never going to work, how do you have disagreements among among you?

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Do you

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I'm sure you have vociferous debate, but how how do you handle

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that as a partnership?

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I think,

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like all the partners understand that

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there's a consensus driven decision making doesn't lead

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to great outcomes and venture.

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And so the pushback would be more like, hey, I don't like this

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deal for this, this and this reason, but if you really want to do it, go for it.

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I mean, that's usually the conversation we have

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got it.

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And very last one because it's front of mind for us.

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We've just we're about to launch our second fund.

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Does ownership does that word get raised

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a lot in the craft offices or are you relatively agnostic?

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Well, we have targets, but they're their targets,

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not requirements, because we don't want to we never want to blow a deal

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that we want to do over, you know, some fractional amount of ownership.

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So, you know, first deal we'd like to get 10%

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for a series A, it's 24, series B, it's 15%.

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But we have flexibility around that.

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It's not it's not the reason we want to ever lose a deal.

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Got a really, really helpful. Thank you.

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Going back to to bottoms up and famously you had 8 million enterprise users

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within within four years at Yammer

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how talk us through the early days there of was

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was bottoms up a very self-conscious exercise how did that evolve.

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Yeah I'm not sure if we call it bottom up back then.

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I guess

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the term that we latched on to very early was the consumerization of the enterprise

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because we were a bunch of consumer founders who had never done anything

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in enterprise software.

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And we had this belief that we could use

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a lot of the same growth tactics that we had learned at PayPal

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in in enterprise software.

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And, and basically we could make enterprise software viral.

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When we went out to fundraise for the first time

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and the 28, you know, Enterprise VC

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wanted to back this like this idea that you could use virality

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to kind of infiltrate, you know, an enterprise

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and then somehow get, you know, an enterprise deal.

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Like no one was buying into that idea.

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It was all about, you know, what's your top down

00:13:35:11 - 00:13:38:19
sales experience of which that wasn't you know, that wasn't my background.

00:13:38:19 - 00:13:40:14
I was more of a product founder.

00:13:40:14 - 00:13:44:09
And so, yeah, no one really believed in this idea in 2008

00:13:44:10 - 00:13:50:01
and I mean, the jammers, real innovation, I think was

00:13:51:09 - 00:13:52:16
I it was

00:13:52:16 - 00:13:55:02
the first time that you would go to,

00:13:56:09 - 00:13:59:11
you know, a website for a business product.

00:13:59:11 - 00:14:02:01
And we asked for your work email.

00:14:02:01 - 00:14:04:08
And I think before that, it just

00:14:05:00 - 00:14:07:11
no one had really thought to ask for the work email.

00:14:08:01 - 00:14:10:05
And then once we got that, we wanted you to invite

00:14:10:05 - 00:14:11:23
all of your coworkers and spread it.

00:14:11:23 - 00:14:15:12
And you know, this is before you connected with,

00:14:15:24 - 00:14:18:19
with Google, you know,

00:14:18:19 - 00:14:20:21
so so yeah, that was that was sort of

00:14:21:10 - 00:14:24:06
that was like a very conscious

00:14:24:06 - 00:14:26:08
decision was to use

00:14:26:08 - 00:14:29:00
consumer growth tactics in attacking enterprise software.

00:14:30:02 - 00:14:33:06
And and that those consumer tactics

00:14:33:15 - 00:14:36:05
was there an element of unexpected virality

00:14:36:13 - 00:14:38:23
that made you turn to it and say, okay, hang on, this is a

00:14:39:00 - 00:14:41:04
this is a dual approach that we can take.

00:14:41:04 - 00:14:43:24
Or even it it was it was

00:14:44:01 - 00:14:48:00
you leading that with that consumerization of enterprise that you spoke about.

00:14:48:00 - 00:14:52:21
What what kind of what came first, so to speak?

00:14:52:21 - 00:14:56:05
Well, we did did we launch with the idea or.

00:14:56:06 - 00:14:57:03
Yes, exactly.

00:14:57:03 - 00:14:57:07
Yeah.

00:14:57:07 - 00:15:00:21
I mean, so so the thing I had learned that a PayPal

00:15:01:11 - 00:15:04:18
was that when you launch a new product, you need a product,

00:15:04:22 - 00:15:06:14
get a distribution track.

00:15:06:14 - 00:15:09:24
A product book is, you know, what is the repeat transaction?

00:15:09:24 - 00:15:10:19
What is the

00:15:11:20 - 00:15:12:13
what is the

00:15:12:13 - 00:15:15:21
UI that's going to entice the user into engaging in the product?

00:15:15:21 - 00:15:17:16
What's the atomic unit?

00:15:17:16 - 00:15:20:18
You know, with PayPal had been putting in an email address and a dollar amount

00:15:20:18 - 00:15:25:05
and sending money to somebody, you know, Uber, it's putting a pin on a map

00:15:25:12 - 00:15:29:14
to summon a town car for, you know, Google.

00:15:29:14 - 00:15:31:23
It's obviously uses that search box.

00:15:31:23 - 00:15:36:04
So not trying to talk was always something I'd been thinking about for a year.

00:15:36:04 - 00:15:40:02
And then Twitter came out in 2007 and the prototype

00:15:40:03 - 00:15:43:11
was just asking, you know, what do you what are you doing?

00:15:43:11 - 00:15:45:23
And that started to spray some thinking around.

00:15:46:04 - 00:15:48:06
You know, we had this idea for a corporate social network

00:15:48:21 - 00:15:52:00
a year before, but we didn't really know what the product it would be.

00:15:52:00 - 00:15:54:24
And just having that simple partook of asking the user, What are you working on?

00:15:55:12 - 00:15:56:22
Help kind of ground the product.

00:15:56:22 - 00:15:59:21
So we had the product and then the distribution track.

00:15:59:21 - 00:16:03:21
I knew that like we needed some way to grow that wasn't just buying

00:16:03:21 - 00:16:06:21
advertising or a portal deal or something like that. And

00:16:07:22 - 00:16:09:05
that, you know, the thing that we had figured out

00:16:09:05 - 00:16:12:16
it at PayPal, well, one of them was, was email virality.

00:16:13:02 - 00:16:16:01
And so that was, you know, that was part of the

00:16:16:14 - 00:16:19:04
the blueprint from the beginning.

00:16:19:04 - 00:16:20:14
You know, I'd been thinking about this idea of

00:16:20:14 - 00:16:23:24
of creating a corporate social network, you know, a safe, secure network

00:16:23:24 - 00:16:27:09
for inside your company for probably a year or two

00:16:27:09 - 00:16:29:16
before we launched the product, until

00:16:29:16 - 00:16:32:13
the product checked in, the distribution track kind of came into focus for me.

00:16:32:13 - 00:16:34:21
We didn't start building that product.

00:16:34:21 - 00:16:35:22
Okay. Understood.

00:16:35:22 - 00:16:40:10
And the the transition and forgive me because that may be the wrong word,

00:16:40:14 - 00:16:42:22
but but a year or two prior to Yammer

00:16:44:00 - 00:16:47:16
Gini or maybe pronouncing wrong because obviously once one one's

00:16:47:16 - 00:16:52:20
background and family heritage, like how did how did that evolve into Yammer?

00:16:52:20 - 00:16:55:08
Were they in parallel or what was that?

00:16:55:08 - 00:16:58:02
What was the story that yeah.

00:16:58:02 - 00:17:02:07
So I founded a in 26 as a family social network.

00:17:02:07 - 00:17:05:07
I grew really fast, but by 2007

00:17:05:19 - 00:17:09:17
I was getting quite paranoid that Facebook was just going to eat that space.

00:17:09:17 - 00:17:10:06
When we launched,

00:17:11:06 - 00:17:12:20
Facebook was only for college students,

00:17:12:20 - 00:17:17:11
and the dominant social network was MySpace.

00:17:17:11 - 00:17:19:21
It was hard to see how MySpace the

00:17:19:21 - 00:17:23:08
the it was so unstructured and the content was so raw.

00:17:23:08 - 00:17:24:11
It's hard to see how MySpace

00:17:24:11 - 00:17:27:12
would get into something like families, but with Facebook,

00:17:27:12 - 00:17:29:01
it wasn't hard at all to see.

00:17:29:01 - 00:17:32:06
And I began to become paranoid that,

00:17:32:22 - 00:17:34:16
you know, ultimately family members and friends

00:17:34:16 - 00:17:36:02
would not have different social networks.

00:17:36:02 - 00:17:38:19
It would just all the network effects would just take over.

00:17:38:19 - 00:17:40:20
And so I started thinking about a pivot.

00:17:40:20 - 00:17:46:01
And as early as 27 and and by 2008, you know,

00:17:46:01 - 00:17:49:07
I was pretty sure that like corporate social networking was the direction to go.

00:17:49:17 - 00:17:53:21
And I just had to kind of the idea for the product and that distribution

00:17:54:08 - 00:17:58:10
trick or hack, if you will, that just needs to come into focus. And

00:17:59:14 - 00:18:02:10
and so yeah, once it did, we, we kind of

00:18:02:10 - 00:18:05:08
developed jammers, an internal project, a genie, and then we spun it out.

