This Week in Startups - E1063: The Power of Accelerators E5 Joshua Baer, CEO & Founder of Capital Factory shares lessons from investing in 400+ startups, best practices for transitioning accelerators to remote, insights on SXSW cancellation & more

Episode Date: May 20, 2020

0:35 Jason intros Capital Factory CEO & Founder Josh Baer 1:47 What is Capital Factory in its current iteration? How are they transitioning to remote? Loss of serendipity of random in-person connections 5:38 Josh takes Jason through the SXSW cancellation 10:29 Issues conceptualizing COVID's impact 15:35 Transitioning to rolling cohorts & optimizing their Slack community 21:36 Capital Factory's standard deal terms, why founders join, how returns are divvied up 27:30 Starting Capital Factory during the last economic downturn, how millennials will react to this crisis 30:45 Josh describes his 5 buckets of how companies are weathering the COVID storm 35:09 Remote work's effect on startup collaboration 41:01 COVID's effect on children, getting back to work 47:37 What investing mistakes has Josh made, and how has he learned from them? 56:00 What founder traits does Josh look for? 59:14 Moving to Austin, SXSW history

This week in startups, the Power of Accelerators series, is brought to you 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 imbroker.com slash twist. While you're there, get an extra 10% off using offer code Angel 10. and LinkedIn jobs. A business is only as strong as its people, and every hire matters. Hey, everybody, welcome to this week in startups. This is our Power of Accelerators series.

It's a series we designed to help founders learn about all the different types of incubators, accelerators, and startup platforms that are out there. There are many of these around the globe, and everybody's got a different spin on it. Some are incubators, some are pre-revenue, some are pre-product, some are post-ravenu. Some are more like graduate schools. Other ones are like finishing schools. You get the idea. At the end, will you tell me which one I am. I will. Because we're still trying to figure it out. There are so many names. There are so many names. And my guest today, I've known for over a decade. And he was one of the pioneers in Austin, Texas.

We hear about Austin a lot as a center of excellence for startups and a hub. Well, Josh Bear has been the founder and CEO of Capital Factory for over a decade. And he's invested in how many companies now, Josh, and welcome to the podcast. Hundreds. I don't know if I'm quite at 500 yet, but got to be getting close. Really? So over 400. So tell everybody what is Capital Factory today? What is the iteration today? What is the offering you have for founders who are listening to the podcast right now? So it's, you know, it's so interesting. You asked that in my mind races because do I give you the answer from pre, you know, a month ago or a month and a half ago before coronavirus or try to describe, you know, what it's evolved into in such a quick time. But I'll try to do both. Do both. Because it's

not fundamentally different. But Capital Factory is the center of gravity for entrepreneurs in Texas. And what that means is we're really focused on helping on being a connection point, bringing people together and connecting entrepreneurs to the really three other kinds of people they need most to get started. Investors, customers, and talent, people that they can hire. And we get that through our network, through our mentor network, through the activities and programs that we do, and through our space through bringing people together. And what is it now with coronavirus and the inability for people to come to your physical space? You've got a lot of space, and it's sitting there empty, I assume.

It is, it is. It is. It's just starting to open back up a little bit. But it's not going to be the same for quite a while. And we were really on the leading edge of this in some ways because South by Southwest was one of the first events in the U.S. to get canceled because of coronavirus. And we were one of the first to cancel our activities at South by Southwest. And the funny thing was, I thought that was like the whole thing. I was like, oh, no, South by got canceled. I didn't realize, you know, at the time, it was going to be months or even years of, you know, of consequences.

But now what it really means is focusing, quite frankly, on a lot of things that we should have been doing all along anyway, things that we had at our disposal and we're using, but maybe we weren't using as well as we could to be able to help connect people virtually. And that starts with office hours, which we were already doing, helping connect. startups with people that can help them. And that, surprisingly, is having more utilization and more activity now that we're virtual than it was in person. I don't think it's the same as being in person. I still think there's a lot of value and being face to face with someone. But it turns out it's easier for people to connect. It's easier for them to get on a video chat. So we see even higher utilization looking at on the order about 200 meetings a week happening that way. Does you lose something there

when it's not in person, because you and I think are both Gen Xers, I believe, and still in our 40s. I'm barely holding on. We'll be able to do that for much longer. But we kind of had in our minds, you know, there's nothing like that in-person meeting. So now we're forced to do it remote. And of course you see an uptick because it's more convenient. You don't have to get in a car. So that does well as a line. No one else has anything to do right now. They're all stock at home. Yeah, so there is that, right? You're not going to an NBA game. You're not going to go to a Warriors game or a movie. So what is lost or is anything lost in your mind by these virtual meetings? There's two big things lost. One is you lose the serendipity. It's really easy for me to have a Zoom with anybody that I want to. But it's not easy for me to have a Zoom with somebody I wasn't intending to have a Zoom with. And that's a really important part of serendipity. And that happens in place. That happens from bringing people together. When mentors come in for office hours, one of the most important parts is they see the other mentors. And at Capital Factory, we don't put you in a conference room by yourself where you're not going to see anybody. All the mentors are out in the big open area all sitting at tables because they want to see and talk to each other as they come by,

right? Or I might be talking to an entrepreneur and I might say, oh, you need to talk to Brett hurt. He's right there. Let's grab him. Right. And so that can't happen quite as easily, virtually as it does in person. And the other thing I think is big is this, we built up this capital. We built up this in person capital, right? You and I even have it. And it lasts us so long, even from small interactions over years, right? But that allows us to have an authentic conversation now virtually. And that's not quite as easy when you've never had that foundation to build on. So that's really a big loss. But the good news is you can get that back, right? And take me through the South by Southwest moment. South by Southwest seemed to actually be holding on. And it was quite a

controversial moment. You had Tim Ferriss come over the top and say, this is bonkers. We are going to bring 100,000 or 500,000. I don't know how many people come to. 100,000. 100,000 come to interactive or all three? All three. I think that's on the order of how many people come to the inner of the city. So bringing 100,000 people from around the planet during a pandemic, probably not the best idea.

And Tim Ferriss came over the top, but it was like a one or two week process for South by Southwest to cancel. Where were you on that emotionally and in terms of when you saw Tim Ferriss come over the top? and South by was kind of holding on and not making an announcement. What was your, what was going on behind the scenes? I was really deep in the middle of it. We're one of South by's biggest partners. We're a big venue for South by Southwest. And in a microcosm, we had to deal with a lot of the same issues they had to deal with, right?

It's not such a simple decision of even how to cancel it, right? There's a lot of financial implications to doing it the right way. So even, you know, and so I'm not speaking for South by any means. But from what I could see from the outside, even just from a liability perspective, Southby kind of needed the city to cancel it. You know what I mean? Right. If Southby cancels it, it was their decision and they're responsible.

