This Week in Startups - China cracks down on US IPOs, winning founder qualities, Ask Jason: accelerators, investing | E1244

Episode Date: July 13, 2021

Jason covers the CCP crackdown on Chinese tech companies listing in the US, shares how he spots winning founders (14:02), then answers Ask Jason questions: finding a technical co-founder (36:47), signals for startup success (39:29), advice for new angel investors (45:18), and more.

Okay, we've got a great show for you today. A bit of a variety show. First, we're going to break down the CCP, the Chinese communist parties, grip over tech companies in China. They've codified their new cybersecurity laws. And then we're going to do a quick Founder University segment about the qualities of a winning founder, both from an investor perspective and how you as a founder can build your credibility. And finally, I'm going to answer a bunch of S-Jason questions about how to pick an accelerator.

And if you should do it or not, based on the founder's perspective, and we're going to rank the top three indicators of startup success. And what is the value you bring to the table if you are a non-technical co-founder with a great idea who can't find technical co-founder? Stick with us. More to come. This week in startups is brought to you by Notion is one place for notes, docs, docs, projects, and everyday work that goes way beyond a wiki.

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slash twist. All right, the Chinese Communist Party, the CCP is officially cracking down on Chinese companies going public in the United States. This Saturday, China officially issued new rules to halt foreign IPOs and maintain control of their largest tech companies. China's internet regulator, the cyberspace administration of China. What a name?

Cyberspace. I think they need a new name for this. Issued new rules that require Chinese companies collecting data from one million or more users to undergo a cybersecurity review if they want to go public in other countries. One million, obviously being a very small number of users in a country with. you know, billions of people. So this is essentially the CCP writing their heightened security of Chinese tech companies into law. They've codified this law now. And the Wall Street Journal reported that in March of 2021, just a couple of months ago, TikTok's parent company ByteDance put its U.S. Hong Kong IPO on hold after Chinese officials told them to focus on addressing these data security

risks. Now, are they actually concerned about users' data or the cynic in me likes to think they like to plug in those data sets and pipes into the central government's database? That's what I think is actually going on here. I think the risk is that they don't have the data. I don't think the Shady's government cares if people are being tracked and their location and their likes and their email addresses. I think they care if they have access to the data. So this is just framed and named in a way that I think is totally insincere. But that's just my personal conspiracy theory. I don't have any data to support my guess or theory.

But this news comes after BightDance's CEO, Zhang Yaming, stepped down in June of 2021, amid Chinese regularist titan scrutiny of the country's biggest technology firms, according to Reuters, yes, once again, a CEO didn't exactly disappear, but gave up control of their company. Their most recent valuation at ByteDance was $180 billion in December of 2020. And ByteDance's shares have traded steadily at $330 billion in secondary markets over the past month, according to the Wall Street Journal. BiteDance has been weighing this initial public offering of all or some of his businesses

in the U.S. and Hong Kong. The information newsletter that we all know well said, and this is a quote, investors and bankers who had previously been expecting bite dance to go public as early as this year, now say there is no clear time table. And of course, you remember, Trump wanted to block TikTok from being in the United States. India, I believe, did ban TikTok. I do think that the United States should put in to law and we should codify on our side that this data is not stored on their servers, maybe it's stored locally, and that if they have access to our market, we have access to their market. In other words, if we allow TikTok, they allow Twitter and Facebook

and Instagram and Snapchat and their country. Obviously, that will never happen, which means I am, in fact, in favor of TikTok being banned from operating United States. That doesn't mean I don't think TikTok stars are incredibly talented or the service is very compelling. Quite the opposite. I know that people who are creators on there are very talented. They should not be working for the Chinese government, which is what I think is exactly happening. The reason why the Chinese government is tightening all these controls is because they want the data, and they want the data on Americans. I know this sounds like a conspiracy theory, but that's what I believe. And I think if you were in the CIA, FBI, or any government, you would believe this as well, which is why India decided to pull the plug

on Chinese social networks operating in their country. You'd have to be very foolish to know exactly how powerful social networks are and to give an authoritarian country control over a social network in your country. We are very dumb to allow this to happen. Again, does it mean I don't think creators on TikTok are awesome? Does it mean I don't think the platform is an incredible design or UX? It just means we're absolutely crazy to give this level of access to this many Americans, tens of millions of them, to a communist authoritarian country. I would again not want us to use a North Korean, Iranian, or Cuban app and give all that data and information to those authoritarian governments. And we covered this on episode 1241. China's internet regulators removed

DDI's app from the app store and they stopped new downloads. So they did this because they were citing data violations and they did just two days after DDI went public in New York in a $4.4 billion IPO. So again, why is China tightening the reins, the noose on their own internet companies? Why would they do that? Don't they want their companies to succeed? They do. But they don't want individuals like Jack Ma or other CEOs becoming celebrities. And they want access to that data.

