This Week in Startups - 1M fewer college students: is it a problem? + Ask an Angel with Zach Coelius | E1360

Episode Date: January 13, 2022

First Jason covers the recent college enrollment decline (1:23) and lay out his alternative (9:56). Then Zach Coelius joins for an Ask an Angel session, where they answer 12 audience questions about investing and startups (20:37). (00:00) Jason intros the show (01:23) There are 1 million fewer college students in the U.S. compared to pre-pandemic levels (08:57) Dataiku - Create transparent, repeatable, and scalable AI and analytics programs. Visit https://dataiku.com to learn more. (09:56) Jason's college alternative (17:51) Lemon.io - Get 15% off your first 4 weeks of developer time at https://Lemon.io/twist (19:03) Ask an Angel welcoming Zach Coelius to the show (20:37) What is the definition of an outlier success in VC? (29:56) Are investors okay with founders that use no-code software like Bubble as an MVP? (32:43) Fiverr - Sign up for https://Fiverr.com/Business free for the first year and save 10% on your purchase with promo code JASON (34:16) How does a seasoned investor deal with a founder who is headed in the wrong direction? (39:49) Common pitch failures? (43:23) When should you go for top line versus bottom line? (49:14) Would VC funds do better with individuals instead of institutions? (53:31) What industries Zach and Jason would like to see disrupted (1:03:03) How much of an impact does bad reputation have on investing? (1:04:22) What makes a good Board Meeting? (1:08:02) As a VC, is it better to stay off the board from a liability standpoint? (1:10:55) What is too expensive at the seed stage? Check out Coelius Capital: https://coelius.vc/ FOLLOW Zach: https://twitter.com/zachcoelius FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

Okay, no Molly today. It's day nine of her being the co-host and she's out sick. Oh my God, she might have, she might have the Rona. Let's hope it's the Amicron, but she's doing okay. So I'm going to do just a quick solo news. And then I'm going to talk with Zach Collius and do Ask an Angel. The first story I want to talk about is the fact that a million less kids have enrolled in college in 2021 compared to 2019. And I'm going to tell you why this might be a great thing. Stick with us. It's going to be a great episode. This week in startups is brought to you by Data IQ allows companies to leverage one central solution to design, deploy and manage AI and analytic applications. Visit Dataiku to learn more. Lemon.io need to speed up your product development without draining your budget, hire vetted engineers from Europe at lemon.io. Go to lemon.io slash twist to get 15% off for the first four weeks. And Fivera Business is a modern workplace for the digital world. Their team of dedicated business success managers help match you with the best freelancers for your team.

Right now you can sign up for Fivera Business free for the first year and save 10% on your purchase with promo code Jason. That's FI-V-E-R.com slash business and use promo code Jason. All right, everybody, before we get to our Ask an Angel with Zach Collius, there was a story that I saw across my news feed, and I thought this was particularly important, and I had something to say about it. And here's the big headline. Over a million fewer students enrolled in college this fall, this is in the United States, compared to pre-pandemic levels. In other words, two years ago, 2019, I would assume. That represents the lowest enrollment numbers in 50 years, a nonprofit called the National. student clearinghouse released this day to Thursday morning and NPR reported on the metrics. In the fall of 2019, there were 15.4 million new enrollees. And two years later in the fall of 2021, there were only 14.4 million. Since 2019, total undergrad enrollment has dropped 6.6%. Undergrad enrollment was already on a slight decline since 2012, but the pandemic has accelerated this. Now, I don't know if that has to do with the number of young people there are in the country. Who knows if there are other demographics

there or the fact that we didn't let a lot of people into the country, those are two factors that I'm not sure we're addressed in this study. We have a lot less immigration in the country. Trump was anti-immigration, and it does seem like Biden is continuing the less immigration or straight up anti-immigration, which is a big mistake. We should be letting people into the country when we have over a certain number of jobs available. And we obviously want the smartest people in the world to come here. So my feeling on immigration, I made it very clear on this program over and over again. Anybody who's got a STEM degree who comes to college here should get a 10-year green card with a path to citizenship. Anybody who has a STEM degree or an in-demand science,

technology, engineering math, or is entrepreneurial and starting a company, we want those people in this country, not other countries. We should be looking at them. as draft prospects, like in the NBA, and we should be trying to get all of those draft prospects here. Now, back to the college study. Community college were initially hit hard with 500,000 student decreased from the fall of 2019 to the fall of 2020. That represented a 10% decrease in enrollment. Community college enrollment is down 13% since the fall of 2019. Pretty staggering there. You know, listen, community colleges, I don't think, are the most flush with cash already. So, as the pandemic has gone on longer, students seeking for you to

have stopped enrolling faster than those seeking two-year associate degrees. So that's an interesting rub here. This means students seeking higher-level degrees are now opting out at a higher rate than those with associate degree counterparts. So that's fascinating. Why would that be happening? Do people see less value in a four-year degree? Do the people get in a two-year associate degrees? Are they hungrier? Very interesting. Or maybe people are looking at the amount of debt and saying, maybe I can just get by with a two-year degree and be considered a college graduate, right? That's another possibility. in the workforce today, the stigma of not having a college degree is much less than when I graduated in 1993. I was supposed to graduate in 1992, but I was a couple of credit shy.

It took me four and a half years to go to school at night while working two or three jobs. So I was supposed to graduate in 92. And back then, your college degree did matter. And whose name was on your college degree was actually a deciding factor on how much you would get paid and which job you would get. So literally an Ivy League degree, a Fordham degree, a city college degree, it was probably $10,000, $20,000 in salary difference based on your degree. So the NPR article quotes why young people might be skipping college at this point in time. Wages at the bottom of the economy have increased dramatically, making minimum wage jobs,

especially appealing to young people as an alternative to college. Let that sink in. We've been sitting there saying, oh, my God, the minimum wage is minimum wage. well, when we stopped letting people immigrate into the country, then we had less people fighting it out for minimum wage jobs. And as the economy boomed and people embraced services like DoorDash or Uber Eats. You had all of these gig economy jobs happen. The gig economy put pressure on fast food, factory jobs, Amazon warehouse jobs, everybody in a dogfight, which means now what used to be $7 to $12 is $15 to $35. I could see people.

saying, I could go into debt or I can make 30 bucks an hour. It's a pretty easy choice there. If you can make 20, 30 bucks an hour or go into debt, that's a very interesting observation from NPR. In December, for example, jobs for non-managers working in leisure and hospitality pay 15% more than a year ago, according to the Bureau of Labor statistics. And the statistics I have, you know, from gig economy and factory jobs, I think it's even much higher than that, a 50% increase. Do some back in the envelope math here with me. We love the boat, B-O-T-E, back of the envelope math. If you want to be good at business, you've got to be able to do this stuff in the back of the envelope.

If the average pay went from $1466 to $17 an hour over the last year, that means the average non-manager or cafe employee went for making $20 more a day, $117 to $136, and they're making almost $200 more per paycheck from $1172 to $1360, and you could actually do that over the entire year, $20 more a day, If you worked 250 days, you get the idea. It's 5,000 more a year, right? It adds up quick, right? If you were just making a dollar more a day and working 250 days, that would be 250.

Now you add a zero. If you were making $10 more a day, you're making $2,500. Now you doubled that to get to 20, and you're talking about $5,000 more a year. That's a lot of Coachella tickets or a lot of crypto and NFTs. So, quote from the National Student Clearinghouse, head of research Doug Shapiro. it's very tempting for high school graduates, but the fear is that they are trading short-term gain for long-term loss. And the longer they stay away from college, you know, life starts to happen. It becomes harder and harder. Start thinking about yourself going back into the classroom.

So this, I don't know what the National Student Clearinghouse's head of research's biases, or what Doug's personal biases here as the head of research, but I would assume that he is in some way in favor of higher education. So maybe he's pumping his own nonprofit. Who knows what his motivation is? But I think it's a valid observation. If you don't go to college and you start operating the real world and doing well, then the need to go back to college kind of goes away, right?

