This Week in Startups - Garry Tan on lessons from past startup failures, power of community funnels, Alexis Ohanian’s departure & more | Angel S5 E8

Episode Date: March 11, 2021

Check out Initialized: https://initialized.com FOLLOW Garry: https://twitter.com/garrytan FOLLOW Jason: https://linktr.ee/calacanis

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slash twist. That's O-D-O-O-O-com slash twist. Hey, everybody, welcome to Angel. This is season five of a series I do with Angels. Now, we've done four seasons already, and we were really thinking, what would we bring you in the fifth season, these 10 episodes? And we decided Super Angels would be the way we would go. What's a Super Angel? I don't know. We made the term up. But basically, people with over 50 investments who've been doing it for a decade, and frankly, who are, who are, at the top of their game. You look at the lineup that we've had, it's been nothing short of amazing. We did an amazing job. And by we, I mean, my research team did an amazing job. Look at this

lineup. Joanne Wilson's coming on episode 10. Paul Judge is coming on episode nine. Episode seven, Matt Mullabuck, episode six of season five, Reid Hoffman, Mark Cuban, Howard Linson, Eli Gill, Des Traynor, and David Tisch. What a lineup for the season. And today, episode eight of season five of Angel, the Super Angel season. Gary Tan is back on the pod. How you doing, Gary? What up? Thanks for having me. Everybody knows Gary. I met Gary in the lobby of the Ritz Carlton with my friend Billy, who invested in his company, Posterous. I heard you're talking about postures once, and you were, I think you were on one of your clubhouse rooms, and you were talking about how you had regrets about how you didn't focus enough or stick with it enough,

where you didn't have product market fit enough. Now that you're in, I think, are you in your second decade of investing now like me? Not quite yet. 2009 or 2010? Oh, I started in, I mean, I still had credit card debt in 2009 and 10. I was working on Posterous. You had me on one of the first twist shows. You were episode 14.

Yeah. That's a coia offices. That's right. Yeah. So I had not started investing until, honestly, 2011 when I started working at White Combinator. Okay, so you're a decade. Yeah. You're a decade in.

Now when you look back at yourself as an entrepreneur, what did you do wrong as an entrepreneur? When you look back on it, that's so obvious now that you're an investor. I look back on my successes and failures, and it's so obvious to me what I did wrong. I mean, there are basically two phases to start-ups. The first phase is, can you get product market fit? And that's just like, how do I catch lightning in a bottle? And the thing about posture is we caught it.

Like we were 10x year-on-year growth. We were the toast of the town. And all the people who we needed to use postures were using it. We were on everyone's radar. Yeah, you used it. Everyone who was everyone was using our service. And so we caught lightning in a bottle. But then there was this moment where we needed to hire an exec team.

And I needed to stop coding. I needed to hire the best possible designer to do the design instead of me doing it all. I need to hire the best CTO, the best VP of Eng. And we needed to build the org. And we had actually raised a great Series A from one of the, of the best investors, Satis Darmaraj at Red Point. Like, we had everything going, and it was just purely, we let the lightning go. Like, I didn't want to give up coding.

I didn't want to give up design. And it was a gut punch because it's so obvious, like seeing so many companies now, and you see product market fit, at least now I can go, hey, don't fail the way I did because it will hurt a lot. And it means something when I say it, because, you know, we were sort of competing against Tumblr, Tumblr had their billion dollar exit. And then in retrospect, we're actually competing against Instagram. We just didn't even know it. And so there's so many levels to this game. And buffer, right? You were also like, there was a fork in the road where you could have become the

destination like Tumblr. Or you could have become 10 bucks a month, 20 bucks a month. Did you ever turn on revenue like SaaS revenue? No, we really needed to at that moment. And we didn't. And we could have been Squarespace. We could have been Weebly. We're friends with the Weebly founders. They said, hey, why don't you just charge five bucks a month? You'll never have to raise money again. We were only like 10, 15 people at the time. It would have been trivial to be profitable. For people who don't know, Postgres was like my favorite service because I was addicted

to social media. It was the dawn of social media. And I had an email address that was like a specific unique hash. And I would take a picture on my Blackberry and I would email it and it would go to all my services. Done. I didn't have to open them up. Just like Buffer does now.

Yeah. And Jason at, uh, you know, at Hayduck. They just released a new posterist, but on hey.com email, which is awesome. Good for them. It's so crazy. I just remember from the Mahalo days, I had gotten the Q&A service. Mahalo answers, right? It was growing like a weed. And then I had figured out YouTube, but I was trying to boil three oceans. I was trying to fight a war on three fronts. And I should have just focused on one. And it's all worked out. I'm focusing on one on inside and it's growing nicely. So focus, focus, focus. hire people who can take over from you specific job function so you can move up the stack. You're only as good as the team you build, right? Yeah, that's right. It's like you're saying, it's about product market fit.

But in that second phase, the growth phase, what is it really about? You sort of hinted at hiring people who are better than you so you can do other things and so you're not doing 10 things. What else is it about when you're in that second growth phase? I mean, I think if you look at your calendar, you actually need to spend pretty much 50 to 80% of your time hiring. And then once you've hired them, how do you retain them, right? Like, give them the right goals and then give them the space to execute against it.

Like, don't be in their business being like, what'd you do today? Right. It's like, don't micromanage. You actually have to set up OKRs that are sort of monthly or quarterly. And it's like, you figure out how we get there. But these are the things I need you to do. Right. And, you know, people just don't do it.

Right. And what got you there, what got you here won't get you there where we want to go, right? And there's just that moment, honestly, post-series A, but sometimes it happens at Seed. And it's recurring. Like, if people have not hired people or been executives before, and a lot of founders haven't, you literally need someone to come and slap you on the face. I mean, you need someone to come and just be like, wake up, you're going to die. You're in face, too.

This is going to kill you. I always like to sort of explain this to people like there's a time to be a player and there's time to be a coach. And like when you're a great player, like you were a great designer or are a great designer, you were a great coder. I don't know if you've kept that knife sharp or not. Nope, no, sadly not. I heard that sword bells real quick in the developer space. Yep. And so, you know, at some point you have to then move into the teacher role and the management role like you're saying.