So they're proving to D-D, to bite dance, and to aunt financial who's in charge. And it's pretty clear who's in charge. The CCP is in charge. Now we have three examples that are very public and very high profile of the Chinese Communist Party, the CCP. Make sure you understand that that middle C is for. communist meddling in Chinese IPOs over the last eight months. You remember Ant Group, which is kind of like Stripe or PayPal, Apple Pay, financial service

in China. That was supposed to go public at a valuation of over $300 billion in November of 2020. In less than two days before they were set to start trading, the CCP pulled the plug on their $37 billion Hong Kong IPO. That would have been the largest ever after CEO Jack Ma made very light criticisms of China's banking system, he then went MIA? Like, literally nobody saw him for three months or he wasn't publicly seen him for three months. People might have seen him. They might have seen him in a detention camp. And it sounds like I'm making light of this, but that's, that's actually a possibility.

In May, the Wall Street Journal reported that Fidelity was cutting Ant Group's valuation in half from over $300 billion to $144 billion after the CCP interfere with their IPO. So the Chinese Communist Party is willing to have these companies lose half their valuation in order to maintain control of them and to keep their CEOs from becoming high-profile, powerful celebrities in their own country. Think about that for a second. Can you imagine literally cutting the value of Apple in half or, you know, Amazon in half just to make a point that Jeff Bezos wasn't as powerful or to make sure he wasn't as charismatic or loved within America inside this country? D.D., again, China's Uber, and in fact, Uber owns a large part of that. And in fact, I still own a bunch of Uber shares,

full disclosure on june 30th dd went public on the new york stock exchange started trading at 67 billion dollars pretty amazing and uh two days after going public again the cc the central cyberspace affairs commission announced they would be halting new user signups now the press made this seem like the service was turned off it was new downloads weren't allowed and so dd lost uh something like 12 billion in market cap or 18 percent of their total value because of this again people can still use the service You just couldn't download the app so new people couldn't get onto the service. Imagine if DoorDash, Uber, or Lyft weren't available.

You still had it on your phone. You could still use it, but anybody who was late to the party downloading the app couldn't get it. Now, ByteDance, trading over $330 billion in secondary markets is an amazing company. It's a conglomerant of Chinese media companies, sort of like Facebook owns Instagram and WhatsApp, except they own To Teow, which is a news aggregation type app.

And then they have China's TikTok, which is like a counterpart to it, which is Du Yin. TikTok doesn't operate in China as the name TikTok. They do have this counterpart, Du Yin. I've never used it so I can't tell you exactly how similar it is to TikTok. But in March, by Dan Shove their IPO and they're working on their cyber data security risks. Again, I think that means they're trying to get their hooks into that data. Call me cynical, call me a conspiracy theorist. I'm a realist. Look what happened to Ant Group and Jack Ma. You do not step on the CCP or they're going to pull the plug. It's that. simple. It's happening right in front of us. China is a rigged casino. You should not invest in

Chinese internet companies or any of their publicly traded companies in my mind. There's plenty of companies from democracies where you can have some recourse if the rules were to change. And the rules don't really change, right? We're sitting here trying to debate year after year from Obama's administration on to Trump's and now Joe Biden's. How should we deal with competition and and this consolidation of power. And what's really happened to our big internet companies? They've gotten bigger. We haven't been able to change the rules here,

even though there's this incredibly vibrant debate and discussion across three different administrations. And finally, it seems like we're going to see some change where our internet companies are not going to be able to buy whatever they want and grow and behave however they want. In China, they can on a dime decide you're no longer the CEO, These are the new rules. Sorry, game over.

Now, would you play poker in a casino where they suddenly said, you know, we're going to take the aces out of the decks and now, you know, tens are more valuable than kings, but only if I hold them. You know, it's a really weird situation. So do not invest in these companies. Do not take the risk. Is a lot of risk when you invest in a new IPO or a SPAC? You're adding a level of risk of investing in companies in a rigged market.

where there is no transparency. And in fact, the government can change the rules at any time. We have recourse here. If somebody screws you, you can go to the courts. Are they perfect? No, but at least they exist. And at least we have a press. Is the press perfect here?