And you're kind of like, well, why would I do that? I, um, you know, have been giving this a lot of thought and I've been saying for a long time, if college was less than your total debt for college was less than, the amount of money you make your one getting out of school. So if you get out of college, you make 40 or 50K. If your total debt was under that number, I could see it being worthwhile. It's still you'd have to think it through, right? Because you got to pay that money back.

So if your first job out of college was $40,000 and you're $40,000 in debt, okay, and then you went up 5% a year. You know, okay, you're going to double your salary in about five divided into 72. It's how you do the rule of 72. So if you were, let's just say you were growing your salary at 7.2% just to make it easy. If you're growing your salary, 7.2% a year, in 10 years, you would double that 40k salary. You'd be at 80K. If you're at 80K, you're taking home 60 and change, paying back the 40K, not so difficult, right?

You start paying back, you know, $6,000 a year, $12,000 a year. You're going to be done with that loan pretty quick, right? And now people would probably accelerate paying that back, unless it was very low. Potential for positive change with AI is huge, but seeing that value is hard. AI-driven growth is about organizational transformation, not too. technology, and many businesses struggle with bringing AI initiatives to fruition, and that's where Dataiku comes in. Dataiku is the platform for everyday AI, systemizing the use of data for exceptional business results. At its core, Data IQ allows companies to leverage one central

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If you were going to go 100K into debt, right? Because that seems to be what a lot of Gen Zs are looking at, $100,000 in debt. And you get a degree, which, let's face it, is not very practical in terms of what you're going to use in the real world when compared to trade schools. Well, how about you stay home for a year and save up $25,000, right? So you work for these Ubers and DoorDashes or whatever, and you save up $25, because you have to spend some money to exist. You put a $25,000 deposit town on a studio apartment, Phoenix, Atlanta, Tampa.

Those are cities where I think you could put a $25,000 deposit on a $150,000. studio apartment. I'm not saying this is a three-bedroom that you're going to raise your kids in or a small house. And in that same price rate, you might even find a one bedroom. But I say go for the studio, just tiny, tiny, tiny. So you don't have high overhead. Now you have, like, let's say, $3,000 a month into living expenses for the next 25 months, just over two years. You know, stay home. Learn project management, learn growth, learn developer skills. Get on MIT open courseword. Get on Coursera. All of this stuff is online. And then just do your door dash for 20 hours a week, make your 500 bucks a week, $2,000 a month. This leaves you with $1,000 left to play the stock

market by crypto and just screw around learning finance. Maybe you go on Republic, you go on Seed Invest, you start making $250, $100, $500 bets. Now you're two years into this. And you've got some actual skills that startups need, whether it's being a developer, a project manager, growth, any of those things, even sales, like enterprise sales. But I would go with project management, UX, UI, growth, developer skills. Those are in-demand, high paying. High paying means 50, 60, 70, 80K entry level. That's what people would get in one of those cities or work from home if you were reasonably good at it. You don't have to be an expert. That's what I'm talking entry level. 50 to 80K would be the entry level for a project manager,

a growth manager, developer, or even a sales executive with their full comp. And now, you're two years in, you got real skills, then go to a startup accelerated, go to tech stars, go to launch Excel,

go to YComody, whatever the local one is, and say, listen, I have this skill. I taught myself, can I sit in on your accelerator and see if there's a startup here that wants a third co-founder

who has a scale that they will not need to pay for or they can pay very low, little for. And now, all of a sudden, you get picked up as the project manager, you just watch the 20 startups, you pick the one you love best, or pick the three, you go to the founders say, hey, can I work for you? I'll work for free. I'll work for a minimum wage. I'll work for $1,000 a month draw because remember,

your expenses are very low, and you got the door-dash job 20 hours a week, which is basically your weekend, just work the weekend or work two days a week. Or maybe you drop that down to 10 hours a week, right? Because you got such a low overhead. This isn't for people who have three days. kids. This isn't for people who are in debt already. I'm just talking about people who are graduating from high school and I have a clean slate. Now you've learned a whole bunch of skills. You got a decent salary. Maybe it's a baller salary if the startup gets funded. You got equity in that startup.

You might have even founder level equity, which could be in the double digits, 10% or higher. And you got your own studio apartment. You may have some eth and some NFTs. You've got some equity in startups that you place bets on. Maybe one of those will work. And then bonus, maybe in a few years, you flip the apartment and make a little bit of money. Now, why would people not take this path pre-pandemic? Well, because it seems crazy and risk-taking. But, but if you were learning from home in the pandemic and you couldn't come to the campus,

you basically unbundled a college experience from the learning. And I think what's happening, this is my interpretation, my opinion. I think young people have had an awaited, from the matrix. They were in the college matrix. And they didn't realize, and then they took the pill. And they got red pilled. And then they woke up and realized, wait a second, what exactly am I paying for here? Because I'm doing this online learning and it's bullshit. And I'm not getting anything out of it. And it's a boring topic. And the teacher is okay, but I found a better teacher online because MIT put other courses online. I'm taking a microeconomics course that's

unbelievable. And there's no difference when you're doing distance learning of watching the MIT course or the Coursera course or the Linda course, you know, or whatever other courses out there. There's no difference between those free courses or close to free courses and watching your own teacher. So if you're going to some mid-tier college or even lower-tier college, what are the chances that that professor is as good as the MIT one? I would like to be generous, but I would say it's one in 100, one in 50. Possible, but it's not probable. And that's what's happening here.

Finally, after the millennial generation got themselves horribly into debt, then Gen Z, and now onto this next connected generation, they realize, wait a second, and distance learning proved it to them. It's a bit of a scam and it's not worth it. Again, if your parents are rich and you're not paying for it, sure, enjoy the college experience and you can have a four-year luxurious vacation with low expectations and party and, you know, meet a lot of fun people.

But the reality is, if you're trying to make a career, higher education at $100,000 in debt makes no sense. At what, 10 to 40K in debt, I think I graduated with 12K in debt. I paid it off in two years just because I didn't want to fill out the little vouchers. It was so boring. And connections? Give me a break. The college connections, you're meeting a bunch of other kids like yourself.

Those aren't important connections. You want the connections to the people who are just ahead of you. That's why I said, don't go to college with a bunch of looky-lose and the average people, Gen Pop. That's Gen Pop. Go to the accelerator where there are the people who are just ahead of you in life, two, three, four, five years ahead of you who have self-selected because they want to be entrepreneurs and they want to change the world.

Go run with people who run faster than you. you'll be a better runner. You go to a bunch of people jogging and speedwalking at like the average college. They're just going to slow you down. You want to go with those. You want to network with the people slightly ahead of you, the people in graduate school or startups, those people, if they're in MBA graduate school, maybe. But you really want those startup founders to people who are a cutthroat. Okay, listen, that's just my opinion.

If you disagree with it, you know where I am. Twitter.com slash Jason, Instagram.com slash Jason. Go ahead. That mentioned me and we'll have it out on Twitter. that's my belief. And if college wants to change this, it is a very simple solution. You should give people to college for free and let them pay you back on an ISA, an income sharing agreement. If your college is so great, then you should pay for a college, you should take the risk and then get paid double with an ISA.

That's my belief, you know, sorry. Again, if you've got rich parents or you're on scholarship, great. And that's what I think should happen. I think all these colleges with the huge endowments should go to free and it should be merit-based. I think all STEM degrees in this country should be free if you graduate and go get a job or they could be on ISIS. And you just, you know, if you pay your first $25,000 in taxes, when you hit $25,000 in federal taxes, your loan is forgiven. How about that as a concept? Government makes their money back.

