This Week in Startups - Praying For Exits: the satirist of venture capital | E1348

Episode Date: December 17, 2021

Praying for Exits, the top meme account in Venture Capital joins to discuss being a pseudonymous commentator (01:13), why VCs spend too much time brand building (12:37), entitlement in tech (23:47), assessing founders and companies qualitatively and quantitatively (35:46), crazy VC stories (52:10) plus so much more!

Coming up on This Weekend Startups. There's been so much of this sort of self-aggrandizement that, and I've been, I feel kind of sad even saying that I'm almost jaded by those kinds of emails now. When somebody's like, oh, I've sold my last company for $30 million, I'm starting a new one now, please take a look. To me, instantly, I go to the place of, well, why hasn't anyone else taken a look? Which is definitely not the right way to think about it. This Week in Startups is brought to you by Masterworks, the first company,

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All right, on the program, the second ever guest who will remain anonymous. It's the second time we've ever done it in the history of the program. We normally don't like to have anonymous guests. We want people to own their words. The first time was BitFinext. which is a very cool Twitter handle that has been covering shenanigans at Tether. I'm being charitable. Shananigans would be the word I'd use.

If I'm not being charitable, I would say fraud fines and sanctions, which have occurred around the globe for that firm. And you probably, if you're in the capital allocation community, are well aware of a very funny account on Instagram. And that account is called Praying for Exits. It also has a Twitter handle as Mr. Exits, but I don't actually consume it there. I consume it on Instagram. The account makes fun of, communicates with, and otherwise dunks on and has fun with capital allocators and VCs and the folly of what we do for a living.

We are going to disguise the voice of Mr. Exits, who, as best as we can tell, worked for, you know, some sort of average, you know, prototypical. VC firm. We, as a disclaimer here, do not know. This person could work for me. This person could not be in the industry. We have no idea. So, disclaimer, disclaimer, disclaimer, the account's hysterical,

and I thought interviewing an anonymous account would be funny. So, welcome to this week in startups, Mr. Exits. Thank you for a really wonderful introduction and excited to talk to you. It's been a long time. time I may I call you praying. You can call me whatever makes you happy, Jason.

So I will call you, I'm going to call you Mr. Exits, because it's funnier. So how long have you been doing this Twitter handle? And what was your inspiration for doing it? Well, I've been doing it for about three years now. And as far as my inspiration, maybe I could ask you a question that your audience might not know about and could help us or contextualize this a little bit more. Sure, why not? And maybe you could talk a little bit about Cyber Surfer's Silicon Alley.

So when I was in New York, my first job as a writer was writing for paper magazine. I had had a magazine called Cyber Surfer. My online handle was Cyber Surfer. When you first got onto online services in the 80s, you picked the handle. The handle was not your name. And so I was the Cyber Surfer, which was based on the Marvel character Silver Surfer. And then I did, we had this term Silicon Alley, referred to New York. and I did silly, as in like it's silly.

And that was my first little column, my first writing byline, in fact, in Paper Magazine. Yeah. So, in 1994, maybe. Wow. Yeah. So I'm a big fan of Paper Magazine, maybe not since back then, but more recently, just culturally. And I saw that you had sort of like a semi-suitedonymous sort of thing that you did there. And just, I think that, you know, probably a lot of the same things that you saw when you decided

that was a good idea. was probably a lot of the same inspirations that kind of led me to where I am. The original impetus for the account was never for it to be anything larger than more of a journal for myself to really highlight things that I felt were sort of incongruent between what was widely available via the media and what I was experiencing myself as a venture capitalist, allocating capital, in kind of that environment. And so really what, the impetus was, was just providing a more realistic view of what I thought that I was seeing. And I didn't necessarily need or care to have an audience, which is why it's been private this

whole time. This never really was for any sort of like notoriety. I think it really was just, you know, considering like a cyber surfer as well, it was just to really provide commentary in the most accurate way I thought possible about an industry that I don't think necessarily has too many outlets that are, you know, providing a more just black and white commentary, I'd say. And what has the reaction been? I saw it, and like VC Braggs and other Goldman Sachs Elevator, other, you know, accounts that poke fun at our industry, I thought it's hilarious, and people sometimes don't have a sense of humor. So I'm curious, what is the reaction been to the gentle ribbing and or dunking or commentary been writ large any notable people upset and or blocking you mark and treason

mark has not blocked me but you know i've heard he's had some some commentary on some specific things which is totally fine with me i don't think that i've gotten a very negative response overall um just because i try to keep things as honest as possible and try to keep my opinion uh out of things as much as possible So I really try to be tried not to sit there and say, hey, I think this specific founder or company, you know, is not credible if I don't have any real experience that tells me otherwise. I think what I try to do is I try to pull threads in VC land where, you know, I think that everybody would agree that it's either a problem or it's either something funny to contextualize it with. but maybe because they're not anonymous or because they don't, because they have a lot riding on sort of the credibility surrounding their persona that they've created, they're less inclined to be honest about these kinds of things.

I really, really don't have any interest in just being, like, I think one of the things, and this is no hate on VC Braggs or anybody else, but I think it's a very low form of humor just to, like, put people down because you disagree with them or whatever it might be. I think what's a lot more interesting and what I really try to focus on is like there has, there should be a level of truth telling that matches the level of kind of like building up your own brand that exists in this space.

And I really just want to create sort of a more even playing field between those two states of being. And it really is incredible how just 20 years ago when I was still a journalist, journalists weren't really brands. You'd have a Walt Mossberg once in a while, but generally journalists weren't brands. And founders once in a while

became brands, Steve Jobs, notably Bill Gates, but not too often. And VCs were not brands at all. In fact, they shun the limelight. They generally didn't do press. And just in the last 15 years, social media, blogging, and podcasting has led to this playbook,

which arguably, you know, I was one of the pioneers in Fred Wilson was of, you know, just talking about what we do as capital allocators and before that as entrepreneurs. But now it's kind of jumped the shark in a way where new VCs, and I'm interested your take on this, feel like job number one

is to build their personal brand. And somewhere down the list, after building their blog and their medium and their avatar and their podcast, is investing in great companies and growing them. It seems like they've almost got it backwards. Maybe you can comment a little bit on the insanity of the celebrity investor. Yeah, I think I have like two sort of comments to it.

One is something that somebody told me very early on in my life and something that's stuck with me and which is the way I've decided to approach my career, which is that, you know, like the manager is never the artist in the sense that in the music industry, if you are managing Madonna or Bono or somebody like that, you are not them, just because you are enabling them and allowing them to succeed in some way, shape, or form through your work, that doesn't mean that you are them. I think that we've created this kind of like flywheel that has these very negative implications in the sense that there are so many new funds that have popped up,

that there is not without sort of like, especially if you're a newer capital allocator, you don't really have much to go on as far as track record or sort of any level, unless you're coming from, you know, that industry, coming from the industry before, there's not a lot of different ways to differentiate yourself for LP dollars besides sort of like this level of self-aggrandizement that I think that everybody feeds into.

And I think that once one person sort of starts that, it becomes an avalanche where, you know, if you're competing for Harvard endowment dollars, you better have a damn good story why you think you're qualified to do it, especially if you've never invested before. It's a bit of an arms race. Yeah, it's an arms race for people to build their egos up. And I think that, you know, in a lot of ways, the LPs are kind of not necessarily forcing it to happen, but it created an environment where, you know, because new managers are getting dollars, all of these new managers have to find a way to compete with each other outside of what was sort of necessitated by fund managers in the 90s and early 2000, even the early 2010s.

