This Week in Startups - Joanne Wilson on spotting a bubble, NYC’s post-pandemic reset, portfolio management in an unsustainable market & more | Angel S5 E10

Episode Date: March 24, 2021

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Angel listeners can get 20% off their first SPV at ashore.co slash Angel. Hey, everybody, welcome to episode 10 of season five of Super Angels. This is Angel. It's a podcast we do as part of this week in startups. The number one question people have is, can you give me money? I only have so much money to give you. So what I'm doing with this series is I bring you every year, maybe sometimes twice a year, 10 investors and you can go ask them for money.

No, seriously, we're here to learn about angel investing, early stage investing. And today, one of my oldest friends. And really, you know, to give you the backstory, I learned my biggest lesson just in terms of talent acquisition and building media companies from this individual. Because when Joanne Wilson came to work for me, my business went like this, was going like this. It was nice, you know, growing nicely, you know, maybe 5% a month. And then Joanne Wilson came in and all of a sudden, I realized, my God.

sales solves everything. If you have a great person who can sell, everything goes in the right direction. And so welcome to the podcast, the Gotham gal herself, Joanne Wilson. How you doing, sis? Good. How are you? My big sister here. We worked together on Silicon Alley Reporter back in the 90s. We had a great time. Just, wow, that was some experience, huh? It was. There was no time to even breathe. Like every day was like a year. It was crazy. We go to Gramercy Tavern.

We get the table in the front. And we just sit there in whole court. And, you know, Gordon Gould or somebody would set up 10 meetings. Joanne and I would sit there and you'd be like, okay, this one goes to editorial. Okay, this one writes a check and sponsors the event. Okay, this one goes to editorial and they're going to write a check. And we just sat there with the, you know, it was like a godfather film. We were just collecting the envelopes as people came through or sorted them, you know,

through the magazine. I miss magazines. I miss New York. I miss you and I miss magazines. It's the things that are just so special to me. Well, New York is amazing. I don't know what you're doing living out there, but I ask myself that question every day. But I still get tons of magazines. There's something about that tacturnal, physical touch of just like, you know, and then I just, you know, earmark them and then I go online and look at them. You're like, this looks really interesting. Let's see if I can put it on my iPad. Yeah. I have this idea. I miss magazine so much and nobody cares. So I was thinking about creating my own,

you know, it's like the museum of ice cream and these kind of things. I was thinking about doing, and this might be my okay boomer moment, but I was like, I wonder if I bought one issue of every magazine and then put it in a big, you know, an airplane hanger and let people come and just read any magazine from any decade or whatever.

Would that be fun for people? No. Okay, there you go. So this is my okay, boomer moment. But I thought somebody's got to save these magazines. I mean, I've saved, I have saved, the only magazine that I've saved, and I'm sorry I didn't save any of the Silicon All the reporters, although they're all online.

Yeah. Is that I have saved every September Vogue issue since 1983. Wow. What a collection. It's random, but it is fun. I mean, it's fun to go in. You don't even have to go in them. You can see the thickness of them, and you understand where the economy is.

me was. Absolutely. Like there is a direct correlation between media sales in the old days, magazines, today, podcasts, and what's happening in the economy. And I have to say, you know, there was a moment in time that you would come to me, 26 year old, 27 year old Jason. And I think you're a couple of years my senior, but not that much older. You look great, by the way. I look like a old. I look like Harrison Ford. I'm getting old. And you just look amazing. You look the same. Isn't that supposed to work a different way? Yes. Maybe I need to, I need, whatever you're, whatever green juice you're drinking in the, in LA, I need to get on. But there were moments where you'd come to me and say, we're sold out of March, April, May, and June. Can you

get eight more pages of editorial? I'll get eight more ads. And I'd be like, oh my Lord, I don't know if I can do that. Now, my sales team comes to be like, we got a sponsor that wants to do 25 ads. I'm like, great. And they're like, what does that? mean, great. I'm like, we'll do another podcast every week. And they're like, well, we're doing three a week now. I'm like, great, let's do four. I'm take the money because this is not going to last forever. Is it a bubble right now? And let's just talk about the bubble because as early stage investors, you and I have seen our deal flow go from three, four, five, six, seven million dollar valuations. We can put in a 50k check, a 500K check. And now, hey, we got a seat at the

table and this is interesting. And I got people coming to me with like, I had a $16 million valuation six months ago and now it's 36. And I'm like, does that make any sense? Okay. Thank you for tuning in everybody. No, I mean, it doesn't make sense because the issue is, is that the arrogance or, you know, or tenacity, it could be either or that you come in, you're like, well, I'm worth $15 million and I'm only raising $2 million, which is such a small percentage of your business, great. But what happens when you go out and raise the second round? Like, you better have some serious data that makes you worth more than $15 million, because what you really did is you started off on the foot, which is, you know, a wrong

foot. And we've seen it so many times over the past 20 years. You end up with a down round, even though you did a good job. You get a little bit ahead of your skis. Like, there's a reason why they label, like, each of the runs, green, blue, diamond. They make it really clear. And they even different shapes in case you're colorblind. Like, do not go down the double diamond. There's two diamonds there. When you raise above your performance, it's just going to be a disaster 18 months later when you try to raise, you know, a flat round. And then you start that debt spiral, right? Like, oh, this company's damaged. Yes, that company is damaged. That's exactly what happens. And then institutional investors have moved on to something new and something else and you're

fucked. There you go. Now, let's talk about the broader economy. This has been very weird. We had a year of the pandemic. I don't know if you spent it on the west coast or the east coast, but, you know, New York and L.A. were two of the hardest hit areas. You and I both love restaurants, nightlife and everything. It's got to be just tragic in New York. All these retail stores are just gone, right? They just all shut down. And the more restaurants all shut down. Not all of them. I mean, if you had a smart landlord who understands, that it makes more sense to renegotiate your rent based on your gross product every single month, that makes a lot more sense.

In the end, I think that the landlords will do better versus like, this is what your rent is and that's what it is. They should be much more involved in the business and more partners with the people that are serving food. So many times the food gets like shit after five years. And if you had a partner that was your landlord to say, hey, you're not paying me as much. let's think about redoing the menu. What do you think? Yeah. And it does seem like some folks went to the landlords and the landlords said, hey, okay, you went from making $50,000 a month to $10. Let's just work with you to keep you alive for the year. But we're out of it now. I mean, it's pretty clear to me that we should take the win and this is over. So what do you think is going to happen in terms of this rebound now? Because we did like a $4 million shot day on Saturday, I think. And that's like, I don't know, maybe 2% of the unvaccinated adult population, something in that range.