And it's, it is very hard to make that change. And you have to also have the ability to say, this is the goal. So you have to stop thinking in days and weeks and start thinking in months and quarters. Correct? Yeah. No, absolutely. And that's, you know, for us, like you and I, when we work with our companies, like, that's actually the moment, the thing that we need to do.

Like, there's not really, if not us, then who, someone's got to, you know, help the founders figure it out. It is one of the reasons to have operators as. investors. And then we're part of this new class, I would say yourself, myself, and countless other founders who went from operators and creators of businesses to investors. How are you enjoying being an investor? I get the sense sometimes when I hear you talk, you kind of miss being in the game. Do you miss being in the game and is investing, fulfilling enough? Or do sometimes you just think, God, I'm so young, I should just suit up again. I should sharpen that sword.

I guess I'm trying to figure out how to make investing the game. Because, you know, it's sort of fractal, right? We spend all of our time trying to find people who can take software and apply it to these ossified industries that have no software that, you know, they're not, they're dumb, right? They're still pick up the phone. And venture largely is still kind of that. I mean, I would argue Paul Graham was one of the first people to add some software where it's like, apply on this website.

and like 2% of people can actually get into Y Combinator. And you showed that, oh, there's actually a lot of space for adding software. And then when I got there, I built their social network, which like one in three, YCA people use every day. So I'm like, they're like software things, right? Yeah, bookface. It's a joke on Facebook. It's actually from the office.

Is it a what happens on bookface? People just talk shop? It's just a forum, right? I mean, what's funny is today we talk about, creator economy and things like that. But I actually think, like, Paul Graham figured out a lot of the stuff early, right? He did his essays. His essays were the top of the funnel. It was like, you weren't meant to have a job. And then I read those essays and I'm like, no, no, no, no. Oh, my God. This is great. Like, this is me. Yeah, totally. I mean, I was working for Peter Thiel's, you know,

startup Palantir, which is public now, which is insane. And I read his essays. And I was like, oh, my God, I could start a company. Like, I could start a Palantir. Right. And, you know, then he's sort of like the Pied Piper, right? Like, there's Hacker News, which was arguably like one of the first creator communities. And like part of it was like, you've built all of these things as well. Like, your whole, you know, media universe teaches people how to start companies. Like, how, you know, what's the language? Like, what's the culture? Like, how do you be a part of this culture? And then you have your Slack group, which is giant and massive. And then there, you know, all of us have been building communities for many, many years, actually. Yeah. And I'm latecomber, actually.

I'm like, oh, I need to start doing YouTube. And I need to do Clubhouse. 2021 is looking up. Tons of new beginnings. Lots of hope. It's going to be a great year. And hopefully, great opportunities for you to grow your business. But if you're going to grow your business, you're going to need incredibly talented people to do as a founder what maybe you're not great at or you don't have time to do anymore. You need to build your team. You're only going to be as successful as the team that builds your products, interfaces with your customers, and builds the culture of your company, and LinkedIn jobs finds the right person quickly to fill your positions. And we are going to give you your first job posting free right now. You go to LinkedIn.com

slash angel, LinkedIn.com slash A-N-G-E-L-A-L-A-L. Angel. Very easy to remember. Hiring is super important. I'm doing it here at launch. Just hired a second producer for this week in startups hiring a community manager.

We hired another support executive for the syndicate. We are booming over here. And we do all of this by going to LinkedIn jobs. 722 million members worldwide, mean business. They keep their profiles up to date

on LinkedIn for a reason. They're looking for opportunities. opportunities, and you can post your job with all those great screening questions, and LinkedIn is going to get your role, that position in front of the right people with the soft skills, the hard skills, and all the things you need. The thing I've been blown away with is the quality of the candidates. Very simple. LinkedIn.com slash angel, LinkedIn.com slash angel, and terms and conditions apply because they're giving you that free first job posting. Thank you, LinkedIn, for supporting the show. Your YouTube is great. For people who don't know, just search for Gary

Tan with two R's and Gary. And you do really nice, short, succinct videos. And you were just starting those maybe 18 months ago. What's the reaction been? Oh, it's been great. I mean, honestly, the first six months really were terrible and very discouraging, which is how it works in media. Terrible how. You know, you're like shouting into an empty cave. And, you know, I spent, you know, many, many hours per week, like three, four hours a week, like learning how to do videography and editing and sound design. And then you put it up and then you get like 100 views. You're like, oh my God, why am I spending all this time?

But then there was a moment where the algorithm figures it out. And then I went from 10,000 to 50,000 subs in like a week on a couple of viral videos. And then now I'm like at 65, 70,000. And then it's actually helped all the other platforms. Like I got 40,000 new follows on Twitter. And I was like flatlined for a long time. So I don't know. It's like these are systems that you can hack.

You're either creating or you're waiting is what I learned. And if you just start creating and you don't look at the metrics, you'll wake up one day and you'll be like, oh, what happened? This is incredible. Like there are people actually subscribing to my channel, listening to my podcast, whatever it is. And then every subsequent one goes faster. And which one of the things I learned about Clubhouse and Twitter spaces is like

it's building off of this podcast or my Twitter following and doing experimenting there. you got to Angel invest in Clubhouse. Yeah, that did. True? Yes, true. So now, but explain to me, you didn't do it through your fund or you did it personally? How did that happen? And how did you get in that round?

