This Week in Startups - Fireside chat with Jason Calacanis & Brad Gerstner hosted by Mubadala’s Ibrahim Ajami | E1746

Episode Date: May 19, 2023

This Week in Startups is presented by: Squarespace. Turn your idea into a new website! Go to http://squarespace.com/TWIST for a free trial. When you’re ready to launch, use offer code TWIST to save 10% off your first purchase of a website or domain. Trovata. Starting up is hard. Trovata makes managing cash easy. Start automating your cash management at http://trovata.io/TWIST.Use Code TWIST for 30% off one full year of premium features like AI forecasting. OpenPhone. Create business phone numbers for you and your team that work through an app on your smartphone or desktop. TWiST listeners can get an extra 20% off any plan for your first 6 months at http://openphone.com/twist Today’s show: Jason and Brad speak with Mubadala Capital’s Head of Ventures, Ibrahim Ajami, at Hub71 in the UAE. The three discuss how startups can survive and thrive in an economic downturn (1:02) before diving into the sacrifices that founders must make to create an incredible product. (14:16) They also explain how the AI revolution will affect software, startups, capital allocators, and more! (40:36) Follow Mubadala: https://twitter.com/MubadalaCapital Follow Ibrahim: https://twitter.com/IbrahimAjami Follow Hub71: https://twitter.com/hub71ad Follow Brad: https://twitter.com/altcap Time stamps: (0:00) Nick kicks off the show (1:02) Surviving the downturn (12:46) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at https://Squarespace.com/TWIST (14:16) Sacrificing to build a great product (26:34)Trovata - Use code TWIST at https://trovata.io/twist for 30% off one year of premium features, like AI forecasting (27:47) Brad’s letter to Mark Zuckerberg and AI creating ultra-efficient startups (39:02) OpenPhone - Get 20% off your first six months at https://openphone.com/twist (40:36) The AI revolution (50:48) The implications of AI on the software industry (55:50) Creating the Silicon Valley culture (59:32) Reflecting on the success of the Launch Accelerator (1:06:23) Building culture within your firm and dealing with failure (1:19:03) Opinions on WFH (1:25:05) Recognizing product velocity (1:29:11) Advice for young founders (1:34:47) Advice for founders in emerging markets Read LAUNCH Fund 4 Deal Memo & Apply for Funding Buy ANGEL Great recent interviews: Brian Chesky, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarland, PrayingForExits, Jenny Lefcourt Check out Jason’s suite of newsletters: https://substack.com/@calacanis Follow Jason: Twitter: https://twitter.com/jason Instagram: https://www.instagram.com/jason LinkedIn: https://www.linkedin.com/in/jasoncalacanis Follow TWiST: Substack: https://twistartups.substack.com Twitter: https://twitter.com/TWiStartups YouTube: https://www.youtube.com/thisweekin Subscribe to the Founder University Podcast: https://www.founder.university/podcast

On today's show, we have a fireside conversation between Jason, Altimiter's Brad Gersner, and Mubatelis head of ventures, Ibrahim Adjami. The conversation took place at Hub 71 in Abu Dhabi. Stick with us. This week in startups is brought to you by Squarespace. Turn your idea into a new website. Go to Squarespace.com slash Twist for a free trial. When you're ready to launch, use offer code Twist to save 10% off your first purchase of a website or domain.

Trovada. Starting up is hard. Trovada makes managing cash easy. Start automating your cash management at Trovada.io slash twist. Use code Twist for 30% off one full year of premium features like AI forecasting. And OpenFone brings your team's business calls, texts, and contacts into one delightful app that works anywhere. Get 20% off your first six months at openphone.com slash twist. Welcome to Abu Dhabi. How are you guys feeling? You just arrived? Incredible to be here. I mean, I said the lobby over at the Four Seasons is I felt like I was on Sand Hill Road, Silicon Valley.

It's like we couldn't get out because we saw so many friends over there. So it's great to be here. Thanks for having us. And I couldn't believe when we walked in here, quite the energy in the room. So it pumps us up. Yeah, I got stopped four times in 90 seconds from the end. elevators to meeting him with people from Silicon Valley and see a lot of friends in the room. So it's absolutely fantastic. It was exhausting to get here. I slept three hours, three times. But I just drank two espresso with two sugars each.

So I'm ready to go. Did a couple of red eyes, right? Yeah. Very good. Welcome. Yeah. Thanks for hosting. Good to have you guys.

Welcome everybody to HOP 71. And gentlemen, welcome to HUB 71. We'll talk a lot about that. We have a lot to cover today, but let me just do a very quick introduction here. Two very, very special individuals. It's sort of a sweet moment for me because in 2016 when we started going to Silicon Valley and, you know, when we launched our ventures business as Mubadla, you know, one day I'd hope that, hey, I'm going to meet these two guys.

You know, these guys are heroes. So now you come visit us in Abu Dhabi, so it's a very special moment. So Brad, Brad Gershner is the founder of Altimeter, one of the leading venture capital firms around the world. You started this in 2008 and invested in companies, you know, Snowflake, Meta, and many, many other companies which we're going to get into. and Jason, Jason Calacanis is a very well-known author, investor, and obviously very well known for the various shows that you host, including the All-In and this weekend startups. And you're also known to be one of Elon's sort of inner circle guys. Is that correct? It's very interesting when your friend becomes the most famous person in the world. and because when Elon and I met, he didn't have SpaceX or Tesla.

And we used to go to parties in L.A. And I would introduce them to people. And they'd say, oh, hey, Jake, how are you doing? Can I take a cell? I'd say, hey, what does your friend do? And I said, oh, he's working on a rocket ship company. And a person in Hollywood would say, do you fund movies? And he'd say, no.

And they'd say, nice meeting you. And they'd walk away. So it's quite funny. But, you know, Elon's a tremendous entrepreneur. And it's great to be his friend. and to watch what he's done. A lot of meaningful work. I think a lot of lessons for entrepreneurs.

What he's done over 20 years with these companies really shows what compounding innovation and iteration does. Everybody wants to get rich quick. Everybody wants to find the shortcut and be famous. And what they don't see is 66. 70, 80, 90 hours a week, year after year, and solving problems every day. And it's more pain and suffering than I think a lot of people anticipate, but it's worth it. And he's just a great inspiration, I think, for a lot of entrepreneurs.

And it's just good to have him as a friend. Yeah. Thank you for that. So we're going to start with, we're going to start with the state. I want to start with, especially for founders. So the initial conversation will be targeted towards founders. And obviously the state of technology industry today is going through a correction, is going through a shift, recalibration, a reset.

You can call it whatever you want to call it. Let's start with you, Brad. You've been quite vocal around companies living under constraints, being more efficient, being more creative. How did we get here? and what's your perspective around what founders really need to do in the world we operate in today? Well, it's great to be here. Thanks for having us. In 2016, you're right.

I didn't think of Mabatala as a force in venture capital, and now it's really exciting to see this room and just exciting to see your voice in Silicon Valley. This is the third major kind of correction that I've lived through. Jason and I lived through 99, 2000, 2008, 2009. And now this one, each of them was a financial reset, not a tech reset. They were a financial reset. And the reason I say that is because the secular curve, anybody in Silicon Valley in 2001 knew the internet was going to change everything. But the financial markets were struggling.

Anybody in Silicon Valley, 2008, 2009, knew that this iPhone was going to. to change everything, that cloud computing was going to, that secular curve was as steep as ever. But we had a financial market reset. And that's what we're going through again today. I actually get excited during these resets because what it does is it makes our job easier. During periods of excess liquidity, free money, two bad things happen. Number one, we fund too many companies because capital races in. You compete away the natural profit. So, for example, in ride sharing, we, you know, Bill Gurley talked about capital as a weapon of economic destruction. So the first mover doesn't get first mover advantages because you have 10 people who get

funded to follow and they all destroy the economics of the industry for a decade. And so it makes the founder's job a lot harder. So this period of scarcity, um, I, I think is really healthy for both venture capitalists but also for founders. Because the founders who are really willing to grind it out, the founders who are the most like, you know, the Travis's and the Elons of the world that are going to grind it out for that decade that aren't looking to get rich quick, that are going to build things that matter in the world, that move humanity forward, those are the founders who don't go away in 2009 and 2010. They didn't disappear in 2001. I mean, Elon founded these companies in the

wake of the financial reset in 2000 and 2001. So I get excited because I know when I see founders in the wake of a financial reset, they're the ones who are really, you know, they're in it to win it. They're going to grind it out. I would just, I would end on this and then pass about it to J-Cal. there's no lack of enthusiasm in Silicon Valley. I tweeted a couple of weeks ago. At the end of 2022, I think there were over 1,000 unicorns in the world. And I said, 100% of them will do a down round. So a thousand out of thousand companies will be priced down.

And I got a lot of feedback. Oh, my gosh, this is the end of times. And I said, why is that so unusual? The stock market, every single tech company in the stock market went down. So why wouldn't every company valued over a billion dollars go down? And the worst part is that five to six hundred of those companies weren't great companies to begin with and should have never been valued there. So they'll probably do a down round and may never get back to prior peaks.

