This Week in Startups - Titan tragedy, Meta removes news in Canada + Elizabeth Yin at Angel Summit | E1767

Episode Date: June 23, 2023

This Week in Startups is presented by: Squarespace. Turn your idea into a new website! Go to Squarespace.com/TWIST for a free trial. When you’re ready to launch, use offer code TWIST to save 10% off your first purchase of a website or domain. OpenPhone. Create business phone numbers for you and your team that work through an app on your smartphone or desktop. TWiST listeners can get an extra 20% off any plan for your first 6 months at openphone.com/twist Lemon.io - Hire pre-vetted remote developers, get 15% off your first 4 weeks of developer time at https://Lemon.io/twist * Today’s show: Jason first reflects on the Titan submersible tragedy as he discusses the concept of ‘Toxic Wealth’ (1:41). Then, he explains why Meta will remove news content from Instagram and Facebook in Canada due to Bill C-18 (14:59). Finally, Elizabeth Yin gives a presentation live from Angel Summit on her five major learnings from 700+ startup investments (22:59). * Follow Elizabeth: https://twitter.com/dunkhippo33 Check Out Hustle Fund: https://www.hustlefund.vc * Time stamps: (0:00) Elizabeth’s passion (1:41) Jason discusses the Titan submersible tragedy and how money can lead to recklessness and toxic wealth (13:40) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at https://Squarespace.com/TWIST (14:59) Meta removes news content from Instagram and Facebook in Canada (21:33) OpenPhone - Get 20% off your first six months at https://openphone.com/twist (22:59) Elizabeth Yin of Hustle Fund at Angel Summit (31:32) Lemon.io - Get 15% off your first 4 weeks of developer time at https://Lemon.io/twist (32:51) How to invest in startups (50:17) Q&A with Angel Summit audience * Read LAUNCH Fund 4 Deal Memo: https://www.launch.co/four Apply for Funding: https://www.launch.co/apply Buy ANGEL: https://www.angelthebook.com Great recent interviews: Steve Huffman, Brian Chesky, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarland, PrayingForExits, Jenny Lefcourt Check out Jason’s suite of newsletters: https://substack.com/@calacanis * Follow Jason: Twitter: https://twitter.com/jason Instagram: https://www.instagram.com/jason LinkedIn: https://www.linkedin.com/in/jasoncalacanis * Follow TWiST: Substack: https://twistartups.substack.com Twitter: https://twitter.com/TWiStartups YouTube: https://www.youtube.com/thisweekin * Subscribe to the Founder University Podcast: https://www.founder.university/podcast

I thought and I thought, well, what is a problem that I actually care about for the rest of my life, the next 40, 50, however many years I have left on this planet? And it was actually a really hard question. Like, what is something that you care so deeply about that you want to work on day in and day out for the next 50 years? It was a hard question that I couldn't answer for a couple of years. Meanwhile, I was mentoring all these companies at 500 startups and eventually got more sucked in there. And then one day it dawned on me, the answer was in front of it. me the whole time, which is I'm really passionate about startups. It was something that I understood

well, certainly having been a founder, having been through the whole roller coaster of being a founder, the ups and the downs. And it was also something where I really understood the nuances of the problems, like the problems that founders have. And so our mission at Hustle Fund, funny enough, a lot of people see us as a VC fund, but I actually see that as my startup. This weekend startups is brought to you by Squarespace. Turn your idea into a new website. Go to Squarespace.com slash twist for a free trial. When you're ready to launch, use offer code Twist to save 10% off your first purchase of a website or domain.

Open Phone brings your team's business calls, texts, and contacts into one delightful app that works anywhere. Get 20% off your first six months at openphone.com slash twist. And lemon. Lemon.io. Need to speed up your. your product development without draining your budget, hire vetted engineers from Europe at lemon.io. Go to lemon.io slash twist to get 15% off for the first four weeks.

All right, everybody. Welcome back to this week in startups. We've been having some great interviews from our Angel Summit on the podcast. Today will be no different. Elizabeth Yin from Hustle Fund is going to talk about early stage investing, both for founders and for investors. But there's a lot of news, and I thought I would take a chance here and talk about one controversial one that I have an important take on. And then one that's a little just more straight up tech. The first is, I wanted to talk about this tragedy with the Titanic submarine.

As everybody knows, unless you've been living under a rock, there is a submersible submarine called Titan. and it tragically imploded or collapsed under the massive pressure it was under going 12,000 feet down to look at the Titanic. This was an operation called Ocean Gate. They make the submersible and they charge people $250,000 to go visit the Titanic. And it is pretty unbelievable when you look at, what happened here, how avoidable this was and how reckless it was. And it is, you know, the day after we've confirmed that these poor five souls have died quite unnecessarily, it turns out. And although we struggle as a society with how much time should go by before

you talk about something candidly or you criticize somebody's behavior who's passed, let alone make jokes about it, um, it does, seem that we process things at hyper speed. And so I thought I would talk about the problem I have with this and where I wouldn't have a problem with people taking these kind of risks. So you know, this was an experimental vessel and they were taking tourists on it and they were taking young adults on it. A 19 year old died here, which is particularly tragic to have a soul that's just becoming an adult die in this tragic, unnecessary way. And we see this sometimes in my line of work. People get rich. They have a lot of money in their bank account. And there is a term

for it in our industry called toxic wealth, which is you make enough money that you're able to take on riskier and riskier behavior, maybe chasing dopamine, maybe trying to do interesting things with that money. And in a vacuum, dopamine chasing, listen, I went deep powder skiing in Japan this year. And I went far too fast on my skis this year as well. You know, have a tracking app that told me I broke 50 miles an hour, way too fast. And I've since corrected my behavior and tried to keep it to 40 or less. And doing interesting things with your money. Sure. Why not? The problem here is this company was told over and over again by the industry

that they were going to kill people. They were told in a letter by all the people who had successfully dove to the bottom of literally the Mariana Trench, which is three times further down than the Titanic, that they were unnecessarily risking people's lives with the design of this.

