Unicorns: now and then with Aileen Lee | E1887

SPEAKER_02: entrepreneurial background, having done something, it doesn't almost matter whether it was jet.com or if it was like a lawn mowing business. Yeah, it's like basically you have to have tried and have that fire to actually take risk and failure. I think I think it's really important. I always tell my SPEAKER_01: founders getting your ass kicked is a precursor to kicking us. SPEAKER_02: Yeah, but I do think for the next generation of founders, like for my kids, I encourage them and their friends like start businesses, talk about business ideas with each other. Why? Why are you encouraging them that now? SPEAKER_01: The understanding the risk and all the things you just said SPEAKER_02: about hiring, planning out the business, facing failure and disappointment, selling, satisfying customers, all those things you kind of need reps. Yeah, and then you get better at it over time. This Week in Startups is brought to you by SPEAKER_00: ketone IQ is a clean energy boost without sugar or caffeine. Get 30% off your first subscription order of ketone IQ at hvmn.com slash twist. The paintbrush loan is the earliest startup financing on the internet. No pitch deck, no business plan and no warm intros. Plus you get to keep your equity. Visit get paintbrush.com to see if you qualify for a $50,000 startup loan in less than two minutes. And Koda is the all in one doc for teams. Get started for free and get a $1,000 startup credit at Kota dot io slash twist. SPEAKER_01: Alright, everybody, welcome back to the program. alien Lee is here. She's the founder and managing partner of how boy ventures you could follow her on Twitter slash x alien Lee. A i l e n l e. Thank you. Welcome back to the program. I don't know when the last time we talked was but yeah, you're SPEAKER_02: gonna do it for a long time, though. Yeah, it's been I don't SPEAKER_01: know, 15 or 20 years. I mean, probably you knew me before I was investing in companies and I was just an entrepreneur. And back in 2013. You coined the term unicorn. You've done a lot of research on unicorns. And you just updated the famous 20 was it the 2013 report? Yeah, yeah. And so I just wanted to talk to SPEAKER_01: you about all that. And then we'll talk a little bit about dei because I know you've been involved in a lot of those efforts here to and you will stay tuned for that part and not SPEAKER_02: be like, Yeah, this is my part to check out when you started in SPEAKER_01: the industry. Correct me if I'm wrong, but when did you start as an investor? Join Kleiner Perkins the end of 1999. I was SPEAKER_01: about to say it was during the dot com era. So you've lived through 123 cycles now. That's right. I think you actually on SPEAKER_02: x said, or some didn't you say something about being a three cycle investor? We did a little series here about being a SPEAKER_01: three cycle investor and is just so few of them now because in our line of work investing a lot of people, you know, if you hit a winner or two, you retire, right? People retire early or they get aged out. I you know, like Bill Gurley is no longer at benchmark and Doug Leone, Michael Moritz, a lot of folks seem to age out or just, yeah, some firms, I guess have that in SPEAKER_01: their bylaws. Yeah, well, I think there's different SPEAKER_02: vintages at Sequoia roll off and Alfred and I are similar vintage my moon similar vintage at Kleiner. So I have a lot of gas in the tank. Yeah, excited to make more investments. I find SPEAKER_02: this job really invigorating. It's, you know, it's challenging, but it should be. It's an elite pursuit. It SPEAKER_01: shouldn't be challenging. We are in a very important position in society, where we get to place bets on who gets to, you know, try and change the world. It's pretty heavy stuff when you think about it. You know, it's a privilege for sure. Yeah, yeah. SPEAKER_01: And then you got Vinod Khosla out here. He's in his 70s. Exactly. He's got lots of gas in the tank. Yeah, that dude's SPEAKER_01: they're gonna have to drag him out of the building. He's awesome. I interviewed with Vinod when I was interviewing SPEAKER_02: at Kleiner Perkins, and I fortunately didn't really know what a big deal he was because I came from gap. So I didn't really I had heard of venture capital. I was an analyst at Morgan Stanley in San Francisco office actually. And the people from banking who went to venture were all guys. And I just figured, and all the people who are hiring them were guys. So I just figured like, I'd both never get a job. And I also would have no friends at work. So I never tried to get a job adventure, even though it sounded like such an interesting job. And one that I would love. So I got lucky when I went to Kleiner that I interviewed, and I wasn't really intimidated by the folks who interviewed me because I didn't know they were. SPEAKER_01: Well, and yeah, you came into it with the idea that, hey, maybe I'm not welcome here. Right? And then you were probably correct SPEAKER_01: me if I'm wrong in the 90s. In finance. There was a bit of gender. I was the only investor at Kleiner in 99. Who was a SPEAKER_02: woman. Right? And when you think about it, there were most firms SPEAKER_01: were all male at that time. Yeah. And it managed shockingly changed in the last 10 years with so many women starting firms and all raise the nonprofit that's really driven representation in the space. But let's talk about unicorns. What was the state of unicorns when you first wrote that report? We then went through this 10 year crazy period? Yeah, I would say unprecedented, but we did have something similar at the end of the.com boom, but nothing like this. So what are the stats now that you've done the report show? Let's get in 2013, I had a relatively new fund, my Cowboys one years old. SPEAKER_02: So basically, we have, you know, a couple investments, I had a little more time on my hands. And so I thought, let me just do some research and figure out, you know, because that seed, especially back then, but still now, at least for us at cowboy, it was, you know, it's your first institutional round. So no one's heard of your company before. Many cases, you don't even have a website, right? You haven't even changed your profile on LinkedIn. So there's not really signal, and you don't have any traction. So you know, how do I I moved from being a series ABC investor to being a seed investor. So I wanted to learn if I had started 10 years earlier, what are the best possible companies I could have invested in? And let me make that list and then figure out like, how could I have found them? What did they work before? Had? What was the original idea? What did the founders do before? Like, what do they have in common that might give me some sense of signal. And so I basically just started hand curating this list, I was like, well, let me just use billion reached a billion dollar in valuation in private or public markets within 10 years. Right? That's pretty good progress. And so that was one of being 39 companies. I posted it as a guest post on TechCrunch. And I came up with a shortener for unicorn. So it's basically a company, US based company that's venture backed in the tech sector, less than 10 years old, worth over at least a billion dollars in private or public markets. So you're not going to write that over and over again. And you kind of record before I tried to come up with a shortener and home run monster hit out of the park, you know, like you could end like all of them end up sounding like both annoying and a little douchey. Yeah, for sure. And so yeah, totally. It just sounds SPEAKER_02: horrible. And I think it also, it doesn't convey how special it is, how much work goes into it. It makes it quite crass, and I SPEAKER_02: think pretty empty. And so a unicorn was the word that I felt like captured that it's special and kind of rare, special and rare for sure. Yeah, it takes a little magic. So and then so that report back then basically wrote up what they had in common, what I found from the analysis. And so basically, it was just the 10 year anniversary of that analysis. So this past summer, actually, we said, Well, it's gonna be 10 years, why don't we go back into the data and see what we can find. And there just wound up being so many more. Yeah, so much more to study. It actually took us a couple months because we went from 39 to 532. Okay, the first list was majority SPEAKER_02: consumer. So this is fascinating the age of Facebook, and Groupon and LinkedIn and Twitter and Airbnb. There were a couple enterprise companies workday service now being among them, but the 80% of the value, the aggregate value, if you added up the valuations of all the companies in the list was consumer and enterprise was minority. And so when you look at this new list, the pendulum has swung to enterprise massively. It's 80% enterprise companies. Wow. So that's a big change. And I should say we only look at us based companies, we invest at cowboy in the US only. So and also, it's just constrains the list a little bit more. But usually, I think if you're an international listener, I hopefully there are a lot of parallels. And the list is probably the US historically, in the last decade is about 50% of the list usually so it'd be about double I think if you were looking at it internationally. SPEAKER_01: So we went from high 30s to 500. Yeah, so 14 x 14 x the number of SPEAKER_01: them. Yeah, let's stop there for a moment. What do we attribute that 14 x and then I want to get into sustainability. I don't know if you've looked gone back and looked at the original 37 was yes, we did. 39 we looked at what happened to them. Yeah, SPEAKER_01: so I think that's a really important discussion because it's one thing for us here in the industry to dub something, you know, a unicorn, but we