But a couple hundred of those will do their normal down 30 or 40 percent just because the cost of money has gone from zero to five percent. And when that happens, they'll go on to higher highs. to build bigger things. So don't let that as a founder slow you down. In fact, you should be enthusiastic in this moment. It may be a little bit harder. When I raised money, I did my first trade were a public and a VC firm November 1st, 2008. There wasn't a soul on the planet who wanted to start an investing firm on November 1st, 2008. But it was great because I had no competitors. I think for founders, this is the best of time. Not the worst.

Jaycal, maybe for you, who are the founders during these times that can actually make it through? Like, what is the soul of that founder? And what does that founder do and behave like during these difficult times? Yeah, I think what we lived through at the peak there was a bit of a delusion. One of the magical things about Silicon Valley is that it's a milestone-based funding system. And so you get friends and family who give you money. It makes it very difficult to go home for the holidays if you lose it. And then you go to an accelerator, perhaps.

And then you raise a seed round, 25,000, 50,000, 100,000 at a time. And each step along the way, you have to prove something. And what happened during this peak was people became so good. And it's partially my fault with the podcasts, teaching people how to pitch and teaching people how startups work, that people became better at pitching investors than selling customers and building products. At the end of the day, what we do as founders is we build products that delight customers, that solve a problem for them. There's only three things that matter, and I'm training a bunch of young investors at my firm. Team, product, customers. Everything else

is not important. But during peaks, that's when people get distracted. They put, get raised too much money. They start doing five projects. And then the founders start creating funds. And they're investing on the side. And really, wait a second. I thought you were a founder.

No, no, no. I've also got my own fund. It just got crazy. So to answer your question, focus. Relentless focus. When you don't know what to do as a founder, when you're scared, when you're staying up at night, when you're panicking, when you've got three months of runway, 10 weeks, eight weeks,

and you have that pit of your stomach and you feel sick and you can't sleep and you're staring at the ceiling. That's when you go talk to your customers. That's when you get your team together over the weekend and say, I talk to our customers, let's build this feature and let's test it. So that's what I look for in founders. I want people who are obsessed about the product and the customers and have what we call internally product velocity.

That's how we make our decisions. to pick the founders. We meet with them. And then maybe four or five weeks into the process, we meet with them again and we look at the product. We don't tell them we're doing it. But we looked at what we look at what's changed in the product. We go look at the app store and see if they updated their app.

One company updated it twice. One didn't update it. So it really is about whoever can move at the head, and have that product velocity, small teams, and filled with builders. not just idea people. People come to me all the time and want to talk about ideas and they say, oh, I got so many millions of ideas. And they said, oh, yeah, I did two last night. I had a dream. Every night we all dream and have a hundred ideas. It means nothing. Your ideas mean nothing. Your execution is the only thing that matters.

If you can tell from the podcast lately, we've been doubling and tripling down on founding university at launch. In fact, it's basically the future of our venture capital. firm, and that's awesome because I'm working with a couple of hundred early stage founders really early and getting to see what tools they use. You know what tool they show up with most? They show up with Squarespace. They put up their first website instantly, quickly with Squarespace, and it's beautiful, and it makes them look like a million bucks. The thing you may not be aware of is that Squarespace, beyond the beautiful templates that make your company look like a million bucks, and that work on mobile. It's not just a pretty website. It is a powerful e-commerce platform now, and

They have member areas. What's a member area? You know, people like to sell content now and premium content? It's a big business. Well, they have that built in to Squarespace and they don't take, you know, double-digit percentages of your revenue like those other platforms do. And they also have appointment scheduling. So, you know, if you're doing a business where you're a consultant, you want to charge for your time,

well, you have scheduling built into it as well. And this is the brilliance of Squarespace. It's going to look beautiful, as you know. So here's what I want you to do. Just head to Squarespace.com slash twist for a free trial. When you're ready to launch, use the offer code Twist. You save an extra 10% off your first purchase of a website or a domain. We love your Squarespace.

You know how it is. When you're a technologist, everybody in your family, your friends, your circle, your network, come to you and say, hey, I've got to get a website up. Can you find me a developer, a designer, a product manager? And you just say, you know what? Yes, I can find you all that and more at Squarespace.com slash Twist. I'm going to unlayer that a bit, and maybe you both can jump on that. But this is specifically for founders here in the region.

I want to unlayer this concept of product. being the soul of the company. It's all about the product. And I know that David Sacks also talks about that on the pod where he says, you know, when a seat founder is pitching me, I don't want to look at a deck. I just want to go through a product demo. And when you look for founders, when you evaluate founders, how do you identify a good product from an average product?

Are you able to see that early on? And maybe you can tie it to some of the stuff that you've looked at, like Snowflake or you've invested in some of the outliers that have sort of made huge returns. for you. Yeah, and I think hearing from Jason and I, because I think we have complimentary, but adjacent approaches, right? So at Altimeter, I had started three companies in starting in 1999. I helped start General Catalyst in 99. And I needed David Fialco, one of the founders of General Catalyst said, you know, you need to help me put together the first company, our launch company. And if that doesn't work, then this fund's not going to work.

So we had an idea for an early online travel business, search business that we ultimately sold to Barry Dillard in 2001. And my observation, 99, 2000 was this is a power law business. The internet's going to be huge. All we need to do is invest in search and e-commerce. So we're very thematic-driven. We talk about super cycles. So I study the super cycle and say, if we get the super cycle,

right, then it's easier to find the companies, right? Because if you know, like organizing all the world's information in search is going to be a valuable toll booth, right? Then I want to go find the people who are doing that the best. Or, you know, when you saw this mobile, or when you saw these devices for the first time, and we knew that those icons were all going to be extraordinarily valuable. So the world had been organized around 10 blue links between 2000 and 2010. And then you saw that and you said blue links are going to turn into icons. So Instagram and Facebook and bite dance, TikTok and all the companies that came out of that. For us, the cloud was something that we knew would be more performant, more secure,

and was the natural evolution of where software was going to go and how it was going to be delivered. And so we were a little early in 2012. But so Snowflake, just as a canonical example, the largest market in all of software in 2000 was databases. It was a trillion dollars of enterprise value and it made sense because it was the primordial, it was a primal component that gave rise to all of software. And so if it was worth a trillion, if data was worth a trillion in the year 2000, what would it be worth 10 years later, when data is doubling every two to three years. So as the world was moving into the cloud, we said, we want to own the things that are re-architecting the data architecture into the cloud. And it wasn't just snowflake.

It was also MongoDB and companies that were enabling the move to the cloud like Twilio and octa. And so we've invested, as you know, and are still investing in what we call the modern data stack. So if data is the oxygen or the fuel that runs AI, then we're only 10% or 15% of the way into capturing all of this data, removing friction from this data. And so once we know that, we went out and we said, okay, who's doing this the best? We found the founding team. You know, there were only five people who had worked on the kernel at Oracle. We found two of those folks. They've been working on an idea.

And so for us, two people walking. off the street with an idea and a good product isn't enough. I need to know it's an end market that is really big, has a lot of tailwinds behind it. The super cycle is heading in that direction. Because if the super cycle is behind you, then even if you're number two or number three or number four, you can still win pretty big. Whereas you can have an incredible product, but if the world is not moving in that direction, it's very hard to overcome those currents. Is that how you look at things, Jason? No, completely different. And I think it's because of the stages we work in.

Yeah, you're on this. You're sort of zero to one. Yes. We are the first investors. We have a program called Foundry University where we give people their first $25,000 to incorporate. We have launch accelerator. We give them $100,000.

And then we'll see invest $250K to $2 million. So we own about 10% of the company. But along those three investment milestones, you know, we're looking at the craftsmanship and the thoughtfulness in each of the. features. And so as but one example, when Travis was showing me Uber, we were having a conversation about it. And the cab icon that was moving on the map as if the person was drifting the car. You know, when they drift cars, it goes sideways. Because the designer never thought to turn the icon and make two icons, one going this way, one going that way, one going north, one going south.

And I said to him, I said, you know, you could change any time. He goes, I know, I know, I could change any time. He goes, I know about this. It's on the roadmap. It's incredibly frustrating. I told them seven times. It's going to be out next week. And his obsession on each of those details. And then Travis and I would have these long conversations about tipping. I'm from Brooklyn. And in Brooklyn, everybody gets tipped. People who aren't, you wouldn't think get tipped, get tipped, like your garbage man gets tipped or you tip the person who installs your phone. Like, it's just like a Brooklyn thing. And I said, you have to let me tip. And he said, no, no, it's too much friction. we want you to get in and out of the car,

we want you to know the price, we're just going to give them a better rate, and they don't have to worry about tipping. And I would argue with him about this, like, hey, how about if I hold the button, and then it gives me a secret way to give a tip? And he's like, nope, it's about friction. You want to reduce the number of steps.