Because I tried to get in that round and they were like, sorry. No, no rooms at the end, but you somehow got a room. Yeah, I mean, it's tricky. I mean, we were one of the players that were trying to do the seed and hats off to Andrew Chen over at Andresen, honestly. I mean, he is aggressive. He's, you know, totally a killer. And, you know, they've done, and Dreson has been a great partner to them. So, yeah. You can go to the, you can go to the URL, who didn't invest in clubhouse.com? Who didn't invest in clubhouse? And it says there was room, but not for you. Yeah. Jason, I have a question for you, which is, I guess like, I mean,

out of your New York days, like, how do you think about, you know, Biggie versus Tupac in the context of, like, media, right? If I'm not included, if I'm not included, it's on. Yeah. Yeah, yeah, yeah. Block me from investing, which in Driesen Horowitz did in this round. Yeah, totally. They, they basically, I think they basically told Paul not to include me because I'm kind of

chippy relationship with them. And, like, Mark blocks me all the time, that unblocks me, then emails me, then stop. He's just weird. I mean, you know, Mark, Andreessen, he's weird. You agree? I mean, weird cool, I think. I'm not overall cool, but he's weird. Has he blocked you before?

I don't think so. I don't think so. He's very sensitive. Anyway, for whatever reason, I didn't get included. And if I'm not going to be included, you know, my approach is I'm going to, and I believe in the space, I'm just going to go meet with every other company and I'll invest in every other one. So I've invested in one called space and they're going to do white labeled clubhouse.

where they're doing white label clubhouse. That's awesome. Which I think is going to be an awesome platform. And then one of my startups, Capiche.com, created a version of Clubhouse where you can basically save the files to a podcast, kind of like Zencaster does. Yeah, yeah. But you own your audience. And obviously on Clubhouse, you build up a following like Twitter. You don't own any of your audience.

You don't have their emails or phone numbers. So that's sort of like the Patreon version of it. And then I'm meeting with all the open source companies. And so, you know, the open source movement is interesting. There's three or four of them. And so, you know, my, I think what happened here is Clubhouse has, and there were a couple people who had played with versions of this before. So I don't think Clubhouse was the originator of the idea, but they obviously made the

best version of it. So I think that they win as the dedicated pure play. And certainly with $110 million in the bank, going anywhere for a decade or two. So I think they win as to pure play. And I'm interested in how you think about the chess field. And then I think there will be, just like social networking, 20 versions of this. So if they are in fact Facebook of casual audio, then there'll be a snap and Insta, a WhatsApp, a WordPress, a Twitter, et cetera, a LinkedIn. What do you think?

Dude, we should co-invest on the one that allows other graphs to add this functionality. So let's find one together for that one. Yeah. So if you have a graph. Yep. then you could just add the feature. Yeah, I mean, I think it's going to be a modality within any graph. And so we're already seeing this in a portfolio company.

So Career Karma, which I led the, Kim and I led the series A for. Kim, Mike Cutler. Yes, Kim, Mike Cutler. And she is awesome. Yeah, yeah, he's the best. She mixes it up on Twitter. She was mixing it up with me over politics. Yeah, no.

I love Kim. She's great. She's an expert at all that stuff. So it's, I know, I feel like I'm, yeah, she's like, you're the exact wrong person to I mean, Chesda Bood, rich white male, don't do it. You're not helping. Yeah, I mean, San Francisco is its own thing. I mean, it just keeps happening.

But yeah, Career Karma added audio to their communities. So it's a community for people to find the right coding boot camp initially. But the bigger view is the world actually needs a lot more retraining. And I know you believe that, you know, I deeply believe this is like, you know, tech is sort of leaving behind. too many people. And then the question is, well, what do we do about it? And so Career Karma says, we're going to take people who, you know, they might have spent 10 years trying to get a college degree. They couldn't get the college degree. But if they have the right community around

them and they find the right boot camp, like they can actually join the tech economy. So there's this amazing story of Keisha Lake who she spent 10 years trying to get, you know, get a college degree. She couldn't. She was working. She was in Atlanta, you know, single mom. And then she found the right challenge on career karma, got the community, went through flat iron school. She has a six-figure job now with Stitch Fix. And she's getting 20 of her friends in her community to go through the same thing. I'm like, can you imagine what's going to happen when that just ripples out to all of society? It's going to be awesome. And now it happens over voice. Right. So instead of just having a chat room, they added voice, right? So that would be the modality. And that's real.

Wait a second. You invested individually or from your fund? And how does that work for people? Oh, for basically everything that I try and touch, I try and put it through the fund first. Right. And then, you know, only if I can't get allocation, sometimes if I really, really want to, you know, our LP agreement allows us to do sort of like a placeholder bet. But it's actually worked a bunch for us. Like, you know, sometimes we'll invest in something that's too early or, there was an allocation we met them too late, and then we'll lead the next round, and then I'll sell my angel steak to a fund. You got to move that $25K,000, whatever it is, into the fund, because I think there's no chance that company doesn't become worth $10 billion. I mean, it's definitely on the way.

What do you think? What's your East Coast, West Coast view? I mean, obviously, I'm hardcore. If you decide you're going to exclude me, I'm going to make a point of saying, I don't like to be excluded. Yeah, that's fair. I mean, it makes sense to me. Yeah. It makes sense to me. like literally Twitter spaces reached out to me. They're like, hey, we know you're active on Clubhouse. And then I was the largest user on Twitter Spaces. I started using it. And I think the product's better.

You disagree with, you disagreed with an emoji with me. Yeah, that's right. With a GIF. You disagree with a GIF. Let's hash it out right now. No, yeah. I mean, this is the fastest I've ever seen Twitter get there ish together. Like, they saw this.

They saw the social graph sucking off all the users to Clubhouse, sucking their social graph off to substack, and they're like, enough, we need to have these products built in. Totally. I mean, I'm really impressed by Twitter. They're sort of moving on a dime. Whoever's doing that, like, hats off to them, right? And then the main thing that I'm sort of curious about will be what is, what are those internal

product and VP exec discussions like? Because there's going to be one VP who their whole bonus for the year will be satisfying the metrics that we told the street, right? and there's going to be someone else who's like the disruptor internally. And their whole bonus will be, did Twitter spaces actually work? And then it's like, who's going to win? And it's about pixels and distribution. And so for me, like, that will be, like, I think Twitter can win it, but not without cost, right?

