This Week in Startups - Turner Novak: Turning memes into a $10M VC fund | E1332

Episode Date: November 24, 2021

Banana Capital's Turner Novak joins to discuss breaking into venture, starting his own fund (11:08), what it's like being an emerging manager, rising valuations, and crypto (45:10). Turner also makes the case for quick commerce, group grocery buying in Latin America (1:04:03) and more!

Turner Novak is here, and he is a VC if you're on Twitter and you're into Vista Twitter, which is a full 0.7% of adult males in the United States. You're obviously know who he is, and he's spicy. Is your screen okay? It looks like you're jittering a little bit there. You're on an M1 Mac, yes, of course? No, I'm on an AISZZen book that I got for 50% off at Best Buy. All right, hold on a second.

a VC, and you're showing up to meetings with a Zen book. Hey, it's all Zoom, so no one knows. They know when your machine crashes, like every five minutes and your video goes, this week in Startups is brought to you by Mbroker's Startup Insurance Program helps startup secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off traditional insurance today at Embrose. broker.com slash twist. While you're there, get an extra 10% off using offer code twist. 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

O-U-R-C-O-W-D.com slash twist. And Disruptive Advertising. Get $1,000 off your first month of service at disruptive advertising.com slash twist. Okay, and if you're listening to the podcast, I'm wondering what the heck's going on here with the format, with the lack of formalities, we're trying something new. I'm just asking people, you know, who are guests on the program, if they would consider going on live. When we go live, we use a piece of software pool restream. It sends a video stream to YouTube, Facebook, Twitter, Twitch, LinkedIn, which is kind

of cool, Facebook, which I guess we don't get any viewers over there anymore. Um, well, it's interesting, you know, Turner, when you, when you build up an audience on these platforms, then at some point the platform's like, we'll just take that audience back and then charge you for it. So Facebook, I have like zillions of followers, 100,000 people following the page, whatever. And like three people get a notification about the video. And they're just like, would you like to promote this? I'm like, no, I want to reach the original audience that you convince me to build for five years and whatever. You know, it fixes this. What fixes that?

Crypto. Yeah, web three. Have you, have you heard of it before? Have you looked into it? I have. All right, listen, let me just give a brief overview of who Turner Novak is. You can follow him at Turner Novak on Twitter. I gave massive popularity over the past couple of years in his full 30 months as a VC.

Just basically turned ish posting into a fund. His fund is called Banana Capital, and he's quite spicy on the Twitter. Turner, how did you get into venture? Well, it's a very long story, but it's a very long story. but essentially I just It's a podcast so we have time yeah I mean how much do you want do you want the 30 seconds

do you want the 30 minutes or somewhere in between yeah in between whatever you should then between so you wanted to get into VC but when you were younger or when you could get in I yeah I guess

the kind of the full the minute context originally from Canada moved to the US my parents got divorced dad moved back Canada mom went back to school to get a visa, stay in the country, couldn't really work. So volunteer under the table,

get paid cash gift cards, got food from the food bank growing up. She also had a small business. She designs custom handmade wedding gowns, which is a decent business if you're in New York, Paris. Not the best business if you're in a small city in the Midwest. And I just spent a ton of time in the internet as a kid, got kicked off the computers at school every year.

That kind of an upbringing and just knew I'd do something kind of tech-related, but went to school for accounting and finance, join the investment club in college and was, holy crap, you buy a stock and it goes up. Yeah, stocks go up. Yeah, they don't go down. They only go up. Like, investing. This is awesome.

I want to be an investor. And I just kind of went down that rabbit hole where, you know, you can invest. Were you in college? I'm curious, just to pin it to the stock market. Yeah, 2009 through 2014, I did a victory lap. My last three years, I like cut down. I just did a bunch of internships to make money and avoid student loans. and yeah, so I would look at a company like Uber.

Like it's worth $100 billion publicly traded, but why can I invest in Uber when it was worth like $1 billion? Or there's some people that were like the first investors at Uber. Like, I want to do that. Whatever. Yeah, you want to do that? Yeah, third or fourth, like fifth. I don't know.

But anyway, so. So you became at some point aware of private companies. Do you remember how you became aware of private companies? You just reading like TechCrunch or something? Yeah, honestly, I don't remember specifically. I mean, I think it was, it's probably around the Facebook IPO, the Twitter IPO. I'd watch the opening bell with my roommates and be like, oh, man, like, I remember the Twitter IPO.

It took like six hours. Like, it didn't go public until like two in the afternoon. We like skipped class. And I just remember thinking, like, maybe not Twitter specifically, but like Facebook, what a great business. Like, why am I, why would I invest in the IPO? Like, why can I just invest before? Like, how do I set myself up to, to go earlier?

And that was a long process. of figuring all that out and being in probably the third best city in Michigan to get into tech in VC. It was a long process. But yeah, essentially, I just got some jobs related to investing and kind of more financially related in Michigan, started writing online a lot, just pick some topics to write about that I thought would be worth kind of like planting the flag, building a track record around.

I did this fantasy VC portfolio. It's like fantasy football, but with startups. And initially, my. My Twitter was probably 99% serious back in the day, and now it's like 1% serious, 99% just memes. Buters for joking, trolling. I mean, you get a lot more attention from that. But just to confirm, instead of going to class,

you decided to cut class. And instead of deciding to cut class to go hang out with chicks or to go drink beer or to go to the quad and smoke weed, you and your dork friends went to watch CNBC and watch. and watch the Twitter IPO. I would like to think I was a lot cooler than that, but yeah. I think it's the ultimate nerd move. It's pretty great, actually.

So you're writing online, you get a little bit of attention, but then you want to start your own fund. And how old are you at this time that you decide you're going to start your own fund? Because that's the kind of new thing that's occurred here is that young people actually believe they can start their own funds and they actually succeed, which just didn't even seem like a possibility I'll be on. honest, 10 years since. It's stupid. I don't know why you'd even try it, to be honest. Yeah, it was kind of an accident. I mean, I had been essentially trying to prove I could be a VC from Michigan, which essentially

meant being online instead of in San Francisco. And this was, like, early 2019 was when I finally got all the interviews and everyone was like, you got to move to San Francisco. You can't be a VC unless you're here. No. Which made sense at the time. But my, you know, when I think about like my advantage, like, if you're a startup, you got to think, how do you attack the incumbents? I was like, how do I compete against the incumbent VCs or just like the people who are, you know, probably like a shoe in to get the jobs, you know, I think a complete opposite kind of background and network that I have set up. So I was just like, I don't think I need to be in San Francisco. So yeah, I, that's kind of, I just tried to figure out how to make it work. And I took an internship, it's like a pretty big pay cut.

And I actually had to sell my house because I couldn't afford my mortgage. And then we had a rental property that you can buy rent you can buy real estate in michigan for like 65 000 so i sold it because yeah had a ton of equity in it and we had to move so we just moved right next to my in in-in-a-n-arbor on the other side of the state instead of moving to san francisco and then pandemic hit as i was i joined to this real estate firm called gelt and they were like hey let's raise a venture fund for our real estate lps and with the pandemic covid they were really focused on real estate business It was tough to get LPs to come in. And I just had a bunch of people that were like, Turner.

You know, we've been co-investing together. Like, if you ever start your own fund, like, I'm in. Like, I had a bunch of money kind of soft committed for this fund that I actually wasn't going out to try to do. But I just hit a point where everyone was like, yo, you got to do this. Like, I think you'd be good. And I thought, you know, maybe in 20 years I'd launch my own firm. I think that's why I told my. Pay your news?

Yeah. Like, that's why I told my wife, the first date that we had. I was like, what do you want to do? I want to be an investor. I want to run my own firm one day. And I was like 23 at the time. Yeah, I think I'm 30 right now, started raising this right before I turned 30 in January, was officially when I was like, okay, I have to do something.

And I just kind of went back to all the people that I'd been talking to, meeting, co-investing with, all the founders I'd backed and told people it was happening. And everybody wanted to invest. So, and it was my thesis was I can use memes to get distribution on and it's way more efficient than anything else. And it was while GameStop was happening, and that was not a tough sell at the time. Everyone was like, oh, memes, duh.

Like, this makes sense. So just really lucky timing with how COVID, the pandemic happened, how memes have kind of blown up. It just all kind of worked in my favor. So, yeah, super lucky. If you don't have business insurance, you failed one of the first steps of being a great founder. Startups should look no further than in broker.

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inbroker, E-M-B-R-O-K-E-R-com slash twist. All right, thanks for supporting the show on, I'm broker. Love you guys. And you decide to raise like a $10 million fund based on this meme action. And you start, and this is kind of like how open the industry is, because of Twitter, Clubhouse, other social platforms, previously blogs, obviously podcasts, getting into VC, literally interacting with the top VCs requires mastering Twitter, which requires arguably 100 hours of being on Twitter maybe if you do it thoughtfully and just copy the people who are doing interesting things. or being, let's just say, reasonably good at the Twitter. Yeah. You just slide into everybody's reply.

