This Week in Startups - Ask an Angel with Zach Coelius: early-stage valuations, product roadmaps, startup killers, Twitter gets its groove back & more | E1179

Episode Date: February 27, 2021

FOLLOW Zach: https://twitter.com/zachcoelius FOLLOW Jason: https://linktr.ee/calacanis

This Week in Startups is brought to you by Our Crowd helps you invest early in pre-IPO companies alongside professional VCs. If you're interested in investing, you can join Our Crowd for free at OUR-C-R-WD.com slash twist. And Fiverr 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 Fiverr business free for the first year and save 10% on your purchase with promo code Jason. That's F-I-V-E-R dot com slash business and use promo code Jason. Hey, everybody, welcome to another episode of this weekend startups.

it's your favorite episode format, Ask Jason. But we've punched it up and we've made it twice as good because we brought back everybody's favorite early stage investors, Zach Collius, who just tells it like it is. He's incredibly candid. He takes it to a level of candidness that maybe even is more candid than me. Welcome back to the pod. Zach. Good to be here, buddy.

All right. So let's do it. We really want to help these founders. We want to give them really great feedback. And I want to go with this first question. It was number two on the list, but I thought this was a great question. My startup is a software consultancy that is trying to transition from a service-based organization to a product-based one.

What are your thoughts on how to position ourselves to begin generating reoccurring revenue? What a great question, because we see this all the time, right, Zach? Somebody's got a service business. They're making $500,000, a million, sometimes $5 billion a year. And no VC wants to invest in a service-based business. They don't grow. They grow slowly. So what are some ideas you might have?

I have my own, but I want to get your ideas first. The best thing about Silicon Valley these days is that there's just tremendous information and knowledge out there about how to solve every problem you possibly can imagine in startups. And like when we started, you know, you were a few weeks before me, maybe a few years. But when we started, it was a little harder. Like you kind of had to figure it out on your own. But in this particular question, there's just been tremendous work done by Steve Blank, Eric Reese, and a bunch of other great folks, lean startups, Four Steps to the Epiphany,

and there's a great book called Monetizing Innovation. And it's all about basically doing customer development, going out, talking to customers, figuring out what their pain is, and then figuring out what they're willing to pay for that pain. And the trick is, it's not so much building, it's asking the right questions to find the thing that they really want solved and they're desperate to give you money for, and that you can actually solve for them. So the great thing about a services business is you're in there with those customers and you can ask them, hey, what do you need me to fix? What software do you need? And find something that's not being solved right now and start building. This is such a great observation. If you're in a services

business, you are servicing these customers already. So you already have the ability to do a listening lab, to do a customer journey, to sit there and just ask probing short questions, like show me how you do that. And then they say, well, what do you want to see? And you say, well, just walk me through it. And you give very like broad, simple, empathetic questions. And you say, well, what takes the most time? What takes the most time?

And they'll tell you. And here's a super hack. There are some Swiss Army Knives tools in the world. And they were made in the 70s. One of them is called the spreadsheet. the other one is called email. And when people don't know what to do, they default to using email in a spreadsheet,

email for communication, a spreadsheet for organizing stuff. So how many times do you talk to a salesperson and say, hey, who are our customers and how much are they paying? And they're like, okay, let me pull up that Excel or Google sheet. And you're like, really, that's where you're keeping it? And it's like, yeah. And then you say, oh, okay, and where's the project out? And they're like, okay, let me pull up that email.

and it's like, okay, you're doing project management by email, and you're doing CRM and your sales funnel in a Google sheet. Whatever's in that Google sheet will be, unless it's a model, like an actual financial model, does not belong in Excel, but people use it for their to-do lists. And then by magic, people made a to-do list, and then they made project management software like Asana. So if you're sitting there, just a quick way is to just look in their goddamn email box and look at their list of spreadsheets that they opened. Last 10 spreadsheets, it might tell you the story you're looking for, Santosh. And I think your point, Zach, about what is painful and then what would they pay to relieve that pain?

So, so critical because sometimes people have things that take time, but they actually don't want to avoid that pain. I'll give a silly example. but when we worked in offices, people would say, oh, it was like a box. It was like a room, four walls, and you would go there

and you would do work in it. What? To other people, you work, yeah, it's really weird. Not in my kitchen? No, imagine like you and I

went to another kitchen. Imagine you and I went to like a kitchen design just for us to do work in. That's called an office. Anyway, whoa, people used to have horses back then?