And you just saw that level of obsession. But the truth is at that early stage, I could lie and tell you like, oh, I can see it. And I lied to myself for a long time. I thought I could look at a founder's up, and I could figure it out, right? And it was just that when I started investing, it was 2008, 2009. I started in the down market.

So when I hit three out of the first seven companies were unicorns, I thought, well, I'm a genius. I can pick. One, two, okay, unicorn, three, unicorn, unicorn. I am great at my job. It wasn't that. It was just that there was only seven people starting companies. You had to be like a lunatic to start a company in 2008, 2009.

that's the moment right now. So the absolute relentless focus that I'm seeing now, I'm investing more money now in more companies this year than I ever have in my career in the down market because I'm seeing incredibly focused teams who are obsessed with product. But it's the ideas that sometimes confound us the most that are the ones that break out and induce a market to exist. What do you mean by that? Confound us the most?

What does that mean? So if you were to, when Airbnb and Uber started pitching people, the first thing people said about Airbnb was you're going to stay on, I'm going to stay on your couch. So you're like, what if you're a serial killer? And they were like, oh, yeah, yeah, no, because you have a rating system. I'm like, oh, really? Serial killers are not going to game the rating system? Like, do you know nothing about, did you ever see Silence of the Lambs?

Hannibal Lecter? He's very charming. He would get five stars. And so people couldn't understand Uber. And when I pitched it to people, I brought about 20 angels together in a room like this. And I had Travis pitched them. Three of us invested and 18 didn't. I see those same 18 people.

I know all of them. And they come up every time. Oh, my God. How did I miss it? Five million dollar valuation. You told me to invest and I didn't. And the thing is, it was in a logical idea that people would get in a random person's car. And many people at that point in Silicon Valley did not.

want to be in the hardware business. And they said, we don't want to be in that business. And one VC, I'll never forget it. He said, JCal, I will take the whole round, just convince Travis and Garrett to not create a marketplace, have them make software and sell it to cab companies. And I looked at the person and was like, wow, this person is incredibly successful and so stupid. Like, the cab companies are the problem in this. We have to remove the cab companies and then lower the prices and make it more accessible. And I said to them, because I didn't, I was coming up in my career, I didn't want to insult them. I said, well, that's a great idea. Yeah, I'll totally talk to Travis. And then I thought about it and I was like, I'm never going to tell Travis this because it's so

embarrassing for this person. And so over time, I stopped worrying about my ability to understand the customers in the product. My job is to support the founder and to look for that product velocity, look for incredible product design, and an obsession to every little detail. I had one of the early Teslas, and I was driving with Elon in the car, and we were on the highway and was making a whistling noise. And I kid you not, he started raising in the window up and down on the model X, pushing the glass, and then he said, just pull over here. And I was going to my house. I pulled over, got out, took a picture of it, and just getting on the phone. Like, he was literally in the car doing product stuff about this gap in the window.

That's real obsession. Yeah. And if you don't have that, what it means for you as a founder is that either you're not cut out to be a founder, she quit, or you haven't found the right idea that you're passionate enough about. But if you don't bring that level of passion, that should tell you, you're doing the wrong idea. move on to the next idea or you should go find somebody who has that level of obsession,

work for them and just be incredibly skilled at helping them realize a dream. Or you could work, you know, I don't know what the equivalent of the postal service here is, but you know, you can work at the post office or something or at Starbucks where you don't need to have that obsession. Yeah. But it requires unbelievable sacrifice, your sanity, your relationships, you have to be. be willing to sacrifice. It is a dogged competition. Lest you think everybody is going to succeed, I can tell you, 80 or 90% of you who start companies will fail and it will be brutal and you

will feel sick in your stomach. And all you have to do is get up and do it three or four times and you will be successful. But be prepared because Uber was Travis's third company. he got sued for a quarter trillion dollars in the first one, scour. He created Napster, but for movies. He got sued for $250 billion by the movie industry when he was 22. Then he did Red Swush, which was like a CDN, but he was too early, and he sold it and it was like a $20 million sale.

And then he did Uber. You have to be prepared for pain and suffering and obsession and sacrifice. And what happened for the last five years was there were a group of people who were playing the role of founder. They wanted all of the accruciamont. They wanted to be famous. They wanted to say they were a founder. They wanted to have the pitch deck.

They wanted to raise the money. They wanted to watch their valuation go up. But they were actors. Yeah. And now it's time for the real deal. Because if you want to raise money now, you better have a great product. The benchmark has gone up 10x, 100x, to get 10% percent evaluation.

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Company is over. It's lost its game. It's lost its leadership. And for you, Brad, tell us the story. You wrote this letter to the CEO, to Mark Zuckerberg. And it was contrarian at a time. You know, you said, hey, you need to start doing one, two, three, four. And it looks like he listened.

Either he listened or he was planning on it. And things have changed. But tell us a little bit about your deep belief that this is what he needed to do. And if he did that, this company was still a very, very important special company. You know, one of the things I love most about Silicon Valley is it's a real community. I mean, we've been there for two decades. And we know all of Mark's senior team. And, you know, we know Mark.

It was really around the poker table and our dinner tables where we had been having a conversation for two years about the downside of zero rates and free money, the age of excess. Like, what did it lead to? And if you just looked at the raw number of employees at Google, at Facebook, Facebook went from 40,000 employees to 80,000 employees in two years. Google went from 100,000 to 190,000 employees. And everybody that we talked to said, it's slowed down. We're not releasing products. It's no fun to work there. And it showed in the numbers.

And I think that there was also a lot of dislocation around IDFA and a lot of things happening in the world that specifically were hurting meta. And so if we telescoped out, there are two choices you can make. as a public market investor. I had first invested in META, and Mark knew this, in 2012. The company had gone public. The transition, Mark had famously made his app in HTML5, and it didn't work.

And investors concluded that they wouldn't be able to monetize mobile the way they monetized desktop. And the stock broke $20. there's a share and the cover of Barron's was that Facebook is finished. But we knew talking to all the people who were working there that he's working on a native app. I knew marketers that were using it in the sandbox and how well it worked. And it just stood to reason that an infinite scroll, right, where I could entertain myself like television, was going to work better on mobile than it did on desktop because I get up

leave my desk, but I don't leave my supercomputer, right? It stays with me. So I wasn't a flyby investor. I'd invested for a long time. We were talking about the downside of the age of excess. And so one of the downsides is you do too much, you invest too much, you hire too many people. And at meta, that manifested itself in a 10-year project where they planned to spend more money that the U.S. government spent on the Apollo project that put men on the moon. And nobody really even understood exactly what it was, including Mark. And yet, staring them in the face was probably the biggest gold mine, the biggest opportunity that we've seen in our investment careers, which was AI.

And this was a company I had been talking to them about four or five years because we were early investors. We had back Yaming at Bite Dance. And I remember Yaming sitting in our conference room. And I said, how are you going to build an entertainment feed in China without a social network? And he said, Brad, AI is way more powerful than a social network. And so that was really the conversation with Mark that the core business needed to get fit and focused that he should double down on AI, and he should just quarantine, invest five billion a year, which is still an insane amount of money on Metaverse instead of 15 or 20. Then when I sent the letter to Mark, I'd been talked. Here's the thing. He's 38 years old. He doesn't have to listen to me or talk to me or

any other investor. But the brilliance of Mark Zuckerberg is he's infinitely curious. He's mentally flexible. He's in the building. Larry and Sergey are not in the building. Mark is in the building. He cares deeply about the product. And so when I took him through this alternative vision, I said, this isn't about stock price. You don't care about stock price. But what you do care about is working with the smartest people in the world on the most important things in the world to move humanity forward. And he's like, yes. And I said, this path won't get you there. Here's the path to get you there. And so I would like to think that we made a small impact. But when we discussed it on the pod or we discussed it on CNBC, I said, this is an open letter to all of us, to all of Silicon Valley.

We've all become unfit. Working from home, we convinced ourselves that it was as a lot of Silicon Valley. We've all become unfit. working from home, we convinced ourselves that it was as productive as working in the office. It wasn't. Being in the office, working long nights, pizza boxes, you know, that is how stuff really gets done. It's where the energy. So I thought that, you know, it was important for them, but I thought it was even more important to send that message to everybody. And it was really the message that we had been discussing around the poker table.

So I wouldn't, I don't have a lot of pride of authorship around it. You should. I think it was really good timing and it was brave of you to do, actually. I'd give you a lot of credit for it because you saw it arguably a year before. I think a lot of people saw it and you said it, you know, a year before a lot of people were willing to say it. The truth is, like great products are typically made by small teams. And when you have so much money, what people were doing was they were getting office space. and employees based on two years out.