And I get that they should definitely make the right decision if it comes down to it. But it really wasn't their fault that it happened. And if the city tells South By they can't do it, now it's not South By's fault. It's force majeure. And I don't know that that saved them or anything. But that, you know, there's a right way for this to happen. And it looked to me like it basically happened the right way. The decision was made by health officials and by the city. And South by didn't fight it. They said, we're going to defer to the city

and they waited for the city to tell them to cancel. And I can guess at some reasons why that made sense. Yeah. I'm sure they have event insurance. And I'm sure the event insurance kicks in when the city says, you can't host this. It's now. Ironically, they was in the news that their insurance does not or did not. It probably will in the future, but did not cover. communicable diseases. So I don't know exactly how it played out because in the end, they claimed publicly that they were not covered by insurance. But again, I don't think anybody knew how it was going to play out. This was such an unprecedented thing. Yeah, it's so weird to think about how that was a hard decision. And now it's such an easy decision. In hindsight, it's so

easy, right? I'm like, oh, of course we canceled South by. Right. But it was hard for me. You had so many different, you know, views and people sent, you know, different perspectives. And, you know, the saying goes, it's really hard for a man to understand something that involves them losing their livelihood. Right. You know, like that's, you know, that was the situation that South By was in. That's part of the situation I was in. And we were the first to cancel. We did come to grips with it. We did accept it and we canceled before South By or the city did. But it was a really hard decision. And there were some serious financial implications to it. Yeah. I mean, people had.

had taken deposits from sponsors, sold tickets. Now the question is, are they refundable? And this is so interesting because having spent a lifetime hosting events since the early 90s myself, like you, I would always be obsessing about these minor details and contracts. And people on my team were like, it's a standard contract. Now they all mattered. Yeah. And I'm like, it's a standard contract that's completely negotiable. You see this part where it says force majeure? Like, this is really important. Do you see this one that says, and I would write it myself in plain English, if there is an act of God or the event is, you know, whatever, we will work to reschedule the event at this date. And, you know, from the venues to the sponsors, everybody has to have that spirit of we're going to do it again next year. Your deposit is good. We're not throwing your money away, but it's going to be for next year. And what do you think the chances are? We're sitting here a year from or close to 10 months from now. And it's March is when it takes place, I believe. We're of February. Next March, yep. So they have the dates already. They make the dates for this five years in advance, I think. But not this year, right? Because I don't think they know what's

going on. Yeah. So they already have their dates on the calendar. But what do you think, personally, the chances are that it occurs? Wow. You know, I've been pretty close to all this. I work with the Austin City Mayor, the Governor's Council, the National Guard here in Texas. So I've got a lot of inputs. I see a lot of charts. I'm sure other people do too. And, you know, and I see things that go different ways. I find if you look at all the statistics, it doesn't seem so bad. And if you talk to doctors,

you're scared shitless, right? So, like, you know, there's, there's somewhere in the middle there. It is really hard to try to find your bearings because the data is so convoluted, and there seems to be so much politics in the data,

and different countries, authoritarian countries might be putting out some numbers, you know, Italy. It seems to me like the only way reopen is with a miracle. There's maybe, and there's three, categories of miracles, right? So under what we have now, with what we know has happened, with what historically has happened, I don't see how we are back to normal for a year and a half

to two years in a best case scenario. But there are some miracles that could happen, right? So one miracle would be a miracle cure, okay? Drink a lot of milk and you don't get coronavirus. Yeah. If that were the case, if we find something like that, and that's the easy answer, great, we can all go back to work and everybody drink a lot of milk, right? Or whatever that might be, right. Another one would be the vaccine, which, you know, some people seem to think we're on a great path towards the vaccine, but we've never made a vaccine. And I don't know, I heard something between four years and 20 years before. Yeah. And even once they have the vaccine, it will take time to ramp up production of the vaccine for everyone to be able to have it. And that's still

on the order of a year. So even if they got the vaccine, you know, very quickly, it's going to take a long time before everybody has the vaccine. Right. And then I guess the last thing would be, I don't know, there was some other thing. There was some other, but you know, it's like it's something like that. Something has to come that doesn't exist now for us to be able to do it. To do a hundred thousand person event. Now, a thousand person event might be very doable or 500 person. I don't know a thousand is different than 100,000.

You don't. I don't. I mean, I, that's a lot of people tested, you know, in the weeks before an event. Rapid testing might be the third thing. Yeah. If, if, if, so one of our companies is working on a breathalizer. Like, you blow into it and it tells you within 10 seconds if you have. COVID. Wow. So yeah, if that becomes real, do you tell us your name with that company?

Worlds.A.I. Worlds.A.I. Worlds.A.I. World's dot AI. World's that AI. World's that AI. But it's worlds. And, and, you know, yeah, if that, you know, come, but that's not, it's not ready now, you know, like, but if that becomes real and we could test every person walking into Capital Factory, okay, I think we could go back to work, right? Yeah. So something has to become a real that's not real now. Now, that's the world we live in, right, of people inventing things that aren't real. So I think that can happen, but it's not, it hasn't happened yet. Right. When we get back from this quick break, let's talk about how you're going forward with the Capital Factory accelerator when we get back on this week in startups.

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10% off by using the offer code Angel 10. That's right. 10% off for using Angel 10. All right, Josh Beres here. He is the founder and CEO of Capital Factory. And he's been doing that for over a decade, invested in hundreds of companies, even more than I have. I think I'm at just over 200. You've done like 400. You've been out of for a decade, amazing pace. Previously, people would come and you would have cohorts or would you have a rolling acceptance? You know, when we first started 10 years ago or a little more, we had cohorts and every year we did cohorts. But now we've moved to a rolling acceptance where basically every month new companies come in. And I love cohorts.

I think it's a great thing. That's one of the things we lost is there isn't really the sense of a cohort. But at the same time, once you're in, you're in. It doesn't expire either. So as long as we own stock in your company, as long as we're part, you know, have some equity, you get the benefits of being part of capital factory. So that's the new model. you invest, and it's all gone virtual, basically.

Yeah, well, again, not that we don't think that people will come back in person eventually, but we have to assume that for a significant period of time, we're operating fully virtually. And so there's a couple different components to that. One is the mentor office hours that we talked about before, and that was really easy to transition. And the next was activating our Slack community. And first place I look to as an example is what you're doing with this weekend startups. But, you know, how do we take our community and get them really engaging online and Slack was an obvious place to do it? And it's not like we have something new.

Like we had this before. We could have been doing this before. It's kind of embarrassing that we weren't doing this before. But suddenly we just put a lot more intention and effort into it. We moderate it really heavily. We really try to curate it and make sure the right things are. We're bringing people into it and, you know, and getting other people into our Slack and talking to our community. and that's been really successful.

Yeah, I mean, we started our Slack. I saw that when we created this week in Startups. Dot Slack.com instance, it was like 2016, I think. And there were like 10 people in there and nobody did anything. And then I was like, oh, God, I'm stuck at home. I'm lonely. I'm just going to start inviting people. So I took all of our mailing lists and I just invited people.

And all of a sudden we started having thousands of people, you know, a week, over a thousand a day, just hanging out in there. And we've come up with a couple of little devices that I can share that have been fun. Please. One of them is small wins. So it's a chat room where you post your small win of the day. The other one is we created offers and promotions as a channel. And we said to everybody, this is where you put an offer of promotion.

And then anytime anybody puts an offer a promotion in another room, we've replied to them and say, please put this in offers and promotions, and we delete the original message, like five minutes later. So the reply is left, but the original message isn't there. So people subtly get the sense that, oh, the reward you get for posting in the wrong place and marketing is you get your thing deleted. Then we search for, you don't have this problem because these are companies of yours, but you get people who are just there to use it as the top of the funnel. And so we just tell people, like, listen, if you're here to use this as marketing,

you're going to have your account deactivated. If you're here in order to have conversations, that's the right reason to be here. So put your display name as Josh Bear and then in brackets, capital factory.com. Is that your domain? And then your display name has a modest amount of marketing in everything you do. It's not a hyperlink. People have to cut and paste it. But it's pretty good marketing.