00:18:05:08 - 00:18:07:00
It was basically a pivot.

00:18:07:00 - 00:18:07:23
Kind of got it.

00:18:07:23 - 00:18:10:22
And I find it fascinating those early reactions that the VCs

00:18:10:22 - 00:18:14:24
that you that you alluded to, particularly given how stellar your background at

00:18:15:13 - 00:18:18:24
then was, do you attribute that. To.

00:18:19:17 - 00:18:22:09
Maybe your own storytelling being not quite,

00:18:23:04 - 00:18:25:22
you know, articulating how you were going to build something out?

00:18:25:22 - 00:18:27:23
Would you think they just were slow and didn't get it

00:18:27:23 - 00:18:30:18
or you know, there are lots of founders on the line who get who

00:18:30:23 - 00:18:35:04
who beat their head against a wall, VCs not getting that product or that vision

00:18:35:04 - 00:18:36:07
or that go to market.

00:18:36:07 - 00:18:37:11
When you when you look back

00:18:37:11 - 00:18:41:07
on those early conversations in a on Yammer and them asking about the

00:18:41:07 - 00:18:45:21
top down approach and why is this lacking etc., how do you reflect on those?

00:18:46:14 - 00:18:48:17
I'm sure I could have pitched it better.

00:18:48:17 - 00:18:51:03
I could have put it in greater historical context.

00:18:51:03 - 00:18:54:18
I mean, now looking back, I can look back over the past,

00:18:55:06 - 00:18:57:21
I don't know, 20 years and understand exactly how Yammer fit

00:18:57:21 - 00:19:01:23
into the progression of the cloud and you know,

00:19:03:03 - 00:19:06:05
you know, product like growth or bottom up SAS, whatever you want to call it.

00:19:06:05 - 00:19:10:13
And, but you know, at the time you just have a product idea and so yeah,

00:19:10:13 - 00:19:12:12
I'm sure I could up leveled at better

00:19:12:12 - 00:19:14:15
but obviously it's hard to know how you fit in,

00:19:15:16 - 00:19:17:19
you know, to a two decade

00:19:17:19 - 00:19:20:12
timeline or something when you're still living inside of it.

00:19:21:05 - 00:19:25:03
I think the the you know, the other thing is we didn't know any of this jargon.

00:19:25:03 - 00:19:28:11
You know, I didn't even know what SAS was when we started Yammer.

00:19:29:01 - 00:19:32:04
I didn't really learn a lot of the jargon until our series

00:19:32:04 - 00:19:35:06
B, which is when emergence invested.

00:19:35:06 - 00:19:37:17
And they were really our first

00:19:37:17 - 00:19:40:08
sort of B-to-B SAS investor.

00:19:40:08 - 00:19:44:08
They were specialists in that area and we started learning a bunch of

00:19:45:03 - 00:19:49:19
terminology and benchmarks and you know, we talked about like sales

00:19:49:20 - 00:19:52:08
and they helped us recruit a sales leader and things like that.

00:19:52:08 - 00:19:55:18
So yeah, sometimes you're you're a little bit too close to it

00:19:55:23 - 00:19:59:19
to know exactly how to, how to pitch it.

00:20:00:11 - 00:20:05:16
But I also think that a big issue going back to 2008 was

00:20:05:21 - 00:20:08:18
consumer enterprise were really perceived as very different worlds.

00:20:09:12 - 00:20:12:02
And so the voices who were doing

00:20:12:02 - 00:20:15:07
enterprise software had no consumer experience, they had no

00:20:17:17 - 00:20:19:02
sort of

00:20:19:19 - 00:20:21:12
point of reference to

00:20:21:12 - 00:20:26:13
understand how powerful virality can be, which was my whole experience with

00:20:26:13 - 00:20:31:02
with PayPal is we saw just how insanely powerful virality is.

00:20:31:02 - 00:20:34:21
And, you know, same thing when we invested in Facebook and Peter knew this.

00:20:34:21 - 00:20:38:01
This is one of the reasons why you became the first investor in Facebook,

00:20:38:01 - 00:20:41:16
because you really understood virality.

00:20:41:16 - 00:20:44:22
So so, yeah, I think part of it was also just there's there's

00:20:45:24 - 00:20:47:13
just lacking

00:20:47:22 - 00:20:49:19
a point of reference,

00:20:50:09 - 00:20:52:14
you know, going back if you go back to kind of the

00:20:53:10 - 00:20:56:02
the early 2000, so I guess

00:20:56:02 - 00:20:59:03
Salesforce started in 99, they couldn't get VC funding

00:20:59:03 - 00:21:03:02
in the very beginning either because again, your VCs saw

00:21:04:08 - 00:21:07:24
yeah, enterprise VCs saw the cloud as this is

00:21:09:01 - 00:21:13:07
they mirrored the, the beliefs of enterprises at that time,

00:21:13:17 - 00:21:17:00
which is that the cloud was this presumptively insecure thing

00:21:17:00 - 00:21:20:09
and it really took Salesforce a number of years

00:21:20:10 - 00:21:23:22
to just change the perception of the cloud.

00:21:23:22 - 00:21:28:22
But Salesforce was still a it pretty much top down sale.

00:21:28:22 - 00:21:32:09
They would try and find their prospect into the VP of sales

00:21:32:09 - 00:21:35:21
and then make a departmental sale to the VP of Sales.

00:21:36:05 - 00:21:38:22
It really wasn't around until like around

00:21:38:22 - 00:21:42:07
2008 when Yammer and then I would also say Box.

00:21:42:17 - 00:21:43:07
Aaron Levy

00:21:43:07 - 00:21:47:19
It was also kind of a pioneer in this area where you would try and appeal directly

00:21:47:19 - 00:21:52:00
to an end user of the product and you would use the just

00:21:52:13 - 00:21:55:08
regular employee of the company as a point of,

00:21:55:08 - 00:21:58:11
you know, as an entry point into the corporation.

00:21:58:11 - 00:22:01:07
You'd infiltrate and then once you had

00:22:02:16 - 00:22:02:23
kind of

00:22:02:23 - 00:22:07:07
taken over virally inside the company, then you would go to to it

00:22:07:11 - 00:22:10:15
and try and, you know, and try and make the sale a fait accompli.

00:22:10:15 - 00:22:14:10
And so it wasn't, you know, so we started with, you know, the cloud

00:22:14:10 - 00:22:18:12
and then top down SAS and then, you know, had to evolve to bottom of SAS

00:22:19:06 - 00:22:23:01
and yeah, so that's been the evolution of it.

00:22:23:01 - 00:22:26:11
And so as an investor today, I still think there's a lot more

00:22:26:11 - 00:22:28:04
that can be done with, with bottom up.

00:22:28:04 - 00:22:31:15
And so that, you know, that's the area that interests me the most.

00:22:32:13 - 00:22:34:15
We we heard about that lack

00:22:34:15 - 00:22:37:16
of hinterland and enterprise SAS investors

00:22:37:22 - 00:22:41:18
from Russ Mason of of MuleSoft and you know joining and seven

00:22:41:22 - 00:22:46:01
eight of how VCs at the time were just not not not getting it

00:22:47:03 - 00:22:48:21
but what would you then.

00:22:49:08 - 00:22:52:05
I remember, I mean back in 0809 when we first started

00:22:52:05 - 00:22:55:01
going viral among a few Fortune 500 companies,

00:22:56:13 - 00:22:59:08
they would talk to us and

00:22:59:10 - 00:23:01:11
then the conversation was basically, this is cool.

00:23:01:11 - 00:23:03:12
Can you burn on it just for us?

00:23:03:12 - 00:23:04:23
We're going to run it on our own servers

00:23:04:23 - 00:23:07:02
and we're like, No, this is multi-tenant cloud.

00:23:07:02 - 00:23:08:13
We don't do that.

00:23:08:13 - 00:23:11:01
And a few of our networks got shut down the early days.

00:23:11:01 - 00:23:16:08
It took a while for corporations to trust it, that the cloud was seen

00:23:16:08 - 00:23:20:11
as presumptively insecure by Fortune 500 companies until about

00:23:22:01 - 00:23:25:20
like 8 to 10 years ago, maybe.

00:23:25:20 - 00:23:28:21
And so I think probably VCs at that time were kind of

00:23:28:21 - 00:23:32:08
reflecting the views of buyers, you know.

00:23:32:08 - 00:23:33:24
But we always saw it as a moving target.

00:23:33:24 - 00:23:37:23
We knew that multi-tenant SaaS was architecturally better

00:23:37:23 - 00:23:42:13
and it was just a matter of time before enterprises gave in to that reality.

00:23:43:09 - 00:23:44:06
Got it.

00:23:44:06 - 00:23:49:08
And in some of your writing, you spoken about the your love of products

00:23:49:08 - 00:23:52:17
that speak to the most desperate customer segments and really finding

00:23:52:17 - 00:23:55:10
that that that either pain point or need.