all know Groupon and some other companies have had a hard time. Right? I don't know if they're still a unicorn or not. But I know they're still around. So yeah, what is the data show about those original 39? So the original have had mixed fates. The other thing is 60 I think SPEAKER_02: 66% of them had exited. So they had either been bought or gone public. So a lot of them like Airbnb, some of the networks affects companies like x like maybe actually became quite a lot more valuable and better. Facebook turning into meta. Yeah, a lot more valuable over the past 10 years. And then some of SPEAKER_02: them out of business not worth nearly what they were before worth less. So it's definitely a little bit of a mixed bad but for the most part, the majority are worth more. That is I think one SPEAKER_01: of the key realizations rule off had at Sequoia, which was for I think Michael Moritz and Doug Leone had it as well. Man, if if we hold on to our companies when they go public, one form of exit, that's right. They did much better as investments after they went public. Now, I don't know if we could say that today because SPACs kind of threw a wrench in there, some things went out too early. And then we have overpriced companies going public. So on a sustainability basis, that group had a lot of sustainability and staying powers. But this new group, that's a big question like SPEAKER_02: totally so and of those original 39, the enterprise companies tend to have had more consistent performance and held up in value than the consumer companies. And the other thing that was a big takeaway and might have been to your question about why are there so many more and so many more enterprises, the capital efficiency of the enterprise companies in the first batch was much higher than the consumer companies. So the consumer companies on average were worth 11 times the amount that they had raised the enterprise companies were worth 26 times the amount they had raised. Ah, so if we pause there and explain SPEAKER_01: the awesome. Yeah, so they've raised a million. Yeah, if you SPEAKER_02: raise $1 and you wind up becoming worth $26 that's a pretty good return. Pretty great. When you're in the SPEAKER_01: startup business, you should always be looking for a performance edge. There are simple ways to do this like getting better sleep. We all know that. But let me tell you about a little hack that elite athletes and US military members use. It's called ketone IQ. 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If you raise that dollar in year one SPEAKER_02: and then you sell the company for $26 in year four, I think that's a 40% annual rate of return. Sure, especially when interest rates are 1%. You'd much rather get 40% a year than 1%. I guess one of the big topics during ZERP money became SPEAKER_01: free. There were lots of funds, lots of investors, people started dipping down into what we do, like Masayoshi San, you know, and Softbank or to to Tiger hedge funds coming down SPEAKER_01: and putting in those last couple of bets. Some of those were perhaps not as efficient, right? Well, not even last. I mean, they started doing A's and B's. Yeah. And without really being thoughtful about them, I think was, I think the criticism that seemed viable when you look back on that time, what's the lesson? Now that we started to look at the data, what's the lesson from that peak mania, which probably lasted 2019 and 2020 and 2021. And then that's right, a lot of founders at the time, and I'm like, SPEAKER_02: obviously, this is a conversation because I know you have a lot of experience and points of view on this too. So I think at the time, because there was so much money swishing around in the system, if you had a new and there was a real war for talent, so people had more money than people in a lot of cases. So they were like, well, let me solve this for technology, I'll just buy more software. And so a whole bunch of venture backed software companies found selling their products quite easy. And so everything was, as I say, up and to the right, you know, it's like you start you sell, and everyone wants it because they've all got fresh venture round rounds. And so I think a lot of founders were like, this is not hard, I should just take money, I don't need guidance, I just need money, I'm going to optimize for valuation and build a war chest to scare off competitors. And because I know exactly what I'm doing. I've been in business for a year, I got this, and times have changed. So I think a lot of founders out there know that that's not going to be the case for the next five years. And so I think the amount of help that you bring on to your cap table early on is going to be you're going to need different help. SPEAKER_01: Yeah, when I was on a couple of boards, and I watch these late stage C's and D's occur during that time period, you know, people asked me what my advice was. And I was like, well, you've already got a board, you've already got product market fit. This feels like a financial transaction. Why don't we look, why don't you present to the board, I said to you, you can go to one founder, these five offers you have, and just give us a Google Sheet, and put them next to each other what price per share they're paying, what terms and what the you know, pro forma cap table would look like, what would this look like in the case of an exit? What would their ownership be? yada, yada. And just don't even tell us the names of the firms. Just look at it completely as if you were getting a mortgage. Do you care when you get a mortgage for your home? Right? If it's, you know, from this, you know, firm named after one tree versus one oak tree versus this tree versus that tree, you probably don't care. Right? You know, which tree it is for that late stage round or for the mortgage. And so they did, I think, make some decisions like that. And in some cases, they didn't even take board seats, which was, yeah, right. That was a weird moment to like, you're putting 100 million into this company, or 200 million this company, you're not involved in governance, maybe you could speak to how governance has changed. Yeah, I mean, I think that's a that's a whole nother SPEAKER_02: topic. Is why you're here, alien, you've seen SPEAKER_02: how lax we got in governance, you know, and I think people now realize that having a board can be a very constructive thing, but who's on your board and what experience they have. And, you know, I think people didn't really want accountability. And so there was a feeling like don't have a board, just you know, what you're doing, just go for it. But I think we're paying the price now of not having, you know, having proper feedback, or proper dashboards, or KPIs, or being open minded to different points of view. And I think when you take on a fund that has, you're one of many bets, and it's a very large fund. And they've got a portfolio and they are basically there's a bunch of flowers that they've pollinated, and they just needed a couple of them to grow really, really tall and everything else doesn't matter. So I think the incentives when you take on money from large funds, you just have to really understand that they want you to have a giant outcome that you may at that period of time, I think it will change in the coming years, but at the period time, it was like, you know, spend as much as you can get as big as and fast as fast as you can. Let's see if it works. So I can see if I can have the big outcome that I need for my giant fund. I think there's risk associated with that. To your point, if you were to get in on these companies at SPEAKER_01: a billion, 2 billion, 3 billion, and you had any of the ones, you know, from Airbnb over here, and you start seeing the enterprise value of these and this is the original enterprise value. Anybody getting in at these, these companies became very large, right? I mean, if you took something like Airbnb, yeah, which here was, it looks like it's at about three or 4 billion on this chart. Yeah, that became an $80 billion company. Uber, I don't see it here on the chart. networks, huge, huge. Yeah, these are bigger, much bigger. Yeah, SPEAKER_02: there's a lot of folks on this chart that have gotten a lot bigger over I mean, Facebook, I think is more than seven x in the past 10 years. Yeah. So you know, that's a very important SPEAKER_01: thing to understand about your investor. If they are placing, you know, 30 bets on 30 unicorns. Yeah, they're looking for one or two of them to go more than 30 x and then they've doubled their returns. And that's what late stage investors are looking for. And this is where strategics also become problematic or challenging, because they don't care about the returns on a financial basis, primarily. Yeah. What have you seen in your career with strategics? I'm curious. SPEAKER_02: I mean, like a lot of things, it's a mixed bag. I mean, sometimes they can be very helpful. And with door opening, customer introductions, validation, but then yeah, sometimes they, they say they're gonna be helpful and then they're not, they also can screw up and exit potentially, yada, SPEAKER_01: yada. So be thoughtful about where you take the money from. Yeah, now what's happened to because you did this at the 10 year anniversary, which means you got those seven years of just up into the right, but then you have these last two years of everything constricting. So what have we SPEAKER_01: learned about paper corns? Yes. Okay. So that was one of the things that we do. So SPEAKER_02: basically, we looked at this new set. Wow, there's 532 I think what's really interesting is obviously the 14 x, and then also just how many sectors they cover. So when you look at the og list, as you mentioned, like meta, right, it's kind of a horizontal company, like anybody can like, anybody around the world can use