This Week in Startups - Bootstrapping vs. taking Venture Capital (FounderU) + Ask An Angel with Zach Coelius | E1260

Episode Date: August 5, 2021

In a Founder University segment, Jason compares running a bootstrapped vs. venture-backed company (1:17), discusses 'pegasus' companies (11:09), advises what types of businesses should take VC (23:59), and explains what motivates VCs (33:27). Then Zach Coelius joins to take some listener questions (38:48).

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That's O-D-O-O-O-O-com slash twist. Today I want to cover bootstrapped startups versus funded startups. Now, we need to set some ground rules here and some basic understanding of what we're talking about. bootstrapping comes from the term pulling one up by their own bootstraps, which is a physical impossibility, I think. Bootstraps are little straps on the back of your boots that help you put your boots on. Okay, we get it. Bootstrapping is like, you can pull yourself over the fence with your bootstrap.

It doesn't exactly make sense. But the term basically means you're able to create a company off of either sweat equity or revenue that you immediately start generating. So what are examples of that? A consulting business where you say, I'm willing to charge you $100 for every hour for me to be a consultant to you. Well, immediately, if you sell 10 hours a week, the company's got revenue on day one. It is really easy to bootstrap. And all it requires is if you're going to be in one of these venture capital categories,

all it requires is that you are a designer, a developer, or somehow a business, a salesperson, a marketer, one of those skills. And you kind of need to have all three of those, to be totally honest, to get most of these companies off the ground. That's why a lot of accelerators like Y Combinator or others insist on having a developer on the founding team. If it's a technology company, that's high growth. How are you going to have a technology company that's high growth if you don't have a

developer? You're not in all likelihood. And if it's an outsourced development shop, that's a red flag. Why can't you get a developer on your core team? why can't you be a developer? And so there is a bias against people who are idea people. There's a bias against marketers. There is a bias against idea people or quote unquote business people.

In fact, I've heard many venture capitalists say, business person means no skill, that you have no skill. You're just an MBA with an idea. Maybe you can build a model, et cetera. Now, you do need to have leaders to hire everybody and bring the band together. So I don't necessarily feel that way. But I think a lot of people in Silicon Valley think in order to be successful, that management team, those co-founders at the start need to be developer, UX designer, product designer, product manager.

There's a lot of different names for basically the person who architects conceptually the product, product manager, PM, UX, UI designer, user experience, user interface. Those are the terms that and the titles that people get excited about when they see a team. So if your team was an idea person, like I am, to be honest, I'm kind of an idea person and a marketer business guy, that's fine, but you need to have a collaborator. And I did. Brian Alvey was my CTO and my collaborator on Weblogs Inc. And that made me go a long way and had Mark Jeffrey as my CTO when I did Mahalo and then moved

on to Inside. So having and I was also a product guy. So having a product person, a designer, product person, sometimes those are two different skills, by the way. You can have a designer who just makes things beautiful and a UX person who works on the user interface and how the product flows. But you do need to have that in order to bootstrap because the worst case scenario is you give money to a startup. They hire an outsourced dev firm. The dev firm says, okay, you stop paying us this month. You've been paying us for 10 months. The product's out. And then the product doesn't work. There's no developers to work on it

and the company goes backwards. So one other caveat here is something called friends and family money. Friends and family money is when you are not qualified to get venture capital and you go to your friends and your family, your associates, maybe people you've worked with and say, hey, I'm passing the hat, I'm trying to raise money. And then I'm going to take that money. I'm going to hire people. And maybe you can with that friends and family money kickstart the project to get enough traction to get into an accelerator or to get venture capital. Pretty hard to do. Not everybody's got the rich uncle or rich aunt who are willing. to throw 100 grand or 250 grand at a project, but some people do.

Some people will keep their day job. There's another bootstrapping technique. Keep your day job and build on the weekends and nights. Or go to your boss and say, hey, I'm willing to stay on for two days a week. And I would like this consulting fee. And then the other three days a week, you work on your startup or three days at your current company, two days on your startup. A lot of people will start the flywheel going that way.

Do their user interviews, understand customers, do their research. research, build their MVP, you want to have your landing ready before you take off is basically how I would describe this. So if you're going to take off and go out over the ocean, you better have the landing in mind and you better have enough fuel. Fuel in this case would be your personal runway. Personal runway would be, okay, you've got $5,000 a month in bills and payments and rent and whatever.

Okay, it's going to take you 18 months to build this company out to the point at which you get venture capital. do you personally have 18 times five? Do you have 100 grand, 90 grand, 100, 10 grand with a buffer in your bank account to keep you solvent while you spend a year and a half of your life trying to get this startup off the ground? And I did that. A lot of my startups, I was working as a consultant or I had a little bit of cash from the

previous project in my bank account or I went into debt, which is very dangerous, you know, and not for everybody. But there is risk. You're not entitled to be a start. founder or you get venture capital. You must understand this when you come to the table and decide you want to work in this space. So we talked a little bit about bootstrapping versus VC. If you bootstrap, the longer you bootstrap, then the less dilution you will have to your cap table. So let's pause on that for a second. If you raise money from that friends and family

round and you raise 250K, you might get a two and a half million dollar valuation. You've given away 10% of your company for that 250. Now, if you find a co-founder who's a developer and you're a designer, UX person, you don't need the 250 because you're not going to give it to an outside firm, so the two of you just build it on the weekends or nights. Now you have no dilution. Now, you get the product to a prototype phase and you go to a seed fund or an accelerator and you raise 100K for 6% of your company at an accelerator, or you get a seed fund to put 250K, 500K and let's say, at a $5 million valuation. Well, now you got the product done and you got 500K and you diluted 10%.

As opposed to in the previous scenario, you would have spent the 250, gotten the product to launch and then taken another 500K from a seed fund and diluted another 10%. In other words, you would have given away over 20% of your business. You would have less than 80% and you would have raised 750. The longer you can push out the funding and the more you can accomplish with less, the less funding you have to do. We call this a Pegasus, or I came up with the term Pegasus. So there's unicorns, companies worth over a billion dollars. But a Pegasus for me as a company that flies over, through the wings of bootstrapping, they fly over funding rounds and they skip

funding rounds. And I encourage you to think about how can I grow this business so strong that I can skip my next round of funding? It's very out of favor right now. Everybody loves to raise funding. It's such a hot market in 2021. Valuations are high. Why wouldn't you take money off the table, that's true. And that is a true statement. Money is sloshing around everywhere. People are raising money at very high valuations. I don't blame them for doing that. A lot of advice is situational, right? So I'm giving you this advice based on a certain situation, which would be a normal market. In a hot market, yeah, if you can raise money at a high price, you know, the same example I just gave, if you were raising that first 250 at a $10 million

valuation, it's only 2.5% dilution, who cares, right? So that would be a de minimis amount of dilution, you can go for it. But some companies like Webflow, Bubble, Com.com, Notion have skipped rounds of funding. And we were involved in Com.com and we watched them skip two rounds of funding, three rounds of funding. And that meant our percentage ownership, along with the founders, was very high because we didn't dilute. And then as a company came worth and worth more and more, we didn't have to put up a bunch

of pro rata. We didn't have to keep investing to keep our percentage ownership. And that was amazing for everybody. Every startup needs business insurance and you should look no further than in broker. If you don't have insurance, you fail one of the first steps. Inbroker technology saves you time and money. Prices are up to 20% lower with better coverage than the incumbents. You can go from sign up to quote and purchase in just 10 minutes.