What do your thoughts on when this ends and what it looks like in Q3 and Q4? I've been thinking a lot about that as we all have, anyone that's in the investment business, is that when I see what's going on in the streets of New York, and by the way, restaurants from making it so great as it was anyhow over the past decade, and retail is sucked for a long time, all I see is opportunity. And I firmly believe that COVID shoved us in a direction that we should have gone a long time ago. There will be plenty of survivors, there will be plenty of new entrepreneurs that have new ideas and the way to run those businesses.

And New York will come back just like it always has because we've got theater. We have restaurants. We've got opera. We've got live music. All the things that make New York such a unique place that you could be doing at three in the morning, that's never going to go away. I think if anything, we'll have all these young people that will say, I can now afford actually to go there and be super creative with my idea. Yeah, I mean, the idea that you would have to pay $4,000 or $3,500 to live in Manhattan, I think that went down massively over the last year.

Like now it's, what, $2,500 you can probably get into Manhattan somehow. Yeah, I mean, it's definitely changed. I know a guy who basically sold his half his brownstone in Bed-Stuy to move into, New York City. He's like, this is the one time I'll be able to move in at the price I can afford. Wow. That's incredible. You know, it's going to be great for New York because there were all these people buying real estate there as like some store of value and never living there, right? All these new tall buildings that they look really weird, like these tall, skinny buildings. Well, they have to change the tax system, right? These people that go off to Florida for 180 days,

fuck you. Okay. If you live in Florida for 180 days or you live in New York for 70 days, you pay 70 days worth of taxes. You get to take the subway. You get to drive on the streets. You get to enjoy New York. And you own a goddamn apartment.

It's just bullshit. I mean, I didn't live in New York for 180 days this year. But you can be damn sure I paid our, we paid our taxes. It is very interesting. The allure of just moving to Florida or Texas for New Yorkers with taxes where they are, you know, it's cold as hell in January, February, March, and people are going away for 100 days, so they're just like, eh, I can work remote. Maybe I just relocate the hedge fund or whatever down in Florida, but that's actually a really interesting concept. A minimum number of days triggers

taxes. Right now, it's more than half, but maybe there should be, if you do more than a quarter, you pay a quarter or something. That's what I think. And certainly they have to work with the federal government over that versus state. But these people that are doing that, don't close the door on the way out, you know? It's like, you love this city, then support this city. As someone who has invested in over 250 companies and advised even more, I want to talk about a serious pain point that I see all the time. That's reducing your burn rate. You don't want to waste money. You want to put that money to work. And just ask yourself, how much money are you spending on all the different software products you're using right now? And how much time are you spending and your team spending

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It seemed like New York was just going gangbusters pre-pandemic. Am I correct? Gangbusters. But keep in mind, the restaurants were not making ends meet. The amount of real estate got ridiculous. People took off tremendous loans against their buildings. They figured the restaurants would pay for the overhead. And, you know, they were barely breaking even.

You now have to pay some. when he watches the dishes, $20 an hour, which you should, which means we should have health care for all so that the restaurants don't have to pay for that health care so they can make more money for everyone else inside the restaurant. I mean, there needs to be fundamental changes in our society that systemically has been built to keep people down. Yeah. It really is strange that we attached health care to employment and it leads to all this perverse second order effects that nobody really wants, which is like, oh, you have to stay in this job. I mean, how many times do we try to hire somebody for a business? And they're like, I would love to come

join your startup, but I got a family and it's going to cost the $17,000 or $70,000 in healthcare. We just can't come to a startup. It's just like not possible. I do think it will all change. I mean, look, we all came, not all of us, but the foundation of our country came from England. That is basically who we were. When we create a new country, when we wrote the Constitution, we will eventually get to where England is in regards to health care and income for people that need income that don't make enough money. I mean, we will take care of our fellow people. It just might take some time. I think we're at a point right now where we are going left and the right wing is done.

They do seem to have like really threaded the needle by getting Trump in, but that was like a hellmary pass that doesn't seem like it's possible again. I don't know. I mean, their immigration policy alone, I think, is a non-starter for winning when the country's demographics have shifts so greatly. Well, he was all, the people that voted for him that might not have liked him, they only voted him because they like the fact that they don't pay taxes. But, you know, for the amount of money these people are making,

that they've had education, they've had the right family, they were born into the right place. Not everyone has that opportunity, and we should be helping others who don't. I mean, what a boring life that is if, you know, we all have children and they compete with a bunch of other white kids. And that is not good. Yeah, we've almost created like a caste system here in the United States. Just, you know, if you were born into any kind of opportunity, you're kind of fixed in that, and then it's a little harder to break in. But I do think it's really cool.

I know you have a passion for education. and spent so many years trying to create equality, equity. I'm sure what the right word is, but just more fairness. It does seem like the education system is also being disrupted right now, and so much information is available online. And then I don't know if you're following the ISA movement, income sharing agreements where people can go to a trade school and have a job that pays, you know, 60, 70, 80, $100,000 out of a six-month trade school

versus, you know, go to college. for four years for 250k and being massively in debt and getting a $50,000 job. Have you looked at those income sharing agreements? I'm curious, your thoughts directionally on education and careers being connected. I mean, education has to completely change. And I've always believed that you're going to end up where you're going to end up based on who you are. So, you know, all my kids went to a school, a liberal arts school, and they're all doing different things, but it doesn't mean that they're necessarily going to be, you know, English teachers,

even though one was an English major. So I believe that a lot of these universities and colleges shouldn't exist. And I also think that education has to completely change, that we should not be paying overhead in buildings that are so old that you can't even get Internet in them, that they're unhealthy. They should all be completely carbon-neutral buildings. We should take them down. They should be smaller.