Or the government makes back $1.5. So you have a $20,000 loan. The second you pay $30,000 in taxes, the government says, ah, don't pay. has back. You did good enough paying $30,000 in federal taxes. Okay, let's go to my all-ask an angel with my pal, Zach Colius. When you're growing your startup fast, hiring engineers can slow you down like nothing else. Well, here's the good news. Lemon I.O will find you a perfect candidate in just 48 hours. What's Lemon.io, you ask? Well, they are a marketplace of engineers from Europe. Lemon.io is a great solution in a lot of different scenarios. Maybe you're a technical

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if you go to lemon.com. Hey, everybody, welcome to our monthly Ask an Angel segment. This is where I, Jason Calacanus, investor in over 300 companies and my good friend and, dare I say bestie, Zach Collius, my brother in Amacron. We both caught Amacron at a particular of super spreader event that we shall remain nameless. We answer people's questions candidly, and that's the key here. This is why Zach is such a great advocate for startups and is so loved in the entrepreneurial and investing community because he's candid. Zach, welcome back to Ask an Angel.

Awesome to be here. I miss you, brother. I miss you too. But now that we're both Amicron brothers, we can. can go anywhere we like. We can go to Hokkaido and go snowboarding or skiing. We can go to Miami and get Cuban sandwiches. We can do what we want. Let's go. We are free. I am ready to go. Just like I was hot to try it when I got the vaccine and then they told me, oh yeah, the vaccine doesn't work. Or it kind of works. It keeps you from dying. You're still going to catch it.

We didn't die. We did not die. And it went pretty easy. So I think the vaccine did great. I'm happy. I am so... I wish some people here I'd give a big fat, wet kiss. Oh, big hug. Two of us could hug those great MRNA folks. Literally, Omicron was a cakewalk. Zach rated a 1 of 10 on a flu scale, and I rated a 2 of 10.

It was so easy to get through because we were both boosted, I believe. That is my belief. So we are homicrons for life. All right, let's get to it, Zach. You and I always like to get to it. This is from Tim Ryan on Twitter. Everyone has their definition of an outlier based on your experience and level of success

with big returns, what constitutes an outlier from your point of view? 500x, 1000x, please break down your definition of a single double, triple, and home run. Very good question. At this point in our careers, how do we look at, you know, hitting a home run? Specifically for yourself, Zach? Yeah, I think in any early stage investing, there's two. key variables. One is a multiple

on your outcome. So your, cash on cash. Your Uber numbers world class, like hitting the ball out of the park times 1,000.

Beautiful, beautiful strike on that ball and it just sailed. Like, it left the park. It left the fucking universe. It was a beautiful, beautiful ball. Still down. Unbelievable. And then,

and then obviously, ownership. Because if you would own 10% of Uber, I mean, you just take Mr. Bill Gurley and you just trade seats with them and you just take all that money

and put that right in your pocket. Make me Bill Gurley. So nice. It would have been a whole different ball. Okay, so that's one. Boom. Yeah. So, but also like, you know,

I look at some of my best companies. They're not 10,000 X's, but I own 10% of a $500 million business. It's growing in 300% a year. and that's pretty amazing. Yes. That's going to move the needle. This is a key,

key important concept. Yep. And so I think for any angel investor, it really comes down to your portfolio construction and really understanding the end of the day how much high quality deal flow you have coming in. And then how do you maximize your ownership in those high quality deals? But at the same time,

get as much diversification as possible because one, 10,000 Xer can totally change the game for the rest of the portfolio. And so you've got both sort of a balancing act between how deep are you and how broad are you. And that really comes down to your judgment. It's a tricky game. This is a key point that I was going to double click on with you and to just rephrase it and reflect it back to you, Zach. What you're saying is you need to have enough portfolio companies that you qualify to have an outlier. And we've talked about this before. Some people say the number is 20. Other people say the number is 50. You and I both agree the numbers between those two in all likelihood if you're fishing in the right ponds,

if you're investing in venture-backable companies that are in the right sectors, whether it's SaaS or marketplace fintech or consumer subscriptions, whatever it is. So this is a key important concept. You must be diversified and you must be concentrated. And these seem like disparate ideas, but when in fact you can build ownership in the winners. Now, this is. is something I want to double click on with you, Zach. You said, when you identify a winner, you try to increase your sizing. So take us through. You talked about a $500 million company that you have a 10% position in. How did you get to that 10 position? Did you buy it in the first time you invested? Or did you do it over rounds? Yeah. So both in that case. So I think my initial check

into that company was I syndicated it and I put in 800K at 15 free. And so... A solid 5%. Good amount of ownership right out of the gate.

I'm happy with that. By itself, that would have been awesome. But then a year later, the company went through a fundraise and struggled and had good revenue but had some tricky sort of business model problems that people were still trying to figure out. And

the raise wasn't working. and they were in a position where they needed more capital. And that's where I sort of had gotten a chance to know the founder over the year, has been a lot of time working with them on the business and working with them on all the moving pieces and felt really comfortable with where they were. And I was able to back up the truck and put in another 1.5 at the same price. So $15 million valuation.

Yummy. And because, but let's just pause here for a second. The company had not figured it out. and sometimes this happens. A founder runs out of money or they're running low on money. They haven't figured it out, but they've made progress.

But because of your, if I'm reflecting this factory correctly, let me know, because you knew the founder and trusted the founder, you trusted their assessment of the situation, you agree with their assessment of the situation,

hey, if we tweak this business model, this thing's going to take off. And so you were able to place an intelligent bet because of your insider information. Yeah. I like to argue that there's really one key inflection point in these businesses, which is when it goes from being qualitative to quantitative proof. And what that means effectively is when it's qualitative proof in the beginning,

you can make an argument as to why it's good. You can show the value. You can talk to customers. You can see that this seems really compelling, but it's not yet reflected in metrics. You don't have month-over-month growth rates. You don't have revenues scaling to the moon. and you don't have users going up every single month.

And most venture capitalists, the people who follow us, they come in at the point when there's enough meat on the bone in terms of quantitative information, enough metrics that they can convince their partners that they should do that deal. And it's really hard to convince your partners with qualitative information. Like, oh, I feel this one's great.

I trust the CEO. But it's pretty easy once you've got that month-over-month growth rate. And so what I've found is there's this sweet spot where it's pretty clear that the company's doing something awesome, but it's not yet showing up on the Excel sheet, and that's when you can basically show up and write a big check and take some ownership. This is one of the great things.

You get a great question from the audience. Great job on that great question. But then, you know, Tim Ryan asked such a great question, but we get to jump off and figure that out. In terms of for myself, single, double, triple and home run, I no longer, because I've hit so many home runs and not to be obnoxious about it, you know, now I am, I kind of feel like I'm in, you know, maybe the Michael Jordan or the Steph Curry after three rings.

After you get a couple of rings, you're not worried about your legacy. You're not worried about paying the rent. You're not worried, am I good at this or not? I know I'm good at what I do. Isaac knows he's good at what he does. We're now in the position. You know, it's a great place to be. I've been investing for 11 years, and I think, Zach, you're right behind me.

Yeah, about seven now. seven, right? So I'm just a couple of, I'm like literally a couple of years ahead of you in this thing. And what happens is, all of a sudden, you're like, okay, I'm good at this. I'm good at the game of basketball. I am one of the top, you know, I'm in the top 25% of the league, whatever it is. So I am going to be successful at the game. It's a matter of how successful. So then once you're free from that, you no longer think single, double, triple, or you no longer say, I need to deal with nonsense or I have to win on every deal. You don't have to win every deal.

In fact, more unicorns, as great as Y Combinators run has been recently with unicorns, more unicorns exist outside of YC than in it. Proving the point that even the most active investor, by far, thousand companies this year or something crazy, I don't know if it's 500 to 1,000, they don't have to hit everything. You don't have to hit everything.

So now I play for the love of the game. I enjoy every day. if a founder is a great founder to work with and we're winning, I want to invest more and more. We just had a company become worth a billion dollars that launched at our festival. I can actually say the name of it because it's public now, density.