You start doing funny stuff. Obviously, I see it. You're trolling me or you're, you know, mixing it up with somebody else. And it's like, okay, of course I'm going to respond. You're talking about me. I have no choice. I'm at least going to like it. I have a sense of humor.

But you must have gotten blocked. Did you go over the line with some of these memes? Did you, you know, piss people off? Because when you're doing comedy, it's a fine line, you know, like the joke and the hurt could be right next to each other. Yeah, there's definitely. it's it's funny enough it's a lot of public market hedge fund anonymous

Twitter accounts that don't like it you probably know the exact archetype I'm talking about yeah it's probably not the funest people to hang around anyways I think most VCs they kind of like we all kind of acknowledge you're like yeah we are kind of a meme like we are kind of pretty easy to make fun of and I think it's pretty easy to make fun of yeah it's like who are these

affluent e-bags who just write checks and then take credit for all their portfolio company's success and what is that job even doing like you listen to a pitch and you say yes it's like okay you wrote a check yeah like congratulations you're an ATM i always tell people like don't forget you're an ATM like people are not talking to you because of your personality they want a check they want money to fulfill their dreams and sometimes maybe on the margins you can help them with some stuff um but you didn't you didn't uh go fly so close to the sun that you burned any relationships that you can think of who was that Who's got the least sense of humor?

Who's got the least sense of humor that, like, was like, blocked you or something? Certainly, Mark Andreessen's blocked you for sure. No, he actually hasn't. He's recruited a couple of the memes. You got work to do. Yeah, he, uh, yeah, I love A16s. They're awesome. I think they're the strategy that they're trying to execute on.

Like, there's all these different, if you think about venture firms and you pick a strategy, it's just like companies. Like, the one that they're executing on, it's working. Like, I think they're really good at what they do. and there's other lanes to compete on. And so, yeah, I have a ton of respect for them. I think they've done a really good job. So tell me about mechanically, you know, for the benefit, obviously I know, embraced funds,

but for the benefit of the audience, there's people who are watching who are 22 years old or their 19-year-old Turner Novax in college watching this. And they're like, okay, yeah, he did it at 2930. I'd like to do it at 24, 25. How does it work to, you know, raise a microfund, this like $10 million of my first fund kind of situation? My first fund was $10 million in fact as well. Yeah, I just passed the hat. you know, 10 years ago at a poker table with a bunch of my besties.

You know, that's how I did it. You know, didn't do it over Twitter, but your technique over Twitter seems a lot more efficient. Yeah, honestly, it was, so initially, like, it was a pipe dream. I might take a really long time. It was just trying to build a track record and, like, trust. Because people are not, there's people who want you to be a fiduciary of their capital and get a return. And there's other people, if you're a VC, it's, and if you're raising a small fund, they want you for a deal flow.

Like, it's almost like, be a scale for me. 50K, tell me when your best portfolio company is raising a series A or a series B, I want to lead the round of the $20 million check. So those are kind of the spectrum of the people. That's a new dynamic in the industry, which is Mark and Dresden did that in my first fund. A bunch of venture firms are in my first fund. You have Sequoia capital in yours. I was the first outside venture fund that Sequoia backed actually with launch back in my first one.

And that's a new phenomenon. Mark and Dresden did this as a way to sort of spread influence. He put 50K into a bunch of funds. I subsequently kicked him out of my second fund. Well, he wouldn't speak, you wouldn't come on the podcast. And he wouldn't come to the event. So like, do a fireside chat? And I was like, he's like, do I, in order for us to like be in business together,

do I have to like be on your podcast or come to an event? And I said, yes. And he said, okay. And I said, great. Just that was the end of the relationship basically. Well, I started with like a like a jerk move. Like you, you want to support me or you don't want to support me. You know, like pick one, Mark.

Like, and then you block me and unblock me and then email me and then, you know, want to buy my superhuman shares from me. And, you know, I was just like, no, I'm not selling you my superhuman shares. But this is a new phenomenon of venture firms wanting to use you as an early signal. So how many venture firms are in or partners in venture firms are in your fund? Approximately a dozen. It's a pretty big number. Venture firms and partners probably like 50, 50 or so.

Wow. They put in 100K each, that would be 5 million. So on average, they hit 100 or 50. It's 2.5 to 5 million, something like that. Yeah, it was probably about 75 on average. Yeah, that makes sense. So that's amazing. Now you have 50 of them.

You have a portfolio company that's breaking out. How do you communicate that to 50 people because they all want to relieve the A? So you just do a BCC? Or do they just read your LP update? Like, hey, here's what we invested in. And then they just look at the spreadsheet or do you give them a spreadsheet and say, hey, here's what we're investing in so they can double click on it. And it's up to them to go drill down and ask for the introduction?

Yeah, I think that's the RRourable. of it, right? Like, you want to keep all these kind of downstream or upstream, I guess, depending on how you think about. Investors. Downstream's the way to think of it, yeah. Yeah. The way I think of the downstream thing, just so people understand the metaphor, what we're talking about here is downtream investors. So if Turner and I are at the well, YC's at the well, you know, you're just watching, you know, the water come out of the well, you know, the spring, it goes downstream and then seed funds that do three or four million

checks and venture funds that do $10, $20 million checks would be downstream from us. Downstream from the Series A funds would, of course, be the late stage funds. Yeah. So it's essentially you just try to have a good relationship with all of them, and you kind know what people like. Like some people, I invest in kind of tilts consumer. There's a little bit of more like software stuff, and I just kind of know this guy's not going to like this thing.

Don't have to mention it to them. But you just kind of balance it. And you, I think ultimately you take what the, the founder wants ahead of everything. Sure. Like you might say, you know, hey, just a heads up. These guys are raising money. He's not taking any intros, but you can reach out if you want.

And I'll just tell the founders like, hey, I mentioned some people. These guys might reach out. You don't have to reply, but, you know, you probably should with these guys. You know, so it's a spectrum. You just try to balance it. It's like a relationship thing. How far into the, how far into the 10 million deployment are you? So of the fund we have invested, it's probably like,

55, 60% and through SPVs kind of total, it's like 25 million Oh, so you're doing the fund plus SPV model, which is the model I did or pioneered, yeah. Yeah, and it was explained to the audience how that works. Yeah, so the,

so the fund is essentially 25K to 300K checks, try to have a balanced portfolio. I basically pitched people. There's going to be 40 to 50 companies. Nothing is going to be tilted and weighted really heavily in the fund. And there's some cases where we'll, put a million dollars, 1.2 million in a C or 5 million in a B or 10 million in Series D. And that can't fit in the fund. So we'll have invested in those companies earlier in the fund. But then

when they follow on and break out, we'll go to all the LPs. And there's some people who don't they don't want to do SBVs. They, you know, they're like, I don't want to pay fees. Like, I want to invest direct. I just, I want to leave the round. But there's a lot of people. They're just like high net worth, you know, have a lot of money that are like, hey, let me know, I can't do 100K checks, but let me know when we can do a million or five million in SPV and we're interested. And so you kind of use those to augment the fund. I actually do not

like the SPV process. I think it's a hassle. We're raising the money. It's just like it takes a lot of for you have to convince people. It takes six weeks. You have to pass the hat. You have to write a deal memo.

Which is doing diligence. Like who does diligence? I do massively. I do absurd diligence for a same with me. Yeah. I don't, I don't sleep usually. No, for fifth, I have a team.

I have 18 people. I mean, you are, but this is the, this is the big challenge when I first had my fund, which I had no people. I had an executive assistant at the time, um, then became my chief of staff, but you have a $10 million fund, even if you were taking fees on it. I didn't take fees on it. I didn't take fees on my first month. But if you did take fees, two and a half percent a year is 250K.

That's basically enough to pay yourself. So how do you staff one of these funds? Or you just not staffed? And you, you just, that's kind of part of the issue here. It's like you're writing 50 to 300k checks. You're not going to have to read the legal documents. You're kind of going along for the ride. You're not going to be doing the diligence.

You're just going to get to the founder. And everybody kind of understands that at this early, early stage. Yeah. Yeah, I think it depends. So my pitch to my investors and the founders that I back is there's all these hedge funds that are coming down from the public markets and they're going early and earlier. I, my long term vision is do the exact opposite, start it precede, but eventually invest in the public markets.

and to the founders it's like, okay, so you have like the DNA to actually like understand what I'm doing and like maybe work with me a little bit earlier on. I don't pitch a value at at all. I'm just like, I'm a dude. I'm not going to help you grow your business, but can maybe understand the product, maybe a little bit better than a later stage hedge fund that's that's coming in. Which is Sequoia's point with the new Sequoia fund. Sequoia is saying, hey, listen, I'm rule off both. I've been on the board of Square forever. and why would I leave the board?