And so I think I'm not a fan of it necessarily. I think that it might be a necessary evil in this current epoch, but I don't know if it's something that is sustainable or good for the ecosystem over the long term. Listen, you know I'm not an art guy. I don't know anything about art, but I do know where to go to appreciate a masterpiece. My investment portfolio, that's right. I recently allocated a little bit of my cheddar to a piece by Brooklyn's own boss. I always love Boscaut growing up. I just thought he had a really great style. I can't afford a Boscaut. I mean, maybe I could, but it would be a big purchase. And so, I went to Masterworks and I just put a little money towards that. And while people are going crazy over those NFTs, many savvy investors have been allocating capital into the art market. In fact, art as an asset class has outpaced the S&P by 175% to 2020, according to Masterworks. But fine art has always been way more exclusive than other alternative investment categories. now. With MasterWorks, you can own

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At masterworks.com slash disclaimer. Yeah, I think when you look at it, there were, in the early days, a cohort of people. You know, I was a journalist. Oh, Malik was a journalist. and we became capital allocators, so we just didn't stop writing because we love to write.

So we blog. Fred Wilson in New York had invested in Tumblr and was investing in RSS companies, Technorati, etc., blogger with Ed Williams, and I believe, and he just wanted to use the software, so he started writing a little bit. So there was kind of the three of us writing,

and Dave Weiner, of course, creator of RSS and OPML, was writing about technology. So it's just a way for us, before social media became the place to do this, to just sort of share ideas, what we're going on in our world, and create conversations.

It was really about having a conversation more than deal flow, building a brand. It was more for the conversation, right? And something changed along the way because it, Bradfeld and then Jerry Colonna, Fred Wilson's partner,

and then Mark Suster all started blogging. We were all kind of in the same circles. and it was just a fun way for us to share information. And the great part about it was, when I came into the industry in the 90s, you wouldn't be able to get a term sheet from another founder because they didn't want to share it because they were scared they were going to get sued. And so the idea of how to pitch something or how a term sheet worked or what these deal documents meant, none of that was available online.

It was all a black box. It was all opaque. And what these early blogs did was Bradfeld explained to people, you know, how to read a term sheet. Mark Suster explained, you know, how to, you know, get meetings, whatever it was. It was very how-to-y and just trying to support entrepreneurs. And then everybody saw, wow, their deal flows increasing. Their speaking gigs are increasing.

And that created the arms race to now where people have taken a correlation and attributed causation to it. And that is, I think, dangerous. and I think I would be in some ways more successful as an investor if I spend less time podcasting. If I took, instead of doing six podcasts a week, if I did just two and I put those other, you know, five or six hours into meeting with founders, I think I would be more successful. Yes. And so even I look at it and go, oh my God, the infrastructure that this takes, seven, eight people work on this podcast, you know, and I don't know what market. Drescent and like their crazy media thing that they kind of, you know, built up over there and nobody really reads it.

It's not very good. But they feel like they have to replace the media for some reason. It's kind of strange. And I do think it's having a weird impact on this next generation that they don't seem to want to do the work that Bill Gurley did or Michael Moritz did or Rulhoff did. When I looked at those folks as, you know, mentors of mine, and I would ask them questions, it was about picking up the phone on the weekend for a founder or, you know, being willing to go to the founder's office and spend time with the team and give them advice and hear what their plans were or, you know, interview a CTO for them and convince the CTO of why you put this $3 million in and why that equity might be worth something and try to close a couple deals. And now it's, you know, I mean, TikToks and I mean, we're kind of getting to the point of,

craziness. Like, does the world need the 15th version of this week in startups or the 25th version of, or the 250th version of Fred Wilson's blog? I don't know that we do need that. Yeah, I don't necessarily know if we need that any either. And I think that like, I think the weird part that we have to kind of work through is the fact that our industry has now become a point of interest for a large swath of people that might not necessarily have even been interested in, technology by and large 10, 20 years ago. Interesting point. Why is that important? Well, so I'm actually going to quote you. I'm going to read a quote back to you from Jason Calcanus wired 1999. The internet is more about the kid from Brooklyn than the kid from MIT.

You remember saying that? I do. And that's a pretty fucking great quote because it is true. I think it's very, very poignant in the sense that, yes, we realistically don't need another Fred Wilson because there only will be one Fred Wilson. and the things that Fred Wilson can write about and the context that he can provide is very, very specific.

But my argument and my devil's advocacy here would be is there's only a certain amount of people that can really understand what Fred Wilson is writing in the way that he intends it to be written. I'm sure there's a lot of people that can understand 10, 20, 30, 40, 50% of it. But to really understand all of the context needed to garner the true insights of what Fred is saying,

you have to be exposed to a lot. And I think the opportunity that is being created is all of these different siloed places of exposure, whereas, you know, you were a group of five people who were providing this exposure back in the day. People didn't really have the optionality to go and say, hey, I don't, Jason is a little bit maybe ahead of the curve for what I'm trying to understand about the industry. Perhaps there's somebody else that can posit it in a different way that is a little bit more approachable and acceptable. And I would say while that dilutes kind of, while it may dilute the content being put out by the people that are really pushing the edge and pushing the envelope, it also is kind of necessitated by the fact that there are so many people interested in what we're doing right now. There's no way all of them, those people's interests can be continued by reading people like Fred Wilson or Thomas Tongis or whoever it might be. there has to be some level of intermediacy between kind of that high level and just no exposure at all. When you look at the industry today, we're obviously at, you know, a bull run.

I wouldn't say the end of the bull run. It's impossible to predict. But it's been a hell of a bull run. I don't know how old you are. I'm not going to ask you how old you are. Sub 30. Okay. So you're sub 30.

Perfect. Thank you. So having lived through the other ones, and you're probably, apparently, based on Cyber Service, Silicon Island magazine, the wired quotes,

who are a student of history, we're at a pretty topy top of a top right now. And behavior, in my experience, and the participants in the ecosystem

as it tops becomes very strange and weird. In other words, when the market was on the floor in 2009, 2010,

yeah, there's like a new company being launched every other week, every week. You could kind of keep up with it. You know,

just wasn't as much craziness in town. And same thing for 2002 to 2005, you know, delicious, weblogs thing, blogger, there was a very small cohort of companies. And then when it peaks, 2008, it was getting pretty bubbly. And then now, obviously, super bubbly in 1999, 2000. What are you seeing in terms of the entitlement of either the venture class, the entrepreneur class?

You've done these sort of Q&As or story times on the handle. and you get a lot of crazy stories. So maybe you could tell the audience, what's the entitlement level out there on a scale of, you know, one to Elizabeth Holmes? I think we're reaching Theranos levels of entitlement for sure. And I think it's probably important here to define what I mean by entitlement. I don't think it's necessarily the entitlement of like,

oh, I went to Stanford and now you owe me $100 million post money valuation because I have AI in my deck. I don't think that that's necessarily the level of entitlement. But what I do think is the level of entitlement is that, you know, I think that people believe that if they check specific boxes that are outside of educational, but even more so, just like, I'll give you an example, obviously. We're in a very, very interesting time for cryptocurrency right now. And, you know, I think that if you were to even provide the semblance of some sort of structure around some type of Dow,

I think that you would be able to raise a fair amount of money if you had some credibility behind it. And I think that the entitlement comes from people expecting that them participating in a specific vertical or a specific area of technology immediately garners them a specific multiple, immediately garners them a specific level of interest from specific firms, et cetera, et cetera. I think that every popular consumer company in the world probably feels somewhat entitled that Andriesen Orwell, should be back knocking down their door any day, given their metrics. I think that there's this kind of, I think it comes from both founders. I think venture capitalists are equally as guilty of this too because there's a lot of entitlement of like, oh, you know, I'm sure this founder will come talk to me any day now because it seems like he's about at that point, right?