It should be more pod. oriented, that if it's a teacher who is an incredible math teacher, that everyone wants to take that class and that teacher happens to be in Virginia, that any kid across the country can log on to that class at a certain time. And there can be 600 kids taking that class, and the teacher gets paid accordingly. Everything must change. And maybe these pods that you go to for socialization are filled not with teachers, but with social workers and people that are are psychiatrists that have mental health experts that are helping kids get through things and get to the other side. And there's nothing wrong with, you know, if you just want to be a

programmer or you just want to be a fireman or you have visions of running a company, you should be able to do anything you want, but we should have an education system that makes sense for you. Yeah. It does seem like we're, we're, a lot of parents have had this experience. I certainly had it with my 10-year-old. And we were lucky enough to start our own little pod and have our own teacher at home. And, you know, one-to-few or one-to-one education, when you see, like, my daughter was doing the online stuff. And then we got a teacher to do it with her.

And it just changed everything. We're very lucky to be able to do that. But, oh, my Lord, you start unpacking what actually happens at school. And it's like, okay, maybe there's an hour or two of learning. then there's like an hour or two of socialization. I don't know what the other two or three hours are, but it's really basically two hours of education, I think a day is as far as I can tell.

Well, I think education really started changing sometime in the 70s where we stopped funding public education. And so it's just been a matter of a downhill snowball that's just gotten bigger and bigger and bigger. And we have, for some reason, got very lost on who our customer is. and our customers is the student. It really does seem like this union, the power of the unions is kind of flipped

from protecting the teachers and really having their best interests at heart to maybe stifling competition. Do the charter schools work in New York? Has that been a positive in terms of... The charter schools have been great. I mean, I was very anti-charter school at the beginning. You know, I grew up in a public school system,

although living in New York City, our kids went to private school. But the charter schools work. For some kids, it's great that they need to have some kind of structure. I would like to see more charter schools that really help children that think with different side of their brain. You know, I think that most of the kids that are in these charter schools have no necessary structure at home.

And so that's been very helpful. But, you know, with education, there's not. one golden bullet that's going to fix the whole thing. Yeah, it really is such a complex problem. It's one of the problems, one of the things I like in terms of as an investment thesis, I've been really trying to find more opportunities to invest in things that are education or skills improvement or adjacent to education and then housing. And it's just- Housing is tough. Well, I just joined. I just joined the fund for New York housing, which is the arm of NYCHA,

New York City's Public Housing Authority and again, we have let these buildings go to shit since 1970 and they need $40 billion to clean up these buildings and these people's homes.

New York seems to have really kind of like Houston and some other cities just said in Miami, we're going to be incredibly pro-development but it seemed like it was pro-development on the high end. did, you know, not being there, did a lot of like mid-market, you know, units get built as well as

these, like, I remember looking at Redfin one time and I saw $10,000 a square foot, $15,000 a square foot in some of these buildings. And I was like, that's bonkers. The whole thing was bonkers. I mean, it would have been fine if Trump wasn't president because all these people came from overseas and bought these little places and they didn't care if they were here only one day a year. But in terms of housing, middle income, housing and lower income housing, Alicia Grasin, who was our deputy mayor during de Blasio at the beginning, she actually put through a tax that allows people to build, build, income housing. And every day you're seeing new places go up and people have to apply for them and they're

really nice buildings. And we need to see more of that. And I do hope that the next mayor of New York City will say to all of these people that own commercial real estate that have obviously not gotten the memo that we're in a global pandemic and no one's really ever going to go back to the office in the same way, which is let's change it and make these into, yeah, let's make them into like low income or middle income housing. I mean, the biggest issue in urban areas is housing. One out of 15 people live in NYCHA. It could easily be two out of 15. You know, you've got the Hudson Yards, which is the biggest people crap ever. My big. Is that monstrosy? I see pictures of it and I'm like, it looks, when I went to Qatar, you know, could talk.

car cutter, you know, in the Middle East, the only time I've ever been there. That's what it looks like. This billionaire built a mall that, Joanne, I can tell you this mall is like billions of dollars he spent on it. And there were, for every store, there was maybe one person per store in the, in the mall. It was so expensive and so crazy in the fountains. It rivaled anything I've ever seen in my life. And I was like, is, and I said to the guy, like, is this like, does he make money of this?

He's like, oh, no, he did this because he wanted to have the greatest mall in the world. And I was like, okay. And then I saw that monstrosity. And I'm like, what, do, are you New Yorkers taking a, it's on the west side, right? New Yorkers are repulsed with the thing. It's disgusting. Like, you have to take a cab or an Uber all the way to the west side to them, what, go to like a fendi store or like some mall of America?

Then they created all these deals with all the top, you know, companies that went over there. for, I don't know how many years, rent and free, so that they would then shop and the Monde and the food. And now we have COVID and nobody goes to the office or the food. And they don't even have, they have actually buildings that they build around it for apartment buildings. And when someone's like, well, actually, I want to live in building three. That's where I want to buy. They like say, well, you got to got to buy in building two because we can't, we need from the bank perspective, you need over 50% to buy it to make it into a condo. And they don't have enough people that are buying them.

So it's an all-time disaster. And no one is going to go back to that. It looks like a 1980s mall. It's brutal. I mean, you have so many great streets in New York where you can walk down Bleaker Street. You can go to Soho. You can go to Nolita. I mean, there's so many places you could go to have boutique experiences.

I mean, a New Yorkist don't want to go to the Ball of America, go to like the shops at the Venetian. like that's the opposite of New York. The shops at the Venetian. Give me a break. It's horrible. 2021 is looking up and new beginnings mean new opportunities to grow your business. If part of your strategy is adding new members to your team, like it is for me, LinkedIn jobs

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Terms and conditions, of course, apply because they're giving you something for free. grab it now before it's too late LinkedIn.com slash angel okay let's get back to the show I thought all units helped real estate that's what people keep telling me out here like all units help but I wonder if those

super elite units that are for Russian oligarchs or Chinese people trying to you know hide their money or you know other billionaires who are just looking to park assets I guess those don't actually help because they don't actually live there so they're not taking any it's not a release foul where it's like an ADU

when you put like something in your back an extra unit and maybe an in-law moves there or, you know, a kid moves there instead of taking an apartment off the market or mom, you know, grandma moves out of her, you know, apartment in Queens and then moves to the ADU. It opens up the apartment for somebody. Those seem to be a big rage out here. I don't know if that's hit New York. People don't have backyards, I guess, or as much. No, that has not definitely hit New York. And I doubt it will. But I, it all comes down to rethinking the tax code. And even when it comes to commercial real estate,

I mean, I was looking into buying a couple commercial real estate properties. And these people obviously did not get the memo that were in a global pandemic and 12,000 places have closed and they think they're worth what they're worth. But someone is going to come in and they're going to actually force some kind of vacancy tax. and then they're going to have to go to the banks because the reason they're not renting is because they leverage their entire building and then by leveraging the building

and taking out the money from the bank, the bank said you cannot take less than this amount of month and rent and so they're beholden to the bank. So that's the biggest problem. At the end of the day, it's always about the bank. The banks have done such horrendous shit over the years giving 20-year-olds visa cars

that walk out of college with $50,000 in debt with no understanding of what they're doing. The banks literally need some serious regulation. And yeah, I heard this as well. People had bought these buildings and they just levered them up and they bought the next one, the next one, the next one, and then... 10% down. Are you kidding?

