This Week in Startups - SBF buys 7.6% $HOOD stake, SoftBank’s $13B loss, Twitter exec layoffs & deal update + Nicole Ruiz from Compound VC | E1459

Episode Date: May 14, 2022

First Jason and Molly cover FTX CEO SBF buying 7.6% of $HOOD (1:57), SoftBank’s $13B loss (8:29), Twitter’s exec layoffs (14:55) & give a deal update (21:50). Then Producer Rachel chats with Nicole Ruiz is an investor at Compound VC, a thesis-driven, research-centric investment firm (35:34). Together, they talk about her untraditional path to VC, their investment in Pear Bio, the importance of being a skilled researcher, and more. (00:00) Cold open (1:57) 4-for-5 Friday: SBF buys 7% of $HOOD (8:29) SoftBank loses $13B (13:51) OurCrowd - Check out the deal of the week at https://ourcrowd.com/twist (14:55) Twitter layoffs start (20:33) OpenPhone - Get an extra 20% off any plan for your first 6 months at https://openphone.com/twist (21:50) Twitter deal on hold (30:29) Gun.io - Get $250 off your first developer hire at https://Gun.io/twist! (31:45) Toss to this week’s OK Boomer (35:34) OKB with Producer Rachel and Nicole Ruiz of Compound VC (31:45) Toss to this week’s OK Boomer (35:34) OKB with Producer Rachel and Nicole Ruiz of Compound VC Follow Nicole: https://twitter.com/nwilliams030 FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

Snoop Dog has announced that he may have to buy Twitter now. So it's got a nice long, nice long tweet storm about that. So I'm just saying it's a multiple bitter situation. I'm trying to buy the assets to pass.com. I literally tried like three times. I just said it was such a great name, past.com. I know, that's so good.

And I was like, I told Dave Morin, like, can I ask them if I could buy it? He's like, yeah, sure, go for it. Because I didn't want to buy it and not, you know, we're friendly and I consider his friends. And I was just like, if I tried to buy that, would you be okay with it? He's like, they're not going to let me sell. And I guess some Korean firm I think had bought it. So if the folks who own Pat.com want to reach out to me, I would give them some equity in it.

I would back it. And I think it would be cool to have like a path. It's path is a little bit more like an Instagram-ish kind of thing. But I always loved the simplicity and the cleanness of it. And it really did start to work. And I think it would be worth paying for as a service. Call us. This week in startups.

is brought to you by Our Crowd. Our Crowd helps you invest early in pre-IPO companies alongside professional VCs. If you're interested in investing, you can join Our Crowd for free at OUR-CROWD.com slash twist. Open Phone As a startup founder, a lot of mistakes are easy to roll back, but using your personal cell phone number as your company number isn't one of them. Openphone makes it easy to get business phone numbers for you and your team right on top of your existing devices. Visit openphone.co slash twist to get 20% off your first six months. And gun.io, the simplest way for anyone to hire world-class developers, expertly vetted for you by senior engineers.

Get $250 off your first hire at gun.io slash twist. Hey, everybody, it's Friday, and we're doing four for Friday, because Molly and I have no ability to get through five stories, five minutes. So I guess the producers put us on a little bit of a medium-sized leash. We should just get right into it. We have training wheels, so let's go. Let's go. We can do this. Start the timer.

We can do this. All right, let's get to the first story, Molly. Story number one, FTCX founder Sam Bankman-Fried has bought about 7% of Robin Hood. shares are up 25% this morning Friday as we're recording that. For some context here, Sam Bank Ben-Fried founded a hedge fund that trades in crypto. He was like not happy with all the options for fulfillment of crypto orders. So he started FTX, which is a crypto exchange, but it's focused on institutional clients. So not like a bunch of foundations.

Yeah, meme buyers. I wonder, and you can tell me if this buy represents some confidence, some opportunity, around Robin Hood or an attempt to influence it more in a crypto direction? Yeah. So the person obviously understands markets and trading, right? And I guess if they're trading crypto for institutions, their arrival with Coinbase who also, I think I mentioned this the other day, just custodial stuff when we're talking about like if you lose your money, what happens to your crypto? And I guess they have like institutions where they will, you know, manage your crypto for you and be the custodian of it, but it's still your money.

and you have the keys and you have access to it. And then there's everybody else who's logging into an app. And that was part of that big controversy the last two days. If Coinbase, which is extremely unlikely, were to go bankrupt, what would happen to your crypto? And so I guess FTX is not a U.S.-based company. They don't operate in the U.S. in my understanding. And if their rival is Coinbase, well, Robin Hood and Coinbase are a bit on a collision course here, right?

Yeah. Coinbase does not trade stocks, but Robin Hood, of course, does crypto. And I'm still a Coinbase. I was an angel and I still own my shares. So, according to this SEC filing, emergent fidelity technologies, which is his company that he's the sole director and majority owner of, I took a stake word $648 million. What this is, is as we did the other day, this is just a really opportunistic buy, is my take on it by somebody who's in the know.

