This Week in Startups - DoorDash Co-Founder Stanley Tang on founding story, lessons + First-time fund manager panel | E1759

Episode Date: June 9, 2023

This Week in Startups is presented by: Embroker. The Embroker Startup Insurance Program helps startups secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off of traditional insurance today at Embroker.com/twist. While you’re there, get an extra 10% off using offer code TWIST. LinkedIn Marketing. To redeem a $100 LinkedIn ad credit and launch your first campaign, go to [linkedin.com/thisweekinstartups](http://linkedin.com/thisweekinstartups.) Squarespace. Turn your idea into a new website! Go to Squarespace.com/TWIST for a free trial. When you’re ready to launch, use offer code TWIST to save 10% off your first purchase of a website or domain. * Today’s show: The contents of this episode were recorded live at LAUNCH Angel Summit in Napa. DoorDash Chief Product Officer and Co-Founder Stanley Tang joined Jason live on stage at Angel Summit to discuss DoorDash’s founding story, avoiding ZIRP distractions, and the cloud kitchen movement (1:23). Then, Jason sits down with Kelli Fontaine of Cendana Capital, Sophia Amoruso of Trust Fund, and Paige Doherty of Behind Genius Ventures to chat about becoming and investing in first-time fund managers (36:49). Follow Stanley: https://twitter.com/stanleytang Check Out DoorDash: https://www.doordash.com/ Follow Kelli: https://twitter.com/kells_bells Check Out Cendana Capital: https://www.cendanacapital.com/ Follow Paige: https://twitter.com/paigefinnn Check Out Behind Genius Ventures: https://www.behindgeniusventures.com/ Follow Sophia: https://twitter.com/sophiaamoruso Check Out Trust Fund: https://www.trustfund.vc/ * Time stamps: (0:00) Nick kicks off the show (1:23) DoorDash’s founding story with Stanley Tang (11:06) Embroker - Use code TWIST to get an extra 10% off insurance at https://Embroker.com/twist (12:20) The Palo Alto delivery experiemnt (16:07) DoorDash’s first delivery (18:21) The era of excess (23:00) LinkedIn Marketing - Get a $100 LinkedIn ad credit at https://linkedin.com/thisweekinstartups (24:23) Avoiding ZIRP distractions (26:44) Navigating through the pandemic (30:59) The Cloud Kitchen movement (35:31) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at https://Squarespace.com/TWIST (36:49) Defining a fund of funds and selecting managers with Kelli Fontaine of Cendana Capital (44:00) Raising a private fund with Paige Doherty of Behind Genius Ventures (48:14) The origin story of Trust Fund with Sophia Amoruso (53:42) The prevalence of startup funds (59:35) Advice for first-time fund managers and having the ability to say no (1:04:36) Running a small fund in a sustainable matter * Read LAUNCH Fund 4 Deal Memo & Apply for Funding Buy ANGEL Great recent interviews: Brian Chesky, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarland, PrayingForExits, Jenny Lefcourt Check out Jason’s suite of newsletters: https://substack.com/@calacanis * Follow Jason: Twitter: https://twitter.com/jason Instagram: https://www.instagram.com/jason LinkedIn: https://www.linkedin.com/in/jasoncalacanis * Follow TWiST: Substack: https://twistartups.substack.com Twitter: https://twitter.com/TWiStartups YouTube: https://www.youtube.com/thisweekin * Subscribe to the Founder University Podcast: https://www.founder.university/podcast

On today's episode, we have two amazing talks from Jason's Angel Summit, which he hosted earlier this week in Napa Valley. First up, DoorDash co-founder Stanley Tang sits down with Jason for a fireside chat. He tells DoorDash's amazing founding story, explains how they mostly avoided ZERP distractions, and more. Then, Jason hosts a panel focused on first-time fund managers with Sophia Amaruso of Trust Fund, Page Finn Doherty of Behind Genius Ventures and Kelly Fontaine of Sandana Capital. Stick with us. This weekend startups is brought to you by Mbroker's startup insurance program helps startups secure the most important types of insurance

at a lower cost and with less hassle. Save up to 20% off of traditional insurance today at Mbroker.com slash twist. While you're there, get an extra 10% off using offer code twist. LinkedIn Marketing. To redeem a free $100 LinkedIn ad credit and launch your first campaign, go to LinkedIn.com slash this week in startups. And Squarespace, turn your idea into a new website. Go to Squarespace.com slash Twist for a free trial. When you're ready to launch, use offer code twist to save 10% off your first purchase of a website or domain. Next up, a real treat.

We have the co-founder and chief product officer of DoorDash. How many people have DoorDashed this month? Raise your hand. Jesus, whole audience. How many people have, be honest now, have double-dashed. Have you ever double-dashed? Sickos. Double-dashing.

It's enough. You get one restaurant, it's enough. You don't need to pick from two. You're going to be doing a triple dash soon. It's ridiculous. My daughters want a triple dash for dessert. I have three of them. One wants boba.

One wants ice cream. Other one wants cookies. It's enough. It's enough, Stanley. At this point, I don't know if I've won more money from you in poker or you've won more money for me. I'm door dash fees. It's probably about right. It's probably.

I mean, I'm just giving what people want. Exactly. Stanley and I became friends because he has a passion for poker as well. You may have seen him on some of the online. poker games. But I wanted to specifically have an entrepreneur here at the end to talk a little bit about the three cycles that you've operated DoorDash under. You started in, is it, 2013? Yeah, 2013 as a landing page for one Indian restaurant, I believe it was. Yeah, something like that, yeah. We had like eight restaurants on a landing page called, it was called pall alto delivery.com.

So it was really a big vision at that point. Yeah, I mean, I can go into the story. Do you want me to? Yeah, please. So, I mean, so we started 2013. And I'll get to the policy delivery bit later. But, I mean, it's funny because we really weren't trying to do a startup. It was literally one of those typical Stanford dorm room class projects.

We weren't trying to do a startup or even a food company or delivery company. I think me, I met my co-founder, Andy and Tony through, I met Andy was in my freshman year dorm. And then Tony, we met through one of those project-based classes at Stanford. And the idea we were sort of working on for this class was software for small business. And I remember at the time, the kind of the hot startup or the hot thing everyone was doing back then was like social apps, Snapchat, things like that. Like everyone's very focused on sort of the digital world, but no one was really focused on the physical world. So what about like the mom and pop shops, the local businesses, you know, none of these people were using software. And Tony, he just wrapped up a internship at Square.

So this kind of this idea of software for small business was very fresh on his mind. You know, I've kind of built, you know, when I was in high school, I used to build a lot of websites for small business owners, kind of for fun. And so this was kind of an area like we were just talking about. Like, you know, maybe we can work on something here. But of course, none of us have, you know, we're all college students. students. None of us have worked at a small business before, or ran a small business before. So the, so, so the way, the way, the way, the way, the way we kind of approached us was, why don't we just

start talking to a lot of these business owners? Like, why don't we just go, you know, after class, we'll just go down to Pal Alto, go down University Avenue. And literally, we'll just go door to door. We just walk in and say, hey, we're a couple of Stanford students, working on a class project. We'd love to just sit down and interview you, trying to understand what is your day-to-day life like, what are some of the challenges you were facing, and see if there are any unique insights we could get out of that. And they told you, if you order $30 worth of food, you can sit, if not get the heck out. Did you get any nose or? I guess in Palo Alto, you get old. I mean, I think the Stanford student class project trick worked almost every time.