Now, if you are, in fact, an explorer, and this is your chosen profession. That is one thing. And in fact, James Cameron built his own submersible and went with his great wealth down to the Mariana Trench. So it seems on the surface to be a very similar behavior pattern.

But even he, when he was on the news and as much of a risk taker as he is, took an infinitely more measured approach to doing something this dangerous. And he obviously did not take Taurus with him knowing the risk. And I think if this was, if these were adults and not a kid, you know, maybe you could start to say, hey, people, I'm quite libertarian. I don't think there needs to be rules for everything. But as a general warning, between what is the law, right, and your complete

freedom exists a big, wide gray area where there is judgment. And what is, where there is what I would call your behavior when nobody's looking. Your behavior when you're not ruled by law or it's not obviously something inconsequential. What you eat for dinner, completely inconsequential. If you pay for that dinner or you steal it, that's the law, completely consequential. And you need to behave properly in a society and pay your bills. And then in between those two, you have the big gray area. And this exists there.

Now, for people who get rich quick, we've seen over and over again them take on this risky behavior. I want to give you an example that you don't know. 99.99% of you don't. But in 1983, there was a company called Eagle Computer. I remember it when I was 12 years old, 13 years old. I would open up PC magazine or byte, and I would see their advertisements. And I would choose between Adele, a Gateway, an IBM PC Jr. or an Eagle Computer. There were dozens and dozens of these computer companies. So Eagle Computer, essentially think of it like Dell or Gateway.

And hours after the company went public, the CEO, Dennis Barnhart, was driving back to his company's headquarters in Los Gatos here in Silicon Valley. And he had bought himself a red Ferrari because he was that successful. And then, according to the insurance investigator, he drove the car 70 miles per hour in a 25 mile per hour zone. He was 39 years old and he died. And I saw this when an acquaintance of mine, Larry Page, landed at Foo Camp in a helicopter. This was a very famous moment in 2007.

I'll insert a little clip of the video here, Laughing Squid, took. I heard it's Larry King. I heard it's Steve Jobs. I actually heard it's fake Steve. It's fake Larry Page. And we were all kids when this happened 20 years ago almost, 15 years ago. we're like, whoa, Larry Page is taking helicopter lessons. And I just thought, and when I talked to him afterwards, I was like, is that safe?

And maybe, is it necessary to fly yourself as a helicopter pilot? He had a co-pilot with him, obviously. But I did get the sense, like, oh, wow, people are doing risky things with their money. And this Eagle Computer Executive example, the Larry Page example, which wasn't as crazy, obviously, I think I'd taken a lot of precautions. And then I look at this one for John Denver. You may or may not know the singer John Denver and his death. He died in a plane crash in 1997.

He was one year older than me, 53. And he was flying an experimental two-seat plane, not but two hours from where I sit today in Monterey Bay, California. And he plunged into the water from 500 feet and died. that was, yeah, 25 years ago. This is one of the things with success. People can get a little bit risk-taking. And I've looked at all the risks I take,

and I've tried to lower them. And when it comes to technology, it is absolutely the responsibility of this company to really think through, should they let people buy these tickets and be passengers. Again, we have some basic amounts of freedom as humans to take risk. This seems like a risk that didn't need to be taken. And this James Cameron clip sums it up.

Just, and I tweeted this the other day, but let me just play this for you here. Because I think it will fill you in on exactly how irresponsible the behavior here was. And again, to the families and for everybody who died, my condolences. But I think having this discussion, frankly, right now, when it's top of mind, could save lives. Let's play the clip. You know, this is a mature art and many people in the community were very concerned about this sub. And a number of, you know, of the top players in the deep submergence engineering community even wrote letters to the company saying that what they were doing was too experimental,

to carry passengers and that needed to be certified and so on. So I'm struck by the similarity of the Titanic disaster itself. where the captain was repeatedly warned about ice ahead of his ship, and yet he steamed at full speed into an ice field on a moonless night. And many people died as a result. And for us very similar tragedy where warnings went unheeded to take place at the same exact site. Yeah, powerful. And in this situation, there's been discussion tragically about the 19-year-old,

was terrified to do this, didn't want to do it, and felt pressure by his father to do it, according to the aunt. Anyway, I don't want to make it too personal. I don't want to be, obviously, when you talk about these kind of things, there's a risk that people will think you're trying to capitalize on it when you have a podcast.

This podcast has been going on for 14 years. We'll go on until I'm dead, and we're not going for ratings here, nor will this get us any ratings. We're not trying to capitalize on a story. I have this conversation privately with a lot of friends who get wealthy, and I tell them about Eagle Computer,

and I send them the link to a story about it. Just so they know, hey, when you're buying those Ferraris, when you're buying your Lamborghini, when you decide you want to pilot your own plane, a helicopter, or go to the depths of the ocean, be thoughtful about it. Be really thoughtful about it. And life is precious. You don't need to take insane risks. And if you are responsible for other people's lives, I mean, take it seriously, folks.