Facebook, or WhatsApp or Instagram, you've SPEAKER_02: got now all kinds of companies serving many more like in the original list, I don't think there were any healthcare companies. And obviously, there were enterprise companies were really the minority in this new list, we basically mapped out 19 different sectors. There are unicorns in logistics in mobility in healthcare in climate, in vertical sass, in horizontal sass and HR tech and learning tech and ed tech consumer marketplaces, b2b marketplaces, like there's all they basically fanned out to serve many more sectors and kind of more verticals, if you will, of society, which I think is really exciting. When you think about it, the iPhone is less than 20 years old, which is kind of crazy, right? Yeah, the I think things like the iPhone where people now have incredible UX, and storage and processing power in their everyday life, then they got to work and they were like, God, why do I have to wait for this shitty software to load this ugly page that then I have to click 20 times to get to the or why do I have to use this clipboard and fill it in? Yeah, and deal with these operator errors in people inputting information into mainframe systems, you know, so I think it just basically every kind of business, whether you're a fintech or a doctor's office, SPEAKER_02: people have gotten a lot more comfortable with modern technology, and they see how powerful it is. And so then when a vendor calls and says, Hey, I've got the software that can fix your doctor's office and make it really magical. And on your phone, like, show me more. Yeah, because if you think about SPEAKER_01: it, the expectation of consumers now has risen so dramatically that they're like, Hey, this is not as elegant as Instagram. It's not as right efficient as Airbnb. You know, or Uber or SPEAKER_01: DoorDash. Yeah, wait, I want a DoorDash experience. And if I can get food delivered, and yes, a burrito is at stake. Well, my health care is at stake. Why am I filling out a piece of paper that you're retyping in this makes no sense when I'm SPEAKER_02: procuring for my company? Why should I wait 60 days to get this order? They've had the Amazon experiences. And that's right. SPEAKER_01: It is very interesting that it went consumer to enterprise, the consumerization of the enterprise is a theme, make it easy, make it simple. Yeah. And then this speaks also to entrepreneurship and the efficiency of capitalism. If you just think about what happened here over the last 15 years, or 10 years, when you and I were, you know, active and placing bets, entrepreneurs just took those lessons they saw Uber Facebook, Instagram, everybody do really well DoorDash. And they just said, Well, where can I apply this? Didn't yeah. Listen, SPEAKER_01: not every business is venture scale. If you're not, you won't be able to raise money from VCs. We all know that. And not everybody has a rich family member to do their friends and family round. So if you want to jumpstart your business with $50,000. Let me tell you about paintbrush loans. paintbrush has created a new kind of loan product. They connect idea state startups with bank capital. So you don't need to give up any equity and there's no pitch deck or revenue required and the paintbrush loan is available at the idea state. In fact, you can apply the moment you incorporate your company. monthly repayment is a flat predictable amount, which makes cash flow planning really simple. So here's your call to action. If you're a founder in the US, go to get paintbrush calm to see if you qualify for a $50,000 startup loan in less than two minutes. That's get paintbrush calm to see if you qualify in less than two minutes. And also, I think what was exciting about that is SPEAKER_02: so it's modernizing a lot of industries that haven't had the benefit of mainstream technology. And when we looked at the founder backgrounds and the geographies, it also democratized quite a bit. So in the original analysis, the majority of founders went to highly selective schools, and they also worked in tech and they tended to know each other from their tech jobs. Yep. The new founder crop, first of all, we moved from I think about 100 co founders that we were studying the backgrounds of to 1300. Oh, wow. So kind of by definition, you're going to see a lot of change. And so we did. Most of them were not technical. And most of them did not work as a software engineer before. So people, different backgrounds, SPEAKER_02: different schools, the leading market share school for where these founders went to school was Stanford, but it was 5%. Right. So it's a big change. Like it used to be that VCs SPEAKER_02: would like just camp out like near the dorms or in the kind of cafeterias at Stanford, just hoping to meet computer science students. Like, that's important, but like, it's not the majority anymore. And you witness that I mean, john doerr SPEAKER_01: actually had a famous quote, he said, Oh, yeah, just by I mean, it's a cringe worthy quote now, but at the time, he didn't mean it in a bad way. He's just like, Listen, if you want to be good at venture capital, just hang out at Stanford, like you're saying, and you know, two or three white dudes come along and khaki pants, he was kind of giving them a little bit of a fashion dig. But it was true that that maybe was the majority of, you know, the teams coming out was computer science or whatever. Now you've, you know, I watch the team at YC that SPEAKER_01: they're obsessed with Waterloo, you know, and yeah, there should be universities that, you know, really produce great computer science students on in Israel, like, it's, I mean, another SPEAKER_02: topic is immigration, we didn't actually, it's hard to understand the immigration statics, there's a bunch of dimensions, whether you're in the military, you know, like, what's your sexual orientation, the budget stuff is just obviously very hard to capture. But my guess is, if we were able to get the data, a high percentage of the founders would still be immigrants, I know, on the first set, that was the case, we didn't see as much progress as I hoped on gender mix. And for founders, that's slow, we got a lot of work to do on that. But I think what was consistent was most of the founders were in their mid 30s, when they founded their companies, and most teams were co founding teams of three, both SPEAKER_02: you know, 10 years ago, and now, these are two very important facts. There is a bias from SPEAKER_01: people, they think everybody who's going to be successful dropped out of college, and they started their company in 1920. Yeah, it's not actually a case that is a bias that people remember those stories, because there's such iconic stories, whether it's Gates, or Zuckerberg, or Elizabeth Holmes, you know, it's it's almost like this pattern recognition, oh, if you quit the Ivy League, you're done right. So much so that Peter Thiel created an intercepting thing SPEAKER_01: called the teal fellows to try to manifest more of those people. And you would expect that from him, since he did so well on Facebook, he literally made a program for that. But the truth is, people in their 30s, who've worked at two or three companies, yes, are the ones who create the most value on average. Yeah. And that's actually one of the reasons why SPEAKER_00: SPEAKER_02: I published the first analysis was because in 2013, Mark Zuckerberg was the most aspirational entrepreneur in the world. And VCs were saying like, I pattern match, I'm a pattern matcher. And basically, I'm looking for white guys in hoodies, who dropped out of Harvard, who've been programmed to their kids, that's who I'm going to back over and over again. And so I was having meetings with founders who had SPEAKER_02: great ideas, and they would come in kind of sheepishly and being like, I, you know, I just, I know, I'm kind of old for this, but I just can't stop thinking about it. And I think it could be a really good business. And it'd be like someone who is 32 years old. It's like, No, it's like, you don't. It's great that SPEAKER_02: you have experience and that you can't stop thinking about this. And let's have a deep conversation about it. You could be a great founder. Yeah. So I think that's, I think that's SPEAKER_01: encouraging. Yeah, I mean, Uber was Travis's third company, space acts were Elon's third and fourth or second and third. He SPEAKER_01: had just had zip to PayPal was a third and fourth. Yeah, you know, pretty obvious. There's something like third times the charm that exists for a reason. Like, you really start faster because you've all the blocking and tackling. I mean, really SPEAKER_01: silly stuff, but cap tables, accounting, HR, your first five hires, all of that goes so much easier when it's your third time that takes two years of mistakes out of the process. I SPEAKER_02: totally agree. And in the first analysis, and in this one, we found entrepreneurial background, having done something, at least one co founder has started a company, but it doesn't almost matter whether it was jet.com or if it was like a lawn mowing business. Yeah, it's like basically you have to have tried and have that fire to actually take risk and failure. I think I wish I could capture or quantify what percentage of the people have had prior failure. But I think it's really important getting your ass kicked. I always tell SPEAKER_01: my founders getting your ass kicked is a precursor to kicking ass. Yeah, but I do think for the next generation of SPEAKER_02: founders, like for my kids, for example, and we have two, three kids, and two of them are girls, and I encourage them and their friends like start businesses, talk about business ideas with each other. Why? Why are you encouraging them that now? The SPEAKER_02: understanding the risk and all the things you just said about hiring, planning