Yeah. And we always try to go, you know, between 2 and 4 p.m. Perfect. And when it wasn't busy. So, yeah, we talked to pretty much every business in Palo Alto, Mountain View, San Mateo. I mean, these are restaurants, retailers, flower shops, furniture stores, you name it. And I remember one day we walked into this macaroon store in Palo Alto on University Avenue. If you haven't been, it's this place called Shantau.

Giong, they have great macaroons. And I remember I walked in, sat down and Chloe, who was the manager of the store at the time, greeted us. We started talking. And I remember in the middle of our conversation, she had to go take a phone call real quick. She came back a couple minutes later. She brought this really thick booklet with her, opened it up, started writing some stuff down. and we asked her, oh, what was that phone call about? And she said, oh, it was someone placing an order for macaroons for one of their office parties, and they wanted it delivered. But the problem is, you know, I had to turn that order down because, you know, I don't have the capacity to fulfill it.

And I asked her, oh, interesting. So how often does this happen? Do you get these requests all the time? And she said, yeah, this happens all the time. And she started showing her this book label, which turns out was her, what do you call her, order bookkeeping, like a book clip of all her orders she has from the previous month. And she started showing her, showing me all the orders she's gone that were delivery requests. And majority of them she had to turn away.

And it started, which was, you know, again, like super strange. Like, why would you turn down business? And as I started talking to Chloe, and she said, well, actually, I don't want to turn them down. I wish there was a solution out there. But unfortunately, like, you think about it. Like, as a small business owner, if I have a delivery request that comes in, I pretty much have one of two choices. First is I could do it myself, which is what ends up happening 99% of time. but that means I have to, it takes time, it means it's taking time away from the store.

Like, I have to go do it myself. So unless it's like a huge catering order or something massive, it's not really worth my time. All the alternative is I can use one of these, you know, third party delivery services. And at the time, you know, you would think like, you know, delivery is not a new thing. You would think with like UPS FedEx, they've been around 50 years. Like you would have thought. It would be an option. Yeah, there would be not.

I'm sure there's like a UPS version that can do a five-mile delivery or a three-mile delivery. And it turns out actually there were. And they're kind of these old school services. We looked into it. And you're typically these career services, very old school, no technology. everything was operated with pen and paper. And they typically are very expensive, not very efficient. I think their average delivery fees is probably like $100 to do like a three-hour delivery.

Not really designed for kind of local commerce. Typically they're designed more for legal documents, medical supplies, things like that. So again, like, you know, like if you're going to pay $100 for delivery, but the Macro itself is only $50. The economics just doesn't make sense. And then we started talking to other business owners. And we kind of heard the same thing from, it was like this flower shop.

We heard the same thing from a coffee shop. And of course, we heard this from a bunch of restaurant owners. And that was kind of when the light bulb started ticking. And so, well, maybe instead of building software for these small business owners, is what have we built, use software, and applied it to building a more efficient local delivery service that was designed for local commerce, designed for kind of the consumer goods, and offer that to rush, or sorry, not rush, offer that to the business owner. It's almost like a delivery kind of delivery as a service.

Maybe that's actually the piece of like, quote unquote, software that these business owners we're looking for and that's what we should work on. So kind of the kind of, you know, or, you know, the light bulb moment kind of turned on and, you know, we kind of got, got to work. But except there's just one problem. We have, who are we to offer these delivery service? Like we don't, we're just three college students. You know, we didn't, we had one card between the three of us.

Credit cards. Was it working? And sorry, I said, cars. Oh, car. Yeah, a car. It's like, we can't go out and also one credit card too. And it's like, so where are we going to get the delivery drivers and the trucks and the

infrastructure? It's not like we can just start offering this service. Listen, I work with super early stage companies at launch, like literally year zero. They haven't even incorporated yet. And then we hit the Series A. People have thousands of dollars in MRR. And they, maybe they've only raised a couple of hundred thousand before that series A. And they don't have their insurance set up.

And in fact, we recently had a great startup that didn't have DNO, and we had to really stop everything because they were having board meetings. They were making massive decisions. There were legal issues. And they didn't have the basic D&O insurance that protects directors and officers. So we send them right to Embroker. Embroker is business insurance built specifically for startups. A single application will help your startup get four quotes for four lines of coverage in 15 minutes.

Think about that. Four quotes, four lines, 15 minutes. and they're going to connect you with one of their expert brokers for unmatched service that goes beyond your policy. We use it at launch. It's easy, peasy, lemon squeasy. It's easy, breezy. What more do I need to tell you? I use it. I love it. A lot of our startups use it. They love it. Try and broker today with the code twist and you'll get 10% off their startup package in broker.com slash twist. That's E-M-B-R-O-K-E-R.com slash twist and use the code twist for 10% off. Okay. Let's get back to this amazing episode. So we decided, okay, you know, we can't run it. We can't operate it. We don't have the

resources to build a delivery service. But what we can do instead is why don't we run an experiment? And this is where we, where the political delivery comes in. So we, you know, the experiment was basically what we wanted to validate was, is there actually customer demand for something like this? Well, maybe it turns out there's no delivery service because actually, besides a couple offices wanting Macaroos maybe turns out people don't want delivery. And that's why no one's, no one built it. And that seems to be a kind of a pretty logical, kind of premise. So we kind of wanted to validate, okay, like, well, do people actually want, do customers actually want delivery?

And once we can validate, okay, the customers want delivery, then we can go back to the local businesses and kind of figure something out. And, you know, that part, honestly, we haven't really thought through at the time. You know, it was really, okay, let's try to validate this first part first. So what we decided to do was, okay, let's pick one thing to focus on to deliver. What is it? Restaurants seem pretty obvious because, you know, people are used to, you know, pizza delivery, Chinese food delivery. Or pickup in Palo Alto. Pickup was still a business at that time. Exactly. And also the other thing was the reason why pick up. restaurants was, oh, so we thought, okay, like, restaurants probably one of the hardest

categories to nail when it comes to delivery, because if you think about it, it's the, you know, the food is, you know, it's perishable. It has to be instant, has to be media. So the idea is, people are hungry. Hungry, exactly. So the idea is if you can build something that works for food delivery, then you should be able to build something that works for anything. Dry cleaning, yeah, groceries, whatever, shaving cream. Yeah, because you're starting with the hardest thing to nail perishable. It's an important insight, yeah. Yeah, so we decided, okay, let's do this, let's run this quick experiment. So what we did was we went ahead, found a bunch of restaurants we liked in Palo Alto,

we found eight of them, none of them offered delivery, of course. And, you know, we kind of found their menus, put it into these PDFs, linked it to them on this website, and it's literally just a static page, has no functionality. And all said was if you want to order delivery from these. eight restaurants, called us phone number, and it was basically a Google voice number we set up that ran our cell phone. It probably took us two hours to make that website. It's probably one of the ugliest websites I've ever made in my life. The idea was, okay, let's put this website out there. Put a menu on it. Yeah, and see people. Yeah. There wasn't even a form. It's just a phone number.