Of course not. We have plenty of complaints about the press. But you can be sure if what happened to Jack Ma, happened in the United States, there would be court cases and there would be press, and it would not be allowed. So don't invest in any market where you can't audit the, books. And I guess the real question is, should the SEC look into delisting some of these Chinese companies? I mean, there's a lot of U.S. investor money in Alibaba, 10 cent. Now, I don't think

you can, you know, put the genie back in the bottle in those cases. And those companies are worth a lot. But I do think the United States should not participate in Chinese IPOs anymore. That's my feeling. If you disagree, you can add mention me on Twitter at Jason and explain to me why I'm wrong. Okay, let's go on with the show. today need a central hub for their information and work more than ever, especially in a world of remote work. That's where Notion comes in. It's one place for notes, documents, projects, and everyday work that goes way beyond a wiki. When we went fully remote in March of 2020 here at launch and this week in Startups, Notion became our internal knowledge bank. I'm literally

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And use that promo code twist to get $250 off at checkout. You're going to love it. All right. Next up, I wanted to talk a little bit about the qualities of selecting a winning founder if you are an angel investor or you're an employee thinking, should I go to work for these people. And a lot of you have been asking me, how do I spot a winning founder? I get this question a lot. People seem to think that I'm really good at picking founders.

I believe I can do it really quickly. And I can understand most people's businesses, with the exception of biotech and some of the stuff that is really complicated, most of the Internet businesses, you can understand them in under 30 minutes, well under 30 minutes in most cases. And I can pick a winning founder in about 10 minutes. It's pretty straightforward.

The number one thing is really the resiliency, right? Are people willing to give up everything to see their mission succeed? And when you ask people, like a very simple question, hey, is there any other ideas you have besides this one? Or is there anything else you would want to do besides this? Or where do you see this going in the coming years? Some folks will literally say, yeah, you know, I think I can flip this one in two or three years.

And then I've always wanted to be an actor or a director or I work in movies or I wanted to write a book or I want to start a conference, whatever it is. They just don't have the resolve and the desire to, focus on this company and see it through. And that really is, the ability to see something through to completion, one of the things that I pick up on very quickly when I'm talking to somebody. So here are some other tells that I see all the time. I think a lot of people want to play the role of founder. They actually don't understand exactly what it's going to take. And I will have people say, hey, I want to start this company if you invest.

Well, that is an automatic disqualification. The great founders will start working. working on their company, and they'll start building it, and they'll convince other people to work on it, and they'll build prototypes or MVPs or run tests, and they will find ways to build their credibility without having any money. The equivalent in film would be they write the screenplay, or they go and they shoot a scene, or they do a table read, or they draw storyboards. In our world, it would be creating a landing page. It would be finding a developer to make an MVP, or learning to code, or doing no code to make your first version of this, maybe running a test,

maybe doing user interviews with potential customers. You see all that happening beforehand in the winning founders. They are just moving ahead with their project no matter what. They are not waiting for permission. At the end of the day, what does it take to be a winning founder? At the core, I think it's this unrelenting desire to see your vision realized. And a lot of people don't have them. they basically will quit when things get hard.

And this is why people say, oh, follow your passions and you have to have passion and you have to have to have that fire. That's what people are referring to. I kind of look at it as, you know, maybe not just passion because that word is so overused. It kind of means nothing. What I see in those founders is they want to complete a certain mission. They want to see this product, get to market, and to be adopted. by a certain group of people.

And if that's Airbnb, they want to be able to find a place to stay in a home or an apartment anywhere in the world, right? And they want to see people be able to host anywhere in the world and make an extra income stream or the Etsy founders who want anybody to be able to start a business at home. Same with eBay or Uber wants to get you from point A to point B anywhere within, you know, two or three minutes of waiting for a car. That's the kind of stuff that when you see it, you are immediately. attracted to the founder. Also founders who can build and have that ability to craft a product

and make a beautiful product and understand every feature, product obsession is such an obvious tell that this person is going to win or at least have a good chance at winning. So do you care about this vision being realized in the world? Do you have the ability to build a product that is really well crafted and not give up, right? So you have that resiliency, combined with that vision, right, and you can execute on that vision? Now, finally, can you get other people to join the mission? Right? Because if you think about at its core what a startup is, it's a product or service

that delights some customers built by a team, right? And if you have a team that builds a great product and delights customers, you're going to get a feedback route. Those customers, you can look at their data and how they use the product and figure out the next feature, or they might tell you, or you might dream of one and test it. All different ways for you to enhance your product. Studying data is one, asking the customer explicitly, right?

So one is implicit and one is explicit. You know, it's implicit from the data or it's explicit because they tell you. Or you can test something yourself. That's like the vision sort of category. So once you start adding those features, maybe that gives you more money because you're charging more for the product or you've increased the usage of the product. So as the product usage or price increases, you have more money, which you can then spend on a better team or additional people for your team or paying your team more money. And then you have a better team and what happens, you can build a better product because they can study the customers better.