They will, this other guy, this other guy or gal, whoever it is is going to lose and they're going to lose some internal battles and they're going to be mad. Right. And so, you know, that's, I think, the classic thing. inside these giant organizations is like, and so, you know, part of it is like maybe Jack, you know, way up at the top, he's thinking about it and he's just going to make the call, right? And he's got to make the calls. To explain this to people who don't understand, Wall Street's looking at typically the total

number of active users. They're looking at revenue at this point in a company. And they've been very frustrated with Twitter being slow growth. But high engagement and high authority or high authority. I don't know. Something special about Twitter based on the people who use it, right? It's a high profile, maybe.

The graph is so high profile, so strong, but it's under monetized, and it's not growing like it should for the quality of people. And man, when you look at talking to people and the minutes people spend on an audio app, like when I did a clubhouse room last night

for two or three hours, and it was like, all of a sudden, I looked up and two hours are gone, and I'm like, this is not stopping. People don't want to leave. Yeah, totally. It's like a dinner party.

I mean, people use that metaphor. So I think it's going to really increase minutes. But to your point, if you push that new product, it might be at the cost of other products. I think Trump House wins the dedicated app version of this functionality. I think Twitter wins minutes used or minutes consumed, right? but what people what I've learned over these this decade of investing in two three decades in the industry is that it's it's not winner take all it's winter take most or winners take most like the top three take most is that is that right is that match your experience now

yeah I think so and then the thing is um it's kind of like stories in a way like here's this new way for people to communicate and then you know there are scenarios where both Instagram and Snapchat coexist. And it's sort of a duopoly or like, you know, three or four way tie. And Twitter is not going away anytime soon. It's going to have incredible reach for the long haul. And then, you know, some of these conversations are just going to happen on spaces because that's where the graph is.

And then, you know, I think that this is growth mindset. It's not exactly zero sum. So I think they will coexist. And then the longer term view that I'm just, sort of curious about is, you know, any social app that has a graph like career karma or, you know, anything that tries to bring people together, you know, this is the first time that you can have really deep conversations. If you set up the norms correctly, that, you know, that's value. That's value unlocked, period. Like, if you just have people and you have their attention and they're on the phone

and you can put them in a room and they can actually talk as if they were in the same. room, you know, that's amazing. And it's so simple. It's like amazing how simple it is. It's like, there's a room. That's the really thing as product guys. This was sitting right here. Yeah, this is here the whole time. It was sitting there the whole time. Literally, we're all standing, we're all sitting at a table. And on the lazy Susan, next to the Peking duck and the roast pork is this incredible entree, but it's invisible. And nobody put their fork down and realized, oh my Lord, right in the middle of the table is this incredible dish. it really makes you excited about entrepreneurship that there is always room to innovate.

Yeah. It's just so great. It's just so great. I mean, I'm actually very happy for them. I think it's super cool. Now, let's talk about valuations. When you saw that $100 million valuation, pretty shocking for a company with, at the time, three or four thousand VCs using the product.

Yeah, totally. But I looked at and said, I would do that valuation in a heartbeat. Yeah. You did that value. You did the seed, right? Yeah, yeah, that's right. So you obviously did that in our fund maxed out at 60 for what it's worth. Our fund maxed out at 60 post.

So we came in, they came in over the top like 2X where we were at, which is interesting. Oh, really? Oh, I see. You offered a $60 million valuation. The winning valuation was 120. And I understand. And 60 was already like the highest first check that we had ever. I mean, we basically looked around.

I mean, because we're a seed fund. Like, we are not a series A fund, you know? And, you know, you look at your, you know, at 200 million, it's like, you can do some series A's, but we like to be relatively disciplined. And we said, this is a once in a lifetime sort of deal. What's the craziest that we could think of? And it wasn't crazy enough. So, I mean, but hats off to Paul and Rohan.

I mean, I am super impressed by them. It wasn't about 120 or 100, whatever, posts. Something. Yeah, it was north of 100, I heard. And then the secondary piece, I thought, was very meaningful. full because, you know, Rohan... He took $4 million off the table. Yeah, yeah.

I mean... Is what I heard. I mean, it's incredible aggression. And then the thing is, I think it's right. You know, I think there are VCs that... And now I'm going to get in trouble with people who are friends. But the reality is like... This is why we're here.

We're here to get in trouble. Good trouble. Good trouble. Good trouble. But, I mean, I really do think, like, if you look at MMT, if you look at Bitcoin at $56,000, what it really means is that the dollar... is worth less. Like, 25% of all dollars were printed last year 2020, right?

So, of course, like, there's a crazy asset price bubble. You see it in the public markets. You see it in real estate. You see it in crypto. How could it not affect... I mean, this is water at this point, right? And so the question now is, do you believe that it will stay this way? Will it get worse?

Or will it go back to when seed and pre-seed was like, $2 to $3 million. And it's like, as far as I'm concerned, like I don't think we will ever see two to three million, like Dropbox and Airbnb at two mil post, three mil post. Like, Posterous was two, you know, three mil post. Like, it will never happen again. If you're an accredited investor, you need to know about special purpose vehicles. What is a special purpose vehicle?

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purpose vehicle by visiting ashore.co slash angel a ssus ur.c o slash angel to get 20% off your first spiv i love this company so much they're such a great partner i actually invested in ashore i kid you not those will be valuations that an accelerator gets yeah for running an accelerator which is a ton of work i can tell you it's like yeah yeah totally you you worked out ycombin here I mean, it is a lot of work to have people come for 12, 16 weeks. I mean, it's brutal. I mean, you're, and then you're, the companies know that you're getting a good deal. And therefore, they're going to extract value from you.