What? So then the music stops and here we are and the value of... What is retail going to go for half as much? Yes. A third as much? Two there. I'd say half to two thirds, right? Something in that range, 50, 60%.

Yeah, I totally agree. And you can't, shouldn't be able to put 10% down. What do they care if they walk away? Okay, take the building. Yeah. It's like this creative destruction that will happen because you, when I was coming of age in New York and in yourself, like late 80s, 90s, you could, people were buying storefronts and putting their architecture firm or their magazine or living in them

and then maybe having some creative art space in the front. So this is going to be great. I mean, you remember my place at the start of Lehigh building. I was living in an illegal loft for five, six years when I was in New York. I paid $1,800 a month to live in what was completely illegal statute of limitations up, but people will get creative with those spaces, and that'll be so great and vibrant for New York. I think that it's going to be great for New York. It really hit a peak, and it needed to reset itself. I love a good reset. Okay, let's talk about angel investing. You've invested in how many companies to date?

$130, $35. Perfect. Now, you started this process. I think maybe you, maybe you, 15 years ago? I'm trying to remember when you started, but I know I started a couple years after you. And you specialized in investing in female founders? What has changed? Okay, perfect. So underrepresented, is the, the monocers that we use out here. Underestimated. Yeah, underestimated. It's kind of cool, right? I like it. It's a little bit, you know, like, hey, you're missing out here. How have things changed in those 15 years in terms of the number of underestimated founders who are reaching out to you, number of, let's say, non-sist white males as venture capitalists. How has this arc changed? Because you really pioneered this change.

You pushed for it. But back in that time, you know, we would put out, we'd give our free tickets to our events. And I'd say about 15%, 20% of the audience would be female. So just on a free ticket basis, you know, people coming. Now it's at 40%, sometimes 50%. I mean, the industry really feels like it's changed dramatically. But I'm curious from your perspective as a pioneer in the space. what you've seen and what's changed? It has changed. I mean, it takes time to change things. I mean, 15 years is a long time.

And many more women are starting companies. Companies as a whole. I mean, the perfect example, when I really saw start to see change is Fred is a company and they were looking to bring on a couple people to the board. And the people that they were talking about were unbelievably talented women. at the top of their fields.

And they were only looking at women for this particular two positions on this board. And, you know, I know just by knowing who they are and their trajectory, and that started back 10 years ago. And so that was like, oh, this is so great. You know, I don't think most of these people know the women's names, which is very classic. They only know the male's names. But the good news is that we're seeing change. We're seeing change on the investment end in black venture capitalists and more women that are becoming venture capitalists.

And more awareness, right? When you get a deck these days that has a bunch of white bros smiling at you, I think that everybody, if they have a brain and they woke up, would be like, this is not a good situation. I mean, this is great, but you guys got to have diversity before we put any money into this. I just had one of the founders of Harlem Capital on, Paul Judge on. I mean, SoftBank made a big bet. Andresen Harowitz was making a big bet on founders of color.

It's really great to see it actually starting to hit firms, et cetera, because the firms turn over what, you know, at a venture firm, every three, six years, maybe they add one partner because somebody retires. Like every two funds, maybe a partner release. leaves. So it's a very slow process, but I always thought the solution would be, you know, people like you, just starting your own firms, or just saying, I'm not going to wait to get a seat. I'm going to drive my own car. I'm going myself. I'm not waiting for you to let me on the bus. That's been, I think, a huge change. But when we look at the number of deals and the VC dollars,

and I guess there's an overhang with the VC dollars, so I think looking at dollars, if, in fact, underrepresented founders are getting funded much, much more often. In fact, it's probably double where it was when you start, it's up at least 50. It's over 50% in terms of the number of VC deals in terms of female founders. So that's great. But it's from a very low pace, to be honest. Like we're talking about going from 3 to 6%. So it's still a ways to go here.

There is still a ways to go. But I, we're driving in the right direction. And that feels really good. and I believe that most firms are committed to making that change, which is good. I mean, it's in, and even, you know, a handful of the black feces that I'm talking to, as well as one, which is black capital, that I'm a advisor on, they are privy and connected into a world of black founders that they understand their businesses and they know what's happening because it's literally we're living on different planets. It's like there's a whole

group of amazing black founders that no one who's a white investor has ever seen. And so I think that is a really good thing. And it was the same thing when I started investing on women. There were all these amazing women out there, but no one wanted to meet them that were like white men in business suits. Yeah. And now we're starting to see that fabric connect. As you put people at the table who are different than you, they know those communities. They know. They know, those subcultures, and they can get to them quicker, right? And so all of a sudden, the diversity starts to happen. And, you know, some people did it because they understood the opportunity. Other people did it because they were embarrassed and shamed into, you know,

their, you know, team slide was like, oh, you know, like, look at this venture capital firms, eight white guys. And, hey, I got a couple of associates over here who don't look like us, but it was pretty, yeah, it's pretty gnarly. And I can, remember so many of them come to me like, I really need a person of color who's female to put on this page. Can you help me? And I'm like, I, do you have an HR department? Do you know anybody? Like, why are you coming to me? Like, it's pretty simple. Like, then I had another VC come to me. It's like, I just realized, uh, I've never invested in a black woman. And I was like, okay. And they're like, you've invested in six. Can you introduce me to one? I'm like, sure, I'll introduce you to all

of them. It's just, like the fear of this guy's voice. Which is good. which is great. It's good. Yeah. You should be embarrassed. You know, you're invested in a hundred companies and you don't have one. I mean,

it's amazing. But I do remember going to L.A. I think it was the first year we went out there. So, yeah, seven or eight years ago, maybe. And we went to this dinner that Fred was invited to.