Yeah, yeah. You had like a horse carriage next to the kitchen. slash off. Okay. But people used to say, I want to get a cup of coffee and they'd say, okay, well, there's coffee right there. It's free. And then people say, you know what, that coffee's free. I'd like to go pay $4 for a coffee and take 30 minutes to get it. And you'd be like, wait a second. We have this beautiful one touch machine, but you want to spend $4 of your own money when you could

have it for free and you want to waste 30 minutes. And it's like, nope, they, what they really want to do is get the frack out of this office for 30 minutes and get some. fresh air and maybe socialize and see other humans. So what that $4 represented was a break. They wanted to take a break and they wanted to go for a walk. So sometimes people would not, they were paying for that service. They were paying to not drink the coffee in the office and to get out of the office. So you just got to remember, sometimes the incentives might not be what they seem. They might be saying they're going to get coffee, but what they might be doing is something else. So just be careful that you'll know if they'll pay for it when you actually get their credit card, right?

And that is the moment of truth. Right, let's take another question. This one is from Leah. And she says, I'm a co-founder in South Africa. We have a lot of fans in South Africa. And we're a pre-seed company gaining traction with our MVP. So to translate that pre-seed is very early funding. Let's call it under 250K.

MVP, minimum viable product. The least amount of product you can build to accomplish the task. How do we calculate our valuation? Who do I speak to? Or is there a place I could go online in order to do this? Right. So you just go to Zach's valuation calculator.com and you just type in your age, your birth date, your zodiac sign, and then it tells you. I mean, let's be candid.

How does one do an MVP-level company's valuation in South Africa? At best as you can tell, how should Leah figure out what her valuation? is. I think the most important thing to do is to realize that the startup valuation is a totally disconnected number from anything that you would think of as a normal business valuation. So like if you value a business on Wall Street, well, actually, it used to be when we value business on Wall Street, we would look at their revenue, cash flows, profitability, growth rates, and we would basically analyze the metrics of the business to figure out what it was worth. Started valuations have nothing to do with that whatsoever. The key to understand that is

a sort of valuation is that it is a question of the probability that you will get to be really, really, really big. So for instance, like when I invested in Cruz, like we thought that it could be a multi-billion dollar business. And we thought at the time that there was maybe a 10% chance it would end up being a multi-billion dollar business, give or take, great founder, huge market, but it was a really hard problem. And the valuation that came out for the series A, that's after it had already gotten pretty far, was a bit less than $100 million. And it's functionally based on that probability of achieving the size of the upside.

So the real question you're going to have to figure out when you talk to investors is how big is the opportunity that you're looking at and how much traction do you have? For instance, if your MVP is growing 100% a week, well, that's a lot of traction. And if you've done this before and sold a company for a billion dollars, well, there's a high probability. You'll probably be able to do it again. So you'd end up with a much higher valuation. whereas if your MVP is growing 1% a month and you've never done this before, much lower probability

and you'd end up with a lower valuation. What's the right number? The only way to figure this out, unlike Zach's magic valuation calculator, is to go talk to professional investors like Jason and be like, hey, I got this startup. What do you think is worth? And they'll give you a number and then talk to enough of them and you'll end up with the proper valuation. Yeah. And so I agree with all of that.

And just to build on it, it's an excellent answer. There is a historic range in your market. So in South Africa, I'm going to guess the valuation of somebody with an MVP who doesn't have any revenue and maybe has a couple of people using their product, might be two, three, four million. That might be historically what's happened. So VCs know what's historically happened. And if you're in that zone of what's happened before in the last year or two, they will

probably feel comfortable investing. And if it's outside of that, they might feel comfortable investing if they see other things. So what are those other things that could make them go for a higher valuation? So I'll build on this question and just say, okay, how do people get outlier valuations or high valuations? Because I think it's kind of implied. Founders want to get a good valuation. Valuation is largely a function of the competition for the shares in your company.

It's a marketplace. It's capitalism. It's a free market. You go meet with 150, you email 150 investors. You get 30 meetings. And of those 30 meetings, let's just say one out of four. eight decide to do a second meeting with you and they start talking about valuation. If you can get two or three of them put a term sheet and now you've got a market for your shares

in your company and you can say, listen, we got three or four term sheets. Here's the terms we're looking for. And those terms could be 10% more than the highest valuation and you might actually be able to work a marketplace. The problem is founders get an indication that one investor likes them, has taken a second meeting and says they're going to do a term sheet and they stop working on the fundraising process. because 99% of founders would rather build than raise money. Then there are some unique set of founders who are obsessed with their valuations,

obsessed with raising money. And that can be a negative signal or it can be a really superpower, depending on how much you put it to use. And they optimize for a higher valuation and they get it. And so if valuation is a function of competition, you need to have people competing, not one. One is not a competition. One is you're going to be dominated.

