This Week in Startups - Nextdoor SPAC breakdown, Pelosi trading options + Morning Brew’s Alex Lieberman | E1242

Episode Date: July 8, 2021

First, Jason breaks down the highlights from Nextdoor's SPAC announcement (1:48) and covers the profits made by politicians trading tech company options (16:26). Then, Alex Lieberman, Co-Founder & Executive Chairman of Morning Brew, joins to talk about growing a newsletter business (45:34), expanding as a media company (49:51), angel investing (57:19) & more!

Okay, today we have a great interview with Morning Brews, Alex Lieberman. We break down how they went from a few hundred subscribers, zero dollars in revenue back in 2015 to then selling the majority of the company to Insider for 75 million, just five years later, just great entrepreneur, who's now an angel investing. So we talk about that a whole bunch. And before we do that, we have two quick news topics for you. Next door is going public via SPAC. In fact, Kostla's SPAC, so this is very interesting to see a venture firm SPAC actually take out

another venture capital firm's big bet, namely benchmarks next door. And Nancy Pelosi is yoloing it with calls now and seems to have made a bunch of money buying Amazon. Okay, stick with us. This week in startups is brought to you by Odu is a fully customizable and fully integrated suite of business apps that lets you build and scale your stack as you build and scale your business. Your first app is free forever.

and right now O-Doo is offering $100 off your first implementation pack at O-do.com slash twist. That's O-D-O-O-O-O-com slash twist. User testing. Real-time video feedback? Real fast. From wherever you work. User testing. Real human insights.

Try user testing free today at usertesting. com slash twist. And Vanta. Compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a SOC2 report fast. Twist listeners can get $1,000 off for a limited time at vanta.com slash twist. Okay, next door, which is a neighborhood network, is going public via SPAC with Coastal Ventures 2, ticker symbol, KVSB for now.

Once the merger is complete, the next door publicly traded entity will trade under the ticker, Kind, K-I-N-D, not Kind bars, but Kind, which I guess is the last ND is next door and the K might be for Kostla. Or be kind to thy neighbor, one of those. But before we get into this fact, here's a hilarious clip from when I interviewed the former CEO, Narav Tolia at launch festival back in 2018.

I'm such a huge fan of Nextdoor. I've been part of three communities. And I thought I would just start with the absolute proof that you have created an incredible phenomenon. This is when you know your company has made it. Is when a parody account

is made and it goes viral. Anybody here follow Best of Next raise your hand if you follow this. So, oh my God, it's only like 10, 15 people, you're all going to love this. It's the best for our handle ever. Thank you, Jason, for getting even more people to follow this account that we don't prefer

they follow. Oh, really? Thank you. Are you crazy? This is like, when you get parodied for, like, the edge behaviors in an ecosystem, it just means you are the greatest success ever. But the point of this account

is that people get, maniacally passionate and sometimes weird about their local communities. Our comms people hate Best of Next Door. I think, I will admit, even though I don't like the fact that there are more followers of Best of Next Door than there are of At Next Door itself.

I do find it humorous. You are a complete liar. You created this yourself. You have a burner phone in your pocket right now. Okay? Let's be honest. I have three fake parody accounts for Jason and none of them have gained any traction. I keep trying.

Every two or three years, I create a parody account, and the same thing happens. I can't parody myself because I'm such a parody. All right, funny moments there from my interview. I stand by it. I think it's one of the funniest accounts ever. And, yeah, the verge even picked up Narav's answer in an article headlined,

outgoing Nextdoor CEO, not amused by at best of Nextdoor. Our comms people ate at Best of Nextdoor. As a aside, Nirav was replaced the CEO by Sarah Fryer. In late 2018, she was previously the CFO at Square for almost seven years. And if you go back to the Best of Nextdoor Twitter account, their pin tweet is till that article from way back in 2018. So here are some of the recent tweets from that account. Nextdoor is Twitter for old people?

Burgers? I don't understand. They make vegan meat. It seems like a scam to me. I have to cancel my Costco membership. Literally a post on Nextdoor with a picture of burger potty's made from plants, perplexing folks. And then best of next door, great, great dunk here was dollar sign Karen not available as their ticker symbol. Hilarious. And then another great one.

If you're on our YouTube channel, you'll see these videos. We'll cut them in. If you're just listening to audio, I'll describe it for you. The man in the picture is six eight for a size reference. I don't have exact measurements. $20 for the rug. Pick up and chop. Anyway, they just, the guy lays down on the floor next to the rug as if you're going to

roll a body in it and throw it into a, uh, yeah, a ditch or something is very weird. Anyway, back to the SPAC. And by the way, if you don't know what next door is, essentially imagine a Google group for every zip code. You invite your neighbors and then you can get into next door and complain about each other, complain about somebody driving too fast, sell, you know, your old tennis rackets, yada, yada. But it is actually quite nice when, you know, at its best, it's great for coordinating

and getting to know your neighbors. At its worst, people are like, oh, my God, there's somebody who looks different than us walking around the neighborhood. And you get some Karen taking a picture of somebody who they think doesn't belong in the neighborhood and all kinds of, yeah, unfortunate kind of post because people are confused because they think that they're in a semi-private environment when they're using next door because you have to have a postcard sent to your house with a little code on it in order to get into your neighborhood. And that can make it appear to people that they're not going to be screenshotted and those won't be sent to another location, which is semi-true.

But, of course, people find out ways to sneak in or people rat out other people for saying inappropriate things inside of their next door. So that's how it works. That's why it's powerful. and that's why advertisers like it. If you want to advertise your real estate services to, you know, people in Palo Alto or Atherton, you know, you can imagine what the rates would be for advertising to a community with an average home of price of $5 million. So they're going to generate $686 million in proceeds by doing the SPAC.

That's going to value them at $4.3 billion, a fraction of, say, you know, the value of the trillion-dollar Facebook Empire. But, you know, a portion of the value of, say, a Twitter or maybe a Snapchat. So they're on their way. $2.0070 million of those funds will come from a pipe. If you don't know what that is, it's a private investment in a public entity. So when institutions or accredited investors buy stock directly from a public company below the market price, this allows the company to raise money quickly, the pipe investors include Tiro Price, Dragon, Niagara Global, and some others.

Major pre-SPAC investors, of course, benchmark and Bill Gurley, Cloner Perkins, John Doer, bond capital, Mary Meeker. And, you know, it's a pretty amazing group of folks. The SPAC is notable because it's COSLA ventures and because they were not listed as prior investors in Nextor. Maybe they were, but it doesn't seem like it. And when venture firms like COSLA or Lear Hapo are now popping up their own SPACs, most people said, oh, they're going to use it for their own portfolio companies.

Now it turns out, you know, we're starting to see them do other people's portfolio companies. And this makes sense because we're always trying to make up for mistakes when you're in the venture space or you've got a seed fund. You miss an investment, but you know you were close on it. So you try to get in the later round. So it might be that, you know, Kosa saw benchmark and Kleiner and Bond and Greylock get in on next door. And they always just had that regret. So now they get to take the company public and make some money off of a company they learned about. At $4.3 billion, that'll be double their last private market valuation, which was $2.1.

billion in their 2019 series H in which they raised 170 million. 2020 revenue, 123 million. 2021's expected revenue, 178 million. That would be a 44% increase. That's, uh, you know, nice growth. It's not like early stage growth where people are doubling or tripling. As the number gets bigger, uh, the percentage slows down. 178 million in 2021 revenue would put next door at 24 times.

their price to sales, in other words, 24 times the number 178 puts them at the $4.3 billion valuation, or if you divide the $4.3 billion valuation by 24, you come up with the number 178 or so. So that's, I think, probably aggressive, but not overly aggressive in terms of valuation. They have 60 million verified users. And remember, you have to sign up with an actual piece of mail to your address to verify. So their users are very, very, very valuable. They have 27 million weekly active users, but they're a little generous in their weekly active users calculation.