And this idea was like, okay, see if people will start calling his phone number. If people called in, we'll just make a note of it, and we'll just explain to him, oh, this is just a class project. We're doing research. We're going to gather. So you just frustrate the hell out of users to understand user demand. Exactly, exactly. And, and, and, and, like I said, like we, we didn't even bother coming up with a name. So we decided, what should we name this?

Well, let's just name at palatal delivery.com. It's not like this is going to go anywhere. You guys hadn't taken any marketing classes at that point, clearly. But great SEO. I see this with a lot of Palo Alto students are like, website domain name dash available.com. It's like the name. Exactly. Yeah.

But it turns out it was actually great SEO because we, because we, I remember we launched this website out. We built, I remember it was a Saturday afternoon. We wrapped up about 4 p.m. went back to our dorm rooms. We haven't told anyone. Honestly, like we kind of just forgot about it. And an hour and a half in, all of a sudden, a phone rang.

Uh-oh. We picked up. This person said, oh, I came across your website, palatal delivery. com. Honestly, to this day, I have no idea how you found our website because we have not told a single person about it. So he literally must have typed in, Paul to Delivery.com or Google picked it up.

I have no idea how. But he called in and he said, hey, I'm hungry. I saw your website. And I want to place the delivery order. I remember his exact order. He wanted shrimp patty and egg rolls from this place called Bangkok cuisine, which unfortunately I think closed during COVID. Did you upsell him on the Vietnamese coffee?

Because that's a big margin item. You could upset him on the macaroons on the way back too. That's true. That's true. Well, originally we were supposed to tell him, well, this is not a real service. But you said, fuck it. Well, I think what ended up happening was I think we're all around the phone and said, well, I'm not going to be the one to tell this hungry person.

This is not real. So you're going to do it? And it's like, well, Andy, you're going to know? Andy's like, I'm not going to do it. Tony, are you going to do it? Well, I'm not going to do it. We said, oh, well, screw it. Why don't we just do this delivery?

It's just one delivery. It's not a big deal. We'll drive to the restaurant ourselves. We'll place a pickup order with the restaurant and deliver it. Just to fast forward. Last quarter, they did 512 million deliveries. That was pretty much the starters. Yeah.

And that was the start of political delivery, January 12th, 2013. Now, it's really amazing about this is a pretty great story. And one of the things I wanted to talk about is just this product market journey that you went on was very basic. You talked to customers. You found a pain point. You observed. You didn't come into it and say, I know better than them. You put up an experiment.

And the experiment showed you, I think the big lesson for founders is, you know, when you have strong product market fit, you will get market pull. And market pull arrived. and obviously Uber Lyft and some other companies started to show, hey, on demand was the thing. I want to fast forward to the era of excess and just tons of money being dropped into the space. I saw it up close and personal with Uber. Obviously, you guys experienced it. It went into such a velocity and a global scale for your business. Maybe you can talk about the peak insanity of the growth at DoorDash. And then we could segue into the age of austerity and how the market has changed its demand.

So when you were but three students looking for seed funding, just having some customers was great. And you were forced to grow at ungodly rates, unnatural rates. And then the market was like, you know what? Show us that you can make this profitable and you have to shift gears yet again. So let's do the second act and the third act together. Yeah. Be crazy. Well, it's funny because for a very long time, we actually couldn't raise money.

Like, I think I remember between 2015 and 2018 when everything started, you know, Uber was going crazy. Like all these funding started coming in. We weren't actually one of the beneficiaries of it. Like, we, you know, we struggled to raise money. Why did they tell you they didn't want to give you money? That's a good question. I guess you have to ask investors that. But I think, I think, I think, but I think, I think, I think, I think, I think really, I think people were not used to this idea of investing in kind of operationally intensive businesses.

I think that's exactly it. It wasn't like a SaaS company or like a social app or digital app. It didn't fit the mold. Yeah. It's like, it's like, you know, like, I remember, you know, actually, I don't know if I want to share the story, but the sentiment was. Well, sure, it would take the names out. Yeah. Yeah, so I remember, like, there was an investor that, you know, that said, oh, well, why you guys are like three super smart Stanford students?

You know, why are you guys working on this like, like, like food delivery business, you know, like operationally intensive, like a real world business when you can just go work on something like when you can build like next Google. Like it's like applying like high margin software, you know, only business. Not an invalid question. Yeah. And what was your answer? I mean, for us, like, I think it's, well, I mean, going back to kind of like how we kind of work through this kind of this phase is, you know, I think because we, the first five, six years, we couldn't raise money, you know, we were forced to stay super lean. And, and I think, and whenever people ask me, well, what's Dordash's superpower? You know, it's our ability to execute and our, you know, maniacal focus on like, you know, Un-Economics. operational excellence, and how do we get that operational excellence?

Well, it wasn't through, you know, it wasn't because, you know, we decided one day we're just like great operators because we were forced to... Constraint. Exactly, constraints, breed in creativity. And between 2016 and 2018, that was when I felt DoorDash was a company was built

because we didn't have the money. So we did not have the luxury to go out and just, you know, you know, just burn money and acquire customers and lose money on every order. Like, we had to do, we had to get, we had to get to unit economics profitable. Like, we had to just go. You did that, but then Uber came into the market with Uber Eats. Postmates got superfunded, I believe. And every, an Instacart, which is not exactly a direct competitor, but they also got hyperfunded. That hyperfunding environment forced your hand. You had to play a different game at the poker table, correct?

So once. So once so so so and then when the soft bank round did come in in 2018, late 2018, then all the work we did between 2015 and 2018 sort of paid off because now we were just structurally we were just much more efficient than our competitors. Like we had better unit economics. We had better product, better quality, you know, much more. efficient, you know, driver networks, more efficient, like customer acquisition. Everything was just more efficient.

So then when we did have the capital to kind of accelerate this, you know, we were just able to grow so much faster because it's- You were thoughtful about it. Exactly. When you're selling to B2B buyers, you really need for your pitch to reach decision makers. It's great if you meet some people who are going to use your product. Okay, great, but you can get those anywhere. decision makers, the people who can take their credit card out, those are called decision makers. And they're upper level executives, right? The problem is, where do you find high level folks? They like

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in the world can offer these kind of eyeballs. Business equals LinkedIn. LinkedIn equals business, business equals LinkedIn. LinkedIn equals business. It's that simple. So how about just give you a hundred bucks right now to test your first ad campaign. That's right. Go to LinkedIn.com slash this week in startups. LinkedIn.com, you got that in your auto-populate in your browser. Then just type this week in startup to claim your $100 credit. Terms and conditions apply because you're giving you a hundy.