But when you get to three term sheets, I'd say you've got competition for your shares. And then what determines that competition? Well, having three people who want the same thing. It's not magic here. There's one of this item left and there's a competition for it. On the margin, your track record can increase your valuation significantly if you've taken a company public, if you sold a company, if you failed but did a notable company or one that was loved otherwise, you could get a much higher valuation, two, three, four,

five times higher than what would be market. And if you have customers who love you and your growth rate is going well, that could also goose your valuation. Anything else you can think of that I didn't mention that could increase your valuation and create an outlier fundraising, because I'm building on theist question here, of how to get like a great valuation. So I'm adding a question, how do you get a great valuation, a high-end valuation, a top 20% valuation?

I mean, the biggest crazy outliers tend to be companies that get press before they get capital. So, like, if you look at, for instance, Clubhouse, recent crazy valuation that everyone got excited about, you know, before they had even raised that round, that $100 million round, they were getting tons of press and tons of hype and the internet was going crazy about them. So whenever you can generate that validation as a result of either PR or people tweeting and writing about your product, that can lead to real outweller. value. Wow, such a great observation. Also, if you have a waiting list for your product, that does create a similar impact, which is buzz. We can put this all under buzz. And the buzz here would be either you're on the wait list or somebody notable is using the product. And remember, Clubhouse is still in private beta. I think you still have to be invited to it. Superhuman. You still have to be invited to it. Both of those got really great valuations and they had

influencers on the platform before it. We were lucky enough to be investors in Superhuman. but not a clubhouse. So I think we, I think we, we nailed that question. We really, crushed it, bro.

I'm giving us a lot of credit on that. Do you ever wish you invested early in some of the best performing IPOs of 2019 and 2020? Well, our crowd investors did invest early in many of these awesome IPOs. With our crowd, accredited investors can invest directly and easily in startups early before they IPO and before they get bought.

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slash twist. I recently wet my beak and placed a little bet on Sciabra. This is a company that uses AI to uncover disinformation and expose fake news on social media. You can go open an our crowd account for free right now. OUR, CROWD.com slash twist. Go ahead and open an account at our crowd for free. OU. R-C-R-C-R-O-W-D.com slash twist. Here we go. Some live questions are coming in. Jordan BMX on Twitter asked,

what month-over-month growth usage are angels looking for when investing in a startup that does not have the ideal-looking founders? Okay. I'm not sure what ideal-looking founders is, but I'm going to guess you mean underrepresented founders or maybe older founders or maybe founders from Middle America, but not Stanford Bras or people who come out of Google or Facebook as a lot. alumni. So what month over month growth or usage are people looking for in early stage? We can open it up from angels to also seed. What kind of growth would you be looking for?

Week over week, month over month and duration. We'll make it really specific. First of all, I would say I love founders that don't look like the Stanford sort of like classic sort of founders because they tend to want it more. They work harder and they're a little less presumptuous about how they approach the process. Less entitled maybe, yeah. Yeah, I'm happy to pay a higher valuation, you know, for what I think of as great founders. The founders that I'm, you know, it's all about how hard you work and how much you want it. And often when you don't come from having success handed to you on a plate by your parents, you want it more. So those folks are the ones I love.

But generally, you know, we're looking minimum at, you know, 10 to 15% a month would be sort of like a low. growth rate and, you know, 20 plus, we start to get excited. And, you know, I, like, for instance, one of the companies I invested in mud water is a mushroom tea company. I invested in in them when it was, you know, $20,000 a month in revenue, but it was growing 100% a month. And so when you look at 100% a month, I went in, I don't know anything about mushroom tea. I knew the founders, but 100% a month, I'm like, oh, I'm in. Done. Absolutely. How could you not be in when you see 100% growth a month, we actually will look at weekly, monthly, quarterly growth at launch accelerator when we're accepting companies. And we like to look at all of those. And we know it's going to be spiky.

We know there's going to be up and downs for founders. So just to put that out there, we would look at a blended week over week for a consumer company at 5% a week. Five percent a week is more than 20% a month. So maybe it's 25% a month for a very nascent product. So if you have a very nascent product, so if you at 1,000 people this month or 2,000 people this month or this week. Can you get it to? Can you add 50 people next week? Can you add it two or 300 people a month? That means there's something going on here because you also are losing customers who are disinterested or we're not an ideal customer. So net net, it might even be a higher percentage growth of new customers because you do have people churning. And for a marketplace or a D to C product or SaaS, yeah,

You definitely want to see 10% minimum month over month. And founders work on everything I find, but growth. They find everything they can do but grow. They'll add the 17th feature that nobody asked for. They'll go speak at seven conferences. They will start their own rolling fund on their side. They'll do a podcast. They'll do anything but grow, the core business.