And so I think that like, to your point, I think that a lot of what we do as venture capitalist has gone from, you know, being extremely problematic. where I'll take calls on the weekend. I'll, you know, go into the office and do a product session with people at 9.30 p.m. I think it's gone from that to, okay, we've established our brand. We'll just let people come to us now. And I don't know if that's necessarily, I don't personally think it's a very good thing. I think like sort of productivity is always the way that you get better results.

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This Weekend Startups once again. LinkedIn.com slash this week in startups terms and conditions apply because they're giving you a hundy. You know the facts. Go get it. The one thing I've had in my career as I never expected to be here.

You know, like, and I kind of pinch myself, like, Sequoia picked me to be the first scout. Navajo picked me to be the first Angelis syndicate. You know, I hit two unicorns of my first five at Sequoia. I hit two unicorns in my first ten on Angelist. Like, oh my God, what a time to be alive, right? Like, I hit it perfectly. I started angel investing the year after the market corrected.

So, like, it was a pretty good time to go, you know, it would be like showing up in California the week before the gold rush, you know, and like having like already bought your house and had a bunch of Yeah, like I had everything set up already. You know, I just bought a farm and everybody's like, oh, by the way, there's gold under the farms. I'm like, really, just bought a 500 acre farm. Okay, great. I guess I'll start mining. And, you know, because I never went to MIT, which in my younger years, you know, what you heard in that wired quote was a little bit of the chip on my shoulder. I just thought to myself, well, I'm going to beat the MIT kids by hustling harder because they're

smarter than me, and they know some things that they taught in those courses that I just don't have access to because there was no such thing as like MIT Open Courseware or any of this amazing stuff, which is free on YouTube now that anybody can watch from around the world, and they have like a million views, and Mr. Beast has a hundred million. I love, you know, on his squid games. I love Mr. Beast, but the love of God, you can take an AI or algorithm or economics or macro, micro-economics course from MIT for free right now, and it's got 600,000 views, and I've been taking it while watching them. I've been watching them at night, and I'm just like, what is going on here?

This has 600,000 views. You have 600 million. Putting that aside, the thing that made me, you know, do well in the early part of my career was that I just made myself super available. And I hosted events and I emailed people cold. I emailed Raul at Reportive and I just emailed info at reportive.com and said, this is a really cool toolbar. Have you ever thought about taking money?

And he wrote me back and was like, oh, Jason Calacaneda. I know you. I listened to your podcast. I was like, which episode? Because there were four episodes or something at that point. And he was like, yeah,

we'll take your $50,000. And then that's how I became one of the first investors in Superhuman. It was because he was like, yeah, I'm going to do another thing. I was like, great.

You know, and that wound up being a major bagger for me. And it's that like humility that I don't see. And I agree with you that the level of entitlement amongst new venture capitalists and even some of these, you know,

quote unquote brand names is like, you know, just. Yeah. you know, I don't need to put my email address out there. Or the one I love is when some, you see this, the guy from Lightspeed who just, Jeremy Liu, like went on this tirade on Twitter about like how to contact him.

And I just read, I dunked on him, you know, it was before like you existed or VC Braggs existed. So it's just like, do me a favor. You can email me anytime Jason at Calcanans. Don't email this dips. If he's like upset at how you're emailing him or what the subject line is or how long it is.

is like, great. You know, like, every VC has that moment where they're like, stop emailing me. You get off my lawn. You should contact me through one of my portfolio companies. It's like, what is this? The riddle of the sphinx? Like, you have to get past Medusa or the Minotaur to get the golden fleece. Like, you have an email address.

Let them open your fucking email. It's your job. Is it so hard to open your email and look at the first three sides of the deck and see if it's a fit? Yeah. It's a fury. So I think, you know, I think one of my feces and, you know, you being a poker player as well, I'm sure you'll appreciate is that ego is minus EV. Oh, yeah. What I mean by that is that, you know, the amount of opportunities that you miss simply by sort of purporting yourself to be more important than you are will constantly get you this negative feedback loop.

And I think that like one of the great things about when I started in NBC that I really, really miss was kind of that. I think hustle mentality has kind of been perverted in this modern day era because it's like hustle mentality to the kids these days is like, all right, let's see how many people we can get to follow us on Twitter. Let's see how many people can join our discord. And then let's see how many people like we can, you know, there's all of these sort of fake bastions of progress that people sort of tie themselves to. And I think what I really miss about old Silicon Valley, and this sounds ridiculous as someone to say who's sort of been in it for about 10 years. But I think the aspect of, you know, you being willing to put your ego to the side and say, hey, I'm going to cold email this founder and literally be like, hey, I just am looking to be helpful. And I think that your product is great. And I also think I have some money for you because I believe your product is so great. Yeah.

It's something that if you are, you know, if you're a 10-year partner at Sequoia, your ego really probably won't allow you to do anymore. just because it is kind of incongruent with the rest of the partner level at all of these other funds, right? That just doesn't happen. And so you kind of get sucked into this sort of whirlpool of like keeping up with the Joneses in a negative way. And I think that like it's,

I really hope we can get back to the place where like VCs and founder, like VCs felt like that they were on the same plane as founders and not for some reason elevated for whatever reason. And the level of sort of like, To your point, entitlement, ego, all of these things. Like, it just sort of perverts this whole industry and kind of bring it back to why we're even sitting here. That really feeds into a lot of what the page is about.

It's kind of like tempering people's egos in a lot of way, hopefully. It's a backstop. Yeah. It's like, behave yourself out there because you could wind up on praying for exits if you show up an hour late for the meeting and you're on your phone the whole time. Right. I don't mean it to be that where it's like, I don't want it to be. be like this reaper of like cancel culture where if you f*** up then I'm going to come.

But I also want it to be like, hey, this is a place where I'm going to be 100% honest. I don't, I don't, I'm not in anybody's pocket. I, you know, I have my own thing. I don't need anybody else's money. I don't take advertisements. I don't take any of this stuff. Like, I really just only do it to be as honest as I feel like I can be. And so I think that, yeah, I think that this sort of like preoccupation with how.

important we all are is just so stupid and hopefully we can get back to building cool stuff because I will tell you as somebody who was invested in by Sequoia and would being a scout there I was always impressed by given their success as a number one firm historically the lack of ego because I would come there as a young entrepreneur and it would be like there's Doug Leone there's Michael Moritz there's these two young guys Alfred Lynn and you know rule off you know sitting in on meetings with them and they were there every day. And when I emailed Michael Moritz that I had this new idea for a company,

he responded to my email in under 15 minutes and called both of my phone numbers back in the day of phone numbers within the hour and said, when can you meet? I'm at my office today and tomorrow, is there any times that work? And I was like, that's why he's Michael Moritz. And I wrote the shortest email. I was like, hey, I'm Jason Calacanus. I sold my last

company to AOL for $30 million, 18 months after starting it. I'm starting my next company. It's in the search space. Boom. He just... Great email, by the way. Yeah, I knew how to put it on the hook. I was like, And they funded me. But I think that like, I think that the problem that we kind of talked about with founders probably prevents a lot of partners from also sort of interacting in that way.