out the business facing failure and disappointment selling, satisfying customers, all those things, you kind of need reps. Yeah, and then you get better SPEAKER_01: at it over time, literally having sold or done customer support. Yeah, a pizzeria or at my dad's bar, being able to sell people the specials, my dad like, hey, veal chop. Let's get some of those moving because where was this? This is in Bayridge, Brooklyn, I would, you know, be like, Hey, listen, we got we got these veal chops at $36. Like, let's get the double stuffed veal chop going here, you know, and dessert is all margin your mom made my mom would make the chocolate moose SPEAKER_01: chocolate moose was and then he had a cappuccino machine, which by the way, in the late 70s, early 80s to have a cappuccino machine was a very rare thing. And I remember this was like one of my first entrepreneurial lessons alien, I was in the kitchen and I was watching the dishwasher and the dishwasher would take the espresso cups and he would go like this and he'd say, buck 50. Then he would do the cappuccino cup and he would say 250. And he would be counting up how much money my dad was making. And he'd be like $275 like tonight on espresso and cappuccino before Starbucks, my dad, I figured it out. And I just like, wow, holy cow, that's how money works. These are unit SPEAKER_01: sales and this press. This I have three daughters, I am obsessed with teaching them about entrepreneurship. I let them listen to the podcast. I talked about it and explain it to them. And then I started taking my 14 year old to parties here in Silicon Valley. And like, I just, hey, what do you do? And the person I work in human resources and culture? Yeah, you explain to my daughter, what you do here? SPEAKER_01: Because if they get access to that, in this next wave, what's SPEAKER_01: going to be left? Because if you look at chat, GPT, and you look at like, what skill is going to be needed? I'm unsure which skill will still be around is being a developer going to be that important in the future? It might not be, SPEAKER_02: I think being able to learn being curious, being able to connect with people and being a critical thinker. I think those are like the things that can enable you to morph because yeah, the puck's gonna keep moving. And we might have called those soft skills, right? We might SPEAKER_01: have called those like, you know, oh, those are, you know, the softer skills, you need hard tech skills. And so do you need hard tech skills? Because this didn't take your study here didn't take into account, you know, the the international ones, but the thing I'm seeing over and over now is the companies on your list. Many of them are having more employees outside the US and inside the US, SPEAKER_02: we did a little bit like in the new list, we know I think at least 22 of the companies of the 532 actually have a completely distributed company and no physical office headquarters. I did not. That did not exist 10 years ago. And SPEAKER_02: a lot of them are multi hub. So I think that is completely I mean, kind of to your early question about like, why did this happen, right? It was a combination of like interest rates were super low, we had cloud and mobile and security and AI and all these exciting things that were basically giving lots of entrepreneurs ideas and opportunities and like you said, it was easier to develop software, it's easier to adopt software than ever. So it kind of made the adoption curve a lot easier. And then we had COVID right where people could work in lots of different places. We were surrounded by technology all day and all night, like we were basically running our work in our personal lives through these new delivery services through zoom and things like that. So it kind of created this perfect storm. But I think it also planted lots of seeds for people to start companies in different places, which is exciting. SPEAKER_01: What do you think about public markets and the stagnation we have there? What happens to all of these companies if they can't get public? What's happening to them now with the paper corn? So let's get back to paper corn. So not indigestion going on in the system. So another big change from in the past 10 years SPEAKER_02: is going from 66% kind of liquid or excited to 93% of this list being private still, so only 7% of the companies have had exits. And I think it's only 3% that have gone public and four were bought. So 4% were bought. So it's a really tiny percentage. And so 93% of these companies and 60% of them are what we call zebra horns. I was talking to someone this morning, Samarikacha, he called them some of them are COVID accorns. SPEAKER_01: In other words, that would mean they got very big artificially. And they raise money when interest rates were really low. SPEAKER_02: And public tech companies were flying high and trading at incredible multiples. And there was so much money in the private markets that so much money more money had gone into venture capital funds. And they were looking to deploy because I looked at public companies, they're like, wow, like tech is a great place to invest, you make so much money, these companies can trade at 50 times revenues. And so we and founders are like, well, this company trading at 50 times revenues, I should be valued at 50 times revenues. So the company well, even more, if a company doing $1 million in revenue was worth was raising money at at least a 50 pre during those times, but it was really that time when interest rates were quite low. SPEAKER_02: So 2021 in particular, and so 60% of the companies on our list, basically were got their unicorn crowning or valuation during that period of time. SPEAKER_01: Listen, I got a lot on my plate. I got a couple of podcasts I do you know, all in this week and startups, I run founder university, man, we had over 2000 people apply, we got 250 teams in there right now, the list, it goes on and on. And I'm able to manage it all with an amazing piece of software called Coda CODA. It's the all in one platform that combines the best of documents with spreadsheets and apps. Here's an example, we use Coda to run our founder university. Remember, I talked about all those founders applying? Well, after they get accepted to the program, every week, we ask those founders to submit a progress update. How is your company doing? How's your startup doing? Well, we built this application in Coda. And now we have a database of all those weekly updates. And we can look at all the changes, graphs and charts, all that builds right into Coda. And this week to week tracker has given me the ability to look at 1000s of startups we've invested in and invested time in and then pick the best ones to give money to. So if we see strong growth, we invest and it certainly changed my world. So if you want a platform that empowers your startup to strategize plan and track goals effectively, well, you can get started with Coda for free today. And not only that, they're going to give you $1,000 in credit at Coda dot io slash twist that CODA dot io slash twist special limited time only for startups. That means you can start planning and build these apps at no cost right now Coda dot io slash twist to get started for free. You can't beat that price. Not only is it free, they're going to give you a grand that's 10 hundies. All right. I love the Coda team. They're constantly giving me new features to make my business more efficient. Thank you to the team at Coda. If you had to guess what percentage of 500 and change would or you know, raw number will maintain their unicorn status here. So our prediction when we basically triangulated SPEAKER_02: it a couple different ways. We looked at how are people trading the secondary markets. So for the companies that we have data on 40% of them are trading below a billion dollars in the secondary markets. Oh, wow. So they're already took the SPEAKER_01: haircuts. Yeah, so that would well, people who are like, let's SPEAKER_02: say someone who worked at the company who's trying to sell their shares are willing to take at least at least half the valuation. And then the other thing that kind of happened is that the distribution evaluation skewed downwards. So I think 20% of our list is traded was valued at just a billion dollars. Right. 40% I think is trading at two or below. So if you kind of take those companies and say, well, they probably raised at least SPEAKER_02: double the valuation that they would have today in today's market, maybe even four or five times. So you kind of pull those people out of the list. So we basically triangulated a bunch of different ways and said, Okay, this list of 532 is probably going to shrink, let's say to 350. But there's a lot of I mean, 350 is still almost 10x growth. Yeah. 39. So it's still a huge change. And I think all the things like the moving to enterprise, the number of enterprise companies, the numbers of sectors, the democratization of the founder backgrounds, and 10x in 10 years is still quite impressive. And the capital efficiency is something I don't think we've talked that much about. But that was the other thing that really fell quite a bit in 10 years, that I think is something we have to be pretty careful about. Yeah. And just to look at sectors SPEAKER_00: SPEAKER_01: and get the capital efficiency, I was just ripping through the deck. And I said, wow, oh my god, two dozen crypto companies. And like Coinbase was able to go public. But my Lord, I mean, SPEAKER_01: talk about a sector that, you know, I mean, essentially, the whole sector has gotten wiped out, except for Bitcoin, Solana, and maybe Coinbase, one or a couple of players. So, you know, we Silicon Valley doesn't always get it right. We are capital inefficient in venture. And that's part of the magic, isn't it? And I think it's well, maybe the way to say it, you