We did a little take the other day. what is the market cap of the company minus the cash in the bank, which gives you true enterprise value. If the true enterprise value seems insanely low after you net out their cash because the cash could buy that equivalent of stock, if you just think of it that way, people are bargain hunting. And what did I say last week? People were asked for earlier in the week. I should say, God, this is a long week. I said, we're bouncing along the bottom. This is the ball bouncing along the bottom. It will come to a rolling stop at some point and everybody will stop losing their minds. We'll create a floor, I guess, as they say in the markets. And it seems like, you know,

today we got the bounce. We have people like Dara bought $5 million worth of Uber. That's another one of these opportunistic buys like this one. I think Toby bought some Shopify. I saw that the guy who does iHeart media, Bob Pittman bought some shares of his own company. He's the CEO of it. So when you start seeing that, you know the people who are in insiders or who are very sophisticated, realize there's an opportunity here, and they might have some cash laying around. Also, Daniel, I think, bought 50 million in Spotify. So people can criticize these buys, but, you know, as like, oh, they're trying to pump up

the stock. It's a pretty cynical look, but, okay, sure, you can have the cynical take on it. My take on it is money's money. If you're placing that bet, sure, you're making a signal, but it's still money and you're still making that bet. So if it's a seven-figure bat, it's a seven-figure bat. Or an eight-figure-but. In this case, it's a nine. Nine-figure-bet, yeah. A lot of figures. A lot of figures here. Robin Hood hit an all-time low of eight-fifty-six, 77 percent from its IPO price. And I don't know where the high watermark was, but it became like a meme stock for a hot minute, like where it went to 50

or 60. That was just like one, that was a really weird day. To be totally honest, they should never have done that, these weird pops. But yeah, I think. think he is just making an opportunistic buy. That would be my take on it. And I think you'll see a lot of these opportunistic buys when things are worth, you know, the enterprise value makes no sense. And I don't know what Robin Hood's exact cash position is now in their exact market cap because it's obviously going up and down 20% over the same week. Minut by minute. But it was it was five billion in cash or something to that effect. Oh, 6.2 billion. So Robert has 6.2 billion. And now his current worth is 9 billion after the price.

So, I mean, is the company worth $3 billion? And yesterday, it was worth $7 billion before the bump. So if you take out the $6 billion, it was worth $1.2. Whatever it was. I think they hit a high watermark of $21 million active accounts. Maybe they're at 18 now. Those people are not opening their accounts. I don't blame them.

If your accounts that down, a lot of people don't open their accounts. It kind of looks like SBF has a bit, which apparently he goes by, SBF, Sam Bankman-Fried, has been, like, interested in Robin Hood for a while, way back in 2021. in June. He talked about how the name is so awesome. It's easy to parse and remember. He goes, four years ago, someone told me once that Robin Hood was a zero fee retail stock trading app. I never forgot that. So 100% opportunistic and in our last 20 seconds, a way to probably get even a bigger foothold in the U.S. market. Sure. Is he the weirdo who like dresses like he's like living on the beach in Kauai and doesn't have a home?

They're all weirdos to me. And he's got like crazy hair. I'm like, yeah. he's that guy. Yeah, this guy's a little bit iconoclastic, and it's working. It works for me. I like a guy who looks like he lives in a tent in Kauai and is worth a couple, Billy. I like it.

I got no beef with that. I got no beef with that. All right. Story number two. If I didn't have a family, I would literally love who literally sell every asset I have. Get a tent, put everything in storage, all the Tesla's in storage,

and just live on the beach. And just live on a beach in Kauai and just be that guy who's like, goes and buys a shaved dice and gives a $100 tip every time. It's a shave. You can't call it a shave dice or they won't let you live in Hawaii. Shave. All right.

Topic number two. Okay. We did it. We're close. We're close. SoftBank. Ooh. Yeah.

Talk about bumping along the bottom. SoftBank lost over $13 billion in its most recent fiscal year, the largest loss in its history and will cut back investments. A lot of Silicon Valley companies and start starving now. Soap bank will cut back investments by 50 to 75% going forward. This is, of course, after raising the largest venture fund in history, Vision Fund 1, which was $100 billion. They raised $50 billion for Vision Fund 2, which is currently being deployed in that fund. You know, they even started to run into trouble raising because that fund includes $30 billion of SoftBank's own capital.

Got it. Yeah, that's $13 billion. I have question for you, Adam. Oh. Smart man or crazy man. Smart man or crazy man? Adam knew he claims, by the way, that his response was smart man. And then Massa was like, no.

Masa, Masa, Masa, Masa, Maas. Smart man always win, Masa. And Masa was like, no. Adamson. No. Crazy man wins. I call you 2 a.m. It's getting canceled. You're going to wait until next week to get canceled.

You're just going to do it now. I know, I can do a Japanese accent. I think that's allowed. I think so I don't know I'm doing a Masa impersonation I think I'm allowed I don't think I'm allowed

I don't think We're gonna find out We're gonna find out I can do a Mossa accent If I can do a Mossa My Northern California 15 year old is like no I think I should do a dramatic rewriting of the script

Where I play both Mossa and Adam On the next inside stream I mean I would listen to the hell out of that I'm just saying And then I should have like Elizabeth Holmes come. And you can just play Elizabeth Holmes. We can just have the three of them talking. I mean, honestly, I cannot wait to be Elizabeth Holmes for Halloween.

Let's talk. Let's go through some notable soft bank investments because out. Okay. Lemonade down the insurance, easy insurance company, down 50% year to date. Okay. We work down. Not so bad considering everybody else. I mean, really, right?

Could be 80. We work, of course, down 30% year to date. But that's after that. like 50, 30 something billion dollar markdown. Yep. They originally invested at $40 billion. Kuang, a South Korean e-commerce company down 55%. Zymergen down 75%, the synthetic biology.

I had high hopes for that, but ouch. Uber, as we know, down 44% and Compass, the real estate company down 45%. Masa's own net worth has dropped $25 billion due to soft banks drop. Two-thirds of his total net worth. All right, listen. this Masa is the guy who's been through this literally more than anybody. He was the richest man on the planet for a period of time. This is, for him, this is normal.

So these big swings for everybody else is like, oh my God, you know, like literally people are, I mean, sadly, I mean, there's reports of people talking about suicide on Reddits. And if you are and you're a young person or an old person and you lost your fortune and you made a stupid bet, there is no reason to kill yourself. Go find help, go talk to somebody. This two shall pass. You can build up your chip stack. You'll be better for it. You'll learn hard lessons. You're loved.