00:23:55:17 - 00:24:00:01
Are you very quick, do you think, to identify products

00:24:00:01 - 00:24:03:06
that you and founders are pitching you products where you feel

00:24:03:06 - 00:24:06:06
it's a nice to have rather than a than a must have?

00:24:06:06 - 00:24:09:03
Are you would you would you say you have a a ruthless eye for that?

00:24:09:03 - 00:24:09:24
Now, as a VC.

00:24:11:07 - 00:24:13:13
It's certainly like an important thing.

00:24:14:01 - 00:24:16:13
You know, the whole you know, you want pain killers, not vitamins.

00:24:16:13 - 00:24:16:24
I would just say

00:24:16:24 - 00:24:19:21
it's like really hard to know in the early stages of a product, whether

00:24:20:21 - 00:24:23:04
it is painkillers or vitamins, because, you know, the early

00:24:23:04 - 00:24:27:21
days, these products, you know, they have a fully

00:24:27:21 - 00:24:29:00
you know, they're not fully baked yet.

00:24:29:00 - 00:24:31:12
In a lot of cases, there represent

00:24:32:07 - 00:24:36:14
10% of the product roadmap that a founder has in their head.

00:24:37:02 - 00:24:39:13
And so, you know,

00:24:40:15 - 00:24:43:05
I think this is one of the things about product.

00:24:43:07 - 00:24:46:02
It's easy to talk about product market fit as if it's like a binary thing.

00:24:46:02 - 00:24:47:05
You either have it or you don't.

00:24:47:05 - 00:24:50:17
But, you know, even when I've been in companies

00:24:51:00 - 00:24:54:24
that in hindsight had really strong product market fit like PayPal or Yammer,

00:24:55:05 - 00:24:56:19
you didn't know it at the time.

00:24:56:19 - 00:25:01:06
You were constantly worried that you, you know, maybe

00:25:01:08 - 00:25:05:10
maybe you've got something here, but, you know, in hindsight,

00:25:05:10 - 00:25:08:03
I think we can see that like those companies

00:25:08:03 - 00:25:11:06
kind of had lightning in a bottle, but it never feels that way at the time.

00:25:11:19 - 00:25:16:02
So it'd be nice if I could only invest in clear painkillers.

00:25:16:02 - 00:25:19:04
But it's it's hard to know in the early stages of these companies, I think,

00:25:19:22 - 00:25:20:12
you know.

00:25:20:12 - 00:25:25:04
I agree at some if it was evident, I think it would be a more simple conversation.

00:25:26:22 - 00:25:28:14
Do you do you one,

00:25:28:14 - 00:25:32:16
you mentioned GMV in areas, things you were interested in early on and

00:25:33:08 - 00:25:36:23
you've again written about areas of kind of growth margins

00:25:36:23 - 00:25:41:00
and how that's a more and more relevant thing for investors to look at.

00:25:41:00 - 00:25:42:08
And founders, of course,

00:25:42:08 - 00:25:45:21
because of the number of tech enabled businesses that aren't purely software.

00:25:46:08 - 00:25:49:17
Could you talk to us a little bit about that and and how you're thinking on it?

00:25:50:02 - 00:25:50:20
Yeah.

00:25:50:20 - 00:25:54:22
So let me preface it by saying that if you are doing a SaaS business

00:25:54:22 - 00:25:58:11
or a marketplace, you typically don't need to worry too much about gross margins

00:25:58:11 - 00:26:00:20
because those are perfect software businesses

00:26:01:16 - 00:26:04:05
to take, you know, an air or SaaS business.

00:26:04:19 - 00:26:09:18
All the expense goes into creating the first version of the, you know,

00:26:09:20 - 00:26:14:01
the first version of the product or, or the software for the first user.

00:26:14:19 - 00:26:19:02
After that, the provisioning of additional users is incrementally free.

00:26:19:03 - 00:26:24:13
You may have some hosting costs on us or something, but it doesn't cost you more.

00:26:24:13 - 00:26:28:11
And so the beauty of pure software businesses and Bill Gates

00:26:28:11 - 00:26:31:13
figured this out, you know, in the 1980s is that

00:26:33:06 - 00:26:34:10
is that

00:26:34:11 - 00:26:37:05
if you can, because all the cost is in the

00:26:37:05 - 00:26:40:18
in the first copy of the product

00:26:42:12 - 00:26:44:15
that these things become incredibly profitable

00:26:44:15 - 00:26:46:03
if you can get to a mass market.

00:26:46:03 - 00:26:50:04
And so what Bill Gates did was realize he should try and cut the cost

00:26:51:03 - 00:26:55:02
of of the operating system and make it up on volume.

00:26:55:02 - 00:26:55:15
And that's why

00:26:55:15 - 00:26:58:15
it was always really important that this model around getting on to every

00:26:59:04 - 00:27:02:04
desk, you know, a a PC on every desk

00:27:02:04 - 00:27:05:18
and windows running on every PC. And

00:27:06:22 - 00:27:10:03
and so, you know, and so he figured out that, you know, creating cheap

00:27:10:14 - 00:27:14:03
mass market software would make him the richest man in the world.

00:27:15:05 - 00:27:20:02
Now, I think, you know, so so the reason I say this is because

00:27:20:02 - 00:27:24:00
historically software companies haven't had to worry about gross margins.

00:27:24:00 - 00:27:26:06
And then what started happening

00:27:26:20 - 00:27:29:20
in the last ten years or so is that software started eating the world.

00:27:29:20 - 00:27:35:02
And so you saw software companies, you know, eating taxicab companies and,

00:27:35:10 - 00:27:38:13
you know, with Uber and eating hotels

00:27:38:13 - 00:27:41:19
like Airbnb and, you know, and so on.

00:27:41:19 - 00:27:45:08
And so that I saw software sort of in the world, it's

00:27:45:19 - 00:27:48:14
software companies started taking on the economic characteristics

00:27:48:21 - 00:27:51:04
of the companies that are eating, which is to say they

00:27:51:14 - 00:27:54:24
they started developing real cogs, you know, real cost of goods sold.

00:27:54:24 - 00:27:57:16
They had physical world operations

00:27:58:03 - 00:28:01:01
and and so there was a real gross margin issue.

00:28:01:01 - 00:28:04:08
So if you're like a food delivery company, for example,

00:28:04:20 - 00:28:07:13
the cost of the driver, that's a real cog.

00:28:08:01 - 00:28:11:04
And if a driver is making more per delivery,

00:28:11:04 - 00:28:14:23
then you're able to charge you have negative gross margins.

00:28:14:23 - 00:28:17:17
They're negative in economics and you do not have a business.

00:28:18:06 - 00:28:22:09
And so over the last several years, we've seen something of a rude awakening

00:28:22:24 - 00:28:27:09
for software businesses that were operating in the physical world,

00:28:27:09 - 00:28:30:21
that weren't managing their gross margins very carefully.

00:28:30:21 - 00:28:33:15
And frankly, the reason why they weren't mentioned carefully is because

00:28:34:03 - 00:28:37:23
they had learned the lesson of the Googles and the Facebooks and the Microsoft

00:28:37:23 - 00:28:39:22
that gross margins didn't matter.

00:28:39:22 - 00:28:44:01
I mean, the reason why these companies are there.

00:28:44:01 - 00:28:49:04
So, you know, if you visit the Google campus or the Facebook campus

00:28:49:04 - 00:28:52:20
or something like that, they seem like examples of just profligate spending,

00:28:53:10 - 00:28:56:16
you know, with the Disney install campuses and then the,

00:28:57:08 - 00:29:01:13
you know, the gourmet chefs and, you know, the free dry cleaning and what have you.

00:29:01:21 - 00:29:03:13
The reason why they can afford those things

00:29:03:13 - 00:29:05:09
is because they're pure software businesses.

00:29:05:09 - 00:29:09:11
They just have, you know, 90% gross margins are fantastically profitable all

00:29:09:24 - 00:29:13:11
and so but frankly, that like profligate mindset was

00:29:13:11 - 00:29:17:24
what a lot of founders went into these fiscal world companies having.

00:29:17:24 - 00:29:18:09
And then

00:29:18:09 - 00:29:19:08
and so I think there's

00:29:19:08 - 00:29:22:01
been a recent recognition that if you're operating a business

00:29:22:17 - 00:29:24:13
in the physical world, you better pay attention

00:29:24:13 - 00:29:27:06
to your gross margins in a way that Facebook and Google never had to

00:29:28:09 - 00:29:28:20
fascinate.

00:29:28:20 - 00:29:32:18
And if you interlace that with with stage, when you're looking at a seed

00:29:32:19 - 00:29:35:21
company versus an A or B, G at seed, you say,

00:29:35:21 - 00:29:39:15
hey, you'll figure out know economics later, show me the vision.

00:29:39:15 - 00:29:42:24
Or do you want them to have a clear roadmap on on their understanding

00:29:42:24 - 00:29:45:24
of gross margins and how and how that might play out.

00:29:46:17 - 00:29:49:04
If they're operating in the physical world?