I don't know if you remember density. People counters launched at our event. Again, I had inside information. The founder was brilliant, hardworking. Andrew Farrow was just a, I could tell he was like an NBA player. And I said, listen, you're in Syracuse or wherever the heck upstate New York. You're playing in the YMCA. Come play in the NBA here in the Valley back when it mattered where you were located.

Yeah. And, you know, he took my advice and he came to Silicon Valley. And then Mark Schuster did the A. Cyanne did the B. And now we've got Kleiner Perkins who did the latest round. Just so many great investors, a company's worth a billion dollars. And, you know, it's just great to be able to keep investing in it. So we invested in the last round.

And it was the largest amount we ever invested in a single startup. So you can either maintain or keep growing your position in unicorns. and that's a whole different challenge, right? It's a whole different ball of wax. Okay, I think we did 10 minutes on that first question because we turned it into three. But what a great question. Next question from Twitter is coming up. And then I'm going to go to my live notice.

If you're watching live, we got 100 people watching. We have 52 thumbs up. Let's get that thumbs up to 75 if we can and go ahead and tweet it and share it on whatever you're into. If you're into TikTok, you're into, you're in Discord. Go ahead and share the link and make sure you subscribe and hit that notification bell. let's give a thumbs up for your squad for your boys. And the next question goes to the Noddy gang members.

Here we go. Next up. Todd Fobble, hopefully I'm pronouncing that correct, asks, are investors okay with founders that use no code software like Bubble as an MVP? Knowing that once it gains traction, it can only iterate scale so much. Will they invest knowing it will need to be hard coded when the funding is there? Frustrating current issue for me. Todd, thank you for that question.

Zach, what's the answer? Yeah, so the short answer is, sure. It's just a question of the value that you're presenting to your customers. So if you can hack together something with duct tape and bubble gum and some rubber bands and your customers are super duper excited about it and they're happy to pay for it and it's a huge amount of value, well, then you've just validated that something really powerful could be brought to market. And now the question is, is can you build it?

Can you bring the right people together, the right team, the right productive capabilities? to make that, you know, duct tape and bubble gum into a real product. And that's kind of our job is to sit down with you and figure out, you know, where are you and can you pull that off? And if you can, then absolutely. It's a great way to figure out, you know, do you really have something valuable? I'll even take it further, Zach. I think it is so meaningful that a non-technical founder or slightly technical founder

took the time and had the audacity, the boldness, the hootspah, the drive to say, I can't find a developer, but I will just make an MVP. I will have it hit customers. I am not scared of customer feedback. I will delight those customers. And I'll start getting customer feedback.

And then I'll figure out getting a developer. And I can do that two things at the same time. Part of running a startup is being able to walk and chew gum at the same time while using your phone, while drinking a latte, you know, and everything else. So you have proven to me, if you've done that, that you're impatient.

You couldn't find a developer. You didn't have the money to pay a developer. I'm not going to look down on you. I'm going to look up to you and say, you're fearless about customers. That's a superpower. You want to, you're impatient. That's a superpower. Yeah, of course you can rebuild it.

And this is the great way to do it. I mean, I have A, B, tested things and done landing pages with a type form, with SurveyMonkey, with Zapier, or if they're. than that, all this stuff is a great way, great way for you to get closer to the customer and learn before you waste money. Think of the opposite, Zach. What if they hired, the worst thing would be to give $100,000 or $250,000 to some dev shop and then not be able to do any changes, not be able to learn anything, and then have to

start over. I'd much rather see you do low code, no code. Totally. Absolutely great. The start of the year is always crazy and you might need some. for help, don't I know it? I'm in the weeds right now, folks. So look no further than Fiverr business. Fiverr business puts a world of expert freelancers at your fingertips so you can get any project across the finish line and be proud of the work, right? And that's what it's about. You want to move

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Bobber, who is a Nody Gang member, says, rookie question for Zach and Jason, how does a season investor deal with a founder who, in their opinion, headed in the wrong direction? Okay, who's just basically headed in the wrong direction? You got somebody who's going off the rails. And let's just say, I'll make this even clearer, and I'll refine the question.

They're clearly making a huge mistake. It's obvious to everybody, but they're so strongly, they feel so strongly about it. They're unwilling to change course. Yeah. I mean, the great thing about our business is that we have enough shots on goal, that it's totally okay if one of those shots goes far wide. And, you know, one of the most exciting things is sometimes those crazy, wild,

headstrong creatures that are going their own direction, end up in a promised land that nobody else saw, and it's full of gold and diamonds, and we're all idiots, and they were right. And so, you know, I think when I spend time with those entrepreneurs, I want to be as communicative as possible about why I think what they're doing is not right and share examples and share introductions to people that can help them see the past experience, but also be respectful of the fact that they're the entrepreneur,

they're driving the car, they have way more information than I do, and sometimes they're right. And, you know, if they drive the car in a lot, the ditch, they're the one who's going to have more pain than I am. And so they're the one who's got to make the decision at the end of the day. It's such a great point. You know, if a founder is going to say, listen, I'm going to run through that brick wall, and you're the investor, and you're like, that's a pretty formidable brick wall. And they say, yeah, and I'm going to knock it down. Okay. I'll be here. If you bounce off of it, you get hurt, you get knocked

on hunches, whatever it is. But, you know, with some founders, they're going to just do it. And our job is to either clean up the mess and help them, you know, get back up and get in the game, or if they break through the wall and they find like there's a diamond mine behind it or a hidden compartment with like, you know, bags of gold, great. They were right. So it's, it's really about sometimes in this industry giving people a space to make mistakes, giving people the space to learn. And I just like to phrase things as questions. So in the case of running into that wall, I'd say, how thick's the wall? And have you run into a wall before? And when you ask probing questions like that, sometimes the founder's like, yes, I've run into walls before. That's a then wall.

I can break through it. And if we do break through it, even if it's a 10% chance, my lord, there's gold on the other side. I am certain of it. So then it's like, okay, do you need anything to help you break through the wall? Can I give you a battering ram? You want somebody else to run through with it? You know, let's have a discussion about that. So we just like to ask probing questions, right? And And common mistakes are common mistakes, you know. The most common mistake for me that they make is they find some little modest amount of revenue. And they stop drilling for that oil. They stop drilling.

They find oil. And then shiny new object happens. I'm like, you know what? This oil rig sucks. I want to go pan for gold. And I'm like, hmm, but what about the oil we found? What if there's more? That's my, we've talked about this before.

That's my pet peeve. What's your biggest pet peeve right now? the founders, that like a common mistake that you're like, oh, focus to me and just keep drilling is the still top of mind for me. Yeah, focus is absolutely it. Like, focus and, I mean,

I think one of the hardest things about being entrepreneurs, like, you're getting punched in the head every day. You're trying to lead your team through complicated and unclear situations. You're, you're battling in the dark and in the fog and you're knee-deep in mud and you're bleeding out of every hole in your body. and it's like it's the hardest fucking job in the world.

And at the same time, you somehow have to have the clarity to sort of like see the mountain for what it is and direct your team up the mountain in a way that is going to get you there as opposed to just sort of like putting your head down and charging against that brick wall when you could just walk around it. And that's just such a hard job. And it's really, really, really difficult.

But. And we've been there. We've both been in the driver's seat. we've both flipped the car. We've both been in pain and suffering. It got put into the founder hospital. And sometimes you're in that founder hospital. And it's like, yeah, by the way, you're in here for six months.

You're like, really? They're like, yeah, you've got to learn to walk again. And you're like, I knew I took that turn too fast. But that's all I remember. All I remember is going into the turn. I woke up in the founder hospital and like cast my hand like this. It's like, what hit me? And they're like, ah, the Google search index.

You got re-indexed by the search algorithm. I'm like, I didn't see a comment. Facebook literally, like, they just gutted me. And my guts were like hanging out down around my feet. And I looked down. I could see them there. The business was still alive. It was gushing cash growing like crazy.

But I knew I was dead. And it was like, oh, it was so painful. Like, it was just like, I know I'm dead, but I'm not dead yet. Oh, shit. This sucks. Like the Facebook zombie horde was eating your innards and you're looking down. And you're like, wow. Yeah.