Where did we think we're going to be in two years? And what happened was there were people who were just at offices saying, I'm working on nothing, but I'm getting paid so much. And this is a money printing machine. What they didn't realize was it was actually slowing them down. And they had managers managing managers. And anybody who's worked in a big organization knows, when you have too many managers, you know,

it just becomes a quick way to drive out people who actually do great work, who don't need a ton of direction. Now, this has led to what I think, well, and you didn't ask this question, but it's the natural follow-up, so sorry, as a moderator, I have to go with the next question, which is, what is a- I've listened to a lot of your podcast, so a lot of this is learning from you. The follow-up is, well, what impact is AI going to have? And so when we were watching this AI thing happen, I just told the people that our companies,

make your default homepage chat GPT or BARD or PO from CORA, whichever one you want, the sandbox or playground, if you're a developer. And just make a list of everything you do every day and try doing it in chat GPT or one of these other services. And what we quickly found was 10, 20, 30% of everybody's job could be done in these tools already or some approximation of them. people was as high as 50. So what we're going to see, I predict in Silicon Valley is smaller teams are going to get more done. And so then you worry, oh my God, are we going to lose all the jobs in the world? Well, no, unless you think that the number of problems that we have to solve as a species,

humanity, that we're almost done with it, how many people think that we're almost done solving all the problems in our lives? Raise your hand if you think we're almost done. Exactly. There's so much more left to do. So if let's just assume, and I just had Brian Chesky from Airbnb, Aaron Levy from Box, and Reid Hoffman, who just started a new AI company from LinkedIn on the podcast this week and startups in the same three days. I interviewed them all in the same days and I asked them the same question. What percentage are people, you know, by the end of this year, 2023, how much more efficient

are they going to be with the tools at the pace we're going? And have you ever seen a pace like this? Uniformly, they said, it depends on the position, but I think 20, 30 or 40%. All four of us had the same answer because we're all using it every day. Now, in addition to that, people are on hiring freezes. If you're a young person who's working from home, you've never spent any time with the founders or the CEO of the company, the leadership, you are in a very dangerous place right now. because you can take your 10-person team.

If you can get 30% more efficient, that means you have a 13-person team at the end of the year. Next year, maybe you get 40% more efficient. Now you get another three or four people without adding to headcount. So what's going to happen in Silicon Valley for capital allocators is what I think about, because that's my job now. We can fund companies for a much lower number. And when I started in the industry,

you would raise $3 million and you'd spend two years, sometimes as little as a year, buying servers, racking them, putting them in a co-locution facility, getting an office space, and your product would come out in month 18. Because of cloud computing, and because of the development of software, three people have a product up and running,

you know, in a hackathon, in a weekend and have 10 customers. That's going to go even faster. And roadmaps will get done quicker, which means the long tail of software is going to really be viable. You know, somebody might have a very niche product and three people will get it to $25 million in revenue. We're going to start seeing companies. I will tell you right now in the next five years,

there will be many stories of three people, one, two, three really talented bionic people using Chad GPT and other technologies, and they will make $10 or $20 or $30 million, $10 million in revenue per employee. The great companies make $500 to $1.5 million right now. That's going to $10X. And that's what's got me excited about investing right now.

Stop using your personal phone for your startup in 2023. You have to stop doing this. It's such a common mistake that founders make open phone has totally rethought every detail of what a business phone should look like in 2023. And it's so affordable you have no excuse. They make it super easy to get a business phone number for everybody on your team. It works through a beautiful web app on your phone or your desktop. And I can tell you it's amazing.

because our sales team and our ops teams use it daily. Recently found so much value using Open Phone for our Angels Summit communications. Open Phone is the number one rated business phone on G2 for customer satisfaction. And Twist listeners are going to love it. Brian Jagger, he's the co-founder of startup called Athlete. He tweeted the following. I'm literally cash flow positive from listening to This Week in Startups for Listener Deals. And he explains that he previously got Open Phone money from this incredible discount

that they give to this week in startup founders. And he says, I'm not paid to say that. I don't know, Jason, pure honest feedback and appreciation. And you know what? I love to hear this because there's so many people who listen to this podcast, we're founders, and you need to use these tools. But listen, you might be cash constrained or you might want to put that cash into your product. Open phone is already affordable at a starting price of only $13 per user per month.

But Twist listeners can get 20% off any plan for your first six months at openphone.com slash twist. And if you have existing numbers with another service, no problem. Openphone will port them over at no extra cost. So head to OpenFone.com slash twist and start your free trial and get 20% off. So let's talk about AI. You've both said that this is probably the most significant value creation opportunity of our lifetime. So deconstruct that for us. And obviously, listen, you have a room here and you're in the, you're in the,

How do we look at this potentially for our founders, for our economies, for our societies? Is there an opportunity for us to go build the $100 billion companies from here, from Abu Dhabi? Yes, absolutely. It's the most exciting. We've been lucky enough to do this for 25 years. But let me just let's all telescope out for a second. The history of humanity has been pretty miserable. for 99% of humanity, most humans in their lifetime did not see a single invention.

The cycle time on invention was slower than the life was long. And yet we're living through these massive, you know, earth-shattering inventions that build on one another. And so, you know, AI could not exist without the internet. mobile couldn't have existed without the internet. It couldn't have, AI could not have existed without the cloud because these are information data gathering devices. These are why we have the data.

The cloud is what makes the data frictionless. That's what runs the AI machine. In 2015, I was at a dinner with Bill Gates and he said, and Bill's an optimist on humanity. Read his annual letters at the end of every year, the Gates annual letter. And it will really pump you up about all that we do because it's been, it's really been entrepreneurs and invention that has moved humanity forward. Governments create the conditions to allow innovation to occur. But it's founders and funders working in that system that actually are doing the innovation.

And so when I think about AI, what Gates said at that dinner is he said, you know, humans make decisions with limited information, right? So we gather. And for most of humanity, it was a single person's data that they held in their head and the single processing power of your brain. And you gathered it over your lifetime and then you died and we started all over again. Now we're collecting and maintaining all the data, all the words ever spoken by all of humanity, and we're building supercomputers large enough to augment human intelligence. So this is not like we're not going to talk about AI in five years any differently than we, we don't talk about internet companies anymore or mobile companies anymore.

Augmented intelligence is going to be the very fabric of everything, of all businesses. If you are not leveraging the power of machines to help humans make better decisions, today, right? I think about where chat, GPT is today. Like, it feels like it's a 10x improvement. But if you talk to Sam or you talk to Reed Hoffman or you talk to, you know, the folks at DeepMind, this is the beginning of the beginning. For the rest of your careers, this is what we're going to be investing against. This is the moment we've all waited for because this is the moment that has a maximum leverage for humanity for all societies. So we live on a globe today where the average human conditions across the globe have never been better.

Children surviving childbirth, you know, length of lives lived, average GDP, you know, per human on the planet, etc. And I think this is going to drive us all forward. Yes, there will be questions we have to answer, like purpose, productivity. If we can all do so much more with less, where will people derive purpose, right? What happens to jobs? What happens to jobs? And you're already seeing that. You're talking about that.

What happens to jobs if this really becomes real? And I think, you know, I know, I know J-Cal has talked about this on the pod. What I would say is, first, every wave of dislocation, starting with the Industrial Revolution, right, moving from Hunter-Gatherer to agrarian, agrarian, to Industrial Revolution, Industrial Revolution to Information Age, we've always panicked about what's going to happen to jobs. But to Jason's point, there's so much left to do. The bigger thing is the nature of the jobs to be done. post-World War II, we had a lot of people who had to rebuild the planet in a very industrial manufacturing intensive way. Most of those jobs will disappear. And so we're going to have different types of jobs. J.

Cal, why don't you roll with it from there? The good news, I think, is if you embrace this technology in the first inning, baseball metaphor, kind of like this is year one of the app store is how to think about it. you're not too late, just because you don't work at Open AI, you haven't been doing this for five years. This is kind of like Steve Jobs holds up the first iPhone, and then six months later, he released the app store. That's kind of where we're at right now. So your timing is perfect if you use it. But I remember when I came into the industry and I used to do network engineering and I would set up computers and networks for companies in IT, there were some boomers who didn't want a PC on their desk.

and they said, oh, give it to my secretary. Okay, well, your secretary has one, but you can have one too. And we have this Microsoft office and you can do all these spreadsheets and documents and they're like at email and just print it out for me. Those people refuse to move on with the paradigm. And there's a saying in psychology about paradigms. Paradigms don't die. People do.

So there'll be a group of people who do not embrace this technology. and they will die, and then all that will be left is people who do embrace it. The amazing thing is two or three of the hardest jobs in the world where we are the most constrained are data science and developers and coders. With this new technology, does anybody here speak English? Raise your hand if you speak English. Anybody? Okay, everybody? Great. Congratulations. You're all developers. You just don't know it yet.

In the coming months, I didn't say years. I said months, you will be talking to a computer and it will be writing code for you. And you will be a developer. It's now, but how many people here are not developers and are writing, coding, chat, GPT? Oh, well, actually more than I suspected. So that's kind of the mind-blowing part. The idea of coding and programming in something other than English will seem silly in a couple of years. of course you would just talk to the computer and tell it in English what you want.

Why would you write code? Just like the idea that when I was coming up in the industry, we would open the computer up and we would put in a network interface card, a nick card, and we would put in extra memory chips and we take out the hard drive and put a new bigger one in when you filled it up. All of that got extracted away. And IT departments didn't have to do that. It was in the cloud. You had more memory than you needed.