So now you participate. If you participate. So now the reward for participating is people see your domain name over and over and over and over again and say, what is that? We also started a book club. That's been great. We've done two books so far. And then we have our Ask Jason area, which is they go first when I do podcast episodes about that. And then we did the daily stand-up, which is you just say what you're going to get done today.

And, you know, those combinations are really giving people something to do every time they come back. And then we're doing AMAs. So we're going to ask you after this to do an AMA with the group. And we've had maybe five of them. And those AMAs are not me interviewing you. It's the audience, just like the Reddit AMAs, and we record it. So there's another piece of content. So a week after this comes out, we'll ask you to do an AMA.

So the audience will have watched this, and then whatever questions they didn't get answered, they can answer. So the AMA. Is the AMA in Slack or on video? It's in Slack, and then we fire up video and post the Zoom or the YouTube link into the room. And then if it comes out well, we will sometimes release it as an episode of This Week in startups. So in other words, you'll be on this. episode and then a week later we'll do another AMA with you. But is the AMA, am I answering by text or by voice? By voice, but you're reading them in the chat room, which is what happens on Reddit. People

ask on Reddit, it gets voted up and then somebody responds in chat or they make a video, I guess is two different ways. But yeah, we're doing it in a video. Anyway, those are the things we've learned so far. What have you learned in your Slack about creating community? You know, one of the things that's worked really well for us, which I'm sure I've, you know, learned some of from what I was seeing in your group and, you know, I've seen you doing some of as well, is the Ask Me Anythings. And what we've done really intentionally is we kick off the day every day with an Ask Me Anything. And so we have about 200 mentors in our network. And we've just started going through that group. And every morning at 930 a.m., one of them does an AM for 30 minutes. It's easy to ask them to come

do. It's easy for people to participate in. It's only by text. I'll cede it with some questions because I usually know them. So I'll ask them a couple of good questions. And then I'll I'll tag some other people that I know would be interested in this could be part of the conversation to kind of pull them in. And then we let it go. And what it does is every day it kicks off our Slack community with a whole bunch of interesting new conversations and thought. Wow. And it gets people being able to participate where kind of like you were saying, they're the ones asking questions. But I mean, they're asking questions too.

And so they're part of the conversation with me and the other person or maybe my partners who are in there. And that's been a really great, just kind of like steady drumbeat. of keeping things going and kicking off the day in a really good way. Yeah, I love that. I love it. So what is the standard, is there a standard deal at capital factory? Is it 100K, 150K for 6 or 7% like everybody else? Or something different?

It's a standard deal, but it's really different. And so our model is really a pay it forward model, not that many others wouldn't say that in some ways about them. And it's a really different economic model. So our goal is to work with every good startup in Texas. Now, I realize that's a pretty big ambitious goal. this is a big place, but that's what we're trying to build a program that's designed to do, because we really see economies of scale. The more companies we have, the more we can help them,

the more benefits it draws in. And so the first step of that is that when they join our accelerator program, our mentors are the ones who fund and run that program. So our mentors all chip in each year, their time and money. They put up a little bit of money to help run that program, and they're all investing their time. And then the startups give up one point of common equity. It's kind of like advisor equity, but like, what would you, but you get an army of advisors. And that all goes into a vintage or a pool for each year. So all the mentors that year all get a piece of all the companies that year. Wow. But it, but it's like, you know, and that pool has done really well. Like that looks really good on papers. I mean, it's still

early. But that looks really good. It looks like that's working really well. But that's not why anybody does it, right? But because it comes to the end, like every mentor has one percent of one percent of, you know, each of these companies, right? But it creates this goodwill and this feeling like all of us are in this together. All the mentors have a little piece of all these companies, right? And when you're giving that piece of equity and you're kind of paying it forward into that group, you're paying it forward with equity. And so I don't know of any other programs that work that way. We've been doing that for three or four years now. And last year, you know, over 100 companies joined that. So all the mentors got 1% in 120 companies actually. So 100 companies, 1% of 100

companies is 100%. That's a whole company that diversified across 100 companies, right? So it's an index. Yeah. And quite frankly, a lot of our mentors do it. So a lot of these, I mean, these are first time entrepreneurs, but they're also some of our most experienced entrepreneurs who put the point in because they want the benefits of the network. Yeah, that's fabulous. And now what about capital then? How do they get money? So separately from that, we have a fund. And the fund is mostly raised from the mentors as well and other large kind of LPs, you know, kind of family offices and others in Texas. It's not institutional.

It's a tiny fund as far as funds go. Our last fund was a $23 million fund. No, no, that's a great. That's a great fund for an accelerator if you're putting $100,000 in top. But we've been the most active investor in Texas for many, many years. And because we're writing a lot, we're basically almost every week we've been investing in one of our startups for the past few years. And so basically what we do, though, is. But anywhere from 50 to 250 is kind of our bite size, averaging around 100 to 150.

And typically, seat saves. We're waiting. Well, we invest a long series seed all the way through B. But we don't lead any rounds. And we basically help them put their round together. And then we participate typically about 10% of the round. Similar to what I'm doing. That's how it's really easy for us to invest across the board.

We know them. We've been meeting them and kind of making the intros for them. We know who's leading the deal. We want to make sure they're getting enough money to have some serious. runway, especially in times like right now, and then we're going to invest alongside as part of that. Fantastic. All right, when we get back from this quick break, I want you to tell me in the audience what startups and founders, founder traits, startup traits, will thrive coming out of this insane downturn because you, in fact, created a capital factory at what would either be the

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Okay, let's get back to this amazing episode. All right, we're cooking with oil now. Josh Bear is here. He's Joshua, B-A-E-R. It's pronounced like a bear, like a grizzly, but it's spelled B-A-E-R. He's a founder and CEO of Capital Factor. And as I mentioned, as we jumped to the break, thank you to our partners who are keeping this week

and startups going through the pandemic. I really do appreciate you guys supporting us. I know it's really easy. to just not do any marketing right now. But man, those sponsors coming out for us and supporting us during this time means a lot to me personally. And I appreciate it.

And I will not forget it. You start a capital factory in the Great Recession. In hindsight, the best possible time to start it because there was no competition at that time for anything. And you've ridden it up to this point in time. And now here we are looking like it will be potentially worse. Do you think this will be worse than the great financial recession of 2008 time period?

It seems like it already is. Yeah, it seems like it must be. It seems like it's global, like it's affecting every industry, not every industry, but most industries. And it's, it just seems much more significant. So yeah, I do think this is bigger than then. But I remember very clearly then thinking that this was a great time to start companies in a great time to invest, and a great time to start an accelerator. Why? There was nowhere to go but up. Love it. And the companies that we invested in, we're going to have less competition. We're going to have a bigger market and budgets and everything we're shifting and changing. And that creates opportunity and disruption. When there's that chaos, right? Further from the truth.

That chaos, that reshuffling, what I say? Chaos is a ladder is the game. I think that's the game of throng's quote that people keep telling me. But it is like, when they say don't ruin a crisis, like you've got to take advantage of a crisis, like there's some opportunity there. Really, that last time, nobody, there was so many people out of work that the idea of joining a startup was like, Well, what am I going to do? Go work at, you know, some big company, Goldman Sachs or something. What am I going to do? Go back and get my graduate degree.