Do not make an irreversible decision based on a very reversible situation. One of the great things that can cap into you in your life is to get your ass kick and then come back and kick ass. Just think about how glorious it would be for you to lose everything in your Luna or a stock or whatever it is and then come back and be triumphant. Put your faith in that story. You are not defined by your worst decision. Okay, there's my BSA. Please don't kill yourself. He lost 99% of his net worth in the dot-com busts.

Yes. And he went back to look. Everything. Yes, many times. And, you know, yes, he's lost two-thirds of his net worth and his net worth is still measured in the bees. Yes. This is no problem. He can handle the swings.

And you know what? There is something to be said for people who are bold enough to put their chips in the pot and to have a little variance. Now, my piece of advice for folks is, you know, always pay for your home if you have games, put money in your kids 529, don't touch it, have a nest egg, have a floor, have a foundation. I did that in my life. That's why you see me out here so happy. That's why you see me playing as if I have a bunch of rings like Steph Curry or Draymond,

because I do. And there's no way for me, with the exception of my, you know, if I had an untimely death, I'm going to enjoy the hell out of it. So I think Moss is in the same camp. He makes the big swings. He goes where he's bold. And he'll be fine. And so my hot take on this is Tuesday, Wednesday, Thursday, Friday, whatever.

He's just going to get back to work, find something great and crush it again. And we need people like him out there making big bold bets. Do they seem crazy to us? Sure. But he's playing a different game than y'all. He's playing a totally different game. And if you look at the course of history, the guy has put up numbers and he has created and helped create some of the great companies of all time.

Criticize it if you want, but he's winning. All around the world, tech companies are innovating and thriving returns for investors. And our crowd is an investment platform that analyzes many of these companies across the global private market. Then they select startups with the greatest growth potential and bring them to you. from personalized medicine to cybersecurity to robotics and quantum computing and so much more. In state-of-the-art labs, startup garages, and anywhere in between, our crowd identifies innovators so you can invest when growth potential is greatest,

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That's O-U-R-O-W-D. dot com slash twist. That's O-U-R-C-O-W-D. dot com slash twist. All right. Topic number three. Ooh, Twitter. Twitter making some interesting management choices considering the state of uncertainty

that it's in right now. The company has announced a hiring freeze and head of product, Kvon Bigpore, was fired while on paternity leave. Okay. It's a good headline, but clearly mad enough that he tweeted about it. So he was on, Kvon Bigpore for Context was on episode 1225 of Twist last year. He is actually known to be one of the people who jumped started Twitter's product velocity, which as we know was non-existent for a long time.

His team helped ship spaces, super follows. Twitter Blue fleets, RIP fleets, communities, all of that. Yesterday, he tweeted the following thread and let people know that he was fired directly by CEO Parag Agra Wall. He said, interrupting my paternity leave to share some final Twitter-related news, I'm leaving the company after seven years. It was not my decision. Okay.

All right. I think, number one, as I told him, and, you know, I think there, it has been very, it is a very hard position to have. You're not the CEO. You're responsible for the product. You've got a board that is sending mixed signals. You know, you should be growing. You should be cleaning up the box.

You should not be cleaning up the box. You know, there's a, this is like, you're getting pulled in all directions. This is like you're the chef at a restaurant, and there's four owners. And one of them wants it to be like, you know, high turnover, fast casual. And the other one wants it to be fine dining. And you're just like, I can do what you want. Just give me a direction here, you know? And then somebody's, you know, and then somebody's,

coming in the back and saying, yeah, but I want it to be vegan. You get him pulled in all different directions. He does not have an easy job. I will say, their shipping of spaces was done very fast in response to competitors. And Twitter Blue, they got it out there. It wasn't, it didn't hit the right notes. It didn't provide enough value. But I think he knows the value it needs to provide.

And there were just too many cooks in the kitchen. Twitter Blue was the perfect example of like, somebody had a big vision. And they're like, yeah, you can't do those three things because those are sacred cows. but what else you got? And they're like, well, here's like the next six ideas. I'm like, yeah, throw those six ideas out. And it's like, you really need to do the number one idea and the number two idea. And so now you're just, you took the stars of the show out and it's just not going to work.

So a really hard job. Now, to the point of like while on paternity, okay, if your paternity happened to be during the moment in time when a company is being sold and there's an epic downturn in the market, there's a caveat here. You know, it's just bad timing. It's, that's not the CEO's fault. it's not the product managed fault is nobody's fault so it's a great one for the press to like you know put in there as a dunk or for you know people to virtue signal how could you do that well if he's

going to be out what if he's on paternity for six months this company is there's stuff going on yeah i mean we're in the thick of it here and in fact i mean i don't listen let me tell you something also if you're on paternity in the middle of this i'm a dad i think i would be like you know what I need to be back at work for a couple days a week at least to figure out what's going on. That would be my decision. I wouldn't blow out on paternity for three months in the middle of this. I would talk to my spouse or a partner if I had one and said, I think I need to be in the office two days a week while this is going on.

And maybe he was, who knows? But this whole paternity thing, let's just put all that aside. And what's the reality here? They need to make a lot of quick decisions here. And maybe they want to consolidate who's in charge. Maybe the CEO wants, maybe for us, wants to make these decisions and then move faster. Isn't Perot going to be gone?

Like my question actually fundamentally is not about attorney leave at all. It's like if you think you're, I guess the question is sort of like, how do you react when you think you are about to be purchased and that you yourself CEO are gone? Do you make a bunch of changes? Or do you just like shut everything down and freeze it? I mean, they froze product releases. Like I just think it's a really interesting time to be like booting your leadership. We don't know all the facts here.