And what I mean by that is like, take yourself, for instance, if somebody were to say that that exact email to you and to be perfectly clear, I think that Sequoia is one of the best people of like no ego. They are willing to look at everything. And they, like, I really want to like reinforce that I have nothing against them. as far as that. But I think that there's been so much of this sort of self-aggrandizement that and I've been, I feel kind of sad even saying that I'm almost jaded by those kinds

of emails now. When somebody's like, oh, I've sold my last company for $30 million, I'm starting a new one now. Please take a look. To me, instantly, I go to the place of, well, why hasn't anyone else taking a look? Which is definitely not the right way to think about it. But it is kind of the way that we are conditioned to think about in this kind of weird, sort of preoccupied behind brand and logo and all this phase of the industry way.

And so I think going for, you know, I think that at that point in time, that was a good email. I would agree with you at this point in this time because everybody's a genius right now. Right. Because everything's up into the right. You know, I used to make a joke and, you know, put the number of unicorns I had. And then it's just like, well, you know, then somebody said to me, oh, you know, I have more unicorns than you. And I said, oh, really, congratulations, you know, which ones? And he starts having the unicorns. I was like, you were in that round? I was in that round. I know. You guys know, I bought shares on second market when it was already a unicorn, and I just put it on my Angel's profile.

Yeah. I was like, oh. So now, you know. Yeah, there's a lot. And so like, yeah, even your email, like, I would say, like, you telling sort of Doug or Michael Moritz, hey, I just sold a company for 30 million. Like me, in this context today, what I would think about is like, oh, he only got 30 million for it. I wonder how much money he lost to sell it for 30 million. Yeah.

Yeah. The reason I wrote it that way, I'll tell you what I was. thinking. I was thinking if I was in his shoes and he did Google and it got past a billion dollars, I would think this kid hit a double, maybe on his next one he's hungry enough to hit a trip, to hit a home run. So I was kind of craft. I took me, I had like three or four different versions of it. And then, you know, I now, in terms of talking about stuff, just, I tell everybody the chart, like, if you just send an email about your customers and how they use your product and the engagement the growth of that

and how many of those customers there are, you will just change yourself because everything now is like some buzzwords or some soft metrics or you. And it's like, I love a charming email that's like, we just hit our seventh customer

and they've got 10 seats of our sales product. And, you know, here's a chart of the number of minutes they're spending in it. Like, that's the perfect email. I train everybody in our accelerator

at the early stage. Own these, modest wins, these tiny moments of engagement, because those are so real. Those are like, you know, you're on the second date with the woman who eventually were a husband, eventual husband or wife, and you just have this amazing date and then you go for a magical walk around Central Park, whatever it is. And, you know, it's just like that early romantic moment of a startup when you get that first big client and they ask you if you have pricing for 25 seats, you know, and do you have great? And do you have great?

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Well, can we just build on that for one? Sure, sure, sure, sure. Are you putting right now more emphasis on sort of qualitative aspects around team, founder, the integrity of those, that kind of thing? Or are you putting more around sort of the qualitative? These are retention metrics. This is our PAC. this is how we're doing.

Like, where do you find yourself, like, putting more of the emphasis on how you're evaluating? And then I'll give you my answer and see if we're on the same page. So I believe that at the end of the day, the flywheel for startups is the team, building a great product that eventually hits, you know, customers. And those customers engage in it, love it, et cetera, which thing makes you money or gets you more investment, which then let you hire bar, raising people or more people to make a better product. And if you can stay in that flywheel as a founder and not get distracted by NFT, Basel and some bullshit Dow and being in the Forbes 30 under 30, 40, 40, 50, whatever bullshit.

And you can just say, can I get another great team member today? Can we make the product 5% better this week? Can we find another customer today? or can we save a customer from churning, whatever it is. The people who have that level of focus and obsession, the flywheel starts, and it really is a contest of who can stay the most focus and least distracted. And if you looked at somebody like Travis at Uber,

or Vlad at Robin Hood or Elon at Tesla, any of the great entrepreneurs, Zuckerberg would be the best example. I mean, that guy is so obsessed of just the product and the growth of that and, you know, iterating on it. You know, Jeff Bezos, it really is very simple. Now, the thing that I see trips people up who are investors is they look at the long list, and Bill Gurley is the one who taught me this,

which was, you know, Jake, a lot of people look at the list of things that could go wrong and they don't invest, and we have an expression inside a benchmark, what could go right? That's my ridiculous, Bill Gurley. That's my ridiculous. Bill girl. Now we do it at the poker game and now everybody at the poker game does it slower and slower.

I love it. More draw. More just like we, to the point of absurdity, as if like you slowed a record down to, you know, whatever, 10% speed. But his point is very correct. The idea that you would dunk on a startup because they failed, it's like, yeah, 80% fell. Like you get no credit for passing. Like, oh, you pass. You passed when 80% yeah. That's like saying like, you know, I didn't bet the number 32 on the roulette wheel. I'm a genius. It's like. Totally. Yeah. Like, duh, there's 40 numbers. Like, of course you, I bet black, you know, and then let's have a conversation.

You know, like, it's not how this works, dummy. And so I think where people get tripped up in the metrics game is, you know, I introduced people to come, Uber, Wealthfront. In some cases, they looked at the churn or they looked at the product and they saw all these problems. And they didn't give enough credit to the founder. for having solved the first three or four. Right. And they were looking at the next 20. Totally.

And I always look at the next 20 and I look at the three or four and I'm like, if they got those three or four done and they can get one of these 20 done each quarter for 20 quarters in five years, we're going to have this most incredible business ever. Sure. So when they were like, oh, my God, you can't, you know, Uber can't be in Vegas. They stopped it. Or, oh, my God, are they part time? Are they full time?

Who's paying their benefits? I was like, those things are all solvable. Yeah, exactly. It may not be solvable in every city. Like, Vegas was the last city to fall, you know? Right, right. You know, the day I went to Vegas and, like, was able to get an Uber, I literally got choked up because I was like, I knew how hard it was. To get it.

Yeah. Like, every CES, everybody was texting, Travis, why aren't you in Vegas? Why aren't you in Vegas? This sucks. And so I do think the ability to look at the team and just say it's all going to work out. If they figured out the first three or four things, they got two or three people. who are really talented to come on the adventure, two or three customers. That's what I look for.

And that's why I've stayed early stage. It's better than being late stage because late stage, there's no romance. You just look at the metrics. You're like, oh, well, they're having a retention problem. And it's like, if they got to 10 million, even in those cases, they got to 10 or 20 million revenue, you don't think they're going to solve that problem? Sure. There's a pivot in there.