Were you put under pressure, though, to spend hard, to go faster, build market share, grow the top line? Did you feel that kind of weight from that giant amount of cash, just weighing on the company? and how do you as founders say, hey, this is not what got us here. Yeah. You know, let's stick to our knitting. Let's keep our discipline. Yeah, I think that was one thing.

I guess our board member, Alfred Lynn, from Sequoia, did a really good job, keeping us in check was because he went through, he also kind of went through the same experience with Zappos, kind of low, almost ran out, almost went out of business, kind a low margin. So he kind of lived through that experience. And so for him, you know, even, you know, when we did raise the big round, he always, you know, kept us in check and, and, and, and, and, and, and, and, and, and, you know, it's important to continue to stay super efficient. Like, he was obsessed with, like, our, like, the, the, the, the, like, he'll go, like, line my line into our financial statements and our union economics and just question everything and

and just make sure like look it's it's it's you know once you you know go down the route of like of of kind of

of excess is really hard to turn the ship it's not like you spend a lot of money and then at the end it's like okay I'm going to be lean now like it doesn't really

work like that the culture gets completely broken and and I think I think you know and so I think having Setting those constraints ourselves, yes, just because we raise, you know, $500 million or billion doesn't mean we have to go spend a billion, right? Like, like, it's like, it's like if you're, you know, if you're, if you're, if you're, if you're, if you're, if you're, if you're, if you're, if you're, if you're spending all the money to subsidize and there's a result, you have negative unit economics, but you're getting a lot of growth. That's very different than, you know, you know, if you have positive growth and, or positive you're spending that money for maybe geography expansion or you're spending.

or you're spending it on customer acquisition where you know what your payback period is. It's like not every dollar burned is like the same. There are more efficient ways to burn the same dollar. Talk about the whipsaw of the pandemic because things shut down, restaurants weren't allowed to open their doors. Then society had to decide,

well, people need to at least if they're going to be, locked in their homes against their will or in some cases, I guess, opting into being locked at home, we're going to at least have to let restaurant workers go to work. That was kind of interesting. And delivery started up again and it created, I guess, a boon for the company. So take us through just for a minute, the crazy, a minute or two, the crazy 2020 year that you had. Yeah, it was, it was, um, Yeah, COVID, it was definitely, it was a pretty unique moment for us. I mean, like, we honestly didn't really know what to expect.

Like, is it, you know, our people, you know, like, everything's shutting down. Like, is that going to impact us? Well, it turns out, like, the exact opposite happened. And, you know, things, like, it's like we, like growth started, like, the growth rate started accelerating, which is not common, right? Like as you get bigger and bigger, you know, typically your growth rate slows down. But during COVID, it kind of just, you know, I remember like every week. Like, it was like a record week.

And it was just, it was just a lot to just keep and keep up. It's like, well, all of a sudden, like, you know, like, well, you got to start thinking about, well, you know, like we had to like roll out all these new features around like, you know, distributing like PPE to all of our dashers. Like, how do we get, how do we get that rolled out? You know, we, you know, consumers now are asking for contactless. Yeah, leave on doorstep. Yeah, yeah. So you basically have to write new software in real time.

In real time. And then for the merchants, you know, like, I think one thing we did, you know, because all of a sudden, like, 100% of their sales were coming through delivery, you know, one thing we did, I think we were the only player that this was, we decided, okay, like, we're going to reduce our commission, our cut from the restaurant. So the way our business works is we take a fee from the consumer, the delivery fee, and then a commission from the restaurants. The delivery fee sort of pays for the drivers, and then our door dash's margin is sort of the commission.

We decided, well, you know, like, if restaurants are going through tough times, like we should also help take some of that burden off their shoulders. So we kind of slashed everyone's commission by 50% across the board, which in a short term costed us a lot of money. But we felt like it was the right thing to do long term. I remember there were a bunch of businesses like Taishoken, my favorite ramen place in San Mateo. And I talked to Yoshi who runs it and he's like, we don't do delivery. Our food is not good for delivery. I want people to experience it here.

Suki-man dipping noodles. He hit very particular and rightfully so because it's the best in the world. And I said, you know, you got to figure it out. You know, I think this could be incredible for you. I would order it. And, you know, he's like, never. And then COVID happened. And now he's got this incredible delivery business.

And so I guess a bunch of people who never believed remote work or remote ramen could work now believe that it can. Yeah. It was definitely an accelerant. COVID kind of made merchants realize kind of the importance of having a kind of a kind of what I call, like, I guess, like an online or e-commerce strategy, right? And the crop applies to restaurants and also just any local business. I mean, I think before COVID, like less than like 20% of maybe even less have, of small businesses had like an online presence.

And that number is obviously jumped significantly higher now. And DoorDash is a great platform to help enable that transition. And that's kind of the position we set ourselves up as. in terms of helping the merchants and local businesses. Tell me a little bit as we wrap up here about how the virtual kitchen, the cloud kitchen, not specifically Travis' company, Cloud Kitchen, but that whole movement, and you can talk specifically about his company, if you like, as well. But just how does the whole Cloud Kitchen movement, how is that now accelerated your business?

Because it's pretty extraordinary to be able to see certain brands pop up in multiple cities. was watching Starbird chicken. I really enjoy the chicken and, uh, great salad. What's that? They have gray salad. Yeah, I don't know about that. I like the fried chicken, but yeah. Well, the fried chicken with the salad. They do have, I have had that. It's a great way to ruin your the healthiness of a salad. I agree. Um, but I'm like, oh, now I'm in New York and I'm at my hotel and I have a choice, DoorDash Starbird or Uberit Starbird, whichever. And, uh, or do I, order this shitty food from the hotel at 11 o'clock a night. It's an obvious decision. So talk about that. Yeah, I think something we always believed early on, you know, as we, as once, you know, as delivery became a bigger, bigger thing, was was kind of this bifurcation of experience and convenience.

Like, you know, like before, you know, like kind of virtual kitchens came on. And I think we're still in. that transition. I don't think we're there yet, but I think the way kind of delivery came along to the restaurant and the local business world was kind of a bolted-on experience. It was kind of hacked on. The same place where you sit down and dine in is also the same place where a driver goes, picks up the food. And if you think about it, that doesn't really make sense, right? Like, if you start from first principles, because, well, A, you know, the, you know, the, the dashers are sort of like, these restaurants are not set up to take this many dashers and they're not laid out in a way where, you know, like, it's efficient for drivers to come in and

out, you know, you're disrupting the dining experience. And secondly, which is probably more important factors, you know, typically like these restaurants are located in like the most expensive real estate of part of the, of the city. Yeah, exactly, right? Like, if you're ordering delivery, like, do you care if your food coming from University Avenue. So I think it was really this idea like, well, as delivery becomes a bigger and bigger thing, like you start seeing this bifurcation where if you want an experience, like you want a great date night on a Friday, you go to a restaurant.

