Angel is brought to you by LinkedIn. You already know LinkedIn as the world's largest Professional Network. It's also a better way to find great talent go to linkedin.com Angel and get a $50 credit towards your first job post terms and conditions apply and Salesforce Essentials jumpstart sales and support by leveraging the world's number one CRM at a start-up price point at just $25 a month per user go to salesforce.com Angel for an additional 50% off and a free on boarding call. Welcome. It's time for another episode of Angel a podcast. That is a compliment to my book Angel and the angel University program, which is a half-day course about four or five hours with a dinner after it. We do this in about ten cities a year. We're on a mission to educate people about how to Angel invest how to do early stage investing intelligently.
And in a considered fashion, so you get a better outcome both for society picking gray companies that are human positive and species positive for all of us and for the planet and how to get great returns Angel Investing in early stage investing is brutally hard and everybody's got a different Theory or thesis on how to do it in a positive fashion. I've done over 200 Investments and I do it here in Silicon Valley seven of them have turned into unicorns, you know, some of those companies Robin Hood com.com data Stacks wealthfront com.com. I mentioned them twice because I'm so proud of it. Oh and they taxi company Uber. So what we like to do here on this podcast is bringing other investors and hear how they do their work how they Source companies how they make a decision to invest or not invest in those companies how they stay in contact with them what to do after they invest how to evaluate Founders how to evaluate ideas how to evaluate the traction in the metrics and should they
Invest in continue to invest in those companies as time goes on my guest. Today is been Ling. He is the founding General partner of bling Capital get it then bling bling. Welcome to the Pod. Thanks for having me. You started investing what like a decade ago. Yeah. How did you get into it initially? It was really just keeping in touch with the next generation of entrepreneurs and I was I was investing with Jeremy stoppelman with Keith raboy, obviously part of the deal with them for a while. Yeah threw you in the PayPal Mafia or you know, I was not yeah, this is rounded. I mean, I was running Commerce at Google so I started a competitive product at the time and so I got to know a lot of the X PayPal guys and clean Max and Keith and so on and so forth shot it and they were running around town what 15 years ago during the oughts 2004 to 2006 era. That's right. Nobody believed in the technology industry and you could find Lofts and apartments in San Francisco for $1,000 a month.
And you could commute from San Francisco down to Menlo Park in like 25 minutes, right? And now they're filled with buses deploying thousands of developers. We're getting paid $250,000 a year or more on a bus for two and a half hours a day. That sounds about right. Can you imagine how backwards the world has become you're the most successful developer in demand person and you decide to live in a city that's crumbling and filled with crime and feces and drug-addicted, you know, just like The Human Condition here in San Francisco's horrible. It's a terrible city to live in we're ready for you to be mayor. Thank you Ben. Marry Jason.com. It's the next block is the crazy thing about it is they decide to not live in the Glorious peninsula where it's sunny and warm they live in rainy cold. Scary San Francisco and do the commute that should be the reverse.
It's bonkers.
But here we have a little bonkers, but I think it's the nightlife. It's like the city or at least it's some troll. I don't I don't know that it is anymore. Yeah, but you know at least that's the theory I think it makes no sense. What was it like in the Arts aside from the easy commute? And what is it? What is that word you're saying the ayaats ayaats. My things are fur to the 2000s. Like you know, you have the 70s the 80s the 90s. Yeah, and we have the 2010s that period is called the Arts 2000 to 2010 is called the aunts. I don't know why I don't know what the origin of oughts is. Emmy Award winning producer Jackie does and she's about to put it into the chat room for me. Got it. Well that era. So the early part of that era was very depressing because the.com bubble had burst and basically half the valley had been laid off or the companies had gone under so there was actually not a ton of activity at the time in terms of both technology investing and then also in terms of job opportunities. Yeah. There's actually a pretty pretty
Depressing time and I think that gave Google a really big opportunity to hire up basically all the talent in the Bay Area from like, you know the early 2000 period to like the mid mid to late 2000 if you're headed and they did so famously in a way the cynical look of it was to keep people from creating competitors. So this like TV show Silicon Valley talks about hooli and people being on the roof and resting investing there was some truth to that. They just wanted all the smart people since they had a money-printing machine to not be out there starting companies in to be working for Google that actually happened. I think much later in Google's life cycle because in the early days, I think there was a draw to Google because of the change the world mission that's one and the second was all the talent people working there. And so for the period of time that I was there, I think it was 2004 to 2012 in the first in the first, you know the up until 2007 or so.