And when it went public, it was 15 or 20 bucks a share, it's now 200 bucks a share. We're going to distribute late and we're going to hold our shares forever at the end. And I think they were also in DoorDash, after Linda, Doordesh. And they're just staying on those. And according to them, they don't distribute their shares to their LPs until they think it's fully realized or maybe in the public markets for two or three years. And now they're saying, hey, we're just going to hold these equities because they're sitting on $45 billion in equities that they have. So they're going to become, everything seems

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So you've only been an adult in an up market. Yeah. Basically, stonks have only gone up for you. And valuations consequently, you're probably seeing this as well, $25, $50 million, even an occasional $100 million pre-launch valuation, pre-product market fit, pre-launch valuation. How do you think about these crazy evaluations and having no. not live through the wars, clone wars or the empire. Those are the Star Wars references.

It was like Harry Potter, but before that. Hey, cool. I'll look it up after this. Yeah. No, yeah, I, it's kind of a loaded question. There's a lot to unpack. Yeah, unpack. Ultimately, like, I don't expect any multiple expansion on any investment that I

may probably expect some multiple contraction. And that could be on revenue users. hype, whatever multiple you're paying. So I think anytime I make an investment, the value has come from actual execution and just like growing the, like making a fundamentally like sound business that is eventually a publicly traded company. And I think if you invest in a seed round and it goes public in 10 years, you might get a 20x, you might get 100x, but you'll make money.

So I don't get too worked up about the exact nuances of it. especially for this fund. Like, if I was, if, like, I think any check that's like $100,000, $150, can return a $10 million fund. You're not leading round. So the way I kind of approach it right now is you really just trying to find the best founders and products and companies and teams and just back them and you're kind of building a track record.

In the future, you have to be, I have to be a little bit more sensitive about what the ownership looks like and, you know, what the valuations are. I do, I have backed out around, which is like, I just think this valuation's kind of crazy, don't have a lot of conviction in it, et cetera. So you kind of... So that is kind of interesting. You're taking the valuation and your conviction, and you're taking those two vectors and saying, hey, I'm high conviction. And then this is how delighted I am with the valuation. If you put it on an X, Y, obviously, if you think it's a reasonable, valuation, reasonable, unreasonable, you can kind of plot on an X, Y chart. If it's a reasonable

valuation and you have high conviction, you're pulling the trigger, you know, reasonable value, even like unreasonable valuation, high conviction, you might actually pull the trigger. right? You're going to give them credit for their Series B essentially at the Cedron. I really don't think that's happened. I mean, Clubhouse was $100 million.

And that was a Series B price previously. And I thought it was kind of crazy. I didn't have enough conviction in Clubhouse. I didn't even really try to invest. I probably couldn't have. I tried a couple times, but Mark Andreessen was in it as I previously mentioned we have a little bit of a

unique way. Yeah. You got to work on that relationship. He's the man. No, I mean, I just think that's one of the things about being early is you answer to nobody. If you're willing to do the work, I mean, think about how painful our job is being the earliest investors. We have to have conviction when the product maybe hasn't even touched consumers yet or there's 10 customers, right? I mean, how do you make decisions? Do you actually talk to customers at this point?

Do you look at data or just look at the product and get to know the founder and that's enough for you? for me uh yeah it's a it's a mix of everything i think data is always helpful you want to be able to benchmark it and you but the thing is almost i think like the sweet spot is decent data like there's some promise there's a lot that needs to that could be better and you can just tell based on playing with the product and talking to the founder like oh the data is going to look way better in the future they're going to make the metrics look better and the valuation is very fair because of that like it all reflects it and you have the conviction that oh the be, they'll easily be able to hire some, some engineers to just go a little bit faster.

And like, they just, they just need the money and they'll execute on all these things that need to happen to kind of close all this and pick all this low-hanging fruit that they still need to do. So that's almost like the sweet spot that I try to look for is like there's some proof point, there's some traction. There's still some questions. And that's typically when it's like C, when it's like a series B or. Most things haven't been, most things haven't been figured out, but something promising has emerged. is if I'm reflecting back to you what you're saying. Yeah, it depends on stage. Like, I've done some pre-seat.

It's like pre-launch, the founder's 20 years old, has never started a company before. But you can just tell based on the conversation, like you pull out all these things she's done throughout her life. And you're like, okay, I should probably make the bet now because I will regret not doing it. Because it just feels like she's probably going to keep doing all these impressive things. But it will dabby through her company instead of, you know, running tuition. or running tutoring classes in high school and, like, getting into a good college from, like, a bad background and, like, all the stuff that she's done. So you kind of try to find those. There's, like, the famous thing saying, it's like, you invest in in lines, not dots. So you kind of, if there's no

lines, you try to, like, go backwards and, like, produce the lines that happened before you met the founder and, like, before they even have any actual data or progress on their company. And then when it's like series B, C, typically for me, it's more of like, do I feel like my spreadsheet is going to be way, like the market size in my spreadsheet can be 10 or 100 times bigger

than how everyone else is thinking about it? Like, oh, this boring, you know, this lame consumer app actually has like, you know, a hundred times more people could potentially use this based on some new features they're adding down the pipeline. And 20 times subscription revenue is actually a fair

valuation because of all these things that they'll do. And again, it's a super contextual, very nuanced. It's not like a one sentence kind of answer, but you kind of try to think about all these things. And I kind of try to back into, like, do I think this founder is going to build a publicly created company that's ultimately what I try to find? And, you know, you try to look for like comps. Like, oh, there's this big, dumb legacy, 100 old company that does 50 billion in revenue

and, like, their executives print their emails to read them or like, they still use faxes. So it's an interesting company to compete against if you're a tech startup. So you just try to find all these different little things to kind of piece together. And like honestly, I don't go out and try to invest in like this is a slam dunk, home run, super obvious to everyone. That's generally not what I'm investing in unless I have some kind of unique edge in and like the founder really likes me. The things that are consensus generally exist in the world already or so obvious, they've probably been tried already. have failed. It's the non-consensus bets. You know, Airbnb famously pitched 37 venture firms

before they got a yes at the Open Angel Forum when Travis presented Uber. Three of us invested and 19 didn't. Marks used to wrote a famous blog post about not investing. And so, you know, and I introduced Tesla to dozens of venture capitalists and, you know, just email friends like, hey, you know, you should take a look at this. You know, like our company, are you crazy? Did you invest? I didn't. I wasn't an angel investor at the time. People always asked me that and it was like, I wasn't an angel investor, but Elon was raising money and I just emailed a bunch of friends who, and that's actually how I wound up becoming a scout of Sequoia was I had emailed them and said, hey, you know, I know you know Elon really well.

Like, he's making progress on this. I just drove in the prototype. I ordered one. Like, this isn't going to be incredible. And then I emailed Twitter and I was like, Michael Moritz and roll off. You just have to do this deal. It doesn't matter that Fred Wilson is overbidding. And I had been talking to the Twitter phone.

folks and they were asking, hey, what do you think of, you've got backing from Sequoia. That's all be in my autobiography at some point, but, and Fred Wilson was doing the deal. And Evan was like, hey, what do you think of Fred? Because I know you're friends with Fred and Fred's wife used to work for him. I was like, Fred's the nuts. He's amazing, like, East Coast VC, but, you know, and back then East Coast VC was kind of a negative signal. And he's like, and what do you think of Sequoia? And I was like, oh, you know, honestly, like, Sequoia, you can't go, you know,

Sequoia versus Fred Wilson. Like, if you were in New York, I'd say, go Fred Wilson. If you're in the West Coast, maybe it's Sequoia. Like, this is like picking between like two of the best options. And Sequoia didn't close to Dill and Fred did. So I didn't do Tesla. And then I told them to do my friend's poker app, which eventually became Zingham. But it was online poker.

So all three of those, they passed on. And then they were like, can we just give you money and you invested? And I did Uber, Thumbtack, and data stacks in my first six or seven investments. So three unicorns in the first seven. And that's basically the serendipity of how my career started was I had been forwarding so many founders. And that really is your story as well. Have Apple's new privacy updates impacted your attribution from paid ads? I bet it has. Well, good news. The folks at disruptive advertising can help you. Disruptive advertising manages over $250 million a year in advertising spend,

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Disruptiveadvertising.com slash twist for $1,000 off. Just start doing the job and then somebody will give you the job. Yeah, exactly. It's like such an easy concept that a bunch of cryberry snowflake peers of yours do not understand. So explain to me why it is so obvious to you that if you just do work in the world, that is credible and that is in the vector and the sector that you want to perform in, then everything just falls into place. And you said it yourself, like, you're like, hey,

listen, if this founder, if she's done a bunch of stuff and she is entrepreneurial and she, you know, worked on this project and it took grit and you're just putting together all those dots and then making a bet. What's going on with your generation? You're Gen Z, correct? Or are you millennial? Are you bubble? Are you bubble? Okay, so even better. So with these millennials, there's a lot of crying, there's a lot of emotions, there's emotional labor going on from what I understand, from one of Rachel reporting's, okay, boomer segments Friday's on the street in startups. Why are they so, why are your contemporaries so caught up in their goddamn feelings as opposed to simply posting on Twitter like you did for six months and then raising your own fund?

I mean, it's such an obvious path. If you just do the work, even if you're not getting paid, you will then get the job. What's going on with your generation? You represent now all millennials. Go. Yeah. I don't know. This is a hard question. I guess I just kind of like, I saw it as, well, I probably wouldn't hire myself.