We're going to start up better than a graduate degree. I think we're going to see that more now. I think all of these millennials who, let's face it, they've been screwed generationally. So, so much, you know, money being pulled out of the system and then them left with these ridiculous housing prices. For the first time, they might look at this and say, you know what? There's an opportunity here. I can't find a job with a job's out there suck. I'm just going to start my own business.

Do you think we'll see a resurgence in entrepreneurship or a capitulation? Because it's going to be so damn hard. I think we're going to see a resurgence. Look, and it comes from necessity. People are going to need to. They're going to need to be creative to come up with different solutions. And this is my second recession. Actually, you know, I was launching my, not launching, but I was really, I just graduated from

college in 1999 after the first in the first dot-com boom. Yeah. And had my first business. and then there was the crash in 2000. And that also was a great time for us to grow and a great time to be... What was that business? In that case, a bootstrap startup.

That was SkyList. It was one of the first email marketing companies, one of the first email service providers, like a MailChimp. And I guess there was net creations at that time had gone public. Mail.com was a big one. That was for more now.

Like, yeah, Axiom was big in... Constant contact. Constant contact. There was just a lot. of people in the email. It was like Amazon Web Services of email. How'd that company do? That was boom days for email. That was the beginning of email marketing, right? And so, and then through that, we also got spam. Had to figure all that out. Did you sell or did it shut down? What was the outcome? I bootchap that business ran it for about 10 years before I sold it. And it was a great outcome

for me. Good outcome. That really got me started investing and, you know, and moving on to other things. What businesses do you think, let's start, let's do this one two ways. number one, you're doing triage on your portfolio right now. What are you seeing in terms of the three buckets, people who are decimated, people who are thriving, and then people in between? I've got five buckets. Okay. It's usually how I think about it.

Okay. Walk me through it. So there's the, you know, if the walking dead are going to drop dead or already have. Got it. Right. If you were going to die in the next year and you just didn't know it yet, you're going to die now, like really fast. Because the world just changed and everything.

got tight and capital is constrained and, you know, like it's just going to, it's accelerating everything. It's going to accelerate that too. There's no bridge around for those companies. No, it's going to everything's, everything got real, really fast. If you were just going to squeak by, you're going to die too. Right. Because you're not going to just squeak by anymore. Right.

Now you just lost that edge. You lost that little bit and you're not going to squeak by. Got it. That's bucket one. If you're one of the strongest companies in our portfolio and I have a bunch of examples of great companies that I believe in. that have strong businesses that are not negatively impacted by COVID-19. Which is so weird.

They're still going to have to fight to get through this. They're still making layoffs often. Not always, but often. Why? They're still because they're realizing we need to make this last longer. They're lowering their forecasts. They're thinking differently about what the next year looks like. And those that are fundraising, even very strong companies, I'm seeing value.

fluctuations drop dramatically, even by half with strong businesses that are more mature because capital is scared and more scarce. So those are the strong companies in the portfolio. Then there's, if you're lucky, you just won't notice. You know, like maybe you just raise $2 million and you're planning on building product for the next year and a half. Like, okay, maybe it doesn't affect you, right? Maybe somehow you're in an industry that doesn't affect you. And then the fifth bucket are the special ones. If you're one of the special ones, you're going to excel. You're going to boom. You're going to explode. This is going to either blow up your business or pivot you into a new business that's going to take over and, you know, and drive in a new way.

It's going to be a lift. This is, yeah. Everybody else is getting like clobbered by this and getting dragged in the undercurrent, whatever the metaphor is here with the ocean. Yeah. But then some people are going to ride it. It's going to be a giant wave. If you're Zoom or your WebEx or your, you know, you know, Amazon food delivery, those things are booming, right? Yeah.

Meditation apps. Anything at home. I think education is going to be such an amazing one. Huge. Because if you think about it, how many education startups do we see over the last decade, you and I, and then how many of them just never got funded, how many of them never got to revenue, and now how many of them are getting bombarded with parents? That's a great example, too, because I think there's a fundamental shift that could be happening right there.

Because before today, you didn't really want to sell direct to parents. No. Everybody sold to school systems. It sucked. but it was even just nobody made any money selling to parents and parents weren't willing to pay for things. And school systems took two years to make a decision. I think that might have changed. It did. Because parents now suddenly are taking, are going to have to take a lot more into their own hands. And we're seeing more interesting models. And I think we could see a lot more direct to consumer

education than before. I think it's going to work 100%. I think parents are now realizing like some percentage of the time at school is busy work, babysitting, et cetera. And then there might be these like two really intense hours of learning because now they're doing the teaching themselves. Yeah. And they're like, okay, I did the two hours of really intense learning. Now what? And it's like, yeah, well, now was gym, recess, you know, electives, study hall, whatever.

You know, there are a lot of other things occurring study time, et cetera, that maybe we're babysitting would be the unkind way to put it or just, you know, community building, et cetera. What do you think this does? you were one of the first to, you know, realize, hey, you know, Emerging City, great place to run a startup. It's half the cost to run a startup in Austin than here, I think. Right. One bedroom's down there still $1,500 a month? Sounds about right. $4,000 a month here.

So it's super expensive. It hasn't gone down that much. I think it's gone down like 5% here. What do you think this remote work is going to do for startups and big companies in terms of, saving money, what's the upside, what's the downside? Yeah, that is a really good question. And I'm just trying to get my head around it right now because I kind of flip, flap back and forth.

Like, on the one hand, I do think that being in physically in person is important, like we said before, that we are, right now, everything's being so successful and moving so fast because we're eating up all the physical capital that we built up, you know, but eventually we're going to, we are going to run out of it. And we're going to realize that there's a lot of value of being in person. And at the same time, and also another thing someone else said to me that really resonated was he's like, the office that's in person is going to have a 2% edge. But that's going to make the difference. Like they're going to be able to have a little bit of an edge

over the ones that aren't in person. And that's going to give them an advantage. But at the same time, I do think the world's fundamentally different. I think that, and I see so, you know, obviously so many people are trying remote work for the first time. And it doesn't mean all of them are going to switch. But if 5% of them switch, that'd be a fucking title wave. It'd be double or triple the amount that currently are. Oh. Oh, yeah, it'd be crazy, right? Like, it doesn't take, and I think that is plausible, right? That could change. I think that's, I would say that's an understatement. I think we're going to go from, if five or 10% of startups, you know, from Series A4, I'm at all companies, actually.

Yeah. I think, I was saying five or five percent across the board. I mean, I mean, if you look at what Jack did with Square and Twitter, he said, you never have to come to the office. And then Zillow, which is an old school management team. They were like, you don't have to come back this year. We'll talk about next year. I mean, what are the chances you say to an employee, hey, you can work from home. And then January 1st, we're going,

you've got to come to the office. And they're like, yeah, I sold my house and I live in Tahoe. A lot of people are doing that. Yeah. Right? It's happening. So I think that's, you know, that is what we see happening. And, you know, and I know a lot of companies that have canceled their leases,

honestly, more than not. Most of the companies I'm talking to, I'm like, what have you done? I canceled my lease. Now, I think a lot of them are going to get their leases back. But. Might be a renegotiation. They're doing it.