I'm still alive and I've got a lot of money in the bank account, but Facebook zombie hoard is eating my innards. They're eating me alive. All right, Luke Skinner, maybe some relation to BF, asks, what is the most common reason that founders flub with respect to their pitch, not knowing their financials, bad valuations, communicating value? When you see a bad pitch, what's typically the problem, Zach? Liars.

It's always lying. Like, you're a little fibbing. You want it so bad and you don't know every answer. And it's for some people, their first inclination is to make something up. And, you know, unfortunately, in this business, I spend all day, every day talking to people who are trying to lie to me. And I've gotten pretty good at telling them when you're lying to me. And I've gotten pretty good tricking them into lying me in a way that I identified that they're lying. And that, like...

What's that? Just asking tough questions? and then see if they... No, I find it's actually better to ask not tough questions that seem really gentle and then they just walk themselves right off the cliff. So how do you make money? Tell me about your current customers.

Something very basic and they just lie. And because you'll identify something that's clearly an issue. You're like, okay, this is the issue. And I'm like, oh, what about this? And then boom. And it's like, okay, well, thanks for saving my time. By the way, I'm done here. See you.

Well, you're like, hey, do you have any competition? and they're like, who are your competitors? And they're like, yeah, we don't have any. And you're like, I met with your competitors last month. And I just did a Google search for their name, alternatives. And I wound up on a website with six alternatives. So you are either completely clueless to your competitors or lying, which is it. In that case, it's like, what's worse?

For me, go ahead. I was going to say it's too bad because I think oftentimes if they just sold the truth, they'd be in such a better spot. So much better. It's not like what we can't handle the truth. Like we see constant chaos in this early stage. Yeah. We can handle the truth.

It's like we're the people who can. You know, for me, I think when the deck is not focused on what matters, that I start to get red flags going off everywhere. So what really matters? Okay. Your product and your customers. maybe your go-to-market strategy, your growth techniques, etc. You know, how you're going to get this in front of customers and your team.

It's a small subset of important things. And then when the slides include, you know, what competition you want and what branch you got and anything that doesn't matter, theories you have about the overall blockchain, you know, something from a Gartner report, you know, for me, team builds a product, product, hits customers, customers give money money goes to build a team team is bigger and better they get to build a better product and that's the flywheel team product customers anything that's not those three things is drifting from what matters especially at the early stage when things are not that complicated you need a great team to build a great product that delights customers enough that they use it and

pay for it stay focused on those three things i think you get a lot further and no fibbing. No fibbing, right, Zach? Absolutely. If you have five customers, don't say you have 10 and five of them are on free trials and never use the product.

Perfect example. Yeah. All right. Jay, Sidhu asks, what kind of indicators metrics do you use for evaluating whether it makes sense for a company to prioritize profitability

over revenue growth? Jay, this is a great question. When should you go for top line versus bottom lines act? And how do you do that dance? I mean, I think the first thing you have to figure out is how much do customers want and need your product? Because if you've got a product that customers want and need, and there's a lot of them out there, the first thing you need to focus on is distribution and everything else can come later.

So if you're Uber and you've invented push a button and get a car, everybody in the world wants that. Because everyone else who doesn't have that is like, oh my God, why is there no Uber here? I want Uber. Yes. So like, and sometimes when your market is big enough, that's years and years and years of losses to get that distribution out into the market. You know, on the other hand, sometimes you have a product that there's a lot of competition and everybody's already got something and you're fighting tooth and nail for every new customer. Well, now basically like building margin gives you the ability in the war chest to win those battles against your opponents. Because if you're operating at a really low margin and you're barely, you know, barely making any.

anything in each customer, you don't have any money to throw at the next customer and you need those resources and nobody's going to fund you. And so building a business that looks really good through margin expansion and effectively profitability can often be worth it when you're faced with a really hard, you know, bare-knuckle game against competition. Yeah, I'll add to this. If it's a vibrant funding environment and you have people who want to keep giving you money and increasingly higher evaluations. Well, and that would be like the last, let's call it, 10 years, or maybe the last seven, where it's just such a tremendously vibrant funding environment, you can say, you know what, we're going to hire an extra two or three customer

success people, an extra two or three account executive, an extra two or three developers, and we're going to build our business to be resilient and to have more cycles, to do it better, to delight customers more, and we're not going to try to maximize the profitability. We're going to try to maximize the top line growth and delighting these customers and reducing churn. And anybody who's a sophisticated investor is going to be able to look at it. And when you explain that, hey, look, we're running this with 27 people. We've got $2 million in annual reoccurring revenue.

This business could run, we both know, with 10 people. Those extra 17 people are building for so we can get to 20 million within three years. We want a 4x revenue and then triple revenue. We're going to go for that big jump from 2 to 8, and we want to go from 8 to 30. You know, you can actually explain that and why you need to be investing ahead of growth. Now, if you're not growing and you're losing money, that's different. So a low growth rate, you're growing 2% a month, you know, you're growing 40, 50% year over year,

and you're overspending. Well, then we have to look, something's fundamentally wrong here. Maybe people are trying the product or overselling it. and they're turning. Maybe you're charging too little for your product. And for Amazon and Uber, these are the two canonical examples. The Penn Ultimate, I believe, was Amazon. And I would say, you know, the ultimate was Uber.

Some people might take that in reverse. But I think Uber was building on top of what Amazon had proven, which is, if there's a huge market, capture the market, don't worry about it burning. I think, you know, Uber had burned total in their life like $8 or $9 billion. and they had created even in the markets where they sold off D, D, D, Grab, and in Russia, those portfolio of that, where else, yeah, in those markets, I think they had generated something like $12 billion in value. So if you just look, forget about Uber's core business where they're number one. In the places where they sold off their interest because they knew they would be number three

or four, they had made more money than was invested in Uber. that was a true statistic at one point in time. I don't know if it still holds. And I would always talk to people and they'd say, Uber's never going to be profitable. How many rides did they do this last quarter? And they'd say, oh, they did whatever, you know, 100 billion rides. I'm like, how much do they lose?

So like, okay, they lost X amount. I said, okay, can you divide these numbers? They did a billion rides. They lost $2 billion. They lost $2 ride. I was like, okay, tell me next part. Oh, they lost a billion dollars. And they did a billion two rides.

I'm like, okay, so they lost less than, you know, 90 cents a ride or whatever it is. It's like, you think if the rides were 90 cents more, people would stop using the service. People were like, yeah. I was like, okay, then the pandemic happens. What happens? The rides double. And there's no, with the exception of people not wanting to ride in Uber's, people still use the service, right?

They didn't lose. They doubled the price. They maybe lost 10% of the user base, the bottom people using Lyft line and Uber pool, right? So you just have to have a little imagination. And I think Amazon's the other example. If your Amazon cost, if your Amazon Prime costs $10. more a year or $20 more a year or $50 more a year. Would you actually get rid of his act? No, obviously not. And the introductory price for Amazon Prime, people forget, was $40 to $50, depending on what city you're in. They tested some bidding ones. But let's put it at $50. Do you know what people are paying now? Amazon Prime is now 150.

There you go. So it shows you that people were willing to pay three times as much. Did they charge them not in the beginning? No. They got as many people on. Did they lose money on two day? Yes. Did they get people addicted? And now do people see a higher price? price on Amazon than on the actual manufacturer's homepage and still buy it at Amazon. Yes. Because they just want to have their orders in one place. They don't care about the $3 extra, the $4 extra. They just want the simplicity of ordering and knowing it's coming on time. So great question. I love that question.