They claim that over 50% of users remain monthly active users after two years on the platform. So that's pretty good retention. But I think, again, a little generous here on how they count the daily active users in the mouse from the investor presentation. They count Dow's as unique members who have started a session or opened a content email. Some people would give them credit for opening an email. why not? Other people would say it's a little sketchy to count those emails because they're not really logging into the service. Maybe they're just casually looking at it. But it counts as an impression. I would need to see that a percentage of people they're counting as daily active users or weekly

active users and what percentage of them were opening the email. In other words, if it was 50% of their active users are engaged by email, that's a little sketchy to make that the number. So that's a red flag there. So, you know, if you're reading an email newsletter, I get it. That's the totality of the product, but if I get an email from Twitter like, hey, here's what you missed, or I get an email from Etsy, you know, hey, here are some things, you know, that you might be interested in, but I don't visit the site. Does that really count as using the site? You know, if you're saying user, you mean using, it's kind of like me seeing in a way, like a banner ad or a billboard for Google. That wasn't actually me using Google. I'd like them to see them be a little more upfront

about that. How does this compare to other social companies? Well, Snapchat defines their daily active users as a registered Snapchat user who opens the app at least once during a 24-hour period. So that's pretty clean, right? Twitter is the most upfront. They only count monetizable DAWS. Twitter users who logged in or were otherwise authenticated and accessed Twitter on a given day through Twitter.com or Twitter applications that are able to show ads. So there, Twitter is trying to be super intellectually honest. Snapchat feels pretty honest. And then Facebook, their DAOs are a registered Facebook user who logged in and visited Facebook

through our website or a mobile device or took an action to share content or activity with his or her Facebook. You just say there, Facebook, friends, or connections via third party website. That is integrated with Facebook on a given day. In other words, if I was on LinkedIn and I shared a post to Facebook, that's a behavior that I didn't go to Facebook, but I did take the action of posting and creating content on Facebook. That seems fair to me, actually. And next door, obviously, super generous with themselves with the Dow, Wow, and Mao counts.

Daily active user, weekly active user, monthly active user, if you've never heard of those. So after two years, greater than 50% of the audience remains engaged is their product market fit slide in their investor deck. And I buy that. I think that's pretty good. If people sign up that they're coming back two years later, it makes totally. total sense. And according to the investor deck, Nextdoor's daily active users and average revenue per daily active user are both much lower than Snapchat and Twitters. I think Nextdoor has had a

hard time figuring out how to monetize the platform because they're up against Facebook and Google and other large ad networks. However, the company pitches this as a positive calling it significant monetization potential. In other words, our revenue per user is low. We have room to grow. Snapchat, $18 annual revenue per user. Twitter is at $59 per annual revenue per daily active user. Nextor has 12 million daily active users, and they count $10 in annual revenue per Dow. This could be because they're just not good at selling ads and they haven't built an ad platform. Twitter, you know, notoriously it was bad at ads and they really didn't have a great product.

So it takes time. But a verified daily audience with significant monetization potential is how they frame this in their slide. And sure, I buy it to a certain extent. Tech crunches, Alex Wilhelm, a friend of the pod, summarized their pitch to investors. As such, the company is saying that its service is unique and that its users are sticky, that its product gets better with more usage, that it has several ways to make money from each user, that some of these methods are obvious and could be easy to attack. And that it has not reached its full potential in revenue from international markets.

So it generates 50 million business recommendations from neighbors. It's nice. I'm sure Yelp does much more. And Nextor monetizes by selling advertising for small businesses who promote their services and products in users feed. Local businesses are notoriously hard. There's like so many of them. They spend small dollar amounts.

So this is, I think, Nextdoor's challenge, what they're best at, getting you local advertisers. Local advertising is a tough business. It's a grinded out business. you know, even from the days of the yellow pages to now, it's much better to be able to get, you know, Nike or Ford to buy some huge campaign across all of YouTube or Facebook, right? And I think Nextdoor probably has a harder time with that.

They also have a Craigslist competitor where you can buy and sell and give stuff away on Nextdoor. Nextdoor CEO, Sarah Fryer told the New York Times why they decided to do a SPAC, she said it made the most sense for Nextdoor because it allowed them to be more closely involved. in counsel by a smaller, more targeted group of investors. I'm not sure exactly what that means. I can kind of infer maybe it's just faster and easier. And it gave them a better sense of certainty about how much money they would raise rather than the riskiness that could come with the traditional IPO process.

So you hear that often. Good luck to next door. It's a great product. And I think they do have a lot of upside potential. How much time and money do you spend integrating a bunch of different software products together? Let me guess way too much. Well, O'Doo is here to help. Odo is a suite of business apps that runs your entire company on one platform.

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O-D-O-O-O-com slash twist. All right, next up, Speaker Nancy Pelosi seems to be yoloing call options, and so is her husband. So should politicians be able to trade options unusual wells, which is some sort of subscription service that sells insights into strange stock market activity, including reporting large option trades across stocks and crypto reported that Nancy Pelosi bought millions of dollars worth of call options on Apple and Amazon in late May. So in their tweet, they say on 521, Nancy Pelosi played Amazon. and Apple call options. She bought 50 calls of strikes 3,000 plus 100, respectively. The worst things,

and this is quoting unusual, the worst things about these transactions is that they were done in May and June, but disclosed in July. Incredible when elected officials are using highly leveraged options on maybe private information. And now the Pentagon cancels their Jedi contract, which benefits Amazon directly. Someone always knows. So they unusual wells described the current stock situation in Congress. Numerous House members also trade options. This means they're using leverage positions on leveraged information. In other words, they might know something during their J job and, you know, buying options is obviously using this kind of leverage to get a better return.

Zero hedge also covered Pelosi and her husband. Paul Pelosi, who runs a real estate investment firm in San Francisco called Financial Leasing Services. They gave some examples of what they consider sketchy trades. Pelosi bought Amazon calls on May 21st when it closed at 3,259. Fast forward six weeks, and great news for Amazon after the Pentagon pulled the rug out from Microsoft's $10 billion Jedi Cloud computing deal, opening the door for Bezos, and the trade is looking great.

Today, Amazon is trading at $3,6.96, and those calls are ITM in the money. So Paul Pelosi in March exercised $1.95 million worth of Microsoft call options less than two weeks before the techs all worth secured a $22 billion contract to supply the U.S. combat troops with augmented reality headsets. In January, he purchased up to a million of Tesla calls before the Biden administration delivered its plans to provide incentives to promote the shift away from traditional automobiles and toward electric vehicles. So politicians are clearly using some intelligence that may or may not be available to the public. Obviously, you get pretty smart. You have inside information. You may have quasi-public information, you know,

maybe lightly traded in information, which wouldn't make it exclusively insider. And we remember back in February 2020, you might remember this headline, just as COVID was starting to spread outside of China, North Carolina Senator Richard Burr sold six figures wrote the stock. This was just days after he co-wrote an opinion piece on Fox touting how well prepared the US was for COVID on February 7th. So there's a lot of the shenanigans going on. And, you know, this is why maybe a lot of people in crypto like Binance or BitFept.