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That's E-M-B-R-O-K-E-R.com slash twist. And while you're there, get an extra 10% off using the offer code. Twist, you guessed it. Okay, let's get back to this amazing episode. So, you can still bootstrap after your... you're funded. You can skip rounds of funding and be a Pegasus, and that's amazing. So at certain point, you can bootstrap and then qualify for funding. So what are the signals that people will see in there? What are the signals, do you think, that will get an investor excited about a bootstrap

company? Very simple. If you have built a modest team of people who are really motivated and who are operating at a high level, we love looking at the team members and who's running the company. So you built a team of three people. You got enough revenue to make $30,000 a month. You are giving that $30,000 or chopping it up, $7,500 each with your three first employees or your co-founder and two first employees, whatever it is. In the mix, you got four people, you got to $30,000 in revenue, and you haven't raised any money. Do you realize how attractive that is to an investor? You're able to hire your first two employees without raising money off of your own revenue. And that's where this art of bootstrapping and getting a couple of customers into your product early and paying you,

which is completely possible for a SaaS product or a software product. Marketplace is a little bit harder, but still possible. You can bootstrap a marketplace, i.e. you could create Airbnb and just source 20 high-end castles, you know, and beautiful, you know, unique homes in Spain and make the Airbnb of Spain and then just book with people you know want to book in Spain and manage those and take the profit from them. That would be a perfect way to bootstrap Airbnb. In fact, I think they did that. They were using their own couch as the test of it when they started. So you can get a team together. That builds credibility. Building the product and finishing the product. That builds credibility. Third, having a customer who will not shut up

about you and pays you either in time and effort or with money, hopefully both, if they're using your product and they're paying for it, oh my Lord, checkbox, checkbox, checkbox. Great team, great product, and really delighted customers. Now you're ready to get funding. But so many people who are coming to Silicon Valley or coming to the tech industry think it's about a business plan. They think it's about networking. They think it's about who you know, not what you know.

It's not about who you know or what you know. It's about what you've built. It's not about who you know. It's not about what you know. We don't care who you know. We don't care what you know here in Silicon Valley. We care about what you've built. What have you built?

The team, the customer base, and the product are all things you manifested in the world. You built. And people have concerns about Silicon Valley. Is it a meritocracy? Is it fair? Oh, my God. You know, representation is in. great, there's bias.

Of course, there is. There is bias everywhere. There are problems with representation in all different markets. When you look at Silicon Valley, one of the things people don't understand is that if you are capable of building a product and a team and getting customers, if you can build any of those three, two of the three, or even one of the three, you are going to get meetings. If you can build a great product, build a great team, or get customers, any combination of those, you will go from being a bootstrapped company to a company that's a fundable company.

Don't waste your time on the debt. Don't waste your time on the pitch. Don't waste your time on networking until you have a great MVP, minimum viable product, a prototype. Don't waste your time on trying to get meetings and coffee meetings with people until you've got a member or two of your team. And don't try to get the meeting with all the partners until you have a couple of customers. These meetings will take up all your time, trying to get them will burn all your time,

and you could have put that into bootstrapping and actually building the MVP of your product. Now, if your product is not bootstrappable, like you want to build a car company, well, you might need to start with a business before building a car company because if you have no credibility, you have no track record, you don't get to be trusted with the $50 million it might take to get a car out the door, where the 150 million it takes to do drug discovery or get a medical device out there. You might need to work on a software business before that, or you might need to work for somebody else's car company or somebody else's biotech company. So again, about this being fair, if you're a nobody with no track record, put yourself in the

capital allocator's shoes. Would you give them $10 million or $100 million? I hope not. I hope you wouldn't do that. That would not be wise. You need to have people who have experience, who've done it before if you want to do those big, big projects. And if you think about it, Tesla Elon funded with his own money that he made building a software company, Zip 2. So you should know the history of these things. It's really hard to do the hardware projects. Direct to consumer or consumer package goods.

When you look at those, they tend to not have high margins unless they're direct to consumers. and they are easy to 2x or 10x those businesses, but can you 100x them? They're a little bit harder. So you don't see too many businesses in direct-to-consumer or consumer package goods getting funding for venture capital. We had a little bit of a direct-to-consumer boom for sure with Casper, 8-Sleep and other companies, but it's really hard.

The product needs to be super differentiated. It has to be a very unique product, like the Peloton maybe, or the 8-Sleep bed. any of those kind of direct-to-consumer hardware businesses, physical products, they are really hard to make work. Tonal, it's just really expensive, and you have to install it. That's why they have to charge subscription fees. So some businesses are just not easy to do. And now there's crowdfunding.

Just a little exception here that's worth noting. Some people will, if they're building a hardware product, be able to put it on Kickstarter, be able to put it on Indigo, go and get the flywheel going with people ordering in advance because it's such a visionary company. The only thing I'll say is many of those projects fail because they undercharge. They think they should charge the people who are the early adopters less, when in fact, they should charge them more. They should charge them extra for letting them be part of the excitement of building a new product,

not charge them less, and then underpriced themselves and get into debt and not be able to deliver the product. So bootstrapping means you have to have some skills. If you don't have skills, well, you know how to get them. Just go to YouTube, take a UX class, take a no code class, learn how to use the no code. platforms out there, web flow, bubble, there's a ton of them out there. You can start building your own MVP's in no code. Now, this doesn't work for every company. You think about a drug discovery company. Somebody's trying to find the cure for cancer or a medical device where they're doing some deep tech or building rocket ships. Some things are massively capital intensive. Now, bootstrapping

versus fundraising. And at what point bootstrapping companies can then become funded? Now, it's important if you understand that venture capital is not a right. Everybody doesn't get to raise venture capital. Venture capital funds a very small percentage of businesses in the world. And venture capital is impatient capital. Venture capital is looking for unrealistic growth. Some might even argue a natural growth. Growth in the 20% a month range. If you're growing 20% a month, that means your business is doubling every three or four months. Where do you find businesses that grow this fast? Well, you only find them in the early stages and you only find them in truly breakout companies. So why does venture capital even exist?

Well, it exists because every 20, 30, 40 companies in Silicon Valley, some company actually achieves this unrealistic goal and they pay for all the other mistakes, and I'm using air quotes in here, or failed experiments in a portfolio. So that's the dynamic. of how venture capitalists look at it. Venture capital is not the only source of fundraising in the world. So take a pause and understand. Number one, you do not get to have a right to venture capital. You have no right to get venture capital.

It is a competition. And the people who judge this competition are capital allocators known as venture capitalists who have to find those big winners in order to keep their jobs. That's the crazy, insane Silicon Valley methodology. I have no idea why this exists or exactly how we got here. I'll be totally honest, but it exists in the world. It is a very strange part of capitalism that this crazy venture capital even exists in the world as a category. We used to have bank loans.