Yeah. They're doing it. It seems to me that a company like Facebook or Uber could not have been created without an office space, without a maniacal group of people in a room, you know, driving towards a vision. That being said, when a company is that scale, is it in Facebook's best. interest to have, you know, thousands of employees on buses for three hours a day or two hours a day, whatever it is? Probably not. Probably not. Right. It's really, you know, like there's some big trade-offs there. It was interesting in Akira Kurosawa's autobiography, something like

an autobiography is the name of it. He talked about how the Toho Studios system in Japan, you know, Kira Kurosawa, Seven Samurai, etc. The director said they would go to like an onsen, like a, they would go to a retreat and a spa, and they would stay there for three or four weeks, writing the scripts, acting out, doing table reads, and then they would go back to their lives. But they had these intense moments of creation. And because they worked with the same actors and screenplay writers, to Shira Mufuna and Kira Kurosawa, kind of the De Niro

equivalent, Scorsese equivalent of that era. They felt like they got to do their best work. I think this might wind up being the model is that the Twitter team comes together or the Facebook team comes together for three weeks in a location. They jam out and then they go for three months and work.

So that's going to be like this nomadic lifestyle that young people kind of aspire towards. I mean, it's hard to do with kids. could become like a model, I think. And when I've been part of larger organizations that have distributed management teams, not even remote work, just distributed management teams, that's what we had to do. I worked with Matt Blumberg at Return Path. You know, that was when I sold one of my last companies to.

And, you know, it's a great company, but they were in New York and Denver and San Francisco and a few other places. And that's exactly what they had to do. Every three months, everybody had to get together. Right. So then you just a different conversation with spouses and employees. Work where you want, but be prepared to be away from your family for 10 days while we grind it out four times a year. So if you want to be away from your family for 30 days a year, it's kind of like doing like the National Reserves or something.

The benefit is you get to be with your family of those other times. What do you look for in companies? What have you learned over the years in terms of refining your own ability to pick winners? Pause on that question for one sec. Yeah. My son's playing Fortnite and I can hear him. So I don't want to make sure you don't hear them. I told him we were doing this and be quiet.

Let me just tell him to be quiet. Yeah, yeah. Leave it in. Gotta leave it in. Hey. That's hilarious. So great. Not only did you do that, he opened the door.

He opened the door to play Fortnite. No, wait, you got a robotic camera doing this? This is awesome. Oh, no, it's more like smart. It's like a high resolution smart Zoom. What does that? This is a Cisco room kit. Ah, I got to get that.

I love Cisco stuff. Yeah. It works well with Zoom, huh? Oh, you can use it as the, you can use it as the camera for your Zoom and then it does, you know, takes over the Cisco calls. That's really good. So was that your son or daughter playing Fortnite? My son, yes. And he's, you know, and he should appreciate this because he's 10 and all he wants to do is be a streamer, right? And like he's, you know, when he's in there, he's putting up the signs like, I'm streaming. Quiet on the set.

Quiet on the set. Quiet, right? So I warned him before I came here. What is going on in his life? How do you think about their child? childhood going into the pandemic. I have a 10-year-old daughter and two four-year-olds, identical twins. So I'm curious, just as a parent, it's a little diversion here. What do you think, is this going to be scarring our kids? Is it going to be a double summer and it's awesome because they get to spend more time with mom and dad on a fortnight?

How are you thinking about it as a parent? And I'll share my thoughts when you finish work. You know, I think first you have to just point out how much this highlights the great inequities, you know, that are in place, right? It's just, you know, how, it's going to be for me and my family is probably really different than it's going to be for a lot of other families. And I'm really thankful of that. And that really, I really appreciate that that I'm so fortunate. But for us, you know, I'm not worried about my kids. Like, you know, like, I think they're going to be fine. And they're going to, you know, this is going to be something they're going to think back on. And there'll be some, you know, it's a different experience that

they'll remember. And they have everything they need. And we'll, they're going to have access to online learning and other ways of doing things. And, you know, there's tradeoffs that they don't get social time with their friends, but they're getting a ton of time with, you know, with our family and, you know, I think they'll be fine. And like you said, it's really kind of like a big, long, extended summer. But then at the same time, you know, I know that that's not true for so many other people. And I've got three kids, right? Like, they can play with each other, right? And fortunately, they're not in an abusive family, right? And they have everything they need to eat and they've got lots of entertainment. And they're not, you're not in a one bedroom where there has to be on

average two people in each room. And this is the other piece of the puzzle that, You know, and again, this is not a political show, but, you know, this discussion about how we go back to work and the impact it has on people's lives and the risk people should be allowed to take as Americans. We're still in America. Like, you know, if you are low risk and you've got four people in a household with two bedrooms, like I, and you want to go to the beach and you want to wear a mask, I'm kind of cool with it. I don't understand exactly like how people who live in giant houses, you know, and who work behind keyboards. get to dictate to people who are gardeners and, you know, own pizzerias or whatever, how they go back to work or if they go back to work indefinitely. You have any take on that? I'm curious. Yeah, I brought it up. I don't, I mean, I do think it's really complicated. My understanding from, you know, what we see in Texas, from what's happening at the city and state level is it's primarily around they're just, all they're doing is managing hospital beds here. It's just like they have a number, and if they think the hospitals are going to get overwhelmed, they lock down more. And if

If it's, if soon as, you know, that's what I see them managing to. And I don't think that's the perfect answer at all, but I, I understand why they're managing to that. And so. As opposed to the Bay Area where we have no cases. Like literally, it's, I think we, because we sheltered one week before everybody else on average, maybe 10 days, maybe two weeks with the slowest states like Florida or something. We've had virtually no debts in San Francisco. I mean, every life is precious. But I think more people die. in a couple of hours in New York, then died here in the entire three-month. Yeah. Pandemic, it's a totally different scale. But is that because they overreacted or because they did because it worked? I think there's the getting on it early would be number one, clearly,

because earlier is better when you have a two-year, two-week incubation period or whatever it winds up being when we have the data analyzed fully. And I think you also have a complying group of people who are highly educated. And so if you've got, got a bunch of tech people who are really into science and they understand a pandemic because they have friends who work in biotech and they've read up on this and they've read the science

fiction novels. I know this sounds silly, but I think, you know, a certain populace that is very global thinking and understands pandemics and understand science would be pretty terrified by this. And I can see other people looking at it and maybe, you know, they think independence and freedom and risk taking is different, you know. I always tell people the story when we were in Australia, like we started jumping off this boat we had rented. And we asked the captains, it okay, if we jump with the boat? He said, yeah. But, you know, like, you can get hurt jumping off a boat.

And he's like, yeah, just, you know, keep an eye out for the whites and the salties. And he's referring to great white sharks and saltwater crocodiles. And he was not kidding. And their approach was, like Texas, yeah, there's dangerous shit out there. And just keep an eye out for it. And if you get eaten by a crock, that happens every year. So somebody's getting eaten. Yeah, I mean, it's tough.

I mean, I think what's happening in Texas is, it's challenging. There's most, you know, I think there's a lot of things we're doing well and doing smart. I think there's some parts that I think are opening up too quickly. What's it like in Austin? Are people going to the restaurants there? Unfortunately, there's a lot of takeout. I mean, there's a really good, efficient takeout mechanism going. But a lot of restaurants still aren't open, you know, and a lot and a bunch have shut down.