Like if you want to experience what the, I don't know, the latest, I guess, Apple Vision headset, you go into an Apple store to. experience it. But if you want convenience, you just need food delivered to your house, it's just, you know, right away. Kids are screaming. Right, right. Then, then it should come from a different place, right? Like a, like a warehouse or, or a virtual or what they call ghost kitchen or ghost convenience stores, which we're making big push. It's, it's, it's, it's, which we call dash smart. Um, you know, like, like, like, there's, there's no reason why these two things should be in the same place. They should be separated.

And I think that's kind of the trend you start seeing. And that's why you're seeing all these platforms emerge, right? Like cloud kitchens, etc. They're helping, again, helping these merchants and these local retailers navigate through this transition. It's all part of this bigger trend of this kind of this post-COVID world where how do how do merchants adopt kind of an e-commerce strategy? how do they move into this kind of convenience world?

I mean, you might have somebody who's Danny Meyer or some famous chef who wants to have some sub brand that goes into 100 cities, but you also might have the next, you know, Danny Meyer who wants to create the next shake shack emerge and we won't tip our cards here, but we're going to be working on something kind of fun. That's true. We are, yeah. But that, yeah, it's all part of that. To maybe inspire some Mr. B-Sy.

It's all part of that trend. And I think, and I think that's really, that to me is really, really exciting and we want DoorDash to be, it's just, it's just going to be one of many companies that's going to help enable that transition. All right. Give it up for Stanley for being so honest and awesome. Thank you. Listen, we have been doubling and tripling down on Founder University here at launch.

In fact, it's kind of the future of our firm. And it's amazing for us to work with hundreds of early stage founders, even before they incorporate, right? They have ideas and they're trying to figure out what tools to use to make their ideas into our reality, and we're seeing so many of these founder university startups using Squarespace. Everybody knows Squarespace has beautiful design templates. They're all mobile optimized. And of course, they have powerful e-commerce integrations, but did you know that Squarespace also added member areas? This is where you can sell members-only premium content, okay, educational

stuff, et cetera. And if you're a consultant of some type, you have now appointment scheduling built into Squarespace. So listen, if you build it on Squarespace, you build it on Squarespace. Everything's going to work. They keep adding amazing features, and you're going to load super fast on your desktop and mobile. It's going to look great, super easy to edit, super easy to evolve. And if you're looking to start your business, you can't go wrong with Squarespace. We all know that.

So I want you to head to Squarespace.com slash twist for a free trial. And when you're ready to launch, use the offer code twist to save 10% off your first purchase of a website or domain. We love your Squarespace, our longest running partner here on This Week in Startups. Thank you so much for supporting our founders and for supporting this week. meet in startups. Sophia Amarosa is a serial entrepreneur, event host podcaster, author, and her fund is trust fund, a full disclosure.

I'm an LP, and her fund, Paige Dordy is behind genius ventures. Did I LP your fund? I didn't. Not yet. Not yet. Not yet. I do one new fund a year, just small checks to build relationships. So who knows, maybe 2024 will work together.

And then Kelly Fontaine is with, how do you pronounce your firm's, SENDA, SENDANA, which is a fund of funds. Maybe you could tell us a little bit about what Sondana does. I know Michael's here from Sondana, but maybe you could explain how a fund of fund works and how you pick managers to start. So Sondana Capital is a fund of funds founded by Michael Kim. He started in 2010 to solely focus on pre-seed and seed funds. then it wasn't really a thing where there's like 20. So we raise our own capital from foundations, endowments, family offices, and then we choose to invest in precedency funds. And as we heard in the earlier panel, it's hard for them to do these small checks.

So I'm assuming people like Hewlett or USC or other folks who want to get access to this, they'll pay you a fee. Essentially, you get part of the carry, you get part of the management fees. How does it work in terms of the DL? We charge our own economics. Yeah. So how does that work and then how does that affect decision making? So yes, we charge a management fee and carried interest on our performance. We think that's the best alignment of interest is the carried interest.

So it works that, you know, essentially our LPs are getting the fees and carry from the underlying funds and then our economics applied on top. but our first fund is 2x distributed net and over 4x net. So the performance is there if you choose correctly. And so we really focus on portfolio construction and fund sizing for underlying managers. And what a fund of funds typically charge? Because we know funds are typically 2 and 20. That's the standard. Is there a standard for fund of funds?

It depends. Some don't charge carry. Some just charge management fees on the underlying fund size. but I think, again, the best alignment of interest is carry, and I would say 10% is pretty typical. 10%. So if an LP does choose to do this or an endowment, let's say, they are paying maybe 30% carry net net, but they don't have to manage all those smaller relationships and do that vetting. You abstract all of that for them. Correct. And again, our first fund is better than most venture funds on a look-through basis.

Yeah. So that is... How do funds make... that decision? How do endowments make that decision? Do they choose to go with a fund of funds only typically, or do your investors typically do fund of funds and do some directs? And then does that create any kind of tension in how do you manage it? It's a combination. You have large foundations and endowments who are not, who need to write a $50 million check. So they're not going to write a $50 million check to a $50 million fund. Our median pre-seed fund is $50 million. So they won't but they'll do the funds when they graduate from what we focus on. Then we have other foundations and endowments who are looking to build out a direct portfolio.

So we work with them and introduce them and share all of our investment memos research network, and they go directly into the funds as well. So it depends on the foundation endowment. I'd say there's not as many foundation endowments who love to do first-time funds. And so... Yeah. And I sort of speculated on that. little bit in the previous panel, but why is it? Why do they not want to do that?

You know, that's hard because even David Swenson said, you know, it's intuition and going back to Mars. If you're looking for this track record, then you've missed the earliest funds and there's venture, there's research that says funds one through three outperform. And we can debate on why that is. Is it the fund size? Is it you fish the low hanging fruit in your network? Is it the timing? Is it the conviction. We can debate on why first-time funds outperform, but there's research to prove it. But, you know, I think, you know, what does your intuition tell you? Because they have something to prove? High energy, not rich in? I mean, if a founder, if a found hungry, yes, there's a lot of the hungry and hunger and drive. But I do think if you're a founder and you're leaving a company

with a stable salary to start a job, it's the same thing as a GP starting the fund. They're taking the risk in the bet on themselves and they have that whole heart that the timing is right, that they built their career to this point that they can do it. And so it's this opportune time. And Samantha mentioned finding, you know, Australia. So they find niches where their experience and their networks is the right time. And again, it's Goldilocks. There's a self-selection process there. If they're deciding to take that path to do the incredibly hard thing of starting a fund, they're probably high performers or insane or have something to prove, chip on their shoulder. not yet rich, are not calling in rich.

All of those things, yes. Calling and rich is the joke, instead of calling and sick. Let's start, I guess, Paige, with... I have a question. Okay. What do you look for in a fund manager? I feel like for everybody in the room who's maybe thinking about starting a fund at some point, that's something we would want to know.