They can try more tests and the fly will just cranks and cranks and cranks to the point at which nobody can defeat you, which is what happened with Google's ad network. It's what happened with Facebook's social networks. It's what happened with Uber and DoorDash in terms of their network of drivers and restaurants. It's what happened with Apple and their ecosystem for apps. Once that flywheel gets going, how do you stop it? It's kind of impossible. But it all starts with that founder with the original vision who can then craft a product to delight customers and build a team. Vision, product, customers, team.

If you get that right, it's going to get moving very quickly. What I learned over the years is that in this process, I thought, you know, if I could build that business, if I could see a way for that flywheel to get moving, well, then it could happen, right? Like, because I could do it or I've seen other founders and I could see those other founders making it work. But you as an investor become a coach, right, or the owner of the sports team. You're not on the court.

you can't play the game. You can't bring the ball up the court. You can't shoot the shot. You can't get the rebound. You have to trust that the players you back and the team you pay on the court to win the title that they can do it. And that's what I do now. I teach all of my team members how to think about this fundamental strategy of picking founders. Do they have the ability to build this product? Are their customers delighted? And are they building a great team? And sometimes you look at and you go, you know what? They're not even talking to their customers. They don't understand who their customers are. Or this product is not that great. It's clunky and it doesn't make sense and it's ugly and it's not well designed. There's no craftsmanship here. I'm moving on. Or they can't fill any positions in their company. They keep coming back to you. I can't find a developer. Well, if you can't find a co-founder, you can't find a director of sales, or you can't find a customer support manager, well, guess what? You're not a founder. You suck. You're just not good enough. If you can't recruit the team, and no excuses about money or time or whatever.

If you can't recruit a team and you don't listen to the customers and you can't build a great product or any combination of those, you're not fit for this career. And that's fine. You should go work for somebody else. You don't have the ability to be in the founder's seat. Listen, I know you're going to feel anxious, buying an expensive suit. And oh my God, what if I get a stain on it?

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So, I'm curious what you think in terms of when you look at founders and what you like to bet on. Some people like to ask me introverts, extroverts, some people, technical, non-technical. None of that really matters. Because I've seen introverts and extroverts both be able to understand customers well and recruit well and build great products.

I don't think that's an introvert, extrovert thing. And I've seen technical founders be able to recruit and build great product. I've seen non-technical founders be able to do the same. I don't think it has to do with the personality traits that a lot of people like to project into them, the Myers-Briggs or any other astrology-based personality testing that you love. I don't think you have to be that complicated. is this product crafted well? Can they recruit great people on their team?

Even if it's just one person, if it's a co-founder. When I recruited Brian Alvey to be the co-founder of Weblogs, Inc, people were like, oh, Brian Alvey is really smart, and he's built multiple content management systems. And then when we recruited Peter Rojas, people said, oh, he was the guy who created Gizmoder, and now he's doing a gadget, credibility went up. And then Peter recruited Ryan Block. And then I recruited Sean Gold, who had worked at Myspace, to help us with sales.

All of a sudden, there was this momentum. of my ability, which I think was kind of my skill set in that company I started Weblogs Inc with with Brian Alvey. My role was to recruit people and to get them motivated. Brian Albies was to build the technology. Peter Rojas was to build this incredible blog and gadget that sort of was the tip of our spear. And Sean Golds was to make the cash register ring. But it all started with me coming up with the idea and then recruiting people. And that really is one of the great ways to win. Sometimes you could have someone like Brian Albi start the company because they're great at technology. That happens all the time.

Larry and Sergey come to mind, great technologists or Elon. And then other times you have people who are great recruiters. And then sometimes you have people who have great sales executives and a great sales executive can come in and get a company going just because of their sheer force of will and their ability to sell the vision. So for you as the founder, let's take a minute to think and be introspective here in terms of how do you build yourself up to be somebody who's worthy of an investment, right? because that's what people ask me.

It's like, why can't I raise money or how do I raise money? Well, we are all in a credibility race. And how do you build credibility? Well, I just told you what I'm looking for. Other investors might have other things that signal credibility. Oh, you went to Stanford or Harvard or you come out of Google or Facebook or Uber. You worked at one of those places. You know, those are legitimate credentials, I guess.

You scored high on your SATs. Therefore, it got you the ability to get into a great school. and it's competitive to get into that school, and you completed your degree. All of that, I guess, is some sort of credibility. For me, the credibility comes from your ability to build a great product, recruit great people, and understand those customers. So if you break that down,

the ability to talk about your roadmap for your product and to design it and talk about why these different features exist, and I would call that being like the product maven, that will raise your credibility. If you really understand your product, then if you really understand your customers and not the Tam, oh, there's, you know, a trillion dollars spent on food, that's not the Tam we're talking about. When DoorDash comes in and says, oh, we are going to be in these six markets and we're going to start with these six markets in this order because they have this many restaurants and these are the

restaurants we're going after. The bottom up Tam that I talk about a lot in our accelerator, where you're not saying top down how much food is eaten in the United States or how many restaurants there are. No, we're talking very specifically about food that's delivered. Well, that takes out the Michelin store in restaurants, and it also takes out fast food, which hasn't participated in delivery. Who's left?