and they like the sort of wild west of crypto because maybe they think that the markets here in the United States that are supposedly regulated are really rigged. So Congress gets to write laws and they get to trade options. Should this be allowed? Obviously, business journalists are not allowed to trade stocks. Some of them choose not to trade stocks only to have index funds, ETFs. And that mitigates a lot of this, right? If you just own the index, you're fine. I don't actively buy and sell stocks. As a general rule, I basically have a lot of my companies go public or sometimes venture funds I'm in will distribute to me stock, i.e., I got Facebook stock at some point and then wind up selling it because a fund I was in had a company that was bought by Facebook

and we got cash and Facebook stock. So instead of them selling the stock, a venture fund will just distribute that stock to their LPs. You know, the question really here is, what should we do about this? on one side of the argument, should people who are in politics not be able to play the stock market and be limited in how they make money, that seems unfair to some people. And then obviously the appearance of this, even if they weren't trading on inside information, even if they were just really well educated about these companies and got to see the future because of their day jobs a little bit more clearly, because they're in the thick of it and they're around smart people who are advising them, there should be some way to balance these two options, people not being

able to participate in equities and people being able to just go crazy buying options and put calls and shorting stocks, etc. Between those two very unfair extremes, unfair to not be able to trade stocks, unfair to be able to short stuff and buy put and calls and do crazy stuff, how about something simple, like maybe once a year they can set their trades. Those trades are public, they're reviewed, and we all get to see them. So if they did own Amazon and they did want to liquidate it, maybe once a year, there's a 30-day period in which they are allowed to set in their trades to either occur on that day or, you know, in five trades over the next 12 months or in four trades over the next 12 months. In other words, automated trading. That would make it a lot

easier. You could do it twice a year, something that doesn't make it look so unfortunate the timing. You ever read a news story in a magazine or a newspaper and they're talking really complimentary about, oh, this Peloton is amazing? And then you see an ad on the next page for Peloton. What does your mind immediately do? Your mind immediately says, oh, they got paid for that. It might be that Peloton is doing so well that they can afford ads. And if they're doing so well that they can afford ads, they obviously have product market fit with their product. And that might get rewarded because people can't shut up about the product and it gets covered in the news because they're doing so well. In other words, great companies are going to advertise, therefore, are they paying things off? No.

But when you see the stories next to each other, it does create that problem. Apple is known for buying a lot of ads. Obviously, the Wall Street Journal in New York Times are going to cover Apple. It's one of the five most important companies in the world. So does this mean one is cause or correlation? And when things are happening too close together in proximity or time, the mind immediately goes to causation, not correlation. When things are just occurring in the abstract, oh, they bought 100 ads in the New York Times and they were covered 300 times during the year. Okay, yeah, they're correlated.

This is a place where successful people advertise and this is a successful company that's worthy of being covered. your mind can kind of separate them. And so that's what's happening here. It's very hard for our minds to be able to separate these two things. But congratulations to Nancy Pelosi on her new billion dollar hedge fund. Pretty hilarious. That was a tweet from exec sum.

Nancy Pelosi is launching a $1 billion hedge fund aiming to make concentrated bets on large-cap tech stocks. She cites her proprietary research method of having inside information as a key differentiator to a competitor. I mean, it's dark, but it is true that a lot of folks who you know, are in politics came from the hedge fund world or go back to the venture hedge fund world or Wall Street for a reason. You learn a lot about how the world works and allows you to make really informed bets. So, uh, okay, let's get to the interview and we'll see you all on the other side. Bye. Are you launching a new product, developing a new prototype? Maybe you're rolling out a new

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slash twist and get the fast human decisions you need to make more informed business decisions at scale. All right. Next up on the program, Alex Lieberman is with us. You know him because he's the co-founder of the Morning Brew, which is an email newsletter for millennials who were into the stock market long before stonks, long before the AMC short squeeze, long before Robin Hood. Alex had started a newsletter for people on Wall Street who were young. It got to two or three million subscribers and then got bought by my pal Henry Blodgett for, I think, 75 million bucks. And now it is continuing to crush it over at Axel Springer, which is Insider's Paring Company, a German media conglomerate. Welcome to the program, Austin.

Alex. It's all good. You put Austin's, I know Austin's your co-founder, but they put Austin. The first note they put in was like Austin's tweet. It's all good. We're basically the same person. Thanks for having me. I appreciate it. Thanks for coming on the pot. So Austin and you co-founded this, what, 2015? Yeah, 2015. I was a senior at Michigan. He was a sophomore and started it while we were students.

Ah, so you actually did something in the world without anybody asking you to do it and it became worth $75 million. We did. And I will say that I think starting in college was a huge advantage because we, for those few years, didn't have to worry as much about, paying New York City rent and the cost of living in the city. All we had were just like, you know, the cost of college, which luckily for us our parents were paying for. And so it was actually a great time to start a business in those last few years of school. Well, I mean, if you don't have to worry about your burn rate as much, right? And you have low overhead, low overhead. That is kind of the secret to any media business is low overhead and email newsletters or perhaps the lowest because you don't need to build any technology, correct? You just

go out in the beginning. hundred dollars a month for the first year of running our business. It was MailChimp. That was it. Yeah. I mean, it's pretty amazing when you think about that. And then you did something really interesting. You didn't go after everybody. You went after a specific audience. Maybe you could talk about your how you thought about your ideal customer profile, as we say, in the investing business. Or did you not even think about that? It was not premeditated. You just wrote what you wanted to read. Yeah. I mean, I would say it was half premeditated. We didn't talk about it in terms of customer profiles. We were more just like, okay, so I was in my senior year at Michigan. I had my job to work at

Morgan Stanley in mortgage trading. Everyone's dream job after school. And so I was trying to, you know, just basically pass the time keeping my brain sharp and it started helping kids prep for job interviews. They were re-recruiting senior year. And I always asked them, what do you read to stay up to date with the business world? And basically, every answer was like, I read the Wall Street Journal and I read it because I feel like I have to because my parents told me to, etc. And so at some point, I was like, this is crazy. These kids are working their asses off to have careers in business, but they don't enjoy the shit that they're reading. So I started writing a daily business newsletter. It wasn't even called Morning Brew at the time. It was called Market Corner. There was a bar and

fighting as the logo. I ripped it off at Google. It was a PDF that I would send out every day as as an attachment. You put it as a PDF and it automatically could notes to people that this is of higher value because somebody laid it out with a document management software. Labor of Love from Alex Laborman. Yeah. There was no website. So if you wanted to read this PDF every day, you had to ask me, I had to add your email address to a school list service. It was Market Corner at Umish.edu. And like, that's how it started. That's why ultimately I brought on Austin as my co-founder, because this thing was growing where it shouldn't have been growing. It was a shitty product. It was like the heart of it.

thing to sign up for. The friction was ridiculous, yet it was growing. And so that was what ultimately told us in the beginning that clearly there's appetite for better business content that is targeted to a younger business person who grew up with the Wall Street Journal, but they only grew up with it because that's what they had, not necessarily what they wanted. So it starts growing pretty quickly. When did you know you actually had a business on your hand as opposed to a project? What did it make? Because a lot of times, you know, people start something as a project. You and I became friendly. I think on Twitter because I had a similar career path, which was I started Silicon and our Twitter as the 16 page photocopy newsletter.

And there was just a moment at which somebody said, I want to buy four ads. Here's $1,000. And I was like, wait a second. And we charged $100 for 10 issues a year. And there was just one morning I came in and there were 15 postcards because people talking about friction had to send in a postcard. And there were 15 postcards where people subscribing. I don't even know what postcard is.

Yeah, it's basically, yeah. It's like, you've seen the people in the postal trucks. I'm messing with you. I know it is. I just haven't touched one in a decade. Yeah. But no, so you actually, I would say, had more clear demand from a business perspective earlier than we did. For us, it was like, I graduated from Michigan, didn't have enough clarity that it would be a business yet. So I went and worked at Morgan Stanley. I was at Morgan Stanley for like a year and a half. Austin was a senior in college. Ultimately, he had to make the decision. Am I going to go into banking? Or am I not going to? It was a clear fork in the road. And so I remember, Austin. and I meeting up for beers at Pete's Tavern in New York City in August of 2016. And we basically, like, we need to make a decision. And we made the decision for me to quit my job, for him to reject his offer, to work in banking, and for us to do this thing. And at the time, we had 35,000 subscribers. We weren't monetizing yet. To it, 35,000 subscribers weren't monetizing,

but we were like, we have enough confidence from looking at other newsletters, whatever, that we think we can convince advertisers. And there's really good engagement. We were looking at our open rates, all these things. And so we first monetized the newsletter in early 2017. Our first ad, we sold for 800 bucks. It was a package. We sold three newsletters for $2,400 total. I would say, we really knew that it would be a business. I would call it late 2017 after we had raised a small family and friends round, after there was clear appetite for advertisers to advertise in front of our audience. And we had a pretty good formula for how we were going to grow this thing. And we kind of understood that if we grow this thing by a certain percent, advertising revenue

will grow by a certain percent as well because we're just going to increase prices as fast as our audience grows. So that was a flywheel. Essentially, you knew if I had a hundred thousand subscribers, I can charge $800 an ad each day. If I get to $200, I can just move it to $1,600. Yeah, that was literally the formula for like from September 2016 to I would say 2019, because 2019 is when we started introducing any other products. It was literally just content, audience, monetization. And every hire we made, every decision we made was about one of those three steps. And so like the real, I would say inflection point in the business was 2018 to 2019 when we went from 100,000 readers to a million readers. And that was the year we started doing paid

acquisition and basically the combination of doing paid acquisition and our referral program working really well. Explain to people what paid acquisition is and then we'll go into the referral programs. Both of those things you did particularly well. I mean, having a great newsletter, that's hard, but it's not impossible. But then you really got focused on those two things, I think. Tell people how paid acquisition works and how much it cost you initially and then eventually what you realized a subscriber was worth.