So what do I have to do to convince myself to hire myself? Well, because I like knew in my, like, in my head, I was like, oh, I could be so good at this. I think those are like all the skillsets I have. I just like, how does someone else know that? So I just kind of started writing online and tweeting. And it was more serious stuff back in the day. It was like, you know, you probably know, like, the thread emoji. The threat emoji did not exist on Twitter, like, a couple of years ago.

But that's, like, the kind of stuff I would do and just try to, try to, like, build a public track record of just my thoughts on stuff. And hopefully I'd be proven correct in the future. And so, yeah, like, I think, and that's hard to do. I mean, I think it's actually hard to come out and say right now, like, Web3 is, like, terrible idea. Like, it's going to fail. Like, that'd be very, very into say right now. or to come out and say, like, you know, San Francisco is the future. You got to move to San Francisco.

Here's all these reasons why. Like, you basically pick stuff that other people are not talking about. But then when you're, there'll be some people to read it and say, oh, this guy's dumb, has no idea what he's talking about. There'll be some people who are going to like, oh, that's actually, that's a good point. Like, interesting. Maybe he could bring a good perspective. And then over time, you know, San Francisco comes back.

And everyone's like, oh, Turner was like, honest. He knew that San Francisco would be a thing. or like he was all about Miami and Austin before everyone moved there. So or if you bet on Airbnb or you bet on Uber when nobody else did, you just all of a sudden get some disproportionate amount of credit for the founder and their team crushing it, right? It's like, oh, you know what? You saw it before everybody else.

And it's like, well, I actually placed, you know, 16 bets as a Sequoia Scout, I think, 700K total and 16 bets. And yeah, like four of them, five of them, you know, became worth over 100 million famously, but that is the model in what we do. It worked out okay. It's one of the things about starting in an up market. I started

11 years ago, so you start in 2009, 2010, you get this huge better. I'm very realistic about that. When I went out and raised my previous funds, I was like, I can guarantee you one thing. My IRA from the Sequoia Scouts fund and going forward, like it's only going down. You can't maintain

109% IRA, you know, or 109 IRA. I think that's just impossible. That's just luck, you know, and a small number of investments, you know, going very big. But I think it's important for people to hear. Listen, I don't want to get into generational war. But I do think it's an important note because Gen Xers, when we came out,

we were like, listen, we're not part of the system. Therefore, we have to make our own system. And we were very entrepreneurial in that way. And was like, you know what? We're going to be rebels. We're going to come at it from a little bit of a punk rock, you know, alternative kind of approach here, which is, yeah, you know, we may, you know, be moody or whatever,

but we're going to build it for ourselves. And then millennials came along and it kind of like bifurcated because I meet a lot of millennials who are like you, who seem like I'm not employable. So, death it, I'm going to just build my own, you know, I'm going to take my own course here. I'm going to chart my own course. I'm not going to just go up the ladder and wait in line.

But there's a bunch of them. We seem paralyzed. And like the system is so rigged. It's so unfair. What do you think now that, you're in business a lot and you were outside of Silicon Valley. Do you think it's a closed ecosystem or an open ecosystem? Having experience right.

I mean, we're touching the third rail here, but let's be honest about it. Yeah. Open or close in what sense? New people being able to incorporate themselves into it. Accessibility to new voices, new people. Openness to accepting young new people. I think it's very open. Honestly. it just depends though

to certain you need the right kind of mentality and things that you bring to the table and you know there's a lot of things that are probably wrong with how it works and I do try my best to fight against those and give like certain people a voice but I think if you

ultimately you know they think there's like I think at the end of the day the startup ecosystem people are trying to make a big impact in the world trying to make money so if you can do those things bring a new perspective in, like, people will value your perspective, right? Like, they don't know, like, meeting you 20 years ago, who would have known that you would have been the guy who sourced Tesla, Uber?

Like, if they would have just, you know, brush you off, they wouldn't have gotten access all this things. But if they would have just taken the one call, got copy with you, you know, they're the one person who did that for you. You'll love them forever. And they'll like, that's why they're sure. Yeah. Yeah.

Yeah. So I think it's fairly open. And I think a lot of people are very busy, though. So if you just say, hey, I want to pick your brain. Not the right way to break into the system. But if you say, I'm going to write, I'm going to do a podcast, I'm going to make funny TikToks. Like, I bring something to the table. I'm going to bring something to the table.

You're going to prove something. You're going to show some work. Yeah. Yeah. It's like with investors investing in startups, I don't think anyone invests pre-traction or pre-s some kind of proof points. Like, there's a lot of pre-re-perf points. There's a lot of pre-launch seed rounds. The founding team has a huge history that you don't need the traction.

The three of them work together at Facebook and built some mobile ad technology that has seven patents. And they're like, yeah, no, we invested pre-launch. And it's like in three people with four patents each, like, okay, great. You know, like, yeah. So I think it's like, risk you took there. Yeah. So I think it's just like everybody is looking for just like new information or meeting new people. and, you know, I think there's always like some proof points that you can show.

I have a theory about it. My theory is, the industry was so closed, and it was all MBAs and Stanford and Harvard MBAs. And to get a seat in a VC firm was extremely hard. You had to know somebody, be a frat brother, you know, and even then, you know, it was hard. You know, there were only a limited number of seats, right? Then you had this like angel investor thing, which when I started 11 years ago, like, I had a hard time finding six or seven. angel investors in Silicon Valley. The demo day is like, yeah, I mean, 10 years ago, you know, it was me, Cyan, Chris Soca,

you know, Ron Conway, there was a very small group of people, angel investing. And, you know, the 20 people, 30 people that you could round up for a dinner to look at companies when I did Open Angel Forum was just so small. But it was enough to get 250 or 500K, a million dollars, you know, passing the hat, 25K at a time that it did work. But I think there's an overhang between. between what was true in 2000, which is, it is a closed system. And you're probably going to be a white guy out of Stanford or Harvard, if you're going to get this job.

And then 2021, which is if you want to start being a VC, you can just be an advisor or you can pop up an SPV or you can pop up a fund on Angelis, Karta, Ashore. Like, all these services didn't even exist. I give a lot of credit to Naval and Angelist and Assure fund management and Karta. well, they kind of were a fast follower, but really Angelist and a sure open the world's eyes to like, yeah, J-Cal could have a syndicate and Tim Ferriss myself and Kevin Rose with the top three and Gil Pinchina with the top four syndicates on Angelist. And it was like, really? Yeah, well, you know, launched it and the four of us were on there. And then Tim Ferriss and Kevin Rose with their followings had five million dollars in commitments and like a thousand people. And then Gil and I had like

100 or 200 people and like, you know, 300K in commitments. But those guys never syndicated deals because they were too busy doing other things. And Gil and I actually just hustled and grew and we actually did a lot of deals together. I feel like that's very impressive 10 years ago versus that. Look, to your one point, though, about the cycle, I do think about it a lot. So what I focused on quite a bit is I'm trying to get very institutional LPs that are in it for the long haul. all my communication with them is it's kind of insane

I'm doing really long paper like it doesn't mean anything I'm just trying to lay the proof points and lay the foundation to actually do this for a very long time and hopefully over a long period of time be a good partner to you guys and you know for 10 funds or however long it takes and

my expectations are always fairly low around the you know I do think we're closer to the top than the bottom so I'm going to act you think like that Yeah, I don't know. Actually, what I'm doing right now as a strategy is, you know, we invested in 350 companies in the last 11 years. Over 200 of them are, I would say, vibrant and active.

Other ones have exited or, you know, are kind of sideways or whatever, maybe zombie mode or, you know, eventually going to be shut down. The founders just haven't, you know, put the final nail in the coffin. I have 50 to 60 of them raising money concurrently the last six months. So every, you know, every week, three or four of them close around. And then three or four more start around the next week. So literally I just took the team and I was like, can we just focus on our portfolio that's raising money, doing our pro rata? You know, we'll still do primary investments and syndicate investments, whatever, other things.

But let's just make sure that our companies get cashed up at this high valuations, high market. Let's make sure they have all the dry powder they need to succeed in their missions. And it's given me the ability to be like, you know what, I'm going to say no on, I'm getting invited to crypto rounds. And I find the idea and the team's credible, right? So that's actually a big, and we should talk about crypto, but that was a big turning point for me because it was just like all these like shysters and like really smormy people who were like I knew them from the dot com era, who were just clowns during the dot com era and they're just like,

now they're billionaires in the crypto era. And I'm like, okay, you're writing a white paper where it's spelling errors in it and you're raising a $100 million ICO, and you're going to destroy Airbnb with a token? That's not going to... What are you going to do? Take the tokens and, like, throw them at the Airbnb employees and, like... Break the windows and the Airbnbs.

It's not going to work. Like, Airbnb's got network effects. Like, why is a host going to want tokens instead of cash? It was just a whole thing was so stupid. But now, like, I'm actually seeing some credible teams, and they're like, yeah, you know, Salana's already built, this is already built, this is already built. So here's what we're doing.

