This Week in Startups - E33: “Angel” Podcast: Dan Rose, Chairman at Coatue Management is leading a $700M early-stage fund, shares insights on working with Bezos & Zuckerberg during pivotal years at Amazon & Facebook, 100+ angel investments, standout founder traits & more

Episode Date: February 12, 2020

0:50 Jason intros Coatue Management's Dan Rose 1:52 Dan takes Jason through getting his internship at Amazon in 1999 and meeting Jeff Bezos 6:55 What was Amazon's core business in 1999? What was it like incubating the Kindle in the mid-2000s? 10:04 How did Bezos grow as a leader and businessman during Dan's tenure at Amazon? 18:21 How does Bezos' ability to turn Amazon around in the eyes of public investors relate to Uber, Lyft and other large & unprofitable companies? How does Bezos inspire so much loyalty? 23:27 What was Amazon's company culture during Dan's tenure? How was AWS developed? 26:08 How did Dan wind up at Facebook as employee ~130? What did he see in a young Mark Zuckerberg? 32:13 Who created the original Facebook News Feed? 35:34 How did they get the ad-network to work at scale? 42:50 Where do Elon, Bezos & Zuckerberg rank in the Pantheon of Entrepreneurs? 44:06 How did the billion-dollar acquisition offer from Yahoo! fall apart? 46:42 Why launching open registration led to the billion-dollar investment by Microsoft 48:30 Insights on the Instagram deal 51:00 How Facebook bounced back from the stock dropping from $31 to $17 shortly after IPO & how Dan's experience at Amazon helped him rally the troops? 58:44 Zuckerberg's response to mistakes 1:03:01 How did Dan wind up at Coatue Management leading a $700M early-stage fund? 1:08:01 What is Coatue's strategy around data science? 1:11:20 Dan had over 100 Angel investments before joining Coatue 1:13:18 What is Coatue's new fund strategy? 1:16:09 How does Dan think of diligence in regards to early-stage companies? 1:20:25 What does Dan want to see in an ideal founder?

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LinkedIn.com slash angel and get a $50 credit towards your first job post. Hey everybody. Hey, everybody. Welcome to another episode of Angel, the sister podcast of This Week in Startups where I talk to investors. And today we've got an amazing guest. Arguably the three. most important companies in the last two decades, Facebook, Amazon, and Google. Our next guest worked at two of those three, Facebook and Amazon. Additionally, he runs the largest angel or startup fund, early stage startup fund in the world right now. When I saw the announcement that KOTU was making a 700 million early stage startup fund, I thought, that's crazy.

Nobody's ever done that before. He's got to come on the pod. He's also in rarefied air. He has made over 100 angel investments. And I know only a half dozen people who've done that. Today on the program, Dan Rose, thanks for coming on the pod, Dan. Good to be here. Thanks for having me.

So you worked for Bezos from what, 99 to 2000 something? 2006, yeah. How did you get that job? When did you become aware of Amazon and take me through that first day? You know, I was in business school at the time, and I was looking for a summer internship. And Amazon was the hottest company on the planet. You know, Jeff was on the cover of magazines. And I didn't know anything about technology.

The internet was obviously starting to become a thing. But I just felt like I had to work for this company. And so I started asking everyone I knew if they had a connection there. And through a friend of a friend, I was able to meet Andy Jassy, who at the time, was a director of marketing. He's now running AWS. He was nice enough after I bugged him four or five times to take a meeting with me. Only took four or five times. Yeah, exactly. They didn't have an internship program at the time. So I just basically had to bulldoze my way in. Email, email, email, email, until he said, I'll take the meeting. Yeah. And then I had the great fortune of

somebody at the school I was going to University of Michigan mentioning that Rom Shri-Rom, who had recently joined Amazon to run business development was a University of Michigan alum. I was at Michigan Business School. And I cold called him. I sent him an email and I said, I really want to work there this summer. I want to do business development.

And he wrote me back an hour later and said, we're looking for a summer intern, call me. And the next day I was on a plane to Seattle and got a dream summer internship. And four weeks after I started there, I dropped out of business school and stayed on full-time. So you did the first year of business school. Yeah.

You get the internship. Yeah. And you're like, what is the point of going back to business school? This thing is a juggernaut. Yeah. What was the footprint in 1999 of Amazon? Had they gone public already? A company went public in 97.

So it's founded in 94. Right. It was only five years old, but it was already a public company. That was back in the day when... 500 employees? A thousand? We had a couple of thousand, but a lot of them worked in the warehouses. So in headquarters, it was probably, you know,

I don't remember, but it was probably like 500, something like that. Got it. And you go to work, tell me the moment you met Bezos, where were you? What was the room? And then how loud was the laugh? Because that laugh, people hear that he has that laugh. It's true. It's true.

The laugh shakes the room. It knocks you over. It knocks you over. So take us to the first meeting and the first laugh. The laugh is so brilliant because it's such a part of, and especially back then when nobody knew who he was. It was such a part of his persona that attracted people like me, right? I mean, I was actually interviewing at the time for Facebook, I mean, for Facebook, for Amazon and Microsoft. Oh, boy. And this was 99 when, you know, Bill Gates was really had this persona of

being, you know, the evil empire. And right. Here you have Jeff Bezos with the laugh. And, you know, he's got this incredible startup and changing the world. And so it was just such a great marketing technique. In addition to being authentic, that really is who he is. It is. And, you know, I met him. I was just, to me, I stayed at the company for seven years. Six and a half of those years were the dark days of Amazon. Dark how? March of 2000, the wheels came off the bus. The internet bubble burst. Right. Amazon was the poster child of the internet bubble. Three months earlier, Jeff was time in the year. And by March of 2000, people were starting to write stories that Amazon was going out of business. So he's the villain. And, and he's the villain. And he's, and he.

He's now that... Overnight. He went from the hero to the villain. Overnight. And when I joined... Just to give you a sense of that, when I joined the company, the stock was $60. A year later, when my first year vesting happened, it was $50. In between that time, it had doubled.

So I was at 120 and then at 50. And three years later, it was $6. Wow. So... And you're in your 20s. I'm in my 20s. And you're watching like hundreds of thousands of dollars in equity. Exactly.

I'm guessing, as an intern. Just get wiped out. For me, for you was everything. Yeah, everything. Like paying off my business school loan, you know, kind of thing. It must have been terribly distracting. It was distracting. A lot of people left.

But the reason I stayed was because of Bezos. I really believed in this guy. I felt like every time he got up in front of the company and talked about why this is going to work, why it's actually a good thing that, you know, we're going through this. I felt like he was right. Why did he think it was a good thing you were going through it? Do you remember that? His view was, you know, what Amazon was trying to do is really hard.

And as a result, it was going to be very difficult for somebody else to replicate it. And so, yes, it was expensive and there was this huge scaling cost. But that was actually an asset, not a, you know, a weakness. And the thing that people were getting wrong about it was as soon as we could sort of leverage that capacity to, you know, become cash flow positive, not relying on the markets anymore, it was going to be kind of off to the races. And that's exactly what happened. It just took, you know, seven or eight years to kind of prove out. And at the time, was the majority of the business just books and CDs and electronics? It had a very narrow offering in 99, didn't it? Yeah. When I joined, it was books, music, and video, toys and electronics launched shortly after that.

I actually joined the retail team and launched the computer store. I ran the cell phone store. So it was kind of store by store expanding into new categories. And then the most exciting thing I did at Amazon was the last two years I was there, I incubated the Kindle. That's really where I got to work with Jeff. Up to that point, I was a middle manager doing different things. And then suddenly I was working on one of these really exciting new areas. And, you know, it was incredible.

Take me to that moment where he says, we're going to do this Kindle. Yeah. Because that was like a top secret. Like when that dropped, people don't remember, but it was the equivalent of the iPhone dropping. That's right. take me to the moment where they take you into the room and say, we're doing this. Because that was how many people knew about it?

10 people in the company? 20. Yeah. Something in that range? Yeah. Take me to the moment. He tells you, I want you to run this. So I was friends with Steve Kessel at the time was running the largest part of Amazon's business, which was the books, music, and video business.