Totally. So I would say, so paid acquisition or paid marketing very simply is paying for advertising on a given advertising channel to convince people to come and subscribe to our newsletter. That was it simply put. And we did paid marketing on everything from the most scalable channels. So like Facebook, Instagram, Snapchat, etc, where you could literally, you know, ramp up the amount you are paying to advertise from $10 a day to $10,000 a day. And you could do that with ease. all the way to us doing paid marketing on other email newsletters, where we would reach out to individual newsletters, like Insides' newsletters or CB Insights's newsletters. Yeah, at some point are you advertised it inside to? Yeah, I'm sure we did.

And in the beginning, I would say we were actually very dumb about paid marketing, where we were basically just like, let's put $35,000 hypothetically a month into paid marketing. Let's see how many subscribers we get. Let's calculate how much it costs to get those subscribers. If it seems good, we'll keep doing it. That was the calculus in the beginning. As we got smarter about it, what we really focused on was how do we acquire high-quality subscribers as cheaply as possible? And so our proxy for high-quality

subscribers was someone who opens at least five of their first 10 newsletters. That was where we saw basically you could measure a subscriber in the short term, but it was very highly correlated with them staying very engaged in the long term. And what we basically said is, let's optimize where we are focusing on the channels that gets those really high-quality people as cheaply as possible. And one of the things we found was even though social media platforms like Facebook or Snapchat were very scalable and we could spend a lot of money on them, we weren't actually initially getting our highest quality subscribers on them. You get drive-by subscribers or something?

Yeah, yeah. We would get drive-by subscribers. We would get subscribers that were very cheap, like, you know, $1.50 or $2 a subscriber, but super disengaged, which would do nothing for us in the long term because they would just unsubscribe within a week or two weeks. Where we actually were getting the highest quality subscribers for a while was email newsletters. When we were advertising other email newsletters, that was always the highest quality subscriber. And it makes sense intuitively when you think about it. You don't have to convince someone to read an email newsletter if they're already doing it.

So you just have to convince them that this is somewhat different from the email you're already reading, but it's valuable for you to read. Yes. You do not need to convince an email newsletter reader that email newsletters are cool and a cool thing to confirm. They already drink coffee. So now you're selling them a different type of coffee, a different, you know, different brew or something like that, so to speak. Hey, everybody, I thought I would bring Christina Casioopo. I pronounced it correct. I'm hoping, Christina.

You got it. Yep. All right. You're the founder of Vanta. People have been hearing your ads on the pod for the last year. And I thought it would be fun to have you on. and you to explain why you created Vanta and what SOC2 is and why it's important people get it right. So let's start with what is SOC2 for people who are just realizing they have to become SOC2 compliant?

For sure. So SOC2 is at a high level. It's sort of a customer asking you to prove your security. So if you've heard about one, it probably comes, you're probably a B2 company and you're doing sales. And somebody asks you, hey, can I have your SOC2 report? Or, you know, hey, can you go through security review? or they usually don't phrase it like this, but hey, I'm going to put a bunch of data in your product, and I want to know if you're actually going to be secure or leak it over the internet.

So they ask you to get a SOC2 report. And these SOC2 reports are basically a third party saying, hey, you can trust this company with your data. It's like a standard, correct? Exactly. Yeah. So a third party auditor comes in, make sure you're in good shape and writes that report. All right. Thanks again, Christina, for explaining to us why this is so important for SaaS companies,

especially when you start getting into that sales process. and you've been very generous. You're making a nice offer. If people go to vanta.com slash twist, where are they going to get, Christina? They're going to get $1,000 off their Vanta subscription, and we're a big fan of twist listeners. Oh, thanks.

I know you had a great response from our listenership, and they always tell you they found you here. So thanks to our Twist Army, and we'll see you all next time. Bye-bye. The low-quality subscribers cost you $2, then you decided, hey, I'm going to pay what amount for these elite subscribers, let's call them.

You know, I would say it was roughly, let's call it on average, you know, six to eight bucks for subscribers. And we knew at the time, like, again, in the beginning, we weren't super sophisticated to know the exact lifetime value of our subscriber. And, you know, in the world of email newsletters, the way you look at lifetime value is basically what is the average amount of time that a subscriber is subscribe to your newsletter? And over that time, what is the per subscriber revenue that you get for? from an advertiser, which allows you to attribute how much revenue that specific subscriber you can attribute to them, the value that they give to you. And we didn't know it exactly, but we knew that it was higher than $6 or $8, which in the beginning was enough evidence for us to say we will keep paying for subscribers, given that there's some spread here. As time went on, we started focusing more on like, okay, well, how long is it going to actually take for subscribers to pay us back what we actually paid to acquire them as email subscribers? Exactly. And you can literally make a calculation there so that it's just a matter of how quickly can you make the money back, how quickly can you acquire people and then. And how much risk too we want to take?

Yeah, because that becomes kind of scary. You know, all the brands I built, I kind of skipped that step I went for, I'm just going to make the product so good. It can't be ignored in Gadget, Autoblog, Silicon and Reporter in the early days. But now it's kind of different in the media space. There's so much competition that if you don't have a paid acquisition strategy and all your competitors do, well, then you're just going to fall behind. I mean, It's an arms race. A hundred percent. And that was the thing is like, I think in the early days, we kind of had this a similar type of thought process, how you had it, which was like, we were just like, we think we have the best daily business read for millennials bar none. We think that will end up carrying the most weight. But over time, we were like, we don't have infinite money.

We don't have a bank that just keeps refilling itself. We have to be smarter about this, especially as a non-venture-backed business. So that was something that we ended up thinking a lot about. And the referral program was a huge catalyst to us be able to spend. on paid marketing. So just to give context, the referral program is literally as simple as Jason signs up for Morning Brew. Jason gets a unique link. Jason shares that unique link with his family members or his friends. If they sign up for Morning Brew through that link, Jason can earn rewards. And as much as like I, Alex Lieberman, would have never been the person to share an email newsletter

to earn a sweatshirt. It is wild how successful it has been for us. You know, on three million subscribers to the brew. Over 300,000 people have gotten at least one referral, so 10% of the audience, which is crazy. Like, you think about what are the rewards we give to people. It's always been mugs, t-shirts, crew necks, the Sunday edition of our newsletter, a Facebook group, super low-cost stuff, but that people who are really passionate about the brand will want because it'll almost be street cred for them if they get it. Well, I mean, it's kind of interesting. You, all of a sudden merch in the last decade became such a big product idea. And it came in some ways, I think, from the comedians and the musicians who couldn't make

money from their albums anymore, said, well, I'll just make it on merch. And then you started to see merch come into startups with stickers. I remember all startups would just hand each other stickers in the, you know, 2000 time period, 2000 to 2007, that Web 2.0 period. Yeah. Because we'd all have laptops, because laptops became like a status. assemble and you know you were no iPads or iPhones yet people just use laptops and you just slap stickers on it it was like a trading kind of merit badge yeah it's like after pro athletes end up

swapping jerseys this was the jersey swap for uh for nerdy people yeah i mean it turns out 80 percent of robin hood's users were acquired either organically or via their referral program yeah that's crazy and it was kind of interesting when i when i when vlad pitched me on robin hood i was like how you're going to acquire customers she's like oh that's easy we're going to give them a free stock. I'm like, you're going to give people money in the form of a stock. He's like, yeah, but, you know, think about it. You know, they're spending $250 to acquire an e-trade customer. I was like, they are. He's like, yeah, they do. I was like, do they do television? He's like, that's all they do. It's television. Everything else has been burnt down. I was like,

did you invest in Robin Hood? Yeah, I invested before it launched, actually. Oh, I didn't realize that. Yeah, it's worked out. Yeah, it's done okay. It's done okay. No, that referral program is amazing, right? Because to me, it's like, one, you're being paid in money, but two, you're being paid in the exact asset. That is the reason you came to the actual product. It's like literally here is, I mean, they're giving you a free casino chip. It's actually, it's exactly like that. You know, when you, I hate to use a gambling analogy, but there used to be buses on Canal Street that you could go to, what's the gambling place, south of New York, Atlantic City. You go to Atlantic City. And they would, if you took the bus, you'd