This is like one of those perfect situations. where there could be three or four really important facts. And we're looking at this chessboard saying, why did you move the queen here? And it's like, right. And we literally are seeing 10% of the chessboard. So imagine all you saw was the queen exposed, but you didn't see, you know, that when you move the queen,

it exposed checkmate, right? Right, right. You know, there's this concept of like, you can have a checkmate occur because you moved a piece out of the way. You move up, you give up a pawn, but it creates checkmate. and the person can't move, you know, whatever, or it creates a check. So this is that kind of situation.

So I would encourage everybody when you see something like this happen and you can't figure it out and you're like, during paternity and that's the headline, understand we know nothing. There could be that the person wasn't getting the job done or missed deliverables. It could be that the CEO wants to cut 50, I don't know, a third of the expenses, right? and they're consolidating the team down. And maybe Kavan doesn't want to do that, right? So he said, I don't want to make cuts to my team.

We saw this with the Apple person who said, like, I'm going to be remote and they challenged a mod and they said, okay, well, you can quit. So sometimes there's a standoff like that. Again, we don't have the information. So I would encourage people to understand. Barag is in a difficult decision, is this a really difficult decision, a situation, and Kvon's in a very difficult situation. And we see but 10% of the chessboard.

We don't know. But I wish well, and that's a good get for somebody, by the way. somebody hire him. Good get. That is a good get. Absolutely. Listen, lots of founders are Lucy Goosey with their personal phone numbers. You know about this problem.

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You're done. And you can create a shared phone number. How great is that? You know how you have like an email for customer support? You do VIP ad. Now you can have that for a phone number where multiple employees can feel calls and texts, including those texts super important because that's how a lot of business happens. A lot of these young folks, they don't want to talk on the phone.

They want to text. Well, open phone can help you with that as well. And it's affordable already. It's just $10 a month. I mean, it's so affordable. It's ridiculous. I think they should triple their prices. I think I would pay $30 a month for this, but they charge $10.

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If you're thinking about phone numbers, I just want you to think openphone.com slash twist. That easy, folks. Speaking of Twitter, there's a reason we save this for last because, again, we don't know about fascinating. Yesterday, Elon Musk tweeted that the deal was temporarily on hold. pending determination of how many actual fake users there were. The company estimated that under 5% of users were fake accounts. Elon, of course, has previously said one of his main goals was getting rid of the fake and bought accounts. It sounded like he was waiting for Twitter to provide more robust data about the scale of the fake accounts.

And then I tweeted quite soon after still committed to acquisition. Sure. But then, of course, then everybody was like, ah! is my sum up of the response to that was that. That's what happened basically. Yeah, I mean, it's a dynamic situation. Yes. It's a very dynamic situation.

I mean, can we even talk about this at this point? I'm just going to be honest with you and tell us to tell you that I was like, no, CNBC. I cannot come on. Right. Like, I don't know even really, like we're in a weird, we're in a weird spot here. We can't comment. We can't comment. We can't comment.

That's it. No confidence. I think that's the best possible. Pretty simple course of action here, which is we knew this day would come. And, yeah. So, yeah, there's a deal, and it looks like the... So those tweets happened. There's, well, let's see, all these deals are a process.

And during this process, the market has crashed. And, you know, diligence occurs. And so, you know, it's... I wish Elon well in it. And I hope it happens. I really hope it happens. And, yeah, diligence is important. So Twitter currently has 229 million multi-active users.

5%, I guess is what they said in terms of it's under 5%. 5% times 200 is 10 million. 5% times the 30 million is another 1.5. So that would give you 11.5 million bots. 11.5 million fake accounts are bots. And so the questions I have about all that is like if you have, if you're Molly Wood and you have six accounts. and one is your Molly Wood account

and what are the other five? Are they real accounts? Where you're really, you know, so I guess defining fake and bot accounts is going to be important here. I would be very surprised, you know, and I'm guessing they net out automated accounts or fake accounts,

but who knows? You know, I don't know that this data, you know, again, back to like, what do we know, what do we don't know? Companies put out data, how would anybody know how they came to that, right? So it's not like these definitions are there. and what are the let's maybe it's useful here to look at like Facebook because Facebook

Facebook has a real Facebook has this real problem and they sort of keep they have a real names policy so it's they don't allow automated accounts a ton of a ton on a number basis but on a percentage basis very small right so it might be a ton of yeah because you know it's very easy for them with the social graph Facebook quietly admits to nearly as many fake or clone accounts as the U.S. population was one headline in 2017. And that sort of keeps happening.

March 22nd, 2021, Facebook says it took down 1.3 billion fake accounts in October or December, admits to having up to 270 million fake accounts. I just think it's sort of like, it's probably a bigger problem than anybody really wants to admit. I think it's one of these problems. But I'm not sure that's entirely the point either.

I bet you say fair. is really proactive in killing them in real time, right? Because you do have these like companies, typically like in India, where they have like banks of folks who you can pay to create tons of accounts. Like they have phones with VPNs. You just pay them and they'll make you a thousand accounts on Instagram,

a thousand accounts on this. And then they'll get you 30,000 followers on Instagram. And it's a, it's an information business, basically. They'll also get you reviews. I know this because when I was on the, board of a lot of companies. Inevitably, they would come to me and say, hey, you know, we can boost ourselves in the rankings in the app store by hiring this company based in India, you know, Manila was the other big place for these boiler rooms. And, you know, they're English speaking.

And they have all these Android phones. They've, I mean, and I've seen pictures of them. You can Google it. Oh, yeah. And just like they're social farms. Yeah. And they will, they're pretty sophisticated. except when it comes to the naming of the accounts,

which is generally like a really like crazy Americana name, like John Jones or Susan Smith, and then a random number sequence. And then no photo or a weird photo of a piece of fruit or a sunset. And you're just like, okay. We need to work on that. But you look at your follower. This happens to me because whenever you're a verified account

or you have like the name at Jason, you will all of a sudden one day see 3,000 followers. And you're like, what? I get 500 a day. Why do I get 300? I get 50 a day. Why did I get 500? When you see those spikes,

if you go to your followers, you'll just see them. And then you click on five of them and you go look at them. Oh, we did this actually. Remember when all the Republicans got those followers? And I was like, I think this is a bot attack as well as whatever. And it was, in fact, a bot attack.