We're building it down. Here's how it works. It's in an LLC. It's legal. got this, you know, Goodwin Proctor figured this out. Well, since, and I'm like, okay, you're not a criminal. But like, no, you know me from these three other startups. And I'm like, oh, okay, that's true.

I do. You're legit. Oh, you have four developers. Okay, so there's four full-time developers working on this, not like maybe some developers who are doing this on the weekends. What do you have thoughts on crypto in 2021? Are you investing in it actively or are you just dunking on it on Twitter or both? Yeah, both.

So I think there's a lot of really, there's a couple of interesting. There's a couple interesting things about it. I do think it's just like my, I guess my Twitter is just like poking fun of the stuff that we're all kind of thinking about and like no one else is saying. And there's a lot of people talking about crypto and Web3. So I'll poke fun at it. But I do think that there are some interesting, like if you can use the token economics to jumpstart the network effects in some kind of a business,

I think that can be interesting. You probably need like a compound. product that's better than the existing product, but then really consumers need a better product to replace the existing one that's solving the problem. This is the key insight. You're 30 years old and you or whatever, 33. I don't know, how old are you? 30. You're 30 and you understand this basic concept that the product you're replacing, you have to be at least

50% better for people, maybe twice as good. Yeah, I was like 10% better product or a product that exists in a white paper. Yeah. So like there's, there's been two that I've invested in. One's Lolly, cashback, Bitcoin cashback. The TLDR is young people... How does that work? The consumer, yeah, tell me, yeah. Yeah, so young people don't use the cashback products, like Ebates,

but Lollie gives you Bitcoin instead of a cash back. So it's interesting to people. You use that as a wedge to build up a crypto-fintech product. The brands that they work with love it because young people don't use them, use their cash-back products elsewhere. So it was a really interesting kind of wedge to build it, and it all made sense. And yes, it's crypto.

And then the other one, it's a game. It's like a free to play FIFA. Like, it's basically like FIFA, like free soccer game, multiplayer first, cross-platform, free to play. I invested. And he's like, oh, I can actually use some of these Web 3 components to monetize. And it actually makes sense. I think it will help us grow faster too. So I was like, yeah, makes sense to me.

So that's simply the crypto I'm investing in where it's like, you understand the end user value proposition as opposed to some theoretical. These are going to be rails or something that everybody's going to build everything on top of and this is the next app store. And so it's worth a billion or $5 billion or $10 billion. And it's like, yeah, there's. That's a long way to go. But okay.

You know, I've been giving this some thought. This is my new theory on crypto because I'm, the store of value I thought was like a pretty weak use case. Like star of value, like most people don't own their home. So like they should probably accomplish that test first of like, own, your home, it's a pretty great store of value because you can live in it. That's true. And you need to live somewhere.

And rent is just you giving money away. But if you own your home, so, or maybe own a second home, whatever. So store of value I thought was, you know, like, and there's other things you can buy that sort of value, like equities in companies that have value propositions, like say Amazon or Disney or Netflix that we know are going to be here in 10 or 100 years. So store of value I didn't like. Then money transfer, I was like, are you guys actually looking at the fees and saying this is cheaper because I don't know.

just a 30% in gas fees for the Constitution Dow, and we're in year 12 of crypto. Like, are you guys morons? Like, money transfer, this is a racket. They're just fleecing people. This is like, I mean, Tony Soprano is looking at the hash on the Sopranos is looking at the Vig at this and he's jealous. He's like, crypto Vigs or 30%.

I get a lot of this. He's getting 5% a week is his juice. You know, and then I was like, NFTs, huh? that actually is interesting if you own the IP okay Cryptopunks you don't own on the IP oh but the monkey you own the IP okay that's interesting and what about royalties oh you can get royalties maybe okay yeah that's actually pretty interesting smart contracts oh yeah I can see that

working because I remember you know like I remember music licensing I remember photo you know uh stop photography yeah these things made money and like there was a lot of money moving around and like if there was a new structure and creative commons and you original photographer gets 10% of every use of their photo and then if they sell it, they get a 20% kicker, whatever it is. Yep.

I was like, well, that's really brilliant. Sorry, I can't help but like it. Now, I think these NFTs are all a giant scam and that people are doing insider trading on them to paint the tape.

Like, there's been 20 transactions on this monkey, but it's probably just a bunch of friends trading it between each other. And then you're the 21st who buys the monkey and you're the bag holder. Like, are you guys schmucks? Do you not think this is occurring? Putting that aside,

then I saw it down. And I was like, ah, this is smart. So why do you look about Dow's? Like, I don't think I get the Dow's. I get at a T. I'll explain it. Okay. So, uh, you just went through, uh, putting together a venture firm.

Did you use Carda, Assure, Angelist, Angelist? Okay, use Angelus. So Angelus charges like, whatever, 30, 40 grand to set these up or they, you need to give a percentage, right? So you're giving of your 20 points, two points or something. What's the deal on Angelus now? It is 25K. I maybe got a deal because I have like a Twitter following.

I have no idea. But it ended up being like 0.3% kind of like admin fee, which I thought was really fair. Great. So that exists as a concept. And so that changed venture forever because it used to be $250,000 to set up a venture firm. So now you did it for 10%. If it was 250K,

how accessible would building a $10 million fund be for you? Not as accessible. Wouldn't have been able to do it. Wouldn't have been able to do it. Okay, great. So now you've proven my point. Now, we start looking at capital formation as a, just a genre, right, as a as a tool kit. And, you know, sure, we have GoFundMe.

GoFundMe's work. I did a go fund me to report on crime and $60,000 showed up and I gave it to an investigative journalist and just required a couple tweets. And they're doing Gotham by the Bay. If you Google Gotham by the Bay, you'll see a newsletter on Substack. Just about crime in San Francisco. And a bunch of people donated to it. I said I'd be 1% of it.

So I think I put in $600. Other people put in a couple thousand, hundreds, 50. It was pretty neat. Okay, so we have that proof point. We have you as a proof point. Okay, so now let's say we want to buy an asset. Let's say we all live in San Francisco and there's an open lot in San Francisco. It's a giant triple lot going for $12 million.

And I just tweet, I want to buy this $12 million thing and I want to make it into a dog run and a kid's park. anybody want to put $12 million into this? I'm starting a Dow. Dow gets fired up. Their donations. But then I say, in the programming, we're going to share the designs, and everybody gets to vote on the designs. And then we're going to let anybody who donates use it for their kids' birthday parties. There will be a reservation system you get up to six hours a year in using these facilities,

either the dog park for your doggy birthday or the park for your kids' birthday party or whatever you want to use it for. and we'll have a special key and a key code. The park will be available to everybody during these hours, but only to members with this key code after hours. So you can use it 24 hours a day since the private park. Might that be an interesting concept to fire up for close to free? If let's say it was in fact, you know, it gets to this free. And then some programmer just fills out a form.

It could be like a no code, like a bubble or a web flow or even Zapier or if this than that. So you go in with an if this, then that statement, and you're like, if you own this many tokens, you get this many hours, and then you have governance. And oh, you can sell your tokens to other people if you leave the neighborhood. And so, boom, now we've bought this acre in San Francisco. We tweeted it. It caught viral, which is what happened with the Constitution. You can just start thinking about every possible use case like that.

Let's say we said, hey, you know, we want to fund five new managers. We create a fund of funds of $100 million. dollars and we're going to just give 20 million to five fund managers and we're going to all vote on which fund managers the fund managers come before us they give their presentation they show their metrics we all get to vote and then you could share you could sell your state in this fund of funds to each other how interesting would be interesting I feel like there's some regulatory stuff that has to be figured out because that definitely sounds like we're scurting some because you would have to be these dows would have to be people who were accredited.

investors. And then if they're donating the money, they don't need to be. But if you did have a share of it, it would have to be accredited investors today. But I think what they're doing is with the Dow stuff, like they're pushing the envelope each time with these Dow's. Yeah. And kind of like Bitcoin, like, could you ban owning Bitcoin in America today? I don't think so. Like, too many politicians own it, too many people have adopted it. Just like at a certain point, you couldn't ban Airbnb because if you were a senator or congressman, you know, president, mayor, you would have too many constituents call you. Yeah, political suicide. And actually, Bradley Tusk used that technique against the mayor of New York when they tried to cap the number of

lifts and right churn. Oh, interesting. And when you opened your app in New York, it said, hey, you know, the mayor, de Blasio wants to cap the number of things. If you disagree with this, press here to email him, click this to call his office right now. And de Blasio was like, I give up, I submit. All right. So that's what I love about Daz. And now I do think I am looking at it saying there's, I think it's five percent realized. And I do understand that people are looking at saying, hey, JCal, and this is a big fight we had on all in episode 56 and a little bit in 55 when I was so pro these. They're like, this is idiotic. And I'm like, you guys are pulled up the ladder behind you. Yeah. This is not idiotic. You just have to imagine, squint a minute and assume like, okay, they've solved five percent of

this. Now I assume they've solved 60 percent of it. 70. percent of it, 80 percent of it. That's what's going to happen over three, four, five years. And at some point, somebody's going to just say, I want to buy the Knicks. Probably going to be me. And $6 billion is going to show up from around the world and, you know, a bunch of funny imaginary money. And I'm going to convert it to over it in the Knicks. That's what I like about it. It all makes sense. I think it's like we'll see, because with all these new crypto innovations or waves, I feel like the first, the first wave of that new concept is kind of just people

trying things out. There's some grifters that come in. and there's a lot of bad actors like you kind of pointed out earlier. So yeah, I think like I'm approaching it from an investment. Like I try to be a fiduciary of my LP's capital. So I like to really understand what I'm investing in, which is maybe crazy for a VC.