20 bucks to the bus, but they give you $10 in chips, you know, or a roll of quarters or something, so you could then go play slots. This is way back in the day. I'd be so much more likely to take the bus. It kind of incentivized people. They're like, okay, I'm going to pay 10 bucks to get on the bus, but they need be 10 bucks in chips. Totally. That all of us of that casino's got somebody in the door and they can make money on from there. And it's also, it's such a good thing, not only just like to incentivize you to share, but it's also such a great retention tool, right? Because then you have your stock in your app that you're now incentivized to check every time the market's making a move. Exactly. Yeah, it's incredible. So at some point, you

realize, you decide you're going to sell or you never raised venture capital for the business? You just did a friends and family? We raised friends and family. We raised 750K on a convertible note. You know, at the time, Austin and I knew nothing about VC. Like, we were finance guys, but like we were finance guys who were more into like banking and sales and trading in Wall Street, not VC. And so we had, you know, in talking to the few entrepreneurs we knew, we just heard these horror stories around VC. And so like without at the time as college students doing our diligence, we were just like, oh, no, like, we want to control our destiny. This is exactly why we were starting the brew. And we didn't really do the homework to really understand the nuance of VC.

So we raised 750K from family and friends. And actually, you know, I call family and friends. It's more of like, you know, friendly, rich people in our circles. And that was, we ended up, I would say, if hindsight's 2020, if we had raised the appropriate money, we probably would have raised like 300 before the business actually started kicking out money and be able to reinvest. But that's all, that's all we ever raised. And then. I mean, that can be, you know, in a way, I tell people, the amount of time it takes to raise money can be so long that if you do get more interest than what you were originally planning, if you get 750 instead of 400, you have to ask yourself, can I deploy that money? money intelligently. And so if I take a little bit of a hit on my ownership percentage, if it allows me to keep my head down and not have to go raise again and have that distraction, and it gives me insurance and downside protection, I would think that through if you're a good steward of capital. Some people are just not good with money in their pocket.

I had a friend, we go cash our checks in lower Manhattan, like every two weeks after work, and like that money would be flowing out of his pocket. And I was like, I'm going to deposit my check in my bank account. Everybody else in the IT business, who used to fix printers down on Lower Broadway, would go to the check cashing place, give them 30 bucks

for cashing their check and get back. Literal cash in their hand. This is before a direct deposit. Isn't that hilarious? I lived at a time before direct deposit existed. I remember them saying,

like, do you have a bank account? I was like, no. They're like, you should get one because then you're going to do direct deposit. And what they did was, if you got direct deposit, you got your check, you got money in your account

on Thursday. Yeah. And then the people who, you know, didn't got their checks, somebody would literally walk around the office at 3 or 4 p.m. on Fridays and hand people their checks. And they would just race out to the check cashing pace. And then it's wild. And at the time, I'm sure everyone just looked, was like, this is normal.

There's, you know, there's nothing else where we can, we can compare the student to, we look back and we're like, how did human beings do that and interact in the way? It's wild. It's wild. It's wild. And you're like, wow. I mean, literally when I did my first email, newsletter was Silicon Allie Daily in 1996 or seven because I was competing against at New York,

which was a weekly email newsletter. Yeah. Then I had the print magazine, Silicon Air Reporter, and then somebody else had like another monthly email, a monthly like newsletter and I turned into a magazine. And I, but the other person, Allie Cat, I think it was, had events. And then at New York had the email newsletter. I had the print magazine. And I just had this moment of clarity.

I was like, those people look down on me because they really looked down on me because I wasn't a journalist and they were like 10 years old to me as journalist. I was like, screw those guys. Explain to me their business. Like in this person's business, they get paid a thousand dollars. Everybody comes to their events. I was like, great, we're going to have an events business. So what's this other business? It's weekly. I said, great, we're doing Silicon Ali Daly. And that's when I had Rafad Ali, Will Leach, a bunch of like really cool riders, Shenney Jardin. And we just did Silicon Valley but at the time there was no mailchimp. So Brian Alvey set up QML servers for me.

So we had a rack of servers in our offices on 37th Street, and we would get the newsletter all put together, and then somebody would go over to the rack of servers. They'd have the computer. Brian Alvi would be sitting there. Okay, give me the file. He'd stitch it together. He'd run a script, and it would go out, but it would take five hours for it to go out. And I said, what if we had like five servers? He's like, well, take one hour. I was like, how does that work?

He said, well, I'll break the mailing list up into five chunks. Oh, my God. And then every time we get a new subscriber, I'll add them to either one through five mailing lists. We'll have the five servers, and we'd all just sit there and watch the servers cranking because they had lights on them. And we had a T1, which was $5,000 a month, which nobody had in 97. That's how we did the first newsletters. If people ever wonder why AWS is valuable that this is Exhibit A. What inbox or ESP did people use?

Like Gmail wasn't a thing at the time, right? Yeah, people used, there were all kinds of mail clients, like QMAL and, well, the QMEL is a server. God, what were the original email client name? Was Outlook a thing or not yet? No, no, no, no, no. I forgot the name of it. Oh, God. Oh, Udora.

Udora. Udora was the popular, like, cool kids use Udora email client. And the way it worked was you would fire up your email browser, your email client, and you would hit the refresh key. Then it would go hit the server and take your email off the server and then onto your local device. And it would be gone forever.

There was no cloud at the time. Yeah. And if you didn't download your, if you didn't hit that button, download my email, enough, you would run out of email storage space really quick. So that became like the bane of everybody's existence because somebody would do a spam campaign. It would fill up everybody's email servers. Everybody's email will go down.

Everybody's email would be bouncing. There's no more room on the server, which would then exacerbate the situation. Right. So there were always these like outages occurring because somebody would spam the network. It was really bonkers. It sounds like this that I wish I had like a time capsule that I could just go back to that day and just see what living life would be like with just like the way you had to do it. Well, what became really cool was I had this email list and the, you know, then I realized how

valuable it was that this is like was my big click because the at New York guys were real journalists who taught and went to Columbia, you know, and I was just a hack, but I was like, daily is better than weekly because what they started doing was these FNPR people. I would put somebody on the cover of the magazine. It would leak who was going to be on the cover of the magazine. The at New York guys would then interview them and put them. put them in an email interview two weeks before. Yeah.

The thing came out. And then I was like, okay, now I'm not going to tell people who's going to be on the cover of the magazine. We're doing three photo shoots for everything. And I told people, whoever, if you leak that you're going to be on the cover and you do any press between now and then, you're definitely not getting the cover. And the cover will be determined by whoever does the best photo shoot. And then that's how we got all these incredible photos shoots as we love it.