It was also where all of the company's cash flows came from. And Jeff went to Steve one day and said, I want you to start a digital media business for us. And, you know, at this time, the iPod had already been out and digital music was a thing. And Jeff said, we can't let what happened to music happen to books. That's our core franchise. We have to do to the book industry what Apple did to the music industry. And Steve said, great. Let's do it. I want to, you know, bring a couple of the people that I have working on those core businesses today and have them move over and start doing this and we'll and we'll do it. And Jeff said to him, no, you don't understand. You're going to do it. And Steve said, but I'm all in. Let's do it. And Jeff said, Steve, effective tomorrow, you've been fired from your job of running our core business. We're promoting the guy who is the finance person for that business, a guy named Greg Greeley, who's now at Airbnb. He's going to take your job and your new job is to run, is to build a digital media business. And you're the only employee of that team. Go build a new team. And your job is to kill your old business. I mean, is that the brilliance of Bezos? Is that the innovator's dilemma to him is nothing? He internalized the innovator's dilemma. He talked about it openly, and he knew that the only way this was going to work is if he separated the two teams and he gave the mission to one team to go destroy the existing business.

And by the way, remember, the existing business was the entire company's profits, cash flows. It was their core business. It would be the equivalent of Tim Cook right now coming in and being like, you know this iPhone, that Prince, money, destroy it. You made the iPhone. I need the three of you to go to another room and destroy it. What would destroy this? And that might actually be happening with the augmented glasses. Who knows? It was a remarkable move. And Steve and I knew each other. And so when I heard about that, I told him, hey, I got to come help you with this. And I was the first person on the team that was working on the Kindle. What did you see in terms of the growth of Bezos over that seven-year period?

because he had gone through the fire. He went from hero to, you know, villain. And those seven years were really the seminal trial by fire. Coming out of it, what was the difference in Bezos from 99 to 2007, in your opinion? And what is his genius? Because he is a genius at business management. Is that his genius? Is it operations or is it people?

I think he's an absolute visionary and he's a strategic. machine. Strategic machine. Unpacked. What does it mean? So if you think about a couple of things, first is early on in the company, the book business was doing really well and was actually profitable. And he immediately realized that this was a much bigger idea and pivoted to get big fast and

build a moat. He understood at a deeper level than most people, because we all read about moats and we all read about the innovator's dilemma. He internalizes that stuff and he just lives it. And so, you know, he immediately shifted into, we're going to build this thing as fast as we can, get as big as we can because that's our protection against competition. Then, you know, the capital market shut down and he realized we have to pivot to being cash flow positive because we're not going to be able to rely on the markets anymore. He turned this massive ship on a dime. It took about 18 months.

It was not easy. went from losing over a billion dollars a year at the height of, you know, the bubble popping to being capable of, you know, generating positive cash flows, which was a remarkable feat. I was there. And to me, I mean, I was there knowing that this thing might not work, but realizing that I'm going to learn more from this than I would from any successful kind of experience. How did he do it? How did he take a billion dollar losing business?

Because this is very prescient, in fact, because we're in another moment. That's right. Exactly like that. Yeah. How does one go to a team that is spending, also known as investing? Yeah. The criticism from, you know, outsiders might be you're spending like a drunken seller for people like us. You're investing in building a foundation of a business that could be worth a trillion dollars someday. Yeah.

Which is really weird. Like, why do people look at investment as like burning money? It's just journalists don't understand this basic concept that you invest to build market share. It's so weird, isn't it? one to get your head around when you're talking about the scale of investment that these companies are making. And the reality is I think the markets do play a role in requiring companies like that to show some amount of discipline, right? Because at the end of the day, you have to be able to do both. You have to be able to invest, but you also have to be able to run a business. How did he do it? Did you just lay people off or just raise prices or everything? Very few layoffs. Raise prices was the big one. And that was a tough pill to swallow. The company's growth stalled out. out, actually. In that time frame, growth went down to single digits. Year-over-year growth. As opposed to going up 20 percent year-per-year. As opposed to going up, I think, at the time, it was probably 100 percent year-over-year.

So all of a sudden, you radically decelerate the growth rate in the company. And, you know, as a result, the stock went from 120 at its height to $6, right? Everybody's underwater, so you have massive issues with employees. You have to figure that out. A lot of huge challenges. But ultimately, what needed to happen was the company needed to get kind of reset to a place where it didn't rely on the markets to support itself and then could kind of rebuild from there. And, you know, a lot of blocking and tackling along the way. They shifted out of being relying on sun microsystems and moved to Linux, which was really the seeds of what ended up becoming AWS. but just a lot of things that that basically save the company money and allowed it to be self-reliant.

And the thing I give him the most credit for, because all of that stuff is like good operating, right? And he had Jeff Wilkie at the time who he had brought in, who's an exceptional operator, now runs the retail business who really played a big role on this and a lot of other people around the table that did that. But the thing that is so remarkable about Jeff is in the middle of all of that, and you can imagine the disruption that that creates at a company. He launches in 2004, in the middle of all of that, AWS and the Kindle, two massive new bets, one of which was designed to destroy the existing business and the other of which nobody thought Amazon had any right in the world to be working on.

That was crazy. He did it in the middle of it. He didn't wait until the company had exited all of this and the stock was back up. When I left the company in 2006, the stock was $13. Oh, my Lord. And we were already two years into AWS and the digital media business. That's now Fire TV and all these other things. All right. When we get back from this quick break, how does his performance in turning around that company from money losing to, I think his idea was make a dollar and invest everything else into the company. But, you know, crossing that chasm, making that pivot. I want to know how that relates to today with the companies we're seeing now who have been in investment mode and now the markets are demanding that.

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All right, everybody, it's going to be one of the top 10 episodes of the podcast. David Dan Rose is with us. As I said before, worked at two of the three most important companies of the last two cycles, and he's seen the booms, the busts, and live to tell about it. Before we end our Amazon chapter of your career, which obviously was foundational, how does his ability to manage Wall Street and get through that relate to what we're seeing today with Uber, Lyft, and other money-losing companies that have unbelievable growth and scale. Yeah, I think, you know, first, like I said before, the market plays a role in requiring

these companies to demonstrate that they can not only grow, but also do it in a disciplined way. The public markets. The public markets. And I think, you know, what Amazon, you know, the muscle that Amazon built during that really tough time was the ability to run a massive operation in a disciplined, organized way. Again, people like Jeff Wilkie played a big role in that and also invest in an event in ways that Amazon is maybe the best in the world ever at doing, which is really where Bezos shines. And I think his ability to surround himself with a leadership team, if you look at that leadership team today, most of the people on that team have been at the company from the time that I joined in

1999. People are loyal to him. Jeff Blackburn, Jeff Wilkie, Andy Jassy. These people have been at the company for 20 plus years. Why are they so loyal to him? Why are they so loyal to Amazon? What is it? I think it's, you know, you work for somebody like that and you realize this may be the greatest business person ever. Right. Where am I going to go? How am I going to replicate? He's certainly in the argument for greatest business executive ever, isn't he? Absolutely. I mean, I'm trying to think of anybody.

I mean, Henry Ford, you know, he's in that sort of, he's in that category. Eschalon. Yeah. For sure. Yeah. Do you think the current crop of companies, the Uber's, the lifts, how quickly can they do this? If he did in 18 months, because we're looking at Uber, which obviously I'm an interested party. Yeah.

I still have a large position. Congratulations. Oh, you know, even the losers get lucky sometime, like Tom Petty said. Broken Clock, right? Not sure about that, but 11 times. I always tell people I got lucky 11 times. I like that. I think, you know, at a certain point, if you just keep placing bets, we talked about this in makeup.

The index approach to angel investing. I've done that, yeah. It works. You know, if you're here in Silicon Valley with great deal flow, I don't see how you lose if you're consistently betting over a decade. Yeah, there was an angelist article about this recently. The index approach, right? The index approach said it works. Yes. They looked at all their deals. Yeah. If you have good deal flow. If you're in the epicenter. Yeah. If you're in, you know, a second or third tier market where there's never an outlier, you're not going to hit an outlier by

definition. So it can't work. That's right. But the outliers do work. Uber now cutting costs massively, getting out of money losing businesses, did 1.7 million deliveries and rides, lost like a billion. So they're losing something in the, you know, whatever, 25 cents per ride. Why is everybody convinced that their business is broken if they could simply raise prices like Amazon did, 25 cents or 50 cents a ride, which would make no difference in consumption or little to no difference? I just think it takes time for these things to play out and to see kind of, you know, how the story unfolds. And I don't have a, you know, personal perspective on how that one's going to play out. But I do know, having been on the inside at Amazon, it was, it was not a, it was not obvious that the company was going to emerge from that crisis. I stayed with it because I really believed in Jeff. And I also was early in my career and I figured, you know what? But even if this doesn't work, I'm going to learn more from this than I would from an experience where everything goes up into the right.