Maybe people raised friends and family, but somebody had a rich uncle or an auntie. or got an inheritance, and that's how businesses were built, or people inherited businesses or inherited wealth. And now you have this weird practice of venture capital. Now, many founders ask me to invest in their company when they have an idea. We don't do that. Why don't we do that? We don't have to.

There's so many people out there who've bootstrapped their company and come to us with $10,000 a month in revenue or $1,000 a month in revenue or $50,000 a month in revenue. And they have a couple of customers and they have a product that we can use and look at the how well it was built. And we can look at the customers. We can look at the growth. We can look at the churn rate, how customers leave the product,

how they acquire customers. So you, as a founder, are in a competition. So let that sink in. This is not socialism. It's not communism. Everybody doesn't get a loaf of bread or a certain percentage of venture capital. It is a dogged competition.

It is a crazy competition. It's an unfair competition. Just accept. that as the table stakes. And then you will be free to understand how you can qualify and how you can actually win that competition. Once you have that realization that it is unfair, that it is a dogged, crazy fight to get that venture capital money, then you will be free to start thinking about what are the precursors to getting venture capital. And maybe even do you want it? Because venture capital is jet fuel. You put jet fuel on a skateboard or a bicycle.

or a car, it's just going to explode into a fiery mess and everybody dies. Jet fuel is for rocket ships and you have to ask yourself, is this business in fact a rocket ship or is it a slow growth or a normal growth business? Remember, venture capital, impatient capital. Realistic growth is not what they're looking for. Venture capital is looking for unrealistic and perhaps even unhealthy growth. Growth that is going so crazy and so fast that maybe the tires come flying off or things are messy, mistakes are made, but growth at all costs is really what venture capital is about. Now, people will argue that there's conscientious capital or people are looking for you to grow slow and steady wins the race. People might say that, but I think it's platitudes. I think in reality,

venture capitalists want absurdly high growth companies in the double digit percentage month over month. And most businesses probably grow double digits year over year. So this is a whole different pace. This is like sprinting versus jogging, right, or walking. It's totally different. How much time and money do you spend integrating a bunch of different software products together at your company? Let me guess. Way too much time. Well, Odu is here to help. Odu is a suite of business apps that runs your entire company on one platform. They'll streamline your workflow by bringing all of that information together. Plus, Odo's integrations, eliminate repetitive tasks and data entry.

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Your first app is free forever. And right now, O-Doo is offering a $1,000 credit on your first implementation pack. That's not a joke. That's $1,000. Just go to odu.com slash twist to check it out. That's O-D-O-O-O-com slash T-W-I-ST. What type of businesses should see venture capital? Well, if you're looking at venture capital, it's very few companies really get those.

And, you know, very few companies qualify for venture capital. And that's why many times people will say, hey, your bootstrap business is a lifestyle business. This is not a negative term, although it's perceived as a negative term, we will say, hey, I think you're just a lifestyle business. That word just, you're just a lifestyle business. It's a little derogatory. But what we mean in our industry, when we throw around the term lifestyle business, is this is going to be a great lifestyle for you, the founder and owner of the company.

But it's not going to provide returns for venture capital firms that would please their LPs who are big endowments or retirement funds or high net worth individuals, it's a lifestyle for you. You might make a million dollars a year from this lifestyle business. You might make $10 million a year from this lifestyle of business and rock on. That's unbelievable. And if you have a business that's throwing off a million dollars and free cash flow a a year and you're pocketing that every year and every year it's growing 20 percent,

well, the best thing for you to do might be actually to pocket the million dollars, 10 years from now, it's growing at 20 percent a year. That means it's doubling, you know, every four or five years, you know, three or four years, you're probably doubling. And if you're doubling every three or four years, then maybe you're taking out $2 million after four years. And then after another couple of years, you're taking out $4 million. You get the idea. And you still own 100% of the business. Why would you ever sell it?

But it's not fast growth. So it's not going to IPO or get bought by one of the bigger companies, which is typically how venture capitalists get their money out. They buy in, they have an IPO. They buy in Microsoft, Google, Facebook, whoever buys the company. Those are the two big outcomes for venture capitalists. So lifestyle businesses, which means businesses that are growing single digits per month, not double digits per month, and that are growing less than two or three X year every year, that's a lifestyle business in the minds of venture capitalists.

They're not going to fund a lifestyle business because it doesn't have venture scale. Venture scale, another term that we use in the industry. What does venture scale really mean? Venture scale means that this business can get to in 2021 terms, 100 million a year in revenue, $250 million a year in revenue. You start thinking about those numbers, you know, $100 million a year in revenue is $250,000,000 a day in revenue, $10,000 an hour. It is possible to build these businesses. It's just hard to build them.

And so why do they need to have businesses? that can reach that level of scale, well, those are the businesses that start to get the attention of the big companies to buy them. A lot of big companies, they're not interested in buying any company with under $500 million or a billion dollars in revenue. You know, take Microsoft or take Google. You know, when you're printing up as much money as they are, to move the needle on an acquisition is very hard. You need to have a business that really is making some large amount of revenue and that can grow from that point forward. Hopefully with that motherships, you know, reach and dexterity and expertise.

That's for an acquisition. And then for an IPO, well, the public markets are not going to care about a company with 50 million in revenue, generally speaking. They're going to want companies that have hundreds of millions of dollars in revenue, if not billions of dollars in revenue, as we've seen over the last couple of years, when we've had a boom in SPACs and IPOs. And the SPACs do bring the benchmark down a little bit. You could have companies that are pre-revenue, go public, et cetera.

So venture scale businesses, it's just, just means you're going to grow 3, 4, 5x year over year, 10, 20, 30, 40% month over month at certain points and times in the business. And you're going to get to 100 to 250 million a year in business, which means the investor has a chance to turn $1 into $100. Not 100% growth, which would be doubling your money. We're not talking about percentages here. We're talking about X.

$1 goes 100x, 100 times $1 turns into $100. That's kind of what venture capital is looking for. So you have to ask yourself, does my business really qualify for this insane race? Is it an outlying company? Is it a software company? Great. Software companies can grow that fast? Why can software companies grow that fast?