All of those people were like brand new accounts or like no image, right? They didn't put their image on. Totally. Although I think back to our no comment. Back to no comment. Of this, I definitely don't think the fake accounts are actually leaving the story here. Breaking news as we go to the last part of our show, Snoop Dogg has announced that he may have to buy Twitter now.

So it's got a nice long tweet storm about that. So I'm just saying it's a multiple bitter situation. I'm trying to buy the assets to pass.com. I literally tried like three times. I just said it was such a great name, Path.com. I was so good. And I told Dave Morin, like, can I ask them if I could buy it? He's like, yeah, sure, go for it.

Because I didn't want to buy it and not, you know, we're friendly and I consider his friends. And I was just like, if I tried to buy that, would you be okay with it? He's like, they're not going to buy, let me sell. And I guess some Korean firm, I think, had bought it. So if the folks who own Pat.com want to reach out to me, I would give them some equity in it. I would back it. And I think it would be cool to have.

have like a path. Its path is a little bit more like an Instagram-ish kind of thing, but I always loved the simplicity and the cleanness of it. And it really did start to work. And I think it would be worth paying for as a service. Call us. Call us, path.com owners. And also a great domain name.

It's a great domain name and great design on that product. Yes. All right. I think we mostly did it. We even sneaked in a fifth story in four for Friday. All right. enough of four and a half for Friday. It is time for everybody's favorite Friday.

Four point five Fridays. Four point five for Fridays. We just like a little fractional investing around here. Yeah. Okay, Boomer. Round up. With everybody's favorite producer, Rachel. Nicole Ruiz is who she's talking to today,

an investor at Compound VC, a thesis-driven, research-centric investment firm. Quants are back. The kids are doing quants these days. Yeah. Nicole is extremely smart, but she had to explain everything. to me, like she was explaining it to a five-year-old because compound VC is incredibly awesome,

but they do invest in things like med tech. I don't know what's on happening in med tech. The coolest thing that she explained to me was their investment in pair bio, which monitors cancer progression and they're doing really awesome stuff. She had a really untraditional path into going into venture capital, where I'm starting to realize that there is no traditional path, I guess, going into venture capital. Her is extra special. Overall, I think it's going to be a really cool episode for people that are interested in alternative investing, especially those that just aren't interested in that CPG space.

I see a lot of Gen Zs that are interested in investing, gravitating towards like consumer social, CPG, things like that, like more of the sexy industries. And she is really focusing in on a little bit more on traditional things, deep tech infrastructure. So really cool. I love to see that. You love to see like especially if. If we're just leaning into the trope here, you'd love to see the idea that a Gen Z investor, a millennial investor is like,

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how scary it is more so, that you're seeing so many young people really wanting to be things like influencers or TikTokers or YouTubers when they grow up. Whereas like just a few years ago, you know, you had kids being like, I want to be a scientist, I want to be an astronaut and just like the detrimental like effects that could have. I think she's like a great person to have as a role model, especially for young women that are interested in investing. Yeah. Yeah. Totally. I mean, there's a lot of trends going on here at once. You know, we're starting to see a lot of diversity in the investment class. We're starting to see a lot more women, people of color, and we're seeing a lot more young people, right?

And so I think that's great that the people who are writing the checks are younger and more diverse. They're going to see things that maybe the people who, you know, 10, 20 years ago were, you know, a bit of a monoculture in venture is now cracked open. And that means more entrepreneurs are going to get funded, maybe who didn't fit a certain mold that that monoculture had had previous success with. Because once you have success betting on things, you become, you have a little bit of survivorship bias, confirmation biases, all these biases. We talk about mental models and in venture. And, you know, I always try to fight against those. But, you know, if you had a success in consumer apps like Uber and Robin Hood and Com, all of a sudden, you're just like, ooh, consumer apps, you know, and then, oh, you know, Sacks had a bunch of SaaS wins and, you know,

Friedberg had a bunch of science wins. It's very natural for you to pursue the things you're good at, the things you've had success in. Now, that could be in a topic, and it could be on the theme of the company, it also be, people don't want to say it, it could be in a certain archetype, somebody who went to Stanford, somebody who went to Stanford for a science degree, somebody who went for an MBA, somebody who's tall, somebody who's a male, somebody who had this pedigree. And, you know, people don't like to admit that they have biases. And in some cases, they don't know they have it. So this is just the great result of the last 10 years of the change in venture capital, which it's just really nice to see. I think it's a great win for the industry

that there's more diversity in younger people doing it. And it's easier and easier to get into venture. The numbers in venture are going to be an entrepreneurship on a gender basis are going to change radically because if you look at college right now, the statistics for men going to college and for graduate degrees is plummeting. It's 60 or 70% in some areas, including like science and things that maybe people were like, oh yeah, that's traditionally male dominated. The graduate degrees and men in college is going to be 60, 40, 65, 35 female to male. What is that going to look like in 10 years? that's going to be really interesting.