know, SPEAKER_01: we're so risk taking, that I think people who don't SPEAKER_01: understand the job, like, why would you bet on these companies? Well, because they don't understand the power law. Yeah, there are plenty of companies. I think Amazon's SPEAKER_02: probably the best example of companies that know that they're losing money and are willing to lose money for a long time, because the pot of gold at the end of the rainbow is very big. And they have a strategy to basically be willing to lose money on categories for up to 10 years, because once they get dominant market share, they can start to creep up prices and figure out and work on profitability, and margins, and they've kind of fled, they fled, they've washed out the competition. So I think Amazon has been masterful at that. If you look at their history of how much they raised, and when they went public very quickly, and they raised a lot of money, because that was the only way they could actually access capital. And then they raised a lot of money as a very wildly unprofitable company for many years. So I'm not this is not saying that every company has to be like Viva, where they got profitable and $4 million and then went on to be worth billions of dollars. But that is a really great way to build a company that has sustainable value is that you you know, you're not spending too much on marketing, you know that you're being really efficient with your people, you know, you're building and shipping a product that customers like because you have very low churn, you have high margins, and a very healthy P&L. So that is a really nice, sustainable way to build value. SPEAKER_01: And here's the chart for average capital efficiency valuation divided by the equity raise 2013 versus 2023. Maybe walk us through what we're seeing here with the two bar charts. Yeah, yeah. So you can see on the right hand two bar charts is SPEAKER_02: 2023. And you can see that enterprise companies basically went from 26 x to seven x. So basically being worth, let's say SPEAKER_02: if you raised $100 million, and you're worth $700 million, that is a big decrease. And enterprising consumer being the same is kind of very surprising. Because when you look at what's going on the public markets, I think didn't Microsoft just pass $3 billion or something crazy? They just dipped above it. Yeah, SPEAKER_01: you're correct. And the Dow hit a high I mean, to make seven x SPEAKER_02: in 10 years, in many cases, you would have been better off picking a basket of public stocks, which are liquid and freely tradable. And you can decide every day whether you want to hold or sell versus locking your money up in a private company where you cannot sell freely. So with three SPEAKER_01: decades of experience doing this, haven't watched three cycles, you come to the conclusion that the industry got too big. There was just too much money chasing too few high quality deals. And so then efficiency goes down. Is that the reasonable conclusion? I wouldn't say I think quality is SPEAKER_02: so I mean, there are a lot of quality companies that I think are going to get screwed up or quality ideas that when you raise too much money, then you can't grow into your valuation, you put yourself in a big zone of risk. And they might have been quality opportunities that kind of got screwed up by the fact that they raised too much a high valuation. We lost discipline around valuation because we had like a, I guess there was too much demand. There was too much money in the venture ecosystem. In a way it's a boutique business, isn't it? And SPEAKER_00: SPEAKER_01: well, it's not anymore. Yeah, well, so then should it be, you SPEAKER_01: know, or can it be a scale business? Like, you know, because it seems like we try to scale this business. Or at least the the private equity folks dipping down thinking, Oh, well, this is easy. I just look at what Sequoia and Andreessen and whoever Kleiner have invested in, and we just double it and SPEAKER_01: we give the founder more money, and we're the next round. So we don't have to do diligence, we don't have to have a board seat. We'll just double or triple their valuation and give them, you know, 100 million bucks. And that's it. We punched our ticket. That doesn't work. SPEAKER_02: It's, it's funny, Aaron Griffith, Griffith in the New York Times just published something today about how like everyone always says there's like many times in the history of the tech and venture industry where people like there's too much money, it's a bubble, it's gonna pop and like it just never does. And I have to agree with her like I don't the genie is not going to go back in the bottle. Like we have delivered fantastic returns in the past, you and I are both very excited and bullish about the power of software. And I think believers of how many more great software companies are yet to be built. And that will deliver great returns for people. And there's still so much money out there that doesn't have venture exposure. No, there's sovereign wealth funds, there's pensions, like this is going to be a great time because the next couple I think people are gonna have learned a lot of hard painful lessons, they're gonna be more disciplined the next five years, valuations are going to be lower, people are going to raise less and be more disciplined with how they use their money. So the next vintage is adventure, I think should be much better than the past three years, like the past vintages. SPEAKER_02: It's gonna be a great perspective for people to actually get into venture, because we're gonna be better. SPEAKER_01: Yeah, this would be the best time to do it. The valuations I'm seeing are the same valuations I saw back when I did Uber and thumbtack and calm and, you know, companies with products in markets that are valued in the seed round between five and 15 million, as opposed to 15 and 100 million before they even have products launch. So where do you think the opportunity is, if you were to look at it, in venture, you're in seed, I'm in seed and precede. Then there's series A seems super competitive series B and C seems to be a commodity. Where is the opportunity in venture today? I think there's SPEAKER_02: opportunity across the board. Okay. I mean, I think at every SPEAKER_02: round, there's opportunity. I am a little worried. I've heard from some multi stage firms that they're just like one. One guy at a multi stage firm recently told me he's just doing seed and B and the fund is it's a one and a half billion dollar fund. Like that doesn't make any sense to me. I do think founders, we do a lot of seed, right? And we were telling our founders to just be a lot of the people who could do A's could also do B's and C's. And so they've gotten pretty SPEAKER_02: conservative to look at the aim be like this is kind of promising, but it's not perfectly deressed. I'll wait for the B and be willing to pay a higher price and invest in a bigger round several a big fund. And I'd rather wait and see more SPEAKER_02: cards turned over. And so I think it's creating a little bit of a gap in a so I think an A's are, you know, when you're a board member, for series A, you're carrying the water for a long time, you have to be willing to sign up to really be committed to this company for 10 years. We've added a lot of people to the venture business in the past five years, but not that many people who have training to be great board members. So I'm a little worried about that. But I think there's opportunity across the board. I think cowboy we're very excited to make some new investments this year. I think the founders know that it can be potentially a marathon, and it's not a get rich quick scheme. And they the people who are down for it, and they're like, I don't care, I just really want to help build something substantial that stands the test of time, the next three to five years, we're going to see tons of great founders like that. See, this, I think is so important. We talk SPEAKER_01: about venture tourists, there were a lot of people who are trying on being a venture capitalist, you really have to have a certain personality for it. My friend, David freeburg, got incredibly frustrated running the production board. And he's been very public about this, I wouldn't speak about a public if he hadn't, but he's been on a bunch of pockets talking about how frustrated he was trying to get founders to do what he wanted. He wasn't and then now he's CEO of his own company again. And so it is much happier because he can come in and make that change. The people who you did also have founder tourists, people who might have been a great, I don't know, CTO, SPEAKER_01: CMO, VP of sales, whatever it is, they would have been a great number 345 on a team. And then they were putting the CEO slot. It's not for everybody. Right. And and I think now we're starting to see people who are built for it when I hear your description of the grit, tenacity, and what people are signing up for. That to me is I get people who are built for war. And let's just face it, you know, these these companies, we've seen it up close and personal. They're always on the verge of flipping over going off a cliff, even the public ones are, you know, always have somebody looking to disrupt them. So you need to have a certain amount of grit that maybe we didn't see in the peak era, did we? SPEAKER_02: Another combo is, I mean, there was just a lot more budget five years ago, you know, and then there was so much money that these new venture backed high growth companies had in their bank accounts, and they could buy one of everything. And so as we've seen as the recycle investors also that economies tend to move and go in cycles and enterprise budgets also kind of do so. I think I've seen you've probably seen this too is like you people used to there used to be the same you never get