And I even fall prey to this in my career. And I've gotten laser focused at launch at just telling people, I want to see things grow 10% a month. If we're not growing 10% a month on something, I want to know why we're still doing it. So if founder university or the accelerator is not growing every year, every month, every quarter, why are we doing it?

And it's like, you know what? That kind of created a North Star for us inside of our own organization. And the syndicate, as an example, has been growing 100 users a week, week in and week out, to the point at which I told people, we don't need to grow the syndicate anymore. Let it grow organically. What else can we grow?

because all of our deals are now two or three X over subscribed. We'll take another question from the live audience since they're here. George F. Clay on YouTube asked, if you can afford to bootstrap, is it always better to use your own money? Yes or no?

So I love how you let me take the easy little hanging first shot at it so that you give yourself a higher bar. You have to like answer them. I mean, I could, if you want, I'll take it. Anytime you want me to say take it first, just say take it first.

You take that. No, I like it's easier to go first because, you know, I can just give the obvious answers. You have to, like, come up with the complicated ones. That's true. I mean, look, I think the secret to bootstrapping is it's really a question of two things. One, if you have the resources to bootstrap and you're in the discovery stage,

you're still figuring things out, you haven't yet hit the accelerator, and you have the ability to, like, explore with your own money, it's always better. Because whenever you have to deal with idiot investors like me, it's a waste of your time. your energy and your focus. You should spend that on exploring the space and figuring out where the opportunity is. The more you can focus on being close to the metal, which is your customers and a product, the better you're going to get to the right answer. Once you get to the acceleration part of the business, you've found the gold mine. There's gold pouring out of the ground and you've just got to dig faster. You've got to build a railroad. You've got to hire people. Well, now the resources

is required, that bar becomes much higher. If you're rich like Jason, you can afford to do it yourself, go for it. The longer you can not deal with idiots like me, the better. But at some point, it's time to hit the accelerator. It's time to ram that throttle forward. And that's when really, that's when raising money starts to make a lot of sense. And you need only look at the people who have the resources to do this. Elon started SpaceX and then funded Tesla himself before going and getting money.

Evan Williams after doing blogger funded Twitter, Odeo, his podcasting platform that was way too early. But he was right. He just gave up to do Twitter. So if he had just done both simultaneously, he would have had two multi-billion dollar tens of billions of dollar companies. And he did media himself first and then he brought in other investors. And I think Zach nailed it. The amount of meetings and emails, as I've said over and over again, to do a proper fundraise, you know, you're talking about tens of meetings and hundreds of emails or introductions. So

hundreds of introductions, dozens of meetings, a handful of two or extra second and third meetings. I mean, all of that could be done in product discovery to dovetail with another question we got earlier. You could actually spend that 300 hours of a fundraising process. And a fundraising process is probably 300 hours as best as I can tell. Those 300 hours, I mean, what if you spent them? You know, a hundred of those hours on customer discovery, a hundred of them on product and a hundred of them on sales. I mean, your growth rate would be 20 or 30 percent and then people are going to throw money at you.

So going to investors early, it almost universally results in, okay, come back to us when you have growth or come back to us when you have five customers. So you're kind of going to an actor and saying, I want you to be in my movie. It's a science fiction movie. And they're like, great, can I read the script? And you're like, yeah, I'm going to have that next year. And they're like, okay, you want to come back next year? because why are we having lunch?

And they're like, well, I'm just really excited. It's like, do your work first and then bring the script. In this case, the script's the MVP. All right, another one from YouTube. Enrique asks, what's your process like from first meeting to an investment decision? What a great question. Go ahead, Zach. It's different every time.

Sometimes I have invested five minutes into the first meeting. Sometimes I have the first meeting and I'm like, this person's smart. I like what they're doing, but it's not quite at the proof point that I'm looking for. Let me try to be helpful. Let me introduce you to a customer. Let me introduce you to a partner. Let me try to be helpful. And then I try to hang around the rim and watch as they progress and see them solve problems

and learn from their path to basically create a line for me to invest in. And so it can be anywhere from, you know, five minutes to five years between the first meeting and getting to a yes. Fantastic answer. For me, I have a team now that does first meetings. And so I have removed myself from what we call the introductory call. And we call in an interruptor call because it's to introduce what you're doing to somebody in our firm and to introduce our firm to you. So in the early stage, we have so many people coming at us that we do 50 introductory calls every week right now. We're trying to get that to 100. 50 introductory calls means 20 minutes on a Zoom. You take. tell us about your product and one of our associates or researchers tells you about the firm asks basic questions. If they can't answer the questions, they will bring on a managing director like Jackie or Ashley to join the second call and then I'll be the third call. If something is absolutely fantastic and we have to move quick, we will short circuit that process and I will just jump on the call. So there have been times where, for example, Ruloff from Sequoia just sent