There's an iteration in there. There's a higher in there. So anyway, what's your thesis at this point? Yeah, my personal opinion is that integrity is one of the most. most sort of underappreciated metrics in evaluating early stage startups. And I think that it's also one of the metrics that has the most latent value if you can understand how accurately to underwrite what a person with high integrity is capable of. And what I mean by that is that, you know, everybody is sort of benchmarking their understanding

evaluation on the same things, right? If you have 20 firms and everybody's looking at the same customer acquisition costs and the same three-month turn and the same, like all of the metrics that you're looking from the same data room are the exact same, then you are likely going to come to the exact same conclusion as everybody else. And that doesn't really give you the opportunity to really like do what venture capitalists are supposed to do and get those 100 X's, those thousand X's and really make big swings. I think if you're underwriting things the same way as everybody else, you're leaving this massive sort of qualitative moat of these businesses that you're

you're not really evaluating because you're so preoccupied by the quantitative. And I think that, you know, in the last, I would say really since COVID, I've really been trying to reorient my brain from thinking purely from just metrics to thinking about how does the integrity of the person and the team behind those metrics. What does that do for the future of this company? And I think it's critically important because when people get the integrity part wrong and they're not super focused on, you know, the company culture. setting that in the right direction, you know, you could flip the car.

Sure. And there's a million in one ways to financial engineer any metric that you want to create. Like, you know, and unless you're doing like forensic accounting and really digging in and diving in and going to talk to their customers and all of those things, then there's a million and one ways to kind of like, you know, be not 100% forthcoming about how your business is operating. And I would rather bet on sort of the personality of people and say, hey, this is somebody with high integrity and is like a trustworthy and honorable person. Like, even if things, even if it hits the fan, like I know this is the guy who will write the in the right way and not take shortcuts to kind of just, you know, get around. As I'm sure, you know, you've invested in enough companies by now. I'm sure you've seen every slice of a founder at this point. And there are some people who are, no matter how talented and qualified, there's something.

about their inherent personality that just prevents them from being successful. And I think that that's the kind of thing that I would like to move myself away from as much as possible. It really is. I have three instances of that in 300 portfolio. Yeah, I mean, one percent is still a meaningful amount. It literally is one percent.

And I have three instances of such insane, unethical behavior. And I'm just perplexed at how the person could be so gifted in one aspect. and so, you know, either criminal or borderline criminal ethical that I have to tell them like, do you want to go to jail? Yeah, yeah, yeah. Like, I literally had to have a conversation with somebody of like, this is like, I can't. I have like, you know, the top three law firms on retainer working with them. I'm like, I checked with one of the top three law firms in the industry.

They told me under no circumstances can I be on your board because of what you've done. It's so insane. and they don't want me to have that exposure. Why would you do this? And it was just out of total self-servant greed. So let's go there. Let's go to unbelievable stories, ones that you've experienced or you've been told about

of, and we'll start at founders, and then we'll go to VCs. We'll do this in a dueling banjo kind of way. You go first, and then I'll go. So tell me, in this crazy, insane, entitled moment, something you've experienced, hopefully, or you've heard about, you know it's true, but don't say the name of the company, obviously. Yeah, yeah.

But just broad strokes, what happened and why that's so disconcerting to you? Yeah, I think that like, obviously that, you know, I think what I have seen is I have seen more and more recently as opposed to kind of like the last decade or so. These instances where you have partners and people who are best friends who have worked together for, you know, decades and, and built things together for decades, all of a sudden now, in the last two to three years, have, you know, been at each other's throats. And I don't know what is kind of like the sort of the more macro thing that is happening. But I think that you see this across firms. I think you see this across companies, people who are like insanely close. You could, you can never expect them to be close. Besties. Yeah. Like you have your group of besties,

you know, like what I'm starting to see is groups of these besties becoming more fractured over things that you would feel like never would have fractured them before. And like small Twitter comments or, you know, this guy went and met with a company without the other person knowing or like these really things that feel almost pedestrian and like we're still in high school, driving these massive rifts in companies and firms and organizations that you thought were like larger than life. Take me through the example with, you know, protecting the guilty. Yeah, I think, you know, I've worked with a firm that's.

very well known in Silicon Valley many times across, you know, a few investments. And the company that we were working with specific company doing a follow-on round. And we asked, you know, is this firm, will this firm also be participating? Because, you know, they led the last round. Sure. Follow-on round. Make sense that they would. They would. And we found out from the founder that no, there was actually an internal battle between the two GPs of this firm that got so bad that one GPs actually now leaving. And so not only will they not be doing a follow-on, but the person who had done the original investment was actually just leaving now.

And so I think that like it's become, I think that this thing that we were talking about with this ego, this preoccupation with ego, it's like almost elevating all of the negative aspects of things that you would have seen. aspects become magnified. For sure, because you... In an up market. In an up market. And I think the reason is, is because everybody has a platform now.

Whereas 10 years ago, you might just keep that in your, you know, something terrible happened to Facebook. That would most likely stay in your circle, might be shared amongst some text messages forwarded in an email chain. Now it's like, I'm going to go onto Twitter and write a 25 tweet thread about exactly why this doesn't work. And, you know, and so I think that you're starting to see this divergence of like... people that you would have never expected to see.

And I really think a lot of it is just because, you know, there's this like preoccupation with like fame and, you know, being the top of the Midas list and all of these things that are sort of driving away, you know, like how people used to work together. Yeah, it's crazy. This is a trend you might have seen. Founder goes out to raise money. They get a term sheet.

Term sheet requires them to double their ownership in the firm. but the new investor doesn't get diluted by that. They're selecting this term sheet. And you're like, well, that's a conflict of interest. Why don't we have a comp committee board meeting? We'll handle your compensation. Before or after the deal is done whenever you as the founder want that to be done. Okay, you've been with the company for six years.

You're fully invested. You want another grant? Great. Super reasonable. Let's come up with something. What would we have to pay a new CEO? 5% of the company? Great.

We'll give you the 5% over 5 years. Lock you in for another couple of years. No problem with that, right? It makes total sense for everybody to lock in the CEO, so they don't even start another company. But you've been there for two years. You own 45% of the company, and now the new VC wants to own 25%,

and then give you another 20%, and everybody else has to experience this massive dilution. Oh, and everybody has to give up their prorata. Right, yeah. And I'm like, what is happening here? And in the same situation, we had a side letter for a board seat, and we all agree to the board seat over email and everything like that.

We own 12% of the company. It's not like a crazy request. Turns out the founder didn't co-sign. We have the agreement, you know. And then the founder's like, well, I guess you'll have to sue me because we don't have a signed contract. Right. I'm like, we were your first investor. We own 12% of your company.

And now you want me to sue you. And now you want me to sue you. and you want me to get massively diluted and you've got this new, and I talked to the VC, I was like, how long have you been in venture capital? I just started last month. It was a formal lawyer. He's like, I'd love to host you, a big fan.

I'd love to host you at my ranch and Napa, some bullshit. I was like, let me tell you something, pal. Never going to happen. I am never going to work with you again. I will never send you a deal. And if anybody asks me, like, if any of my founders asked me, I'll tell them exactly what you did.

Sure. As you should. As I should. Like, your reputation is horrible from day one. And then I just said to the founder, like, listen, you know, I got 350 investments. If you don't want me on your board, you don't want me around. Okay. I'm not going to sue you. I don't have time.