Okay, Nick asks, Nick Piscote, not Fiscote, which I love, but Nick Piscote, who I also love, if VC funds could replace their institutional LPs with individuals. So, okay, here we go. Would the average startup shed 50% plus dead weight at IPO? Would founders prefer value at an individual LPs over institutional ones as well? So just to make this clear, the person is asking if VC funds, the funds that Zach and I run, instead of having institutional LPs, think, you know, a big retirement fund or a fund of funds, professional limited partners, the people who give us the money, and they let it be just individuals,

civilians, citizens of America would the startup shed 50% of the deadweighted IPO in that LPs who are institutional might clear their positions at IPO. What do you think? Interesting question. It's in the weeds.

Yeah, it's not clear to me. All I know is, you know, like on my syndicate, we've got 3,600 people now who are part of that syndicate. And it's like a fucking superpower. Like, every day they send me deals. Every day they basically help on diligence. Every day they point out when I'm being stupid. They're really good at that.

They're like, yeah, this is a terrible deal. What the hell are you doing? And like, it's like I have 3,600 people on my team. And like, they get to make money and I get to make money. We all make money together. And I don't think I would be where I am if I didn't have those folks with me. And so I think, yeah, the letting individual investors join into stuff like this and be part of the opportunities is, I think one of the biggest travesties that the

SEC has ever put in place is you can go buy lottery tickets, you can go gamble in Vegas, but we're not going to let you make money on really good startup investing. We're going to leave that to the rich people. Like, it's just like, uh, drives me crazy. And now add to it, we're going to let you do fantasy sports, which is awesome. We're going to let you do crypto, which depending on what you're buying may or may not be awesome. But still, if you wrote it in Uber, if you used Amazon, if you did DoorDash, you can't

participate. It's like, really? You just ordered from DoorDash. You drive for DoorDash, but you can't buy a DoorDash share, but you can buy an NFT of a monkey. Okay, this makes a lot of sense, folks. Let's get it together. And, you know, it's, it's so great to have so many LPs involved because in an average deal, I think we're at maybe 150 people, 125 people, participate in our average deal. You know, you're going to have half of them probably, you know, are not going to provide any value. They're just putting money beyond the money they put in. But the other half, you know, they might know somebody at Disney or the SEC, you know, or have somebody who could fill that CMO position.

You know, there's so many opportunities there. So I really do think having more LPs would be great. And I was just doing a tweet soar. I don't know if you saw it. I was so jealous of like Mac the VC who built his fund on social media. And he's going to be on season six. He's going to open season six of Angel. He was able to just bomb with people.

And he did a 506C, which means you are raising in public. I, Zach and I were old school. We were told not to do 506C, and we didn't, right, Zach? Yeah, no. Well, I have a rolling fund, which I think is, I think it's a 506C. Yeah. So now you're doing that and all of a sudden you can have people participate who you've, you didn't have a previous relationship with.

You developed it when they said, hey, I'm interested in participating in your fund, right? Yep. So that's just so powerful. But you could only have 250 of them or 10 million. whichever's greater. You can't go past that 10 million cap with a 250. Like, I would like to have 2,500 accredited investors. I'd like to have 25,000 non-accredit investors,

maybe capped at $1,000 a year each. And maybe you cap the accredited investors at a million dollars a year. You know, whatever, a million dollars. Come up with some reasonable caps, SEC, because there's nothing exists in Dowland. There's nothing in NFT land. There's no rules of the road there. And here we are in startup land, you know, being obsessive about the rules.

So just a little more fairness and let more. people get involved. I would love to have more people involved in calm or grin or density when we run our syndicates. And I would love to have people who maybe aren't yet wealthy, aren't accredited, and help them become accredited, which is the American dream. Okay, here we go. OG Bob G. In the Hizzy, always the best questions. Let's go. Bob G says, what industries would you like to see disrupted like Airbnb and Uber did? You got something top of mind. This is a good question. I have to think this one through. What industry?

Hmm. Great question from OG Bobji. Always. That's the first NFT I'm sending out is the OG Bobji. What is an industry I would like to see disrupted? I have two already. And now I got three. Ooh, I got three.

You thinking about any yet, Zach? I got my three. Okay. Let's go. You first. Give me one. I mean, I'm desperate. Desperate, desperate, desperate, desperate, desperate, desperate, desperate, desperate, desperate.

desperate for a carbon tax. Because if we put a carbon tax in place, like literally climate change let entrepreneurs will come out of the woodwork and start doing cool as shit to basically save our planet. And that's, that's just one little change

in the law will enable entrepreneurs to like actually move the needle because fucking politicians are never going to get it done. And so that's a disruption that I would love. Imagine that carbon tax existed and then some crazy entrepreneur said, you know what? People's windows are letting all this energy out.

I'm going to make an energy efficient window, and I'll put it in your house and I'll install it for you. In order to get the carbon credits for you spending less, and if you prove it spending less, then I get the carbon credits, and you pay me back for the windows over five years and I break even, whatever. So many examples. So I just came up with that one off the top of my head

because I see people with bad windows and drafty windows. All right, here's mine. I would like to see higher education and perhaps even homeschooling, micro-schooling, massively disrupted, and I think that vouchers are the way to do it. Now, I understand the arguments against school vouchers that, oh, the best students with the best parents

or taking the word best out, because I think that's a little offensive, really maybe the most engaged parents, in other words, the parents with the most free time, who have the most income, maybe they're two parents, one of them works, one of them doesn't have to work, works half time so they have more time to put into school as opposed to the parent with

three jobs who can't come after school because they got to work the second and third job. I would love to see those vouchers because I believe that five or six disadvantaged students might take their $16,000 out of the California school system and put that $16,000 to work in total $86,000 to hire a teacher and run their own micro school and get a better outcome. So I want to see education up and down, start to finish, disruptive and I believe you said carbon tax would do it. I think a government's or even, you know, state by state, the old voucher system would actually help. What do you got? What's your next one that you'd like to see disrupting? I mean, healthcare. Like, oh my God. That was my number two. Health care.

God. Give me something. Give me something like off the top of your head. That would be amazing. So here's a good example. So, so with COVID, suddenly, um, they decided, hey, we're going to like, we're going to change some rules. for once instead of sitting on our hands for like they have for the last 50 years. And so they said, oh, we're going to let you do telehealth. And now we have this unbelievable explosion of telehealth where people are getting world-class care

regardless of where they live. And so, for instance, one of the companies I'm an investor in is called Ever Now, they do metapause care. And the thing about metapause is really frustrating is if you're rich, you get great care, you go to the doctor, and they figure out all your symptoms, they give you the right prescriptions, and you're totally sorted out. But if you live out in the sticks,

and you're not time to drive into the hospital every week. Three hours, two hours. And so you go through untreated menopause and your symptoms are excruciating. And telehealth solves that problem, but regulations prevented that from occurring. And simply by getting the fuck out of the way, entrepreneurs are able to go in and make people's lives substantially better. And so, like, I'm, that whole system, like, we got to just, we got to just attack it piece by piece and just take it down because it is such. Here's my idea. Mental health is such an acute issue. Yeah.

You got people doing telemedicine. Here's my idea. Do you ever go to the post office, Zach? Have you been to the post office ever in your life? Are you trying to trigger me? When's the last time you went to a post office? Be honest. Like 10 years ago?

I don't even know. I don't even know. It's over 10 years. A long fucking time. So, post office is antiquated. No offense. So, but we got a lot of them. We got a lot of people working there.

Post office. is not, and getting postal delivery is not a major issue for Americans. You know what it is? Obesity and mental health. Let's just take mental health. What if we said we're going to take the budget of the post office? We're going to take the post office down to two deliveries a week. You get your Tuesday delivery and you get your Friday delivery.

And that's it. Anything else you should get by a private carrier. So now we've eliminated the other five days of the week because they went to seven days, I think, to compete. And we redeploy that budget for free. mental health counseling and services. And you could do it at the goddamn post office buildings because you could get rid of, you say, you know what, no more boxes,

no more of us subsidizing people selling shit at home, nonsense. We'll just do what the post office did for getting people, their post and their communications, which you get all online now anyway. We'll just redeploy that for mental health services. Anybody who's feeling down, blue, depressed, or maybe they want to go do some incredibly violent act or do something, you know, they regret.