And, you know, we never experience any kind of, you know, real challenges. So to me, it was it was a great opportunity to go through something like that. But there were smart people at the time, you know, real analysts on Wall Street who really believed and had a legitimate argument that Amazon was six months away from going out of business. When you look at where it is today, we'll end on this with the Amazon. Amazon chapter. What surprises you about where it got to today, if anything? What's the big, like, surprise there? Is it AWS? Is it that people don't leave? Because there was this, I don't know if you remember this New York Times story where they did this huge story about how many people think it's the most oppressive place to work ever. And I looked at that article and I was like, this feels like fake news, not to get all Trump on people. I mean, obviously, I cannot stand Trump. But I just looked at it and I was like, This makes no sense to me. How are people, like people we know, there for 25 years and say it's the greatest job ever? And then other people, you know, the New York Times writes this story.

It's like, it's fairly obvious that a certain type of person this is the perfect company for. Yeah, I think, you know, cultures, every company has a different culture. To me, the important thing is having a strong culture, a culture that's defined and has sharp edges. and Amazon definitely has that. It's not for everyone. It's tough. It's for people who are hyper-competitive, who are builders, right? They put people in positions to own something and to build.

And who are comfortable with, you know, not having a lot of the touchy-feely kind of, you know, cultural benefits of a lot of Silicon Valley companies. When I was there, I don't know if this is still true, but I suspect. it is. When you walked by the, you know, the, the snacks bar, there was one thing in it and that was black coffee. Right. Bring your own half at half. Yeah. He won't stevia? That's on you, bud. That's on you. That's hilarious. Yeah. So. Oh, there was water too. There was water. Yeah. Free water. Free water. All you could drink. Seattle's best. Seattle's best. Yeah, the thing that's amazing to me is the loyalty of people there is phenomenal and the ownership he gives people is phenomenal.

But you have to, in order to take ownership and be given ownership, you have to earn that. You have to put in the time. But boy, are people loyal to him in that AWS business coming out of nowhere and beating Google, Microsoft. Microsoft, IBM, Rackspace. I mean, who would have expected the bookstore would become the most important technology company as well? Yeah. Well, I remember when Jeff announced it internally to the company. And again, a lot of people were scratching their head.

Why is this, you know, retail business trying to do something in infrastructure? And he said a couple of things that stuck with me. One is he said, in the early 1900s, in order to... start a company, you had to build an electric power grid to power your store or your building. And he said, it's crazy that today, in order to start a company, you have to build your own data center. There's no reason why that should be the case. And we're going to fix that. Wow. And I thought, you know, that was the power of Jeff. He had this ability to kind of connect dots and see around corners in ways that, you know.

History doesn't repeat, but it rhymes. Yeah. For sure. Yeah. How did you wind up meeting Mark Zuckerberg? You were, what, 120th, 130th employee? Yeah. So that means you joined in year two or three.

Yeah, year two. Yeah. Were they on university Avenue still? Yeah. And they had, what, like five offices on University Avenue in Pelham? No. At the time I joined there was one. One?

Yeah. Was it that the Excel building or something now? It was in the building that was above the Indian restaurant right there on the corner of high university. Yes. The Indian place. What's the name of that place? It's been changed a couple of times. It's still Indian, but it's still Indian. Yeah, I've been there. It's good. And the skateboard shop was downstairs, too. I love that place. Who recruited you? How did you find out about it?

So one of my first managers at Amazon was a guy named Owen Vanada. He was running business development at the time. And I was a, you know, early, a junior business development manager. And I spent a year working for him. He promoted me and really kind of gave my career its first big kickstart. And Owen ended up joining Facebook in 2005. He was the first CEO of the company. He took over after Sean Parker had left and was there until Sheryl Sandberg joined. And so he and I had remained friends. And he called me in 2005 and said, hey, you really ought to come down here. I think this is a special company. This young guy, the founder, I think, is really exceptional. But I was working on the Kindle. And he knew that

because he had been at Amazon in a senior position before leaving to go to Facebook. And I said, you know what I'm doing here. I can't leave. Like, this is the most exciting thing I've ever done. I'm working directly with Jeff on it. We hadn't launched yet. It took actually the company three and a half years to launch the Kindle from the day that Jeff fired Steve Kessel and asked him to take on this new job to the day that Kindle launched three and a half years, which is amazing to think about in today's compressed timeframes. But Jeff was also a perfectionist and wanted the product exactly right before it shipped. And so I was right in the middle of this thing, and I just told him I can't leave right now.

But it kept gnawing at me, and I kind of was one of those things where I was waking up in the middle of night thinking about it. And so finally I said, you know what, I got to go at least meet this team and learn more about what this thing is. So I came down and interviewed, and my last interview was with Mark, and I spent 45 minutes with him. And I left that room thinking, I think this kid, because at the time he was 21, 22 years old, really could be the next Jeff Bezos. Like, I just had this instinct about him. And the business itself appealed to me for two reasons. One, when I was at Amazon, there were two companies that kind of started after Amazon but ended up eclipsing Amazon in terms of their success. One was Google and the other was eBay.

And what eBay had that Amazon didn't have was network effects. Amazon was a retailer, eBay was a marketplace. And what Google had that Amazon didn't have was a high margin advertising business. Amazon's margins were like 3%. And Googles were like 60%. And I looked at Facebook and I thought, network effect. business with an advertising business model, this could be big. Yeah, it's like basically the confluence of two of the greatest forces that business has ever seen. That's it. It's that simple.

Plus margin. Yeah. And so I left that, you know, interview and told Owen, I'm ready to, I'm ready to do this. And I had always known eventually that I was going to go start my own thing. That was kind of my dream was to be a founder. And I thought, well, you know what, if I'm going to do that, I need to be in California. And I need to get some experience at an earlier stage company. Because when I had joined Amazon, it was already, as we talked about, five years old and kind of, you know, a public company. So I saw Facebook as an opportunity to kind of do that. And then, of course, 13 years later, I never left.

And it turned out to be the greatest ride in my life. What was the footprint when you joined in that year two? Had it broken 10 million? Seven million users. Seven million? It was growing. I remember it was growing at about 7 or 8,000 new users a day. Wow.

It was still a college-only social network. Right. And the reason I remember that is because six weeks after I joined two seminal things happen. One, we launched a news feed, which turned out to be, you know, at least at first, a total disaster. And then two weeks after that, we opened it up to anyone who wanted to join not just college students, which many people thought was going to take down the company. And the way, just so people understand, before News Feed, you would visit individual people's pages

and see what they posted on their board. So it was a series of individual message boards, basically. Or what we called at the time, graffiti boards. boards, I think was one term on the internet or like sign-in books where you would go to somebody's web page and just write a message and it was like your sign-in board. It was called the wall. The wall. It was called the wall. Right. So if you wanted to understand what was going on, you would just click on your friends and you'd be like, oh, there's dance wall. But could you post on, you could post on dance wall. So you'd post on each other's wall and you were like hunting and packing. That's right.

But was it Dave Morin who decided the feed was a thing? Had anybody done that? I guess, friend feed or Twitter had done it? No, this was before those services. I mean, at the time, really the only thing, the only kind of feed-like experience that existed was RSS. RSS, right, Dave Wein. This was really before sort of the feed. And in fact, everyone, every product effectively that's launched a feed

since Facebook copied newsfeed. Right. Because News Feed was the first truly kind of consumer. Who made that there? Who was the architect of that? Was it Dave Morin? No, no, Dave hadn't joined the company yet. It was Dave, Dave kind of was the developer evangelist after we launched a platform, which came about six months later.