00:29:49:06 - 00:29:52:11
I think they need to have an understanding that they can show us

00:29:52:21 - 00:29:56:01
even in the series a like that early

00:29:56:14 - 00:30:00:02
because the thing I'm always worried about with gross margins

00:30:00:02 - 00:30:02:17
is it's easy to create when you're operating

00:30:02:17 - 00:30:05:02
in the physical world and you're dealing with physical products,

00:30:05:16 - 00:30:08:21
especially products that are a replacement for other things like

00:30:09:21 - 00:30:13:08
food delivery or hotel rooms or something like that.

00:30:13:16 - 00:30:18:00
The thing I always worry about is it's easy to sell dollars for $0.90, right?

00:30:18:00 - 00:30:22:20
You will appear to have a business that's going through hypergrowth

00:30:23:15 - 00:30:27:07
because if you're giving away food deliveries or hotel rooms or whatever

00:30:27:07 - 00:30:30:08
at the low their market price, it's easy to be legacy.

00:30:30:08 - 00:30:32:24
Competitors have to make a profit.

00:30:32:24 - 00:30:35:05
So it's very easy to create the appearance of a business

00:30:35:05 - 00:30:36:07
that's growing really fast.

00:30:36:07 - 00:30:37:15
But then when you dig in

00:30:37:15 - 00:30:41:12
and you realize you're losing money in every transaction, you begin to wonder,

00:30:41:12 - 00:30:44:09
well, wait, if if this company priced this product correctly,

00:30:44:22 - 00:30:46:13
would they have any market at all?

00:30:46:13 - 00:30:50:01
And so it's easy to create the appearance of hypergrowth

00:30:51:20 - 00:30:53:22
and again at a below market price.

00:30:53:22 - 00:30:58:12
And the question is, you know, demand is demand is really

00:30:58:13 - 00:31:02:24
you have to see demand as a function of a price. And

00:31:04:03 - 00:31:06:24
and that demand could go away if you raise prices.

00:31:06:24 - 00:31:11:22
Now, if the startup is doing B2B SAS,

00:31:13:17 - 00:31:14:23
I don't worry about it.

00:31:14:23 - 00:31:16:23
I don't need them to show me their gross margins.

00:31:18:12 - 00:31:19:24
Well we care a lot about

00:31:19:24 - 00:31:22:14
then is like what are your sales and marketing costs.

00:31:23:04 - 00:31:25:20
So you know like

00:31:25:20 - 00:31:27:20
I know that your gross margins

00:31:27:20 - 00:31:30:23
are going to be 80, 90% because

00:31:30:23 - 00:31:33:16
you're just paying for storage on,

00:31:33:16 - 00:31:37:05
you know, w ass and you know, maybe there's some customer service component.

00:31:37:18 - 00:31:40:08
We're going to want to make sure that

00:31:40:14 - 00:31:43:17
you're not you don't have a mechanical Turk problem.

00:31:43:17 - 00:31:47:13
We can get into that, basically throwing bodies

00:31:48:06 - 00:31:51:06
at the problem because the pipe doesn't do it.

00:31:51:06 - 00:31:51:24
It's supposed to do.

00:31:51:24 - 00:31:56:00
And so you have a huge customer service overhang that can be kind of a

00:31:56:00 - 00:32:00:15
that can be a problem for SAS companies, but but otherwise, you know, it's just

00:32:01:05 - 00:32:04:17
gross margins aren't really the Achilles heel of the SAS company.

00:32:04:17 - 00:32:08:01
It's usually sales and marketing costs.

00:32:08:01 - 00:32:11:06
I know in your earlier comment reminds me of the

00:32:11:19 - 00:32:14:14
kind of the anecdotal founder who stands on the street corner

00:32:14:14 - 00:32:17:19
taking a dollar of VC and selling it for $0.90 to someone else.

00:32:18:09 - 00:32:20:01
You see. Thriving business. If you do that.

00:32:21:09 - 00:32:24:05
For a period.

00:32:24:05 - 00:32:26:01
Be willing to fund it, right?

00:32:26:01 - 00:32:27:19
Yes. Yes.

00:32:28:05 - 00:32:29:07
For that.

00:32:29:07 - 00:32:30:03
In that Yammer journey,

00:32:30:03 - 00:32:33:20
you later took on money from Founders Fund and also social capital in the E!

00:32:34:12 - 00:32:39:14
How did your experience as a founder and how those venture funds helped you

00:32:39:18 - 00:32:44:15
inform how you wanted to be, whether as a as a as a person, as a venture capitalist

00:32:44:15 - 00:32:48:10
or as a fund or what what operational support you gave?

00:32:49:00 - 00:32:51:03
How did that founder experience lead you to be

00:32:51:11 - 00:32:53:12
a venture capitalist that you could be proud of?

00:32:54:09 - 00:32:54:19
Yeah.

00:32:54:19 - 00:32:57:22
I mean, I see my job as really giving advice.

00:32:58:23 - 00:32:59:24
I mean, that's basically it.

00:32:59:24 - 00:33:02:18
There's a lot of places where founders can get money.

00:33:02:18 - 00:33:04:23
We want to support whatever the founder wants to do.

00:33:06:07 - 00:33:08:14
So we'll never vote against what if.

00:33:08:15 - 00:33:10:09
What a founder wants to do

00:33:10:09 - 00:33:14:07
is pretty simple, but I think the job really is providing advice.

00:33:14:07 - 00:33:17:18
And you know, again, I'd like to think that we can provide good advice

00:33:17:18 - 00:33:22:05
because we've just been through so many situations as a founder CEO.

00:33:22:20 - 00:33:26:10
And you're right that there's a growing number

00:33:26:10 - 00:33:29:13
of former founders who now entering the city,

00:33:30:14 - 00:33:33:14
but certainly when I was a founder,

00:33:33:19 - 00:33:36:06
if you just look at the percentage, there are very, very few

00:33:37:18 - 00:33:39:21
VCs who had, you know,

00:33:39:21 - 00:33:42:12
founder experience, you know,

00:33:43:15 - 00:33:45:17
at a company that had kind of gone the distance.

00:33:45:22 - 00:33:47:05
You know, there were very few of them.

00:33:47:05 - 00:33:51:16
There are more today, but it's still probably not the majority, I would say

00:33:53:01 - 00:33:56:23
so. So, yeah, we'd like to think that's that's a value add that,

00:33:58:03 - 00:34:00:20
you know, is a little bit distinctive.

00:34:00:20 - 00:34:05:00
And to go back to a comment you made earlier was a very clear moment

00:34:05:01 - 00:34:08:19
in your life when you felt you didn't want to be running a business anymore.

00:34:09:00 - 00:34:13:09
Was it was that a was there was it was it identifiable moment?

00:34:13:09 - 00:34:14:22
Yeah, it was pretty easy for me.

00:34:14:22 - 00:34:20:05
I mean, like after Zenefits, I was just like, you know, I did a a year

00:34:20:05 - 00:34:25:08
stint trying to lead a turnaround in that company and, you know, that escalates.

00:34:26:03 - 00:34:28:14
Well, yeah, we'll say it, but

00:34:28:14 - 00:34:32:20
but it kind of cured me of any desire to, you know, to keep operating.

00:34:32:20 - 00:34:36:13
And I kind of felt like I'd done everything I wanted to do as an operator.

00:34:36:13 - 00:34:37:24
And, I mean, I had

00:34:39:05 - 00:34:41:08
been founding

00:34:41:15 - 00:34:46:01
era CEO at PayPal that I'd founded Yammer and I'd done this turnaround stand.

00:34:46:01 - 00:34:47:11
I kind of felt like

00:34:47:11 - 00:34:50:16
it was getting repetitive and I just want to do something different.

00:34:51:08 - 00:34:53:02
And I think you miss about that.

00:34:53:02 - 00:34:54:13
Operator Life

00:34:56:01 - 00:34:57:17
when everything is working, it's great.

00:34:57:17 - 00:35:00:06
You know, when everything is up and to the right, it's, you know,

00:35:00:10 - 00:35:04:11
the highs are higher and the lows are lower than being a Etsy.

00:35:04:12 - 00:35:07:05
So when everything is just going great,

00:35:08:07 - 00:35:11:04
you know, that that is that is a lot of fun.

00:35:11:04 - 00:35:13:21
But the rest of the time is not like that.

00:35:13:21 - 00:35:14:03
You know,

00:35:14:03 - 00:35:17:05
most of the time you're as a founder, you're just trying to get things to work.

00:35:17:05 - 00:35:20:11
And even when in hindsight you'll look back and say,

00:35:20:11 - 00:35:22:24
wow, that was really working, you're always too paranoid

00:35:22:24 - 00:35:26:01
at the time that it's, you know, not working or about to break or

00:35:26:19 - 00:35:28:07
you've got competition or whatever.

00:35:28:07 - 00:35:31:19
And so no, I mean, I don't I don't really miss it.

00:35:32:22 - 00:35:34:02
I can understand that

00:35:34:02 - 00:35:37:14
we've got some from from Milian and Melissa and David.

00:35:37:14 - 00:35:40:02
Lots of questions coming through all types of questions in 5 minutes.