The reason of software company grow that fast because there's no cost of goods. You write the software once. I write the game Angry Birds. And if 10 people play Angry Birds and they pay a dollar each, I make $10. If 10 million do it and I charge them a dollar, I make $10 million. The cost of Angry Birds remains. the same. The five developers who developed it. Instagram. Maybe they had a dozen people working on that when they sold it for a billion dollars. And you really don't need more than that. Building a world-class

app today, even, on iOS is a dozen people for Android and iOS. Like literally 12 people can build a world-class app. So you have to ask yourself, is it a software business or a marketplace? What's a marketplace? eBay, Airbnb, Uber, these were all marketplaces. One side puts up up supply. Another side is the demand. I'm demanding. I need a place to stay when I'm in Paris. And you're the supply. I have an extra flat in Paris that I can rent you for 300 euro a night. That's a marketplace. Marketplace is scale because as the number of participants increase and the frequency of transactions increase, oh my lord, the five or 10 or 20 percent of each transaction they get can add up pretty quick. Uber Eats, DoorDash, also marketplaces between

drivers, restaurants, and consumers. So it's really like a three-sided marketplace when you think about it. Those are the type of businesses that investors typically want to invest in because we've seen over and over again their high margin and they're high scale. High margin, they don't have a high cost of goods, high scale because, you know, the hundredth person coming in doesn't require any handholding. The 10,000th user of, you know, a marketplace like DoorDash or Airbnb, doesn't cost you anything to onboard them

and neither does the millionth or the 10 millionth. They just can come in and use the marketplace because it's already set up there and it's vibrant and they get to just jump in and benefit from all that velocity in the marketplace. So those are examples of a very high-scale business. What's a business that's not high-scale and low margin? Selling Ethernet cables, selling chargers for your phone.

It's a race to the bottom. It's hardware. Anybody can make it. You don't have any IP. There's nobody cares about the brand. I mean, I might care about Anchor. I love that brand. But most people don't care. So hardware is hard.

And it tends to not have any reoccurring revenue. You sell it once you're done. One transaction at low margin. Services business, consulting businesses. Consulting businesses, your cost of goods is how little you can pay somebody. And your top line revenue is how much you can charge for that person. And you just live in that tight little margin between we're charging $200 an hour for this developer. and we're paying them $125, and we get that $75, and everybody hates you because the developer

wants to make more money, the customer wants to pay less, and your margins constantly getting crushed. It doesn't scale gracefully. It's a waste of time in most people's minds. And that's why SaaS, software as a service, cloud computing, consumer subscriptions, all of these things are software-based businesses that scale very gracefully. When you are going into venture capital, you also are going to, in all likelihood, be giving away a large swath of your company.

Think 10 to 20% of your company three, four, five times in the life of the company, which means typically two founders will get down to 10% each in ownership of their startup by the time there's an exit. And if it's a single founder, maybe they have 15 to 25% ownership, but you're going to get diluted massively. And you will often lose control of your company in that you have taken on three or four venture firms, three or four, 10, you know, one million to $25 million checks over a five or six year period. They are on the board. They can ounce the founders. Sometimes founders have protection and provisions in there, but other times they can be ousted and remove from their own company. It doesn't happen as much these days, but you get the idea.

So keep this in mind when you're building a business that if you do go to the venture out, you're going to go really fast. You're going to give away a lot of your company. And it's going to be with a high risk of failure because venture capitalists only care about outlier success. If you're going to be an average success, they're really not interested. So they're going to disengage from your business. They're not going to want to be involved in it if you only grow at 50% year over year.

They're only going to be interested and they're only going to get excited when you're doubling and tripling revenue year over year consistently. So why would you do that? Well, the reason you do it is because you could have an outlier success. That's why people sign up for it is they might have the chance to be an outlier success. Why would somebody opt out of it? Well, because the chances of success are like one in 10 or one in 20 or two in 15. Who knows? It's a very small chance of success, but if you do win, you get outlier success. And most people, candidly, don't understand what venture capital is. They think that everybody's

entitled to it. They don't understand how competitive is. And they don't understand how narrow the lens of businesses are that are venture fundable in the current model. Other people have tried to make slower growth models where they do slow growth companies. And just as a little bit of an side, you're really not trying to build a business with the acquisition in mind. Going in saying, I think we can sell this company to Microsoft in five years for $50 million. That's not what venture capitalists are looking for. So keep that in mind. They want the outlier success. It turns out venture capitalists and venture capital firms are typically defined by one success, maybe two, each fund. And that means a venture capitalist over the course of their career, they might be

involved in five, six funds. If they're involved in five, six funds, if they're involved in five, funds and there's one or two hits each fund, there might be a dozen hits over those five funds, maybe 10. Of those 10, the top two or three will be the majority of the returns. The top 10 will be 95% of their returns. And that means each partner might work on one of those. So, in other words, a career in Silicon Valley, a venture capital career is made with one outlier investment over a decade or two of working in venture capital. Sometimes you get people who hit two or three. I've hit three or four really big ones. And they kind of define your career.

Robin Hood, Com, Uber. These things are career defining. I've gotten very lucky to hit, you know, three plus in a decade. You know, there'll be more, you know, down the road. But this is the nature of the other person on the side of table who might fund your startup is that they are going to place 20, 30 bets in their

career and one is going to define their career. And the one that does is the crazy outlier, The crazy outlier. This is, but 5% of funding of companies or less is from venture capital. It's a very small mix of the investment in companies. So, again, if you're going to do this, you really want to be doing it in a growing market and you're going to want to have to go fast and you're going to want to have other people involved.

If you don't want other people involved, if you don't want to be collaborative with investors and hear their opinion, if you are not swinging for the fence, and trying to grow really fast. Don't take venture capital. Don't even consider it. You can just have a bootstrap company, get to profitability, and just sweep the cash off every year,

make it an LLC instead of a corporation with shares, and just focus on distributions year after year. So building to sell is really a dangerous idea. You don't want to do that. You're building to build a large, sustainable enterprise. And the second option is you sold to somebody. Now, bootstrapping versus funding companies. I hope that this candid candidate,

advice is helpful for you as you start your journey. Remember, you got to have great skills. You've got to be able to build these products yourself. You've got to be able to build a team and you've got to be able to have great customers. Product team customers. Product team customers. Those are the three pillars of building great companies. The market is out there for so many products, you know, and all you need to do is build a great team and build a great product and put it in front the customers and let the magic happen. It's that easy, folks. No, it's really hard, but you have to have skills. If you have no skills, ask yourself, what? Am I ready to be a founder? Maybe I need should get some skills. You might get lucky and just be an idea person who could manifest a bunch of

investment and talk people into it. I've seen it happen. It's just happening less and less these days. The people who are getting funded more often than not are able to build their prototypes, MVP, and get something in front of investors with zero dollars, with only sweat equity as bootstrappers. And those are the best, most fundable founders, according to what VC say, around the poker table, or when they're having dinner, or they're being candid with each other, oh, that person can bootstrap a company and get a couple of customers. They're capital efficient. That's who I want to place my bet on, the person who actually knows how to build great products and teams. So keep that in mind. And I hope this has been helpful. Okay. Every startup needs to ensure

they own their intellectual property or IP for short. And that starts with filing your trademark. I have been filing trademarks for 30 years. And I know what I'm talking about. It's one of those things that people forget to do or they put at the bottom of their list. And I understand that. It's a pain in the neck. But it is not a pain in the neck anymore. If you don't know where to start, look no further than brain-based file. It's a clean, simple, and automated trademark filing platform that gives anybody the ability to protect their best ideas. There is no need to spend thousands of dollars of lawyers to file your trademark for you. No, now you can do everything yourself in just a few easy steps. Brain-based file gives you goods and services recommendations using AI.