Right. And he joined around that time. It was really Zuck. I mean, Zuck had this vision for Facebook. And it was so much bigger than anybody at the time really understood. This is, again, when I interviewed with him, I started, my eyes started to open to what this could be. But the vision was, you know, an identity platform for the web at its core. the social graph powering that and the idea that information was going to be open and accessible.

And to him, the idea that you had to go to different people's pages in order to find out what was going on, when in reality it was all there in the system and all we had to do is show it to people. Yeah. It just seemed obvious. And that's the reason that, you know, six weeks after I joined the company, and keep in mind, I had moved from Seattle with three young children and had made no money at Amazon. So I literally was renting a house in Palo Alto and betting my career and my family on this company. Six weeks in, we just turned on news feed one day.

It wasn't like, hey, we're going to test this and we're going to see how people respond. And then we're going to gradually expose people to it. We just flipped the switch because Mark thought this is going to be great. Everybody's going to love it. And, of course, in the first 24 hours, they hated it. And then in 48 hours, they started to kind of get their heads around it. And within a couple weeks, our engagement rate just went through the roof. It was a hard technical challenge, too.

People don't remember that databases weren't designed to make a custom feed of objects for at the time 7 million members. That means 7 million database instances of those posts because each person's was unique. Yeah. And those had to be updated. Yeah. You're talking about a database instance every time somebody changes their profile picture, which used to happen six or seven times a day, because that was the way people would kind of post photos.

Yeah, that was very time somebody wrote on their wall, no photos. Every time somebody wrote on someone's wall, every time somebody changed their status update, you know, each of those became a database instance. And then the algorithm needed to say, of these changes, which ones are going to be interesting to Jason. Yeah. Because the things that are interesting,

version, there was no algorithm. It was just chronological? It was. Oh, that's interesting. I thought it was always just chronological at the start. And then it went algo after that. Right out of the gate. In fact, it was the opposite. We started with the algorithm. And then when Twitter came along, we switched to a real-time feed. And then we switched back to the algorithm because it turns out people actually don't like the real-time feed as much. So the thing that, you know, the team that did it actually today are all luminaries in the tech industry. It was Andrew. Bosworth, who's now, you know, Boz, who's running Facebook's ARVR efforts. It was Chris Cox, who was an engineer at the time and then went on to become the chief product officer of the company. It was Rucci Sangvi, who's now, you know, an investor and one of the preeminent women in Silicon Valley. That was like the team of product managers and engineers that built this thing. Zuckerberg was very public about hating advertising in the beginning, but he personally didn't like advertising. And I didn't think advertising was going to work on Facebook. It was my, and obviously I was tremendously wrong. But it seemed to me that people didn't want to

have advertising between like all this personal stuff. And I wasn't sure advertisers would want it. And the click through rates were so small, but the number, the amount of volume was so great that it actually all worked out. What was the magic behind the ad network? Why? did that work against everybody thinking, this can't compete against Google because Google you're typing in Volvo, San Francisco, you know, Indian food, Palo Alto. I mean, the intent on Google is insane. The monetization is absurd. So on each individual transaction, Google just wallops Facebook. But then Facebook all of a sudden became a money printing machine. So what did we miss? What did everybody miss? Because I wasn't the only one

thought this thing isn't going to be able to take on Google. Did you actually think it would be able to take on Google? Was the spirit in the company that this will take on Google? What I thought, and I think people misunderstand, I don't think Mark ever hated advertising. Mark didn't like irrelevant advertising. At the time, outside of search, most ads on the internet were pretty irrelevant. It was banner ads. The big company at the time behind Google was Yahoo, which basically had giant banner ads on their homepage. MySpace was actually a hundred times 10 times larger than Facebook when I joined. MySpace had over 100 million

users. Facebook had 7 million. And MySpace's model was, you know, homepage takeover ads. I remember the Hulk when that movie came out, the Hulk coming out of the, you know, the homepage at you. Breaking it apart. So that was the kind of advertising that Mark, you know, didn't love.

But keep in mind, from day one, Facebook had ads. There were these ads on the side that were kind of replicating flyers at college campuses. And, and and even banner ads because one of the things Mark believed from the beginning was that the company needed to have discipline and that advertising wasn't going to be the business model. And so we needed to learn by actually doing it and see what worked and what didn't work. But the benefit we had and the thing I believed, the reason I believed it could work is Google had proven that ads are not bad.

Irrelevant ads are bad. Relevant ads are actually good. And in search, yeah, their content. And in search, if you took the ads away, and we had a lot of people who joined us from Google who told us this, when they ran experiments where they took the ads away, people complained. Oh, yeah. The ads are additive to the user experience. And so from the beginning, we said, how do we make an ad product that's additive to the user experience? And in the early days, we thought the answer was social ads.

We thought the answer was, well, if you can see which of your friends have engaged with a brand. that's going to make it relevant. And it turns out... It's like the beacon kind of project or that was shades of it. Yeah, those were all kind of attempts at getting at this sort of idea that, you know, we know content is more interesting to you and your friends have engaged with it, right? If your friend is tagged in a photo, you're more likely to look at that photo than if it's a photo of people that you haven't, that you don't recognize. So how do we bring that same idea to ads?

And that was the original idea. You went to see a movie behind social ads. I might want to see the movie. Exactly. You put your image under the movie or something. Exactly. And I know Jason has good taste of movies, so I'm going to go see that movie. And that worked, but what ended up really unlocking the value was less the social context around the ads and more the liquidity in the auction.

because when you have a lot of ads in a system and you have a really good matching algorithm that is able to show me things that I'm likely to be interested in based on other things I've done, then you're more likely to put an ad in front of me that I'm going to be interested in clicking on. And I think everybody had this experience over some period of time where they went from the ads on Facebook are eh to, wow, I find myself engaging with a lot of ads. And it wasn't because your friends were there. It was because the ads were good. and the things they were showing you

were things that you were interested in. And I think that's the social equivalent of what search and what Google ended up doing in search. All right, when we get back from this break, I want you to take me to the moment that Yahoo offered a billion dollars and you guys didn't take it.

And then we move on to KOTU and this absurdly large startup fund that everybody is confounded about how you're going to put 700 million into early stage startups when we get back on Angel of Podcast. Zeus, Living, makes it easy to live wherever opportunity takes you.

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and Facebook. And Dan, there was this moment where many of the investors begged Mark from my understanding to take the billy the billion dollars from Yahoo for a company that was three years old, which at that time, there were no billion dollar exists. That did not exist in the world. That was when a billion dollars was a lot of money. That's when a billion dollars was a lot of money, as opposed to now when a billion dollars is a lot of money. Exactly. Just doesn't seem that way when Tesla goes up $50 a share in one day. I mean, did you see that yesterday? Yeah, incredible. Incredible. A percent or something. Unbelievable at a day. I mean, wow. Where do you put Elon, Bezos, and Zuckerberg in the pantheon of innovators and entrepreneurs?

Well, I think we already talked about Jeff. Mark is, you know, the amazing thing about Mark is he's still in his mid-30s. Yeah. I mean, think about Jeff started Amazon when he was in his late 20s. Yeah. And what Mark has already done and he's just getting started. So I think there's going to be, you know, 20, 30 more years of. of watching what Mark is able to achieve in the world.

And I think the world of him, he's, you know, I think one of the most exceptional people, not just business people, but people, human beings I've ever met and engaged with. And then Elon, I don't have a strong opinion. I don't know Elon personally. I think a lot of people are hoping that he's successful because the impact that he'll have on the planet and arguably the most important social issue of our time. which is climate change. And I think, you know, on the basis of that alone, let's hope that he, that he ends up, you know. So you're one of those people who believes the scientists.

Crazy. Okay, scientists can be wrong. Okay. You were there when the billion dollar offer came in. I joined right after they turned it down. And in fact, I'm really glad they did, because if they hadn't, there wouldn't have been a Facebook for me to join in 2006. But, yeah, I mean, Mark's told the story publicly, you know, that he didn't want to sell. Everybody around him wanted him to sell. It was life changing for really everyone and most importantly him, but he just had conviction. And the thing that he knew that he felt people outside the company and even some people inside the company didn't really have the same level of belief around is that he was already working on news feed. He was already working on opening up the site beyond college. to everyone in the world. Two things that he thought could really dramatically change the trajectory of the business in a way that would make it a lot more valuable. And he already had the inkling and was starting to develop the underlying developer platform

that would launch in the spring of 2007. He knew those things were coming. This was in, you know, the timing of this Yahoo offer was shortly before I joined. So it was the spring of 2006. He finally said no. and the story of how he ended up turning that down. I don't know if you know the inside story there. So he was under a lot of pressure from his board and his management team to take the deal.