And I got to say, it's very clear this company did not take this seriously. to receive letters explaining to you exactly how this disaster would happen because of the design of it and then to ignore it because you wanted to do something that was more innovative or used a new design and then put a bunch of, you know, I don't want to say uninformed, but people who didn't build the sub customers who are paying a lot of money. To me, it's beyond irresponsible. It's beyond irresponsible. I think this company, really did something incredibly, incredibly evil, if I have to use a word. And I really care about all of y'all listening. And I hope everybody pauses here and just looks at this toxic wealth situation and maybe how dangerous this stuff is. And just think before you do stuff, especially young people and sometimes rich, powerful people. Young people, their brains aren't fully developed until they're 25 years old, the frontal lobes. So they don't make good long. term decisions. And then I got to tell you something, people who are rich and powerful don't make

good decisions all the time. Why? Because everybody's trying to get something from rich and powerful people. People will not tell you the truth when you're doing something stupid when you add a certain number of zeros to your net worth. And every time you add one more, the advice you get becomes less and less correlated with reality. All right, let's keep moving on. We'll talk about some more stories. Just really sad. Listen, we have been doubling and tripling down on University here at launch. In fact, it's kind of the future of our firm, and it's amazing for us to work with hundreds of early stage founders, even before they incorporate, right? They have ideas, and they're trying to figure out what tools to use to make their ideas into our

reality. And we're seeing so many of these founder university startups using Squarespace. Everybody knows Squarespace has beautiful design templates. They're all mobile optimized. And of course, they have powerful e-commerce integrations, but did you know that Squarespace also added member areas. This is where you can sell members-only premium content, okay, educational stuff, etc. And if you're a consultant of some type, you have now appointment scheduling built into Squarespace. So listen, if you build it on Squarespace, everything's going to work. They keep adding amazing features and you're going to load super fast on your desktop and mobile. It's going to look great, super easy to edit, super easy to evolve. And if you're looking to start your

business, you can't go wrong with Squarespace. We all know that. So I want you to head to Squarespace.com slash twist for a free trial. And when you're ready to launch, use the offer code twist to save 10% off your first purchase of a website or domain. We love your Squarespace, our longest running partner here on This Week in Startups. Thank you so much for supporting our founders and for supporting this week in startups. Meta is going to start blocking news on Facebook and Instagram in Canada because the country is adopting its own version of Australia's news law. Now, this is a nuanced issue, that is being negotiated through laws. The Canadian Senate passed the Online News Act on Thursday.

Bill's called C-18. It's designed to force Google and Facebook to share revenue with news publishers for stories that appear on their platforms. The bill doesn't specifically name Google or meta, but it applies to companies that, quote, make news content available and have a significant bargaining power imbalance

with the news business. Okay, that's pretty clear. here's a quote from the National Post article. Bill C18 was modeled on Australia's legislation under that system. Google and Facebook reached yields with publishers that kept the news media bargaining code from kicking in, meaning neither has actually been designated as a digital platform subject to the code. And Canada's bill has a similar exemption. So this is a backstop.

But if Google and Metter removed the news content entirely, they won't have to worry, obviously, about making these deals. So meta, you know, they don't really need the news all that much. And they've confirmed they're going to remove news content from Facebook and Instagram for all Canadian users. There is no confirmation here about how much and what is fair use.

It's something I talk about all the time here on this program. Google hasn't confirmed if it's going to cut news content, which would basically mean, I guess, taking them out of the search index or taking them out of Google News. but they're holding last-minute talks according to news reports. And Google spokespeople said they don't want to remove the news. Obviously, they want to have it there.

But it could be pretty wild if you did a search on Google in Canada. And you didn't see the New York Times, Wall Street Journal, CNN, Washington Post, Fox News, whatever it is. And this is a pretty simple solution in my mind. I think they should cut deals with the news companies and give them a menu. And the menu should go something like this. Here are five different ways you can work with us.

And in your Robots.T.xT, a little file that exists on a website that you can go see, new yorktimes.com slash robots.t. Should show you their rules around scraping their website. Anyway, give them three options. Give them five options. Number one, you can take all of this content.

Number two, you can take none of this content. Number three, you can take the headline and the snippet that we wrote. Number four, you can take the headline you can take the subhead, the author, and the first sentence. Or it could be something simple. You can take the first 200 characters, but you have to include the following, right?

And there could be some back and forth here where this is automated. And then if you want to take more, we are okay with that on a programmatic basis, in other words, automatically. If you want to take another 100 characters, it's $1 per 1 million characters you pull from our site. So if you want to put two paragraphs and it's 300 characters, characters and 3,000 people see it, we get a buck, right?

3,000 people, 300 characters, about 900,000. And if you charge a dollar per million characters, you give them some sort of licensing fee. And this would go a long way, I think, to these companies creating a better experience. Because how terrible is the experience on Facebook or Google, where you wind up at a paywall or you wind up in a browser window coming outside of the app and they have that janky browser are built into, you know, Facebook, meta, whatever app you're in. And it just is a bad experience where maybe when you're in search, you just want to get the first two paragraphs.

That would be kind of delightful. And maybe a third of people want that. And the other two there want to click. You can come up with all kinds of interesting options. And I think the reason for Facebook and Google to do this and actually be happy doing it is they would get more content. And right now, they're in a perverse dance with the content creators, where the content creators are just trying to game their algorithms, do link baiting, et cetera. If they align themselves

where good news, not high quality news, not good or bad, who's in terms of tone, but high quality news with high quality headlines, if that was rewarded with more people clicking on it, and there was a way for the news organization to make but $1,000, $2,000 on each story that, you know, in syndication fees, well, that kind of pays for the cost of the story. the majority of cases, and people might be saying, oh, you know what? We're making some advertising on our site. We're making some of these syndication fees.

So that's, as an industry, instead of going through the courts, the industry should come up with a syndication fee. And you know who should lead that? Facebook, Google, Twitter, all the online services should make an offer. And they should see if anybody takes it. And you know what? You know, with Vox, Vice, BuzzFeed, all laying people off or in various, you know, stages,

of having their revenue go down flat and unions increasing their costs and the standoffs they're having internally. This could be a wonderful way for the tech industry to support independent journalism and content creation. I highly recommend they do it. It's worked for YouTube. It's work for the app stores. So why not do it for news?