fired for buying IBM, right? There were like certain vendors that everyone was like, yeah, it's not the best, but like, it's safe. And so people had bought software, and they had a rep who had a relationship, but they would buy software from the same vendors over and over again is a very tight and then something changes. There's some new technical technical innovation or something that the incumbents are a little slow to grasp. And some new software companies like I've got best of breed for this problem that you're trying to solve. And I've got the new thing that you don't that IBM doesn't have like buy this new package. And then you kind of move into this best of breed cycle where you wind up having a bunch of kind of point solutions or smaller software vendors who solve very acute problems, but then you wind up having a lot of vendors. And SPEAKER_00: SPEAKER_02: then you might have a security breach or your company misses a couple quarters and you need to get back on financial plan. And what where we are right now is because of the refocus on margins and profitability. And because public market multiples are compressed, everyone's cutting people are cutting budgets, cutting vendors, also their security risks. So the CIO, the CTO, the chief security officer, the CFO, they're all like, hey, we we spent way too much this whole like, byo a like bring your own app just like, you know, sure you can start using Dropbox or Slack or whatever just expensive like no more. Right? We need too many vendors, we need to cut back. So SPEAKER_02: that's a lot of headwinds right now selling to the enterprise SPEAKER_02: big time. And so I think to your point about like, everyone thought they could be a founder, like you have to be a founder who has an idea that actually can break through the headwinds of today's enterprise market. SPEAKER_01: Yeah, the the benchmark is much higher for what people would say, you know what, we have this built into our office suite over here. Or we're getting this from Google Docs or you know, notion and code to have this built in. You know, and I had this happen. SPEAKER_01: Somebody wanted to introduce a certain project management software that they had. And I was like, so we got to train 21 people in our venture firm how to use this. And we've got to pay per seat. And in notion and Coda, which we're already paying for, there's a template for project management. And we only have four projects that really need project management. Right. So what are we doing here? Yeah, like, just even the idea of stopping everybody's day to have them log into a new piece of software, learn it, you know, forget about the $10,000. Just SPEAKER_01: that part to me is what I'm worried about. And then, you know, so let's keep everybody in notion and Coda and whatever. And that's what we wound up doing. And I see it in my portfolio, of enterprise software companies where they're SPEAKER_01: saying, Yeah, we lost this customer, why do we lose it? All they loved it, that people who are using it loved it. But you know, the CFO and the CTO, CIO all conspired to say, we're going to get rid of we have to get from 20 vendors down to 15. And we were one of the five that got cut. So the benchmarks SPEAKER_01: higher, one of the great things I want you to talk about talent here in the valley. The Bay Area is just unbelievably magical in SPEAKER_01: terms of the density here. I mean, people ask me if I could change anything in life, what would I do? I might have had a great run in New York City, but I might have just come here in the 90s. That might have been like a better thing for my career to get here a decade earlier or something. I think you're doing okay. I think I did. Okay. And the kid from SPEAKER_01: Brooklyn. Okay. But shout out to Dora and Uber hitting another 52 week. That's like the crazy thing about investing is like, I talked to investors like they hit some home run, you hit some great company, and then they sell their shares. And I'm like, my thesis about Uber has not changed since I made the first bet. And I keep getting rewarded for not selling shares. It just by hanging around. And I was talking to somebody who had Google shares, another person, a Facebook shares at a dinner, and they both sold their positions. And they were just sitting there lamenting, like, why did I ever show my position? No, but there's so many counter examples to that. Yeah, people SPEAKER_02: who held on to Peloton people who, you know, just I love that SPEAKER_02: product. So I don't mean to trash talk them. I think it's an amazing product is incredible. But yeah, the SPEAKER_01: valuation did get wonky. I do think selling half is like where I've come to. I feel very good about selling half and then putting it somewhere else for safety. But and putting or SPEAKER_02: putting it on a regular program. Like every quarter you sell a certain percentage regardless of where the price is. Yeah. And SPEAKER_01: then you could just you have some downside. protection seems to make sense. But the thing I want to talk about was talent here in the valley. Things are much more diverse. We have founders coming from anywhere. But I do see a correlation between people who come here kind of wanting it more, or maybe they're more serious, or maybe they're able to deal with more pain, or maybe it's just self fulfilling prophecy, you're here. And then people project into you that you're more seriously, and then they invest in you. And then you know, the flywheel just gets going, you're top of mind. I don't know what it is about this place. That's so magical. I think it's a super SPEAKER_02: magical place to I will note in our analysis. So in our first analysis, savage the Bay Area, Silicon Valley and San Francisco were the hands down winner for being unicorn central, right? Like 70% of the companies were here and all the other geos, I think New York had three unicorns. And that was like the number two. So it was a huge gap between San Francisco and New York, and then everyone else like had none, or maybe one. So SPEAKER_02: that changed a lot. San Francisco lost a lot of ground, we went from 70% to 45%. Now the list is a lot bigger. So there's a lot more unicorns servers, and we lost a lot of ground. And New York jumped to 19%. Wow, it's almost half Fin Tech. And you showed the crypto slot crypto web three. So we'll see how to see how it plays out. But and then Denver, Austin, Southern California, Boston, all now more than 10 unicorns. And so I think the Bay Area I mean, I love it. So I hope we get it. We expensive place to live public schools are not consistently excellent. Living in San Francisco to get my sister lives in San Francisco, her car has been stolen and broken into like three times. Yeah, and we got to clean up our act. If we want to be as compelling a place in the future as we were in the past. SPEAKER_01: Yeah, it's definitely the safety security in the city is an issue and yeah, the doom loop is very real. And the areas around it still doing great. But there's not a lot of space here. And we're so nimby and anti. Yeah, building housing. It's just SPEAKER_01: unbelievable. If somebody was expensive place for if you want SPEAKER_02: to be a teacher, or it's like, we have a lot of things to fix. And I'm so I'm hopeful that maybe people who are paying attention will look at the number and be like we had 70% and now we have 45%. We better get on our game. SPEAKER_01: Yeah, I you know, watching the people who are very passionate about San Francisco, the city, and we live in the wider Bay Area, we say here like there's a Bay Area and then San Francisco is part of it seven by seven mile part of it. You know, SPEAKER_01: Michael Moritz and Gary tan and his brother and just any number of people in the city who are really committed to changing the political landscape there to maybe have more will to keep up SPEAKER_01: with this change. And if not, you just you lose the companies to New York, which is a dope place to live and Austin, which is also a dope place to live. And you got a lot more room to move around. And Utah is amazing. Totally. Some of our most valuable companies were not SPEAKER_02: based in the Bay Area, and also founders that didn't work in traditional tech. So we love when you're asking about where the opportunities I mean, we at cowboy we invest a lot pre product. So founders need the money to actually build the product, we are a great place to call. And also founders who don't come out of central casting. When we we invest in both, obviously, and we've got lots of people who are experienced CTOs or came up with Coinbase or Google or other but a lot we've had a lot of success investing in people who just have a great idea and have a ridiculous amount of hustle and intelligence and learning mentality but maybe never worked in tech before. I was about to ask you what you look for pre product because you SPEAKER_01: don't have the product to play with. And obviously, if the product doesn't exist, you don't have metrics. So you know, people who are doing serious a series B, they're gonna be looking at some early metrics talking to some customers seed, SPEAKER_01: you might have product you might not, you can kind of talk about the product, but pre product pre seed kind of, what do you look for? At that stage? SPEAKER_02: It's a conversation. And I think that's one of the good things about things slowing down a little bit right in the boom, boom time when there was so much money, everyone was like, nice to meet you. Can you tell me this afternoon if you will give me $5 million? Like that's not I think, a good way to build a SPEAKER_02: relationship. You want to meet over the course of meetings for SPEAKER_02: both sides. You know, it's harder to get someone off your cap table than to get divorced, as they say. Yeah. And so for SPEAKER_02: founders you want if you're