He felt that he couldn't basically say no to all of these people who were his advisors and who relied on him. He had, if they all wanted to do it unanimously, he had to do it. So he agreed to do it, but he said we will take not a dollar less than a billion. It has to be a billion dollars. And they said, great, because that was the offer on the table. A week before they were going to sign the deal or something like that, Yahoo reported their quarterly earnings and the stock went down. And they refused to change the equity that they were offering. So the value of the equity was now something like $850 million.

Right. And Facebook went to them and said, hey, you got to increase the equity to make up for the difference. And Terry Semmel said, absolutely not. the deal is the deal and Mark said that's it we're done and never look back imagine if Terry Simon will close that deal it would have been what a legacy different but think about spring of 2006 Mark you know escapes this dilemma it's a true never looks back and I joined the company a couple months later spring of 2007 we've already we've already already launched newsfeed in open registration. By the way, the day we launched it open registration,

the number of new users went from 7,000 a day to 37,000 a day. Oh, my Lord. And the reason was, at the time, there were 30,000 people a day trying to join Facebook who couldn't join because they didn't have a college email address. So you knew this. We knew this. Mark knew this. They were bouncing. They were bouncing. Yeah, they were getting a single. And the reason people didn't think he should do it is because they thought, well, if you let people's, you know, moms on the service, then they're going to stop using it. Well, it turns out, you know, when you add 30,000 new people, A, your growth rate goes up dramatically, but B, those people start bringing in their friends. And within a couple weeks, it was up to 70,000. Within a couple months, it was over 100,000. Literally overnight,

we went from low single digit thousands of new users to hundreds of thousands of users. And then spring of 2007, we launched the developer platform. And shortly after that, I negotiated a deal with Microsoft along with Owen and a couple of other folks that valued the company at $15 billion. Right. And that was one of the greatest investments Microsoft ever made. It didn't look that way at first, but yes. You know, I mean, I remember actually the narrative was they're idiots. And they had done it just to get the ads on the network, right?

Because there was some ad network deal combined with Bing or something for two years or something. Yeah, that's right. You had to run Bing ads. Actually, half of the company's revenue came from Microsoft at that time. A deal that I had negotiated after I joined where they basically powered all of our banner ads. And again, remember, Mark didn't believe the future of the company was in Banner Ants. So he basically said, let's outsource that to Microsoft. And let's go spend all of our advertising energy on trying to invent the future of what ads will look like on the internet.

How important and how did the Instagram deal go down? Because Twitter thought they had that locked up. Twitter thought they were going to get Kevin Sistram to sell to him. You know, it sounds like I'm repeating myself, but every one of these seminal moments in the company fundamentally came down to one thing, and that's Zuck. He saw the Instagram thing. He wanted to do it.

A lot of people didn't think he should. It was expensive. The company was tiny. It was 18 or 19 people, and he spent a billion on it at the time. Yeah, less than that, I think. 15 people, yeah. you know, some low millions of users kind of thing. But he just had this, you know, vision for what it could be and, and how to be complimentary.

No revenue. Like $11, $12 billion, $100 million a person. Yeah. And my understanding is he just did it unilaterally because he controlled the board. He was just like, listen, we're doing this. Well, he, you know, he got the management team on board. And I was there from the beginning. I really was with him.

And then he got the board on board. I mean, it wasn't like there was a lot of resistance to it. It was more that, you know, he said, I want to do this. And nobody else had even really considered it. And then he did the work of building a relationship with Kevin because it's buying a company like that. Well, and he had been investing in that relationship for, we didn't even realize it, but he had been investing in that relationship for, you know, over a year. And so this was really all him.

What was the company worth when he spent that billion? It was worth 50? It was shortly before the IPO. Got it. And yeah, Facebook itself, probably the last private valuation was maybe, you know, 40 or 50, something like that. Wow. And the WhatsApp was even more significant. That was 19 billion.

And yeah, that was a big swing. And by then we were a public company. So then it was like, wow, what is this going to do to our stock price? And, you know, how is the market going to react to this? And Mark's, you know, Mark's view is, doesn't matter we have to do this. It'll probably hurt for a while, but he had so much conviction in this company, this product. And so we did it. And the day after the acquisition, the Facebook stock went up.

The market went. Oh, right. It paid for like half of them immediately. The market went, wait a minute. This guy's done this before. We trust him. Right. Maybe we should get on board.

People forget. But the stock collapsed shortly after it went public. I went public in the 30s and then came down to 17 or something crazy. Yeah, that's right. And it was all based on the fact, if I remember correctly, that you guys just totally botched mobile. You built a rapper kind of app instead of building a native app. That's right. Good memory.

Yeah, well, you know. You follow these things. I follow these things. I have a podcast. I talk about them on the podcast sometimes. We made it. You know what we did is we made the wrong, and I was very involved in this. We made the wrong architectural decision.

We thought HTML5 was going to be a thing. We were concerned about Native because we had this whole platform on the web that wasn't going to translate to Native. And so we made a big bet on this idea of HTML5. Brett Taylor and I spent a lot of time working on this along with a bunch of other people. Brett's now at Salesforce running a big part of that company. And the story of the IPO is, It happened right around the time of the IPO, mobile started to take off. And because we had been spending so much time on the wrong architecture,

we hadn't built any advertising into our mobile products. So we literally didn't monetize mobile at all. And yet more and more of our users were starting to engage on mobile. And so it took us some time to kind of work our way out of that. But what Mark gets credit for is as soon as he realized we had made the wrong decision, he pivoted the whole company. And the problem we had was people at the company, the engineers, didn't know how to write code for iOS and Android. So we created boot camps and we put people through those boot camps and we shut down our HTML5 efforts completely.

We pushed everyone through boot camp to teach them how to code in this native language. And then Mark said, I'm not going to review any more product designs for the web. Every product review has to start with a mobile design. Mobile first. And forced the whole company to kind of move to mobile first. And then we had to figure out how we're going to monetize it. And what the outside world didn't realize at the time was our whole strategy for monetization was to put ads in News Feed.

And on mobile, News Feed is the ultimate monetization surface because it never ends. On the web, when you're monetizing the right-hand column, the left-hand column, the homepage, it's fixed. It's fixed. And you translate that to mobile. There is no right-hand column or left-hand column. Our head of advertising at the time presented to our board. And he said, I'm struggling to figure out how to make money on mobile because the right-hand column on my mobile phone is my thumb.

Right. And they were like, just put it in between the posts. Well, Mark said, no, the answer is we're going to put it in News Feed. We just have to do it in a way that users aren't going to object. So we need to build the right relevancy algorithms. And that's when he promoted Andrew Bosworth to run ads. Boss was, you know, had never worked on ads in his life. But he, like Mark was willing, was able to.

See it amazing that the in a company executing at the highest level building the fastest growing startup up until that point in time makes this like little tiny stumble and all these visionless people then go you know what they've done everything right they tripped once therefore these people don't know how to walk or run anymore I think they just collapse the stock it's so dumb the the challenge was the timing of it right and and that you know the kind of confluence of all these things happening the same time the The cool thing for me around that time was I had gone through the experience at Amazon where the stock had gone from $130 to $6. And so I had this experience of knowing what that felt like. And I was able to kind of get up in front of the company and say, hey, let me tell you a story about what I experienced at Amazon when this happened. Because, you know, it's a tough thing for a company to go through. Morale is low.

People have all these dreams about, you know, what they're going to be able to do. Pay off their college. Pay off their loans. And all of a sudden, it looks like those are slipping away. And of course, by the time I had stood up in front of the company and talked about this, Amazon had reemerged as a huge success story. And so, you know, we kind of knew that all the pieces were there. We just had to stitch them together.