Do people wear masks? Yeah Half and half Yeah So that's the thing I think where That to me is the easy compromise Between the hey Shelter in place is to keep the hospital beds open

And not overwhelm the system If you want to take the chance take it And everybody has to stay home forever indefinitely Is hey You can go take that chance If you wear a goddamn mask It's not too much to ask Right

And they should just keep people To that very basic concept But yeah, I think we were the first... I don't think there's a perfect answer, but I think that's a good answer. It's certainly directionally closer to the perfect answer. Like, there is no perfect answer, but if something is absurdly low cost, in this case, it's essentially free. Let's be honest. You know, like a bandana or ripping up an old t-shirt is free.

If it's essentially free and there's no inconvenience, because what, your pride, where you want to make a statement that you don't wear one? Like, that's just dumb. I mean, that's just like not wearing a seatbelt, right? We give people tickets for not wearing. I put it in the seatbelt category. You kind of got to wear a seatbelt if you're in the front seatbelt because... Except the mask is actually protecting other people. The seatbelt's protecting you.

But even more. Not to disagree. But even more so. It's protecting somebody else from your body flying into them. Actually, that is part of it. Like, you don't become a missile out of your car. And also it's protecting the healthcare system from having to race to your accident and find you on the side of the road.

Like, they're secondary effects. Okay, that was an interesting diversion. I hope the family's okay, obviously. and what how did you when you first started picking companies because now you've got like what there's very few people that have broken two or three hundred investments when you look back what were the mistakes you made when assessing and investing in companies that you've now fixed and why the leaks in your own game yeah you know i was just we actually did an aMA this morning with mason arnold who was the founder at the time i first invested him in

a company called Greenling, which was an organic grocery delivery service more than 10 years ago, which, you know, it was kind of post-Pod, but before Instacart or, you know, or things like that, right? And now has an incredible company called C.C.'s veggie noodle, which is creating pasta out of vegetables that's just killing it as a CPG, like really successful company, raised many tens of millions of dollars and very successful. And so he was doing an AMA this morning, and I talked about it. how at the time that he launched the current company that's being incredibly successful, the other company was kind of winding down. He ended up selling it off and it wasn't really, you know, the outcome probably that he was looking for. And I was on the board of that company

at the time. I'd been an early investor and I'd been very involved. And so the company wasn't really going the way he wanted it to. And he, and I think he did everything he could to save it and put, you know, more than he should have to save, to make the money back for the investors and take care of his employees and other stuff. But it just, it was a tough business. It wasn't working. And so, but then he came up with this new idea, which really was a totally different business and different thing. And he offered us as investors a great, really, really good deal to invest in this new thing after he had already really done everything he could to try to save the other company. And, but we were still in the process of shutting that, you know, kind of

transitioning the other company. And I was on the board. And I just couldn't get my head around investing in his new thing while I was trying to like, you know, recover the old thing. Yeah. And it was a great thing and he was a great entrepreneur and it was a great business and he offered me a great deal and I should have done it and I ended up investing later in a much later round at a much higher valuation and you know and that was that was a good lesson and I have a similar one which I don't know if you know Howard Lerman over at Yext of course in New York he launched at our event and I discounted him as well and that was a huge outcome yeah oh don't discount Howard Lerman. And I, you know, I got to know Howard when I sold my first company Skylist to a company called

Datran that Howard at like the early 20s was the C-O-O-O of. And they had just raised like $60 million from Vantage Point after they had sold MySpace. It was just a kind of a heyday kind of time at the time. And and I got to know Howard and Howard was just a force of nature. That permit, he is unstoppable. And he left with a couple other of his college buddies to go start at the, the time a business called gym ticket, which was help basically selling leads for gyms in New York City. And I knew Howard was a total badass and unstoppable. And I knew the team he was pulling together was great. And all my friends who knew him really well were all investing. But I couldn't figure out the freaking gym ticket thing. I was like, huh? Like, I don't know. Like I don't get it. Like whatever.

And I passed. And of course, he used that, you know, always bet on the team. Like he used that, understood the challenges that small businesses were facing. And that evolved into Yax, which is an incredibly successful company that's IPOed and is, you know, amazing. It does demand side, right? It gets people, customers, but it does it across a platform. It really helps manage all your, your presence across social media and ever else. Such a great lesson. If you had to say that lesson as a rule, if you could state it as a rule, that a new angel investor could easily understand, how would you state that? You know, I think it's really, it's, it comes down. to the, not, you know, as other people

have said before, but it's a bet on the jockey, you know, not the horse kind of thing. You know, realizing that, you know, if, you know, this is betting on great people, but these were great people that were exceptional people. And exceptional people will figure it out, right? Well, we'll find the opportunity. And you always back exceptional people.

Just back exceptional people. And don't, one of these people, I think, delude themselves into thinking as you get more experience is that you can predict what's going to work. and I yeah exactly like who actually thinks they can predict what's going to work tell me what in basic terms your top three investments do of your entire life sure so one of my best companies ever was a company called wp engine their WordPress um managed platform and and kind of run your whole marketing engine now yeah so they're a but a blog hoster that doesn't make the logging software. Exactly.

So just think about how I said that. I'm not saying it to be derogatory. I'm saying it to be as plain English as possible. They wouldn't say it that way, obviously. But yeah, I mean, that's kind of where they started. That's what you invested in. You invested in a blog hosting company that doesn't own the blog hosting software. WordPress sucked at the time from a perspective that it was hard to set it up and manage it

and they just made it easier. And amazing. And then my number one. And they've raised hundreds of millions of dollars. You know, in a super successful company with hundreds of thousands of My number one investment? A cab dispatching software. Right?

It's like most people said no to that. 19 out of 22 people at the event said no at Open Angel Forum. What's your next? Plain English big winner. Give me your plain English description of your next big winner. Next big winner. Probably for me personally would be a bizarre voice. Yes.

Which is Brett Hertz company. Yes. And I was super fortunate that he let me get involved very early on. that. Describe the original pitch. The original pitch. I mean, you know, it wasn't crazy, but it was we're going to give every, every e-commerce website ratings and reviews like Amazon has.

Great. So we're going to be able. But nobody, but nobody had them then. Right. And it was like, wait, they're going to pay you just to put this widget on their website. Yeah. We're, you know, like, why aren't they just going to build that themselves? We're going to get people to put our reviews platform

on their e-commerce sites. Yeah. Like, yeah, that'll never. work. Like literally, if somebody pitched me that now, I'd be like, why would the company ever give you that power? And also, another thing that you might not see in hindsight right now and I might not remember is back then it was like, would companies even want to see reviews on their site? Yeah, no. Like, what if they write something bad? Yeah, no, that was the kind of thing they were dealing with. Yeah. Not realizing that actually bad reviews help you sell more stuff and sell the right stuff. And bizarre voice was able to prove that, that actually having bad reviews improves your

profits. Not to lots of bad reviews, but having, you know, having real data on there. Yeah, makes your product better. Somebody doesn't return something when they know about its limitations when they buy it. That's super interesting. Yeah, people are like, don't buy this. Yeah, don't buy this if you want a rechargeable battery in your flashlight. But if you don't mind, you know, swapping batteries out, this is the best one for the money. It's like you can't. Well, some of its expectations, right? You know, if your expectations are off, you get mad and you return it. But if you knew it was going to come that way, like you're not all pissed off. Yeah. My second best investment.