And it all just worked. And then data science, like I have the chat GPT feature now. I don't know if anybody else is in the plug-ins or whatever, but you can upload a CSV file, any spreadsheet or whatever. And then you just tell it, tell me about this file. And it's like, well, it has these columns. And those are zip codes and the houses of prices and how many rooms they are and when it was sold. And then you say, what trends can you tell me about this? And it analyzes it and tells you the trends.

and then you say, can you put those in graphs? And it puts it in graphs. And I was giving a talk to one of the Rosewood Hotel groups, like the one over here. They had 150 executives. This was just last week. And I was showing them some of this stuff. And I said, is anybody here on the management team, the data scientists? And they all pointed out, they're like, Justin's the data scientist.

And I showed it to Justin. And I looked at it and I said, how many of these requests do you have from other people in the room? He's like, months. I was like, they could all do it themselves now. And everybody's like, oh, poor Justin. I said, no. Now Justin does not have to have an annoying conversation with you about the most basic data stuff.

You can come to him with your questions that are now the questions he's asking. And he can have a really high level discussion with you about your data. We don't know what these things are going to be able to teach us. When we put them on these huge data sets, as Brad was saying before, data is the new oil. You guys have some experience with it. Oil, right? And data. Like, you know, so the metaphor, it's like massive amounts of value.

We're going to talk about that. Yeah. And I think just being able to set up these auto GPTs. And the auto GPTs is really mind-blowing. You say to the GPT, you're a salesperson. You're selling this product. Go ahead and every day, look for new customers. and send them a welcome email and ask them to book a demo.

And you're going to set this persona loose and you're just going to watch it work and then say, if people tell you they're not interested, don't try to sell that person and ask them if they know somebody else in the organization that you should talk to. And it's going to just learn every day how to sell. And then the salesperson is going to have like five salespeople working for them, but they're all going to be digital. It's going to get weird. But it's going to be awesome.

What's going to happen to the, look at from the investor lens. You have an entire software industry, at least some of the best software companies that have 99% gross margins or 90% gross margins. What happens to an entire software industry as this new technology? How do you think about the implication of that? I think that everything is suspect until proven otherwise. I think there was a period over the last five years where everybody treated as all software is created equal. And we would say, oh, it's got 10 million in ARR, give it a 10x multiple or 15x multiple, as though it was all the same thing, which it never was, right? A database is a hell of a lot more important, is mission critical and is very different than dog walking application software.

Right. and yet in the age of excess, everything was treated as though it was mission critical. What you're going to discover in the age of AI is what is really mission critical and what is not. And so what I would argue is the modern data stack, the things that are making AI work better, the confluence and snowflakes and mongos and, you know, Postgres and, you know, all of these things, in the first instance become more valuable, not less valuable. Data bricks. I mean, you see the amount of activity and the acceleration going on in these businesses. But there are a lot of workflow, application software, low moats, where Chad GPT will just do it better in very short order.

Wipes them out. And listen, capitalism is about creative destruction. Look at Netscape. Netscape existed as a business for five, seven years. And arguably was one of the most. important companies in the history of capitalism. So if you're working on something that's really important, it may not live forever. It may not be the only thing that you do as a founder, right? It doesn't mean that it doesn't have a noble purpose if it's part of the building blocks that moves us all forward. I think what if I was a founder and I have been several times, what I wanted to know is even if this thing doesn't work out financially, am I going to be proud of the impact that I got up and I grounded out every day on with this team? Well, I'd be able to look the team in

the eye at the end of the day and say, I'm really happy that we did that together and that they feel great about having made that contribution to the technology ecosystem that we all live in. So yes, I think there's going to be a lot of software that gets displaced. I don't think that's particularly a bad thing because there's a lot of inefficient software in the world. You know, the margins are going to be incredible. Like I said before, like the three-person company making $30 million. But every time one of these platform shifts happen, every single vertical has to be redefended. So when, you know, the mobile phone came out, Facebook wasn't guaranteed that they were going to win mobile and they almost lost it. And Microsoft, they did miss

mobile. Nobody has a Windows phone right now. We have Android or you have iOS. They missed it. So every single time, you can lose that war. Cloud computing the same thing. There were many client server companies. They didn't make the jump. They got replaced. Slack came in or Salesforce came in and back to creative destruction. That's what's going to be awesome. For capital allocators, late stage, capital allocators are going to have a hard time because, the companies are not going to be as capital intensive. So if you're allocating that last round or two of funding, they may not need it. And I think the hiring freeze at these large companies is going to be a five-year phenomenon. That's interesting. I don't think we're hiring

people at Facebook. There'll be specific positions, of course, but it could be three, four, five years before they start hiring again. Let's shift to capital allocators. You want to say something, right? You have something. Ten blue links, right? That was the defining metaphor. for more than a decade is dead. That was a terrible way to do information retrieval. It was a waypoint. It was the best we could do at a moment in time. But I queried, you know, I wanted to find out a yoga schedule.

And now they give me 10 bad blue links that I have to search through. I don't want to search through them. I just want the fucking answer. Just give me the answer. What's the schedule? That's the world we're moving into. And even Larry Page, in 2005, when I said, Larry, is this as good as we will be able to do, he said, no. In the future, we will answer the question before you, before you even ask it.

Right. And that's the direction we're heading in. I want to spend a little bit of time on, I want to shift now to, listen, we are, you spoke about the Silicon Valley community. And it's a special community. It's a vibrant community. And it doesn't exist without the investors. The VCs and the capital allocators play an important role in that community. So we have spent the past 10 years also incubating and enabling a venture capital ecosystem here.

And we have some seed managers and emerging managers and some growth investors in the room. Let's talk a little bit about that. And maybe we can start with, you touched on it earlier, which is curiosity. Can you be an exceptional investor without the sort of endless burning curiosity inside of you? And link that to sort of the ultimate story, please, right? I mean, if they exist, I don't know them. And I think there's a lot of different ways to invest. And I think there are a lot of ways to lose money.

investing. But I think the calling of investing to be great in this craft, right? You look at Jason, he was a journalist. You look at Mike Moritz. He was an investigative journalist. I was a lawyer. I was trained how to analyze, you know, an obscure set of facts and make sense out of it. Like what we do, where did the all-in podcast come out of? You have a group of us that get together every Thursday. We have dinner. We talk about all the issues, right, of the day. We play poker. But really what it is is trying to understand the world around us. And if you didn't pay us, if we didn't get the opportunity to invest, we'd still get up every morning. We'd read everything we possibly could. And we'd try to make sense out of the world and try to figure out the things

that could move the world forward. And I think that's the red thread that connects all of us. And that's, our interest doesn't stop it. Politics or history or finance or investing. It's, it's all of the above. And so when I think about this region, I think about the capital allocators that you pulled together, just the way we've connected, right, on Twitter, through podcasts, the world is shrinking. And, you know, it may still be a long flight to get here. That's going to change too. That's going to change too, thanks to Elon. But the world is really shrinking because you and I can text back and forth or see what each other is posting on Twitter or have a conversation. And all of the sudden, the relevance of this region and its impact from an

investing perspective, from a founding perspective, can be hugely disproportionate to the size of the region in the same way. Listen, Silicon Valley was an unlikely story. Why Silicon Valley? Right? But those ecosystems take nurturing and then they build on themselves. And so I think there are a lot of places around the world where they've tried those things, but they were missing some of the ingredients and they gave up too early. But it is going to happen in this part of the world. You know, Jason and I were talking on the way over. You know, he should start a launch incubator over here. You do one, you know, maybe in Singapore. You know, this is a global phenomenon.

And AI is going to make it that much easier for founders and capital allocators to do what we do all over the planet. What makes launch a successful incubator, accelerator? What makes you an of a very special seed investor? Yeah, I was delighted when I got into investing because of how long. lazy the venture capitalists were. These people take months off a year. They make one bet every six months. And they think they're better than the founders largely and smarter.

And I came into it as a founder and formerly a journalist. And I just looked at it and I said, well, what made me win in those other areas was, you know, how hard I worked. And I realized the more founders I met with. and listen to and ask questions to the smarter I got. And then I started a podcast called This Week in Startups that was once a week. And then it became twice a week. And then it became three, four, five, and then six days a week.

And I said, I'm going to stop going to lunch. And I'm just going to talk to founders on this podcast every day. And I took that philosophy and built out an 18-person investment company. We have 15,000 people reach out to us. and I start at the top of my inbox and I reply to whoever emailed me in the last five minutes first. So at least some number of people get this crazy experience like, oh my God, is that really you, J-Cal?

Yeah, of course it's me. And I will write back to them, you know, hey, that's a really interesting idea. I hope you pursue it. And then it turned out that there were a lot of people who wanted to be founders, but they didn't know how to start. And there was Y Combinator, TechStars and my firm, launch accelerator. We all do the same thing. We give $100,000 to people, $125,000 for six or

seven percent. And we spent 12 or 16 weeks with them helping them, you know, really try to get product market fit and raise money. But I realized there was a step before that where people were thinking about building a company, but they needed to get excited and they needed to have, you know, a little bit of a push. And we started something called Founder University. We've now had 900 people go through that program. And it's a 12-week course. And it was going to be free. But then when it was free, we'd have people would just quit. So I came up with an idea. I said, it's $500 to come. It's 12 weeks. And if each week you fill out a form and tell us your progress on your startup, which takes five minutes, we'll give you back the 500 in week 12.