Why exclude news from the ability to share in revenue on Google and Facebook? I think the leadership at these companies needs to rethink how they look at the news and maybe just try to come up with an industry standard. Everybody doesn't have to take it. But if 10 or 20% of people do take it, hey, maybe it could be something that makes everybody win. The customers, Google, Facebook, et cetera, and the journalists and reporters and content creators on the other side.

All right, next up on the program, Elizabeth Yin, she is from the Hustle Fund. You probably want to take this one. You could even run it through chat GPT or get the transcript, make a summary of it, make bullet points, take some notes. And then, you know, use Elizabeth's advice and report back to her, to us. If it was helpful, what worked, what didn't, right? And I think that's a great way to use this show.

Hopefully, the show is very useful to founders and investors. All right, everybody. Have a great weekend. Are you still using your personal phone number at work at your startup in 2020? Stop! Such a common mistake founders make. But Open phone has totally rethought every detail of what a business phone should look like in 2023. Open phone makes it so easy to do this and so affordable that you have no excuse. And you really

don't want your team using their personal phones for business. Why? Well, it could get creepy. People start texting people on your team. It could be that they leave your company. And the salesperson has all of these text threads going with all your clients and they bring them to your competitor. Do you want to deal with this nonsense? You don't. I can tell you open phone is amazing because we use it. Our sales team, our ops teams. We use it daily. We also. started using open phone for Angel Summit communications. It's rated number one on G2 for customer satisfaction. And let me tell you, those G2 rankings, those are dogged battles. If you win that, you really have to be the best. Twist listeners love open phone. My sales team uses it.

Ops team uses it. Customer support uses it. And you know what's great about it? You can create a shared phone number like we did for the Angel Summit. With multiple employees being able to field those calls and text and keep it all sorted. It's affordable at just $13 per user per month. But Twist users are you're going to get 20% off that already ridiculously affordable price for six months at openphone.com slash twist. And if you got an existing number, open phone will port it over at no extra cost. Head to openphone.com slash twist to start your free trial and get 20% off. Give it up for Elizabeth. Thank you.

Before we begin, actually, I'm just curious. How many of you are angel investors? Okay. Almost everybody. And how many of you are VCs or you're thinking about starting a VC? Okay. And how many of you are LPs or thinking about starting a fund of funds or something like that? Okay. Great. Cool. Well, my name is Elizabeth Yin. Thank you. I'm going to raise their head for multiple categories. Okay. Thank you. Well, thank you for the kind intro, Jason. I'm Elizabeth Yen, and I could say that at this point in my life, I am all in on startup. So a quick bit about myself.

for most of my career, I was a founder. I had a company that I started in the last recession in late 2008. I could not have picked my timing really any better to leave my cushy job at Google. It was about a week after Sequoia sent out this memo to all of their companies saying, rest in peace, good times, batten down the hatches. We were not funding anybody new. And I decided to leave my job anyway. Because I was not really sure if I were to wait it out what exactly I would be waiting for. So I left. I couldn't raise any money,

but it actually turned out to be a good thing because I also had no idea what I was doing. I floundered for probably a good two, almost three years before finally figuring out some things, but still had a lot of hard lessons all the way through,

built out essentially an ad network for email, and that company was acquired in 2014. And then I accidentally fell into startup investing. I actually didn't really know very much about investing in general prior to then and certainly didn't really know a whole lot about VCs, as I mentioned. I couldn't really raise very much myself. So I didn't know anything about that world, but I did know that I really actually liked the accelerator program

that we had gone through with our company LaunchBit, and that was 500 startups. And so originally I went back to mentor some companies, and I got more and more sucked in and ended up running their accelerator program, where I invested in over 200 companies while there. And that was sort of my intro into investing into companies, had a lot of really hard lessons learned there as well,

and in parallel started doing some of my own angel investing. So at this point, at Hustle Fund, I did not do the count this morning, but I know for sure we have invested in over 400 companies, probably closer to 500 at this point across funds 1, 2, and 3, which were at the beginning of with Hustle Fund. And I'll talk a little bit more about hustle fund later, but about five, going on six years ago, I left 500 startups and started a VC firm, which I never thought I would do with two friends of mine from college called Hustle Fund. And that is what I'm up to in my day job today. But I'm very active all across the stack, both in my own angel investing, certainly Hustle Fund, and then have more recently become an LP in.

EC funds. My husband will probably kill me. So I'm all in across the whole stack. So that's a bit about me. So a lot of people ask me, well, why did you not go and start another company? You know, LaunchBit was a relatively modest exit. And I still have a lot of aspirations in my own life. And so people said, why didn't you go and start another, you know, another startup? And the thing about it is, after launch bit that actually ads were not my life's work. And so I thought and I thought, well, what is a problem that I actually care about for the rest of my life, the next 40, 50, however many years I have left on this planet? And it was actually a really hard question. Like, what is something that you care so deeply about that you want to work on day in and day

out for the next 50 years? It was a hard question that I couldn't answer for a couple of years. Meanwhile, I was mentoring all these companies at 500 startups and eventually got more sucked in there. And then one day at dawned on me, the answer was in front of me the whole time, which is I'm really passionate about startups. It was something that I understood well, certainly having been a founder, having been through the whole roller coaster coaster of being a founder, the ups and the downs. And it was also something where I really understood the nuances of the problems, like the problems that founders have. And so our mission at Hustle Fund, funny enough, a lot of people see us as a VC fund, but I actually see that as my startup. And our mission is to democratize wealth through startups. Well, what does this mean?