00:35:40:17 - 00:35:43:12
Just on the on on talent

00:35:43:12 - 00:35:46:00
and how you think about it, David,

00:35:46:18 - 00:35:49:06
does do you find yourself

00:35:50:05 - 00:35:53:00
just we were having a discussion internally yesterday on the back of an

00:35:53:01 - 00:35:57:14
LP call, the question of how you pick and whether you could come up with a,

00:35:57:23 - 00:36:00:16
you know, a colleague was suggesting an algorithm or, you know, how

00:36:00:18 - 00:36:09:00
how formulaic do you think early stage investing is?

00:36:09:00 - 00:36:12:10
Well, I think everybody's kind of got their own thesis.

00:36:12:10 - 00:36:17:18
And it's not like there's one thesis that that necessarily works.

00:36:17:18 - 00:36:19:20
I mean, I've heard

00:36:21:02 - 00:36:24:00
Keith Boy talk about being able to identify

00:36:24:00 - 00:36:27:03
like sort of who's a superstar and who's not.

00:36:27:03 - 00:36:30:14
And and in an interview, I personally have never been able to do that.

00:36:31:15 - 00:36:33:09
So I will I will know after three months

00:36:33:09 - 00:36:37:05
of working with the person, you know, what their strengths and weaknesses are.

00:36:37:05 - 00:36:40:16
And I can usually figure out, like,

00:36:41:10 - 00:36:43:02
if I need to make an adjustment in their role

00:36:43:02 - 00:36:47:00
or put them in some other kind of role or whatever, like, you know, historically

00:36:47:00 - 00:36:50:09
I was pretty, pretty good at that, but I had to work with someone

00:36:50:09 - 00:36:51:17
for a few months before I could do that.

00:36:51:17 - 00:36:54:09
I could never figure it out in an interview

00:36:55:01 - 00:36:58:22
and founders these days, generally speaking, I've gotten very good

00:36:58:22 - 00:37:01:20
at kind of pitching or selling their ideas.

00:37:02:16 - 00:37:05:12
Why see sort of a school for pitching.

00:37:05:12 - 00:37:07:17
And so it's

00:37:08:22 - 00:37:12:05
I can't like judge a startup just based on that.

00:37:13:02 - 00:37:16:09
But what I do look at like, so there's other things you can look at too.

00:37:16:12 - 00:37:20:10
Some people look at teams, some people look at product, which I do,

00:37:20:22 - 00:37:22:13
some look at market.

00:37:22:13 - 00:37:27:00
And then the fourth dimension that I really pattern match on is is tactics.

00:37:27:15 - 00:37:30:11
So like we've been talking about, you know, bottom up SAS is really

00:37:30:11 - 00:37:35:24
a collection of tactics to create, you know, nonlinear growth

00:37:37:02 - 00:37:39:03
by making the top of the funnel go viral.

00:37:39:07 - 00:37:40:21
I mean, that's basically what we're talking about.

00:37:40:21 - 00:37:42:20
And so for me,

00:37:42:20 - 00:37:45:17
you know, I try to do the same things that, you know, other VCs do in terms

00:37:45:17 - 00:37:46:17
of looking at all those things.

00:37:46:17 - 00:37:50:03
But maybe the thing that I do a little differently is I really focus on

00:37:52:06 - 00:37:54:07
starts of figuring out some sort of distribution

00:37:54:07 - 00:37:57:24
hack or contract, and it can just be

00:37:57:24 - 00:38:01:02
like bolted on to the startup.

00:38:01:02 - 00:38:02:18
It's got to be

00:38:03:00 - 00:38:06:09
it's got to be kind of like inherent, like the more closely

00:38:08:01 - 00:38:10:02
connected it is to the product itself.

00:38:10:02 - 00:38:12:17
That's what you know, that's what gets me excited.

00:38:12:17 - 00:38:13:09
Got it.

00:38:13:09 - 00:38:16:04
And actually there's a

00:38:16:05 - 00:38:20:01
there's that my co-founder Brant was also like you born in South Africa.

00:38:20:05 - 00:38:23:13
And he he took his business public in 2000.

00:38:23:13 - 00:38:25:23
And he often attributes

00:38:25:23 - 00:38:29:01
a lot of his success to feeling like a slight outsider

00:38:29:12 - 00:38:33:00
of having been born in a different place and having having

00:38:33:06 - 00:38:34:09
that sort of, as he calls

00:38:34:09 - 00:38:37:11
it, sort of chip on his shoulder, but in a way that he's proud of.

00:38:37:11 - 00:38:41:04
Like, is that did you I think you grew up in Tennessee,

00:38:41:04 - 00:38:43:24
like how, you know, whether it's Stanford or Chicago law.

00:38:43:24 - 00:38:46:16
Did you do you feel like an outsider at all?

00:38:46:20 - 00:38:51:00
Was that part of your drive in any way?

00:38:51:00 - 00:38:51:22
Probably.

00:38:51:22 - 00:38:53:16
I mean, I think there's something to that.

00:38:53:16 - 00:38:55:02
I don't it's hard for me to

00:38:56:04 - 00:38:58:09
analyze my own psychology, but I

00:38:58:15 - 00:39:01:20
you know, if you look at startups in Silicon Valley,

00:39:01:20 - 00:39:04:15
something like 50% of them have an immigrant on the

00:39:05:10 - 00:39:09:09
you know, on the founding team or as a as a co-founder.

00:39:09:09 - 00:39:12:18
So that number is so high, it can't just be accidental.

00:39:12:18 - 00:39:15:11
There must be something to it. And

00:39:16:18 - 00:39:17:19
I think

00:39:18:09 - 00:39:20:13
if I had to guess, it's something

00:39:20:13 - 00:39:22:21
to do with the fact that immigrants,

00:39:23:24 - 00:39:28:08
you know, already like the first decision they make is, is entrepreneurial,

00:39:28:19 - 00:39:33:07
is that to leave the place where you grew up and all the family

00:39:33:07 - 00:39:37:07
and friends that you have there to not accept that as a given,

00:39:37:20 - 00:39:40:14
but to actually then go move thousands

00:39:40:14 - 00:39:43:19
of miles away to a different country and start over.

00:39:44:22 - 00:39:46:22
That is a fundamentally entrepreneurial decision.

00:39:46:22 - 00:39:49:23
I mean, you're you're it's a contrary and decision because,

00:39:51:12 - 00:39:52:23
you know, it's it's within that

00:39:52:23 - 00:39:55:14
given community that most people don't do that.

00:39:56:04 - 00:39:59:14
And so I think you are kind of selecting for a group of people who,

00:40:00:19 - 00:40:03:02
you know, who don't take the world

00:40:03:02 - 00:40:06:23
as it is, as they as they find it as a given.

00:40:06:23 - 00:40:09:24
And they go in search of opportunity.

00:40:10:19 - 00:40:13:04
And and yeah, I think that,

00:40:13:04 - 00:40:16:08
you know, that that's that somehow is,

00:40:16:08 - 00:40:18:09
you know, that that that breeds entrepreneurial ism.

00:40:19:08 - 00:40:20:22
I love it.

00:40:20:22 - 00:40:24:15
It's I know I from from reading it sounds like you had a very brilliant

00:40:24:15 - 00:40:26:04
father as well, endocrinology.

00:40:26:04 - 00:40:29:13
And I wonder whether it was medicine ever something you ever considered doing

00:40:29:13 - 00:40:31:05
was that that wasn't part of the game plan.

00:40:32:04 - 00:40:33:11
I you know,

00:40:33:11 - 00:40:36:24
I just never had an interest in in doing medicine.

00:40:36:24 - 00:40:39:06
It was certainly something that would've been happy if I did,

00:40:40:03 - 00:40:41:19
you know, the old,

00:40:42:09 - 00:40:43:07
you know,

00:40:44:05 - 00:40:47:03
you know, like the stereotype of the Jewish mother is they

00:40:47:07 - 00:40:49:11
they want you to become a doctor or a lawyer or something.

00:40:49:20 - 00:40:52:15
They almost had me on the right track when I went to law school, and then

00:40:53:07 - 00:40:57:03
somehow I fell off the track, you know, within a year of graduating and,

00:40:58:07 - 00:41:01:00
you know, and

00:41:01:00 - 00:41:03:02
so so yeah. I mean.

00:41:03:02 - 00:41:05:04
They got so close to you being a success, David.

00:41:05:04 - 00:41:08:02
If only you got to know.

00:41:08:02 - 00:41:13:19
So I, so I graduated law school in 1998 and joined McKinsey and worked there

00:41:13:19 - 00:41:17:21
for about ten months before Peter called me and recruited me to PayPal.

00:41:17:21 - 00:41:23:00
And so as a 1999 and even back then, you know, the Internet had sort of

00:41:23:00 - 00:41:26:02
taken take off and you had these high flying public companies.

00:41:26:22 - 00:41:28:23
But joining Internet company was still perceived

00:41:28:23 - 00:41:32:01
as an incredibly risky thing to do is like seen as throwing your

00:41:32:19 - 00:41:35:12
your career away because, you know, there were all the like

00:41:35:12 - 00:41:38:21
all the good jobs at that time were these like heavily tracked jobs.