Okay, you've got a range of businesses. Okay, why would they consider doing delivery? Okay, well, some of them are already doing it, so you don't have to win them over. Who are you trying to win over? Are you trying to win over? Another set of restaurants that are very popular, but they're so popular they don't even bother with delivery.

Okay, how do you make a restaurant? restaurant that's sold out, decide to create a delivery arm. Okay, you've got to make it brain dead simple and easy for them and not screw up their main business. The way I'm describing this to you is how it was pitched to me by various DoorDash-like companies. And you just like have this moment when they're talking like they actually understand who their ideal customer is.

And they understand how many there are. And they understand how many deliveries they could do and how much they would use a service and what percentage of the revenue they would allow them to take. All that specific knowledge about the customer or that specific knowledge about the product will let you build your credibility over time. And as you answer questions crisply with investors about your product roadmap and the product you're building and the customers, they're going to be able to tell that you're answering very specifically about your customers, not generally. And you have a very specific roadmap and a go-to-market strategy.

And you're not being apologetic about your business. You're unapologetic. You're saying, hey, listen, we have four customers, and here's how they're using the product. This customer is not really using it. This one is paying a lot for it, but they don't actually get tons of value, but these two are getting the most value, and here's the value they're getting. And when I talked to them last week, these are the features they asked us to add to the product.

Those are the people that when you're talking to them, you're. a light goes off as an investor. Oh, this person really understands their customer, and therefore I can give them money. You want to be one of those. And when a founder gets asked, hey, what was your revenue for the last three months? And they don't give three numbers.

They just start talking and they start filibustering and making a bunch of excuses before they've even answered the question. Man, you're doing it wrong. Just answer the questions very specifically for those investors so they can ask you the next question. So it's incredibly hard to be a founder. 80% of startups fail.

And you have to really start thinking about it. Do you have what it takes? And are you prepared to go on this journey? To go on this journey and to have what it takes means this company and this product has to have some relevance to you. You have to want to see this company succeed. Because if you don't have a very specific axe to grind and some real burning desire to take this company all the way,

you're going to give up. You're going to get distracted and do something else. You're going to quit. And that's what investors know. We know how hard it is to do a startup, and it takes a decade or more, and we know you're going to give up. Therefore, if we don't think that you're really in it

for the right reasons and you have that resolve, that resiliency, it's a non-starter. Doesn't matter how good the idea is, doesn't matter how good the product is, or even if you can recruit people, if you're not motivated, that's kind of a non-starter. starter. So make sure you pick something that is really something that you will go to work on

100 hours a week for 500 weeks. Think about that. A hundred hours, 500 weeks. That's a lot of work. Make sure that you're signing up for something that you really care about. And then make sure you're executing at a very high level. You understand those customers. So product and customers, product and customers. Well, you can only do so much yourself in terms of understanding your and in building a product, you're going to need other people on your team. Nobody gets there alone. So then you have to ask yourself, can I recruit? Can I build a great product?

And can I really, really understand these customers and their needs deeply? If you can do those four things, it has personal relevance to you, you can build a great product and you can recruit people to build that product alongside you and you understand and are obsessed with those customers, you're going to do well. Even if the company fails, you're going to do well because you're going to learn so much and you're going to gain so many skills that on the second, third, or fourth company, you're going to hit a home run.

So I encourage you to start a company. I encourage you to get great at recruiting, great at talking to customers, and great at building products. You do not have to overthink this, folks. And most people overthink it. They think they're going to convince an investor to bet on them and their company.

It's not about convincing the investor to bet on your company. It's about convincing yourself that you want to do this company and you want to put the work, work in to recruit, build a great product and understand your customers. Keep me updated on how you're doing with your journey. You can follow me on Twitter. I'm at Jason.

You can send me your progress on product, recruiting, and customers. All right, let's get some ask Jason's in. Over the past few years, everybody's been talking about no code. And one of the first no code apps was Bubble. You've heard of Bubble. Bubble empowers people to design and launch their own apps, marketplaces or tools. without ever needing coding skills or pricey engineers. Bubble offers a digital editor and cloud hosting platform for as little as $29 a month.