Google really didn't have any competition in terms of hiring. It was only when Facebook showed up in around 2007 that Google actually faced serious competition in terms of hiring before then. It was sort of we at Google we just win 99 times out of a hundred. Yeah, if there was a hundred people who were going to be hired this month at this Talent level you were going to win. Yeah like high 90s. Yes. Yes because you had the bankroll a correct game respects game. Like if you're smart and you're like, wow, I interviewed there in the seven smart people. I went to some other place and I was like, what's this like tiny little startup? Forget it. I'm not interested. Yeah, and then that that change in 2007 when Facebook was really on its meteor meteoric rise, right in terms of user growth. Yeah for people who don't know aught is a variant of not
Sir Charles is telling me the Brits call that period the 2000 to 2010 the naughties as the Brits are absolutely new term. There you go. What was the first investment you made to remember the first investment? I made I believe is palantir. So your first time up at bat you hit massive home run. What was the size of the company at that point in the stage? And how did you get in that dealer? I assume from the PayPal Mafia. It was it was a I think I think I think the then CFO reached out and I invested along with Jeremy and Keith inbounder. Yeah, Keith was I think he was on season one or season 2. I'm not sure of this very podcast or he may have been on this week in startups. So you've invested in over a hundred companies.
Cora Cafe X lift gusta Gusto are table Square palantir 15-5. I'm in a couple of those myself. What is your thesis for investing companies? How do you have such a great track record? I mean, obviously you and I are both start investing and let that guide so we kind of have the advantage of like surfing When the tide was coming in right but putting that aside there is something to your ability to select when you look back on it. What did all those things have in common? What is your pattern man? Yeah. I think it's two things. I think the first is really great Founders who are mentally tough mentally agile their stubborn but they're not so stubborn that they tank can take feedback from other entrepreneurs and other investors. So that's the first just really great founding team. And the second is really large market and I think that combination Ascent so in terms of the real large Market, it doesn't have to be really large market today as long as it's going to be a very large Market in five to seven years.
I think that's what matters the most. So I think those are the two main criteria. Obviously, there's other things like, you know is the product currently working but in the early stages, sometimes it's just the team and an idea, right? And so you're really investing on the team in the space. What's the difference between a stubborn founder who can take some input and somebody who's just an insane, you know, narcissistic personality disorder uncoachable person and how does that correlate with success in your mind like unpack that a bit Yeah. So I think that it's important for founder to be stubborn and stubborn enough to stick to it. Even when times are really tough but the stubbornness should only go so far. So in my opinion a great entrepreneur can listen to feedback from others and incorporate that feedback. Sometimes they'll say yes, I agree and many times. It's a no, I don't agree and here's why I think too.
Me but I've considered the feedback and this is why I'm doing this. I mean choosing this path. Right? Right. There's certain entrepreneurs that are certainly so sure of a path that they're right and they might be right but that doesn't necessarily mean it's going to be great to work with them. Right? So I think for me the perfect mix is someone who's stubborn is really tied to their Vision but is willing to listen to different viewpoints and then incorporate those viewpoints and thoughtfully accept them or thoughtfully reject them. Got it. So there's some EQ emotional intelligent intelligence here that is necessary for a Founder to be able to say hey, I've got world class investors like a world-class Partners like a world-class team members. I know where I want to go, but I have to be able to work with them take their input and either make them feel good about saying yeah, that's a great idea, but we're not going to do it.