00:41:38:21 - 00:41:39:21
You had worked

00:41:40:02 - 00:41:43:20
seven years at a law firm or a McKinsey or an investment bank or something,

00:41:43:20 - 00:41:44:23
and then you become partner.

00:41:44:23 - 00:41:47:24
And it was seen as a really risky thing

00:41:47:24 - 00:41:51:03
to do.

00:41:51:03 - 00:41:54:03
I mean, if things are really different right now, you know, where,

00:41:55:13 - 00:41:56:19
you know, back,

00:41:57:04 - 00:42:00:08
I think now the most common degree

00:42:00:08 - 00:42:03:09
that students graduating Stanford get is computer science.

00:42:03:09 - 00:42:07:11
Like like half the class when I graduated was political science.

00:42:07:11 - 00:42:08:11
You know

00:42:09:01 - 00:42:12:06
something totally useless, basically.

00:42:12:06 - 00:42:14:07
So, yeah, it's it's changed a lot,

00:42:14:07 - 00:42:16:23
you know, the resources that are available for entrepreneurs.

00:42:17:10 - 00:42:21:05
I mean, I had this idea 20 years ago, I want to be an entrepreneur,

00:42:21:05 - 00:42:24:02
but I had no idea how to do it. You know, I wasn't plugged in.

00:42:24:02 - 00:42:29:01
It really took someone like Peter to recruit me at his startup.

00:42:29:01 - 00:42:31:05
And then I learned it was like an apprenticeship.

00:42:31:05 - 00:42:33:24
And then I went off and did my own.

00:42:33:24 - 00:42:35:19
That was really the only way to learn how to do it.

00:42:35:19 - 00:42:39:06
There is no blogs, there is no wiki or incubators or whatever.

00:42:39:06 - 00:42:43:02
There was none of this like collective knowledge that's been built up.

00:42:44:02 - 00:42:44:16
So it's so

00:42:44:16 - 00:42:48:18
much easier now to just start something, to learn how to start something.

00:42:48:18 - 00:42:50:16
And of course, there's so many VCs

00:42:50:16 - 00:42:53:23
running around throwing money at anything that seems like a good idea.

00:42:54:22 - 00:42:56:11
And that was not the case 20 years ago.

00:42:56:11 - 00:43:00:10
You had to kind of pilgrimage up to Central Road, hat in hand,

00:43:00:10 - 00:43:04:16
and convince one of those VCs who were on that street to give you money

00:43:05:04 - 00:43:09:21
and you had to be a little bit wired into it to be able to do that.

00:43:09:21 - 00:43:14:22
So anyway, all this is this just day that this is like great news for for founders.

00:43:15:13 - 00:43:18:13
Totally, where we've got I'm going to get in trouble for not turning to questions.

00:43:18:13 - 00:43:19:09
We've got them pouring in.

00:43:19:09 - 00:43:21:12
One of them is actually about is there any difference

00:43:21:12 - 00:43:24:00
raising from a top tier, obviously, versus a lesser known one.

00:43:24:00 - 00:43:25:22
But we'll come to that one in a moment.

00:43:25:22 - 00:43:27:18
We'll start with David and Melissa.

00:43:27:18 - 00:43:30:12
Maybe just very last one for you, David.

00:43:30:12 - 00:43:31:20
Thank you for smoking.

00:43:31:20 - 00:43:33:07
Golden Globe winning.

00:43:33:07 - 00:43:34:10
When's when's the next film?

00:43:34:10 - 00:43:37:18
When are you planning it?

00:43:37:18 - 00:43:38:12
Yeah, it's

00:43:39:15 - 00:43:41:13
well, I,

00:43:41:19 - 00:43:44:07
I you know, I said that I wasn't going to do another one

00:43:44:08 - 00:43:46:17
actually for smoking, but I may have misspoken. There.

00:43:46:17 - 00:43:51:06
I do have a project that is pretty interesting,

00:43:51:06 - 00:43:54:18
and we have a great writer who created a fantastic script.

00:43:54:18 - 00:43:57:18
And it may actually it looks it looks like it might actually happen.

00:43:58:05 - 00:43:59:14
So we'll see. We'll see.

00:43:59:14 - 00:44:02:23
I don't want to announce anything yet, but I wouldn't you know, it's possible.

00:44:03:15 - 00:44:08:14
But watch that space will hand over to David who's New York based was

00:44:08:14 - 00:44:12:20
was founding of Compass and now a CEO and founder of Harness Wealth.

00:44:13:23 - 00:44:15:16
David, over to you.

00:44:15:16 - 00:44:16:11
Thank you.

00:44:16:11 - 00:44:19:08
I really enjoyed the comments so far.

00:44:19:08 - 00:44:21:21
I'm curious on your perspective of the ideal

00:44:22:08 - 00:44:25:07
board structure and composition coming out of this series?

00:44:25:07 - 00:44:29:22
A I'm sure Kraft has perspective on, you know, how they like to be involved,

00:44:29:22 - 00:44:34:13
but curious broadly what you see is most effective for a company at that stage.

00:44:35:07 - 00:44:36:08
And I'm going to be very

00:44:36:08 - 00:44:38:07
I'm going to be very bossy and take two in a go

00:44:38:07 - 00:44:40:11
just so we can we can get through because there are so many questions

00:44:40:11 - 00:44:42:12
coming through. David. Thank you, Melissa.

00:44:42:12 - 00:44:43:06
Why don't you go?

00:44:43:06 - 00:44:47:05
And Melissa is Ross Mason's co-founder of Dig Ventures.

00:44:47:05 - 00:44:51:09
That early stage SAS fund based in London, been investing across the U.S.

00:44:51:09 - 00:44:52:13
and Europe. So, Melissa, over to you.

00:44:53:20 - 00:44:54:15
Thanks, Spencer.

00:44:54:15 - 00:44:56:00
And hi, David.

00:44:56:00 - 00:44:58:13
Really, really enjoyed hearing your story.

00:44:58:13 - 00:45:00:10
There's a ton that resonates.

00:45:00:10 - 00:45:04:00
I was previously at Soft and it took a good five, six years

00:45:04:00 - 00:45:07:13
to figure out how to talk to CIOs, having got developers excited.

00:45:07:13 - 00:45:09:24
So plenty of learnings.

00:45:09:24 - 00:45:12:07
One question I had for you was around the comment

00:45:12:07 - 00:45:15:04
that you made on getting a product early on.

00:45:16:02 - 00:45:21:07
I interpret that as something that ideally sticks in a certain type of customer

00:45:21:15 - 00:45:24:00
that is well understood and then can expand later on.

00:45:24:10 - 00:45:27:07
And we often find companies as an investor

00:45:27:07 - 00:45:31:00
who have these fantastic kind of general purpose enterprise platforms

00:45:31:13 - 00:45:32:07
that can cater

00:45:32:07 - 00:45:35:12
to all sorts of different use cases, but they need some sort of entry point.

00:45:35:21 - 00:45:39:14
And it's it's really hard to figure out how to sometimes navigate that.

00:45:39:14 - 00:45:40:16
So I'd love to hear

00:45:40:16 - 00:45:44:10
any advice you have for future founders in those kind of spaces.

00:45:45:09 - 00:45:46:19
Yeah. Okay.

00:45:46:19 - 00:45:48:21
So let me take the second question first

00:45:49:13 - 00:45:51:21
and then I'll go back to the board structure.

00:45:51:21 - 00:45:57:17
So I think with respect to, you know,

00:45:58:17 - 00:46:00:01
I guess

00:46:00:07 - 00:46:02:07
the question here is,

00:46:03:20 - 00:46:07:09
is, is how to think about,

00:46:08:24 - 00:46:13:01
you know, about customers and how specifically

00:46:13:01 - 00:46:16:08
you need to address the the needs of customers when you launch?

00:46:16:17 - 00:46:19:13
Is that sort of the question or exactly?

00:46:19:13 - 00:46:20:19
Yeah. No.

00:46:20:19 - 00:46:24:11
So so I have this view

00:46:25:20 - 00:46:28:06
that, you know, there

00:46:28:06 - 00:46:30:24
that that the customer does not come first,

00:46:30:24 - 00:46:33:04
that the product actually comes first

00:46:33:24 - 00:46:36:12
for most founders.

00:46:36:12 - 00:46:40:19
It would be nice if the founder knew exactly who the customer was

00:46:41:09 - 00:46:43:20
and could build specifically to their requirements.

00:46:43:20 - 00:46:45:24
But that's not in fact what usually happens.

00:46:45:24 - 00:46:49:04
I think what usually happens is the founder has an idea

00:46:49:04 - 00:46:50:23
for a new kind of product.

00:46:50:23 - 00:46:53:09
They don't they're they're clearer

00:46:53:09 - 00:46:55:23
on how that product will create value for the user.

00:46:56:18 - 00:47:00:10
But they may be a little hazy on details like who exactly

00:47:00:10 - 00:47:03:18
is the buyer going to be, how much are they going to charge?