Audio files for meditating. One audio, one new audio file delivered every day for meditating. It's like a paid meditation blog podcast. It's calm, right? Wow. Yeah, com.com. You know, it was like,

now on my TV, now everywhere. I literally just put it on my sonos because my kids are so addicted to it for sleep that I have to put sleepy paws on the overhead speakers for them every night. They fall to sleep. I read them a story.

My wife reads, a story. I tell them stories. Then they want to still get the third sleepy time, sleepy pause sometimes. And it just, it's really interesting. The humility you have to have of releasing yourself from trying to figure out if this idea is going to work because the great founders will figure that out very quickly and iterate. I mean, Twitter was when I passed on because I was like, Ev, this is dumb. Like, it's just a headline.

It's the headline of the story and you got rid of the story. Who the fuck just wants to read a headline all day? Like, it's a bunch of headlines. It's a cacophony of stupidity. Now that's all I read all day. I don't even read the stories. I just read the headlines. Exactly.

So when you're looking at founders now, what are the founder traits now 10 years into this? You know, and people like to talk about founder traits, enthusiasm, passion, skills, whatever. But really, when it comes down to it, what are the things that founders can learn that will make them better at the job? And then we'll go to inherent things. What are the things that if you could sit a founder down and say, spend two weeks working on this, spend two weeks working on this and spend two weeks working on this, then launch your company, what would they be? You know, I think one of the first things just in how you talk about your company, how you pitch to anybody, you know, investors, customers, employees, and other people is just realizing that your job is not to convince everybody that you're perfect or that your company is perfect. You're not expected to be perfect. You're a startup.

In fact, everything's expected to be broken. You just really need to have one or two good things that are really good, right? Promising. So it's not credible to try to position things like you're perfect. So don't try to do that. Just like be real and be candid and, you know, talk about your limitations and what they are. And in a similar way, when you don't have much, showing what you've learned is very impressive. And, you know, I think I don't know if it was the Airbnb deck or one of those was a classic story of like,

here's all the experiments we tried and what we learned. But I think that's a great story to tell, right? It's just here's what, you know, that's the story. Here's what we tried. Here's what we learned. And if you can show that you're consistently learning and improving, that's something that people want to bet on. And I've got one more.

And that is so simple, but it's so hard to do at the same time. Simple to say, just do what you say. That's what investors are looking for. You're telling them you're going to do something. You're asking them to believe that you're going to do what you say. So start off by doing the simple things that you say. If you say you're going to send them a follow-up, send the follow-up. One of the most impressive things that some very successful entrepreneurs I know do, like Brett Hurt,

is they send a weekly update to all their investors. That's not what I choose to do. Maybe that's a little excessive for me. But that's what they do and it works for them. And the fact that they do it religiously, that it comes out every day, every Friday, and the same time and the same way and you know it's going to come. It makes you believe them. They're credible.

It gives them credibility, just that simple act of doing what they say they're going to do. gives them credibility. And that's something anybody can do is to get small wins, like you were saying before, with investors and with others, by doing what you say you're going to do. Yeah, it is amazing the number of people who, you know, will take so much time to get in front of somebody and then not follow up with them. Or tell the person, hey, we're going to get this product launched on this date and then we're going to get to 100 customers by this date. They do it and they never tell the person they did it. such an wonderful opportunity to follow up with the people who did invest in Dallas. That's a great follow-up.

That's a great follow-up. Hey, when I met you, I told you we're going to launch in September. We actually launched on September 10th. Here's the TechCrunch article. Here's the New York Times article. Oh, and that's the whole update. That's it.

That's all you got to tell them, right? That's just, hey, that's enough. Well, now the company's alive, right? Which for what we do is, you know, a company still being in business is a pretty promising sign. What do you think the global workforce is going to look like going forward.

One of the, and this kind of relates to Austin with a lot of people moving down there. You get a lot of New Yorkers moving there, a lot of people from L.A. and San Francisco, I believe. Are those the top three places people come from? I don't know, but the top places, definitely a lot from the coast. Yeah. And when they come there, what is the experience like for people when they move to Austin? Take me through it. You know, I'll tell you about what I think it's like.

what I hope it's like and what I hear from people it's like. But that's actually one of the things that I hear is the most different. And it starts with Austin being, and Texas, being a rising tide kind of place, right? And there's this feeling that things are growing and getting better, that there's opportunity and that there's room for more people to come. And so when people show up, we welcome them and we plug them in and connect them into other things. And why that might sound like what everybody would say, what I hear from people who come

is that it's different, that they felt more welcome here, that they felt more plugged in. And quite frankly, that's what we try to do at Capital Factory. So many entrepreneurs, when they're moving to Austin and when they come, this is the landing spot, right? That's part of being the center of gravity. And when they show up, we immediately connect them to a whole bunch of other people that they want to know and they want to meet. And that makes them feel, makes them feel connected and feel like they're part of the community. Yeah. What about venture capital in Austin. Has that changed over time? Do you have more investors there? I know it was like a two or three investor town for a while. And then do it was one for a while. And that was Austin Ventures.

And it really has changed quite a bit. There's both basically they were, think of them like a big company that got broken up. They had a whole bunch of investors. All those investors are still here. They just now all have 150 million dollar funds instead of a big, you know, a couple billion dollar fund. And that's better for the ecosystem, right? It's competition. It's energy, it's activity. other LPs and other investors that are joining them. And then there's a whole host of a next generation of new investors and new VCs that often have smaller funds, some bigger, but that are coming from these other places that are moving here. Jim Breyer just moved here.

What? From Excel. Yeah, he's got a house here. What? Jim Briar from Excel. Yeah, yeah. But there's stories like that all the time. You know, Kenny from PayPal moved here right before he became the ambassador to.

I didn't know that. Was Kenny there? Oh, wow. Oh, yeah. Kenny's got a house. He's been trying to move here for years. He's in Sweden. He's in Sweden. Yeah, Sweden. You're right. And then you got Tim Ferriss on the team. We got, yeah, Tim recently came down here a couple years ago, very publicly. Does anybody ever see him or is he just stealth? Because he stopped angel investing. I know that. We're your friends.

He's pretty, he's, he's, he's, he, I mean, he has come, he spoke at my demo day for my class at UT. He's definitely not like he's, you know, totally recluse. But he's, he keeps to himself. I see him running every once in a while or at the coffee shop across the way. But he's definitely, you know, he's not, he's private. All right. So when I moved down there, when San Francisco collapses, should I live on Lake Austin, which is kind of the Colorado River or above the downtown? Yeah, downtown. Lake Austin is really a very slow river that goes through downtown, but boating on it and lots of houses on it, controlled level, it's really great. It's pretty great, right? So one of those houses with a dock and a boat would be the dope thing to have or no?

Oh yeah. That's a great start. It's hard to go wrong with that. Is there a better? What's the better situation? What's the best situation? You know, there's a lot of different situations. Yeah, you got you got a family, you know, things like that too. So for me, I'm not on the water, but I'm, you know, still close into downtown and able to have a house and a yard and, you know, and my kids can ride their bikes and things like that. I really can almost got a condo downtown, like a penthouse downtown because it's such a great downtown. It's just walkable and it's small and there's everything you need, you know,

and you wouldn't really need a car. So it's a great downtown as well. And then there's a lot of other pockets. There's a lot of other great communities around, both planned communities and ones that are a little bit more organic and crunchy that have evolved. So hard to go wrong, but the lake's probably the lake's probably the spot. Lake Austin.