That's not happening. And here's why yeah, I mean the other thing to think about here is that in terms of hiring if this person can incorporate feedback from outside sources and thoughtfully address it I think it's also important from a hiring perspective because if you're going to work for this person you want to make sure that you feel like you understand what this person stands for. And then also what this entrepreneur, you know, if you have feedback as a c-suite, you know member or even a just an engineer that that there's some degree of trust and communication versus like it's my way or the highway just get on board. All right, when we get back from this quick break. I want you to address one of the most frequent questions. I hear from new investors people who don't have ten years and a hundred Investments, which is how do you determine the valuation of an early stage startup when they're so little data to go on and we see such massive variability with one group asking for five million dollars with more performance than
Another group asking for 15 or an uncapped note with less performance when we get back on Angela Hawkins.
Hiring a so hard you are suffering right now and I understand that I'm suffering too. I've got to hire people. I've got 200 portfolio companies. We're all trying to hire talent and it's a record low unemployment here in America. Well, I have the solution for you and you are already using this product its LinkedIn jobs. It helps you fill all these open positions. You have 500 million people are active on LinkedIn, you know that and they come every day to make connections to grow their careers to discover new job opportunities 90% of LinkedIn users according to a survey are open to new opportunities, but they are not actively looking these are called passive Job searches LinkedIn jobs gives you access to an entirely different demographic than anywhere else in the world. In fact, we found our director Sir Charles and our marketing manager Marine on LinkedIn LinkedIn is amazing and you need LinkedIn jobs to find the
Right person for your best that you can get to Target your job promotion. It's going to recommend matches and it does candidate match management. It's a dashboard ledge attract everyone from application to hire all in one place and you really need that candidate management so that you have this beautiful elegant dashboard and it will track everybody from application to higher so you don't lose any of those premium candidates LinkedIn jobs uses knowledge of both hard skills cloud computing social media video productions and soft skills, like collaboration time management to match you with people who fit your role best. So here's your call to action. It's a really great offer. I can't believe they're doing this. I want you to go to linkedin.com that's super easy. When you type the word letter L in your url. It's going to fill in linkedin.com. We all know that because that's the place you visit most that begins with an l and then / Angel linkedin.com / Angel. You know me. I'm an angel an angel investor you're listening to Angel podcast.
Linkedin.com / Angel and they will give you $50 a city 504 free just for posting your first job. So get that 50 bucks. And you do that by going to linkedin.com Angel terms and conditions. Of course apply. Thank you to LinkedIn for helping us find Sir Charles. He has been a real gem. Okay, let's get back to this amazing episode my guest today. None other then been Ling you can follow him on the Twitter bling Bri NG get it with the 0 with the zero and now he has bling Capital before that. He was a general partner a khosla we put in six years there. The note is an interesting personality. How is he to work with? He's very very talented has very strong opinions. Yeah, you can learn quite a bit from him.
Very strong opinions is what stood out in that sentence is he as intense as he seems I've had have interviewed him nice intense. What is his? Why is he so successful?
I think he's successful for a variety of reasons one is that he's just very very smart so he can see ahead and can see like two or three or four steps ahead of everyone else so you can see around the corners. The second is has a really broad breadth of experience in the 30s conviction. Ah, so he's willing to bet when others are not willing to bet and I think that's really important. Yeah, that is a important lesson. We see such lemming-like.
Investing here in Silicon Valley voices true founded confounding when people are alike.
Pouring money into the 16th you no slack competitor or Postmates Uber Lyft competitor and not giving even a modest check to something that is truly Innovative out there so weird.
You find this in your career you definitely I definitely find that to be true. Yeah, and then I the other part of that lease it in yourself. And then yeah. Well the other part of that that I think is true is that once an elite is identified in an investment round, then all sorts of people want to follow right? So that's the other part of the lemming-like behavior that I thought you were you were going. Yeah. No, that is one definitely like you have a you have a two-fold lemming-like Behavior. Now that I am packet from what your feedback you have a lead investor goes into a deal now. It's oversubscribed the same investors who passed now I want to get back into the deal Azaria or into the next round try to do a make good and then you have two companies had success in a space now 20 other investors have to bet the sixth seventh eighth ninth horse in the race, which makes no sense.