And if you have somebody who wants to buy out half my shares or all my shares, you know, at some point, let me know. And, you know, I'm not going to go out and market them for sale. But if you're successful, you know, we'll probably sell them. on a secondary market if that's okay with you. And we'll just divest and you lost me and that's it. And the founder was like, okay. I was like, wow. Are you finding that the sort of increase in these crossover funds are leading to

more aggressive terms that trickle down from the later stages to the earlier stages? I am seeing more and more this game of let's pay off the founder. The original payoff was secondary shares, which I don't mind. I don't begrudge a founder from selling 10 or 20% of their stake. either. If they can put one to five million dollars in their bank account,

it's not enough for them to retire. You know, if it's Pari-Parsu and other people in the cap table, like other employees, other co-founders,

get to participate in that. I kind of feel better about it, especially if it's a, you know, company with, you know, a lot of people, you know, key employees who might also

want to take advantage of that. So that doesn't feel like you're buying off the founder too much. Right. I can see an extreme case where it would. But I don't see

that tool. often being like a payoff. But then I see this, you know what? In order to win this deal, we're going to demand a 10% refresh, 20% refresh to a founder's already got 50% of the company. And it's like, that doesn't make a lot of sense to me. And the early investors are the ones who are getting punitively sort of punished for that. Yeah. And I said to the, you know, this happened three times to me. And all three times, I just, you know, listen, I got other founders who are doing better and who are ethical. And so I just, just, choose to put my energy into their companies.

Like, that's one of the great things about this, you know, when you're on the capital allocator side is like, unless it's your Uber, you know, unless it's your number one investment ever, like, you don't have to sweat it. Because in all three cases, the companies are failing. Yeah, exactly. And they're in failure trying to screw the people who are their earliest supported. And that, to me, speaks to this issue you're talking about. You know, in one instance, I had the founder.

Anyway, you give me your next one. crazy founder story, yours or otherwise, or crazy capital allocated story. Yeah, I guess one of the things that you've sort of talked about is, you know, it's okay if founders are getting sort of one to five million

because nobody wants like a founder who's so preoccupied with their bills and they're, you know, they're maintaining their lives that they can't work for you. Like that's, or not work for you, but work with you. Like,

that's not what you want. You want them to go along. For sure, for sure. And so what, but what I'm also saying, starting to see is I'm starting to see, and you kind of touched on this, is that in these later stages, there are founders who are getting to take 20, 50 off the table. And at that point,

it makes me feel very uncomfortable because I'm like, you know, if you make 20 to 50 million dollars, that is more, that is quite a life changing amount of money for somebody who most likely three years ago had nothing. And so that's all you're talking about. You're talking about To be clear here, we're not talking about a 10 to 20-year-old company. No, no, no. We're talking about a sub-five-year-old company. Which is disproportionate. They're taking more money off the table and the company has revenue in that case.

Most likely, yes, in that instance, yes. And these are being built into, it's not even that anybody else has a say. It's being built into the contract as such that, you know, if. Take it or leave it. This term sheet comes with the sort of, comes with the clause that you actually have to sell up. You actually have to sell us your shares. Because we're not getting enough allocation via the round. We'll just buy shares off the CEO.

We'll pay whatever the market prices, cash them out. And in some instances, I've seen people get close to $50 million via these sort of mechanisms. And to me, that feels very, very frothy, top, uncomfortable because you're kind of rewarding somebody for a job not yet done. You're kind of saying, hey, Michael Jordan, you took us to the second round of the playoffs. Yeah, here's your ring. Yeah, here's your ring. It's like, yeah, I'm not exactly. Yeah, there's still a few more games left to play.

Yeah, fourth place, eighth best seed, fourth best team. Like, yeah, you're not quite there. And I, that is, I think it's an eloquent way to describe it, which is we're starting to give people, I don't mind people getting a little extra credit. But if we're giving people, you know, their championship and their Oscar before they've even, you know, edited the film, you're like, wow, great screenplay. Those, you know, the trailer looks awesome. But like, what a script. Yes. And here's your Oscar.

It's like, uh, kind of want to see the film first. Yeah. Yeah. I think that's really, I think that this kind of idea where we're rewarding people for almost finished work is something that's going to come back and buy this on the ass. Absolutely. In essence, we're valuing 80% of the job. Like we're saying, you know, you deserve to be rewarded for almost getting to where you told us that you would go.

And because you're so close and we can see where you, we can see the kind of A to B of you getting to that actual end place. We'll just call it here and say that you did you know. I think crypto's got this going on in a crazy way. Listen, I don't want to give anybody a hard time about their investments, but my, you know, all my friends are in Salon. And I was like, wow, congratulations. This is like the greatest return in the history of venture capital or something.

And I had, you know, Sam from Slow on. And I was like, well, it's great. you know, you return $2 billion from a $500K investment. Obviously, it's not liquid. Obviously, there's not enough buyers to buy out $49 billion worth of Solana. Right. But I'm like, they have eight developers. Mm-hmm.

Because I have the Salana founder on it. And it's like, you have $4,000, $7 billion. It's like, it's $6 billion per developer. You know, we were talking how crazy it was and Facebook was doing aqua hires at $6 million. Right, right, right. No, right, $6 billion? And that, to me, is super dangerous because we had a sudden. the company grow from here?

How does an investor put money in and expect any kind of return? I don't know if you saw Fred Wilson's blog post, but he wrote his blog post of like, if you're pre-product, pre-product, forget about pre-product market fit, pre-product. You haven't built the product and it's at $100 million. How does a fund ever return 20% IRA? It's just not, he made a model and he said, maybe I don't understand it. Maybe there's going to be $100 or $200 trillion companies, but this doesn't add up. Yeah, basically you're expecting that, you know, when, you know, 10 years ago when all of us were so happy that, you know, we had a unicorn in our portfolio.

Now it's like, unless you have a decacorn because you invested so late, it doesn't, like, if you're investing at 100 million seed, you need a decadorn to you for it even to make sense. Yeah. It's just so great. What's the worst behaviors or just sticks with you story about this moment in time on the VC side or on the founder side? Yeah, I think, I think one thing that is kind of. leaving a bad taste in my mouth is like, you know, we always as an industry have spent a lot of money on like, you know, parties and events and off-sides and things. But it seems to have reached like an inflection point now where it's like people are just not even being at all

specific or seemingly having any sort of like corporate strategy as to why they're doing these things. It just seems kind of like for the sake of, you know, having our names in people's We're going to spend a million dollars on an art basil activation. And when you ask like, okay, well, how does that translate into customers? And how does that, you know, how does that sort of what's the feedback loop between your enterprise SaaS product and this Soho Beach House party that you just threw? It's really, really hard to get from A to B. And I think that like, again, we're in one of those flywheels where it's like, oh, well, you know,

X company that just raised 10 billion just did this massive activation and X, Y company that just did this. And so it's like, again. Crazy. Yeah. This is exactly what happened at the top of the dot com market. People started throwing million dollar parties, half million dollar parties, celebrities coming. And you asked yourself, well, is there not a better use of that for customer acquisition?

Right. Or staff to build the product and delight customers more. And you could look at both them. If you're throwing a million dollar party at Arpaasel and you said, well, our current customer acquisition cost is five. 500K, or $500, let's say it was a SaaS program, $500, we can get a new customer. Well, you could have a thousand more customers. Right.

And then you could have three more game-changing developers or sales executives. That sounds like a better deal. So is anybody doing that math? And I literally have a experience in this exact space recently where, you know, first-time CEO wants to throw parties. And I'm like, you want to use, you know, X percent of the money you just raised on a party on parties over the next year is this, can you show me a marketing plan? And, you know, I was just like, I'm the guy at the board meeting, like pumping the brakes.