And you can't say no to, I need these 10 introductions. And then you have seven companies. Now you got 70 introductions in your inbox. And okay, there goes a day of your life of like going to war for these folks. It's hard. Yeah. I mean, so from, you know, even for me, like the lesson is, you know, our self-limiting belief was we're a seed fund. What's the craziest seed deal we could think of? And it wasn't crazy

enough. But I actually don't think seed and series A even apply anymore. Like, it's just one big thing that's early stage. And then it's sort of a bidding process at the end of the day. Like, things are very competitive. Everyone's on Zoom all day. All the distributions that are coming out from the IPOs, they're going back to the LPs. The LPs are plowing them back into the mega funds that, you know, I mean, you can see the progression. Like people are raising 200 mil, 500 mil, a billion. If they're at a billion, they're raising three. If they're at three, they're raising 10, right? So it's, I mean, what's funny is it makes no sense. On the other hand, I would argue it makes a lot of sense. So it's just money. The LPs are just taking their

winnings and then like keeping it at the table. And then it's actually like pretty logical. How do you efficiently deploy early stage capital? As you know, when you get more money, it's harder to place small bets. It's really hard to place 100K bets for a billion. It's impossible for a billion dollar fund to place 100K bets. Yeah. Yeah. Yeah. They shouldn't even try. They don't even try. I mean, but you can't make 10,000 bets. I mean, it's just not feasible to make that many bets. Well, I think someone might come back to it. I mean, your buddy Tamath was doing Capital as a service. I'm still still super interested in that. And I kind of like that too. Explain is alluring to you about capital as a service cas. Yeah. I mean, we're just, yeah, we believe in tech. And so,

you know, anytime I hear someone say, like, it's not possible, I'm like, there probably is a way using software, right? And I mean, even like Clubhouse itself sort of shows you that there can be new interactions with people. You put people, it's like pixels on a screen, and you can somehow turn those pixels on a screen into a place that feels like a dinner party. That's so powerful. And that could never happen before. Like YC, people had to fly to Mountain View, spend 10, 12 weeks there in like a physical location. And YC is totally virtual now. And from what I can tell, is as good as it was when it was. We went fully with the launch accelerator. It's better. Yeah. Yeah. And people, here's the thing. A lot of people came here under duress. Yeah. Yeah. You know,

and sometimes that duress was good because it got some people to make the jump and then they met their co-founders or, you know, their third employee or their fourth co-founder, whatever it is, their key hires. But now, I mean, the efficiency, tell me about your meetings and your meeting style when you're meeting a new founder. Like, if I were to send one to you and you're like, okay, I'm interested in that. How has that changed from pre-COVID to during COVID? And then what do you think the future of a Gary Tan meeting is post-COVID?

Totally. Well, I guess two things. One thing is that, oh, but briefly, I want to. to complete this crazy point, which is like too much money and then crazy number of problems. And then I think like using social software, there will be just the new institutions, right? Like your accelerator is one of them. And we're using software to actually find more people. You know, career karma is bringing in the engineers and like future designers and product people. It's like this revolution is only getting started.

And the money. Actually, now I'm with you. You convince me. Dude, the money is coming, right? the money is here. And then like, if people are worried, like, are there going to be the startups? I'm like, they're coming, right? Like, they're watching our YouTube channels.

They're reading you. They're watching your podcast. Like, they are ready. They're here. They want to be a part of this thing. I mean, if you look at the Robin Hood Revolution, you look at Bitcoin as a revolution cryptocurrency. What do those indicate, if not people want to participate in equity?

I think young people have realized that being a wage. slave is a dead end unless you're learning massively. So I mean, it is fine. I mean, I went to work for other companies. Learn or earn, right? Yeah, that's it. You're earning and learning, great. But at a certain point, if you want to create multi-generational wealth, which is what everybody's saying, just if you want to be independently wealthy, you want to be able to define your own schedule. I think these young people just realize, I have to have equity, which is why they're literally fucking with Bitcoin and NFTs and anything they can get their hands on. through a Robin Hood or Coinbase interface.

They want to take risk and they want to be in the same assets that you and I are or, you know, a bunch of old boomers are. Yeah, I mean, I'm excited that people want to create. And it's like the money, the wealth, like the status, whatever it is, like these are all zero sum type things that like don't matter really. Like it's the creation that's awesome. And then the score sort of takes care of itself. I'm like, let's like rise that up.

It matters to people who don't have it, right? Oh, no, totally. It absolutely does. Money, it does matter. This is one of the weird things about Silicon Valley is when you get, everybody gets post money so quick here, or a large number of people get post money so quicker, just based on the size of the salaries and, you know, people hitting lottery tickets. That's new. That's relatively new, I feel like. I mean, then again, it's still like the 10-year overnight success too.

Yeah. I mean, but I mean, is it possible to spend 10 years in Silicon Valley aggressively taking risk and not come out of it a winner? I don't think so. Even if you don't make any money, your experience makes you employable for the rest of your life. Yeah. Look at Paul and Rohan. I mean, they literally, you know, they worked on, you know, highlight and like so many different startups for years and years and years and years.

And then, yeah, and then all of those learnings. Right. Did they even have a winning startup during that whole time? Like a big exit or any exit? I don't know the history. Yeah. I know that they spent a lot of time learning a lot of things. And then, I mean, it's testimony to show that you can take those learnings.

And if you just go back and you're in it, you know, you will find something. Well, I mean, and they found it. Uber was Travis's third major effort, right? I mean, yeah, yeah, yeah. And he was in his, what, late 30s when he started it or mid 30s? Like, yeah, there's a cult of the young here. But no. Yeah, it's definitely not.

I think the kill zone is your 40s or late 30s to early families. early 50s. Like, I would say 35 to 55 is when founders have enough experience and still have energy. And then they get past 50, 55, the energy starts to trail off. Is that what you find? I mean, it just, it's so individual. So it's true. It just depends. Like, I don't think it's even an age thing. I mean, I'm about to turn 40 in a month. And I don't know. I hope to continue to feel 27 forever. We'll see. I think doing what we do in the early stage is the fountain of youth. I turn 50 and I feel younger than I ever have because I hang out with 20-somethings or even 30 or 40-somethings or 50-sumns who are starting companies but who believe they can change the world.

That's important. It's just the greatest job ever, isn't it? Like to just get winners. It's nuts. Hinch my self every day. Yeah. Well, you got to spend time with the losers and help them turn them into winners too. And then I think that's what career karma is for, you know? Yeah, yeah, totally. You know, Lambda school, et cetera.