00:47:03:21 - 00:47:06:16
Maybe even the business model's a little bit fuzzy,

00:47:07:11 - 00:47:10:17
and what they do is they just put the product out into the world.

00:47:10:17 - 00:47:12:06
They kind of go wide with it.

00:47:12:06 - 00:47:15:12
They this works, I think, better for horizontal products.

00:47:16:02 - 00:47:18:15
And then what they do is they observe

00:47:19:12 - 00:47:23:04
how the parties actually use who is it creating value for and why.

00:47:23:23 - 00:47:28:02
And then if there if they see that there's some initial adoption, they will then

00:47:28:13 - 00:47:32:17
they will discover the market insight and then they will lean into that insight.

00:47:33:02 - 00:47:35:03
So as an example, with PayPal,

00:47:36:00 - 00:47:38:10
you know, we didn't know exactly who would use the product.

00:47:39:03 - 00:47:43:08
The the auction use case had been discussed, but it was one of many things

00:47:43:08 - 00:47:46:11
that was discussed along with splitting dinner taps or what have you.

00:47:46:23 - 00:47:51:04
And but we just knew, you know, just founder intuition that

00:47:53:13 - 00:47:55:20
that people would want to email money.

00:47:55:20 - 00:47:59:15
It was a more convenient way of of of sending money online.

00:48:00:02 - 00:48:03:11
And so if we could just launch like a very simple,

00:48:03:11 - 00:48:05:09
easy way to email money, people would do it.

00:48:05:09 - 00:48:07:01
And so what we did, so we launched it,

00:48:07:01 - 00:48:09:03
we then observed very closely who was using it.

00:48:09:03 - 00:48:11:08
We discovered that people on eBay were using it,

00:48:11:08 - 00:48:13:02
and then we had the market insight, which was that

00:48:13:02 - 00:48:15:24
eBay was the key beachhead market, but we had to win that.

00:48:16:09 - 00:48:19:05
And then if we could win that market, that would get us to critical mass,

00:48:19:05 - 00:48:20:07
critical scale.

00:48:20:07 - 00:48:22:07
And then we were able to go off and win all the other markets.

00:48:22:07 - 00:48:23:21
And so that's the kind.

00:48:23:21 - 00:48:28:05
So, you know, I call that product first as opposed to customer first thinking.

00:48:28:16 - 00:48:31:08
You start with the product and then you kind of reverse

00:48:31:08 - 00:48:33:21
engineer who your customer is.

00:48:34:10 - 00:48:37:05
And I think that's the reality

00:48:37:05 - 00:48:40:14
for most founders and most startups

00:48:41:01 - 00:48:44:05
and what ends up happening is that once the market insights discovered,

00:48:44:14 - 00:48:46:16
you're the investor presentation gets rewritten,

00:48:47:00 - 00:48:50:10
so that the founder had this great insight all along and they started the company

00:48:50:10 - 00:48:53:21
because they had this great insight and the story gets kind of

00:48:55:02 - 00:48:56:11
retroactively retold.

00:48:56:11 - 00:48:57:11
But and

00:48:57:11 - 00:48:58:23
there are some founders who are smart enough

00:48:58:23 - 00:49:01:05
to have the market insight before they even start the company.

00:49:01:05 - 00:49:04:22
But I tend to think that it's more about having the product first

00:49:04:23 - 00:49:07:06
and then they discover the insight later.

00:49:08:04 - 00:49:08:19
Makes sense.

00:49:08:19 - 00:49:09:17
Thank you

00:49:11:00 - 00:49:13:10
to the question of board seats.

00:49:13:10 - 00:49:16:13
You know, typically what we see coming out of a Series A is there's two

00:49:16:14 - 00:49:18:12
or three seats for the founders.

00:49:18:12 - 00:49:20:21
We're fine giving a third founders seat because we don't expect

00:49:20:23 - 00:49:22:24
be in control anyway.

00:49:22:24 - 00:49:26:22
There's one seat for the series and there may or may not be a seat for the seat.

00:49:28:05 - 00:49:30:03
Really, the only mistake you can make coming out of

00:49:30:03 - 00:49:32:19
the series a is is to have too many investors on the board.

00:49:33:03 - 00:49:35:15
You know, we like to see founders maintain control

00:49:36:03 - 00:49:40:06
after the series A, because there's so many more rounds to come.

00:49:42:00 - 00:49:43:24
David Thank you, Melissa.

00:49:43:24 - 00:49:46:21
Next up, we've got John and Lana.

00:49:46:21 - 00:49:47:19
So, John, you should be.

00:49:47:19 - 00:49:53:22
Our mutual note leads tech investing for Richard Branson as part of Virgin John.

00:49:54:00 - 00:49:55:23
You should be unmuted.

00:49:55:23 - 00:49:56:24
Hey. Hey.

00:49:56:24 - 00:49:58:24
Thanks, Spencer. Thanks, David.

00:49:58:24 - 00:50:00:17
So many golden nuggets. Yeah.

00:50:00:17 - 00:50:03:02
Two takeaways to thanks for sharing them with us.

00:50:03:13 - 00:50:06:00
Quick more general question.

00:50:06:00 - 00:50:07:16
What's the best advice that

00:50:07:16 - 00:50:10:20
that you've been given or the advice that you'd give yourself,

00:50:12:00 - 00:50:14:22
you know, starting out 20 years ago.

00:50:14:22 - 00:50:17:23
And then linked to that one liner and founder of Flame

00:50:18:10 - 00:50:22:01
Marketplace for fliers that has assassin operating platform off the back of it.

00:50:22:14 - 00:50:24:06
Lorna, over to you.

00:50:24:09 - 00:50:24:17
Yeah.

00:50:24:17 - 00:50:27:13
So obviously you write a lot about virality.

00:50:27:13 - 00:50:31:01
I also read a lot about network effects and effects.

00:50:31:23 - 00:50:34:07
And I think that it's or at least

00:50:34:10 - 00:50:35:16
I've been trying to create

00:50:35:16 - 00:50:39:14
that same system where you see a lot of that in more horizontal source,

00:50:39:14 - 00:50:42:24
just some examples of virality and verticals.

00:50:42:24 - 00:50:46:18
That's where essentially your customers are all in the same space

00:50:46:18 - 00:50:48:09
and are very competitive with each other.

00:50:48:09 - 00:50:52:08
So they're not they're less inclined to share out to each other.

00:50:53:03 - 00:50:53:12
Mm hmm.

00:50:54:23 - 00:50:55:05
Yeah.

00:50:55:05 - 00:50:59:24
I mean, so virality is a tactic that's not going to work for every company.

00:50:59:24 - 00:51:03:13
You know, it's I mean, it's obviously it's a beautiful thing when it does work.

00:51:03:13 - 00:51:05:21
And we really look for those companies.

00:51:05:21 - 00:51:07:21
It tends to work best, I'd say, for

00:51:08:22 - 00:51:11:15
companies versus products that are involved

00:51:11:16 - 00:51:15:23
in collaboration, obviously, because the whole objective is to you

00:51:15:24 - 00:51:18:04
invite people to to collaborate with them.

00:51:19:24 - 00:51:22:10
I think for for companies you don't have I reality

00:51:23:00 - 00:51:26:02
there are a lot of other tactics that you can use.

00:51:26:02 - 00:51:28:16
I mean so obviously free trials,

00:51:29:21 - 00:51:33:09
you know, don't let let users sign up organically.

00:51:33:09 - 00:51:37:03
You don't have to go through a salesperson.

00:51:37:03 - 00:51:40:09
You know, there's content strategies that seem to work really well.

00:51:41:07 - 00:51:43:11
So write content, generate SEO

00:51:43:21 - 00:51:46:11
events and so on. So

00:51:47:23 - 00:51:50:02
yeah, I mean, there's kind of a litany of tactics

00:51:50:02 - 00:51:54:09
and I think the important thing is just for there to be

00:51:56:01 - 00:51:58:07
allegiance channel that

00:51:59:11 - 00:52:03:03
we're maybe half your leads come from that doesn't require paid marketing.

00:52:03:21 - 00:52:04:20
It could be word of mouth,

00:52:04:20 - 00:52:07:04
it could be content, it could be virality, whatever it is.

00:52:08:07 - 00:52:10:14
Jason Lampkin has written about this as well.

00:52:10:14 - 00:52:13:14
You know, the problem with getting all of your traffic

00:52:13:17 - 00:52:17:07
through paid sources, Google or Facebook,

00:52:17:07 - 00:52:20:14
is it's going to be very expensive and so very competitive.

00:52:21:03 - 00:52:23:08
And if they ever change their algorithm,

00:52:23:08 - 00:52:26:21
you know, you all of a sudden your your traffic can dry up.

00:52:26:21 - 00:52:29:23
And so I you know, I look for

00:52:30:05 - 00:52:32:07
some some sort of organic lead

00:52:33:12 - 00:52:35:15
Lee Jones channel

00:52:35:18 - 00:52:38:21
to is kind of an X factor for versus companies

00:52:39:21 - 00:52:41:23
was the previous question it was around.