And he's like, I should even be there because Joanne has eight investments in L.A. And I don't have any. So they're like, oh, yeah, bring Joanne alone. Okay, there was not one other woman in the room,

except for the guys, house and his wife, who's amazing. And while I was there, four VCs pulled me aside and said, we really wanted to bring a, you know, a female partner. Who do you think? And I thought, okay, this is a good sign. Yeah. That's nice to see change. If you're an accredited investor, you need to know about special purpose vehicles. What is a special purpose vehicle? Well, we call it in the industry an SPV. It's basically an investment vehicle. It's basically an investment vehicle. that allows up to 250 investors to invest up to $10 million by a one entry on the cap table. This is how I run my syndicate.

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I actually invested in Ashore. I kid you not. Are you as active now in the peak market as you were, you know, leading up to this because you and I have been through this, we've seen this movie before. Oh, yes. And this one's going a long time. It was like 2007, we had the great recession, financial crisis, and now it's 2021. I think it's like 12-year bull market.

This feels really frothy. What is your approach in this crazy frothy NFT Bitcoin market? Well, it really has gone on too long. and I thought that the whole world is going to fall apart, you know, a couple years ago, and I'm still waiting for that, although, you know, I call the retail worlds falling apart way too early, and now it's happened. So I have not been that active in angel investing in the last couple of years because I got burnt out and I got extremely frustrated with the pricing and the replication of multiple businesses

when the one that was starting to really pull out of the gate just started a year ago. And I also felt that as a generalist, that was fantastic 15 years ago. I mean, I had my finger on the pulse of where things were going, what made sense, and who I thought could actually execute on those ideas. Now, I don't think it's so easy being a generalist unless you have a whole group of people around you that will say, I know you thought the founder was great, but guess what? There's 60 people already doing that that have been funded. And so as a generalist, I think it's just gotten a lot of harder and you really, really now more than ever.

I don't care if you're an angel investor or a venture capitalist. You need a serious thesis. Yeah, definitely the number of companies has exploded. It's gone exponential. Then you have the valuations going up. the clones. So you put all that together, you know, the early stage opportunity, you really need to have a thesis and you need to have a process of sorting through all these. That's, you know, there were so few companies coming to us 10 years ago that you could actually take your time,

meet all of them, and then make a reasonable bet. And then when you have 10 times the number of entrepreneurs, the quality on average is going down. The number of successful companies, I think, will go up net net, but the sorting process, I think I'm reading into, you know, being a solo Angel investor, just getting through all this stuff while you're servicing your 100 plus investments becomes, you start to drown. And you've had so many great investments. I think now would be about maybe harvesting some of those, correct? Yes. I mean, it's very funny you bring to say harvesting is that I was speaking to a young VC yesterday. And he did a lot of stuff in the real estate space. And we do too. And I have made a lot of investments in the real estate space

in terms of more back-end technology. And we have built a variety of things in real estate. So we were talking, and they were raising another fund. This fund was going to be much larger in the first. The first fund was small, $8 million. So I said, how's the $8 million doing? He goes, oh, my God, we have this one business. It's just, you know, valued it a billion dollars.

We put it in at this price. I mean, I'm going to ride this one to the mint. And I'm like, no, you're not. you're going to sell 50% of your ownership and then you're going to ride the rest of the moon. That's called portfolio management. Right. And he's like, what do you mean? Like, no one had ever said that to him.

So weird. You mean, you do have to ride your winners, but you do also need at some point to give some chips back to your LPs. Exactly. And even as an angel, you need to take money off the table when it is gotten silly. and then the rest is just, you know, starting at a zero basis, basically. Yeah, and there's exactly the approach I took when my Uber holdings was to sell, you know, half of it, basically, and let the other half ride. And now I have a house and my kids are taking care of. We're all good. And now I'm looking at Robin Hood and Com and it's going to go public probably this year. It's a rumor. Com maybe not, but Com's hit $2 billion. You know, if you have these large positions, you've had them for 7, 8, 9, 10, 11 years, you do need to start cashing in some chips. I beg these crypto people, I know,

a crypto person who's 95% of his net worth is in crypto in Bitcoin, in one crypto, Bitcoin. And I'm like, do you own your apartment or house? He's, no, I rent. Why would I own? And I'm like, oh my God, millennial, please sit down and let me give you one life lesson. A hundred percent. Buy a house. Or two. I mean, he can afford two or three. And he's just sitting on Bitcoin. I'm like, what if Bitcoin goes from $55,000 a coin back down to three? You're going to feel really dumb. And then that house is going to be wonderful to sit in. I bought a house with Bitcoin before I went to three. A hundred percent.

That's what I said to this guy. I said, listen, you know, he's like, but this thing is just going up. I said, you know what? It could also go down. Yeah, I mean, both of us have a relationship with a guy named Fred Wilson. He was a mentor to me. You married him. And we watched, I mean, you had the front row seat.

I had this, you know, I was like two rows back. And we watched all these incredible flat iron partners companies, geo cities. star what was the star one of that star media i there's a lot of scar tissue here bring it up but i mean there were a bunch of these that you know were fred's ubers uh and robin hoods and you know i don't know if he was able to sell those positions you guys were able to sell them but there were some that went from whatever a hundred dollars a share to a penny a shirt am i right yes yeah these are hard-fought lessons i mean if you had sold all of those at the peak which is impossible to know or do

it would have been incredible, but some of them you didn't, right? I assume. I mean, you can, when you, when you are a, um, an institutional investor, I mean, certainly you have lockups and you can always sell so much, but I mean, we've never been investors in the stock market, right? We're investors in companies and people. And so how we treat it is very different than how we treat, um, uh, how you get out and put some cash into your pocket. Yeah. I mean, I had one venture, an LPN one venture firm that had square shares. They distributed them at, you know, they held them for a long time. Then they distributed them. I think it went out at $9 a share. They distributed them at like 60 or 70. And I was like, you know what? I'll sell half. These

and that might have right. Exactly what you just said. Yes. I wake up today and, you know, I was like, oh, wow, square is at $250 a share. I mean, I sold half at 70, but I don't feel bad about selling that half. Never feel bad. Never feel bad. And I'm free rolling all the rest. Yeah. Cash is. King. Yeah, is why that expression exists. So when you look at helping companies and you look at the reasons most companies fail, let's talk about that. What are the patterns you see of where entrepreneurs totally screw it up?