It was like a pretty cool thing. But then I was like, let's do daily. And we will just crush them because by the time they do their night. newsletter, everybody will know every news story. Yeah, you'll just be, you'll, you'll front run them. I front ran them so hard. And then I like, I was so competitive back then that I just started doing events and demolish the other person who's doing the events by just lowering the cost of the events. I was like $200 a ticket. It's funny. Obviously, it's like, you know, a decade or two difference in time. But I would say like, the stories of our news newsletters are actually quite similar,

even in just like, Austin and I not being editorial people at all. We were just business people. hated you for that. Yeah, yeah. We were just writing the newsletter. And then, you know, our managing editor today, who, it doesn't matter what content company I'm at, like, I would always want him by my side. He's incredible. He has no traditional journalistic experience. He wrote for his school newspaper, and that's it. It's almost better in a way, don't you think, like, that they don't have the pre. Yeah, I mean, I think, okay, look, I, I absolutely believe there's a lot, there's absolute value in being journalistically trained and knowing how to report well. But, at, so much of our business, especially with our daily newsletters in the world of curation, curation and remixing. And if you're in the business of curation and remixing, I would say, like, the ability to have great taste to be able to write both in an informed but entertaining manner. Like, those are not things you're taught in capital J, J school. And so we didn't need that for our daily newsletter necessarily. And you were aggregating more than doing original content at the start, right? Yeah. I mean, it was basically,

we were saying, okay, what are the four or five stories that are the most important? We'd read six versions of the story and then we'd write up our version in 150 to 300 words. And then nowadays you're doing more original reporting. You have 100 people now, right? On the team? Yeah, we're at 110 now. And the way we think about the business is basically it's broken up into B2C and B2B. And the B2B business has our industry or function specific newsletters, right? So we have marketing brew, retail brew, emerging tech brew, and we are going to be launching a fourth later this year. And those are very much so, like, more focused on reporting. Because the whole idea is, like, if you want to help people make more informed decisions

in their jobs, you probably need to actually go deeper into telling them like why shit matters and how they can think about it. Whereas on the B to C side with the daily newsletter, it really is a cover your ass policy. You read the daily newsletter so that when you go talk with your friends, you're not caught guard and look like an idiot. And so it just serves two very different purposes. Yeah, going deeper and giving analysis different, different type of words, you find that these new generation of journalists don't want to report on stuff and more want to do advocacy journalism now that they see that so much of the, even the traditional publications, whether it's CNN or traditional news outlets,

New York Times going sort of anti-Trump, Wall Street Journal digging their heels in a little more conservative. It feels like everybody kind of became more advocacy based. Did you see that in hiring writers where they wanted to take on a certain position as opposed to writing just what happened? Yeah, I mean, a little bit. I would also say we've always been very intentional about saying upfront, like, the brew is not going to take positions. That is not the game that we're going to play. We are all about taking informed views and doing analysis, but if you're going to do that, you need to back it up with fact. And you also, generally it will be better to share the counterpoint of why this may not make sense as well.

But I will say absolutely in a positive way as a younger media organization, as big things are happening in the world, we get, I would say, what is productive push from the team to talk about things that maybe aren't inherently business related, but it doesn't, it kind of doesn't matter. You need to know about it regardless, just as a human being, not a business person. Yes, being aware of Black Lives Matter or what's happening in, you know, a conflict in the Middle East. Yeah, exactly. Like that was the recent one of like, you know, with the conflict in the Middle East, does that impact domestic business or like your job today? Probably not directly.

But if you don't know about it, you're an idiot. Yeah, you want to be informed. But did you have people on the staff who were like, oh my God, you know, Israel's right. Israel's wrong. I mean, it seems like people were really demanded. I mean, if you don't know if you saw, they were demanding that Tim Cook, Apple employees were demanding Tim Cook take a pro-Palestinian. I think they were trying to take a pro-Palestinian human rights position where the, you know, there's an equal framing of, yeah, but there's another city having bombs and suicide bombers. And if that was New York, when it was New York, I should say, sadly, we level two countries.

Like, what exactly is going on here? Yeah. So we, yeah, we weren't, we weren't pushed to take a side like that. by your team members. Correct. And I don't know if that's a function of our culture, the function that were a 110 person company and not a multi-thousand-person company, but we didn't, we didn't deal with that. What are your thoughts on all this stuff that happened with Coinbase, 37 signals, and, hey,

we don't want people in Slack rooms talking about these edgy issues, yada, yada. I think it's the type of thing where my personal belief is that people should be able to talk about whatever they want to talk about, as long as it's done with. respect. Like that, that's kind of my point of view is as long as you respect people, you can share your perspective. The second you don't respect other people's opinion and become a good listener, the second, that's where like you run into territory. But you're okay with people at work, during work time, popping onto a random Slack channel and discussing, I don't know, the Israeli Palestinian conflict or BLM or race issues, whatever. My view is it's going to happen anyway.

Like, my view is like human beings or human beings, their thoughts are going to pop into their head, they're going to look for someone to talk to about it. If they're not doing it in your Slack channel, they're doing it over text message with a person from work as well. And so, yeah, I think you're just trying to fight an uphill battle in changing how human beings think. Yeah, I always told people like, that's something to do in person. Like, don't do that on Slack because my God, people's feelings and misinterpretation happens so easily over those channels. That is a tough thing. Like, to me, this is such a hard thing. We were, you know, we were joking before about how like we don't see people in person anymore and we're all remote working. But like,

to me, that's actually a really tough thing about when people just communicate through Slack, like there's this whole new language that you need to have understood between people. Like, I was joking about it the other day, but it's like boomers are known for saying the word like, okay, okay, period. Millennials, if they're just like, you know, a happy person or a normal person is like KK. And so then you're caught off guard when someone your age says, okay, like are they pissed at me? or do they just type like a boomer? And that's like the most nascent, like the most unassuming example. But I actually think like tone is the hardest thing in text.

And there's so much misunderstanding that happens when you're in an all slack environment. I basically have to, because half of what I say on Twitter is a joke, I literally have to do the rolling on the floor emoji. Oh, yeah. Just that's my preemptive because so many people read my tweet and they're just like, they take this serious approach to it. And then I just use the Superman, the joke. Yeah, I'm like, here's the Superman the joke GIF where the word the joke flies all around him and he's looking around like, whoa, what's going on here?

But I mean, it's very different for you because you're a news organization. People are used to talking about tough conversations as opposed to a bunch of crypto folks in a chat room who might have very weird views of the world. Or I should say unique views of the world. Crypto people tend to look at the world slightly differently than normal people. What do you think of the whole crypto thing? You think this is all a giant multi-level scam? Were you afraid to say what you think because you're going to get a thousand people replying to you on Twitter?

I'm not afraid to say. I think the reason I'm fascinated by like reading it and studying it right now is I've had enough part smart people say that this feels very much like, you know, the early 2000s or late 90s all over again. Oh my God. It does. And so to me it's like if I'm going to be an intellectually honest person, I'm going to study it to see what it feels like.

Um, you know, have I bought Bitcoin? Yes. Have I bought Bitcoin that shows a shit ton of conviction? No, or I wouldn't have bought more of it. But to me also, I, you hate bought it. You hate bought it. I'm somewhere between, I'm somewhere between hate buying it and conviction buying it. No, I, like, I, I think there's a 50, 50 chance that Bitcoin is going to be, uh, you know, digital gold. I don't right now think it's going to be, um, a medium eviction. change. That said, though, if I think there's a 50-50 chance, one would argue that I should put 50% of my net worth in it. I'm not hurting 50% of my net worth in it. And, you know, right now I'm going down the Ethereum rabbit hole. It's very tough because there's just a shit ton of noise right now.