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Build up a little armor. That's right. Let's wrap up on Facebook with, they went again from being, much like Bezos, the most love, world positive company in the world, to now you broke democracy. And you got Trump elected. What is the fair analysis from your position

of what Facebook could have done better during the election and all of this, you know, and then, you know, Musha Ghanah. and then what are they being unfairly, you know, sort of characterized by four? Because I don't think anybody at the company wants Russians, you know, using Facebook and buying rubles to subvert democracy, certainly. But things could have been done better. Yeah, and I think they've, I think Mark and Cheryl and others have admitted to that. I think, look, at the end of the day, these are human beings and they're running, you know, companies.

that, you know, where they make mistakes. We talked about the mobile mistake, right? We had a, we had an idea of what the world was going to look like and it ended up looking very different. And so the key to me is how do you respond in the face of that? And I think what, what Mark has done well is recognize that we were on the wrong path and immediately snap the company to a new path that is, you know, in retrospect now the right path. But those things take time. You can't just, you know, like with mobile, it wasn't like we could just shift. to the native strategy and launch a bunch of good native apps. We had to put a whole team of engineers through boot camp to learn how to code for those

platforms. And so when you're talking about the changes that the company's been making over the last couple years, you know, those changes take time. You're starting to see the fruits of that now, I think. And the political ad thing, I'm just curious what you think of that. Twitter said they're not going to take the political ads. Saccharacter seems to have ground into this like you can

we can't police the ads do you personally agree with that? I don't agree with it. I think they should just take this take the season off. It's too controversial. Why be so hated? Why not?

Because how much do they make on political ads anyway? Like 100 million or 200 million? It's got to be a de minimis amount. Why not just sit it out instead of taking all those hours? Why is he so principled about this particular issue because it's confounding to the rest of us?

It's just the issue is it's more nuance than it seems on the surface. And when you start to dig into it, and I think this happened with Twitter where they announced that they weren't going to take any, and then they immediately faced a bunch of blowback because there's actually real costs to that policy. What is it? I don't get it. Well, candidates who don't have large followers now have a hard time getting large followers because they can't buy ads. That's one cost. So incumbents are massively advantaged. So Trump with 50 million members, Yang can't get his 5 million because he can't spend. It's very hard to draw lines between politics and social issues. And so if you're going to

have a blanket policy, then suddenly organizations that want to advertise about climate change may not be able to do that. So these platforms are important in the world and the stewards of these platforms think deeply about the tradeoffs when they're making these types of decisions. And then also the practicality of how enforceable they are and so on. So, you know, I was there. I know how deeply Mark thinks about this stuff. It's not you know, it's not like he he is blind to the downsides of some of these policies, but he also is more aware and I think thinks deeper about the nuances and the tradeoffs. And at the end of the day, that's kind of the challenge of running a large platform like this. Seems to be some

belief that Peter Thiel has some Schengali-like influence over Mark. No, I don't think that's true. I don't think that's true either. He's in his ear, though. He's a board member. Everybody on the board has a voice and Mark is very good at, you know, surrounding himself with diverse perspectives. I think that's, again, one of his great strengths is he seeks counsel from lots of different places. He absorbs all that information, and then he comes to his own conclusion about what he thinks the right answer is. And frankly, a lot of people who are covering the company are looking at it through their narrow lens, and he tries to look at it. things through the broadest possible ends.

Elizabeth Warren wants to break up the big tech companies. This seems to me to be a really difficult, a really difficult thing to do when China's picking the winners in their country and then we're going to break apart our winners. Then don't we by default lose to China if we did that? What do you think about that? I think that's the argument that, you know, a lot of people are making about the, again, the tradeoffs of some of these, some of these decisions. Yeah.

I mean, I could see Amazon spinning out AWS. I mean, how much would that unlock and value? Hard to know. I mean, obviously, it's a massively valuable. Or YouTube. Can you imagine if YouTube was standalone? Oh, my Lord. All right.

How did you hook up with CO2 and what's going on? This seems like a large number of $700 million. Are you doing early stage or late stage or everything? Because early stage is what I do. and if you're putting two, three million dollars, four million dollars into each deal, the math says you have to do a lot of deals. So let me back up for a second because I think a lot of people haven't heard of KOTU. Yeah, explain what it is.

So KOTU is a started in 1999 by Philippe LaFont, who at the time was working for Julian Robertson, one of the great hedge fund managers in history, and started his own hedge fund with $50 million under management in New York City. A few years later, his brother, Tom, Thomas joined him. And over, you know, that period of time and going through two really bad economic cycles, both the Internet bubble bursting in shortly after he started it and then the economic crisis in 2008, they built a very successful hedge fund that was largely investing in

technology companies, public technology companies. In 2011, Thomas moved to Silicon Valley and started a growth fund. And the logic was pretty obvious. Private companies are staying private longer, Facebook kind of being maybe the best example of that at the time. And so as a public company investor investing in technology businesses, if you're not accessing the private markets now, you're sort of at a huge disadvantage because a lot of values, well, a lot of the values being created in the private markets. And by the time these companies go public, there's a lot less opportunity. You know, CO2 invested in Apple in 99,000 was one of their biggest kind of early bets. And, you know, to be able to buy Apple at that time in the public

markets, you could obviously have a massive return. But if, you know, companies are going public now at 50 or $100 billion valuations, how much of a return you can be able to get? So they said, we need to go private. We need to go late stage private, which looks a lot like what public used to look like for technology. Companies used to go public at $5.10 billion. Less. Amazon went public in 97. I don't remember the exact number, but it was hundreds of millions maybe. Yeah, I mean, if you look at Twilio and Shopify, they both went low single digit billions public. And even that was, you know, later than companies used to go public in, you know, the 90s and 2000s. So why did that happen? Because you were there for Facebook to extend it.

This is a deliberate strategy to keep the growth under wraps so you don't inspire competitors. Is it a better life for founders? Or is it just there's so much goddamn money? around that people can do it? I think it's a combination. Certainly for us, it was a combination of you can do it now because there's a lot more late stage capital available where, you know, in 97 for Amazon to continue to invest, they had to go public. That was the only way to raise that capital at that time. There weren't these hedge funds. There wasn't this private, you know. Yeah. The idea of growth venture didn't really exist. And so that, you know, category emerged at the same time that Facebook was kind of coming up. Once, you know, venture investors started

to see the, you know, success of companies like Google and Amazon, they started to realize that you can invest in these companies, even at the later stages, and still get a great return. Combined with the benefits of staying private, which were that, you know, you got to kind of continue building your business a little bit outside of the lens of competitors and you can kind of, you know, not have to reveal as much about yourself. And, you know, Mark actually said when we went public that he thinks the company, it too long. And the reason he said that is because going public has a lot of benefits, but the number one benefit is it forces you to have discipline, you know, going back to that idea. As Bill Gurley's

been saying forever, he was on the board of Uber, he wanted to go public much earlier. And Gurley's been, you know, definitely on this as well. And that's the, you know, the benefit of public markets as they do require and enforce discipline. So, Kotu started doing late stage investing in 2012, 2013, and invested in SNAP, Lyft, and a plan, a number of other great companies. And then about two years ago, kind of completed the circle, if you will, by raising an early stage fund to become, you know, one of a few companies, investors that now do everything from early stage up through public company investing, full life cycle investing. And the idea with the venture fund was twofold.

Number one, a lot more money is being raised at the early stage in the same. way that, you know, in 2011, 2012, you were starting to see the emergence of these growth funds. Just the opportunity for technology to impact the world and build incredible businesses, you know, continues to compound, as you know, and you're, you know, obviously playing a big part in that as well. And you can deploy a lot of money in these early stage, in the early stages of these companies, because there's enormous value being created. And number two, COTUS strategy as an investment company is really, around data science and building out a data science platform. And so the firm, actually, we have

45 data scientists on staff at KOTU. Are they analyzing early stage startups, those data scientists? What they're doing is we buy an enormous amount of data and we ingest it. And then our data scientists are using that to help us make good investment decisions and help us assist our companies in running their business. What's an example of that data? You get satellite data, you get an app install data. What? Yeah. You know, you're, you know, You can buy data from a lot of different places now. And the data economy is obviously exploding. And so a lot of hedge funds are doing this.