What are the themes there? What are the times they, you're like, oh, I've seen this movie before. This founder's not building a great team. This founder is not. This founders distracted. What are the top reasons founders fail in the early stage? Many. I think one is fine.

They don't have product market fit, which happens. That's okay. The thing that I find frustrating is they might not operate the business in the hardworking 24-7 mode that they actually need to be in. They are not willing to change modes or go down a new. path when they realize things aren't working. They stick to what they think it should be, and that's all there is. Like, you know, at a company that was in the clothing business, and I said, once you figure out your customer, you're going to do fine. You might think right now she's a 30-year-old hipster, but you might find out she's like a 40-year-old, you know,

housewife. So you've got to figure that out. And I think a lot of founders are like, no, I have the 30-year-old hipster, but when you don't. And I think the other thing is, and interesting enough, I see this more in black and Latino founders. And I don't know if it's cultural or it has to do with a next generation of entrepreneurs that need to prove themselves to their families that they didn't go out and be like a doctor or a lawyer or something in that area is that they don't ask for help when they need help. They feel they can do it all themselves. They don't want to share what's going on.

They're very stoic. and then things are going really bad. When things go really bad, it's really hard to turn that to going well. And everyone around the table wants to help you. Everyone around the table wants to see the success that you want to succeed. And it is important to use those people around the table to be honest with when things go shit and when things go good. And so it's a combination of all of those.

It's really interesting you bring this one up. the stoicism, we're not asking for help. My perception of this, and it's anecdotal, is I think a lot of founders who are underrepresented and underestimated, who are new to this game and are getting funded for the first time, they're looking at going, this is my only shot at this. I can't show weakness. I can't show that I don't know what I'm doing or else they're not going to back me again. And I literally had a woman tell me that.

I was like, you're working a little too hard. Like, are you going to burn out? Like, you might want to take a vacation with your family. and like let's get you some help if you're doing six jobs. And she was like, I have to make this work. And I said, well, no, I mean, if it doesn't work, it's okay. Like, we'll do another company. You'll have another great idea.

This is like, you know, we're going to invest in you for two or three companies. That's our, that's one of our core thesis is that besides we want to invest in a founder's, the arc of their entire career. Come to us with your second, third company after you've lost our money on the first two. That's fine. And she said, no, that's different for women. I won't get funded again. She was absolutely convinced that there is no way to get funded again as a woman if she failed.

That's interesting. I mean, I had one woman who was her company. She couldn't get funding. And it was actually a longer term company than she realized because it was in enterprise software. And she had an offer to buy. And she really didn't want to sell it. And I said to her, sell the company. Because what's going to happen is you're going to be in the same position,

18 months from now, unfortunately, because of the long term of arc of that kind of business. And if in that fact, now you're a winner. You have a win underneath your belt. You know, you got some money in your pocket. Do another company, right? I had a black founder, a guy, super smart, and actually understood the business better than anyone in how he was building it. It was almost a full circle business the way it worked.

and his competitor has just taken off. It's a shitty business, but he never said, like, I got a week's lift of money in the bank. I need this, I need that. And when he finally woke up that he should have asked for help, nobody wanted to give him help. Yeah, it was too late. Yeah, when you're speeding 60 miles an hour towards a wall,

and you're like, I need help stopping this car. It's like, could have told us like a mile out. Like, we could have taken the wall down or giving you a different route. We're going to give a different coordinates. I mean, if there's a founder listening to this and you're in dire straits, right now, absolutely say, I am in dire straits. I am scared. This is a problem. Go to whoever your best angel is and just talk for hours and figure it out. There is no harm in asking for help, and there is tremendous failure in not asking for help. This is totally agree. I mean,

the importance of asking for help and the importance of being honest is so underestimated, but I also think the thing that people have to realize who are the founders is that where they get the money, be an institutional investors more than anything else, they don't care. They lose money all day long. We could go through a litany of people that have put out $100 million and like, oh, all right, done, gone, move on. That's the business they're in. And so if you look at it and realize that, it does make you run your business differently. Yeah. What is your advice when founders get the opportunity to raise large sums of capital at great valuations? We obviously talked about early on you can get ahead of your skis. But let's say the business is up and running and there's some crazy offers coming. And I don't know if you're seeing this in your portfolio, but you'll have a series C term sheet come in and you look at it. Whoa, to 30 million for 5% of the business? Like, take it. What's your advice when these founders get these colossal, like massive amounts of cash available to the best? secondary, they can take off $5, $10 million.

What's your advice to them? How do you counsel them? I know you're doing a lot of advising now that the market's super hot and you have this huge portfolio of companies. You know, it's complicated. I mean, on one hand, there's so much cash out there. My advice is take the cash. Why not?

You want money in your bank all the time. It puts you in control. My other advice, which has been consistent for over a decade, which is get profitable. It doesn't mean you have to be profitable right now, but God forbid, if you had to be profitable and you could basically be responsible for your own destiny, how could you do that? There are certain companies, they have no competition. So you get $10 million in the bank. You could just keep growing every year, no problem.

If it takes you 20 years, you don't care. Where other companies, in order to really grow, you do need a lot of capital to get to where you want to get going. But if something happened one day, you should be able to, like, cut everything out and become a profitable company. It's such an important insight. You know, I've always run my companies to just have a year of capital in the bank. And I'm so conservative after being through these brutal down markets that maybe I'm far too conservative. But I always tell my founders, I like to see you have 18 months of cash in the bank. When you get down to 6 to 12 and you have an opportunity to pop it back up to 18 or 24, why wouldn't we do that?

and have some downside risk protection. I mean, if it's at a reasonable valuation, it's a good to great investor, let's roll. Like, what's the downside here? And they're always like, well, I think I can grow, I can double revenue in this amount of time and then the valuation will be this much higher. I'm like, are you over-opt? I always just ask, I always ask things as questions now because, you know, when you tell somebody to do something, the chances are very hard. So now having had kids and been through 200 investments, I'm like, I wonder if there's a downside here. And I just let them talk it out. They're like, well, I don't think there's a downside. I'm like, oh, that's interesting. So there's no downside. I'm like, no, there's no downside.