You've got people who aren't where they want to be in life. And then you look at these Ices. Man, I think that this is the game change. I'm looking for every ISA company I can find income sharing agreements. You have any investments in that space yet? I mean, career karma is sort of like the beginning of that. And then, yeah, yeah, the top of funnel for that. Do they make their money by funneling people into different boot camps, etc.?

That's right. Commission for that? Oh, what a great business. Yeah, so the whole ecosystem is growing. Yeah, that's right. That's right. And then it's the, I mean, having these voice groups that you are with, even as you're in the accelerator. And then afterwards, they're going to, you know, I mean, what you're doing with your accelerator

and what YC is doing with sort of this idea of being a part, like being a part of a cohort. Like, you're a part of something. There's an identity. And then when people in the cohort do well, you know, you do well. And then you know, then bar is raised. And you know you can do it because that person did it. And then, you know, amazing things sort of have. Like that's the missing piece to me.

Like the accelerators and career karma and communities that are facilitated through the internet are the missing piece to square the circle of like too much money in the world. Right. There's way too much money. But then there's so many problems. And who's going to solve it? and like this is how we get enough people to do it. How much money does your startup spend on all these different software products

and how much time does it take you to integrate them all together? Let me guess. Too much time, too much money. Well, O-D-O-D-O.O. It's a suite of business apps that runs your entire company on one platform. I kid you're not. And if you're currently using a frankenstack of individual software solutions that don't talk to each other while you're wasting your time, energy,

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with accounting, payment, tracking, invoicing, and more. Your first app is free forever, and right now O-D-D-D-L-O-D-O-Credit on your first implementation pack. Go to O-D-O-O-O-O-O-O-O-O-com slash twist to check it out. O-D-O-O-O-com slash twist. Take the $1,000, put it in your account, and then use it. it when you're ready, but get it now because I don't know how long the offer is going to last. Well, you know what, and all that money is in dead assets. You know, when money is sitting in

Bitcoin or a bond or in Apple's, you know, giant hedge fund like of $200 billion, what is that money doing for humanity or the world? I call it dead money. It's just dead money sitting there. It's not being touched. There's no velocity to it. It's not moving. It's just, it's static. It has no value to anybody. Yeah. It's sort of the difference between like, I think a bank and then a really good concert or party, right? And it's like you can go to the bank, the money's sitting in a vault, and it's doing nothing. Or like the most pure form of idea creation

and value creation in the world is like two people come together with a dollar each. They put it together and it's like, here's $3, right? And then let's keep that going, right? And that's like we get a front row of that. Yeah. The thing I think that's problematic is so many of these VCs are moving downstream

with these larger funds. that the, I don't know if you're experiencing this, but it's almost like there was this incredible orchard of apples and apple trees and fruit trees. And all the VCs are like, you know what? Too much work. Just bring us them, your seed funds, Y Combinator, tech stars, whoever. Just bring us when you have a shiny apple.

That's really nice and we'll overpay for it. Yeah. We call it the bag of gold. Just bring the bag of gold over here and just leave it on my desk. And I'll think about whether I want to take it. Isn't that funny? But I don't think, I think there will be a new model. And, you know, hopefully we get to build it together, right?

Yeah. What's the new model for you? When you think about this, you have a $200 million fund or something in that range, I think. Yep. 230 out of the last fund. You got 30 people working at the firm? About 18. So we have eight, yeah, six partners and two principals and two associates now.

And we've been growing. So we have a team. It's crazy when you start getting to that level. You actually have to have a process. So how do you think about it in terms of ownership percentage and not giving a bag of gold to the next person or giving some of the bag of gold because they're going to put 10 bags of gold into the treasury of that startup? How do you think about your role and not getting rolled over by the later larger funds?

Yeah. I mean, the thing that I feel like, you know, at the angel stage or as a super angel, the one thing you can control is what percentage ownership you're willing to take. And so our men off the bat is 10%. And then our pitch to people is like, we're worth it. Like we will work for you. Like yesterday, I dropped everything and we like turned around a video for around one of our seed companies. And it's like, wing did the A, forerunner did the A.

But it's like, I'm the seed investor. Like I was one of, you know, I mean, actually, Maples was like the main seed investor. Maples was like, come on over. Like, let's work on this together. And it's like, we drop. everything to turn around like a video for that company in like 24 hours. And there's like, they got like 8,000 views on that on that video like on Twitter this morning. And I'm like, that is like what I want to do. It's like, what can we do to like help these companies at any

stage? And I'm like, we're worth the percentage ownership because like that's what we do for the companies. Right. And so I think that's really important like picking people who are not just money. And then also the hard part is like, how do you see through the marketing? Like, I sort of empathize with and sympathize with founders because everyone says their value ad. Everyone says that they're, and we're like, whoa, no, no, like we actually do it. But I don't know. It's like, the marketing I don't really care about. It really, it really needs to be, do we actually have a positive impact for these companies? And saying early is the right way. provide massive value to prove that you're worth that 10%.

And then you probably have this experience all the time. Founder comes to you. This VC wants to do the series A, series B. They asked if you could step back from 10% ownership to five and you could waive your pro rata and sell some of your shares to them. What do you do? And how often does this happen to you? It doesn't happen too often.

It has happened. The way we try to get around it is if we're the ones who introduce the founder to their A or B, that doesn't happen. So that's good. We actually basically help people raise their, you know, sometimes B's and C's and Ds. So, I mean, so that's the number one best way that a seed investor can sort of avoid having that happen is like, we literally made that connection. So it's an unspoken rule.