me a company he's investing in and he thought I would be creative to the success of the company if I was involved, I'm not sending them to an associate and then making the media managing director and do it three calls. They were referred to me by a bestie, or if you referred somebody, I would just get right on the call, especially if you were investing. So referred high quality deal flow that's referred by people who we trust, I'll get right on the call. And then we make a very quick decision for the accelerator, which is, do we go to due diligence and make an offer or not? And if we make that due diligence decision where we're going to spend an hour or two or three really going and deeper and maybe talking to some customers, we're going to do the deal unless we discover

something bad and due diligence. So that's our process. I would say on average, three meetings with our team, two or three meetings, and then we make a decision. When did somebody direct with me, I'll make a decision like you do, Zach, very quickly, because that's the nature of the time we're living in. Again, the market determines a lot of what we do, right, Zach? like if the train is leaving the station and like somebody just told us like that's a really great train

like we're chasing the caboose and trying to jump on and throw 50k in the back of the in the caboose we're like running with a bag we got a duffle and we're just trying to throw that duffel on the back of money train okay next question is i can see that in my brain it's exactly what it's just about me and zach running with our duffles and ruffles back in 2019 our team at launch was pretty small, I'll be totally honest. And when we were having trouble finding founders to attend the launch festival, Sydney, Fiverr's networks of freelancers was there to help us so quickly. We literally hire researchers on Fiverr, I kid you not, and they filled the top of our funnel so quickly with thousands of founders who were based in Australia. We emailed them. We offered them

a free ticket to our event. And our biggest problem in running that million dollar event was finding all the great founders. And Fiver did it for us. And it made it. the event a huge success. So thank you to Fiverr for helping me. Fiverr business brings you the team you need with freelance talent you can count on a dedicated business success manager and collaboration tools and so much more all from one intuitive dashboard. Speaking of teams, did you catch Fiverr's new commercial during the big game? I bet you did. Fiverr ran a Super Bowl ad. We love Fiverr at launch from hiring researchers for our events to designers for our portfolio company's pitch decks. Fiverr has been there to supply experience talent.

quickly. Stop wasting time researching and searching for talent. Just leave it to Fiverr business. Their team of dedicated business success managers are going to help match you with the talent you need for your team. There's no more guessing. There's no more wasting time. You're going to get one year free and save 10% on your purchase of Fiverr business with the promo code. Jason. That's pretty easy to remember. So I want you to go to fiver.com slash business, F-I-V-E-R-R-com slash business. Fiver with 2Rs.com slash business and don't forget to use the promo code Jason so it's free for the first year

and you get 10% off your purchase. Am I allowed? This is Kerthan Dididge on YouTube. Am I allowed to call a successful Kickstarter campaign as a product validation test? Obviously, yes. Of course. I mean, it's one of the best tests.

Come on. Yeah. People are giving you money. You must be doing something. They're giving you money for the promise of a product that you're going to make in the future. Oh, my Lord.

That is some Huck Finn right there, man. It's like, hey, you want to paint this fence? It's really a lot of fun to paint this fence. If you give me your apple, I'll let you paint my foot. Is that Huck Finn or Tom Sawyer?

I'm going to get canceled. You've been using that reference. Tom Sawyer. It was Tom Sawyer. Anyway, there was a, yeah, kid's story about a guy who had to paint a fence.

A kid had to paint a fence. Oh, no, come on. No, no, no. This is Mark Twain. It's a great, great seminal piece of literature. Yeah, it's like, I really get frustrated about that. The canceling of literature was written a long time ago.

Samuel Clemens, right? This is a... Yeah, this is a real name, yeah. Real name, Samuel Clemens, Mark Twain. Mark Twain. Amazing writer. Past in 1910, but the Adventures of Tom Sawyer, a pretty notable work. But I do think you'll get canceled, so be careful folks out there.

Okay, people can cancel me all they want. Yes. I embrace my likelihood of being canceled. canceled by people who disagree with me because, I mean, you can't be a great investor unless you basically are an account of class and you can't be an account of class if you're afraid of being canceled by all of these people who literally want to impress their ideas on the world. 100%. 100%.

Own it on YouTube. As a young and growing startup, we have a lot of product improvements that we believe are inevitable. Should we continue to put off these inevitable tweaks until it's an immediate priority? A bit of a convoluted question. It's a young and growing startup. We have a list of product improvements that we believe are inevitable. Okay. Should we continue to put off these inevitable tweaks until it is an immediate priority?

Okay. So let's just interpret this as how do you prioritize your roadmap? What's a good way to think about your roadmap and to prioritize what's going to be done next? So I think there's two questions they're asking here. One is should you delay? building features that you know you need to build in order to deal with scale. And the answer to that goes back to what you said earlier, which is get the growth.