94% of people complete the program now. Stripe is not happy because we're charging 100,000 and charging back 100,000. So to the Carlson brothers, I'm sorry about that. But the funny thing about it is we realized that a lot of these people didn't have a rich aunt or uncle. They weren't independently wealthy. And we said, how could we help you? And they said, well, we just need some money to get our servers and to, you know, incorporate. So I just told my team, when the weekly reports come in, look at whoever has the most product traction. And every week, just give like four or five of them $25,000 and a note at a million dollar valuation. And, and will be their rich aunt or uncle who puts them in business.

We've done like 30 of those. And so now I'm scaling that up and then scaling up the accelerator. And we have a philosophy internally, which is never underestimate anyone. Because my lord, I have seen so many awkward people, products, people who couldn't pitch, people who shook, or they had dirty shoes, or they were sweating or body odor. just not ready for prime time entrepreneurs who then became billionaires. I see it all the time. Where you start is not where you finish.

And everybody, was anybody here ever, was anybody here ever a teenager? Is anybody ever a teenager? Like, was it awkward? Like, every first time founder I meet, it's awkward for them. They don't know what a cap table is. They don't know what a convertible note is. So don't write them off right away. And people write people off far too quickly.

Oh, you didn't go to Stanford. I had a great benefit. My dad was a bartender. My mom was a nurse. And then I came into Silicon Valley. I started a magazine. And when I started my magazine in the 90s, all of a sudden I realized, oh, these people are desperate for attention and to be on the cover of my magazine.

Oh, I have total control over them. I can just pick who's on the cover of the magazine. And then I realized, wait a second, where else is power located? The power to write the first check is incredibly powerful. And the power to introduce that person to 10 other people and say, I wrote them a 25K check. Why don't you do it? And the first check is the hardest. The next nine are easy.

And so that's why I made it, you know, my life's mission to be that first check. And right now I'm on track to do 100 this year and next year will be 200. I'm going to work for 10 more years. If I hit those 2000, if I can be the first check into 2,000 companies, which is my new goal for the next 10 years, I'll become the greatest investor in the history of angel investors in Silicon Valley because nobody's ever done it.

There's only one other person who's done it, like a combinator. And is the world's greatest moderate. Yes. But I mean, it really is. And that requires curiosity. But this is what it, you, people are not willing to take the chance of the risk. Yes. And the job is to take risk.

And the job is to. meet with people when they're awkward and they don't know exactly what they're doing. And take a point of view and make a decision. Be courageous. Yeah. These venture capitalists are cowards and lazy. Yeah. That's the reason I've become successful is because I like to take risk and I like to work.

That's it. You just, if you're a capital allocator and you're in here, make more bets and be more supportive of the founders. Naval said something to me when we were both. both starting out as angel investors 12 years ago. And he was doing something called venture deals and I was doing open angel for him. We were both trying to just get people together to angel invest. He hadn't started angelus yet. And he said, do you know why we're winning? And I said, no, Naval, I don't know. Why are we winning? And he said, because we're in a competition to see who

can be the most helpful and we are being much more helpful than the VCs. The angels and the and the, These seed funds are being more helpful. And the genius of Naval stuck with me. And that's all I do. I wake up every day and just say, can we be more helpful to founders than everybody else? Yeah, you wake up thinking about what do, what am I doing today to help that founder, to enable that founder? To increase the probability of success. That's our job.

So, Brad, for you, what's your advice to fund managers here in the room and in the region? about building culture as an investment firm and defining the soul of an investment firm. How have you done it, Altimeter? I mean, you just heard a great culture that J-Cal drives. For us, it's a lot of time to think and do less. So our cultural North Star is essentialism, the art of doing less better. and I think when I look around a venture capitalist, they actually do too much. They want to believe in every founder who walks in has a good pitch, and they end up with a

random assortment of investments. Now, if you're doing that in the angel stage where J-Cal is, I think it's perfectly appropriate because, as he said, who am I to judge? I just want to see product velocity, you know, I'm not going to judge whether it's going to be Airbnb or Uber. I think when you're investing in series B, C, and D, there is information, right? And the problem is if you spend 10 years on a journey, B, B, B, B, B, B, B, that is the size of the prize at the end of the day is $50 million or $100 million outcome. That may be a fantastic lifestyle business for the founder, but that was a terrible venture investment. Yeah.

Okay. And so for us, we think a lot about size of the prize. We want to work on things that could be the most iconic, most impactful things that we can possibly be working on because our scarce resource is our time. You know, it became in vogue over the last couple years. You know, Ultimiter has made 80 venture investments over the last decade. Now, we've been lucky enough. Those have included, you know, things like leading the series being Zillow or. ITA software or Snowflake or Mongo or Twilio or Bite Dance. You know, we've had some great investments, but we haven't made that many, which means if I make, if I spend a lot of time making investments that end up consuming all of my time, but none of them end up impactful, then the opportunity cost of those investments is sky high. So I think once you're outside of the angel stage, and if Bill Gurley were here, benchmark had this strategy for years, I would say we take a very similar strategy a stage later. But it's, you know, it's measuring twice and cutting once, right? It's being very deli-you're entering into a marriage, a relationship with this founder for a decade.

right? Another thing I say to my team, if this founder relies on us to succeed, then we chose the wrong founder. Our job is to increase the probability of success, not to create the success. It's a, you know, I would just say in terms of that culture, really know who you are, know the strategy that you want to execute, don't drift in the strategy, get up every day, outwork, you know, everybody else in executing that strategy. And I think, you know, several different styles can win, but that's ours. I think it's really well said. And there are distinct differences in stages.

You have to realize that. I went to a hotel called the Amman Hotel. Have you stayed at one of these? Very nice. I mean, but like compared to what a normal hotel, it's kind of mind-blowing. And I stayed at it when I was in Tokyo, when they translated my book, and I was on book tour. And I was just taken by this service level that I had never seen before.

And, you know, I've been everywhere in the world. I just never seen anything like it. And I designed my firm around the philosophy of never underestimate anyone, but also of realizing that we are in the service business. And that's, I think, what people forget when you're a company. capital allocator. You're really a partner and you're a service to these founders. And so I told everybody on my team, if a founder emails us or calls us, I don't care if you're in the movies, I don't care if you're on vacation. I don't care if it's Sunday or Saturday. You can walk out of the movie theater and call the founder on the phone. If they texted you and there's something wrong,

the movie, whatever Marvel movie you're in, it'll be on Disney Plus in a couple of weeks. leave the theater and when they tell you, oh, am I disturbing you say, no, I always have time for you. And when there's a hard discussion, call them on the phone or text them and say, is now a good time to talk. So I had to retrain my team. I said, stop booking phone calls. Get the founder's cell phone number. Have it in your phone. Text them when they email you and they say there's a problem or there's an issue or they have a question.

I want you to text them and say, is now a good time for a call? Or should we set something up? And they say, nine times I think, yeah, I have everybody's phone number. I will call founders randomly and I'll just call them and say, hey, it's Jake How? Just want to check in on you. How's the business going? They're like, nobody ever does that. And I stole that because Doug Leone at Sequoia, when I was a founder, would randomly call me.

And I would have a heart attack. Doug Leone, like the most legendary venture capitalist like in history, and I'd see it on my phone, I'm like, breathe? Do I answer on the first ring or do I wait for the third? And I just decided answer as quick as possible because it's Doug Leone. I just answered, Mr. Leone, how can I be of service? He's like, oh, I was talking to somebody about you and I was wondering, how do you get good domain names? I noticed you buy great domain names. And I'm like, well, I have a strategy for that.

I knew you did. Would you talk to my, Brian? He's with this bread and breakfast thing we're investing in. And you ask questions about buying the domain name. I said, what domain name is it? He said, Air. Or B&B. Or maybe they want Airbnb.

I don't know. I was like, sure. He's like, okay, hold on a second. Hi, it's Brian. Doug's the hands on the phone. This is a conversation I had 10 years ago with the Airbnb founders. And I think you have to really decide that you're going to be of service and then be relentless about it. Having a theme or a thesis, that's all good, having a culture, a philosophy.

Remember you're in a competition to be the most helpful you can be. And when people fail, that's when they need you the most. So I actually give a pre-speech to founders. And I will say to them, hey, we'll put this money in. And I just want to let you know, like, when we put this million dollars in or it's half a million dollars, seven, eight, nine times out of ten, the company is going to fail statistically. Now, I think you're going to be in the 10% or I wouldn't make the investment. But there'll be a time when you feel so sick to your stomach that you will be embarrassed to tell your team how bad things are.