I'm like, hmm. Interesting. No downside. Yeah. Well, you know, the downside is, is that, you know, someone's going to pull the plug on you and you're not going to get what you wanted. And the other thing, I think a lot of founders concern themselves with is, well, I'm only going to own three percent of the company now. Okay, fine. Then go back to your board, get more options. Perhaps you're already vested. But, you know, zero of zero is zero, right? And if you actually think this company's going to be worth a billion dollars, what do you give a shit? Yeah, 3% is pretty good. I mean, this is the other thing, when you get so low, if your equity gets so low, and you're the one who's in the cockpit and you're flying the plane, and you go back to the investors who are passengers and you say, I know none of you

fly planes anymore and you don't know how to fly this plane and we're at 30,000 feet. I'm down to 3%. Can I get five points over five years? That's my standard. I ask for five points, five years when I'm on a board and we have this issue of re-upping a founder. Anytime they get below 10% 15%, I'm like, you know, and they're fully vested, why not? Five points, five years, we've just solved the problem for ourselves. We don't need to ever do a CEO search. And it's risk management for the VC side. So founders don't worry about that dilution if you can always re-up. And the way I like to I love your thing about zero equals zero. When you're in that cockpit and you've got the plane

and all those passengers, your team, your customers, all the stakeholders, investors, all the great pilots know there is, how can I ditch this plane? If I need to get this plane on the ground, there's Tito Barrow, you know, there's JFK, there's LaGuardia, you know, and the West Side Highway and, oh, the Hudson. Yeah, that's another place I can land a plane if I absolutely needed to. And that's exactly what Sully did, right? That's what gray hair lets you do. no, like when you were gray hair like Sully and he just said, yeah, I'm going to be down in the Hudson. Do you ever hear that, you ever hear that call tower where the guy's, I'm sorry, you just say the Hudson? He's like, yeah, we're going to go down to the Hudson. And he's just

cool like a cucumber. He's like, this is the best option. And I'm going to take it. Exactly. Yeah. Can you clear the Hudson for me? Sure. Yeah. We'll get the circle line to get out of the way. Exactly. Greatest moment in New York history. Yeah, it was so good. But it is true. I mean, People have to be, you know, very, I mean, I also say to those founders that freak out about their valuation, most founders own somewhere between 7, 11% when the company goes public or they sell it. And so if you're at 26% and you have an opportunity, you know, that you'll be diluted down to 21 and you have this kind of money in the bank who gives a shit. Absolutely.

Larry and Sergey did okay with 9%. I think they're doing okay. I think they are. I think they bought like half of the British Virgin Islands. I think they have more islands than any sovereign country. I think maybe the only UK. It still has more islands. And I don't think they even own them.

Well, while we get close to rapping here, I have to ask, how are my three favorite kids doing? Because I know Josh is still the youngest. Josh is still the youngest. He's 25. 25. Jessica. Jessica and Emily. Emily's 28.

Emily's 28. Right? Or a writer? Emily is a big writer. She's a freelance writer for the food industry. She's been in Bon Appetit. She's been in the L.A. Time. She's been in taste.

She's doing great. Jessica. I wonder where she got that passion for you. And Jessica's an artist. She actually had a show at the new museum this winter, which was very exciting. Fantastic. Now you're an artist. Yes.

Now, if you did a show in the museum, you're pretty much an artist. You're legit. And she taught her. herself completely self-taught. It's all computer imaging. It's really freaking cool. And Josh is figuring himself out. He's extremely happy and he's about to make a major investment than he's going to oversee, which is in the food business. And he's going to be working and operating and running it. And he has, it's super cool. He really likes a lot of the stuff that we do as a family. And I think that he's going to get involved with more and also do.

his own thing. So no one works for themselves and no one ever wanted, I mean, everyone works itself. So it's perfect. Yeah. I think when you watch your parents start their own way in the world and you included them in so much, I was taking notes on how you guys parented doing the podcast together. You guys always did fun trips that were very cultural and interesting for the kids. I always watched you raise those kids. And I was like, they're going to turn out great. And here we are. They turned out great. I'm so happy for you. Yeah. No, it's really, I mean, you're as is your least happy kid. Right.

That is such good life advice. Yeah. The other thing I realized watching you guys is like you put the time in early. It pays dividends later. Am I correct? You're 100% right. If you think that by the time they get teenagers, if you are just going to work all the time and then when they're 13,

you're going to check in, they don't want anything to do with you. You know, it starts from the very beginning. And even the relationship you have and how you do, trust them as individuals and how you respect how they think. I mean, that starts from day one. They're just not fully mature yet or they really haven't ripened yet. And so I think that's how I've always gone about it. Thank you for, oh, by the way, thank you for sending Katie from Lately. She's the best. She is a force of nature. I was like, oh my God, I literally have somebody in

the accelerator who is as rambunctious as I am. She's amazing. I mean, that's a perfect example of an industry that I'm not so sure I understood really, but some of the investors in it were people that really understood it. But you just meet her and you're like, okay, she's going to figure this thing out. For sure. And she has. I mean, the company. And she has. I mean, she really has revenue dialed in. I was, and I think the advice we talked about earlier is like, hey, if you have a plan to get to profitability and you can do that, now you control your destiny, that any capital you take, you, take is really your choice if you take it or not. Which is where she is, which is quite amazing.

She's like, she was, I should have told them, I don't want your money. I'm going to leave now. And I was like, I love that you're going to do that because I think that more people that are on the other side, you cannot have investors. You cannot own art. You cannot, I mean, you can't go to see concerts. It's all about this. the artist, the founder, the musician, the teacher. And we should, you know, revel in these people. You and I couldn't do what we do if it wasn't for founders. Right.

And she, I'll tell you, like the great anecdote, we have a thing where at the end, I think you've participated at the end of every accelerated class, we just ask the investors, hey, give us your three, two, and one. Out of the seven companies, which were your third favorite, second favorite, first favorite, through the lens of investing. And I do that in a very Machiavellian premedian way. premeditated way to then give the founders and the investors an excuse to do a follow-up meeting. Because if you pick them number one and two, you're kind of obligated to meet them.