So you can avoid the back and forth with the US Patent and Trademark Office, USPTO, and you can eliminate human error. They also offer full transparency into the USPTO process with step-by-step notifications and real-time updates on your trademark's approval. This is a process, folks. So save a ton of money. Just head to brainbase.com slash twist and enter the code TWIST at checkout to file your first trademark now for just $169. That's a 15% discount. That's right, brainbase.com slash twist and enter the code twist at checkout to file your first trademark now for just $169. Okay, Zach Koliath is with us again. How are you doing, Zach? Yeah, every day, just try to suck a little less. I'm trying.

There is a goal. Every day trying to just not suck. It's humbling. I still suck a lot. I just want to suck less. Or you could say you want to incrementally get better. It's two ways to say in the same thing. It is humbling what we do as investors because we are constantly faced with making decisions and not knowing if we made the right decision for somewhere between five and ten years,

how have you reconciled this, you know, challenge to keeping a scoreboard? Yeah. Well, I mean, my default is I just assume I'm an idiot. So that just like it goes with the territory. Yeah. But, you know, I like to, I really think about it in terms of like

the day-to-day tactical execution of the businesses that I'm involved with. And it's, you know, I try to be in there figuring out what's going on and trying to be helpful and watching. And if they're moving the ball forward, I'm super happy. Because at the end of the day, this business is a business where you can get incredible rocket ship growth in really unexpected ways at unexpected times. And as long as you're on the field and you're moving things forward, you're in a position

to be ready to catch that. Like, so, for instance, today they announced that KOTU put one point or 120 million into one of the businesses I've invested in Mercury. Oh, Mercury, that's the bank, right? The bank, yeah. It's like a billion and a half dollar business now. Congratulations. When they first started that, oh, man, they were, it was not easy.

And I mean, watching them, yeah, building a bank, like, not easy. Wait, I'm shocked. Starting a bank is not easy. Yes, yes. I just summarize your two points, I think, if you think about what we do as our day jobs and what founders do. You cannot absolutely guarantee any outcome. You have very little control over the outcome,

but what you do have a lot of control over is what you do today, your process. And the process of being an entrepreneur from what I'm hearing from you is to be on the field and to keep improving and to be of action, to be getting stuff done so that if you do catch lightning in a bottle,

if you do happen to catch that wave, man, you can have a great surf, you can have a great ride. and just be ready for that. As an investor, we just have to be as helpful as we can and see as many, meet as many great founders as we can.

That is the process, is it not? Yeah. I mean, for me and my day job, I think about it, like, am I helping my companies adding value so that they let me keep investing in their businesses as they grow? And am I talking to new folks and being helpful to them, helping them see around corn,

and helping them meet other great investors or meet customers or partners so that when the time comes that they raise money, they let me join. For me, it's like the more value that I add in a leveraged way in the ecosystem, the more goodness comes back. And that's my, every day that I can do something useful to the ecosystem, whether it's my existing companies or companies that I'm involved with or companies that I just, like, I'm excited about. I feel like I'm moving the ball forward and I'm happy.

Or being here on Ask Jason and Zach are reoccurring. of questions and commiserating over how absolutely we have imposter syndrome every day. I mean, when you think about it, you work really hard as an entrepreneur. You and I both got our asses kicked and kicked a little ass as entrepreneurs. And then you get lucky enough to be a capital allocator where you get to, you know, pick who gets money to pursue their dreams. It's pretty humbling. And it's super random.

I, too, today had a great day. Robin Hood went public. Yeah. Woohoo. That's awesome. Yeah, I mean, it's the third biggest win of my career after Uber and Com, which are now tied, actually. Oh, wow. Well, you know, we owned, you know, just basis points in Uber, but we owned five or six percent of calm.

So that shows you when you own 5 percent of something worth to a $3 billion, you know, and you own 10 basis points or 20 base points of whatever of something that's, you know, $100 billion. You can have slightly similar outcomes and owning a larger percent now is part of my goal. What is the average check size, just as we start the show off here before we get into the questions, average check size for you today, how many deals are you doing a month, a quarter of a year, whatever number you want to pick? Yeah, yeah. So check size is growing. I've got a new fund and it's bigger. But average check now is probably in the sort of 500 to million range for early stage. And that's growing.

So it'll probably be a little bit bigger in the next six months. and I try to do in a given year five or six new companies and then I'll try to find and then I'll invest in my existing businesses so a good year I deploy maybe $15 to $20 million if I'm doing my job correctly and you know things are

As a solo GP Yes as solo GP Yeah you and I are the same Both solo GPs with teams around us You have a team built out yet? No no no no no I don't even have an assistant Whereas you have like this squad of Uber

assassins on your side. I do have a squad, yes. Well, you know, the advertising on the show has helped me build a team. It's literally the truth. For the last couple of years, the profits from this week and startups pay for the investment team, although we now have some. With the new fund, we have a little bit more for the first time, some fees to hire some folks. So we're getting there slowly. All right, let's get into these questions here. First question via emails from Francis. He asks, What is your number one piece of advice for newer angel investors? I'm part of the syndicate and would love to up my game.

Okay, we got a new angel investor, fresh in the game. What's your best advice there, Zach, in 2021 for a new investor? Yeah, I always say, take your time and plan on this being a really long game, both in terms of the outcomes, but also in terms of the deployment. Like, if I look back over the last five years, you know, I've written about eight. checks and the first check I wrote, I was in a very different place in terms of my capabilities and my education and my experience. And if I had, you know, blow my water early and wrote a bunch of checks at the beginning and then hope they would all work, I think I would be, I'd be happy because that year ended up being a great year for me.

But I wouldn't, I would be in, I wouldn't be in as good at places I am now. So just expect it to take a long time and then you're going to have to write a lot of checks. I always like to use the analogy of learning poker. You would would not want to sit down at a high stakes game when you don't know which is a better hand, a flush or a straight. And literally, when I started playing poker, I was in games where people were like, I win, I got a straight. And the person, well, I got a flush.

And he's like, well, a straight's better than the fly. And people didn't even know, like literally somebody at the table had to keep a card of the winning hands. Like what was, you know, three of a kinds better than two pair. Yeah. Okay, great. I want to play in that game. That's awesome.

It was funny. I mean, this is literally, but it was a $20 buying game. I think they were playing 25 cents, 50 cents a game. So people would bring rolls or quarters to the game. It was quite fun. And so I do think you want to take your time. And in terms of thinking long term, you are playing a long game and you're playing a reputation game. And you're also playing a long game against the cycles.

So here we are in a tech super cycle that started in 2009, which is exactly when I started investing. And you started investing similar time frame, right? In 2015. 2015, okay, you came five years after me. So you started investing halfway into the super cycle or maybe a third of the way in. And so it was starting to climb up. When I started, it was on the floor. I mean, I couldn't get but five or six angel investors to show up to meet four or five companies at Open Angel Forum.

And at that time, Angel List was called Venture. Venture Hacks. And it was an email newsletter. There was no Angel List. There were no syndicates. It was just people shooting emails around, which actually you did as well. So take your time making those first couple of bets. There's no rush and don't feel pressure, be disciplined.

The other thing I'll say is, you know, maybe the first 10 bets you make could be in companies with products in market and some traction so that you're not making these bets before the products even launched. You can actually use the product. Okay, we got a live question from Gatsby. no indication if he's great or not. The question is, what are typical mistakes you see founders make in their first meeting with you? They should avoid.