It actually means that I think that the world would be a much better place if we can empower more great founders to start companies. Because as we've heard from many of the prior talks this morning, for startups that are successful, they do job. creation. They enhance productivity, as Brad alluded to in his talk, and just generally improve our society as a whole, whether you're involved in the startup or not. But the problem that, as I saw as a founder, is that most great founders, especially 10, 15 years ago when I was working on my startup, they didn't actually really get a great shot, even if you were a phenomenal founder. When you think about all the things that a great founder needs to be successful, they need capital, they need knowledge, and they need networks. And I think for people who are super well connected, who have perhaps all three or some permutation of these, you can be off to the races.

But there are many people, especially when you look at it from a global perspective who are outside of Silicon Valley, you don't really have access to all of these three. You may have access to one, if even, maybe you have a rich uncle who can help you with a little bit of seed money, but you don't really have access to all three. And when we were thinking about things at Hustle Fund about six years ago, in particular, the capital piece we felt had a real empty spot. We invest at the earliest stages at Hustle Fund. So two people in a garage, you have no revenue, you barely have a product, you know, everything is so half big. there is really no institutional VC, especially back then, six years ago, who would invest in that? You might have your rich uncle again, but there were no institutional VCs. I could have counted about a handful of them at that point in time who were just getting started.

Somebody I look up to a Charles Hudson who runs a fund called Precursor was one of those, but, you know, these five small microphones were not going to be able to impact the world. So we decided to start Hustle Fund starting with capital in helping founders at those earliest stages who would pretty much nothing get them going in business with a 25K check. So it sounds kind of ridiculous of VC writing a 25K check, but that's how we started this fund. Fast forward to today, you know, our mission involves helping founders with all three of these things. So we are now just starting Fund 3 with Hustle Fund. We are in process of actually launching a late stage fund as well to help founders much later in the stack, and we run SPVs in between those stages. We also have in parallel what I would call a modern day angel club.

Some of you, I think, are in that called Angel Squad. We have over 1,400 members globally who have joined that to help us in our cause and mission in helping fund great founders globally, especially those outside of Silicon Valley. And then we also are pretty active in writing tactical content, in newsletters, in blogs. I even have my book here, and if anyone is brave enough to ask a question later, you can get my book. We run events such as Camp Hustle. We're doing one in Asia this September, if you would love to join. So we do a lot of these three things because these are the ingredients that you need to build startup ecosystems to empower great entrepreneurs. and we'll continue to hone this over the course of the next 35, 45 years, however long we have.

Okay, listen, you got an idea for a tech startup. Great. You think you want to change the world. You think you got this. This is the one. Well, you've got that same problem that we all do. You don't have an engineer, or you don't have enough engineers to make this happen. And you need product velocity. You need to go fast and how are you going to go fast and how are you going to control your burn rate if you got no engineers? Well, what if you had a partner who could provide you with more than a thousand on-demand developers? And those developers were all vetted experience, result-oriented, and passionate about startups and building great products. Well, what if they also charge competitive rates? Does this all sound too good to be true? I know it does. Well, then you need to head to Lemon.com. I.O. Because your dreams

have come true right now, startups, choose Lemon.com. I.O. Because they only offer handpicked developers with three or more years of experience and ones that have strong portfolios. Only 1% of candidates who apply to work at Lemon.io actually get accepted. And if anything goes wrong, Lemon will get you a replacement ASAP. A couple of great launch founders have worked with lemon. dot I.O, people in our portfolio, and they have had great experiences. I want you to learn more at lemon.io slash twist. And when you go there, you're going to find your perfect

developer or an entire tech team. And you're going to do that in 48 hours or less. And Twist listeners get 15% off the first for a week. I want you to stop burning money. I want you to hire developers smarter and faster. Visit lemon.com.i.o slash twist and give it a shot. But you're like, okay, blah, blah. You know, that's nice and sort of kumbaya and everything, but why should I really care about it? I'm here to make money. I think the other interesting observation is I think some things about the markets have changed over the last couple of decades. So I would actually argue that Dodd-Frank killed the public

stock market returns. And here's an example. Amazon went IPO at around 300 million market cap. You do not get any company IPOing at that anymore. I think I looked at the hands. I looked at the handful of companies that supposedly are rumored to IPO in whatever the next few months or year, Instacart, Stripe, any time, any of these. They're all in the tens of billions of dollars that they're going to IPO for. So that means that your upside is fairly capped. Maybe Stripe will be a trillion dollar company someday. But you're talking about, all right, best case scenario, now you're getting like 100x. But most likely in many of these IPOs you're getting 10x. Maybe. In contrast, in the startup markets, and Jason can probably talk about this more than anybody,

if you had put 5K into Uber and you had waited until the IPO, supposedly you would get $25 million or thereabouts, which is pretty incredible. I guess it just goes to show you that these kinds of asymmetric bets are the kinds of things that are great for returns that no one really actually thinks about. Everyone thinks about how startups are so risky. And yes, there's certainly a lot of risk, and we'll talk about that as well. But the returns in private markets are so large, especially now that the public markets have shifted so much, that actually I think startups are the best place to put your money.

And as I kind of mentioned earlier, I'm all in on it. So obviously I'm very biased. But I think if we just sort of run some of the numbers here, and this may be hard to see, If you put your money in index funds, traditionally you might get 7%, 8% IRA on average. And I realize some of the markets have been frothy more recently. But across all the decades, 7 to 8%, meaning you double your money in about 10 years or so. So if you put in, let's say, $250K,000, like let's say that you work your job in your 20s and you save up a lot of money every year for the next 10 years or so, and 25K a year, and you sock away 250K,000, and then by age 70, you're ready to retire,

and that 250K will be worth about $3.74 million. So that's index fund investing. So that's great. It's fine. But what happens if actually you put 90% of that into index funds and 10% into startups? And we'll talk about how do you actually do that. But, you know, there's certainly a range in what your IRA could be. We've heard from some phenomenal investors here whose IRA is like super high, 30%, 40%, 60%, etc.