A lot of hedge funds. It's a big edge, buy data, ingested, and then use it to try to have an edge in making public company investments. Fewer companies are doing that on the private side. Thomas and Philippe, the two brothers, who were the founders of KOTU, kind of had this insight that this data platform that they were building for their public company investments could actually be applied on the private side. And it turns out, if you're going to invest in 45 data scientists and you're going to apply that to public and private investing, you might as well apply it all the way down to the early stage because it turns out there's a lot of data that can help you gain insight into which companies are doing well. And more

importantly, when you invest in a company, every company now needs to have data science to be successful and so you can become their data science platform. So you can use it to find the companies and then you can use it to accelerate the investments you've made. That's right. And the way I think about it and one of the things that really attracted me to to co-to was, you know, I think venture, uh, the last big innovation in venture was Andreessen Horowitz, which had this idea that, you know, you could build a kind of full service agency like staffing model to help, yeah, to help startups. And, you know, you could build a kind of full service agency like staffing model to help. and, you know, as a venture firm, that would be a differentiator.

And I think what we're doing at KOTU is the equivalent of that with data science. You read the Ovid's book? I did. How great was that book? Loved it. I loved Michael, too. I mean, this guy came in and just took over the entire industry just by thinking, I mean, he started thinking about strategy. He's like, when I worked as an agent,

we all competed with each other. I have an idea. Let's have all the agents in the building work for the client. Yeah. What was your favorite part of the book? Do you have a favorite moment? I just loved how honest it was, you know. Yeah, he was really self-deprecating and candid about himself.

Yeah, and we know him. We both know him personally, and I think that is true to who he is now. Yeah. I love stories of innovation and business. And you're right. Like, he really transformed that industry. And, you know, I've been lucky to be part of two companies that have obviously had massive impact and transformational impact on their industries. And for me, when I was, you know, ready to leave an operating career and move into investing.

You know, I had been angel investing for a while. Yeah, he did over a hundred. And so I kind of got my feet wet. that way figured I would learn the ropes with my own money before I started investing other people's money. I wanted to try to do that in a way that was also potentially going to have an impact on the industry itself. And that's what attracted me to go to. I think what we're doing with data science has the potential to really move the investing industry forward in a very innovative and new way. And that's why we're having a lot of fun. Yeah, I mean, when you were an industry,

individual angel investing your own money. Square, gusto, open tour, Flexport, AirTable. FlexPorts founders come on the pod. He's awesome. Yeah. I love Howie. Yeah, I mean, you have, Jess. You just crushed it, huh?

Well, we'll see. I think in this type of business, as you know, it takes a long time to kind of find out how good you are. I think you're six, you know. We'll see. You're five, six, seven. I feel like you know. Yeah. If the company still alive.

It's hard to have a pretty good idea. But I personally feel like until these companies have exits and, you know, I can really say for sure that this was a good investment. You know, I don't want to take credit for it. But I do feel lucky. And I think my approach in angel investing, because I was in a big operating job, I didn't have time to diligence companies and really think deeply about their products. I would meet with a founder if I thought they were good. And I felt like I had a pretty good, you know, litmus test for that because I had worked for two of the greatest. of all time. So signal. I would bet on the person. Sure. And these are early stage investments usually, so the idea might change, the product might change, but if I like the person, I would bet on them. And then I kind of figured that if you take an index, effectively

an index approach to this, then a few of the companies are going to be outliers. And as you said, these are... You only hit one? That's right. What is the strategy with the $700 million fund? Are you doing million dollar checks, $10 million dollar checks. How many investments have you made? How long you've been doing it? And, you know, how does data science play into a two or three person company? Or are you trying to go a little

later? So all of the above. We're on our fourth growth fund. So the growth fund that started in 2012, you know, we've done, you know, a lot of investing, obviously, in later stage companies. The early stage fund, the venture fund is a couple years old. We've hired a great team. We've deployed You got Mazio. Matt Mazio. Who was Chris Sock as number two before he retired. Yeah, exactly. And Karen Maruni, who worked with me at Facebook, ran communications for Facebook.

And, you know, as a luminary in Silicon Valley, she joined us recently as a GP. And so we have a fantastic team. Five, ten people? Yeah, we have, yeah, roughly. And general partners and partners and principals. And so, you know, but we're focused primarily on enterprise software, consumer, and fintech. Those are kind of the three categories that we focus on. Obviously, we do stuff, you know, when we see an interesting company or an interesting founder, we'll do other things,

but those are the ones that we really lean into. And we do everything from seed to public company investing. It's a smallest check you route. I'm curious. 250,000. Wow. But, you know, most of the deals that we're doing are, you know, in the venture fund, most of the deals are leading in the seed A or B rounds and taking a board seats. You believe in the governance? Absolutely. Yeah. Critical.

What do you think of this sort of party round, no governance approach that we've seen over the last decade? It's troubling to you? Is it something we need to change here in Silicon Valley? Because, boy, have we seen some weird stuff? Well, I would say as an angel investor, I didn't care about that. In fact, a lot of the angel investments I made were party rounds gusto was a great example of that. And, you know, I benefited from the fact that Josh made room for people like me.

Yeah. People like you. And, you know, I think it helped him in some ways. And so I never objected to that. I think as a institutional investor with LPs, you know, we have over $16 billion under management across our hedge fund and our private vehicles. You know, we take that stuff very seriously. And I would say as an investor in late stage technology companies, especially, we take diligence very seriously. And we look at every company from, you know, seed up to public through the same lens of diligence to really understand at a deep level.

What is this company worth? And not just what does it work today, but what is it going to be worse someday as a public company? What's your methodology for figuring out what the potential is? what do you think about and then what do you think is important in terms of diligently and maybe what's something that you don't have to focus too much on that works itself out well obviously it is different because you can diligence yourself right out of a deal that's right and and you have to balance those things and that's that's frankly part of what my role at the company is coming in as an operator is to kind of you know gut check is this a big

idea. Is this a great founder? Should we be willing to make a bet on this, even if, you know, the numbers don't necessarily tie out perfectly? But at the end of the day, we started as a hedge fund. In the public markets, if you're not incredibly disciplined, you can get hurt very quickly. And remember, we went through, you know, the team went through 2009, 2000 and 2008, and came out of those two cycles, you know, strong, which a lot of hedge funds did not. do. And so that is in our DNA. And we're, you know, I think today. More armor. Just like Bezos got his armor and Zuck got his, Koto has theirs. Yeah. And our armor in many ways is our diligence process and our data science. And I think the two of those together kind of combined for us to say,

look, we might miss some big ideas because we are, you know, too disciplined. But at the end of the day, that's who we are. We're going to invest in companies that we really believe are worth what we're pain and that we more importantly believe are going to be worth more when they're a public company because we understand how the public markets value these companies. Right. So it's really aligning those two things. The eventual exit is going to be a public market exit if it goes well. And so you want to make sure those are tight.

It's amazing to me watching Angel Investors' diligence companies to the point of absurdity. It's in some ways the opportunity for early stage investing is that things are not yet solved. They're not fixed. The news feed hasn't been launched. The Kindle hasn't been launched. They haven't reached profitably yet. They lost a billion that year at Amazon. So it is a balance, yeah?

It's a balance. And I think in the earlier stage, obviously, there's less of this sort of hardcore modeling because, to your point, the product might change. There's nothing there. But you can still tell a story about what this company. might look like if things go the way we're hoping they go. And what does that mean in five or ten years? Like, is this an idea that legitimately could be worth billions of dollars? And those are the kinds of questions that we tend to ask at the earlier stages.

At the later stages, you know, at the very later stages, we're looking at it purely through the lens of if this was a public company today, what would it be worth? Interesting. What do you, do you have a percentage you're trying to hit? Do you believe in that style of invent? knowing what you know about how valuable, even a small percent of your undergraduate and your graduate degrees became worth, Amazon and Facebook respectively? We're actually, I'd say, probably more flexible than most people in terms of how we think

about it. We're not, you know, beholden to... So if you can get to 5% you take it. If you think it's going to be a rocket chip, you're not going to say, give me 15% or I'm out. Yeah, in the right situation, you know, we're, I'd say, generally speaking, but, you know, both flexible and also, you know, very oriented towards working with other firms. You know, I come from a partnership background. And so we definitely are, I would say, we have, you know, less sharp elbows than a lot of,

a lot of other firms. But at the same time, if you're going to join a board and put a ton of energy and as a VC, as you know, you can only do this with so many companies, you want it to, you want to have enough ownership for it to be meaningful. And so there's a balance there too. All right. As we wrap up here, and thank you for being so generous with your time and just all the details of what happened at Facebook and Amazon. It's just incredible stories.