Now wait, there's a bigger lake that's like a half hour or 45 minutes out of town. What's that call? Lake Travis. Yeah. There are some bonkers houses there. I was looking at some house that was like on a mountain that looked like Pablo Escobar lived in it or something. Yeah, dozens of acres and big, you know, big campus type things and multiple houses and docks.

But it's a very liberal, libertarian. What would you describe the vibe in awe? And obviously, I've been there many times. But for people who are listening, people say Texas. And I was just in Houston, like there's Texas. And you think, oh, Texas, like scary, you know, hardcore. So Texas is a bullseye. Yeah.

So it's a big red circle. Yeah. With a little blue dot in the middle, which is Austin. Yeah. And then in the center of the blue dot is the red dot, which is the Texas capital, which is in Austin. Wow. Which is where all the senators and all the lawmakers from Texas and the governor are. So they have to go through the gauntlet of the little blue dot, get through all the liberal, libertarian hippie-dippies, degenerate.

So we've got this. I actually think it's kind of a fun. good thing we have going on. On the one hand, I think the rest of Texas likes Austin. They know, like, it's where all the college kids go. It's like they're kind of cool, hip, you know, fun tech place, right? But on the other hand, the state loves overturning all the liberal policies passed by the state, the city governments in Austin, right? Oh, right. You constantly have the governor overturning the mayor, right? You know, like going back and forth. Oh, really? Who's the mayor down there?

Steve Adler, who I'm a big fan of. He's good? How many terms do you be, a second term? This is his second term, yeah. All right, interesting. Mayorjason.com. I was going to run for mayor of San Francisco, but hmm, maybe I think I'm thinking about my third act. Right.

Come down to Austin. Have you mayor of Austin? Well, I mean, and so the barbecue or Franklin's, if you had to pick only one, the barbecue or Franklin's for brisket? My go-to is Rudy's. which is a gas station. I mean, it's a great restaurant,

but it's also, it started as a gas station. You can get gas there too. So my go-to's Rudy's. Franklin's is great, but my go-to's Rudy's. And what? For the,

for the brisket or for the beef ribs, pork ribs? For the brisket. Lean brisket, maybe some burnt ends. Wow. Awesome, man. And then the other debate in Austin

is the tacos and queso, right? So what's the, what's the Tex-Mex place to go to? Yes. And is it typically the trucks, the food trucks, or the place to go?

I mean, people like the food truck. But no, no, no, there's well-established Tex-Mex places. Wait, when you say queso, that just means, like, the cheese sauce. Is that what queso is? Yes, yes. But, like, queso is, like, a connoisseur kind of thing here. Like, everybody has, like, their opinions and their different kinds of cases.

It's melted cheese with stuff in it, right? That's casso. It's not like, velvita. Come on. This is, you know, there's like, is it. And, yeah, and what's in it? You know, like, do you want lots of stuff in it? There's mud casso.

There, you know, just like meat and, like, all kinds of other stuff thrown in. Interesting. I'm down with both brisket and casso. Oh, you can do the whole Keso tour, the whole barbecue tour. Also coffee, too. I noticed you guys got serious

about coffee about five years ago. I remember coming to, I think it was one of the first interactives before the convention center was built, right? Because that was built in 2000 or 99 or something, the convention center. I think 99, yeah.

So in 97 or 98, a bunch of Silicon Alley people, Doug Rushcroft myself, Stacey Horn, just a bunch of like that, like, Web 1.0 crew went there, but it was taking place in, what's the famous Texas-style hotel?

The Driscoll. It was taking place. Interactive was in the Driscoll. And there were like four conference rooms down a hall that fit 50 people each. Were you there for that or are you still in college? That was, I was right before my time. So I came in in 99.

So right as the convention center and everything was opening up, the new airport. The convention center, the original time, was I think interactive had maybe 10 conference rooms, like just a small portion of it. And there were so few people going. I always tell the story that the average person going to South by Southwest in 97, 98, 99, 2000 time period was on four or five panels. So you would go and speak and they were just trying to get people on panels. They couldn't get speaker.

So the audience was speaking at four different things. It was a lot of fun back then. Which is good. Yeah. I mean, you know, it's really, it's amazing. So now you said it was part of the convention center then. Now this, you know, what it would have been this year is the whole convention center and every other hotel downtown. The Marriott, the Hilton, the, you know, the Driscoll, the four seasons. We're talking a dozen other hotels, hundreds of thousands of square feet of ballrooms and conference rooms and meeting rooms. All would have been full. That's saying. What, what's it like next year? It's got to be crazy for the economy there. It's just crushing, right? I just, I don't know. Yeah. Yeah. And is South by Southwest a nonprofit or is it a for-profit?

I've never. It is a for-profit. Somebody owns it. People have, yeah, a trio and they've made a lot of money off it off the years. Is Hugh the trio? What? Is Hugh Forrest? Was he the, he was like a...

No, Hugh runs all the programming and content. And he's, you know, he's certainly, you know, a key player there, but he's not one of the three original owners. But it came out of the Austin Chronicle, which is a, you know, a, you know, a, you know, a newspaper. And, you know, the story goes that during spring break, all the bars on 6th Street would be empty because everybody would be gone for spring break. And so they were like, how do we drive traffic to the bars? And so they had this music festival where they brought in bands into all the bars to get people into the bars when they were empty. And that's why South by happens during

spring break. Ah, I did not know that. All right, listen, continued success. Thanks for spending in a well over an hour with us here, Josh Bear is the CEO and founder of Capital Factory. He's still at it, still accepting folks on a rolling basis. Do you have a Goldilocks zone? Is it like products launched a little bit of revenue

or do you invest pre-product launch? Where are you at now? So we're typically investing in rounds, so that happens pre-product launched or later. But we're work with companies all the way through Series A. And if you're working on something really interesting in Texas, and you're going to go through cycles of

needing investors and customers and talent. And we're the network you want to be part of. Do you guys open in Houston? I heard the rumor that you guys were to open in Houston. We do. We got a team in Austin, Dallas, and Houston. We've got locations and partners in all those different places. And we've been recruiting heavily.

We've got about 50 companies that have joined our program from Houston in the past year. Oh, fantastic. Houston, I just spoke there. It seems like it's doing pretty well, huh? I remember when you did. It was big news for Houston. They were really excited. Yeah, yeah.

It was like literally the week before like the week before the pandemic. And I was almost canceled. And I was like, ah, fuck. You know, I'm like the headliner. They got like three speaking gigs going, two or three events going on, two speaking gigs and another event. And I was like, I can't cancel. Like, you know, even if this is a pandemic, so I went.

But if it had been the next week, I would have had no choice but to cancel. It would have literally been canceled. So I just squeezed in there. And I loved it. It was great. All right. Listen, continue success, Josh. Good to know you.

Do you go by Joshua or Josh mostly? Do you have a preference? Go by Josh. But you'll see it written, Joshua. Yeah, yeah. My brother's name, my little brother's Josh. All right, continued success. And everybody, if you want to get in touch with Josh, he is Joshua Bear, B-A-E-R, or Josh at Capitalfactory.com, I'm sure.

Go apply. Josh at Quit Your Job.com works too. Josh at Quit Your Job.com and be a founder. I love it. Capitalism for the win. All right, we'll see you all next time on this weekend service. Bye-bye.