Focus on the growth. And then once you have the growth and things start breaking, then you can fix the problems that are preventing you from breaking. You can fix the roadblocks that are constraining your growth. But the only thing, as far as I'm concerned, you should spend time and energy on is what features and functionality will improve growth. If it improves growth, build it. And in fact, if a startup is collapsing under its own popularity, fundraising, I mean, instead of just me and Zach chasing the train and trying to throw duffel bags on it, you're going to have 50 people behind you.

So when Twitter had the fail well, people were like, what? It's crashing from that much usage. Oh, YouTube's crashing? We need to invest in that company. If company is getting shut down because too many people are in line and want to buy their hamburgers, like we want to invest in that hamburger, or joint. Duh. In terms of

prioritizing the rest of your features, I just love what Des Trainer says, you know, you can make an X, Y, axis, and here are

features that people use every day, and here's how many people use that feature. So here's the frequency of using the feature, and

here's what percentage of your users use it. So if we were talking about Slack, on Slack, every day, somebody chats,

right? So they compose messages and they read messages. So making it really readable, the design, and making it

really easy to compose, well, if there's improvements to be made in the compose window, make those. Now, there might be a feature like, I don't know, cross-functionality between two organizations. Okay, what percentage of people use that? Well, that could be your high-growth feature in the future. So if you think everybody's going to eventually be using that every day, then you would want to put a lot of time into it.

And something like reminders or a to-do list or piping in the weather, it might be 10% of your users use it 10% of the time. It's not a priority. This is why Zuckerberg is such a genius. He puts so much time into the feed and making sure your feed was so addicting, whether it was on Instagram or on Facebook, that you couldn't help but open up those apps. And he probably did that so well that, you know, he made people addicted to social media, right? Social media actually took that to heart. Everybody uses their default feed so often, we should just keep making it 1% better. And something that gets 1% better. And something that gets 1% better, day gets better every 72 days. So that's just one percent better. This is the magic of compounding

interests. Jake asks, I recently graduated from college and moved to a mini tech hub. I think Miami, Austin, Atlanta. Jake, does anybody care where you actually are? Okay. He's trying to obscure where he is. I didn't graduate with a tech specific degree, but I want to break into the startup industry. Any tips on growing my personal tech network locally? How did you guys break in? Great question, Jake. Go ahead. You take it first. So I first moved. to San Francisco in 2005. I didn't know anyone. And the first thing I did is I started crash in every conference I could find.

So I went to Web 2O. I took the badge lanyar they had without a badge in it. I just put it in my suit pocket. So it looked like I had a neck thing around my neck, but I actually had no badge. And then I just walked around meeting people. And I did it every single conference anywhere I could and just trying to make friends. And the thing,

the secret to Silicon Valley, and I think generally in tech, is that you never know who the next Mark Zuckerberg is going to be. So, like, when I first moved here, I was playing poker with the founders of Uber and Dropbox and Airbnb, and they were nobody who's just like me. And if you do favors for those people, and you're like, hey, you guys should hire this guy. He's great. Or here's a customer for you. If you do favors and you don't ask for things, you just give, freely give, pretty soon you'll find you've done a lot of favors for a lot of people who end up being pretty amazing. And those favors come back. And so it's a beautiful ecosystem of do favors, help people, and then lots of value will circle back to you relatively quickly. Well, I don't know about quickly, but it will come back.

It'll happen quicker than you think. I, too, would play cards with, you know, my friend who had just left AOL where he was managing ICQ's demise. His name was Chimoth. And my other friend was starting a company called Jeannie. He had worked at PayPal, and that was David Sachs. And, you know, that is what happens. You just be a friend to people. You be of service.

You help people out. And you build and build and build. And, you know, speaking of Travis from Uber, somebody said to Travis and I was overhearing this, like, you got lucky, you know, just putting the, you know, 25K into Uber or whatever it was. And Travis stopped him and said, no, Jason making all that money off of Uber was the culmination of how helpful Jason's been to be for a decade. and he deserves more than every penny he's made in that investment because you don't know that Jason helped me on my first company, my second company, and has been friends with me for over a decade. And that's the long game you're playing as a young person. Play the long game. And, you know, for every, any time you can help somebody help them and don't get bitter,

when you watch everybody around you get successful, study why they got successful, and then help them even more and then figure out how to get on cap table. The way you get rich in this world is by, I think, as much as I can tell, either you get lucky, which means you were born into money or won the lottery. Putting that aside, since those are not in your control, the other three ways is by being the creator of a company, a capital allocator, or a virtuoso, which I would say is just somebody who's so good at something that they get overpaid for it. And if you look, Zach and aren't enough virtuosos, well, we're capital allocators.