And I also try to make sure that I know what's going to happen after I invest. So for me personally with a lot of the crypto stuff, I'm just going a little bit slower. I'm kind of waiting to see how it all plays out. What I'm looking for right now is a call for startups. I'm looking for like two or

developers who want to create a Dow company that builds the infrastructure of a Dow. In other words, you come to the website, you press a button, it creates a chat environment, it creates suggesting of governance, it lets people vote on the governance, it lets people see their ownership to see the cap table, as it were, of all the shares, and allow somebody to just fire up a Dow at any time for any reason. Almost like if a GoFundMe and a Dow were combined, I want to build the platform that is the Dow of Go Fund Me Dow platform, you know? So if somebody has two or three developers, I'll put like 500K, a million dollars into that, just if you build me like a pitch deck and you're credible. So it's a call for startups. Let's go through your portfolio and questions from our live

audience. What's the best question we have? Go ahead and put it up on the screen. Oh, Bob G, always great questions. What data do you ask to see first when investing in a startup? What metrics are most important? Big fan. There you go. Big fan. Wow. That's huge. Thank you. What data asks you first, it's tough, probably retention, whatever that means, whatever kind of company it is. I think- Why is that important? Well, you can be growing really fast, but if you don't have a sound product, it will

kind of all fall apart at some point. So I think the growth is really important, but I really care about like, okay, cool, retention is 2%, it's a leaky bucket, or if it's 90%, like people do not churn from your product over a certain period of time, depending on what your business model is, you can be like a cash generating machine. You don't even need to raise money.

So, like, that's, there's kind of that spectrum that you can be on. So I really like to say, like, hey, the product works really well. Typically, the retention is a function of how good the product is, how the founders think about things, the team that's been hired, the market that they're competing in.

Like, it kind of answers a lot of those questions. So that would probably be the number one. But yeah, you always look at it. Yeah, you look at the growth rate and like the economics, like the unit economics, the business model, like all that kind of stuff makes sense. Like average contract size or revenue per user on the consumer side. Yeah, retention is probably the number one for me. Yeah, I mean, if you have a leaky bucket, as we say in the business,

you could be acquiring customers incredibly efficiently. And then if four out of five are leaving, now you've just your caps gone five X. Okay, tell us about your thesis of why Joker, 15 minute grocery delivery, is going to beat Uber eats. Okay. DoorDash, Instacard, etc., etc., etc. Yeah, so if you look at Joker's website, the Rear's page, you look at all the public information that's out there,

they're really focused on Latin America. They're really not, they're smaller in the U.S., smaller in Europe. So they've essentially built a business that's really similar to Gophe, but in Latin America. And when you look at these dark store vertically integrated, model versus the marketplace model. The marketplaces are typically more capital efficient.

You can spend them up quicker because you don't have to build the warehouses. You just partner with the local store, like local grocery stores, local convenience stores, gas station, restaurants, etc. But typically there's two different systems that are communicating. So it's a little bit more inefficient. Since it's not all vertically integrated, it's a little bit slower. The inventory systems aren't hooked up. So oftentimes there's issues with like your order going through.

The platform doesn't actually have control of the supply and the product in a lot of cases. So that flows into lower retention and sometimes less controlled growth and just like a worst customer experience. So when you go super vertically integrated, way more capital intensive. Maybe you can't scale up quite as quickly. But it gives a way better customer experience. And Joker's early numbers, the, the, traction and the retention that they have compares very well to kind of some of the other models.

So, and they're mostly focused in Latin America. There's really not quite as many people doing it down there. And I think they're in New York, so they get comped against everyone else that's in New York. But that's not really their main business. Makes sense. They'll also try to be in the U.S. But, and yeah, just the team previously ran Food Panda, which is like the grubhubber,

the door dash of Southeast Asia. Yeah. Yeah. So they're, it's, it's the majority of delivery heroes business now by like revenue. and GMV and deliver your heroes like a $30 billion company. So I have a no-brainer. Just met the team before they launched, to invest a couple times.

And yeah, they're doing really well. Okay, let's take another question from our audience. We'll take two more questions. Next question is from Kevin. He asked, breaking into VC question, if a 37-year-old CPA business owner was bored of accounting, I wanted to break into VC. Zero current network or prior industry experience.

How would you do it? How would you do it? I would start, writing online, do some tweets, do some blog posts, pounding related startup concepts. Very boring. That doesn't feel like a sexy place or a place that's very competitive. So I would have some content out there,

specifically on your Twitter timeline, make sure when somebody hits your Twitter or whatever social channel you're using, whether it's blog, whatever, the first couple things they see are all relevant and interesting to people like how a founder can use QSBS to maximize their secondary or something. I don't know. Just like some topic thing. That's a perfect example of like something that's incredibly boring

but that a large number of people would be compelled to read. I would say also, I've seen people use Quora and tons of questions come up on Quora. And so if you branded yourself, the VC accountant or

you know, the venture accountant and you started answering questions about QSBS on something like Quora. When somebody comes to me and I see they've answered like 150 questions on Quora and I can read the actual answers. Each answer might take you 15 minutes. You're making yourself smarter. So back to how Turner was able to just pull a venture fund out of the air based on this exact strategy.

I mean, Quora is another great place to be active. A blog is a great place to be active. And then Rachel, who works here, had started her own podcast. And I listened to it and I was like, seven out of ten. That's what I thought. I just said, how good is this? It's a seven out of ten. And I was like, seven out of ten for somebody out of school who just manifested a podcast

out of nowhere. Like, if she's starting on second base, that's pretty good. Okay. That's pretty freaking impressive. Like, her podcast was better than my first hundred episodes of This Week in Startups. Like it was in terms of production and like how refined it was. So obviously you're taking notes. Right.

More than qualified to work here at This Week in Startups. Let's go. And then Henry Belacaster famously, you know, wow, David Sacks. And now, like, I think they're in like a chat room together, working on edits to make David Sacks, you know, and his right wing position papers, even more palatable to Democrats. Like, they've got some, they've got some, like, signal room with Keith Rabeoy and Peter Thiel and Sacks and Henry Belcatchers. That's what I'm imagining. And they're making videos and memes together, like this, you know, Purple Pill. meme. Okay. That's what I think. All right, pick a, what's, uh, what's an underdog firm in your

portfolio? In other words, one that's under the radar. Maybe most people didn't understand when you sent it to them that you're absolutely delighted and have strong conviction about. This is a one for you to pick an under the radar firm, a company that most people didn't understand, but that you have high conviction. I was uniquely just smart and proud investor, right? Yeah, I guess probably the easiest answer. It's a company called Fasili. It's, if you've ever heard of Pindodo, it's the, it is now the largest e-commerce company in China by number of customers. It was founded about six and a half, seven years ago, grew like 100X a couple years in a row, just insane. A guy who started a similar concept in Latin America, it didn't quite pattern match

the same if you're just pattern matching and you were an earlier investor in PDD in China. So, I mean, I sent it to all the early investors and was like, this is insane. doing like it's the same thing I think it's going to work just as well and so I've invested a bunch of times in almost all the rounds I had to skip one when I was raising my phone. Can you spell the name of the company? It is F-A-C-I-L-Y. Fassily is how you say. F-A-L-L-Y and their domain name is I'm looking for them F-A-C-I dot L-Y. Ah, they got the dot-L-Y rocking. They do. So they're basically Libya. Yeah. So they're an e-commerce platform for lower-income consumers in Latin America.

So that's the majority of people. And it's unprofitable for the Mercado Libre. They're like the Amazon of Latin America. They just can't really serve these people very well because the ticket sizes are too low. So you figure out a couple tricks to get really cheap cash, get really cheap distribution and logistics to serve them. And it's working pretty well. The company breaks a lot because they're growing like hypergrowth and they're opening new locations and warehouses and rejiggering everything every couple months because it's just, always it's growing exponentially. But yeah, it's, they're really, I think they're the number

two overall downloaded app in Brazil right now. Amazing. But, and no one is really talking about them, but I'm, I'm a concept here that a group of people can buy in bulk together and then chop it up when they get the package to their house or something like that, like in terms of social commerce, or is it just small ticket sizes and being able to figure out how to get those to people who aren't ordering $200 in grocery? They're ordering $30 in groceries. Yeah, it's smaller ticket sizes. And typically what it is, is like if I go on the app and there's like potatoes that are on, they're like maybe 10% cheaper than the store.