But let's just say that you're okay, maybe on the not-so-great side, 15%. Or let's just say that your IRA actually just zero, you just lost it all for whatever reason. If we even even just look at those scenarios, like let's say you get 15% IRA on that 10% that you're socking away, instead of $3.74 million at retirement, you're retiring with $10 million. That's 10% of $250K or $25K. It's a small investment. But it's because of compounding. And that is the amazing thing about the sort of asset class.

Like, if you have your strategy right, you can make a lot of money with very little. The key is the time and the compounding. And this is probably my number one regret, not having learned about this asset class earlier. Had I learned about this asset class when I was 22 and even just started socking a few thousand away every year, that would have been amazing. But it's not too late for anybody. And then let's look at the down scenario of, let's say, you just end up losing all your money, your portfolio construction was terrible, you picked all the wrong companies, et cetera. Actually, you know, because it's only 10%, actually, you are still retiring with $3.3 million.

So I want to want to want to pause and think about that for a moment. And I actually encourage you to run this spreadsheet exercise yourself if you haven't already. A fun one to run is if you invest 750K, and let's say you're actually pretty good at this, and you get 20% IRA, you'll be a billionaire. Okay, but how do you actually do this? And this is what everyone wants to know, right? How do you actually invest well in startups?

So I'm going to talk with you about five learnings across my portfolio companies or so, but it will certainly not be comprehensive enough to cover everything that I'm, I've ever learned. So I encourage you to ask a question or two. There will be time. So the first learning is that I think a lot of investors, especially if you're coming from a traditional investing background in bonds or real estate or even the stock market where the upside is not so huge, generally speaking, and you're making 5% a year, 10% a year, et cetera, then just the natural tendency

is to want to avoid downside risk. But actually startup investing is the exact opposite. You don't care about the money you lose. All you care about is how much money you're making in your winners. And this is like where it's a real

mind flip because there are very few professions where this makes any sense. If you find a brain surgeon who gets it wrong 90% the time but fixes your brain 10% of the time, you would not,

up to work with that person. So this is one of the few professions where actually it is okay to make mistakes most of the time, but when you do it right, you do it really right. And that is, I think, the number one learning. And the reason for this is that number one, we're going for huge upside. But then I think number two, I would also argue that the downsides are a little bit hard to avoid. And so let's talk about this a little bit.

You know, there's this added to that nine out of ten companies fail. And I think the natural reaction for most people is like, well, why don't investors just pick better? Like, what is wrong with them? Why aren't they picking actually good companies? But I want to talk a little bit about what is behind this, because nine or a ten are not necessarily companies that are shutting down. It is nine out of ten companies, you are not making money. So I'll give you an example. I have some companies in my portfolio, either from 500 or I even assume.

Sim from Hustle Fund that, you know, are doing quite well. And they do tens of millions in revenue, hundreds of millions in revenue. But they're just never going to exit. Like we're just not going to get any liquidity out of it. Either because the secondary markets are not very good for their category, because people only like sexy things, or, you know, the founders will just never sell, etc. That's a winner, but it's a loss for you.

So that's an example of I would count it as a failure. And that's hard to stomach, right? Another example, of course, is a good chunk of your companies of the 10 will just never find what I call product market fit. How many of you are familiar with that phrase? Product market fit. Okay, so most people. But basically, it's this idea of, you know, a startup.

You don't know if you're actually solving a problem with your product, and is it a big enough problem that many people have and are willing to pay for and that you can repeatedly find a customer acquisition channel to get to that user. And a lot of startups, because it's an experience, they just won't get there. So that's a good chunk of companies as well. So nine out of ten companies, roughly speaking, I would say my experience, that that hits the nose on the head. And those who do return money, it might be, you know, one X or, you know, half of that or even two X, et cetera. I would all, I would lump all of those into this failure category. And so what that means is,

well, you have your one winner. How big is that one winner? Well, if that one winner is doing 10x and you had put money equaling to all 10, you are just kind of getting back to where you started, right? And if you're a VC fund with fees and all, you're actually losing money. So a 10x winner is actually not good in startup investing, which is something that surprises a lot of new angel investors. Like I often hear of angel investors saying, oh, I want to sell secondary at the Series A. I'm getting 10x. That's actually what you do not want to do. If you have a winner that's continuing and you still believe in that company, do not take money off the table. You should continue to ride that out because you're going to have very few companies that actually had that repeatable customer acquisition process.

You want it to grow beyond the 10x in order for your overall portfolio to return good returns. And in fact, where this 100x number comes from, which is what you're striving for out of that one winner, if you just kind of do the math, you know, if that one winner returns 20x, that means your overall portfolio is roughly 2x, which is about as good as index funds. So, you know, you would have been probably better off putting your money. in index funds. So 20X is not great either, great for the founders, but not for you as an investor. And after delusion in all of that, you know, I think, which often is 50% after three rounds, you have to be striving for numbers like 100x. So that's where that number comes from.

Of course, some companies will end up becoming 1,000x or 10,000x in the case of Uber or Airbnb or Dropbox, and that would be phenomenal. But what I'm saying here is that you want to want at least 100x out of your winners. This is not something you can control, by the way, but this is what you're aiming for. So in terms of your behavior, a when to sell or when to think about selling, keep that in mind. All right, so the next lesson learned here is around portfolio construction. Now, I'd say that a lot of investors, a lot of ECs have contradictory views on this, and I actually believe in all of them. So I'll tell you what they are. There's this Kampa people who believe that actually spray and prey is the way to go. Invest in many companies.

Your chances of capturing a winner like this 100x is a lot higher if you take more shots on goal. And because of these asymmetric wins and the power law that Sam described earlier, your big winners will more than make up for all the losses by a ton. It is not a linear game. It's a power law game. So Spray and Prey is a way to increase your chances of success. So that's one portfolio construction theory. And we see winners in that category, of course. A lot of the accelerator programs fit into that category. You know, there are funds who write a lot of checks as well in that category.