00:52:43:00 - 00:52:46:00
Best best advice that you've been given

00:52:46:00 - 00:52:46:17
from.

00:52:47:21 - 00:52:50:19
The thing I've I've kind of realized recently

00:52:51:21 - 00:52:55:09
maybe it is when PayPal hit a $200 billion market

00:52:56:13 - 00:52:59:22
and looking back we sold it 18 years ago for 1.5 billion.

00:53:00:12 - 00:53:05:03
Is that is that the outcomes if I'm speaking to myself 20 years ago

00:53:05:04 - 00:53:07:23
as the outcomes are going to be a lot bigger than you think,

00:53:09:04 - 00:53:12:18
like intuit it like on some level, you know that this like the new economy

00:53:12:18 - 00:53:13:20
is taking over the world

00:53:13:20 - 00:53:18:03
and this like tech stuff is the future like we all know that, but I don't think

00:53:18:03 - 00:53:23:00
we realize like that's going to be orders of magnitude bigger than we think.

00:53:23:00 - 00:53:25:17
And even when I was doing Yammer or,

00:53:26:03 - 00:53:28:21
you know, sort of call it ten or 12 years ago,

00:53:29:11 - 00:53:32:07
we thought that like a great outcome

00:53:32:22 - 00:53:34:02
for us as a company

00:53:34:02 - 00:53:37:08
would be like, you go public at like a one or $2 billion valuation.

00:53:37:24 - 00:53:40:16
And now we have SaaS company like the Slack

00:53:40:17 - 00:53:42:13
I think is worth about 15 billion.

00:53:42:13 - 00:53:44:20
Zoom is our 120 billion.

00:53:44:20 - 00:53:47:13
Facebook's is worth over 200 billion.

00:53:48:01 - 00:53:50:22
And so it's just, you know, everything has turned out to be,

00:53:51:09 - 00:53:55:01
you know, ten times or 100 times bigger than than we thought back then.

00:53:55:15 - 00:53:58:17
And I think sort of the corollary to that is

00:53:59:17 - 00:54:00:05
you really

00:54:00:05 - 00:54:03:15
want to stick with your your winners or your winning ideas

00:54:03:24 - 00:54:08:01
as long as possible.

00:54:08:01 - 00:54:12:06
Selling too early and especially this is true for investors, is that

00:54:13:08 - 00:54:15:11
not letting your winners run

00:54:15:11 - 00:54:19:01
is an even bigger mistake than just investing in the wrong thing.

00:54:19:24 - 00:54:21:12
You have to let your winners run.

00:54:21:12 - 00:54:24:13
It really takes 20 years

00:54:24:18 - 00:54:27:15
for these companies to realize their full potential.

00:54:27:15 - 00:54:28:20
Now you can get liquidity

00:54:28:20 - 00:54:33:03
sometimes for like, you know, a shooting start type company in four or five years.

00:54:33:03 - 00:54:38:13
But if you really want to, you know, if you really want

00:54:38:13 - 00:54:41:21
to see them like achieve their full potential, it takes 20 years.

00:54:42:12 - 00:54:43:23
Great. Thank you.

00:54:44:05 - 00:54:47:07
I feel like you and Luke Nosek might have had a conversation on that.

00:54:47:07 - 00:54:51:00
We've heard him speak about giga funds 20 year and if you sold Space X, now

00:54:51:00 - 00:54:53:04
you're missing out on the next ten years. Except yeah.

00:54:53:04 - 00:54:55:10
I mean, yeah, I think there's a lot of truth to that.

00:54:55:10 - 00:54:59:05
And I mean, look at Tesla, it's so Tesla.

00:54:59:05 - 00:55:01:01
I mean, he also working on that for

00:55:03:06 - 00:55:06:08
like eight years or so or close to 20 years.

00:55:06:08 - 00:55:07:11
Not quite.

00:55:08:06 - 00:55:11:02
It's gone up ten X in the last

00:55:11:02 - 00:55:12:09
year, year and a half.

00:55:12:09 - 00:55:16:11
And so if you had stayed in the company for the first six years,

00:55:17:02 - 00:55:19:14
you would have made 10%

00:55:19:14 - 00:55:24:06
of what you would have made by just staying in it for like last 1 to 2 years.

00:55:25:00 - 00:55:28:17
Like 90% of the value creation has come in the last year or two.

00:55:29:10 - 00:55:32:03
And so like, that's pretty remarkable.

00:55:32:03 - 00:55:40:14
So yeah, you have to keep that in mind.

00:55:40:14 - 00:55:43:02
I think Spencer just froze here.

00:55:43:02 - 00:55:47:06
And David, as I can jump in with, with, with a final question.

00:55:48:15 - 00:55:51:18
In. Relation to use to you seeing yourself as a,

00:55:52:00 - 00:55:56:15
as an advisor to the companies and sort of there's so much collective

00:55:56:16 - 00:56:01:01
knowledge available to founders today, particularly with the early stage.

00:56:01:01 - 00:56:04:22
Are there is there some advice that you outright disagree with?

00:56:04:22 - 00:56:10:06
But that is very common for early stage founders. Um,

00:56:11:18 - 00:56:13:18
well, I guess, I mean, I saw

00:56:13:18 - 00:56:17:09
in the chat that somebody called out

00:56:17:10 - 00:56:21:24
the know says here you've taken opposing beta programs

00:56:21:24 - 00:56:26:16
advice on do things that don't scale.

00:56:26:16 - 00:56:28:07
Yeah I mean

00:56:29:03 - 00:56:30:13
I guess that the do

00:56:30:13 - 00:56:33:11
things that don't scale advice is is

00:56:34:15 - 00:56:36:19
is something I don't particularly agree

00:56:36:19 - 00:56:40:11
with a lot depends on what kind of company it is.

00:56:41:01 - 00:56:44:21
So if it's a marketplace like Airbnb, I think it's okay

00:56:44:22 - 00:56:48:00
to do things that are scale in the early stages in order to

00:56:49:01 - 00:56:52:15
generate that initial liquidity, which is so critical for a marketplace.

00:56:53:04 - 00:56:55:17
But I think for any of the physical world,

00:56:55:17 - 00:57:01:04
sort of the online to offline startups, it's really critical that you get the unit

00:57:01:05 - 00:57:03:21
economics correct from from the beginning, like we talked about.

00:57:04:08 - 00:57:08:03
And when you start throwing bodies at problems, which is the doing things

00:57:08:10 - 00:57:09:05
that would be like the

00:57:10:11 - 00:57:11:04
less charitable way

00:57:11:04 - 00:57:15:05
of describing do things that don't scale your three bodies are problems.

00:57:15:05 - 00:57:18:13
You develop some really bad habits

00:57:18:13 - 00:57:20:23
and it's very hard to re-engineer

00:57:21:12 - 00:57:25:13
the cost structure of a business at scale.

00:57:25:13 - 00:57:28:03
So yeah, that'd be like one I would disagree with.

00:57:28:03 - 00:57:31:10
And most context,

00:57:31:10 - 00:57:35:07
you know, a lot of the advice we give is, I mean, I try to write blogs

00:57:35:07 - 00:57:37:22
about the things that seem to be

00:57:39:09 - 00:57:41:09
broadly true, but

00:57:41:17 - 00:57:45:19
but then, you know, so much of the advice we give is situational as well so,

00:57:47:01 - 00:57:50:07
you know, it's

00:57:50:23 - 00:57:54:00
yeah, I would just say maybe maybe the advice is

00:57:54:12 - 00:57:57:04
you can't just like read a blog and then

00:57:58:02 - 00:58:00:07
I mean you can get useful out of it but

00:58:01:04 - 00:58:03:09
really tricky decisions in a startup

00:58:03:09 - 00:58:07:07
it's it's got to be the advice has to be situationally applied.

00:58:07:07 - 00:58:08:14
You can't just like

00:58:08:14 - 00:58:10:21
read something in a blog and then automatically assume, oh,

00:58:10:21 - 00:58:12:03
that's what we should do, you know.

00:58:13:14 - 00:58:15:17
David as, as the clock strikes 8 p.m.

00:58:15:17 - 00:58:16:19
here, I think 11 a.m.

00:58:16:19 - 00:58:18:19
with you, we can't thank you enough.

00:58:18:19 - 00:58:22:19
You've been a star and big thank you to Jessica for making this happen.

00:58:23:13 - 00:58:24:08
And he says, right.

00:58:24:08 - 00:58:28:09
We've we've we've all of our my first minute talks are now on Spotify.

00:58:28:09 - 00:58:31:21
So do do take a look but David really a huge thank you.

00:58:31:21 - 00:58:35:17
There are at least a dozen more questions that I probably shouldn't have waffled on

00:58:35:17 - 00:58:36:16
as long as I did.

00:58:36:16 - 00:58:37:20
But we really appreciate it.

00:58:37:20 - 00:58:40:06
Your insight and taking the time to chat to us.

00:58:41:07 - 00:58:43:16
Absolutely. Great. Great to be with you.

00:58:43:16 - 00:58:44:24
Thank you so much.

00:58:44:24 - 00:58:47:11
Thanks for.