They can go postal at the goddamn postal service in the form of postal building. Fate loves irony, let's go. Or we take all the postal services, if we want to take another one back to your health care, and we say, we are going to take the post office budget and this other budget,

and we're going to fry it. I know everybody, universal health care is too controversial. We can all agree that being fat sucks and that obesity is the number one risk factor for Americans right now in their health. So we turn every post office into a diet, consultation to help people who are obese lose weight.

Just one issue and you give them that mandate. Post office, I'm not saying people who carry the people who carry the post are not fat, right? You ever see a fat post a postal delivery person? I don't think so. It walked too much. So they know what I'm talking about. All right. I just want to let people know.

You know, we beep out the curses, Zach. And I'm looking at the slack right now because they have to write down when we cursed. And it's literally like, we're starting out like, it was like, eight minutes in curse word, 24 minutes in curse word, 25 minutes in curse word, 40 curse, 47 curse, 43 curse, 43 minutes in curse,

44 F bomb, they can't keep up with the curses. You started talking about health care. Health care is so frustrating. I'll tune it down. I can be a little aggressive. It's okay. It can be passed. It's great for the show because you get the beeps in there. I'm going to give one that's a wild card. I feel like I am, you know, as a cinephile,

really, really sad at the funding of independent films. And I... You and Sacks can go go do some work together here. You know what?

It was so painful for him to do thank you for smoking that I think he went back to the technology industry. He was like... That makes sense. I can't do this. But I think film funding and ownership of the films

could be solved with syndicants. So... So imagine we emailed our syndicate and we said, hey, here is a documentary film director and they have this great idea for a doc. In fact, they have three docs they want to do. We're going to give them, we're going to raise $5 million. And for that $5 million, we are going to get 50% ownership in these films and they're

going to get 50% ownership. And however it's monetized from this point forward, we will get our $5 million back and then split $5050 from that point on. and we're going to basically agree to put these films online, you know, and make them accessible to people, whatever, so they get seen. I think this could be an incredible way to bring back the orator, you know, that really considered independent filmmaker, whether it's documentary or otherwise. And I would just like to see more interesting films in the world.

And I think you can do that with music and other art if you like it, because you would align the incentives around, the creators and the backers. Right now the backers always got screwed in films. In fact, I was like, I invested in one film because a friend of mine, Nick Duracchi. And I think we made our money back, whatever. I didn't do it for that reason. I just did it to support him.

But when I looked at how people were doing it, they're like, yeah, you can get back one and a half times your money and that's it. Like they literally cap the money you can get back. So it's terrible. It's always been a terrible deal. So I was thinking about a way to do a studio or a platform that would back these things. But they don't have the tradition like we do of not. screwing each other in the tech business, you know, and you still have to be visual in the tech

business because people can do all kinds of crazy things, like issue more shares in a company. But, you know, in the film business, they're like, oh, yeah, no, no, we're going to screw you. Like, we're going to do crazy accounting. And if you try to audit it, you can do that, but you'll never work with us again, unless you're Robert Downey Jr. or whoever, and that we'll let you audit us and maybe. You know, and you're up against Disney who has 20% of the, or 25% of the box office now. They're basically movies are Disney. Okay. James asked, how much of an impact does bad reputation have on investing in superior technology? Example of a company's mismanagement.

Companies management has a bad reputation, but the technology behind their product is superior. I'm not sure about this question, but what do you think, Zach? I don't work with people who suck. Yeah. I think it goes back to what you were saying earlier. You got three rings on your fingers and it's just not worth it to, like, deal with, like, close of losers. And people you got to, like, because the problem is people who suck, they're going to try to

you. And you got to keep their eye on them. And that's just a huge amount of time and attention. Wasted cycles. It's the worst. Yeah. So, no, I run as far and as fast as I can people. I mean, there's rumors that, uh, Newman from WeWork fame is Adam Newman is going to do

a new company. Obviously, if Theranos gets out, he's going to do, she's going to do another company at some point. Um, yeah, it's just not worth. It's not worth it. because you have other options. That's one of the great things about our industry. You don't need to hit every single unicorn

to have a successful career as an angel investor. So why deal with people who are of low moral character? If they show you that they're going to do something horrible, you can be sure they're going to do it again. All right. O.G. Bob G. always with the great concise questions. The great, you know, I call him the fourth producer

of this week in startups. O.G. Bob G., our fourth producer. coming in hot with more great questions. When you attend shareholder or board meetings, they'll be called board meetings. What insights or questions do you look for? What's your approach? What's your approach to board meetings?

I'm sure you're doing some boards now. Yeah, I don't take board seats. Even when you get to 10%? Don't you need to? I do not take board seats. I've got a couple companies where I'm deep enough and I own enough that they kind of treat me like a board member, but I'm got it.

So do you go to some board meetings then? Yeah, I do. I do sometimes. What's your approach to being productive in a board meeting? What, if you're an angel investor now and you get invited to be on a board, what's productive in a board meeting versus unproductive? I mean, I think the most important thing is you got to remember that, like, dealing with investors is a cost because you've got to educate them.

And so the more you can get up to speed when you show up to the room, you know what's going on and you've read the materials and you're prepared. I mean, that's just like, it seems like such low-hanging fruit, but having seen so many board meetings where the VCs did not do that, it's like, that's just like, it's just critical. And I think, I think the second thing to go back to what you said earlier is just, you know, it's not about you telling them what to do. It's about you asking them what they're seeing,

you asking them how you can be helpful, you asking questions, and those questions can go a long way to helping them understand the truth. Because, I mean, it's, it's, we're so removed from having our hands on the metal compared to the, it's like literally like somebody sitting in the stands yelling at, you know, Lewis Hamilton when he's running the race telling him how to drive. You just can't do it. Like, you can't hear you anyway. They don't care. And like, you just got to try to stay out of the way and be as useful as possible without getting in the way. Here's my three tips. Number one,

I think it's important to be relentlessly positive as a board member. You have to be calm, positive, even in the face of problems. You are supposed to be elder statesman, unflappable. I come to these things with the seriousness of, hey, you know, a general or a general who, you know, is now working up on the hill, maybe not, you know, a sergeant on the front lines. But I like to be relatively positive. Whatever challenges there are, we can face them if we define the reality here by looking at the truth. And we can all be in this together by being candid and let's stay positive. Whatever the problems are, we'll get through them, even if that means shutting the company down and then starting another one in a couple of years. Number two, you said this yourself,

Zach, be prepared. You should have used the product, read the materials. Sometimes I have not been able to read the materials and get on a call. I'm always honest about that. But, you know, be as prepared as you can. And then I would say, three, be concise in your feedback in questions. Do not ramble, do not have a question on everything. Be concise. What I do now is I write my questions and Now that we're in the age of Zoom, I write the questions, and I'll just put minor question, and I'll put it in the chat room. So I don't disrupt the flow of the founder. And I tell the founder, I'm going to put some questions in the, if I have any questions,

I'm just going to put them in the chat. If you see them, you can answer them in line or you can wait. And then I take notes. And I take notes on Notion, and then I'll cut and paste them into the chat. And I say, here are my notes from the meeting. These are things I was wondering about. And one of them might be. I saw we had a monthly chart and we had our yearly.

chart, I would love to see a nice quarterly chart. Boom. All right, let's get a couple more questions in here. Follow up from Zen Profit, the Zen Profit and Bob G. tag team. And this is like Stockton and Malone here. This is like two of our greatest Nody members. As a VC, is it better to stay off the board from a liability standpoint? What a great question.