Users can build pretty much any complex web app from marketplaces to social networks to SaaS and more. So why is Bubbles so great for founders? Because you can spend 10 times less on building out your MVP, your minimum viable product. I have so many people come to me and say, hey, JCal, give me money. I want to build this. And I'm like, have you built an MVP? And they're like, no, I don't have a developer. I'm like, well, use Bubble, use no code, drag and drop elements in their visual editor,

and you can quickly and easily build a powerful app. You can go from Idea to a launchable product in a matter of days or weeks, not months or quarters or even years. And they handle all the annoying stuff like the deployment and hosting of your app. So you can focus on your product and your customers. Bubble has over one million users worldwide. And they enable over $1 billion in business volume. The bubble is offering one month free on any of their paid plans, ranging from their personal plan of $29 a month,

all the way to their production plan of $529 a month, but act fast because they're only offering this deal to the first 500 redemptions. Again, head to bubble.io slash twist, bubble.io slash twist, and snag one of those 500 coupons for your first month free. Okay, we have an ask Jason from Paul Salzman via Slack. We're early stage and we're accepted to a medium-sized Excel. What qualities would you advise founders to look for an accelerator before accepting an offer? Okay, number one, how much money are they giving you for how much equity?

Standard deal, Silicon Valley, 100 to 150K for 5, 6 or 7 points, 5, 6 or 7% of your equity. This is reasonable, it's kind of the standard. All you have to ask yourself is, if I were to sell that 100K in equity for two or three points, would this accelerator, the remaining three or four points you give them in kind, the money you get, the equity you give them for running their program, did they make the company, let's call it 4% more valuable? If you come to my accelerator, we introduce you to a thousand people, we run you through our 16 week program,

your company is going to be worth more than 4% better. So if you don't have other funding options or you think it's going to get you, and or you think it's going to get you 4% more value, at the end of it, and it's going to act as a catalyst and an accelerant, that it's worth doing. Now, if they want 10% for 10K or 10% for 0K, and those sort of low tier, I would call those the third tier accelerators, they do exist. They want a ton of equity, and they really are just giving you advice, which is probably not worth that much.

That is an all likelihood, too sweet of a deal for them and not a good enough deal for you. you can pass on those pretty easily. If it's a top tier accelerator, very little downside to going to TechStars, Ycombinator to launch accelerator. That's like the top tier. Now, you asked about the middle tier accelerators, right? A medium-sized mid-tier accelerator,

if you can't raise money any other way, and the founders of that accelerator, who are you going to be interacting with, have had some success in life? Maybe, yeah. I could say definitely a maybe, but you want to make sure how much money they're going to give you for what amount of equity.

If it's reasonable, great, but they're not going to follow on. Accelerators don't have a big checkbook. The only accelerator is really that follow on are the top three I mentioned. Wycombinator has a continuity fund. They used to automatically take their pro rata, but now I think they're discerning about it. They make a decision each time, in other words. And then TechStars has a growth opportunity fund, I understand. And then we, of course, of the seven companies per cohort, we will, I think, invest on average

in four or five of them on graduation. And if they get another investor to come in and lead the round, we're almost always going to be there. The only exception would be if they do it on weird terms, like an uncap note, common shares, or a crazy evaluation, which I think happened twice in 150 companies. Beware of predatory folks who have not had success in their life, they're not going to really teach you much.

You're better off just staying focused on your customers and building your product. Tyler Jenkins, Frye, Slack asks us, As a college student in business school who has very little technical knowledge in building a product, but wants to get involved in the entrepreneurial landscape, how do I make connections with people who have technical skills or go about working on a startup with my ideas without having almost any of the coding technical skills to develop myself, any advice. Okay, you are worthless in the entrepreneurial space if you can't build product or you can't sell or you can't raise money.

And I'm not saying you're worth this, Tyler. But I think you need to take a look in the mirror and say, what exactly are you bringing to the table? An idea? It's not enough. That's not enough. I'll be candid with you. Your ideas are not that great.

Nobody's ideas are. Everybody comes up with the same ideas over and over again. You need to have some specific skills. Now, if you're not a developer, that's okay. There's something called no code. You can use any of the no code solutions. Take you maybe 10 hours a week for 10 weeks to learn how to do no code reasonably well to build an MVP. You can also do sales. And if you can't make connections and find technical

people and get them to work on your project, well, you're not that convincing and you don't have a great vision. And this is a really hard advice I have to give to a lot of idea founders, you know, business founders. The word business doesn't really mean much and ideas means less. If you're just an idea or business person, which some people might actually say I am an idea or a business person, they don't understand that I actually know how to recruit people and I know how to market stuff and I actually do know how to build product. That doesn't mean I'm a developer. I mean, I did write some coding when I was a kid. A lot of founders who are in your situation are greatly overestimating the value of their ideas or their business, in quote,

skill. Business is not a skill, okay? And ideas is not a skill. You need to be able to do something very specific in the world. Now, being a product manager is something you can teach yourself, no code you can teach yourself, and UX and UI, user experience, user interface. You can buy a couple books on that. You can start doing mockups. You can learn all that stuff. And if you don't have any of those skills and you just want to be an idea person, well, you better be rich or you better be able to raise millions of dollars. And there are some people who could just come up with an idea and raise a bunch of money. If you can't, then you haven't earned the right to just be an idea of business person, you need to actually add some skills.