Okay, this is a great question. What are silly, stupid things that founders do or you've seen that are just a mistake when you're meeting with investors? I mean, the number one is lying. Like, you know, a lot of these founders are just, they really want to get the deal done. and they feel pressure to basically put their best foot forward. And it's pretty easy to sort of stretch from exaggerating to lying. And, you know, when you're on the other side of the table and you just watch these folks all day long come to the door, you get a really good pattern recognition of when they're lying.

And, you know, there's a lot of ways to trip somebody up. And, I mean, I'm constantly basically trying to figure out, are they really a truthful person? because that's one of the biggest things that is like a red flag for me is people that I can trust when times are bad and things are not working right to be truthful and honest and open and transparent about what's going on because otherwise it's really hard to work with people. And that's the biggest one. And I see it over and over and over again. And it makes me sad because it's like there's this great entrepreneurs where I love to invest in, but they're just liars. And I'm like, I can't do this. You know, and there's lying and then they're stretching the truth.

There's exaggerating. There's a whole spectrum here. And I think what's important in what you're saying is, as an investor, we know imposter syndrome. We know that you don't think you're adequate. We know that you're concerned you only have three paying customers and one of them doesn't actually use the product and the other one's your friend from college. And you really, at the end of the day, only have one paying customer. And we are okay with that because we've invested.

in companies over and over again and watched this collection of rag tag, misfits and pirates create something of massive value from nothing. We understand that. So there is no actual need to exaggerate to us. And you're so correct because it always comes out. I always find it out because I do math in my head. And I say, how many customers do you have? They say, 100.

I say, what is the product cost? And they say, it costs $100 a month. And I go 100 times 100. You get $10,000 in revenue a month. a month? I say, okay, you're doing 10,000 revenue? I said, well, no, not exactly. I'm so what are you doing revenue right now? And I said, we're doing zero dollars. And I'm like, you have no revenue. You just said you have 100 customers. Like, oh, well, we plan on charging 100. Those 100 people are on beta

and they're not paying. And I'm like, okay, great. So you have users in an unpaid trial. Great. If you had presented it as users in an unpaid trial, I'd be like, oh, that's great. Tell me about the top 10. How are they using the product? Whatever your traction is, however modest it is, it's something and it's better than lying. Okay, next question. And this is from the dude. And so you know when the dude has a question, it's going to be a good one. He's coming in hot.

What do you think about white labeling tech to help build or finance your core product? It's a great question. Coming in hot, dude. What do you got, Zach? I mean, I always say that anything you can do to get to sort of, like, Sarah Tabal has a great saying where she's like the red hot center of your business. and whatever you can do to like make the other parts easier and faster to get to that spot, the better.

And so white labeling technology, whatever you have to do, totally, totally fine. Now, at the end of the day, you still have to basically be able to tell a compelling story about how you really are a technology business and how there is a moat around your technology and how your technology enables you to grow really rapidly and you won't become commodified. So if you're using the same technology that everybody else has access to, that's going to be challenging when it comes time for competition to show up. And they're always going to show up. And if you don't have the ability to protect yourself,

investors are going to look at you very differently than if you've built your own proprietary stuff. But getting to that sort of core proof point to validate the idea, the business and the value that you deliver to a customer, and then building out from there is a great idea. Yeah, and by the way, Sarah Tavill, a general partner over at Benchmark, was on 84 episode 4 back in February. Great guest.

She's awesome. She's pretty great. I think it was one of my final guests in the studio before COVID started. Wow, that's crazy to think about. If you're doing white labeling as well, and you sort of mention here, dude, the dude, sorry, I didn't mean to be a casual there with you, dude, the dude, sorry, Mr. Dude.

It's a great way for you to keep. keep the lights on. And some people are very precious about like, oh, you know, just raise money and stay focused and da-da-da. But the truth is, you may not be able to clear market with investors. You may be an outsider or whatever. If you get three people to take a white label version of your product and you own all the code and they're giving you $5,000 a month each or $15,000 a year each and that keeps the lights on, great. Keep the lights on. And then you can launch the web-based product that is not white label for everybody else based on what you learned on their nickel. I'm not precious about it.

Whatever it takes to get to product market fit, to get that burning ember at the core of your product, not a problem. Now, if you do have a consumer-based product and you're like, should I have a white label and a consumer, those are kind of two businesses? Yeah. It's kind of hard to run both in the same company, isn't it, Zach? Yeah, absolutely. That's another to go back to the first question we have.

It's like, what's a red flag? whenever you have two different things going on that have different focuses and different areas of attention that are required, and you have to make different decisions for those two things, it's a huge red flag for me. Because at the end of the day, when you actually find product market fit, what happens is that the things that used to be really hard, revenue, customers, traction actually becomes really easy

because all these people see this value and they just come running for what you have. And you start growing really rapidly. But what happens is all the things, is it used to be easy. Managing your company, scaling, keeping up with growth becomes really hard because you're growing really rapidly. And when that happens,

entrepreneurs need to be really, really focused on basically growth. And they need to go from basically putting their energies against making things work to putting their energies towards simplifying and making things simple so that it can keep up with that growth. And what I find is that if you're distracted, doing multiple things,

you get totally crushed during that period. And also, it's a really good indication that you actually haven't found product market fit because every entrepreneur I know who once they find it, they get that idea really rapidly and they start discarding everything that gets in their way of the one thing that is 10x, that is growing like crazy.

And so... Yeah. I mean, the most famous example was Groupon and the founder had started Groupon inside of another company that was doing like petitions and lobbying kind of, you know, like, uh, these petition website. And then people started using the petition website to petition to get two for one meals. Yeah, yeah, yeah, yeah. He was like, wait a second.

There's a restaurant downstairs. Let's see if we can petition them to do this. And it was like, okay, it's a petition. They're like, you know what? Who cares about this petition to get, you know, Buffy the Vampire Slayer back on TV or whatever, you know, or the stupid Comedy Central thing back on. Let's just focus on lot, you know, creating customers through, deals and they created an entire category.

And as Andrew, the founder of a Groupon told me, it wasn't even his choice. The entire company didn't want to work on what was slow growth. They all just moved to the side of the ship where all the fish were coming in and everybody just stuck their fishing rods and went to the

other side of the of the ship to go fishing on the other side. Okay, Mohammed asks a live question here, can you share a few insights on what data points you consider the most valuable while iterating on product. This is a great question, and it obviously varies by the type of product.

So let's go with a SaaS product first, and then we'll go to a consumer product. Yeah, so the way I like to think about it is you can kind of break it down into three sort of categories. The first category is very qualitative, but it's about the value that you deliver to your customers. And it's about crystallizing the articulation of that value in a way where you can say,

this is what we do that our customers love, and then I can ask your customers and they say, this is what we love and those two things are the same thing, which sometimes they're not, but that's really, really the secret is that the customer's like, oh, this is what I push a button and a car shows up my door, that's fucking awesome. Or, you know, I can put up my screenshots and I can work with them really easily and it's the best app in the world for doing that.