gonna have choices, which hopefully you will meet your investor a couple different times, ask them questions, do references on them and see how they handle things. But also for us, we want we want to see how you process information. We want to understand how you learn when you are hit with both what do you figure out when you have very little resources? Like how ingenious can you be? Or when you get thrown a curveball? How do you take in the information? How do you respond? Because I think one of the things that we found is we use this term learning animal, the people who we've backed who have actually survived and thrived and scaled also because I think what was really impressive was of the companies that have had exits or you know, gone public or been bought in the most recent set similar to the old set of the prior set, it takes about seven years to get to an exit and whether you get bought or go public, but 70 to 75% of those founders scaled from being the person with no money and just an idea to being a public company CEO or a multi billion dollar company leader. That's like, it's just you have to live through so many different phases from basically being like a infant to being kind of an adult and all the stages of development over those seven years. It's really impressive. So you're trying to look for both is the idea innovative SPEAKER_02: enough? Is it going to deliver really significant measurable user or customer value and time in and a quick time to value is you know, how big is the market? And then, you know, the founding DNA and the kind of the hustle and ingenuity of the founders are the things that we're looking to use that term learning SPEAKER_01: machines and learning animal Yeah, learning machine. Yeah, I SPEAKER_01: love it. Because we have one internally because we do also do pre seed pre product or while they're in this MVP stage. And we say we just we like this product velocity. And then people say what's product velocity? I'm like, Yeah, well, SPEAKER_01: you know, when you meet with them last week, and then you meet with them this week, and they shipped a new product, and you saw the app was updated in the App Store, or you looked at their corporate blog, and they had a new blog post up. And then this other company was outsourcing, you know, their tack to some place, you know, halfway around the world. And, SPEAKER_01: you know, they ship every six months, like people who I have some people in the portfolio, I've watched them ship, you know, every couple of days, and man, the learning. That's right. You become learning animals when you ship because you then hit the customer, you make contact with the ball. There's nothing like getting punched in the face or making contact with the ball to sort of drive learning. Yeah, yeah, totally. I'm just fascinated by, you know, people in the early stage and how they SPEAKER_01: try to figure these things out. And I too have seen now the funding cycle feels like we're back to proceed stage, you know, 612 weeks of running a process. And man, is that so much better SPEAKER_01: than six hours or six days. It was so weird to for people to say like, get off a zoom call and be like, Are you in and I'm like, in what? Interested? I'm interested. Yeah, yeah, let's SPEAKER_01: have another call. And then I just took the same approach because I am old school, I think like you and they would say like, Well, I have to know today. I'd say okay, well, then obviously, the answer is no. But would still love to meet next week and keep hearing about the product. And I would just keep the meeting on the books. One of the times I'm watching people are not clearing market. So I I've taken to this rule off kind of SPEAKER_01: taught me about this not yet. Which is like, I like everything you're doing. It's a not yet for us. Yeah. And I've been training my team. Like, let's explain to them what we would need to see. SPEAKER_01: That's right. For the next meeting. Kirsten Green told me SPEAKER_02: at for one or they they basically have got COVID taught them to become more transparent with I think she wouldn't mind me telling you this. Sure. With founders about the reasons for not yet. And so we've been doing the same thing of kind of being like, here's where I'm stuck. And these are the questions I have almost like, let us show you what's in our memo. Yeah. SPEAKER_02: And, and let's work through it together. And through that process, you start to get a feeling of what it would be like to work together and how they think SPEAKER_01: ah, so this is because you want to have a great relationship. And if the person can handle, hey, we're not convinced yet. Yeah, it's a sign of maturity. And if how they respond to it, SPEAKER_01: like, you know what, you're right, we we do need to have a customer that's not a friend of ours. We do need to earn a customer through a cold call. Right? That's what I always tell them. Like, I like the two customers you have right now. How did you get them? And they're like, I worked at that company. And that's my brother's company. Yeah. I'm like, I've SPEAKER_01: seen this trick before, you know, like with YC companies. replicable. Yeah, YC companies have this great trick. And one of them explained it to me. I said, Where do you get these 12 customers? Like, Oh, it's great. You go on to bookface, you say that what your company is, and then you trade customers. So I buy your product, you probably might I'm like, and they SPEAKER_01: literally explained to me. Yes, that this was like a process SPEAKER_01: that people were in the same, I don't want to get into the YC founders. I'm not saying everybody did this. But it was SPEAKER_01: like, build your roster of customers through the YC, you SPEAKER_03: know, ecosystem. And it's, if you even double click just on SPEAKER_01: but two customers before an investment, you'll find this out, where did you source this customer and, you know, look at SPEAKER_01: their page? How many employees? I think some of it is the SPEAKER_02: transparency. It's like, if the founder tells you right away, like, look, I have these 12. And I did kind of like bootstrap in this way. But I learned a lot through the process, and I had to start somewhere. So here's how I'm thinking about, try cold call someone that I don't have a warm intro to here. So I'm going to do it like, that is a great conversation to have. But if you pretend like, no, these are, you know, that then you are starting to be like, well, this person isn't honest with me about this, what else they not gonna be honest with me about? Exactly. And this is where sometimes SPEAKER_01: founders make a mistake. The opportunity for us to invest at the early stage is that it's not perfect, is that you are figuring it out. If you had figured it out, you would be raising a series B. That's right. And we'd be having a totally different comp. No, we were doing counts versus public market, whatever. Let's end on this. You know, you've been at SPEAKER_01: it for a little bit. SPEAKER_01: Well, listen, I, I'm saying it out of respect, because every time I talk to you, I learned something like writing stuff down as you talk. It's one of the great things about having a podcast is I get to learn what and I was I was talking to Brian SPEAKER_01: singer man about this, like, from founders fund. What do you think now that you've watched a couple of different archetypes over three cycles, succeed adventure, and you're part of the bill girly analyst mindset, I would say right, you were an analyst. Okay, pretty well, you were an analyst, right? SPEAKER_01: Not like Bill girly kind. But I was a financial analyst. Yes, I SPEAKER_02: was an M&A analyst. Okay, so yes, that requires like SPEAKER_01: creating mental models and architectures and really, you know, thinking strategically. And then of course, we have people who are operators and growth hackers, and there's relationship people. What what archetypes really work in SPEAKER_01: venture, in your experience that just create massive value for founders and for LPS? Yeah, I mean, I guess the beautiful SPEAKER_02: thing is, I don't think there's one archetype I did actually when I was at Kleiner, we really small, there were eight GPS and three associates, that was the whole firm. And what was really cool about that is we had one partner meeting for everything, whether it was chips, or medical diagnostics, or routers or consumer internet, so I got exposed to a ton, but all the GPS had a lot of operating experience. And so that was we had a belief that you kind of had to have walked in the shoes of the operator, the founder. So actually, when I was at Kleiner, I was a partner, I think I was a GP, but maybe not yet a senior partner. And I had always felt like I had operating experience from working at gap after business school and before moving to Kleiner, but not like in tech. And so I actually went and ran one of our portfolio companies for two years. It was in between series A and I actually raised series B. And it was actually really interesting time to do it because it was between 07 and 09. Things were really good. We learned a lot because we it was enterprise software, I became a sales animal with two twin one year olds, I basically like lived on a plane. And then we did well enough to raise a $20 million series B in 2007, which was really big back then and then oh, it hit and I had to lay off half the company. But we kind of because we had done a kind of financing strategy, we had basically conserved all the cash, we had a lot of cash in the bank, and we lowered our burn significantly and then we want to acquiring our two closest competitors. And then ironically, that company went after I left and replaced myself, that company went public in spec. But, but I would say like, that's just it's not the same as being like a true I had a job at Kleiner still. So it was