Why would you try to step on me as a downstream investor? They wouldn't do that because you brought it to them. Yeah. And then the other thing that we try to do is make it very. clear when we, you know, so first check ownership is what you can control. And then after that, we actually explicitly say, like, we're going to set aside half of that first check. And if things, if you get punched in the face, things don't quite work out to plan, but we have a plan to get to the other side, like, we're going to be the ones who do the seed extension. And a lot of

people say, like, we don't do seed extensions. A lot, you know, a lot of people I respect are like, we'll never do seed extensions. And I, you know, for me, it's like, if I were that found, you know, I was that founder, right? Like, I remember the moment where you're like, oh, it's not going to quite make it, you know, like I need a little bit more time. And it's like the best thing a seed investor pre-product market fit can do is literally just be like, we believe in you, we believe in this problem so much that if something happens and we still believe, and we all believe and we have a plan to get out, like we're going to do, we're going

to double down, right? We're going to help you through. And in exchange for that, that we're here to send you that lifeline, please don't ask us, or downstream investors might ask you to sell us out and erase our pro rata, our ability to maintain that 10%. And do you pre-socialize that with founders? Like, hey, be aware this could happen downstream. I guess the ideal is to be so useful to the founders, like it doesn't quite come up. Yeah. I just tell them now explicitly. Here's what's going to happen. If this succeeds, they're going to ask you to screw us. And then just know that whoever would

ask you to screw us, the next person on the cap table to get screwed is you. So if they're willing to do that, and I've had funds do this to me, and I just tell them, if you try to screw me, I'm the point guard, I will never pass to you again. Which is why I don't send companies to Andreessen Horowitz. Just too many elbows thrown in my face and not enough love. And so when the founder comes to me, I'm like, okay, here's Chamath, here's Sachs, here's Ruloff, here's everybody but, Andreessen Horowitz. If they ask for an, you know, an introduction to Erresen Horowitz, I say, okay, you know, I haven't had a great experience there, but, you know, if you want to, I can, I can forward your email there, but, you know, here are some other options for you if you like these better. And so, you know, like my explicit concept here is since they haven't been kind to me is I hope that my next Robin Hood, Uber, Com doesn't make it to their doorstep and goes to one of their competitors. That's the level of competition I like to play at as if you're going to, but you, you haven't had anybody try to squash your pro rata? It happens and you have to like have a bunch of back office.

Let's do it. You just have to like talk. I don't expect you to call people out on the show. But tell us a story of how that went down and how you protected your interest and an interest of your LPs. People left to know about this back, this, you know, like behind the scenes. There's not really one way to do it, right? It's like, okay, so we have the lead.

We usually know the lead. And then the lead also knows like, we're probably going to send you more things. Like this is terrible way to like start a relationship with us. So you can have that conversation. Then you have it with the founders. Yeah. And, you know, sometimes it works. Sometimes it doesn't.

I don't know. I mean, we're friends with most people. Like, I try to be really friendly. Like, I don't have sharp elbows. I try to be. You don't, you know. But there are people who, you know, yeah, like, I have enemies too. You know, like, I'm a human being.

So, so, yeah, you know, do we keep a list of people who we don't like? Like, yeah, we keep a list. Oh, I got my list. You know. Dresen Horowitz, Indrice and Horowitz. But everyone does, right? Like, you know, even the nicest among us will, like, keep a list of people who, well, we remember that, right?

As we get towards the end here, I got you warmed up. What happened with Alexis? Oh, man. You guys woke up. I've never heard you address it on a pod. You guys are both super nice guys. So what happened? Like, it's like one of your favorite couples gets divorced.

But we're still friends and we love each other still, you know? Would you love each other? You have to. So was this a conscious uncoupling? I think so. I mean, I have to point to, dude, like, you know, exec coaching is amazing and it can do work wonders. I mean, I guess a lot of it is like some, you know, even among friends, it's like sometimes you hit your numbers, like you, things like succeed to like your wildest dreams. And then your dreams are different, right?

And the reality is like, you know, if you love someone and you care about them and you want them to do well, you know, at, I'm a, you know, at, I'm a lot. At what point do you say, like, well, I don't want to sacrifice my dream, but I also want you to have yours. And that's sort of like, that can happen. So you guys were in executive coaching together and like you realized you had just a different set of goals? Yeah. And I don't know. It happens. You know, the hard part about this business is like it's so long duration, right?

Like I feel like I grew up with Alexis, both as, you know, he helped me with my startup. Like, we started the fun together. We learned about how all this business worked together. And then, but at some point, it's like, you know, we're also different people. And, you know, we're extremely aligned in the way to do it. But, I mean, you know this. Like, the judgment part is so hard. Like, you literally, you know, sometimes do not have exactly the same idea of what is a startup that will succeed versus not, right?

Got it. So you guys, what I'm reading into there is you guys couldn't agree on which deals to do together. He wanted to do a certain type of deal. to do a certain type of deal. And the fund's got a thesis. So if we're going to have disparate thesis, thesis, how do you say multiple thesis? Thesis or this I, whatever it is, multiple strategies. You can't run two strategies with the same set of LPs and the same fund. It's just not possible, right? Yeah. I mean, unless you like end up running two different funds and we explored all of those things too. And I was like, you know, the thing is like, I knew he would be happier and I would be happier

if, you know, Alexis is a true founder for real, you know? Legit. So, legit. You too. You know. And so, there are times when you want to keep it together, but you know, like, if you play it out in the simulator, you're like, everyone will be happier and we'll be able to honor our friendship if.

Better. Wow. If we're not together. Thanks for sharing that. I think everybody's been wondering what happened. I think it's cool that you, I didn't pre-screen this just so the audience knows with you. Oh, not at all, yeah. And I was wondering if I should bring it up, but we're all friends.

And you guys, everybody's rooting for you. So it's almost like this, you know, like perfect marriage. We all saw, and we saw you do great work together. And then you went off to do different work. And I think that's cool. Yeah. I mean, Alexis is like the best consumer person I've ever seen. Like, he really pioneered this idea that every business is a meme.

He taught me that for sure. And then he's doing super well. Explain what that means. Oh, I mean, you know, it's like that JZ line, you know. I'm not a businessman. man, I'm a business man. You know, like, that's how you are. Like, that's how, you know, I've learned to try to be like that.

You know, I think Alexis is the original real deal on that. And the things he can do for founders, it's unbelievable. And, you know, he's having great wins. You know, Dispo is an incredible company. He, like, he saw it. He met David Dobrick. He met Daniel Liz. He, like, did that whole thing, you know.