What do you think, Zach? I don't think so. I think it's just a question of your business model. If you're in the business of owning a large percentage of the business and being able to spend a huge amount of time with each business. And I think, you know, the VC that I have the most respect for that I've heard talking about this is Peter Fenton over at Benchmark. Like when he talks about his board work, I mean, he talks about it the way a founder

talks about being a founder. I mean, he's just deeply in the game and he's there and he's just like, it's all he thinks about is all he does. And his business model is, you know, once or twice a year, he'll find a company that he can get that level of engagement with and he can take him to the next level and be a superstar on that team. Whereas my business model is more about a larger number of

bets across, you know, less clear opportunities. I don't have to be a thousand percent sure this is the right thing. I can be 75% sure because I've got enough of them. I've got a very different diversification. And they're taking board seats just wouldn't pencil. But it's just

what's best for you. Yeah. It's a great question. Here's some things to know. Very rarely does a board get suit. A company can get sued, but, you know, piercing the veil, going down to board members, it generally does not happen. If it does happen, all companies have something called directors, uh, and officers insurance. This provides a massive amount of legal, uh, resources to those board members. So if they do get sued, they don't have to pay for their own lawyers. So now,

you know, you have to have a company get sued and then they have to go after the board members. And then you would have to have the insurance not be online or, you know, unless you're committing some really crazy self-dealing, or you've really done something crazy, I think you're going to be just fine. But you can get sued. It does happen. It just happens very infrequently.

But it is some liability. I like to be on boards. I have a different approach than Zach, which is for our big winning companies. I like to have a seat at the table because I like to be super helpful. And I made this commitment that some of these companies, you know, a beat or grin. I want to be there when they

ring that bell, you know, at the stock exchange. And if TK was still the founder of Uber when they went public, I would have been there. He was going to have me there. He, in fact, invited me to come to have dinner with him, but he wasn't allowed to go up and ring the bell because of things. I wish I thought that was, you know. I was such a travesty.

I thought that was terrible. I didn't mean to do that, but it was good. It was a Travis T. Yes, it was. But it is what it is. We move on. Okay, Christian, Jay Hoffman. We're going to wrap this up, I think, with two more. Christian J. Hoffman, and thank you so much to Zach. Let's everybody give a thumbs up for Zach and everybody follow Zach Kolias on Twitter. Let's get him like a couple of hundred followers. Let's give a thumbs up for your squad. And if you ever, one of the greatest investors I've ever worked with on your team, that's Zach. Get in there

and email them. Thanks. Might be overplaying it just a tad, but I'll take it. Listen, you and I, we've got to pump each other up so that we can get this deal flow. Christian J. Hoffman says Great show so far. Can you talk about current seed stage valuations? I see, I see currently valuations of 20 to 30 million for stage companies. What is too expensive these days for US-based early stage sharps? Thanks for narrowing the field, Christian. What do you think, Zach? We are seeing these $30 million valuations, maybe sometimes even higher for a seed stage company that's before Series A, you know, and they basically have a product completed, maybe a couple of customers, or maybe not even product and market. What do you think about these valuations?

I mean, the range is pretty broad. I mean, I just did a deal, seed deal, just a team, founder that we had back before. We had a successful exit. So, you know, somebody we'd made a good amount of money with before. And all of the previous investors just re-up when it was, you know, 40 pre. Okay. But what you said there is important. This is a seasoned founder.

Seasoned, season pro. I mean, this. And he's going for the moon. Like, this is, this is, they're shooting big. and so I felt very comfortable paying that price. And then I just did one at 12 free with a strong founder, but last experienced as a Silicon Valley founder, no big exits, interesting market, relatively unclear.

And then everything in the middle. But yeah, I mean, 12, 18 months ago, prices would have been half that. So we've seen some pretty significant appreciation in pricing. But the upsides, you know, we have, you know, companies going public for $10 plus billion, so that those are up even more. And so as long as, and when you think about it, the way I think about it is when I invest,

we're looking 10 years out. So like I invest today, and the exit is not today, it's 10 years from now. And so if an exit is a multi-billion dollar exit today, in 10 years, it's going to be even significantly higher. And if you factor inflation into it,

it'll probably be even more. And so I feel pretty comfortable that pricing has gone up, but it's still reasonable relative to the outcomes that I'm expecting. I mean, I think this is a great answer. I don't have much to add here other than entry price does matter, except in the case of a serial founder who's, you know, can command a higher valuation two or three times what a new founder can. I think the valuations are going up because the exits are going up and the opportunity is going up.

So if we used to invest that four to 12 in the early stage, if it goes up to 7 to 20. Is that such a big deal? Probably not. But if somebody wants 30 million and their product's not in market, it really is no reason to invest at that point in time as an angel in my mind

because they will be raising more money when they get their product to market and when they get to a million dollars in revenue, they're not going to get more than 30 times or 40 times that number. In other words, their valuation when they get to a million in revenue will be 40 million, maybe 50.

And now you've proven a massive amount that they got to a million of revenue. Am I directionally correct there, Zach? Absolutely. Totally agree. So you can get to know the founder and say, hey, this isn't a fit for me right now, but I'd love to be in touch with you. I'll use the product and you say, you know, put on your calendar to reach out to them in six months.

Pretty easy. Okay, here's our last question. Kind of a weird one. So I'll expand it. Beard script says, how should you handle a large competitor getting weird? Weird defined as offering you a job and then infiltrating your company. Oh my God. This is crazy.

undermining you, et cetera. How should I read this? So I'm going to just say, okay, they offered him a job, I guess, and then maybe try to infiltrate the company. And, you know, just some general thoughts, Zach, on if you're attracting a ton of attention from a big competitor, what do you think? I mean, I think everyone forgets that business competition is a war,

and they're trying to steal your milkshake. And some people are going to play fair, and some people aren't going to play fair, but you're still at war. and you've just got to fight. And there's a lot of ways to fight back when big companies do stuff like that. You know, oftentimes I think it's your advantage of your small company and a big company is doing all sorts of nefarious things.

Go public. Be loud about it because it's very difficult for a big company to respond to a loud, like competitor who's pointing out all of their dastard deeds. And it gets you a lot of exposure. The press loves those sort of dog fights. And so you got to be, you know, oftentimes you've got a counterposition against the way that They're trying to to fuck up your business. But that's what it is.

It's war. And you got to fight it. Yeah. Please remember, this is a war. And you do not want to, you know, if you're, if you're the underdog, fight up. You never fight down, but you will fight up. In other words, if I'm competing with launch accelerator with Y Combinator, I was very clear, hey, we're a side. We have seven people.

They have 200. You're going to get lost at Y Combinator. It's going to be a more intimate experience. at launch accelerator. So I would fight up and criticize Y Combinator and mix it up with them. But I wouldn't, if there was some new, you know, accelerator and they were throwing rocks at me, I would ignore them. So you ignored down and you engage up.

So if you're 37 signals, remember hey.com was getting into it with Apple. They were fighting. And Apple's like, I don't even know if Apple ever responded, which is the right move for Apple. but if Apple wants to get into it with a peer like Facebook, you know, they'll even do it in a more subtle way. Like, we don't store your information and we,

you know, we'll obscurify your email address and put you through basically a VPN or a, you know, a relay so nobody can track you. And we're going to stop tracking of your phone. That's how Apple fought with Facebook. They never mentioned their name.

They just said, we're the privacy company. We don't make money from advertising. We think that's evil. That's like high level kung fu. here you're not it's not even worth mentioning Zuckerberg or Facebook's name so anyway this has been great Zach you're awesome thanks for spending an hour you're always so generous with your time and to the audience and all these great notie members give a thumbs up subscribe hit the bell so

you get the alerts get in there because the notie NFTs are coming and I need some feedback what do you think the noty NFTs should be should it be you come 10 times you get one maybe you distinguish yourself with great questions, you get one, and then maybe we have to give you a nickname, and then we make a graphic, and then we put it out there, we gift it to you, and then, hey, listen, maybe you can resell it down the road. But this weekend startups, Nodie Gang NFTs are coming if somebody will do the work and come up with a good idea. You can follow Zach Kolis. It's C-O-E-L-I-U-S. Zach Kulles, my guy. Thanks so much for your time.

My pleasure.