So we're going to have the pendulum swing the other way. I don't know why these guys are not going to college or for graduate degrees. And they're playing too many video games and trading too many NFTs. Yeah, they're trying to become TikTok is just something. It's really cool being like a young person interested in the tech space and the investing space during like this entire movement where I feel like I have so many awesome people that I can look up to. Whereas like if I was really interested, even just a few years ago, maybe like five, 10 years ago, I don't necessarily know if like the landscape would be the same right now the shift is happening so very very thankful yeah also i love anybody's twitter bio like nicole rezes who where her uh cover photo is uh brittney spears guide to semiconductor

physics this is going to be a great interview she is incredible yeah enjoy everybody have a good good enjoy everybody thanks sit down rachel rachel reports thanks get okay boomer okay boomer i understood the assignment thank you so much for joining me today at nico um this is very very cool for me i've been follow you on Twitter for a while now. For those of you who don't know, Nicole is an investor at compound VC. She's pretty popular on Twitter. Super smart. Thank you so much for joining. Of course. Yeah, excited to chat. So can you explain a little bit what compound VC is? Totally. Yeah. So we are a firm that's focused on the pre-seed and seed state of companies. So typically, in pre-incorporation sometimes to, I don't know, around two or three years into operation.

we are focused on Frontier Tech specifically. So Frontier Tech means a lot of things to a lot of people. We say the common denominators of these companies are machine learning, robotics and automation, digital health, biotech, synthetic bio, decentralized computing, next-gen computing, DFI, crypto, all that good stuff. Plenty of things outside of those categories, but we're super thesis-driven as a firm. So we take a lot of time to read white papers, dig into technical communities around these industries more broadly and basically develop a view on what a core technical inflection point is

that's coming up and why a new company that's built there would be built off of that new technology. And so that's us. We're on our fourth fund. We've been around for a little bit over than over a decade now and I joined about two years ago. That is very, very cool. You got your job and venture in kind of a unique way. Can you walk us through how you were able to, how to land this very, very sick gig? Totally, yeah. So I guess I'll add some of the context that I had an atypical background in general. I didn't have a college degree. I tried college. I tried community college. I did Lambda school for a little while and jumped and dropped out. I did MOOCs online. So all sorts of types of education and then obviously sort of more self-taught as well. But I lived in D.C. at the time. I moved up to New York recently and was interested in the tech community. It's very interested. in machine learning, especially machine learning, applied to healthcare and a lot of these newer areas of research. And so, uh, sort of realized that a lot of people got their jobs by, you know, not just having a college degree, not just like applying through a job portal and

started sort of going to professional meetups all the time in D.C. There's a lot of things to attend. There's a lot of things you can sneak into for free. And so I would do that and sort of just ask people like, hey, how did you get your job? What do you do? You know, what's the day to day look like. And then more specifically, started putting a ton of white papers on Twitter. I found, you know, white papers for the industry super interesting. Then I also found that, like, academic people are super willing to answer your questions. And so, you know, it's almost the better version of what LinkedIn should be, which is like a lot of researchers posting what they've been working on. And they're super happy to answer any questions about like what their research means. And so that was super

exciting and started doing that more and more. And then Michael Dempsey, who's a GP at compound, who I'd been mutuals with him on Twitter. I was job hunting at the moment, and I guess he has said that he was just sort of intrigued by all the weird sort of machine learning-related stuff I was posting, and so he reached out and said, hey, we should have a chat about venture. Are you interested in the industry?

I didn't know a ton of things about the industry at the moment, but I knew I liked Mike's writing and the approach of the firm broadly, so we chatted and sort of learned more about compound's focus and the thesis-drivenness of it, which I love. the rest is history. It's awesome. I guess there isn't really a traditional path into venture anymore because every time I talk to somebody, I feel like it's radically different, including the way that you found your job. And similarly, I guess, to your boss with how you discovered you post-machine learning, I think one of the first tweets that I saw from you was in the quantum space. And

definitely in the healthcare space, if it wasn't just in the quantum space, I would love to hear your thoughts a little bit about machine learning powered healthcare because your content on that is really interesting. Totally. Yeah. I'll start out with what first got me interested in the industry and then I can expand what's interesting now. So originally in 2017, again, was super interested in ML, reading all these white papers that

would publish online. Google Research published this paper on Federated Learning, which is a type of machine learning where you're basically storing models, your training models locally. And so if you have an iPhone or a Google phone, like both of your keyboards will use this technology, which is basically not sending every bit of a conversation that you send to the cloud. So your information is stored in Google's services or Apple servers. They train models locally to predict text, right, predict what you're going to say next in conversation, and then only send the high level takeaway to the cloud.

So I found that super interesting because healthcare broadly has a ton of interesting applications of just basically studying data at a larger. scale to make predictions, do diagnostics better. But there's a number of regulations around the category. HIPAA is one of them. And those are rules about where your personal data can be sent. And that makes machine learning a lot more complicated. Plenty of them, plenty of those rules exist for good reasons.

But there's also plenty that can be done safely in the near term with that data. And one of those things is using federated learning to make predictions off of your healthcare data about whether or not, you know, some circumstantial data you have around your own body and your own markers that might mean you're at risk for kidney cancer. Maybe you should go get checked out. And so privacy preserving machine learning is super interesting. And that was what originally interested me in the space. But more broadly, there's so much being done right now.

Genetic testing is a huge one. People who have outlined conditions like treatment resistant depression, for example, or other things like that, there are often genetic markers that can tell us a little bit more about why an SSRI that a person is prescribed doesn't work for them, why it might cause a really bad experience. And rather than going into that prescription more randomly, you can begin to take their genetic data as a person, you know, submits their data to this company, and understand how to make better predictions off of things like SSRIs or even birth control or things like skincare as well. So that's another area down the rabbit hole on recently.

That's so interesting. It's funny because I think mental health is one of those like sectors of medicine where it's so trial and error for lack of a better term, but it feels so trial and error that you would think there is a better, like a better solution. So if there's all these laws like around HIPAA, right, how are these companies actually able to collect data? Is this like all volunteers that have to like give up their data to them or? Yeah. So is this with, so the cool thing about federated learning is that with HIPAA there, most of the time you're actually totally fine. Because that specific personal data is staying on the device that you collected on, the company isn't collecting it. They're collecting a high level, sort of like meta-level analysis of how a model should change.