Like, really? Like Jason Gallic-Anneson, I'm usually the most optimistic crazy guy who's like, let's go. I'm gung-ho, but I'm pumping the brakes. Like, I've seen this movie before. This is a sign of founder focus drift, which I, when you ask me how I make my decisions, but that flywheel, nowhere in that flywheel that I described of team product customer. is our Basel or some party. Yeah, when you're spending more than your MRR or even your ARR in some instances on one event, it like to me just seems like there is a misalignment between what is

what is supposed to be understood between capital allocators and people who are using that money to build businesses. And is one of the pernicious things now that if you're the adult in the room and you say pump the brakes, you're not going to get deals or you think your reputation is going to be as, a Debbie Downer? Yeah, I think that it's like, it's like, oh, like, well, look at that boomer. Like, they don't understand how culture and community is built in this modern day and age.

Like, stick to your enterprise SaaS and selling stuff at CES or whatever. Like, yeah. I think it kind of like, it almost puts you into this box of like, oh, you don't understand the new sort of way that technology permeates into, you know, public like consciousness or culture, right? Yeah. It's ridiculous. It's the stupidest premise ever.

Of course we know how it does. Like, yes, people buy commercials. They do influence or activations. Like, we sit here in any number of board meetings or strategy sessions talking about marketing channels. And nowhere in those marketing channels is just spending money like a drunken seller. Like, it's just not part of this. And if there's no accountability or strategy, no plan, that's what gets truly offensive to me. And I love the way you frame this.

And I'm going to reflect it back to you for the audience. the people who are doing this stupid shit, they are the ones with the most modest revenue. If you are at 10 million in ARR, you actually understand the value of 10 million in ARR and you're not blowing the million dollars on anything. Because you know how that flywheel works and you know that million could get you to 12 or to 13

because you're efficient. But if you're at 10K a month and 100K a year, you're like, yeah, this million dollars, you know, I raised 10 million and I did it in 30, days, so I'll just raise another 10 million next year with no absolute knowledge of the fact, complete naivete that trees do not grow to the moon and that $10 million might not be there. Yeah, the quickness of the round turnaround, I think is also a huge problem in this. And, you know, the fact that people are sending in term sheets a day after they've done their

first phone call with the founders. No diligence. Zero diligence term sheets. Oh, I mean, I'm not sure. like, yes, you've got to think, though, like, if a product, if you're investing a hundred million dollar pre-money valuation in a pre-product company, the only diligence that you can do is on the team. There's literally nothing else that you can do. And so, you know, like if you, and doing diligence on the team in a lot of instances is like, all right, well, we'll look at their LinkedIn. We'll talk to some of the old places that they work. And we'll

just get a general sense of from our community of what these people's sort of overall feel what the community's feeling on these people are, right? And I think that because round, nobody appreciates the money anymore, because the round turn around time is so quick and people are getting so much money for so little. It's like, oh, yeah, like I raise $10 million on 100K. I'll spend a million dollars right now because even in the sense, even in the off chance that I get to $300K, that should be a $30 million round. And so it's just this weird, f***ed up mental math that everybody's using.

But we as investors, and I say we is kind of like raw base, but the investor class is kind of like feeding into this because they're like, you know what, if you want to spend our money on a party, but we still get in the round, you know, like whatever. I have a funny story for you.

Please. I don't know if I can tell it here, but my God, it's such a great story. I mean, maybe a, maybe a two-sify sort of a. Well,

you have a, your profile picture is of Travis, Shervin, Snoop and Shug Knight. One of my favorite pictures of all time. What a group. I was there. I'm standing to the right of Shugnight.

Oh, stepped out of the picture. The story of this is I'm out one night with a friend of mine. I won't say the name. And we're at a club. And Snoop Dogg's playing. And Travis was out and I invited Travis to come sit at our table. And then Shervin is out and about and he had invested in Uber.

He's like, can you get me into the club? I said, sure, sure. He's like, can you put my friend's name on the door? And I'm like, yeah, we got to tell you. I think it's possible. Who's your friend? And he said, Shug. I said, Shug.

I said, Shug. I said, Shug Knight. And he says, yeah, Shug Night. I'm coming with Shug Night. I'm coming with Shug Night. He's like, yeah. Then somebody says to me like, Snoop Dog's plan. And I'm like, yeah, is like, Shug Night and Snoop Dog have like this crazy B for decades.

They're going to kill each other. Like they've got death threats. And, you know, I don't know if that's true or not, but I guess there was some story of this. Yes. and uh shervin like at the time like a little bit of attention i'll say i remember those days well yeah uh and so i go to the door and i say listen my friend shervin's coming uh is it possible to put him the list and i i know this is crazy he claims and i don't know if this is true or not and i don't know this person but he claims he's coming with shugnight i don't know if that's a disaster or not i don't

know if my friend is punking me, but I just wanted to give you a heads up. That if my friend does come, he could be with Shugnight shows up. Yep. Shervin proceeds to broker this photo with Shugnight and Snoop. Incredible. And tries to pull me into it. And I immediately, out of self-preservation, say, no fucking way do I want to be in this photo? So I immediately step back with my other friend who's high profiles and we're not being in this one.

because this will wind up in TMC, which is exactly what happened. My favorite part about that story, and I love Shervin, is that Shervin and should not have friends somehow, which makes all the sense in the world and none of the sense in the world at the same time. At that time,

Shervin had done the B round of Uber. Bill had done the A, and Prasaka and I had done the C. Shervin was so hyped on this investment, he put the Uber logo in the back of his head. I remember. And was walking around and people thought he was the third founder of company. I'm sure he loved that.

So people are like, you know the founder of Uber? I was like, which one? Garrett or Travis. And they were like, no, Shervin? I was like, Shervin? Like, he did the third round. There were like 50. I mean, I give him credit for doing it.

There were 50 people who wanted to do it, but he got it. So all credit to him. But I was like, yeah, that's an example of something I, wouldn't do. I'm not going to put the umpoural go in the side of my head. We can't expect the Robin Hood fade for you. No, I mean, I understand

like maybe a neck tattoo or something. Like, yeah. Just the palm.com. Yeah, exactly. There we go. O.G. But that was a pretty fine photo. I'm just happy it still exists on the internet. I was 50% responsible for it.

No, I'm 20% responsible for it. And, uh, it's 80% responsible for the showering photo. And thank the Lord I'm not in that photo. Literally, I have a lifetime of stepping out of the photo. Yeah. That's a talent that not a lot of people appreciate it,

and it should be appreciated more. Like, what's the upside here? People know I'm... Somewhat tangentially related to that. Somehow, friend of a friend in some other orbit. Like, no. I'm with a hard no for me. Well, listen, this has been great.

I hope someday we meet Are you, is it, wait, was this a goof that you're raising, a praying for exits, uh, fund? No, we've, we've, it's been fully raised, all committed. I'm going to start investing it at the top of the year. Okay. Does that mean you're leaving the fund you're at? Nope. Does the fund you're, right, here's a question.