And then there's the other camp of largely VCs who would say, no, concentrated is how you make your money. You know, maybe you're investing in 10 to 20 companies. a year, maybe overall 30 companies in your fund, just really have high conviction and put in large chunks of money into those companies. And that can work too. Certainly seen a lot of winners in that category. You know, lowercase capital is an example of that. I think their fund was something crazy like 200X liquid, but, you know, they had Uber and Twitter in there of their handful of positions. So both can work. They can work. And this is more a matter of what your personal comfort level is and your personal preference. I think for people who are newer

investors, I highly recommend the spray and pray approach because it is more forgiving when you make mistakes. I certainly made a lot of mistakes with a lot of my early investments. And I think you don't really know what good looks like in the beginning. But as you go along, like everything else, like practicing the guitar, you get better at it. And same with investing. So those are kind of the two camps. But I do think that regardless of what portfolio construction you pick, it is really important to think strategically about this. So a lot of angel investors, what I see them do is they plunk down 25K or 50K into a particular company.

They have super high conviction. They're like, yeah, this is going to go places. And then they run out of money after doing this a few times. And so even if you're having a concentrated portfolio, typically I do not see VCs having a concentrated portfolio of three companies. So this is not really a good strategy if that is the kind of capital you have. So think about the capital that you have at hand and what risk reward profile you're looking for and set that accordingly. And as an angel investor, maybe that means that you're writing checks of 1K.

And actually startups will take your 1K. And as we kind of described earlier, if you had put 5K into Uber, and there were people who put 5K into Uber, there's actually a list, I forgot, printed in the New York Times of everyone who invested, quote, only 5K. So people will take small checks. Founders will take small checks from you. So whatever your portfolio construction is, work backwards and figure out what your average check size is. But this is really, really important. I actually think construction is more important than actually trying to pick. Because I think the more experience I have and start investing, the more I realize actually I have a terrible ability to pick and everyone else does too. There are just too many things that can go wrong. I've seen companies go from zero to unicorn back to zero many times. And then the exact opposite, right off. And then three years later, they pivot into something crazy.

The third lesson is around deal flow. Now, this may sound obvious to you, but I'm going to frame. this a little bit differently. I think a lot of us as investors are looking for strong go-to-market from our founders. Like, how are you going to get customers? Why are customers going to pick you over your customers? You know, do you pay attention to your unit economics? All these things. We ask that of our founders every day. But I have seen so many VC decks, and I have not seen a single person have a go-to-market slide on how founders are going to pick them. And there are thousands of VCs out there pitching their funds today. And no VC talks about their go-to-market. So I think that in

order to track the best deal flow, you need to be really good at marketing these days. That may not have been true 20 years ago when there were a few VCs, or maybe if you were in Australia and you were the only VC. But it is true today in this global market. You need to, win deals. You may not know who the right deal is, but you need to see the deals, and you have to be better at marketing than pretty much everybody else. So here's a handful of strategies that I think has worked well for some of these investors. I'll go through them quickly. Some of you may have heard of 20 VC, Saster, of course, launch. Like, these are great marketers at inbound. There are some VCs who cold email. There are some VCs who are specialized, like they know Finney's

tech better than anyone else. There are some who have assets that are basically used for investing, like Illumina. I don't know if anyone has heard of them, but they're in biotech, and they basically say, hey, if you invest, you can use our expensive machines that you can't afford. And so these are some strategies to get deal flow. If you're a new angel starting out, just follow every single syndicate. And that's a good point for deal flow. Because deal flow also allows you to compare startups with each other, so you can better understand what good looks like. Lesson 4 is basically the opposite of that on the founder side. Are they doing lots of experiments to figure out their customer acquisition very quickly?

And the most successful companies in our portfolio, and I define our portfolio very broadly, like my personal, our hustle fund portfolios, et cetera, they tend to be the ones who ship customer acquisition experiments very fast. They learn from it. They iterate. They do another one, I've had companies who are on the brink of death come back because they didn't run out of money and just experiment like crazy into something that works. And then the last thing is around knowing your strike zone. So if you figure out you've really honed this strategy, stick with it. I see a lot of new investors basically try to invest in anything and everything under the sun.

I have found that when I have done that, it has not worked out really well. For example, I do not know CPG very well or food and beverage very well. And, you know, there are a lot of things I don't know about the price of aluminum of cans and things like that. It does not really work very well. Warren Buffett is probably the best example of somebody who does this. Know your strike zone. Go for it. Well, let's give it up first with a round of applause. You mentioned, like, riding your winners, generally great idea.

But you also manage, you also discuss like, hey, the 100X is the target. So there can be two truths there. There are occasions when, I don't know, a 25x, a 50x, 100x even becomes available in secondary. We saw that a couple of times. And if you have a philosophy of maybe selling 10 or 20 percent of your shares when you hit that target, locking in some percentage of a win and how you think about that. Yes. So I agree with that. And this is where it's just very case by case.

I say the 100x is simply a target. but obviously you know or hopefully know more about the company than anybody and there are some cases such as in these frothy markets where the valuations went up like crazy and you got these insane multiples that frankly speaking didn't really make any sense per the revenue the company was doing you should probably lock in those gains but then there are other cases where it's like well actually you know it seems like it's continuing to do well they have a repeatable process et cetera, and we're just going to let the whole thing ride. So I don't have a great set of rules on this one.