And so what I'm just trying to understand is like, how do I think about what is actually going to be valuable 10 years from now and what is just noise? Because there's very smart people talking about what is both noise and signal, stuff that is going to be very valuable and stuff that isn't and I'm basically trying to form my own view of who are the smart people that are wrong and who are the smart people that are right. You know, it is exactly like the 2000 time period or the five years before 2000 in the web 1.0 days. You had this very promising technology that was very nascent and confusing and hard to use,

as I was saying, like to send an email newsletter. You had to rack servers, et cetera. And then what happened was it had so much promise. And the early hackers and people, you know, putting the servers in and getting a T1 line and figuring how to set up their IP routers and everything in their offices and their mail servers, that group of people then started to build stuff. And then all these charlatans and people who wanted to get rich quick came in and were like, yeah, let's put some lipstick on it. Let's take it public. You know, how big can it get? Okay, a billion people are going to use it. And then obviously

it all crashed. And then the rebuild started. And man, that's how Google and, you know, Facebook and everything grew straight through those moments. And so it depended it, I think, if you have a really long-term view and you held on to 100 stocks that went public, I mean, if you had Amazon in that group or Google, you would have been fine. But it feels a lot like that where like, is there a Google or an Amazon and all of this? Because so much of this feels so scammie. And also, it's weird in the sense that like, if you wanted to bet on the internet at the time, how could you have bet on the internet? You'd bet on a bunch of, I'd assume just like a bunch of individual companies. Whereas people will make the argument today, if you want to

bet on the next internet, you're betting on Ethereum. But this concept of buying a cryptocurrency that is both a bet on a currency and a bet on the internet, that is not a bet that at least I can see like a historical data point, you would have been able to do in a similar manner. No, there was no way to bet on, you know, the Apache server or like a web browser. I mean, I guess it's arguably, you could buy Nets. It's at the time, but that got crushed because it became free. So there wasn't like an economy built into the infrastructure. structure like there is with crypto. Yeah.

So I think it's really interesting. I think there are, what I will say is there are specific applications that I think are really interesting. Like, I think the application that, you know, Mark Cuban talks about of the resale market and teams being able to capitalize on secondary sales by scalpers makes a lot of sense in my mind.

The ability for musicians to allow fans to participate in the upside of their albums and cut out their, their labels makes a lot of sense in my mind. I would say there's a lot more shit right now that doesn't make sense in my mind than the applications that do. Which is exactly what happened in the internet. People just said, internet plus, and they would just pick two random keywords. Internet plus restaurants.

And you'd be like, okay, internet plus restaurant. What do you mean? They're like, I don't know. Menus online or reservations online or? Yeah. It was all just reasoning by analogy, which is like you take the internet, you take an old thing, you combine the two. and it must be valuable because the old thing is valuable.

Well, it was like every category has to have something worth a billion dollars in. So they were like, okay, CDs plus Internet equals CD now or something. And there was literally a company that went public that was, I think CD Now, that had given $50 million COL to be the official provider of CDs for AOL, like music CDs and the music category. It was really kind of a strange, bizarre time. So now you're getting into Angel investing and investing in companies. Tell me about that. I am.

How's that call for you? You know, we spoke about it. And basically, I feel like a lot of angels go through kind of this come to Jesus moment. But basically what happened was like I started writing a few checks. I wrote, I want to say three or four checks. And at some point, and I had no strategy. I was just like, this is fun. I'm backing cool founders. I'm getting onto cap tables. And then I was like, okay, this is actually not zero dollars now. It's actually enough that it's enough money that I should have some sort of strategy. And so then I step back. I didn't write any checks for call it three or four months. And it was like, There are three possibilities that I could do. They're not mutually exclusive, but I should probably pick some combination. It's like one, write individual checks into companies, the most risk-loving part of angel investing, depending on also how many companies I'm writing checks into. The second is B&LP in funds. Positive as I'm getting diversification of some sort in the asset class. The negative is that I'm not really getting close with founders or getting my hands dirty.

And then the third is like start my own fund, start a rolling fund, start a normal fund, start a normal fund, whatever. I ruled out number three pretty quickly because my view was like, I don't want another job right now. Yeah, I mean, it quickly becomes another job. Now you have two sides of the marketplace talking to you, not just one side, right? Exactly. And I think, you know, there's a point in time in the future where I absolutely could like it, but I didn't, I didn't want to be responsible for other people's money yet. And so then one and two, I was like, it's probably going to be some combination of both of these. But what I said to myself, and it was actually after our conversation, I'd read your book also and I talked to a bunch of people. I was like, if I'm going to start

writing checks, I need to write more checks because three checks a year for the next 10 years is probably the worst approach I could take in terms of, I'm not the world's most risk-loving person, but it would be a strategy that made me think that I have like balls of steel. And so my strategy is over the next year, I'm going to write 15, $10,000 checks. And my whole view is I'm not going to size up with my initial checks more than that because it starts getting to be really significant money. The idea is, like, I'm writing a lot of checks to bet on founders to also refine my way of thinking. Like, every check I'm writing now, I'm writing a memo to myself about, like, all the questions that I'm asking myself for why, you know, why is this going to end up

working out? And my view is it's a call option. It's a call option. So when the founders inevitably raise an A, a B, a C, I get the look. And that's where I could size up because the risk profile of the business generally will look a lot better or lower risk. Yeah, I think it's a great strategy. I mean, if I could go back and do it again, I was the single bullet banded, I would just make one bet in Uber or one bet in Robin Hood. I wouldn't make the subsequent bets. And I would own, you know, basis points on a company. Then I started taking my pro rata and I started to own, you know, I don't know, you know, 2% of superhuman, 5% of calm, whatever it is, you know, smaller but significant chunks. Then I started doing the 10 to 20% ownership.

And it was a process over a decade of being a single, you know, 25 or 50K. you know, of Sequoia scout money to eventually my own fund and then the syndicate. It is a lot of responsibility to have other people's money. But it also makes you sharper. Totally. What you're doing is great because because you're writing the deal memo, you now can look back on what you were thinking when you made the move, right? I had a friend who's a celebrity, I won't say his name, but he had a book with him

and he was always like when I'm playing poker writing things down. And he's a very famous actor, writer, comedian kind of guy. And I was like, what are you writing in that book? He's like, well, you don't have ideas or whatever. I was like, are you writing about your poker hands? And he's like, I'm writing about my decision making for big hands too. Yeah. And I was like, wow, so smart.

It's so smart. And this was a concept in the last year that I picked up through like listening to a few podcasts. It was actually, I think you were on, um, at some point, Shane Parish's podcast. Knowledge Project? Yeah, yeah, exactly. Knowledge Project. He writes Farnham Street. and I was listening to his podcast and he also has an article on decision journaling.

And I started keeping decision journaling on like all different things in life. Angel investing, the new hires we're making at the brew, other just like life decisions that actually have nothing to do with work at all. Nice. And it's, I mean, it sounds kind of ridiculous, but it really is like. Wait, are you writing decisions? Like, should I go on a second date with this person? I'm writing a decision.

I'm writing a decision journal on like why I decided to move to Hoboken and why I decided to rent an apartment versus not buy an apartment right now. I like it. That's great. And to me, it just, it closes, like, it just makes the feedback loop shorter of was I thinking in the right way. And, and yeah, it's interesting with the angel stuff, that what I'm also realizing in kind of the short time I've been doing it is I'm getting a lot of deal flow. I feel like I'm not getting Tier A deal flow yet. Give it time. I'm getting Tier B deal flow. And so it's, it's making it interesting to think about like, should I be holding out till I get tier A flow or should I be writing checks in the tier B's. So that's one thing. Where did you come to with that? I still think that I should

be writing checks in the tier B's because I think I'm not good enough yet to actually distinguish between tier A's and tier B's and several tier Bs could end up actually being really significant companies. So that's one thought. The other thought is I'm noticing more and more companies, obviously want to include operators and other entrepreneurs on their cap table, but it's something I'm spending a lot of time thinking about is like, how can I add value when you have, you know, the Sequoia is the A16s, the Jason Calcanus of the world. What can I do to be different that will You could tweet. You got a good Twitter following. Yeah. Yeah. That's a start. And, you know, all money's green. So like, you know, if you're a founder, you have to do something to, you know,

raise that first 400K. And high profile people like yourself wind up being an unlock and social proof. So, you know, when people told me like, hey, you know, when you invest, it helps me. It helps me. me, you know, get other investors. I was like, really? I was like, those investors were famous and they're really successful. They're like, yeah, but you know, they know that you did these two deals, so therefore you are. But you, when you go back and you think about that decision to move to Hoboken, good Wi-Fi at bars, 15 minutes to Manhattan, new construction. You had your list. Lots of lots of dogs. Lots of dogs. Okay, dogs, strong dog game. Same price of an apartment. You get a three-bedroom instead of a one-bedroom. That was probably the, you know, that was

Right? Versus Manhattan? Oh, yeah. Wow, I didn't realize that. That's incredible. Yeah, three-bedroom place that we're looking at seeing. What was the downside? Oh, you have to say you live in New Jersey.