And if you're not willing to put 100 hours or 200 hours into adding one of the skills I mentioned, no code scripting and building MVP's, being able to raise money, that is a skill, or UX, UI, if you can't add one of these skills, you probably shouldn't be a founder. All right, Jacob, by email says, if you had to rank these three signals as most to least important for a startup success, how is you rank them? a beautiful world-class design product app, like com, two, customers that love the product, good example, Uber, or a massive market size,

good example, Stripe. Okay, it's an interesting question in framing that I have to rank them. And just looking at each one, well, a beautiful world-class designed product without a massive market is a niche product. Now, niche products are not bad. Those can be businesses worth $10 to $100 million.

That's real and valid in the world. It might not fit the criteria for venture backing because it's too small. I'm talking about the enterprise value of $10 million to $100 million, which would then imply revenue of $1 million to $10 million. So let's put that aside. You know, having a beautiful world-class app in a small market, not really good. Now, a huge market with an ugly app that customers love, I don't think I've ever seen that.

In hindsight, you might say, Craigslist and eBay and Amazon are ugly-looking websites because over time they've chosen to not refresh them and kind of not confuse people. It's understandable. You know, IMDB also super ugly websites. A lot of these ugly websites from Web 1.0 or into Web 2O, they didn't change for a reason.

They were such money-printing machines that the cost of changing the design radically would mean that you would lose and confuse customers who are just absolutely pouring money into the products. At the end of the day, you really need to have, I think, a huge market if you want to be a venture-backed startup. So without a huge market, you can't be a venture-back startup. That's a non-starter. And you need to have customers that love the product.

Does it have to be beautiful world-class design? No. But I will say early on, a beautiful world-class product that's beautifully designed will get you the first set of customers and is still confident. and we'll get you the money to build it. So the beautiful world-class design helps you get investors. If you get those investors

and you have beautiful world-class design, you have the money to spend on marketing your product and getting more customers. So I kind of feel like this flywheel of a beautiful product, raising money, and some early customer love

is they're not independent of each other. And you shouldn't think of these as a ranking as much as a circle and the fly-wheel. will going around. If you have a beautiful world-class product, you're going to be able to raise money. And if you have customers, you're going to be able to raise more money or have more money come in from them paying you for the product. And do not get obsessive about market size, because a lot of the best startups induce a market to exist. The market for renting somebody's

couch or actual bed and breakfasts in the United States and globally was very tiny, a fraction of the size of Airbnb. But they willed a type of vacation and nomadic lifestyle, you know, Airbnb or a bed and breakfast that did not exist before they created their platform. So, a lot

of times a market will emerge because of a great, beautiful product. An example would be meditation apps. Com and Headspace got millions of people to pay for meditation apps. The total addressable market for

meditation apps before those two apps existed was zero dollars. Ten years ago, nobody was paying for meditation apps. Now you have probably 10 million or 20 million people paying for all the different meditation apps out there. They induced that market to exist.

So it's a really interesting question. Another way to frame this question, that might have been better, not to redo your question is, was you rather invest in a world-class product with moderate customer love or a slightly janky product with incredible customer love and usage? you'd obviously pick the latter

because even if it's a little janky if customers love it and use it, you can polish it up and you can iterate on it. If it's world-class, but customers don't love it, it means you don't have product market fit. That does not mean you should not aim to build a world-class product,

but it does mean that if you don't have a world-class product yet, you should keep working on it because customer love is at the end of the day what it's all about. If you solve that customer problem, you know, and things will solve themselves in terms of how good looking your product is. I remember Travis hated how the Uber app looked and worked in the beginning. He was really upset about it.

And, you know, Ilam was, I think, not happy with a lot of the features of the Roadster when it first came out. He inherited the Roadster from the original creators of it. But, you know, he quickly fixed those things. But I do think a product that is a little janky, but that has customer love is better than a beautiful product that nobody cares about and is indifferent to. Another way to ask this is, you know, which should be your North Star, a beautiful product or customer love and adoption. If you could only pick one, you would pick customer love and adoption.

You know, if customers love it and they're using it, it kind of doesn't matter if it's a little janky. You know, if there's a hole in the wall place with the greatest hamburgers ever and there's a line out the door, people are not going to care all that much. That being said, in today's market with a competitive app store, with world class, exceptionally beautifully designed products out there, I don't think that you should aspire to have a janky product that's unrefined.