The second sort of category that we have is sort of the metrics of your business. And those are really simple, straightforward, and you can go deep dive into SaaS metrics. of the day, it's how much is it cost to acquire a customer? How much do they pay you? How much do do they use your product? How long do they stick around? And there, once we have those numbers, we can understand where the business is going to go relative to, you know, pretty close, like down to individual decimal points. I mean, we have people in the industry who specialize in doing late stage SaaS funding, and they do all kinds of formulas, and they will understand your business

and customer base. I mean, Chamath was doing this at social capital. SACS is doing it at There were other people who specialized in SaaS, where they started coming up with their own formulas. How much money did you spend this year on your sales team versus your net new ARR? They're just figuring out all these kind of things. I'll talk a little bit about a ratio that really matters depending on the product, which is how many monthly active users do you have? Okay, great. We now know, let's just pick a number. You have a million people a month who use your product.

Okay, now what percentage of the daily, what's the daily? daily active user to monthly active user. In other words, are people coming once a month to check their bill or to use the product to watch one TV show or something? Or are they on Snapchat or TikTok every night for four hours? How many sessions are they opening up? So those ratios in a consumer product become really interesting to understand exactly how sticky is a term people used to use, but just the level of engagement. A fancy term. Engagement is a fancy term. Stickiness is a fancy term for the number of minutes, how often people use your product. And you can do all kinds of interesting ratios. And if people use your product more,

that generally indicates product market fit. They're getting delighted because people are so busy that to get their attention is a big win. So if you were calm, the meditation app, and people are using it three times a month, the chance of of them churning down the road would be less than if somebody used it three times a year. And if they used it three times a week, maybe that person churns less. So that's where getting users to use your product more helps. What's an example of how somebody could increase usage of a product? Well, streaks.

There's a thing. You've done this many days in a row of fasting in your fasting app, of working out on your Palaton, of sending a message to another person in Snapchat or doing meditations in a comm. So just doing something as simple as that stupid feature, you know, you're on a five-day streak, you're on a seven-day streak, could greatly increase the engagement. And that's a sign of strength. Those are but some of the important metrics.

And then you will create metrics inside your company to motivate your team. And boy, just be careful with incentives. Because if you motivate your team on daily active users too much, then they might do things to goose that number that are unnatural. So you don't want to have unnatural acts like firing off too many notifications because then people will turn off notifications because you're being too annoying. So make sure you're not, you don't motivate your team too much and put them on tilt to do something unnatural. I think is important.

Yeah. Right on. You miss anything there with metrics? I mean, there's a whole world, right? Like books and books and books. We talked about consumer. We talked about SaaS. Did I miss any?

Is there anything missing there? I mean, growth. I mean, I think one of the things that you always have to come back to the sort of third category in my book is growth and understanding growth across your cohorts of users and across your channels and down to the, down as incremental as you can possibly get is a critical, critical part of any business. Because if you ain't growing, you be dead. Basically, our industry is about growth. If you can't grow, VCs might take a meeting with you because a friend begged them to or, you know, whatever. But if you are growing, conversely, you email any VC, any angel, any seed fund, and you're growing

20% or more for three months or more, you're getting a meeting. Let me say that one more time. If you're growing 20% or more for three or more months, that means you doubled your business in but three to four months, right? The rule of 72. Divide a time period, divide a growth rate into the number 72. That's the time period. If you're growing 25% a week, that means every three weeks you're doubling.

If you're going 25% a year, every three years to doubling, if you're going 25% a month, every three months you're doubling. If you can show you're doubling every three to six months, you're going to get a meeting. And it really is that simple. It doesn't matter how ugly your deck are. It is, how ugly you are, how ugly your clothes are. You've got a big pasta saint. I mean, if you showed up with a pasta stain and spaghetti down your white press shirt and you look like a hobo, and you got 30% month over month ground for three or four months in this town,

you're getting the meeting and you're probably getting the check. Here's the check. Here's the check. Don't knock over their grandmother to get you the check before another VC. Okay, let's take another question. This one is from SP. What are the most important skills to learn, develop, to become a success, to become successful in VC? What a great question.

Now that you're looking back on it with almost a decade of experience and certainly multi-decade, being on both sides of the table, what do you think are the skills to become successful in VC? I mean, to go back to what we started the conversation on, the most important thing in this business is deal flow. If you have access to the deal flow, you're going to be in a good spot. And if you don't, it's going to be really challenging.

And deal flow comes back to the value that you've delivered to the community. If people think you're useful, they send you deals. And so you really, the most important skill you have to learn is how do you actually deliver scalable leverage value into the community in a way that people appreciate and they want more of. So I want more of that. How do I get that guy involved in my business? And it's a non-trivial thing to pull off, but it's the most important thing is to get access to deal flow. And if you look at the precursors to deal flow, reputation is one. And there are ways to get additional deal flow. Like if you email other VCs and you build a good relationship with them,

other investors and you say, hey, here's a company I'm investing in. Would you like to meet them? There's still room in the round. That simple act, people will reciprocate over time and they will include you in rounds because of the reciprocity effect. You can look up the reciprocity effect. It is a very simple concept. You do something.

If somebody does something for you, you are more likely to do something for them. If you do, if somebody asks you to do something for free to them, you're going to feel much more connected to them. don't be afraid to help other people out or ask for help and be of service. Great question. The only thing I can think there is to be a level-headed, calming, stabilizing force in our industry because our industry is so chaotic already that when, you know, you're going to have crazy moments come up and be acting hysterical or getting freaked out or adding gasoline to

a fire is not the job of the VC. The VC's job is to come in and be a fixer. And you want to be calm and fix problems, not cause problems. And we've both been in situations, Zach, where our peers are causing chaos. And now you're trying to solve a business problem and solve a bad VC problem. That's brutal. It's not good. I mean, I have had people on boards just causing all kinds of problem. I much prefer a neutral investor who doesn't provide any downside. And, you know, maybe there's light upside, but the check cashed, that is wonderful to just have somebody who put money in and was not a distraction and was just patient capital. If you're just patient capital, you're beating out like a third of the market, which is the annoying capital. I'd say a full one-third

of the market is annoying capital. At least. At least, maybe it's half. Yeah. So it's probably like 25% of VCs are actually really helpful. 25% are kind of neutral. They don't harm the business. They might not be super helpful, but they're certainly not hurting it. And then there's half that are just causing chaos with bad advice. Or like,

what is the advice that we give now, Zach, that we learned 10 or 20 years ago that's valid? How much of it is valid? You know, like half? And who knows? Like I think sometimes people

would be better off asking questions than giving advice. I've found myself, I just ask questions. So what's the problem? Great. What's your plan to solve the problem? How confident are you in that plan? Are there things that you're worried about with your plan?

Is there anything I can help with that plan? And did you think about these three things? Because I just read your plan. I mean, that's literally the approach I've been taking. That's not the approach I take when I'm running my company, when I have to be the leader. But when I'm the investor of the board, I just want to ask probing questions and have a positive dialogue.