Speak yourself, man. Speak yourself. Whatever. What are you a virtuoso? I'm asking questions? Answering questions on this? You are, actually. So maybe you're a virtuoso had advice, but...

I think you're virtuoso. I was going to, like, I don't know. You're the hardest freaking man in show business. I don't know anyone who basically has made as much money and it's as much success as you are. That's still cranking away, like building, building, building. I like to build. I like to work hard. And you know what?

It just happens to be that my skills, my superpower, talking... is you are a talker. That's it. My superpower is talking. When I was a kid, they told me to shut up. They said, sit down,

shut up. And now people are like, stand up and do a keynote at my event. Can you bring the besties with you? And by the way, folks, just as a side note, I've been busting my ass

on this podcast for 1,200 episodes. And when you come to me and say, you love my podcast, I assume you're talking about this weekend startups, not all in. All right? The top 10 tech podcast, just because I have number one

and number 10, doesn't mean that number 10 is not my life's work. I know how people ask me, can I come on your pot? I'm like, yeah, great. And they're like, oh, I want it to be on All In, not this week in startup. So I'm like, God damn it. There's no guests on All In.

So get that out of your mind. I'll go on this weekend service any day of the week. I love it there. I feel at home. It's like a cozy, happy place. You don't want to talk about politics or Trump or the insurrection or vaccines. Terry asks, what is the single most detrimental thing to a startup? Lack of focus, lack of skill, inability to recruit talent,

or something else. Wow. What a well-structured question, Terry. You're forcing us to pick one of these three or come up with our own. Focus skills or inability to root-cat talent. So lack of focus, lack of skills, inability to root-cownels or something else.

Wow. What kills startups most often? What's the most detrimental thing? Hmm. Hmm. What do you think? It's not listening. Not listening.

is to be a good listener. If you go to your customers, you ask them what they want, they will tell you. And all you got to do is keep asking them until they tell you something that you actually can build. And then when it starts working, you listen to them. They tell you what's broken about it. You fix it. And when your employees get mad at you because you're not doing something right, you fix it. And when your investors say, hey, we need to do this.

You listen, you fix it. If you can just listen, you will succeed. such a great answer. I'm going to say for me, focus is the killer of existing startups. So I'm taking this from the vantage point of the startup is started. I'm assuming the startup is started and has some level of basic product market fit. So I think Zach's question is pre-product market fit. So I think that's the right answer. But I think the right answer for a startup that has product market fit after doing that listening. That's very, very hard for founders to do sometimes. is focus.

I've got to tell you, so many times I see a startup hit $100,000 in revenue, and they're like, what other bullshit can I do other than add a zero? And then they get to a million in revenue and they do the same thing.

Sorry, take that out. I don't want to curse in the pot. Tagged. They do the same fracking thing. They get to a million and they're like, what can I do that isn't adding a zero to my revenue? And then they get to $10 million. I'm like, we got to 10 million.

We're thinking about building a hardware product. I'm like, oh my God, you built software to 10 million. It's printing money. You have $5 million in profits. Now you want to do hardware. Is there anybody else who wants this goddamn software? Can we get to $100 million? Because then if we do, you're billionaires, and I just made $100 million, and we're good.

But you want to divert all this into another product? Please, for the love of God, if you drill and you hit oil, keep drilling. Do not dismantle the rules. rig. This is a message to founders. It's so hard to find that oil. It's so hard to strike oil that when you do strike it, you have an obligation to all the other founders who came up with no oil to keep drilling. Because when you lift up your drill and go try to find oil, there's seven other founders who saw you hit oil and they're going to drill your well and they're going to drink your milkshake. They drink it up. It's so true. It's so painfully true. It's what is it about? It's

this ADD, ADHD that we all have, that we hit some success and we stop. I hit success in early stage stortem. You know what I did? I went from 10 a year to 20 a year to 30 a year to 50 a year and now 100 investments a year. I did more investments in the first last year than I did in my first six years of investing. Put more capital of work and did more deals. Next year, I want to do more deals than I did this year.

It's pretty simple, folks. You figure out something you're great at. You figure out something the world needs and you just do more. of it. Tesla has made the model S, or they made the Roaster, the S, the X, the three, and then I think the culmination of all their work is this masterpiece, the Y, that if you buy the model Y, you cannot, cannot drive any other car, I don't think ever again. Matt Rode on YouTube asks, with 15 plus angel investments through syndicates, what is the best way to start getting your own deal flow?

Someone with a non-operator background. Jedi. Are you not? investments you have done, but face fader you must. Training you must complete. All right. Zach, what do you think? Got the 15 investments through syndicates and he wants to get on deal flow.