But anyway, when she would get a vote, she would give a whoop in the class. I had to take her side. I was like, Katie, I think your whoops, and I think you know this, are influencing the voting. So no more whoops. And she was like, all right, you're right. Because I was like, you know, it's kind of like, you're kind of leading the judges, you get an early vote. And you'd be like, woohoo.

I was like, Kaylee. Oh, it's so funny. Let's, let's wrap on art. You've always been a patron of and appreciated it. And I think buyer of some art. Mm-hmm. And digital art was a passion for you also for me. It was wonderful to see.

But, and these NFTs are super fascinating as a, you know, smart contract with the artist can keep getting. 10%, 20% whatever they define of the sale of an artwork as it goes. This is super fascinating to you as an art collector, I would assume. I mean, I have very mixed feelings on these NFTs. I do too. I love it on one level, but what's the downside? I mean, honestly, I would have preferred to buy Picasso with $70 million.

But regardless, I think it just says it's been time for the art world to be disrupted for a long time. There's no doubt that everything should be on a blockchain for security purposes and for reality checks. Is this really a Gerhard Richter? Yes, it is. It's on the blockchain. This is confirmation, sign, date, everything. That makes complete sense. What they call that?

Providence? Providence, yeah. Yeah, so that makes sense. But unclear how many real artists want to participate in this. And I think it's more of a test. thing. I mean, I want to go back to the days where in the second generation of people pitching businesses when blockchain started to be talking about, you know, it would be like, I'm starting this business, this is the whole thing. And I'm like, okay, I've seen this before.

But, you know, we're going to be on the blockchain. It's like a blockchain on it. Yeah. It's going to beat Airbnb because your stays on a blockchain. No, that doesn't beat Airbnb's network effects. Sorry. So, you know, I think there's something of interest there. where this goes is unclear. Not a lot of the, I think that it will change the gallery business. It will change the auction houses. I mean, the art world is so ripe for disruption.

You know, what are galleries going to be? We certainly don't want to just be museums where we see art and experience art. Are the galleries going to be more your agent if you're an artist? Are there going to be different type of shows that are more interactive? You know, I don't know. This whole thing is fascinating and could evolve into something else besides art.

But some of the stuff I've seen is God awful, and I don't really get why people are buying it. There's definitely a moment in time right now with these stimulus checks are going out, these crypto wealth this year. And I think, you know, the art market is always. been a little a little bit of collusion and manipulation with like the insiders getting to buy pieces first. So that exists there. So this could in one way maybe make that a little more transparency there. But I think my thesis is the people buying the people at some record number or buying the tweet, I think they have so many stakes in NFTs and platforms in crypto that

if you had a billion dollars in crypto and you spend 70 million on, you know, this people thing, and it's nothing. And then what if it makes crypto go up 20% because people are fascinated? So you just did marketing with your crypto gains to then make your crypto gains go up. It's almost like painting the tape, you know, in making almost like false transactions.

Like you didn't actually believe it was worth $69 million. It would be like people buying the first 10 apartments in a complex, you know, having celebrities buy them. And then selling them, yeah. Almost sold out. The whole concept, is art is an asset class has never been one that is really

resided me we have bought what we've liked is it nice to see your art grow up in value absolutely but you know what it's like it's like supporting an entrepreneur you know you're you are buying pieces over the course of their career and you are supporting them as an artist of what they've chosen to do because they are

an artist and that's how their brain thinks and I think that is one way to think about it but the concept and I know many people that buy art is an asset class that is just something that has never really turned me on. This has been amazing. Congratulations on all the success.

Great to catch up with you. I'm sad. Curbed is gone. Well, it's not gone. It's just not. It's part of Ox. No, but they stopped doing curb, New York, curbed L.A.,

curbed Austin. I like to just like, well, it's curbs. Yeah. Now they're doing, they're doing eater still, but they don't have these like local. I used to load,

I used to load the San Francisco one every day and check it out. I love that. You know, these things involve when they get bought, they're never what they were. It is sometimes the case, sadly. For every time a YouTube, you know, our Instagram gets, you know, accelerated by the buyer. You do have the reality of this. Listen, continued success.

Can't wait to see you. I'm done with this pandemic. And I'm coming to New York. So you and I are going to see a show. The second Broadway starts. We're going to the best restaurant. We'll go to a Nick's game with Fred. And it's my treat, obviously, since you guys.

paid for everything for the first decade of my life. Sincerely, thank you for just being my rock when I was coming up. I would not be where I am in my career if I didn't have your support. And it really means a lot to me. Thanks, Jason. I mean, that was such a great time. It really was. We had a lot of fun.

We did have a lot of fun. 90s were great. And the 20s will be better. That's my belief. Well, we'll see. I mean, I still remember, you know, and I still talked to Gordon like a couple times a week is that going into the last party we had after the you know the big trade show yes walking and and seeing all those people and I remember thinking

oh my god this is like the music industry in the 1970s and that was like not farther from then did the whole thing explode I think that was the West Side the famous Westside highway party that's where I invited everybody and like 10,000 people signed up for a party that could have two or three thousand people. The fire department came. Thankfully, Josh was a firefighter at the time. My brother. And he was able to talk them down from shutting the party down.

But they said, you know, this line of 3,000 people and you got 3,000 people in the space and you're in max capacity, those people have to go home. Yeah. Or else we have to shut the party. I was like, no problem. Lock the doors. Take everybody inside. No more clipboards.

If you got in, you got in. It was the greatest party ever. That was the party. I remember IBM came to you and said something like, hey, can we give you like another $50,000 for the party? And you were like, yes. And like, what will we get for that? We're like, we're going to make it even better.

And we've got a giant IBM ice sculpture with caviar and oysters and shrimp cocktail. I just said, yeah, spent like $10,000 on seafood. My brother Jamie went crazy and got the ice sculpture. IBM was like six feet tall. I mean, that was the peak moment. It was the peak moment. But we're still here. So it works out.

Right the wave. Right the wave. As Gordon knows, you just, if there's waves you surf, if there's no waves, you got, you can take a dip in the pool, whatever, you can have lunch. Yeah. You don't have to go surfing that day. Exactly. I love you, sis.

Thank you for everything you've done for me in my life. You and Fred, I've been two of the great supporters of my career. Well, thank you for having me on. It's so great always to see you and talk. Yeah. All right. I'll see you in the real world. post-pandemic in the next couple of months.

Sounds great. All right, love you. All right. See you next time, everybody. Bye.