And you'll be scared to death to tell your investors and the board because you'll be afraid they'll fire you and you'll be afraid your employees will quit. I said, that's when you call me because I've seen it all. call me because all of these companies are about to flip over, be distant, disrupted, whether it's Facebook or Tesla or, you know, any company, even the smallest one, they could all have a near-death experience. And one Saturday, a founder called me. And I said, hey, how you doing? I'm going to just make up a name, John. And he said, I'm not good. And I said, okay, tell me everything. And he said, I'm in the bathroom. My kids are in the car. My wife's in the car. I'm supposed to go to the farmer's market. The company is going to fail. My CTO just quit. I said, okay, where are you exactly?

And he said, I'm in the shower. I just vomited. I just puked because I, I'm going to fail. I said, if you fail at this company, I will back your next company because you take it so seriously and you're so hard working. Go hang out with your family. And then if you're around later, let's talk. Enjoy your family. Let's have brunch tomorrow. If this one, if we shut it down, or we sell it, then you can just take a year off and I'll back the next one. Sure enough, that's exactly what wound up happening. But founders is a lot of shame in failure. And if you are going to make this region work, you have to be able to preemptively let everybody know, we understand that failure is part of the process. You cannot have Uber, you cannot have

snowflake, you cannot have Tesla, you are not doing the job correctly if 70, 80 or 90% of the company succeed. You want 90% to fail and you want the founders to wrap it up, take the tax loss, and then get back up and start again and do the next one. But that's counter to how our minds work. And the power law, you know, the 80-20, the Pareto principle, defines capital allocator's career in every fund, there'll be one or two names, sometimes three, that make up 98% of returns. Right. And no investor knows which one that is until year five or six of the fund.

So you have to come to it with incredible humility. I think that point about normalizing failure is critically important among both allocators and founders. But it's also important to realize that taking money. and deploying money is a huge responsibility. So how you fail, right, is really important. And over the last five years, I saw people raise an ungodly amount of money, right? And they were taking money off the table. They had never turned to profit. They were taking $50 million off the table. You would see them on Instagram all over the place, partying. They thought partying and

cocktail parties was a proxy for working hard. And those founders, when they torch that money, right, because at the end of the day, that money comes from children's hospitals, from university endowments, from government pensions that are paying for teachers and firefighters and police officers, if they torch that money that I'm representing as a fiduciary, then they do it irresponsibly. I'm not going to be there the next time, J-Cal. I'm going to be there every time when they grind it out. And by the way, the other piece of that is you don't have to grind it out to the bitter end, right? I see founders overstay their welcome sometimes, right?

If you raised $30 million I did at my last company called Room 77 was a hotel search engine, and Rich Barton was on my board, the founder of Expedia and the founder of Zillow, and I said to Rich, Rich, we haven't cracked the code. We've got 30 million bucks in the bank. We haven't cracked the code on how to win over the consumer. The competitive landscape has changed against us. Google has now introduced this six-pack. There's no way to compete against them.

And I think I can sell the business to Google. And I can make sure that I get this 30 million back to the people who entrusted me with it, given that the facts have changed. And I said, that's what I think we. should do. And that's exactly what we did. We sold the business to Google, it became Google Hotel Finder, and we returned capital to the investors. Some people may have said, you didn't go for it, you should have been more bold, et cetera. But I do think there is that line as a founder, knowing when you've really tried everything, you know, and responsibly landing the plane

in a way that allows you to do the next thing. You know, so it's a, I agree that I'm anxious to back them again. But unfortunately, I have seen a lot of behavior over the course of the last several years that I wouldn't put in the category of responsible or backable. Let's do this. Let's open it up for some Q&A just to, you know, make sure we hear out some questions. I know there's a lot of people that have questions. So I'm going to spend about not more than 10 minutes.

and maybe we'll take, you know, two or three questions. All right, let's take one question here. Hey, guys, thanks for taking the time. I actually have a question that is valid for any and all of you. You know, I guess you all invested in remote companies during the pandemic coming out of it. I saw a tweet from you, I think, last week, about validating remote is dead or something along those lines. what is when you speak to your founders, your portfolio founders today that maybe started remote native or that are remote, what are you telling them in terms of team management? Are you telling them, hey, we need you guys to get an office, especially those like us that, you know, have teams around the world.

Is it, hey, you know, bring everyone together, locate teams, maybe sales together physically, I don't know, create pods. would love to have kind of your insight on what you tell your founders today. Well, I don't think there's one size fits all. So I think there are remote native organizations that design their engineering teams from scratch to be remote and work very effectively. But most of the companies that I see were not designed remote native and are still working. remote and I think that's a huge mistake. And even if you are remote native, I see those organizations trying to find energy, right, by putting pods together in different locations, certain days of the week, etc.

In terms of all organizations that were not designed remote, including the conversations we've had with Meta and Google and others, the companies that were most resistant to come back to the office, as we saw in Silicon Valley, all of the, them have now thrown in the towel. They all realize that engineering and general work or productivity is at least 50% higher. It's the magical energy in the in-between moments. It's the water cooler chat where you come up with an idea to crack a problem that you wouldn't have otherwise had. And so I would say you have to just look at the mirror and be really honest about the nature of the organization that you've designed. And if it's working brilliantly and you think you're

out competing all your competitors and your remote and your design remote native, then I would say that can be a source of competitive advantage. But if it's not, then I think figuring out ways to get back in the office sooner is important. J. Cald? Yeah, it's going to be a really interesting test over the next year or two to see the companies that decide to have an in-office culture and they're whiteboarding stuff together and they have that energy if they beat the remote companies. Remote companies can hire anybody from anywhere, they don't have to relocate that person so they can hire faster. But then the abuse that's in the system, people working two jobs, et cetera, you know, losing the intangible moments.

I am going back to an office myself. I made that decision. I told the 18 people in our investment company, they're all grandfathered in, but I will not hire another remote worker. If they're like a remote worker, there'll probably be chat GPT. They'll be like an automated persona in chat GPT working. I want to get more people into a space. I'm actually going to build a space like this with the fourth fund that we're doing at launch to have a physical presence in Silicon Valley.

That's how much I believe in people being in the room and the collisions that occur from really intelligent people who just ordered in some sushi and they're there at eight or nine o'clock at night and somebody has a brilliant idea and they can't wait to talk about it and start building it. So I think for young people especially, if I was a young person starting my career, wherever the CEO and founders were, I would be next to them. I would live five blocks from the office in the smallest, crumbiest apartment. And I would, this is how I built my career. I came in an hour before my boss and I wouldn't leave until my boss left the office. That boss I had 30 years ago is the president of lunch today. And I learned that lesson from him. He said, if you want to be successful, Mike Savino said, look to your left, look to your right, come in an hour before that person and stay an hour after them and never leave before your boss.

And we just set a really hard working culture. Now, it doesn't mean you have to sacrifice or not spend time of your families. Commuting sucks. We all realize that. People have kids. So there can be exceptions and flexibility. And I think Americans maybe were too inflexible and then too much remote. and there's going to be a balance.

I think Americans should take the whole month of August off like Europeans do and just enjoy like a really good mental break, maybe work half days, whatever, remote. But you need to have that like in-person time. Culture. Listen to the podcast a couple weeks ago where Jason was down at the launch of Starship. Do not underestimate as humans also on this difficult journey,

just what it feels like to be in the same room with these people in the trench with these people, and then to be there to watch the proverbial launch, the feeling. Because I can't guarantee financial success out of a startup, but the pride and the good feeling as a human to bust your ass on something with a group dedicated to a mission and then be there and launch it together,

I get so excited with my team every day. and it's crazy to me to think not being able to experience those highs and even the lows and do it together as a team. Thank you for being here, first of all, giving us all this amazing information, Brad, Jason, Abraham. Welcome to the Middle East as well. Hopefully the next Silicon Valley with your help too. Quick question for Jason and maybe you can also add in however you like. You spoke about product velocity. and how you analyze when you're investing in early stage startups.

I want to ask you what measures or what's the most critical factor for you when you're analyzing the product velocity for early stage startups? I'd like to know more about that. And do you use AI within when you analyze the early stage? We are, I'll go take it in reverse. We're not using AI yet, but we have a project underway to do that. we have been recording all of our introductory calls with founders. We do 3,000 per year. We have all those videos.

We just started running transcripts on all those videos and summaries. And the next step will be to look at that data on a rolling basis and see if those companies raised money from certain firms. So we're going to take last year's companies and we're going to say, did any of these in CrunchBase or Pitchbook, whatever database, raise, of the companies, which one, raised the most money, and did any of them raise from these 10 firms that we would consider a really strong signal? And then did we invest or not? And then how do we miss it? So that project's underway.

And we have the data from last year, 2022, that we'll use to do it. In terms of product velocity, most companies don't have it. And the companies that have two or three co-founders with two or three builders are the ones that do have it. So any kind of product velocity is great. any kind of metrics on the users and a thoughtful discussion of, is this a real metric or not? And so what investors will do is you'll give them a bunch of metrics if you have them.