It's a good. This is good. I like it. I like what you're doing. You built the foundation of 15 investments. You got your logo page. Now what? I think it goes back to my advice generally for success in tech.

You got to do favors. You got to be useful. If you're like it did, day cash is commodity. So like just being one more idiot with a checkbook showing up asking to get on the cap table does not get you on a cat table. You got to be the guy who they want on the cat table because they think you're going to make their company more valuable above and beyond your money. And so the only way to get that is to have proven that you're useful. The only way to prove that you're useful is to be useful. If you're constantly going out and being helpful, people are going

be like, ooh, that person's awesome. I want her on my cat table. She's crushing these other poor tools. 100%. So said another way, look at those 15 angel investments and say, what have you done for them lately? And email every single founder of those companies after you've read their latest update, after you use their product and said, and looked at their competitors products and spend

an hour on each, that research and say, hey, we'd love to catch up on a quick Zoom or just wanted to let you know, I noticed that you're hiring for these three positions. And I saw these other job descriptions of your competitors or I saw this other job description. And I saw this other person on Twitter. I wonder if they might be a good candidate, right? You're just trying to look at what problems they have and how you can help. And that is how you can be most helpful. And there's a million ways to be helpful.

I mean, even just taking a founder to dinner, going for a hike with them and talking and being there to be a warm ear for them to share with and feel heard. It's a very lonely job sometimes running these companies, correct? Yeah. So I'll give you another example. I'm an investor in a new Gen Z dating app called Snack. It's like TikTok for dating. And one of those, yeah. One of the investors through my syndicate is literally spanning it out to all of her friends. And it's like turning to be a huge generator of new users for snack. And Zach is growing like crazy. But this woman is like adding a lot of value. And I'm going to make sure the next time that basically she's. Can I get a, can I get an intro to snack? Founder? Can I get an intro to snack founder? I'd like to get in on that. And it's Kim Kaplan. She was one of the founders of plenty of fish, which they sold for like Oh, yeah, of course. I remember the plenty of fish guy. He just made this incredible simple $30 a month or $20 a month thing. So go ahead and Nick, set up a meeting for me with Kimberly. And let's see if I can chase that train and throw $100,000, $100,000 into the boost. Thank you. All right. We're to end on this one, Clubhouse or Twitter Spaces. Will Twitter Kill Substack with SuperFollows? Wow, such a great question. spaces, has the social network already built out, and it's a single app. And there are some really

unique things you can do when you create a space, like share tweets and refer to those tweets and make them the discussion points. So I've done two or three of these, and I'm getting just as many people on my Twitter spaces in week one of using it as I am in month, I don't know, six, seven, eight, nine of Clubhouse. So that is not a good indicator for Clubhouse. I think Twitter spaces, if they stay focused will have the majority of minutes listened to. That being said, I think Clubhouse has a chance at being a $10 billion or $50 billion company because they will be the dedicated space to it. So it could be similar to what happened with Snapchat and Instagram and Facebook where Facebook and Twitter runs, Facebook and Instagram ran away with the number of stories.

But Snapchat has been worth a lot of money. So a lot of times these things don't kill each other. They build a category. Lyft didn't kill Uber. It only made Uber better. DoorDash and Uber Eats and Postmates didn't kill each other. They just trained everybody to order from home. And then the super follow is going to be the game changer of game changer. The ability to follow somebody you love on Twitter and give them five bucks a month to get exclusive content and spaces is going to be.

I think it's going to make Twitter grow five. I'll be totally honest. I don't know if you saw the Superfollow template, but it's gorgeous. And something happened at Twitter, and I did DM Jack about it today and gave them a couple compliments. They got product velocity back. Whoever's doing shit over there is got the product velocity back.

And I am here for it. Any closing thoughts on that? No, it's great. Great to see the clown car back on the race course. Famously Zuckerberg called them the clown car, yes. I mean, look, I, he's like, it's a cloud car smashed into a gold mine. He fell into a gold mine.

Oh my God. He called Everwell. He was a Jack and Biz clouds. Oh, my God. Zuckerberg is savage. He's savage. But no, look, it's, it's great to see innovation. We've got a long way to go.

It's great to see people try new things. It's great to see new ideas. I'm excited for the superfoil for charity. Like, because that would be, that would be something that I would be a great. way to filter basically all these bots on there that are sorry these effing bots on there that just got me nuts put it out unnecessary censorship

Nick, beep. I really just want like a button or any non-real name user just I never see them again like they can be on there. I don't care you can have I'm going to charge a dollar and I'm going to give it all to charity yeah yeah it's like it all goes to charity. Can't wait. Yeah. All right brother this has been amazing. Thank you so much

and we'll see you all next time on this week's service. Bye-bye. Bye!