And I am super over the moon on how well he's doing and how he, well, he's going to do. How do the LPs take that? I'm just curious as a, I'm a solo GP, so I won't have this issue. And I'm kind of a solo act, you know, I'm kind of like dealing with a microphone and a guitar, not the Beatles. So there's no chance of it breaking up. But how do you explain that to LPs? I mean, that's got to be like a serious thing.

Yeah, it was intense. It was intense. Wow. Yeah, it's, I mean, it's definitely an intense thing to go through. I'm like just, well, I don't know. I'm thankful to, you know, Alexis. And the thing is, like, Alexis has a team. Like, he has Caitlin Holloway. She's amazing. You know, you know, Lizzie Garvin, his chief of staff, amazing. Yeah. I mean, the LPs got it. And, you know, there's so much money in the world. So, you know,

and so it's honestly. So do I get to double my deployed capital? Give you each 10 million? Give you each. Yeah. And the answer is like, absolutely, like, you know, growth mindset. You know, this isn't a zero-sum thing. This is totally like, it's, you know, one plus one equals three for sure. When you look back on your great wins and you look for a pattern and you then try to carry that pattern forward, what patterns do you see in your style of investing that have paid off for you? I mean, I think the number one thing, whether it was like a poor of a meta with Instacart or Brian Armstrong with Coinbase, I mean, really, really good technical founder who like saw something that you know sometimes other people saw but often like not you know

coin base you know the idea of something that was a great well-lit place to buy bitcoin you know that wasn't something that happened like the places you went to to buy bitcoin were like sort of almost the dark web somebody sent me like 10 bitcoins to a mount gocks wallet yeah and then it all got so if we need to get you to move it over to we need to move that over to coinbase earlier God. Jade, my wife bought a bunch of coin, a bunch of Bitcoin. I got all those Bitcoins gifted to me at like a dollar. And they're gone. And then my wife bought a bunch under 100. So we're good on Coinbase. Yeah. So I think that is that, right? It's like there's always a new generation of builder. And then, you know, when they figure out something that is sort of fringe, but it means something to them. And then we meet them and they're like, hey, this thing's happening. I'm going to devote my life to it. And then we believe. It's like you got to believe in things before like it's obvious, right? That's such an important thing. Like if everybody agrees Clubhouse is going to win and is worth $100 million or Coinbase is going to win or Instacart's going to win and they're not going to get rolled by Whole Foods or Amazon.

Like you have to have conviction. And most people did not think Coinbase or Instacard or a number of these companies you've been lucky enough to invest in. And prescient, obviously, it took some skill there too to see those opportunities. Like most people did not understand those, right? I'm assuming you tried to get 10 other people to invest in those and they said no. Yeah, yeah, totally. And, you know, it happens and that's okay. We'll get them at the next round, you know.

Yeah. What was the second round of Clubhouse like? You got that small, tiny little bed in there. Oh, they didn't even ask anyone, I think. They didn't ask anybody. Just Jason was like, hey, how would you like six months later, 100 million at a billion? How do you, that's a crazy, crazy bet?

Yeah. Or is it not? That makes sense to me. It's totally self-fulfilling, right? Explain what people don't understand about that and why it is self-fulfill. I don't think most people understand what- I think the number one thing, when you look at consumer deals, the number one thing you have to look at is retention.

And the retention for Clubhouse was like Facebook level. It was outrageous, right? And so at that point, and then if you looked at the top line growth over even like January, which is when I think they were talking about the deal, and it's like, sort of obvious, honestly. You know, it's like, is this going to be the next Facebook? Is this going to be durable? And if it's going to be durable, this is going to be super long-term cash flows over 100 years. And you just, you know, you can take all those future cash flows and discount it to now. It's like, yeah, can you underwrite like the valuation they gave. Like, I think you can. Yeah, it's going to be a textbook one. I mean, I'm trying to think of the last time we saw a company with, I guess at the time, four or five million members, no revenue, get a billion dollar valuation. I don't know if it's ever happened on our industry.

But I would have, I'll be totally honest. I tried to buy secondary shares at the billion dollar valuation because I had somebody who was on the cap table who was buying some of my shares from a late stage company in secondary because I was trimming our position 10% to get some LPs and syndicate members to lock in a win for them. And I said, I'll sell you the 10% in this company if you sell me 10% of your clubhouse share. She said no.

Got to get the, I mean, there's always a deal out there. So shout out to anybody who's got Clubhouse shares. I would love to get on the cap table. No, I can't get on the cap table now. I got other investments. You're all good. Listen, Gary, you've been great for sharing so much wisdom and knowledge, continued success. Everybody sign up for Gary's YouTube channel.

It's, do you have a name for that? Is it just the Gary Tan channel? Yes, yeah, YouTube.com slash Gary Tan, two hours. That's it. Yeah, easy. Com slash Gary Tan. He does these, and also follow him on Insta because he takes the same content and even make shorter, quicker versions of it.

Are you fucking with this TikTok thing yet and making short TikTok videos or are you to old? I'm too old for that, unfortunately. If you're 40 and you're too old, that's 50 year old, I'm way too old. It feels creepy. People like, you should post videos to TikTok. I'm like, that's like, you know, I like the, my Korean, you know, my Korean dad, Nick Cho, you know, he's great.

It's not an age thing, you know. It's pretty hilarious. like being a Korean family and watching my Korean dad because like the idea of a loving Korean father is such a yeah like a kind loving Korean dad seems to not be the typical art type people had that's right. I see all these reaction video to people crying and he's like, oh, I love you so much. You're so good at everything you do. Don't put any pressure on yourself. And it's like, uh, I don't know that's the, yeah, that's, you know, but maybe it's, well, that's why it's the Korean dad you wish you had. It's the, yes, it's the idealized version of every person's dad.

But yeah, he does make it work. So maybe I should do like a boomer, okay boomer finance channel. Yeah, it could be, well, I'll be a subscriber over here. All right, everybody, Gary Chan. Great job. We'll see you all next time. Bye bye.