And they're not saying, for example, to switch away from healthcare data, if you were sending your social security number to somebody over text, that number never gets stored in like Google servers, in which case, you know, you're avoiding that thing. with some of the companies we've seen on genetic testing and more broadly personalized healthcare, sometimes they do have to go through HIPAA approvals. Sometimes it's perfectly fine and a patient will go onto the site, upload their data and say, you know, I trust you as a company. You've demonstrated that you're not going to sell this to anybody. You're not going to, you know, prescribe ads to me based off of this. And then that's, you know, another way to approach that problem.

Totally. That makes sense. I am a little afraid, though, I have to say, about anything in the medical space and venture capital, Like, how do you know that you're not being serenosed? I mean, technical diligence is definitely important. Yeah, you don't want to be thereinosed. We have a great bio researcher on our team who definitely helps us with that. I think learning how to read white papers is super important on that front, right? Because if you hear from another VC that it sounds great,

but you don't actually dig into the technical side of things, we think that puts you at a disadvantage. And so that's definitely part of why we operate the way we do, which is like being able to read white papers and begin to understand them. Again, you're never going to be as deep as somebody in the industry. And that's why we also talk to people about their research, we talk to academics, et cetera, to help us learn these things. But yeah, definitely, definitely digging into research.

Because it's not like consumer where you'd actually be the one that's using the product. The serenose came up in my brain when I was checking out one of your guys's investments, a paribio. It seemed pretty cool. It monitors cancer progression of patient-derived tumor samples. against potential treatment options. Their organ on a chip technology recreates core parts of the human tumor microenvironment for accurate testing.

That's freaking awesome. Obviously, I was just reading this off of like their website, but that seems incredible. But again, like I said, the first thing that comes to mind, I'm like, wait, is this like real? Like, is this actually working? So is this company fully fledged doing this right now? Yeah. So I can give a high level description of what all those things mean and then tell you a little bit more about how they're doing it.

So basically, they're using something called Oriana Chip. It sounds crazy, but really all it is is like a petri dish that's fully enclosed. You have holes on each side so you can understand how different fluids are moving through that chamber. That's important because, like, in your body, cells are typically surrounded by fluid. And understanding how those two things work together gives you a better idea of the environment that a tumor, for example, is existing in. And so you then take a slice of a tumor from a sample from a patient. A patient submits that to the hospital, a hospital then sends that to paribio. Parabio then tests a number of different chemotherapies across all of these samples.

They use computer vision to understand the progression of tumors over time, maybe certain movements are indicative of the chemo actually causing it to metastasize, in which case that would not be a good, that would not be something that you want to prescribe to a patient. And so helps them gather data, helps them understand what chemo is that they can prescribe to a patient. They had done some initial trials. They're going through another clinical trial right now. So you want to get plenty of patient data before you make sure it's safe and that it works well and that the models are predicting everything accurately.

But again, it's just a way of getting more complex data around these things before you have to try them on a patient. And specifically, Pair does it incredibly quickly in less than a week. And so if you have high growth cancer, that's an incredible differentiation to be able to have, to be able to have that data across a number of different samples and say, okay, we've actually seen how this will interact with the tumor itself. here's what you should try. That is so freaking cool. So as you are explaining all of these things, I can't help wonder, why don't you think there are a lot of young investors operating in this infrastructure space? Yeah. I think broadly there's a few things. I think one is that we need more more sort of research-driven firms. I think the more you're able to engage with primary sources, it helps you sort of form your own opinions about what's going on in this space. I think,

a lot of people are nervous to engage with white papers. They're so dense and maybe don't have a background in the field of the thing that you're looking at. But really, if you already don't know something, what is the worst that can happen as you begin to try and learn those patterns, read them yourself? So you're never going to understand everything, but it helps you sort of pull an expert, find other people to talk to. You can ask them, okay, am I understanding this space correctly?

And so I think it's easier to maybe look at things that a lot of other people are looking at, and that's not bad. But I think it's definitely exciting as we see more. people get comfortable with engaging with newer research and developing non-consensus opinions around those things because the whole thing that venture capital is best at is putting money into very non-consensus bets that could have massive, massive payoffs, even though they're maybe really crazy research. And so, yeah, definitely excited to see more people enter the space. Yeah, I definitely hope to see more people go into this. I feel like I, even on

this show, to be honest, we've had a lot of people that are VC's on, especially on my segment, but they have been investing in things like consumer social, SaaS, not necessarily things that are quite literally helping cure cancer or at least detect cancer at like a much earlier rate. I also noticed that on Twitter when I like violently stalked you before the show, you're really into philosophy. And I find that a lot of really good investors are really into philosophy. How has having that as like a passion or something that at least you seem to pretty well

versed on impacted you as an investor? Yeah, I think, oh man, a few different ways. Honestly, I've always been interested in philosophy and tech, which is maybe a little trite to say at this point. Obviously, machine learning and AI communities have gone through this whole, like, ethical reconciliation moment where everybody's like, how do we do this better? How do we create rules about using these things better? But I think it's just another tool in your tool walks of how to think about the world that

you want to exist and how to sort of approach that as sort of like a starting point of like, what is the world missing? And, you know, there's lots of things that would be great businesses, but do we want that business to exist? And how would it help people and how would it help, you know, a number of different types of people. And so, yeah, I think it just helps you develop frameworks around thinking about these technologies.