But if I invite you to buy your first time, your first thing of potatoes on the app, you get a discount and so do I. So I'm incentivized to like spread the word and get more people on board. And you basically buy together. And then so what they do is they eliminate a lot of middlemen. They go straight back to the suppliers. They get a better deal from the suppliers,

but the suppliers make more money because the middlemen are cut out. And then the consumers get lower prices. because the middle men are cut out. And then since it's all in a hat, it's like you can run an advertising business. You can target people. Genius. Essentially.

Yeah. And then what they did with on the logistic side, it's all pickup. So they do a little bit of directly to your house deliveries, but most of them are they actually partner with local mom and pop stores. And people pick up their orders from the, from the store. So you can pool 20 orders in one neighborhood just to one delivery point

and drastically cut your logistics costs. And then you also do. You also give some traffic to the local businesses, which they really like. That's great. Yeah. So, oh, you can pick this up at this essentially bodega, a corner store, whatever it is. That story now, hey, maybe I need some shaving cream or deodorant or whatever, some milk, whatever. I forgot to get.

It's sort of like poker tournaments at casinos, which are money losers. But whoever wins the tournament then wants to play in the craps table with everybody else's money. They all lose it all anyways, yeah. So when you invest in an overseas company, do they have to be a Delaware C corp? or have you figured out how to invest in a Brazilian company or how do you mechanically do that because that does come up right in our line of work and what's your advice to founders then?

Yeah, it's typically Delaware or Singapore. I've done one Luxembourg entity, one that was based in France, one that was based in Sweden, basically just pay a lawyer to look at it and make sure it all makes sense. There's no tax implications. It costs a little bit more.

but I prefer if it's in the U.S. if possible, usually Southeast Asia and India. I think they're generally Singapore. Latin America sometimes, like Caribbean, Virgin Islands, often it's Delaware. So I think that's kind of the best practice. Seems like everybody's doing Delaware Corpse now.

We see that even Australian companies, UK companies. They get that they want to make it easy for American investors who in some cases just won't invest if it's not a U.S. company. Okay, let's take a question from the audience. next question is from Noah. Noah asks,

why would a first time founder be interested in being in your fund if you aren't hands on what is the benefit? Why would a first time founder? Yeah, that's a good question. I mean, it really depends on the context. There's somewhere we're a little bit more involved

than others. And it's kind of the extent of like an angel. Like if you were to have CEO of some company, like you really respect the founder, you know, they'll help you with a couple things. They're not going to hold your hand and talk to you two hours a day

and so on your board. I mean, I'm kind of in the same boat. And there are a lot of founders who, like, really don't need a lot of help. A lot of times they just need money or they need you to connect them with a couple of people. And that's ultimately the value you provide. There's a lot of VCs that pitch this will add a ton of value, will roll up our sleeves, will make hundreds of introductions. We've got a marketing PR department. We've got an HR department.

And the founders who are the most dynamic are like, I don't want a VC fund running. my employment process, my HR department, sorry, or my PR department. Like, why would I do that? Yeah, you want the company to build those capabilities internally. Yeah, it's perfectly important. Yeah, I can help kind of a little bit. And, you know, I'm happy to jump on a call. Like, there's some founders that I talk to them literally every day, some that I talk to

once a year. Like, I haven't heard from them in a long time. But I've actually noticed the founders that send consistent updates, so they're investors on average do a little bit better than the ones that don't. And then the ones that do like to just stay in touch. And they'll just give me quick updates. Like, we just signed this head of sales like so pumped and like awesome. Like that's cool.

Like you just be responsive and they're like, hey, yeah, it's like being a friend who can give you a high five and then, you know, maybe be a warm ear if they want to talk something through. And yeah, if there's something acute and that has to be handled and there's some fire that needs to be put out, they might ask you, yeah, can you come help me put out this fire? Yeah. And I know that I'm like, there's nothing unique about me. I'm not going to like change the trajectory of your company any more than someone else good. So for me, I just, I just, you kind of have to be a market taker. You go out and find the people that no one else is making bets on or you find out where you

have like a different view on what they're doing. And that's ultimately how I make money as an investor. is I just try to back the people that, you know, they just need your, they just need your money. And they just, they need someone to believe in them. Yeah, I mean, at this early stage, it's just about filling out a 500K to $5 million round. And you're passing the hat a lot. I mean, more and more, I'm just seeing founders in this environment do a party round. They're like, I'm not waiting for a lead. Angel investors now have realized small seed funds have realized if I'm going to get into the round,

it's going to be before a lead has been established. therefore I'm going to put the 50 to 100k in now make sure I sign my documents make sure I wire the money and if I I happen to I'll help you get the lead like after I do that like I'm in and I'll make sure we get someone else on board yeah but it's different now

what it used to be when you were an angel you'd say okay when you get a lead let me know I'm in for 50 the lead would come in and then you put your 50 in and you there wasn't this idea that you would lose your allocation because the market is so hot and somebody's got so much money and there are a billion dollar fund that they're going to take everything and say I'll give you the five million, but no, nobody, no free rides for anybody. And so that's actually a really interesting

switch because what used to happen as an angel, you'd put in 50K, the company's burning 50K, three people put in 50K, the company gets three months of runway. And then in month four, they're like, hey, we're going out of business. And that was like happening so often 10 years ago that you're like, okay, get all your commitments together when you have 12 months of runway, then we'll hit the fund button. But things have changed, you know, like it's just things are moving a lot faster. Okay, let's take a final question from our really astute audience. Turner, you okay over there? Yeah, I'm sweating a little bit, but... Okay, here we go. It's a big, tough question coming in for... I don't know that.

Okay, Muhammad asks, why do you think tech stocks are correcting itself now? Zoom is down 50%? Any thoughts? Okay, great questions. Public markets do impact private markets, obviously. They're connected in some way. So, what do you think is happening in the market? Yeah, I think the biggest thing is just interest rate expectations. You know, you value these companies and it is a lot that goes into it. But you basically take the value in the future and you say, what's that value that they're going to create over the next hundred years? What's it worth today? And the way you do that is you discount it at whatever the interest rate is being set by the Fed. It impacts that value that you'll pay today. And when interest rates are lower, that is a, it makes the valuation higher

of that future cash flow, what the business is worth. When interest rates are higher, you can essentially earn more money, taking less risk. So you would not be investing in some of these businesses, essentially. That's kind of the easiest way to describe it in just like one or two sentences. So it's really just interest rates changing. It impacts where people want to put their money. And people say, why would I be in Zoom? Super risky.

It's a tech stock. All the values are going to come in the future when I could instead invest in a bond from the federal government from the Fed. Yeah, somebody just commented DCF. Discounted cash flow model is essentially how you think about that. That's...

Nicola down 85%. I mean, that was a scam. Like, that was a fraud. That's why. Beyond meat down 67%. Lemonade down 71% Peloton down 72% almost. Zillow down 72% Stitch Fit, 73%.

Redfin down 54% from their high. So it's happening right now. Twitter down 37%, snap down 38% from their high, lift down 39% from high. It's happening out there right now. Obviously, the Chinese stocks are also getting crushed by due to down 55% from their peak.

Alibaba, 55% as well. Zoom, 55.48%, Robin Hood, 58%. Although that was kind of a weird meme stock moment when they went up to whatever they went up to. So I don't, I kind of like, we'll cut that off. when they get into meme stock territory, I just kind of cut off that high.

And I just like, let's forget that happened and just, you know, keep it in the 20 to 30, 40 billion dollar valuation range. I do think this, you know, people have gotten a little bit crazy with this,

you know, price to sales ratio. In other words, just valuing companies as a multiple on top of whatever their top line revenue is. And it's just a little aggressive. I think people got too aggressive with that. You do also have the pay.

pandemic stocks coming back down to Earth. So Zoom and Peloton and e-commerce companies. And then China, obviously, cracking down on their startups and their big tech companies, explains those. So you have to kind of double-click on some of these to understand what's going on. There's interest rates for that affects all the stocks because people are rotating out of tech and maybe going into safer things. But China and pandemic stocks, because you did mention Zoom, people get super enthusiastic about these things. And Zoom is a commodity product is one thing to keep in mind. It happened to be the best

version of it, but that is something I would be cautious about with Zoom is, is that how unique is that product? Have you used Microsoft's, have you been on a board call or any kind of call with Microsoft's team? It sucks. Yeah. It's just like, what are you, what is going, why are you changing the size of everybody's images? Like, I was in like a iPhone size and people's images are moving all around and I was like, yeah, this isn't very good. But, you know, Microsoft, I always judge their fourth or fifth version. Like, I remember when Microsoft Word came out,

that's how old I am. And I was like, this sucks compared to Word Perfect. And like, Word Perfect and Lotus 1,23 were the standards. They were independent companies, right? And then Microsoft's like, we're going to create Microsoft Word and Excel. We're going to bundle it, call it office, and yeah, come at us.

It's that distribution advantage that they had. And everybody was like, these things are dog shit, man. They're never going to compete. And sure enough, version 4 or 5 of Excel, version 4 or 5 of Microsoft Word was like, whoa, they figured it out. Like they are like this giant brontosaurus or like elephant and woolly mammoth. Like, man, they walk really slow. But when they get five or six steps and they get a little bit of momentum going, like, yeah, be careful.