Agree to break. How do you how do you police yourself with that? Do you think about that yourself like your own mental state as an investor and sort of sportscasting or handicapping or analyzing your own behavior and decision-making. Do you do that as like some regular practice?
For me, I really focus on the two criteria. We talked about earlier just the quality of the team. And then the the size of the market. Typically I will not want to back the the you know, the number two with the number three that said there are certain cases when the market is so large that you know, you can have multiple winners and and many markets are not winner take all markets. So I think that's sort of the the ancillary like the exception that proves the rule which is that when you have you know, a hundred billion dollar Revenue markets, then sometimes you can have two three four winners. Yeah, right. So yeah Enterprise. Yeah, Mr. - yeah, even if you just take consumer apps like is there going to be one winner in social media? No, there's like six or seven major players and it just happens to be that one gobbled up three of the top six or seven when we left for break.
How do you think about valuations would you not think about them at all in the early stage when you meet a company that's asking for only five million dollars as the cap on their note and they've got a you know, $500,000 in sales. And then you made a company that is asking for fifteen million dollars. They've got no sales their team's got holes in it the recipe for three times as much how do you make sense of all this? Do you worry about it? Do you negotiate it? Yeah, I think it's really tricky because it's more of an art than a science and I think you know both those poles that you mentioned happen quite a bit for me. I tend to focus on so from the fund I typically will write somewhere between let's say a four hundred thousand dollar check to a million dollar check for 10% So I tend to stay in the you know, 4 million post-money 10 million post-money range. I like to be disciplined because I think you know, I have we've had conversations about this which is that if you think about it at a five million dollar post-money valuation, if you do too let's say, you know three Investments there for 5 million each
For four or five hundred thousand each that's one point five. Right and then you have three shots on goal. But if you have for example an 8 million post and you you to Investments for 10% that's one point six. So you have three versus two shots on goal exactly shots on equal to 350 percent versus 203 flops versus to he's like, why wouldn't you do it? And then when you go to like the 20 million post-money, you do two million for 10% So then you have that then the math more shots on goal that one exactly. It makes no sense. Right? This is where the van this is what the founders who are going for the Sky High valuations don't realize that they're doing is they're taking the Savvy investors who actually think through the betting strategy and the ones who have the most deal flow which would be people like us and they're like, well what I have a lot of deal flow here, I'm picking between 20 great companies this month to invest in
You're just not going to be on that list. You've eliminated the top ones. How do you think about those High valuations? We hear criticism of like uncap notes and raising to high evaluation. Why is it good or bad for a Founder? Let's put the founder perspective on we understand for an investor. We just went through the math you get three or four shots on goal versus one. What are the pros and cons for raising at Sky High valuations? Well It's Tricky. I think it would bucket into two sets. The founders one would be an established founder that's seen success like a big success and Williams Mark Pincus, whoever they got their next Max leftshin. Sure, right so here that I will call the category a and then we call category B, you know others that are it was a first-time entrepreneurs that don't really have a track record in operating or any sort of sort of background other than you know sheer passion and IQ EQ God. So in category one, I think in that case that these
Quote famous Founders that can command a premium and I think For Better or For Worse as an investor, I just want to put as much money as I can get in that round right there proven operators. They have networks. They can hire they can you know, maybe the market isn't exactly what they did and what they expect it to be but you can trust them to navigate and trust them to twist and turn so, you know risk-adjusted they tend to be I think I think they when they command that premium fine that makes sense to me I think for you know, if we look at category to which is most entrepreneurs. I think it's a little trickier. So I think there's pros and cons of raising at a high valuation for the you know for the entrepreneur and what I would say is that the pro obviously is that as an entrepreneur you get less dilution if you raised at a higher price, but I think there's a lot of cons that come with that I think a is that