Yeah, it's incredible. You have that signaling for founders. Share with us, if you can put it in words. What is that magic that you see in a founder? When you're talking to them, when does the sign above their head light up in neon and says winner? What is it for you, Dan Rose, when you're talking to them, you go, you know what, this person's going to win. Maybe not this company, but in life. I think the main thing is that they are able to think different in a way that is compelling.

Think different. They take their own counsel. They're self-possessed. But they can think differently and explain it. They're confident in it. Well, it's not just being confident. It's in, they explain it in a way that is genuinely compelling, right? That they, first of all, they have to be able to think differently than everyone else because if they don't, then they're just going to build something that is going to, you know, have a lot of competition and is going to be replicated.

But a lot of people can do that and espouse an idea or a vision that ultimately kind of falls apart when you test it. and my my sort of barometer is why is this idea that's clearly not you know a mainstream idea not consensus not consensus why is this actually going to work and they can explain it and they can explain it and it's a description of the future that people don't see today that holds together yes and you have that aha moment where they have now educated you that's right i had this with Travis. Because the world was telling him, surge pricing was the biggest mistake he could ever make. And he was getting pounded. If you remember early on when they had that New Year's Eve and people were freaking out that at 5x or 10xed or whatever. And he called me and it was a Saturday night, at 11 o'clock a night. I remember it because I stepped out of the house to not wake up my kid.

And I said, explain it to me. And he said, what's important about Uber is that it's over. always available. In order for it to be always available, the drivers have to go on the road. What driver is going to go out on New Year's Eve and have people abuse them drunkenly puke in their cars without getting compensated for it? We can't force them. And if it's snowing and it's a thunderstorm and they can only drive five miles an hour, I would rather they get paid, you would rather they get paid five times as much and you have that availability. If it's not available, you're going to be more upset by us. So the consumer doesn't actually know what they need. It's better to have it available and be able to pay the driver 5x, which is what they get. It's to send them to get on the road.

And it's the same thing Bezos did when he said, you have to kill the existing business and do that Kindle. And it's the same thing Zuckerberg said when we have to buy Instagram, because this is the future, even if it's just 11 people, I know it's the future. Yeah. But you have to be able to articulate it. And this is the thing I think, you know, founders, obviously you have to be visionary, but you have to be able to back that up with an articulation. And then you also have to sell it. You know, and one of the things when I joined Facebook, Mark was, you know, very young. He would have still been in college if you hadn't left to go start the company.

And one of the things I would tell him in the early days was Jeff was a brilliant salesman. he would have an idea and then he would go convince everybody around him that that idea that idea was right. And it's not, that's not the most fun part of the job. Because when you're selling something, you're basically repeating yourself over and over and over again. In fact, if you watch Jeff in his public, you know, when he's been in the public, he basically has been telling the same stories for 20 years. Sometimes you'll listen to him, you'll be like, I've literally heard everything he's already said, maybe five or six times. But that's the brilliance of being a master salesman. It's like a politician.

You're on a stump and you have to just keep repeating yourself because most of the people in the room haven't heard you before. Yeah, it's the job of management to repeat yourself over and over and make people feel great. And sell your idea. And so I think for a founder who has a great idea and is compelling in their articulation of why that idea is right, they also have to embrace the role of repeating that idea over and over, selling it to their investors, selling it to their employees, selling it to their customers, selling it to their stakeholders, until it becomes accepted as correct.

Yeah, it becomes self-fulfilling. Self-fulfilling. Dan Rose, an amazing 75 minutes. You missed three phone calls to stay here for an extra 20 or 30 minutes. but I appreciate it. It's long overdue. A lot of fun to do with you. If people want to...

Congrats to you, Jason, on everything, seriously. We've known each other for 12 or 13 years. We've known each other for a long time. And, you know, it's just... I feel so privileged that at some point, Ruloff at Sequoia said, hey, here's some money. Can you go invest it?

Because you introduced me some great company. It worked out for everybody. Yeah, yeah. I invested 700,000 for them, and it worked out. Yeah. And, you know, and it really is, I think, one of the great jobs in the world that we have. I agree.

To just sit with smart people and have them tell us. You kind of framed it perfectly, which is, this is the future. Let me explain to you why this is the future. And then you get that juice of being able to be part of it. Isn't that great? Just to be part of so many things that change the world. It's really fun. It is the greatest.

You're enjoying it. I can tell you. I've never had more fun. And I've had incredible, you know, incredible careers. Too great. But you know what's great about this, Ryan? You can sleep at night. When you're on Facebook and things are blowing up. Yeah. I mean, how many nights did you grind your teeth looking at the ceiling saying, oh my God, tomorrow, we got to go in solve these big problems. The fun thing about Venture is you get to see so many different things. When you're in operating roles, you're basically heads down, you're working on one thing. And that's really fun.

Four years for the Kindle, five years for the news feed. You have to focus on one thing. And you own that thing, which is the beauty of operating. But in Venture, you get to you get to dabble and you get to. to you get to see a lot of stuff. Did you miss your window as a founder? You said before you wanted to be a founder. Now look at this. You got 700 million under management, the greatest gig you could ever have, two greatest gigs. You ever going to be a founder? Because now, how old are you now?

I'm in my mid-40s. And you know what? After I joined Facebook, I realized I actually, A, probably wouldn't be a great founder. Why? I think I'm more of a scaler. Ah. You know, I think even KOTU has been around for 20 years. I'm helping the firm scale.

And the reality is that, after Amazon and Facebook, there was no way I was going to be able to do something that came close. And so I decided to do investing instead. It's a lot of fun. I get to help founders. And, you know, it's perfect for me at this stage. And you can sleep at night. You don't have to grind your teeth. Like, oh, my Lord. That's the thing about being an entrepreneur. I explain us to all these precious VCs who are like writing tweet storms on Twitter about here's how you have to email me as a founder. I don't know if you saw that. insanity. Yeah, just like, feces are like, here's the proper way to email me. And it's like, opening up your email is the easiest thing you can do in life. Like, read the goddamn email and respond and thank people for sending you their pitch.

That's right. What's the best way to pitch CO2 as we end? What's the best way to get in touch? I mean, you can reach out to me, D.Rose at co2.com. Correct answer. I respond to everything. Correct answer. I learn that from Cheryl Sandberg.

Respond to everyone. and every email and good things will happen. How much of Facebook success is she responsible for? A big part. A major part. And a big part of my career, too. She really transformed my career. If Zuckerberg went into politics or decided to take some time off,

she's the likely CEO of that company. She'd be a great CEO, you think? I don't know the answer to that, who would be, but I don't think Mark's going anywhere. He's not going anywhere. She should be the CEO of a company. I wish she had taken over Uber. There was talk of her being CEO of Uber.

I don't know. I honestly don't know. I don't know if that's true, but I do, I think of the world of Cheryl. She's exceptional. And politics, right? I mean, God, she would be a great president. She's an incredible leader. Why?

Soft power, hard power, just in raw intelligence, EQ, IQ, everything, right? She's a complete package? She's the complete package. And more than anything else, she really gets people. You know, that simple things like this idea that you should respond to everyone all the time. It's such a basic, you know, thing to do. It takes a little bit more work. But the benefit of being that person that somebody knows when they reach out to you, you're going to respond.

Yeah. It's just massive. It's massive. And it's a basic human thing. Yeah. She's so impressive to me. I wish she would be president or vice president or something. just if you think about her on a ticket,

her in Bloomberg or her and... Who you like? You got somebody you like? You don't like to talk about politics? You like Bloomberg? I'll pass on the politics, but I follow Bloomberg on Twitter, and I do admire him a lot.

Oh, God, if Bloomberg can be president, wouldn't that be the most amazing unlock? He's exceptional. Exceptional. He's exceptional. All right. Thank you, Dan. We'll see you all next time.

Bye-bye. Dude, you crushed it. Thank you.