Tell me about how valuations have shifted from when you started 10 years ago or so, then during the peak and then now at these earliest stage startups. What was the average? You would see the range, then the peak range, and then now. Yeah. It's interesting. So about 18 months ago, I would say we were at peak frothiness. So when we were doing follow-on,

So I didn't see too much actually change at what I call pre-seed. We still very much stay within 5 to 10 million post, globally, actually, including in Silicon Valley. And I didn't see that much change there. But at Seed, which is just a stage later where the company has some revenue, not a whole lot. In our fund one, we were getting in at call it 8 to 10 on second check. In our fund two, oh gosh, 15 to 25. Yeah, the economics tend to break at that point. So you'd stand pat or pass on the investing or case by case, I guess. Case by case. I mean, we look at things from the perspective of do we think we can get 100x there? And, you know, who knows?

All right. We'll take a question. Hi, my name is Nadia. Great presentation. Thank you. You identified correctly. A company can be doing great, but you're never going to see a single send. do you have any lessons insights, how maybe early on you can identify or develop a sense of what company might actually have an exit for you versus a company that'll do great, but you'll never get your money back? Unfortunately not. I've seen founders change. So this is something that actually I take issue with that a lot of VC say. A lot of VC say, oh, you know, this person doesn't seem like they want to be a public company someday, so I'm not going to invest in them. I actually think founders change their mind a lot. They change their mind from their aspiration levels to what they want to do with the business,

just too hard to predict. So if an exciting founder said, I'm not even thinking about exits right now and they're doing really well, they might still be a good bet. Yeah. Okay. Yeah, because an offer can come in. Say that again? An offer can come in and they're like, well.

Now I'm thinking about it. Yeah. Now that you mention it, maybe it would be worth selling. All right, we'll take one more question. Yeah, James Lockheave, you're still in Catalyst. So the point you raised about strike zone was really, I haven't heard a lot of people talk about that. So how do you balance strike zone with lack of diversification? Well, I think even within your strike zone, there's a lot of possibility.

I mean, our strike zone for hustle fund is pretty huge. Like B2B in itself is a big set of categories, fintech, et cetera. Like we do software. But it's to say we don't do e-commerce, we don't do hardware, we don't do these other things or biotech. So I think a strike zone can still be very large. Okay.

We'll take a final question, sure. What would your investor go-to-market slide look like and how has that changed over time? So the best actually go-to-market slide, I guess I have seen is I saw the Saster pitch. Jason Lumpkin was kind enough to share that with me when I started my fund one.

And it basically said, here is our community size of these hundreds of thousands of people and our, you know, our newsletter is, X big and all this stuff. And if you don't have those assets now, like, what is the plan to build those assets? And so that's how I would think about it if your generalist fund.

If you're a specialty fund, like, I don't know, a QED or a B to V or something, it's more about this is what we know about fintech. These are our exits in fintech. These are all the networks we have in fintech, et cetera. Yeah, just if you're building your own brand is like sort of the question. Yeah, I just wanted to see like the thought process behind. it, yeah. I mean, I think small groups are very powerful in conversations, just to add to it. So when you, this whole idea, concept of VCs having a brand, like, or outwardly talking,

you know, it didn't exist but 10 years ago. When I started the podcast, Sequoia was like, we don't speak at conferences. They literally did not speak at conferences. And I was like, okay, really? And they're like, yeah, we don't do that. I'm like, how do you, we're Sequoia. don't need to. And so that sort of set the tone for everybody. And then there were people who were up and coming, myself, Bradfeld, maybe, Fred Wilson, Mark Seusser, maybe. And, you know, a couple people just said, like, well, maybe if we talk about what we're doing, then maybe people would come to us with questions. And it really is powerful to have small conversations. Okay, final question. I didn't want to leave you out. Hi there. I'm Greg. Great chat and presentation.

For you specifically, I know you talked about the strike zone, but do you believe that there's another industry outside of tech that really can generate 100 X returns consistently? I worked in media 10 years ago when VCs entered that arena. That didn't really pan out. You had a couple of wins, but all the big players are now either on the verge of bankruptcy like vice or performing really poorly in the public markets. And then e-commerce five years ago, when VCs tried that, and clearly that doesn't really panned out either. You have a couple of wins, but not really. D2C, yeah. Yeah. So just curious,

you specifically, do you think there's any other industry outside of tech that really can generate those 100x type of returns consistently? Yeah. So, I mean, basically what creates 100x, your entry point and your exit point? So I think one of the reasons why some of these other companies that struggled is the entry point is too high. Like, for example, when I see e-commerce companies, everybody wants the same valuation of like a B2B software company. They're not the same. So this is why accelerators tend to do well because their entry point is pretty low. And actually in emerging markets is even lower yet, right? Like you can get in at 250K post money, 500K post money. It's a lot easier to get to 100x when you're entering at that point. So entry point is

something to think about. And, you know, I think that's just something that people need to understand or have expectations around. And then the secondly is, well, where does A exit point come from. Exit point comes from, you know, some strategic value and multiple on revenues. When you have a B2B SaaS company with repeatable subscription revenues and let's say some buyer comes along and wants to buy, I don't know, Slack or somebody, what they're looking at is, well, how much effort do I have to put into growing the revenues of this company? Well, actually, most of the revenues are going to stick around next year and grow without my really doing anything. So that actually has a huge multiple. This is why B2B SaaS companies have had huge multiples,

traditionally. So you actually don't need to get to as high of a revenue threshold in order to get that high multiple for B2B SaaS. So that's kind of how I think about it. I think for some of these other categories that we're talking about, I think there's probably a lot more that could be done in subscription to kind of help with that. Traditionally, consumer subscription actually has pretty high churn, but maybe there are some opportunities in there that don't. And then because investors have kind of vacated some of these phases, I'll bet you can get in at pretty depressed prices too. So it's going to be case by case. I don't think categorically you'll see a lot of 100xers and some of these others, but I do think there are 100x opportunities in

media, in e-commerce, in hardware still.