It's like, how do you evaluate a fund manager? Is that okay? Yeah, I mean, you're a great moderator, too, so... I've already... It seems to be a theme today that I went from the world's great moderator to number three, It was a soft now, but I need to know exactly. I mean, so. Asking for a friend.

I'm asking for a friend. LPs look at, you know, if you fit their portfolio, you're not going to go and convince an LP that doesn't invest in emerging managers to invest in a first-time fund. So if an LP does invest in first-time funds, it's really is the thesis, is the ecosystem, the broader picture of where your networks are, does that fit? And then you get to the discernible edges. And the discernible edges really you focus on what do you do as a fund manager? You have to source, pick, win, and support, right? And so back to the Mars presentation of yesterday of the rational thinking versus intuition, the rational thinking can help you with the sourcing and figuring out somebody's networks

and the support, you can diligence, you can talk to founders, talk to the ecosystem. But it really is the picking that you have to have an intuition on. I mean, you can have somewhat of a track record, but then is that repeatable? So I would say there's intuition and rational, but it's those four things that we spend a lot of time and a lot of time with founders and co-investors and the perceived reputation in the industry. So Paige, tell me about your fund when you started it and then your process for raising funds, and then Sophia will go to you, you're doing a public raise like I am and we'll talk about the public raising. Did you choose to do public raising as well?

I actually didn't do a public raise. Didn't. So I'm 5 or 6B. And I can talk about, like, if you're thinking about starting a fund, there's a delineation between raising in public through a 506C fund, which Sophia and Jason have both done, and then a 506B fundraise, which I've done while building in public, which comes with certain regulatory, like, lines that I've spent a lot of time with lawyers going through in specific. But, yeah, so I served my fund when I was 22 in 2021. I got into Venture because I was binge watching Silicon Valley. I was like, this is the best job ever. How do I do this?

That's a fiction-based show, just so you. It's a level set here. It's not a documentary. Yeah. Well, yeah, it was funny. I thought it was like, it was so, like, hilarious and outlandish, and now I watch it, and I'm like, this is kind of my day-to-day in, like, a weird way. But I just, like, I fell in love with Venture and the opportunity to

support and pick amazing founders building the future that I wanted to see for myself for like the next generation. And then as I was going along in my journey of learning about venture, I thought it was really opaque. So I started building all these resources on Twitter, helping other people break into venture. I was working an early stage startup by day. And then by night, I worked on a children's book called Sea to Harvest that explains venture capital in 40 pages and a lot of colorful illustrations done by my brother. So my first fund was a $5 million fund invested in 27 pre-seed and seed stage companies. Twelve of those raised fall in financing. I'm pretty heavily involved in introducing founders to downstream capital and our LP base is quite strategic in that sense, a lot of founding

partners. And then my second fund, which I launched late last year, actually, Sundana Capital is our anchor. So I'm excited to be on stage of Kelly today. But yeah, that's kind of like how I got into venture and a bit about the firm. And I focus a lot on like what are the demographic shifts that are happening within my generation and what are the different like software's or connected hardware that enable that to be democratized to a broader group people. Did it turn out making that piece of content in this children's book about venture capital, which is just such an amazing, clever idea? Thank you for doing that. That's when I discovered you on Twitter.

Did that turn out to be like the wedge strategy that got you attention? And then social media then had people say, oh, well, if you're starting a fund, maybe I'll put 25 or 50K in. Yeah. I mean, I think like for any of you raising fun, like our first fund was like 1,700 cold calls. And I was like DMing everyone who followed me on Twitter. Like, hey. You said 1,700. Yeah.

1,700. Yes. Yeah. We have 120 LPs in our first fund. So I think like if you're raising a fund, it will be hard. It gets easier along the way and then it gets more challenging in some ways. But yeah, the children's book actually led me. I set up this community number where I could like text out updates for the book.

And that's how I met the first founder that I invested in. His name's Kai Han. He's the founder of a company called Palet, which is community job board infrastructure. Sure. I, it's great. And I remember, like, being on the phone with him and just being like, holy shit, like, this is the founder that I need my name on this cap table. And then after that, I asked him for allocation. And then I think I asked on Twitter, like, what syndicate platforms I could use. They ended up using your share. I think you made a recommendation about a show around that time. Sorry about that.

Can't win them all. Yeah, yeah. And it ended up investing in his company as my first investment. We ended up doubling down through the first fund and he's an LP and our second fund. So that's been a really cool, full circle moment. But yeah, the book directly led me to meeting the first founder that I invested in. Sophia, tell us a little bit about the origin story of trust fund. I know you had done some angel investing. Obviously, you're an entrepreneur and people love operators as investors. Why did you decide to start a fund now? So I've started a company, I don't know, I won't do the like introduction thing because there's like, you know, we've talked enough about it on this weekend startups. So I've been angel investing for mostly the last four years. I invested in first dibs in like 2012 or something like that. But yeah, over 20 companies at all stages, all sectors, not trying to do a fund zero, just really enjoy working with founders. And after I built my second, I guess, venture back company realized I don't like building companies. I really like being in the weeds.

I don't want to hire executives to do the stuff that I enjoy doing. And it feels much better to harvest what it is that I've learned, building massive companies and flailing and, you know, messing up and falling on a public stage and all of the above. Just to kind of, I guess, use the word harvest again, everything that I've learned for them, which is just like I would do it for free. but, you know, I can hustle advisory shares and roll them into the fund. So I went on a listening tour in 20, I guess last year, and just like talk to a bunch of early fund managers, like emerging fund managers. And pretty much everyone gave me the caveat that's like, you never stop fundraising. You're not like spending time with founders.

It's like miserable. You never, even when you close your fund, you're just, you're always fundraising for fun too. And I was like, Jesus Christ. but everything I've ever done, I've been thrown a bunch of, I'm just like stubborn, and so I'm like, well, maybe it won't, maybe I'm special.

Yeah, it would be different for me. No, I don't know. Maybe a little bit. But I decided to do it anyway. You know, I decided to do a $5 million fund and raise in public. Last year, I just kind of went out and quietly emailed my network

and you're one of those people and Mark Andreessen and Chris Dixon and all these awesome guys signed up Jeremy Liu to be LPs because I had met them in like 2012 when I was fundraising for Nastygal. So I've had, you know, relationships for like, I don't know, people are asking like how I met you. Do you know how I met you? Yeah, like 10 years ago.

We've like played poker at CES and like, whatever. So that's like, that's pretty awesome to have those guys show up because I've actually pitched Andresen in the room for a company and been turned down, which is still one of the proudest moments of my career. Just getting in that room, I guess. So decided to go out with a $5 million fund and just like, okay, I'm going to raise in public. Like I had raised a little bit at the end of last year. Heard about this 506C thing.