Does the fund you're at know you're doing praying for exits? No. Oh my Lord. Yeah. They don't know, which means they, subsequently don't know about the shadow fund. Correct. But what they don't know and

they will probably appreciate is this shadow fund will serve as a scout fund for a much larger fund basically. How big was the fund? And is it like a rolling fund or something? Yeah, it's going to be, we have five committed. And it was like five with a cap of 10. And I just wanted five to start. So we did five. So you make a little

100K, 250K bets. It's twice to say your fund is bigger or the fund you work at is bigger. If you do in fact, work for a fund and this isn't all a punk. Justlammer, justlammer, justamer, justlammer. I have no idea who you are. Literally have no idea. Happy to find some ways to prove to you that I do have a fun,

but at the very least, this has been a great conversation and you're obviously well versed in all of this. So either you're a quick study and this is a complete fake or you're in it and it's completely credible. I don't care either way. It was an entertaining conversation. It's delightful

to watch you operate the handle I think it's funny. The Elizabeth Holmesuff was a little crazy. What do you think? Guilty? Will she be found guilty next week or no? You know what?

I think that... Or percentage odds she gets... So, yeah. I think that my personal opinion is that she is going to be found guilty, but that her lawyers are going to reduce what's coming to her by some very significant amount. But I think that the more important... part is that she will always be considered guilty by the court of public opinion. And so hopefully, you know, there's nobody silly enough to continue to fund.

I know she has some other ambitions in the venture space. Oh, really? She wants to be a VC? No, no, she doesn't want to be a VC. I think she's looking to start another company. Oh, my Lord. Can you imagine? Listen, I don't want, I don't want to be, you know, I don't want to say anything about

anything, but I would be very unsupportive of the people. that made that idea into reality. I would be like investing in the fire festival guy. Yeah, well, I mean, listen, I heard Adam Newman is going around picking up checks. So there's, you know, there's a bunch of... Well, that makes sense to me because I could see people looking at Adam Newman and saying, he got ahead of his skis, but the company did make it public. It did build an incredible brand.

He learned something. He'll be on his best behavior. Like, people will rationalize stuff in our industry to say, you know. The guy from Zepard is. benefits. I remember, yeah. He got a sanction from the SEC, and now he's built one of the great unicorns. So, you know, was that an, did the SEC get it wrong?

I don't know, you know. I guess they can get something's wrong. So, but people, if they think there's an opportunity there, will suspend disbelief. And he's obviously a great entrepreneur in terms of building product. I mean, he's transcended in that ability. So, you know, people will roll the dice. I think is the right way. To say, my thinking on Elizabeth Holmes right now is,

I think there's a 20% chance she gets off. You never know. But I was shocked to find because I just did a podcast about Elizabeth Holmes, the dropout. I just did the dropout. There's like 20 of these podcasts about her, but the dropout was like the best one or amongst the best ones. And so I did the dropout podcast.

And I was like, listen, they didn't call, the prosecutor didn't call any of the VCs who didn't invest. Like, no. I'm like, are you sure about that? And they're like, absolutely. I was like, I hate to tell you this, but I would have gotten her convicted in like three days. It would have been open-shut case. You put the 20 firms that she met

with on the stand and say, why didn't you invest? And they say, she wouldn't show me the technology. She wouldn't let me do diligence. Has that ever happened before that somebody wouldn't let you do diligence? No. Okay. Next person. What happened? She wouldn't let us look at the machine. She said it was

proprietary tech. Have you looked at proprietary tech before, sir? Yeah, all the time. Do you then release that proprietary tech and give it to other companies? Of course not. That'd be the end of my career and when we get sued. So when she told you, she wouldn't show it to you, what did you think? Well, that she obviously didn't have the technology and she's a fraud. Okay. Imagine you do that 20 times. Right. There's no juror in the world that would... There's no juror in the world that doesn't go guilty. Yeah. The prosecutor didn't call one witness. who turned them down. That's the equivalent of like,

this person's a serial killer. And there's five people who went to dinner with a serial killer and got bad vibes and left, you know, the date and didn't go back and get eaten and murder. And you're like,

yeah, we don't need to call those people. It's like, why did you run from the date with Jeffrey Dahmer? It's like, because I thought he was going to kill me. This guy was acting very strange. He was saying weird stuff. It's like, it's strange. But, you know, this other thing

where the press thinks that Theranos was a Silicon Valley, company is crazy. They're like Silicon Valley enabled this. I mean, there wasn't one prominent Silicon Valley investor in it. So it does seem a bit odd. So bonkers. But I think that your, your perspective on it is probably true.

And I think that if there is any justice in the world, and hopefully for our sake, as capital allocators, there will be a sort of line in the sand that's drawn about like, you know, like everybody in this industry tries to paint their numbers and paint what they're doing in the most rosy picture. But there is a cap on what you can do.

And I think that if she were to get off, it would kind of reinforce the idea of like, you know what, fudge the numbers, keep it pushing, just like continue to fake it until you make it. And then hopefully we'll all be rich. I think that that's like a very toxic way to position things.

I think that's well said as well. You know, like I train young entrepreneurs and eventually, you know, at my accelerator, launch accelerator, somebody will have a slide that says our customers. And I look at it.

I'm like, whoa, that's incredible. And I'm like, tell me how much do they each pay? And they're like, zero dollars. I'm like, it says customers.

They said, oh, yeah, they're on free trials. I'm like, that's my customers. I say, you know, I know you don't think that this is important. Right. But, and they're like, oh, yeah, these four are in our pipeline. I'm like, okay. One slide for pipeline, targets. These are people we want to sell to.

If you can help us get in touch with them, that'd be great. One slide that says free trials and then puts how many users are on it and, you know, some drill down metrics if they're actually using it. And then one that says pay clients and how much they're paying. And like literally I had somebody who had 3,000 customers and their product was like $99 a month. And so their deck never mentioned that they had $4,000 in revenue. I'm like, wait a second. What's going on here?

You should have $3,000 customers or $100 a month. You should have $300,000. You have $3.6 million. Why are you coming? Why are you even applying to the accelerator? they're like, oh, well, we only have like 100 people on trials and or a thousand people on trials. I was like, well, still a thousand people.

Yeah. 300 people. You know, we only have 100 people at 300 people. So that should be 30, not 10. Yeah. Or 4,000. They're like, oh, yeah, yeah. No, our original pricing was $5 a month.

And I'm like, oh, my Lord. Yeah. Like, you literally don't know you're committing securities for one in the eyes of the SEC. Sure. Like, and there needs to be something that people can look to. Like, if I do this, this is what happens to me. And I don't think that there is that exists. I don't think that there is.

there has been this one thing where it's like, oh, this person flew a little bit too close to the sun, and their wings fell off. We just had one. There was an app company in the peninsula here that just straight up lied about their MRR, and they got busted. And it was because some investor was told X and, you know, the tax return said Y or whatever. And they were like, okay, wait a second. When I invested, you said you were at 80 million in AR, you have 40 with some like app, you know,

metrics company. And the founder just straight up lied about their ARR. And he's going to go to jail and never be able to run a company. All right, listen, we talk for over an hour. Great guest. Everybody follow praying for exits on Instagram. It's hilarious. It's well worth following. And it was a pleasure having you on the pot. I'll hope to talk to again. Thank you, man. Appreciate it. I can't wait to hear how you're voice. I got to hear your actual voice, but we are going to mask it in a modulator. We worked hard on the modulator. You're making sure we're doing a great job, so I really appreciate it. Well, we will guarantee that we will not out you because we don't know who you are.

And hopefully you don't get out. I appreciate that. And we'll see you all next time on this week's service. Bye-bye.