And that's taking me a real change in my personality. you know, from being a leader to being an inquisitive person who is a coach. You have to adjust from being a CEO to being like an investor and asking questions versus like being a, you know, a general. Yeah, absolutely. I mean, as soon as you become an investor, you are no longer in charge of anything. The only thing you're in charge of is whether or not you write the check. But before that, you're in charge of nothing.

Like your ability to write the check, you're not in charge of that. And you make the decision. and then you hope you actually get to write it. And then after you've written it, you're in charge of nothing. It's so true. It's so true. I mean, you literally are a passenger, you know, or you're maybe you're down in the tower, like an air traffic controller, but you're not in the cockpit unless you're invited into the cockpit.

And you may be invited into the cockpit for five minutes, but they don't want you in for the whole ride. Yeah, even then, like, if they invite me into the cockpit, the pilot is flying the plane, and the last thing they need is somebody talking into their ear. the only thing I'm going to do is the pilot turns around and asks me a question and they're like, hey, what about this? I'll be like, well, here's what I think, but you're the pilot and you're the one who can feel the controls,

you can feel the engines, you can, you can, you're, you got your hands on the metal and I'm just back here, you know. And they might say, hey, Zach, you've landed in this airport before I've never landed in Telluride. Oh, yeah. What's coming up here? Yeah, sure.

And you're like, yeah, you know, this is a sloped runway and there's crosswinds and it's a short runway. And here's how I, approached it. I'm hoping that helps you. Please don't flip the fucking plane because I'm on it. Yeah. Well, let me help you get, talk to some people who've done it before, who are real pros. So like, like, or here's some, let's, let's think about how do we bring in professionals into the problem. But yeah. Or if we can't make it to that airport, by the way, here are two other airports we might be able to land. I don't know if you ever been to Durango, but, you know, I had to land there one time.

So you can kind of give them some, some help and be a guide on the side, but you are not at the control. from Aaron, is it worth working as a product manager for a startup before becoming a first-time founders act? Absolutely. I mean, look, this is a business about getting exposure to growth. And the earlier, like, you know, that famous line that what Cheryl was given when she was thinking about whether or not she should join Facebook. And I think it was Bill Campbell basically said, if someone offers you a seat on a rocket ship,

Don't ask what your seat is. Just get on. And if you can get on any sort of growing business, you're going to learn so much. And at some point, the learning will decrease. And then you can either decide to jump into another one or you can start your own thing. But let me tell you, the brutality of starting a business is, is unbelievably hard. And if you can learn that on somebody else's dime, at somebody else's, like, guidance and apprenticeship, like, highly highly recommend it. And one, then think about the credibility.

you have. Oh, I was at Facebook during this period of time, i.e. Chamath. Chimoth was a nobody in the industry. He worked at what Mayfield, like, and then before that he was at AOL doing ICQ or, and then working before that with Dave Samuel on Spinner or whatever that was. Like, he literally had a meandering career to his own admission. And then this rocket ship shows up and he gets on the rocket ship and he grows it from, you know, four million to 400 million. You can never take that away from Chumath. He watched that happen. And he, he, hired the team that was responsible for growth. So to your point, if you can get on a rocket ship, you can experience growth, product manager is one of those brilliant positions where you are

at the locus of power and decision making. You have to deal with engineers. You have to deal with designers. You have to deal with whoever the stakeholders are, the CEO founder, the sales team. I mean, it is the locus of power. It is the center. Grab that job and do a great job. And if we were, if somebody emailed us and said, I was a PM at Google, Facebook, Uber, Airbnb, and I'm starting a company, how much more credible are they than somebody who didn't have that credentials, Zach, in your mind? Oh, it's huge. Especially if you're there during the growth periods. Like, if, you know, now, like in early days, PM at those companies is different than one when those companies are much more established. But the thing is that like when a company is growing, what happens is that everybody basically gets escalated to. to the limits of their own competence. Every, then you have,

as an insider, you have institutional knowledge about the business, about how things are working, and they're constantly pushing you to solve harder and harder problems. And so the limits to your ability to learn and your ability to,

like, to grow as a human are not opportunity, but instead your own personal competence. And so that's just, it's just an amazing crucible for, for human growth. And then therefore, when those people come,

out of that experience. I mean, they just have seen the other side of stuff that very, very few people get to see. And they understand in a way that I don't think you can understand it until you go through that hypergrowth, what that's actually about, both in terms of like delivering value and understanding how that works and then how to basically deal with the insanity that comes when you succeed. That is so well said, Zach, if you get into one of these big companies, they're going and they hit that hyper growth period like think about Robinhood the last couple years I don't know if you're heard today but I think Vlad said 22 million members and then last year it might have been a 10 or something now imagine you're at a company when it goes from 10 to 22 million

members in whatever it was a year or two years or even from one from zero to one million like those moments in time are so rare now if you are in one of those companies and it happens by definition, that company is under-resourced, which means each person there is not going to be fighting for responsibility or opportunity. They're going to be drowning in opportunity. You're literally, you know, in a surge and the ship is just flying at a hundred miles an hour across the ocean, full sales open. You're going fast. They need all hands on deck and you're there for it. Oh my Lord, it's so exciting. And this is why our industry is such an amazing industry. because what does it take to be a product manager?

You have to be organized. You probably need to know how to do mockups. You need how to do project management software. You can learn all that this weekend. And over five weekends, you can learn how to be a project manager, make wireframes and whatever wireframe software you want to use. There's InVision, there's balsamic. This is a zillion different ones.

Project management, you can learn super easy. There's 10 books on it. Just buy all 10. Read the top three. people are so limited in their thinking about how to break into this industry. I think being a product manager or working as a growth hacker or just in the growth department are two of the easiest ways to break in because there's no college degree for those, are there?

Even if there was, I wouldn't trust it. Yeah. Any college basically who claims to teach you how to operate in Silicon Valley's a line. I mean, and you could learn to be a product manager. so quickly. And you would love to have the Robin Hood project manager product manager today

and previously you'd want the Google one. But a Google product manager today is probably not as valuable as a Robin Hood one today. Who's going through the hypergrowth is your point and I think it's a great point. Well, one of the things that a lot of people underestimate is when you're hyper-growing like that,

you actually get exposure to secrets that other people don't get to see. And so you get to be the first one exposed to like some aspects of the business that nobody knows yet, but like you guys have discovered. And those secrets are not always just in terms of the actual way the business operates, but often it's in the infrastructure. So like, for instance, in my business, we were one of the first companies to get exposed

to quantitative marketing at scale. How do you use data to execute really, really high volume marketing campaigns and then measure it back? And then my sister basically took that and she's built this multi-million dollar performance agency with all of those secrets that she learns. and she took ring from 10 to 100 million in revenue just by taking what we had learned, went into ring and was like,

hey, guys, here's how you do it. And like, whoop, off goes the business. And she's done it over and over again. It's just literally like you get this secret playbook and this, it's almost like you become a mutant, like you're becoming a superhero by getting exposure to this, you know, startup radiation. Yeah, that's a good guy like that.

That's right. All right, Zach, you're awesome. We'll see you all next time. Bye-bye.