You should aspire to have as refined a product as possible and every chance you get to refine it. But customer love and adoption is your North Star 100%. Okay, another question from Blog, Tremendous. What is your number one piece of advice for newer angel investors? Please take your time. And please try to get to some amount of diversification in your portfolio.

If you have 250K to invest, I would love to see you do 20 investments of 5K. Now you got 100K into the first 20 companies, 150 left over. Then take the top five companies out of that 20 and put 30K into those. Now you've got 35K in each of your top five investments. Do not blow your entire bankroll

on the first investment or first two investments because 80% of startups fail or more. second, I want you to invest in companies that have gotten their products to market and have customer traction, customers you can talk to, let's call it 10 to 100K a month in revenue. Because 90% of startups fail before they get their products to market. That's just my personal experience. And I'm talking about projects. Maybe they're not even incorporated yet.

They're kind of starting their startup. And then if you took the class of startups that actually get to launch of those, another 70% wind up in a zero. So it's something in the neighborhood of, you know, projects that become startups, maybe 95% go to zero and then startups that have been incorporated and raised a little money, maybe it's 70 or 80% go to zero. You can avoid all that early pain and heartache by simply waiting and investing in 20 companies, 5K each, that are, that have products in market.

I would find it very hard to believe if you invest it in 20 companies of decent providence, you know, with other Silicon Valley investors. I would find it hard to believe if all 20 would go to zero. It's statistically possible, but I think it's less probable.

And I teach, of course, Angel University, if you want to go, it's a $300 donation to charity, angel.com university, all proceeds. Go to charity. Sometimes we discount it. But yeah, just go, angel. That university, if you're an accredited or an unaccredited investor and sign up.

I teach it every quarter. And we usually have three, four, or five hundred people come to each class and it's on Zoom for, I think it's four hours now. Great course. I love teaching it. I think I've taught it 18 times now. All right, before we finish,

we want to talk a little bit about remote demo day. As many of you may have heard, we started a program called Remote Demo Day. It's like the Demo Day of any other accelerator, except it's for all founders, not just ones from our launch accelerator. And we select seven great founders, and we have them pitched thousands of investors,

hundreds of those investors come live, thousands watch the replay, and it's all fully remote. If you've got a Zoom connection and a camera, and you have a startup that has a product in market, maybe a little bit of traction, you qualify. It's been a huge success. We've been doing it for a year.

We started it during the pandemic. We've invested over 16 million in the companies who presented. 16 million. And I have not met any of these founders in person that we invested in yet because we did it during the pandemic. Looking forward to meeting them all. in the fall. And if you're a founder and you want to apply, go to RemoteDemoday.com and just fill out the form. So RemoteDemoday.com, fill out the form. We're looking for companies that could

grow to $50 million in revenue over the next decade. Maybe you're at 10K a month or 250K a month. I'd say that's a pretty good sweet spot. Anywhere from 100K a year in revenue, up to $5 million a year in revenue, anything in that range, I think, is good. If you just have an idea, maybe not. But even if you have a pre-revenue company, I think you can apply if it's really well done. We would consider it. So go ahead and visit remotedemoday.com to fill out the forum. If our team is interested,

we will book a meeting with you to learn more. And we usually offer people a 10 or 20-minute choice, 10-minute quick meeting, 20-minute if you wanted to run us through your deck. So you apply at the website. If our team thinks it meets the qualifications and you would be a good candidate, we will book a meeting, we do a Zoom meeting.

Then if you're selected, you give a three minute pitch, you answer a bunch of questions live from the judges, and after 10 minutes, each of the companies goes for 10 minutes. After 70 minutes, the audience has watched seven companies. And then we send them an email and say, how much would you like to invest in each company? We then take all of that interest. And if it clears about 250K, we will do due diligence and even run a syndicate at the syndicate.com. So we've done this many times now and have over 16 million invested. So, and it's, I think, some of the great companies we've invested in recently. Gigster comes to mind as one of the great ones that we got to invest in. Super simple, three-minute

pitch. Maybe you get 500K to 3 million funding. The largest funding was 3.7 million, I think. So, again, apply remotedemoday.com. If you're an accredited investor and you want to attend, just go to Remote Demoday.com and fill out the form. And if you want access to all the deals I invest in, you can sign up to join my syndicate, which has over 8,000 accredited investors now at the syndicate.com. The syndicate.com. Okay. And the next two remote demo days, July 28th at 11 a.m.

And Wednesday, September 29th at 11 a.m. So we do it on Wednesdays. We have one in July, July 28th, 11 a.m. Pacific. And then we're skipping August, but we'll do it again on September 29th. So if you want to get in for that July 28th, there's still time. Apply now, Remote Demoday.com. We'll process your application and we'll let you know right away if you got a spot or if we want to do a follow-up meeting.