They're a freight train. Well, I think of Zoom is more like Cisco. Like they got to get into the phone, the communication system. Yes, they should buy some, they should have bought some companies at the high valuation who make the hardware, like Howl or something. They did. They bought the call center company, right? Five, nine or something. What was it called?

Something. You know what I'm talking about. But I mean, they should have Zoom headsets, zoom cameras. They should have, they did have a Zoom hardware product. They made a monitor for meetings. So they did dabble. Maybe keep pulling that string, it's my advice. Yeah, well, also when I make the Cisco comparison,

Cisco's also had a nice fall from their high. So maybe that's what Zoom's doing too. Well, yeah, Zoom is drinking their milkshake because those Cisco rooms at Big corporations had they were about quarter million dollars and then they went down to a hundred thousand dollars and fifty thousand dollars and now it's like nobody's going to a conference room everybody's in their living room or their you know closet and they're just i was on a call with a VC actually she was i think she was on the podcast and she had the blurred background thing and then she blurted at some point and i was like are you in your walking closet she's like yeah my husband's

working at home there's two kids here i just like the quietest like back of the house bedroom closet I'm literally in a closet doing a podcast. And I was like, that is peak pandemic moment. All right, listen. Yeah. Turner, how can people pitch you? That's what they all want to know. So what's the best way to pitch you?

Do you like to hear ideas? Do you like to see MVPs? What's, you know, you're a new VC. So you're probably not cynical and annoyed when people contact you. So, or maybe you are. Are you cynical yet when people contact you? Have you written a blog post about the right way to contact you? If not, yeah, I hope I never do that.

That's when you know a VCs jump the shark. Yeah, I try to tweeting about like, please stop emailing me your ideas. And I'm just like, I'm too busy ringing the bell. Are you in the business, investing in founders of the customer? Like, it's literally almost like clockwork.

Some VC hits a unicorn back in the day and all of a sudden they have a blog book. Here's how to contact me correctly. Your best bet is to go through somebody I know and jump a hoop. And it's like, or you could open your email and just look for 10 seconds or forward it to an associate. That's, that's, honestly, that's probably the best channel. There's a meme that I don't respond to DMs because I don't, I just lose track of them.

Yeah, no, they go by. They're like a river. They're just like, yeah, there's, you don't understand it until it happens to you when you're just like, every day, like 100. And it's not, it's not usually not that high, but I just don't have time to, to respond to them all. And actually Twitter's UI is not very good for responding to DMs. I've been talking to the product manager at Twitter about this. I said, if you really want Twitter DMs to work, make a product called DMs. And make it a standalone DM app as part of the paid program.

Make it searchable. They just added pins so you can pin for conversations. Whoopty do. Congratulations. But they should make a full on dedicated app like Facebook has Messenger. there should be a Twitter DMs app. It should live and die on its own. And it should have like an in-mail function where if you're using Twitter DMs and you're paid,

you can slide into people's DMs. Even if they don't have open DMs on, they could be like a third tab of like paid DMs. And really make it a robust product where, you know, DMing somebody with a cost would at least build some signal, whatever. There's just like a million different ways to monetize it. But yeah, the product sucks and searching and it sucks. Yeah. The search on Twitter.

amazing. People don't realize how good the semantic search on Twitter. You can search by, you know, time period. You can search by if they're verified or not. You can search by, you know, keywords, bullions. I mean, it's very sophisticated. And none of that made it into Twitter DMs. So if you're searching for, you know, like, yeah, it's just terrible.

It's terrible interface. No starring. You can't star them. Can't put them into folders. How about folders? Would that be too hard to do Twitter? imagine if you had Twitter DM folders and you could just be like VC, founder,

journalist, and at the top when you opened it up, it would be like VC, founder, journalist, media. And you just go into them. What's that? I said meme accounts. Memes. Dank memes, dank memes, dank memes, two different ones. Yeah.

So anyway, email works. Great job on the program today. Thank you. Oh, now you're halfway through this fund, so that means there might be at some point another fund. comment. Yeah, we started to think about it. What do you think about these rolling funds? Does that seem like a good idea to you or a bad idea to you?

Well, if you think about Tiger Global, I know you are aware of them. Their last fund, they deployed in like three or four months. This next fund, I would not be surprised if they deploy it in three or four months. They are essentially a rolling fund where every quarter LPs recommit to the next quarter or a couple months. Yeah. And I think that it seems to be the direction everyone. going. Everyone's, everyone is decreasing their deployment periods and they're increasing their

fund sizes, which is showing up in valuations and the intensity of the market. So, yeah, I try to stick to 24-month funds. I'm not trying to become an asset manager where I'm running a treadmill of deploying as much money as possible. Our current portfolio was pretty diversified. The next one will be a little bit more concentrated. Yeah. And so I've started to think about it. We're not like really fundraising. There's a lot of people that are kind of interested in. but I haven't really actually figured out a game plan yet. But I'm excited about it. It'll be cool to officially...

You didn't have to go on the road for your fund. You just did it all over Zoom, right? And emails and small check sizes, people don't even want to meet. They're probably just commit over email, right? Yeah, it was a little bit. A lot of people I'd met and, like, you know, knew them for a couple of years. They're like, put me down for this. And that's the...

This might be the best part of it now is just that you can just raise your fund without going on tour. Last time I went on tour, you know, to East Coast. I'm going to Boston. I'm going to Pennsylvania. You have to wear a suit and all that stuff. I was wearing a suit and tie, yeah. I mean, I was suited up.

And it was felt great. It felt great to wake up in a hotel and get your suit on and polish your shoes, have a proper breakfast at 7 a.m. And get over there at 845 for the 9 a.m. meeting. And just get thrilled. Yeah, I kind of found it. But then I kind of had a, you watch this show Billions at all? You're fan of Billions? I've seen a couple episodes, yeah.

I basically went, what's the guy's name? Axel? Bobby Axel Rod? I kind of had a Bobby Axelrod moment and I was like, what am I doing? Like, this isn't me. And I was just like, I'm just going to put on an ACDC shirt and just be like, I'm putting in my money.

You want to come along for the ride, let's go. There was just a scene where he was like, enough going and pitching everybody. And he just went punk rock. He's like, listen, the fun's going. It's my money. If you want to come along for the ride, you can come along for ride, the end. and he just took like a more and everybody was like oh no no of course course

of course of course we're in and some people were offended but other people were in you don't need to please everybody. Right listen Turner you were a great first appearance on the show will not be your last let's do a six month check in Nick can we can we if Mr. Novak's schedule

allows between TikTok I also like your TikToks what is the inspiration of this like big nose TikTok guy who's just I don't know. I just try to think of the most ridiculous things I could do that was funny and really didn't offend anyone too much. And just, yeah, that's where it came from.

Honestly, if you go on TikTok and you scroll it, you get ideas that you can borrow from the mainstream to like the VC startup. So that's where I get most of my ideas from. They'll be like a funny sound or music or different like character. Like you just be like, What is the character have a name? I think he's just like the VC.

He's just like stereotypical. Nernor Tovac? Maybe. I don't really want to be associated with the character, even though it's me. My favorite was, I think is when I became aware of it, and I just, I retweeted or something, was he just kept interrupting the person with inane, or maybe they, NERN or Tovac does this every time, but it was like, he kept interrupting them with inane bullshit. Like, what's the TAM? What's the TAM?

What's the TAM? What's the Kack? Yeah, with the cock. I was just like, it's in the deck. Did you review the deck before you got here? Wait, what does the company do again? What's the name of company? Who else is, who else is investing?

Sequoia? You said, Sequoia's leaving? You might like this one. I did one where I reviewed all of Chimoth's alphabet IPO spas. I don't, it was just like a year ago. But I like, I like, open door was like the worst. And I like, I made up a bunch of fake ones, like, high hop. he was going to, like, I just made up some funny stuff.

I don't know if you saw that one now. He thought it was hilarious. So it was pretty great. Yeah, so I just, I try to make it funny. I think founders, like, they don't need people to give them all this advice and, like, tell them out they're on their business. Usually they're just like, I want to get to know the people they're investing. I want to be able to trust them.

You know, I think in making jokes and, you know, making memes and being humorous, like, you kind of show like, I know what I'm talking about. Like, I get it. You know, I'm just, I'm not going to come in and boss you around. and usually for me, like for what I'm at, I'm not leading around. I'm not sitting on your board. Founders just want somebody that they identify with and think they can trust and feel like they know before they reach out.

Like, they know what it's going to be like talking and working with me. So I know what I try to portray in the tweets and the TikTok. All right. Everybody follow Turner Novak. T-U-R-N-E-R-N-O-V-A-K in case you knew the spelling. Yeah, search from on Twitter, search from on TikTok. Great follow. And we'll see you online.

And in six months, having you back on the program. We'll do another Q&A. We'll do a little more portfolio review. And we'll see you all next time in this week and service. Bye, bye, everybody.