I agree. And I keep talking about your Twitter and you got your job off Twitter. I got my job off Twitter. It seems like a lot of people these days are getting their jobs off Twitter. What advice do you have around trying to build a personal brand for young people that really want to get into VC? Oh, yeah. Let's see. Okay, so for VC specifically, A, first of all, I will say, feel free to reach out to me about this. I literally right before this was writing a threat on this because it's something I love helping people with. I think it can be very unsettling when you don't have normal background to try and approach something and everybody is telling you. Just have the degree that was focused on this exact thing and you don't have to do that. I think the best things come from people working and crossing industries all the time. So I'll say that first. I think with VC specifically, you really want to think about how you can demonstrate. demonstrate proactively the work that you're going to be doing at that firm.

So VC has become sort of a trendy job. A lot of people get inbound email saying, hey, I'd love to work in VC. Can you give me advice? You don't want to do a very generalized cold email, I think. You know, it's good to write cold emails, but if you want to stand out from those people, I would say, find a few investors who you really admire,

both maybe in terms of their portfolio, the way they think. Maybe they put writing out their character more broadly. Learn about those people, learn about their investors. learn about their history and things they put out, write them really thoughtful, cold email saying, hey, you know, I've dug into X industry that it seems like you guys are interested in. I have a thesis that this piece is going to change in this way, maybe spend some time doing your own work.

That will not only teach you how to begin to think about these things, but ideally will also show, you know, the investor that you're approaching, that you are able to do this job proactively. I mean, cold emailing is generally a big part of VC, but also thinking through those things as part of the industry. So I think it's a great way to search for a job while doing things that will make you better at the job and to combine those in and of itself is super helpful to you. But a lot of people send companies without context, which isn't necessarily bad. If you can source companies, it's great.

But I think having a view, a deep view around why they're good, the market conditions, the way research is changing is really like the most differentiated way to set yourself apart as you're approaching the industry. when you're doing like research on these companies while working in venture what are some of your best practices to do the best research you possibly can yeah on on the diligence side or even before we get to diligence and sort of like forming market abuse before the diligent side before definitely forming market fuse yeah I would say um reading primary research which you've touched on not being afraid of white papers again like the cool thing I think is once you start reading if you in an industry your brain literally starts to sort of absorb the formatting of white papers. And so maybe you don't fully understand 20% of the words, but you begin to realize, okay, this one really matters to the abstract of the paper, for example. I'm going to take the time to dig into this a little bit and then jump back into the paper, whereas these other things don't matter. So that's one thing to do. Don't be afraid of that. I would say also researching or reaching out to researchers more broadly, reaching out to people who are working on like the incubation stage of these technologies and

asking them about what they're seeing. Another thing is on the industrial side and on the infrastructure side as we've been talking about, reaching out to people who do that job on the daily, just generally being curious about people around you. People talk about investing more broadly and always say, invest in things that you would use as a product. Similarly, as you're going through life, if you don't understand how something works, but you have the opportunity to talk to somebody who does who works on that infrastructure, ask them. I think a lot of people, a lot of investors, like, I'm going to think about market research, you know, like, if we need more, if we need more infrastructure this type, like, I'm going to read a report on infrastructure.

And that's not bad, but honestly, like, you probably can get in contact with a person who, like, touches one part of the process and sure it's an incomplete view, but you'll probably learn some really interesting stuff. I think some of the most interesting insights I've had have been just being curious about there's protests going on from this one working population. Like, what are they protesting about? what is the issues that they're facing, you know, that type of thing. So curiosity in the abstract, talking to people who work in these industries who you might not think about approaching and then

reading primary research. Yeah, I absolutely love that. There's something to be said to just going straight to the source and talking to people. I find that that's a really big thing that is getting missed out on a lot of times, even with reading primary research. Like, I think that's wonderful. But you're right. There's something to be said about going straight to the people that are the subject matter experts and could break it down for you in language that's like way more comprehensible. So you've also touched a lot about white papers. And you say they're written certain format. It seems like you've been, you read a lot of white papers. What, how does that process go for you? Where are you getting these white papers? And then how are you reading them?

Definitely. You can find them on Twitter. Again, I think, you know, if you're interested in VC, don't follow a bunch of VCs on Twitter. Follow researchers in industries that you're interested in. of course. So, I mean, I had another investment thesis in sort of like gaming more broadly and how gaming is becoming more persistent and a bunch of other artifacts we see there. And gaming, for example, has almost been like interestingly separate from academia for a long time. So maybe some of the areas in which people are doing real innovation in there, like maybe it's innovation around latency or other things like that might not be an academic institution. So then think about like, where are you seeing social scenes even? Like you almost have to be like a scene analyst. Like, where are you seeing social scenes around gaming and, like, talk to them? Like, learn what that social scene means and why people are part of it and what they're doing there. But once you find that and you find those people, then follow them on Twitter. For academics, you can find their white papers and you can talk to them. I would say, once you're digging into white papers, just trying to understand, like, high-level, like, inflection points that are really novel.

Like, there's a lot of innovation happening all the time, but why does this change something for a bunch of people? Or where it would be implemented would it, where it would change things for a bunch of people. Obviously, that's where venture sort of hits the road is like science that could change a lot of people's lives. And so thinking about how this could change somebody, change something at massive scale. I think it's really important. And then how you begin to break down that research where it would be sold to 100 people or 1,000 people. And then you can expand that product over time. freaking awesome.

Thank you so much for coming on. You answered a ton of questions. You're incredibly smart, super excited to keep checking out your tweets. But more importantly, I actually like your long-form stuff, even better than your tweets. So where, keep talking about your Twitter. Where can people find you? Yes. At N. William 030.

I also have my research Twitter linked in my bio. If you want to read white papers, like I recommended, go check out our white papers. They are pretty incredible. I've been loving, like I said, your latest blog post all about, again, in the quantum space. Thank you so much for being on, Nicole. I'm going to have to have you on again, like a year from now just to see where you're up to. Let's do it. Thank you. Awesome. Thank you.