different than the average founder. But I mean, you see people like Martin Casado, right, SPEAKER_02: who was a very successful enterprise infrastructure structure. Technical founder ran a company now a partner and recent. So I think you've got lots of former operators and former CEOs. And you've got people who basically have been brought up in in venture their whole lives. And Michael Ritz, who you mentioned earlier was a journalist. Yeah, before he became a venture. Right. Exactly. Yeah. So I think all kinds of people can be SPEAKER_02: successful in venture. I don't think there's one answer. The ability to be a learning machine seems to be part of it. SPEAKER_01: When you look at journalists and what we do, or what I used to like, you know, Union Square, as an example, she was a SPEAKER_02: journalist, we had questions. And what I what I was trained SPEAKER_01: was, you can ask these questions, you know, look them in the eye and figure out if they're BSing you or not, or SPEAKER_01: what the spin is, and what the actual truth is. And then you got to find other people who you can ask the same questions to and get the same recounting of events. Yeah. And then triangulate the truth. And then now you do that. I talked to competitors, I talked to customers, you know, you kind of triangulate the truth. That's right. Yeah, totally. So I'm, I SPEAKER_02: feel like we're very lucky to be in this job. And I guess we can SPEAKER_02: end with, I think with privilege comes responsibility. So I think we have a lot of opportunity, as people with privilege in the tech ecosystem to watch out for its future. And to make sure that we do more good than harm. How do you think we need to do SPEAKER_01: better? Or what should we focus on in that regard? I think we SPEAKER_02: still have a lot of bias. There's still not a lot of SPEAKER_02: diversity. So I think we can do a lot better there, the people SPEAKER_02: who control the big funds, and manage most of the money in the industry is still pretty much the same, and tend to look for themselves and their successors. But I also think when it comes to obviously AI, I mean, when we look at the impact that social media has had on society, I think we probably could have done a lot better than we did. Absolutely. Yeah. And and so for SPEAKER_02: the stuff that's coming down the pike neck next, I hope we will learn those lessons. Yeah, it's been pretty, pretty great to see some change in SPEAKER_01: regards to diversity. I often joke like I go to my poker game now. I'm part of like the last white guys at the poker table. We were seeing a lot more diversity. Is it all guys still? SPEAKER_01: And that is part of the challenge. But SPEAKER_01: yeah, I mean, at the poker table, you guys have access to SPEAKER_02: great deal flow. Lots of insights when you're trading information, or you've got a company that's doing really well and you want to invite people to take a look like just think about who you're inviting and broaden your networks. SPEAKER_01: Yeah, it's we're we're on this pendulum now. We saw the fearless founders that they got sued. And as like, has been sued by the same group. There's this group that basically SPEAKER_02: has a war chest that is going to try and sue people, the people who are actually trying to make things a little bit better, right? Some past wrongs. Yeah, it's very, very, I'm sorry, if SPEAKER_02: no, it's okay. SPEAKER_01: But a bee but no, it's, it's, I thought it was kind of strange to pick like, the one tiny, you know, seed fund that was like, you know what, there's not enough black women who are funded. And they're like, you know, we should do we should do that fund. Yeah, SPEAKER_02: why they that is why they did it. Yes. Yeah. And it's just SPEAKER_01: like, scare the shit out of people and they should know it SPEAKER_02: is not going to scare us. Yeah. SPEAKER_01: And if people want to learn more about that all raise this is incredible organization. org. Just check it out. I mean, if SPEAKER_01: you're a woman who and you want to learn about venture capital, you can come to one of these all race events and hang out with 50 women who have the job already, and are supporting the heck out of each other. And just telling you how to, you know, basically hack the system or get into it without, you know, SPEAKER_02: yep. And if you're a man in venture or in tech, and you want to be a great ally, or you want to hire new people meet new people, we are also here for you. Because I think, you know, it's something that when we started all raised 75% of venture firms had not a single woman partner. That's wild. Now, SPEAKER_02: I think hopefully to some of our efforts, we're doing better. So now only 65% of venture firms have not a single woman. But so if you are a founder, you're gonna have choices, you can make choices with who you invite to invest in your company, make money for people whose values you are aligned with. Yeah, I SPEAKER_01: think that is well said. And just go check out all raise.org as great organization to support and we'll see you all next time on this. Thank you, Jason. SPEAKER_01: Hey, everybody, I talked to a lot of founders here on this weekend startups and as an investor, and they tell me the same thing over and over again, they want two things from me more FaceTime and money. They want me to invest in their companies, and they want to spend time together. So we've been working here on a new meetup program, we call it founder Fridays and founder Fridays are an event by founders for founders. This is an event that is hosted in cities by people like you, if you're listening to this week in startups, you're a founder. So what are you going to do at founder Fridays, you're going to get together with other founders in your community, it could be four or five of you, it could be maybe up to 30 of you in a location, pick a cafe, pick a co working space, I like to go to a great Mexican joint, or maybe a dim sum restaurant, you know, you can do shared food, have a couple of cocktails, maybe you do it on a Friday, you get together and you host it. Now, why is it important for founders to get together? Shouldn't you be at home just focusing? Shouldn't you be in the office just focusing on your startup? Well, if you get together with other founders, true founders who are in the arena building like you are, you're going to get a lot of value from that because you can trade notes with that other founder about what's working at your startup and what's not working. The truth is, if you're facing a problem, there are hundreds of founders out there who have probably solved it already. And instead of you banging your head against the wall, when you sit there and you talk to three or four founders, you're having some dim sum, you're, you're splitting the quesadilla, some prahitas, somebody say, Oh, you know what, I had that same human resources problem. Oh, I had that same technical problem. Oh, I had that same marketing problem. And they might tell you about a tool or a service that'll solve that problem for you. This happens over and over and over again, when I do founder Fridays with our portfolio companies. Now we're going to give you that same experience. But here's what I need you to do. I need you to host this in your city. So you're going to go to this week in startups comm slash meetups. That's it. And you'll see a landing page where you can sign up and you can say I want to host in my city. Now your city may already be hosting so you can just join that person. And what if you go to this event and you learn some go to market strategy that 10 x is your growth that might unlock funding or you might be talking to somebody they say, Hey, I'm a marketplace too. I'm not a competitive marketplace, your marketplaces for used cars, my marketplaces for hairstylists, whatever your jam is, whatever you're working on, but they give you some technique that you didn't know about to increase your supply side or get more demand in your marketplace. And you 10 x your business. I see this happen all the time. And founders are like mutants, right? And I'm like Professor x here, I'm trying to put on Cerebro and find all the founder mutants in the world, and then have you get together and do your own little meetup. And here's what you're not going to have to deal with. You're not gonna have to deal with a bunch of service providers trying to sell you software or services. And you're not going to have to sit through a bunch of passive speakers you can listen to this week and start up to get the greatest speakers in the world on your own time. And you're not going to have to pay for a ticket to a conference or get on a plane or fly somewhere. No, this is about having an intimate experience with 510, maybe two dozen other founders in your city. Please go to this week and startups comm slash meetups. If you are a founder, this is for founders by founders only. If you are not a founder, this event is not for you. You can start your own meetup for lawyers, accountants, recruiters, this is for founders by founders, we vet everybody to make sure you're a founder. And if you host it, it's a non commercial event. Our first founder Friday will start on February 2. So please mark your calendars and we're going to do these on a rolling basis. You can join an existing meetup if it's already occurring in your city, or you and one or two other founders can start your own. We're using a wonderful piece of software that we've invested in called river you can sign up for a river account just by going to thisweekandstartups.com slash meetups. We've already got hosts and attendees lined up in San Francisco, New York City, Toronto, Los Angeles, Las Vegas, London, and even in India. So this is your chance to connect. And if you didn't hear your city name, you can start your city go to thisweekandstartups.com slash meetups