And I think Ryan Hoover at Weekend Fund and a few other folks had done this and done it really well and published a lot of content about how they did it. And he's also an LP and a friend. So I was able to ping him and ask a bunch of questions about how this worked. And just like, I don't know, went to TechCrunch and was like, hey, I'm doing this fund I want to tell you about it and maybe I'll do something interesting and I'll let people who anyone who's an accredited investor apply to invest in the fund because you know typically you can only have 99 LPs in a fund. I have a parallel fund where I can have like 2,000 qualified

purchasers which are like super rich people and then accredited investors I can have like 249. Yeah. Up to 10 million dollars. Up to 10 million dollar fund. And so I may This really does solve the cold start problem, doesn't it? Yeah, and it created so much groundswell. So I announced that. Only TechCrunch picked it up, and I talked about it on my socials or whatever, and I got a thousand applications from people between 2 and 20K and over $6.5 million in people who were applying to be LPs in the fund.

And there was a big air table that was like, how could you be helpful? It's an opportunity for a broader set of LPs to evangelize the product, send deal flow, possibly help and have a variety of domain expertise that they can contribute to the portfolio companies. Even their teams can possibly beta test stuff that my founders are doing. And so that was really exciting. And I still don't have 100 LPs. I'm still kind of, and I'm almost, I have like five committed, but I'm almost closed up, which is pretty cool. Yeah. And I've written three checks. I don't know. I mean, I could keep going. No, it's absolutely fantastic. If you think about the previous way to do this, you would have like a benchmark or a Sequoia. They've had, you know, six or nine LPs of, you know, 20k each, 20 million each. And that was their first funds. And this was not democratized in any way. And you just have to, I guess, build relationships now with all of these people to a certain extent. I guess some of them just want to put the check in and be done. I mean, for $2,000.

check, I'm really clear that, like, you're going to get information that everyone else gets. You don't get special information. You're going to get quarterly updates. You might get free stuff for, you know, early access to the companies we're working with. But, like, here's what you don't get. Like, I can't have coffee with everybody. My job is to invest your money. Like, that's an email that goes out before they write a check. Right. Because I literally can. I don't want to disappoint people. So I try to be, like, really clear up front. Yeah. Yeah. So Kelly, let's talk a little bit about what you think of this, you're seeing a lot more startups, startup funds, let's call them, these five, 10, $50 million funds.

This didn't exist, I think, when Michael started his fund of funds, right? So now you have many more choices. Is that correct in terms of early stage funds? Yeah, so we did, to make our lives more difficult, or we started a nano fund. So we started anchoring sub-20 million dollars. We added it as a product. We rolled it into our current fund.

But we think, you know, I know the LP said something different on stage, but it really is fund size. And venture returns is really about portfolio construction and appropriate fund size. And so the small funds just haven't outsized chance of returning multiples of capital. And so we think it's a great opportunity for performance. And so we've always 90%, 95% of our capital

has gone into fund one or two. Like we started all relationships at the beginning. So that isn't new. But we just saw, again, more were subsized. And so we put a direct focus there. How do you sort through so many of these new funds? And a lot of them seem like side hustle. So maybe it's become too easy to start a fund.

Maybe people are doing it for fun or for status. And maybe they don't know what they're doing. Yeah. I think 2021 was tourist fans. founders and tourist managers. And I think, you know, you get a good sense of why they're doing it. If you talk about, we really focus on a narrative when we talk to people. So what is your background?

What have you accomplished in your career and why are you doing this now? And you get a really good sense of what their drive is. Do they like the early stage, right? Or is this, you know, we focus only on precedence seats. We do it even with core bigger funds. Like, what is your focus? You want to be an AUM gatherer. you don't care about, you know, the early stage.

We want somebody passionate about helping the companies, because, again, that goes back to the best referencing and sourcing you can get is from other founders. So we spend a lot of time, the GP market fit. Just as you would look at a founder, why are they starting this company? Is this truly a passion? Are they doing this for, because it's cool to be an entrepreneur? We do the same thing. Do they have to be full-time?

It seems to be like the concept of having a part-time venture fund, is kind of strange. So how do you think about the side hustle specifically and people doing it while they're running a company? This has become a point of contention for a lot of VCs. We're investing in your company, but now you're starting a side hustle fund to compete with us as investors.

And does everybody have to have a podcast, a fund, and a startup? I mean, it's, and a conference. Ask you for a friend, do they have to do all of these things, or can they just shut the fuck up and do one really well? Jason, when are you starting? starting a company.

I have inside.com, yeah, so yeah. Still. You need it simultaneously. Yeah, but it's a serious question because it can become overwhelming. Yeah, I think a current operator, I think one of the knocks, like we, we love operators, right? We love people who have been in the weeds and can be empathetic and know the journey. But I think one of the knocks is your products and tooling and understanding gets dated, right? Because with AI, like what tools are using now?

And so being current and in the market, you get different deal flow because you're one of them. You're a peer and your knowledge is current. But should you be leading deals? And probably not. Most founders that have had success are angel investing. So if it's a small fund and a step up and it's just writing a little bit larger checks, I think it works. But I think if you're trying to lead deals, that's not. That's a different beast.

Is the thesis of a fund of funds that you'll keep going. with the manager indefinitely or there is a graduation point? And do you hit that often? And then also, are you looking to maybe look deeper into what they're investing and have the opportunity to direct invest into those? A lot of the sovereign wealth funds or endowments or family offices are like, hey, we want to be in an early stage fund like yours, Jake Al. But hey, what's the opportunity for us to meet the companies? And then maybe we can invest in their series B. How long do you keep investing, et cetera. So do you do the follow-on investing in portfolio companies of your fund-to-fund funds? Okay, so there's two questions there. The churn of the portfolio and then the direct

investing. So portfolio churn, I think most fund-of-funds raise on the Sand Hill names and they keep the roster. That's never been the way we invest. We want a fresh roster. We want to know what's going on in the earliest stages, capture the alpha. So we do have churn. I would say that We view ourselves as a lead investor, like VC views themselves. And so we do monthly calls with our managers. We have a Slack channel. We bring in a monthly expert, and the monthly calls are one-on-one. And so it's for them to come to us if they're thinking about hiring a partner,

or if they're thinking about pirata decisions, reserves, anything about fund management, we want to be a resource to them. But through those calls, we hear about companies that are tracking really well that they want to boast about, companies that are high. having a hard time they need help with, and we capture all of that in our database. So we do have a very small direct fund, but we don't want the tail to wag the dog, meaning we don't want to choose a manager because we're going to get direct deal flow. So we also have strategic LPs that want the follow-on or to lead the next rounds. And so that is General Atlantic Tiger

and Sequoia Capital are actually invested in our fund. And so we will highlight companies to them. So you become an early warning. system for, you know, hey, here's some stuff that could be interesting to take a look at. Correct. Yeah. What's your best advice to the two fund managers on the table in terms of what's important to do every day and to just do really well? Because you must see some patterns emerge of where new fund managers kind of drift and get distracted and don't succeed. And then you must see, you know, some patterns of what results in outsized, you know, long, term growth of funds and multiple funds and outlier returns. So things to avoid things to focus on.