Got it. You live in. The downside, I live in Jersey. I love the people from Hoboken. Like, where do you live? And they're like, I live in New York area. You're like, Manhattan? You're like, yeah, right by Manhattan.

They're like, oh, so Brooklyn? And you're like, no, no, not Brooklyn. You know, oh, you live in Queens? No, not Queens. You said you live in Manhattan. You live near Manhattan. You live in New York? Not Brooklyn and Queens?

Bronx? It's actually the... Greater New York City area. It's the Italy of the tri-state area. Maybe Italy when they had that garbage strike and nobody picked up garbage for like two months. Oh, my Lord. But no, anyway, like the angel thing's giving me a ton of energy. Like, I would say, obviously the...

It does give you a lot of energy. Why? So one is, like, there's the money side of it, but I would actually say that's the thing that's not giving me the most energy. The thing that's giving me the most energy is the feeling of going through the process of learning a lot about a space that I don't necessarily know a lot about and refining my thinking about it. It also just as like as an entrepreneur, it's making me feel like my most creative self. Like it feels like it is almost giving me a ticket of like momentum, momentum of ideas, momentum of potential new things to test and do within the brew with the

outside of the brew. And so I would say it's like that feeling of momentum, that feeling of having just my most creative self, like that is the most energetic part of this. Ah, it's so awesome. Yeah, you'll do fine. The thing I would say about the tier B deal flow, there'll be two types of deals you'll get. One is they've been on the road forever. They can't close any deal. And therefore, you know, it's kind of people who are not clearing market. So they're going to be coming to you. So the chances of them not being able to clear market and then your check being able to make an impact is probably low, right? Yep.

But then there are things that are just confusing to people, and I would say Uber and Com were very confusing, 19 out of 20, you know, 36 out of 40, something in that range would say no to those two deals. And so it could be that it's just outside of people's thinking. And the way I reconcile that was, is this person absolutely building a great product? and people just don't understand the market and Com and Uber kind of fit into that. People didn't want the risk of Uber operating the real world

and they thought meditation was stupid and you could get it for free. So why would I... You'd be like saying to the Morning Brew like, like, oh, you're getting this email newsletter, but I can get that information on Google News, so why would I do it? And you're like, ah, yeah, you don't get it.

It's not for you. And so that, to me, that's, like, it makes me think of two things. One is, like, in the investor seat, like, having to be able to be able to be, really good at empathizing with the customer even if you're not the customer. I feel like as a skill in itself, because to your point, it's like even if hypothetically you weren't into meditation, but understanding from the perspective of someone who is into meditation, why they would

actually really enjoy this, like that is a skill. So I think, I think that's... Which startup are you like really excited about their product specifically? Like their product just makes you go, wow. So... It's that tingly feeling. Yeah. So I mean, I, I, I, and this is not a company that I invested in, but like, I love, I love Notion. Like, I've used notion a lot over the last year. I mean, too. It's just so simple. And it's, it's so simple, but the fact that it's become so sticky in my life, I think is, is a really cool thing. And then the other one, like, this is, this is a little bit more specific, but I'm circle, which is a startup that actually, I think my co-founder invested in, but we,

used for, Morning Brew launched a paid course, let's call a paid course in the last, like six months. It's called Morning Brew Accelerator. We ran this community on Circle. And Circle is kind of like if Slack had a baby with like YouTube and Reddit in the sense that it was created with community, like cohort communities in mind. And yeah, Circle.com. I know this. I know this. Yeah. It's. Yeah. And it's a former guy from Teachable, I believe. And the experience is just really, really good. Like, if you've ever tried to run a community in Slack, it gets really shitty really quickly. It just feels like it was built for communities, which I think is really cool. I've got to try this.

You know, we've done this experimental this week in startup Slack. And it's so much work to, you know, manage it. It doesn't make any money. And I'm just trying to think of how do I make something that would be worth it for people and like, what will they do in this space and have enough money coming in? from it that people, I can afford to put somebody on it to manage it, right? Yeah, I was going to say, that's always the hardest thing is like even where like the community does make sense, how do you make it, how do you not get it to be dilutive really quickly? And how do you extract money from it? That's been

the hardest thing with communities. Like one of a community business I invested in, oh, you invested in, was soul savvy. Oh yeah, for sure. Great. We incubated it. Yeah. And I think, you know, what they're doing is amazing. And one of the challenges that they've obviously seen that every community sees is like as you grow the audience, how does, how are there not negative network effects where everyone's like, it really felt intimate when we're at 100 people. Now we're at 10,000. This feels really like people who don't actually give it about sneakers. I think they've done really smart stuff around that, but that always is the issue with communities. Yeah, communities can collapse on themselves. And then the person coming in at the end is just like, I'm here to spam the community.

And I'm just like, I created a room called offers in promotion. And it's basically a honeypot. we just tell people, you can promote whatever you want, however you want, and offers in promotion. Just don't, you know, do it from fake accounts and don't ask people to fill out type forms, like just some very basic, you know, information. And then inevitably somebody posted that, then you search for their name in your Slack instance, and you'll see them go to other rooms and then spam those other rooms. Oh, yeah. It's the perpetual solicitors.

Yeah. And so then we're just like, beep, and we just turn off their account. We don't even tell them. And then they email me like, hey, I was in the thing. It's not working. And you're just like, so weird. I thought it was working. No, I don't even respond.

I'm just like, you got a message at the beginning saying there's only one place to post promotions and you post this four places. I told my team, just bounce them. Don't even tell them. Let them just suffer in there. Well, we had a, this was like an actually interesting thing Brian Alvey had built on Engadgett for commenting. We have this like ghosting thing that Peter Rojas and Ryan Block and Brian Alvey had come with,

which was a way to frustrate trolls, which was when, they were allowed to post comments and it was called something like progatory mode. So they could one click put somebody in purgatory mode and I'm making that up. I can't remember the actual name. Yeah, but what would it do? Well, you could still post and you would see your comment there

and then nobody else saw your comment. Oh, so it literally made you think that you were getting in front of people. Yes. Oh, that's amazing. It was so great. That's amazing. It was just like this little innovation. So like you'd have people who were spammers and they'd be like, they would keep posting their spam. And we'd just go, purgatory mode.

So they would email us and say, hey, you know, somebody's wrong. My commenting. I created a second account. I looked at the first account and we're like, oh, yeah, that's interesting. Maybe it's your cash. Have you tried clearing your cache? Oh, my God. That is incredible.

And also it just forces them to admit that they've been trolling the entire time. Oh, that's awesome. It's so great. It was, it was, pergatory mode was one of the great innovations of that time. I love that. All right. Listen, it's been great to catch up with you. Continued success in your angel.

investing career. Remember, save a slice for J-Cal. And so now, are you still involved with Morning Brew? Or you're kind of like, exec chair and kind of got the window seat? I'm exec chair. I'm helping Austin wherever I can. All right. So you got the window seat. Yeah. And I'm, I would say doing a lot more on like the content creation side. Do more to build my brand, work on podcasts, shows like that. I like being, I like being close to content. Yeah, I think I'm going to be on your, what is the name of Morning Bruce podcast again? We have business casual and then founders.

Business casual, yeah. Yeah. You're gonna be on it? I think so. I think I got an invite to be on and I couldn't do it last month, but I'm doing it later this month. Sweet. Awesome.

Yeah, I'm looking forward to it. All right, Alex, continue success and we'll see you all next time on this week in startups. Bye-bye.