And we know if you're giving us real metrics or fake metrics. So we'll see letters of intent. We call them internally or in the industry letters of nothing because they mean nothing. We will see cumulative users, cumulative signups. And they always go up into the right. it's very strange. When you add today's number to yesterdays, it goes up. So the charts always look great.

But the more accurate number is how many daily active users, weekly active users, monthly active users on a rolling seven-day basis. So you want that intellectual honesty. The truth shall make you free. Like you want to have that really intellectual discussion. And don't be ashamed of it being spiky or you're kind of lost and you're triangulating. A lot of founders get caught in a trap that they don't want to share information. with the investors because it's not up and to the right.

The opportunity for us to invest is that you haven't figured it out yet. If you did figure it out, then some hedge fund, not hedge fund, some, you know, mutual fund would be buying Netflix based on its churn or whatever and some allocation. But if you're buying Netflix in the early days, you're buying it because they haven't figured it out yet and the valuation is only five or 10 or $20 million. If you have figured out, then you can add a zero or two. So own the metrics, own the imperfection. be frustrated with how embarrassing you think your startup is, but that constant improvement.

And when you send updates to investors and it has, you want to start up competition and, you know, other nonsense and cumulative users, we kind of know. Because the ones that actually have the goods are like, we launch these three features, we turn these two off, and we have these three paying customers and these two churned, and here's where we source them. And it's very granular. and it's small, little wins that we go, oh, you've sourced three customers from some conference. Are there any more conferences like that?

Yeah, there's 20 conferences. We can go to in the next year. And if we can get five at each, we'll have 100 customers. Great. Let's go do that. So that's what that intellectual honesty and rigor is about. All right. One more.

I'm in my early 20s and I built two companies. One of them failed. And the second one I'm trying to build. and I raised my first capital at the age of 19 from Bangladesh, which is never possible. So I come from a place where the GDP or the monthly income of a person is around $100, $120, but I raise $50K USD, but here is the problem. When I go to investors and I say, hey, give me money, I come from Bangladesh, I'm not from Silicon Valley, and I study at NYUAD, and people are like, okay, you come from Bangladesh, you live in UAE,

and you are not from USA, you are not ready for money, you still go to school. So if you think of, if you're on your early 20s, you have seen a lot of startups who have built startups at university or schools, what were the traits of those founders who really got successful at their late 20s or at their late 30s? Thank you. One of the things I love about what we all do is I came from nothing. My dad tried to start a company in 1978, and it failed.

And there wasn't such a thing as venture capital. He borrowed money from a bank. He mortgaged our house. He mortgaged the car. And when his business fail, we lost the house, right? He lost his health. It was a, it was a grant. Like, that's what I grew up with.

So for me, risk, like I think about risk. I think about risk today, we're here talking about raising venture capital. If you raise venture capital in Silicon Valley and it doesn't work out, but you act responsibly, you don't lose anything. In fact, you gain a lot. You learned a lot from the process. You gained a lot of reputation and experience, you know, and that's the beauty of that system. Imagine that system.

People give you money. If you lose it, your life's not over. For my dad, he lost everything. And so when I have young folks come in from Stanford, I tell him, you've already hit the lottery. You're here, right? You're getting capital that doesn't have recourse. You're not risking your family or your house. And so I think it's a beautiful thing that somebody in Bangladesh or anywhere else on the planet,

don't think that you're being held back because of where you're from, because Jason doesn't care, and I don't care. The only thing we care about is, is the founder going to do what it takes? Are they working on something that's noble and big? Do they have the energy, the passion, the courage, the tenacity to grind through and to achieve? And if they don't, will they have? act responsibly along the way? Are they a person of high integrity? Do they have high, you know, good values, et cetera? And so, you know, in many ways, I think a Silicon Valley is like this great meritocracy. And, you know, it, you know, certainly will benefit from more global diversity in places like this. And as I was saying earlier, you know, like us being here, us communicating on

Somebody, J-Cal mentioned, you know, if you don't have somebody's text, then you're not servicing them well enough. I totally agree, right? Like, we hit each other on WhatsApp because I want immediate communication. And so my advice, whether you're starting a company, you know, in, you know, in Bangladesh is hustle your ass to a place like this, stand up, have the courage, make your case. don't think just because you get a no doesn't mean it's because of where you're from or what school you went to look in the mirror and say maybe it's because my idea is not great maybe it's because my product velocity is not great right are there other things that be self-aware and self-reflective about the things that you can control control those

things i promise you if you're great you will have venture capitalist beating your door down to give you money. Because at the end of the day, they're motivated by finding, right, the next Mark Zuckerberg, the next Elon Musk. I mean, Silicon Valley is full of people like Elon Musk who were not born anywhere,

you know, you know, in the U.S. and didn't necessarily go to all the right schools. Be relentless, which you clearly are. And you can also step back about two inches from the microphone. It's just a little microphone tip.

But be relentless. And then, which is what Brad told you. And then just to summarize it, after being relentless, you have to be so good that they can't ignore you. So you're relentless, obviously. And then maybe you're okay. Maybe the design of your products are five out of ten. Be relentless.

Every day a little bit better. Compounding every day. Make the product a little better. Learn something new yourself. Be relentless. and be so good that they cannot ignore you. You understand? They can't stop you.

The only person who can stop you is you. All right. One more, one more. One more final question, and then we're going to wrap it up. I feel really mad. She's had her hand up for the whole time. Thank you. I appreciate it.

Kind of following a similar theme, just to preface, I lead Violet Ventures, the fastest-growing student startup community in the UAE, And we spend a lot of time thinking about what founders who've been trained here, educated here, and building here need. So what is your advice for new builders in emerging markets that are kind of paving ecosystems? They don't necessarily have the pulse or the maturity of the Silicon Valley investors, but it's growing and it's building. Do you think that time should be allocated to understanding case studies progress from other markets? or should that time be spent into like heads down tunnel vision focusing on understanding

your specific emerging market to the detail and the core and not focusing on anything else? Is it like building a VC firm and investment firm? By the Ventures. It's more like inspiring young founders to understand that entrepreneurship is an option. You want to build a startup community? Yes. So that's what we're building. Yeah.

I've done this many times. Just get people together. entrepreneurs in a room, buy a bunch of food, put them around a table, and then watch what happens. Like, it's really just about networking and getting them together. And then, of course, you can go to take them to other startup communities and meet people. But the power of there being a place for people to get together on a regular basis and share what they're working on is so powerful. And you saw this in other genres. In the 60s, musicians started writing songs and Bob Dylan and Bruce Springsteen.

They all built on each other. You had this happen with writers, poets, artists, architects. When they're all in proximity to each other and they start competing and sharing, everything starts going in the right direction. So networking events and co-working together and little groups like that really work. And then if you check out what we're doing with Founder Universe, founder. And you email me, Jason at calicanus.com.

I'll invite you to come to it. We have 250 people and we made an agenda. Here's 12 weeks of learning. And we just bring people together and then we let them go into Zoom rooms and do breakout rooms. And they make lifelong friends. So it's very lonely to be an entrepreneur.

So what you're doing is so critical for the ecosystem here. It might be the most critical thing, more important than money. Just getting those people into a room together and sharing a meal and talking to each other is so powerful because two of their companies will fail and one will succeed and the people from those two companies will join that company.

We see that happen all the time in Silicon Valley. So I think what you're doing is very powerful and important. Keep at it. I would just finish by saying I think it's such a cheat today that there's so much information online. I mean, the podcasts, just in and around startups, you know, whether it's this week, you know, startups, the all-end pod, obviously the stuff that Jason's doing, but also acquired, which is a great podcast that goes deep in terms of startup companies and their startup journeys and many others, listen to them, right?

Study them, study what the great ones, you know, great entrepreneurs have done. What are those patterns? What are the communities that came together? Then the other thing I would say is, I think there's still a. self-imposed insularity around the world, like, oh, I'm in China and therefore, like, I'm going to focus on China and China investors or I'm in the UAE. Like, I think that you never had that approach. You were always like, hey, I follow him on Twitter.

What do you think about this? And I just think, you know, put yourself out there, right? Email, he just invited you, you know, come over to Napa. He's putting on a great event in a few weeks. You know, with an incredible group of folks who are speaking and, you know, build that network outside of this place and have global ambitions, right? Just because, one, it's starting their company here. There's not a founder I back in Silicon Valley who says, I'm building a Silicon Valley company.

They all have global ambitions. And so should founders and show should capital allocators in this part of the world. You know, in addition to obviously thank the two of you for coming here, we also want to thank you for, you know, the impact and the good that you do for the industry. A lot of us here learn from you. We follow you. I thank you, Brad, for reaching out and connecting. It just shows, you know, the kind of people and human beings that you are. We feel in the region, you know, we feel like this is our moment. We've been waiting for this for a very, very long time. And I hope that you can feel and you will tell from these two or three days here that we don't want to lose that opportunity. We want to make a difference.

We want to build some very important companies. And, you know, we want to be like you. We want to be one day, go to Silicon Valley and host a panel and talk about all the great things we do. So it means a lot to us that you've come here. So thank you for that.