I think discipline. I mean, knowing your lane, I think kind of 2021, nobody had a lane, but I do think the people that stayed in the lane, that's going to stand out. And I think, you know, understanding your lane and your strengths, right? If you're good at early stage, that's where you should be focused, not leading a series B or worrying about karate even in a B. I do think the thoughtfulness, I mean, that's a personal bias. I think that you can really see it with people when they're thoughtful and authentic. When they're so self-aware that they know their strengths, they know their weaknesses, and they're building to a North Star. So, you know, I think Michael was an early investor and forerunner.

She has been so thoughtful and methodical about how she's built that firm. We have Ali Partovian, our portfolio, Neo. He has been so thoughtful. He founded Code.org with his brother. then he founded neo-scholars, then he launched a fund on top of it. Everything has been patient, methodical, and slow to build to the North Star. And so I think it's just the discipline, patience, and thoughtfulness. Sophia, how are you dealing with, you've got a bit of celebrity, obviously, and you get a lot of

inbound, but you have to say no now. And you have to say no to 99 out of 100 deals if you're going to be good at this. how are you dealing with as an entrepreneur, a founder, somebody who is very optimistic, a just constant barrage of having to say no to everybody? I'm really good at saying no, I think. You know, it's like if there isn't, and I, you know, I've never really been a follower in my career, but as someone who's new at this job, I'm going to invest in people who are at least one degree away from somebody that I know.

ideally somebody that I know is also investing or if they can't or aren't it's because they write too big a checks or it's outside of their thesis. I'm not really looking for diamonds in the rough. I'm not looking for people with my story. The community college dropout who like didn't know shit and like raised money and bootstrapped and like whatever. Maybe if there's some wild advantage and they had some, you know. But it's like I'm really looking for for founders who, um, you know, ideally, like, I love second-time founders. So I can just look at, like, a team slide and a deck and be like, meh, you know, no.

Like, I don't need to take a flyer on someone with someone else's money. And I've got like a little, you know, it's like I now have a much narrow thesis. It's not a narrow thesis. But I'm not investing in consumer products, so it's so easy to be like, sorry. No CPJ. Non-alcoholic wine company. I mean, I did well with liquid death, but the other two CPC. brands I did have gone to, they're not zero, but, and they were small checks.

But, and I've marked them down. But, yeah, I don't know. It's like a nice little script that's like, hi, I don't invest in this, or it's outside of my thesis, or, you know, I'm busy fundraising, or I'm focused on this other thing. There's always some really polite way to say no. And often, I mean, you hope that someone is asking, if someone's sending you a deal, they're asking for you to opt into the introduction. So it's much easier to just write that person and say, like, thank you so much. Please keep sending me deals. I don't think this one's right for me.

And some people will just send you shit to be to like prove that they're helpful. And that's just such a like, then you're just, then it's just like some weird. It's not a, it's like a weird expectation of a quid pro quo that I don't, I don't like, I don't like, I don't like, I don't. Yeah. No, the worst advice ever given to founders was when you get a no, ask that person to, introduce you to three more people, because now you've literally got a person who did not see an opportunity sending you to three more people saying, it's no way I'm putting my money in this, but here's the deck. You have to decode that, yeah, because they want to seem helpful to the founder.

Yeah, that's not helpful to founders. I think it's different on the LP side, though, because I do think that there's certain things that won't fit us, like if you're Series A fun, if you do biotech, you know, it might not fit our thesis, or maybe we already have two fintech funds and we aren't doing another, right? But we can still introduce you to other LPs. So I do think even the knows from LPs, it's different than founders. Totally agree with that. Thank you very much for doing that.

Paige, tell us about how many people contact you a week for funding. And then, you know, with these small fund sizes, you don't have huge management fees, which means you don't have a huge staff in all likelihood. I was able to build a large staff off of the profits of this week in startups. basically. I was like, well, I'll just take the profits and hire people to sort through all the deal flow. So, like, literally, I was the management fees. And then in the first fund, we had no management fees. Yeah. And on a $10 million fund, it's 200k a year. So it's not even enough to sustain the partner. Yeah. So talk a little bit about how you manage, how many people contact you,

and then how you manage that? Yeah, sure. I'll take the, I'll take the second part of the question first. So the question was, like, how do you think about running a small fund in a way that's sustainable? So I think there's been like a lot of, there's been a lot more public writing on this. But frontloading your management fees while keeping them still blended like 2% over the 10 years is a really smart way to think about building a firm versus a fund. And so for us, like I front load like the first three years are 5% and then it steps down after that over the period of 10 years. And the way that I think about that is I want to build the firm like through these different funds and that enables me to, to hire a part-time podcast editor since I run a weekly podcast called C to Harvest. I also have a part-time investment analyst who works at a family office as his day job.

And I think one of the reasons why I heard him was, as you were saying, I get an increasing amount of inbound through, you know, being like, semi-public figure on Twitter, which is, and I think, as Sophia was alluding to, I think like the longer that you invest, the more familiar you get with your own set of nos. So now it's like, okay, I look at a company if it's not in the U.S. or Canada, if it's not domiciled there, it's a no. If they're raising at a ridiculous valuation, it's not going to be a fit for us. I would say I'm very disciplined around ownership, which is something that like Kelly and I've talked about a lot.

But I want to get, you know, between one to three percent ownership and the companies I'm investing in, which is not tenable with a company that's going to be, you know, know, over 30 million posts. And then beyond that, I look through, as our portfolio has grown, are there any conflicts within our portfolios? Now I have 36 companies, and I invest pretty heavily, especially in the creator tool space. There's usually some level of overlap. So it has to be a really unique value proposition. It doesn't conflict with existing portfolio companies and hopefully complements them in some way. And, And then I think, like beyond that, I think about investing from a very first principles approach.

So after someone's past those steps, I'll usually take a call with them. And as I'm on the call, I'm thinking through like the three different axes that I think about as a fund manager. So very founder focus. So the first is, are they a compelling storyteller from a quantitative and qualitative perspective? Because this is important whether you're selling to customers, whether you're raising capital, whether you're retaining employees based on an incredible shared fiction that building a company is. The second is do they have a strong mission? I think what I've seen from people of my generation is they want to work for a mission-driven company

that's really important and drives shared action. And the third, and I would argue one of the most important components of my investing work that I look at, is execution velocity. So I'm an engineer by training, and I think about velocity is a vector. being speed and direction. And so how, and I think this goes to like, if you think about like fund managers or founders not having a track record before, like I bet a lot of first time founders. And I look at in their past, like how have they been able to decide a direction? And then how quickly have they been able to iterate and move in that direction with what speed? And I think

those three components are things that I've identified in myself that have helped me become like relatively, I don't want to say successful because everything's still on paper, but have been able to grow, like, quickly in this field. So I feel like I'm uniquely equipped to understand this characteristics. Amazing. Let's give it up for Sophia, Paige and Kelly. Well done. Thank you so much.