A lot of the quote-unquote investors that may consider themselves high value add usually will opt out of those rounds because the price is just simply too high. We just we just talked about that right B is that you're kind of setting yourself up, you know as the founder to have a really high bar for your next round of financing. So put differently the easiest way to illustrate this point is to use really extreme examples because if if you're a Founder The reason to seed round and you raised at a billion dollar valuation you Ace 2 million dollars at a billion dollar valuation, right? Well, okay. The next one has to be higher than that for you to man up round and it's very hard usually to raise a series a at a greater than a billion dollar valuation. It's not common it would need to have heard of nine figures in Revenue in all likelihood or son driving around you or some some some miraculous. Yeah. That's right. Okay, and so therefore super extreme and so that's that's a that's the easiest way to illustrate. Obviously. You're not going to raise that a billion dollar valuation your seed round, but you
20:30 at some point it becomes much much harder to raise your next round as an up round. If your price is too high and the way that that sort of manifest itself is that a lot of the series a investors will look at the last round and say I can't mark it up. And so therefore I might not want to engage I might just pass so when you otherwise would have had investors engaged in actually really dig deep and possibly be great partners for you. They may just pass out of the fact that the valuation expectations are too far off got it. So you limiting optionality. So that's that's that's Part B, which is your limit optionality from an investing standpoint and then also sees you limit optionality from an exit standpoint also because your investors have to approve that exit in all likelihood.
If they invested at 20 and now you get a 25 million dollar offer you own 95% of the company or something, right? You only diluted 5% We don't want to sell. Yeah, or if you if you raised at a twenty post and the offer comes in at 15. It feels like it's a it's a lot for you feels like you've done something wrong. Yeah, right and the employees are not necessarily excited investors are excited. And so it like turns out to be bad for for a variety of reasons. I'm trying to think about like if we could come up with here at this very moment a guide or a metaphor for Founder's because it is a luring having been a Founder to raise at high valuations. It's a nice feeling to have the value of your company be that high because you get to look and say well I own 40 percent or 30 percent and wow, so I own 30% of 20 million. I've got six million dollars. It's a nice feeling but it's obviously false because that's not a realize valuation. So I wonder if you need to have the amount of fuel necessary.
To double the valuation that you just raised that so if you feel raising 1 million at a 20 million posts you give away five percent of your company. Do you feel that's enough fuel 1 million dollars to get you to 40 million in value the answer would in almost every case be no because that buys you five developers or you know a five person team for one year to create 40 million dollars in value now if you were to raise five million
For a 25% that's like a series a if you were able to pull that off that would be enough fuel maybe 5 million would get you 10 developers at 200 k h for two years or so. Maybe you could build 240 million, but that would still be challenging to sit there with 10 developers and say we got to get to this amount of value in 30 months or less. Right? The rubric that I like to use is to say what is how much money does the company need for the next 12 18 24 months to achieve the de-risking points or value proof points. And then from there that's the amount that you need to raise plus or minus 25% because you need a little bit of buffer. And then for that you do a trade for 20 25 or 30% depending upon the investor set and that is the usual usual trade at the early stage because it's impossible to actually value a company, you know, when it has no revenues and just it's too if you want to start a company you want to raise that.
No, 1010 Kapoor, you know 5 cap. Like it's the company doesn't actually worth anything. Yeah, there's no girl. So we just coming up with something exactly style straight there. Yeah. It's a trade of dollars for ownership and then the way to think about so the way that I think about it and I advise entrepreneurs to think about invests choosing investors the same way as choosing your team. So, you know, when you think about the dilution or the amount that the investor should own it's similar to when you hire a great CEO or VP of engineering so if we had a start-up of Jason I started company and we were hired to hire a VP of engineering. I'm sure we could find a VP of engineering that's going to take point five percent and like 150 K per year. I'm sure we could find that but some of the great ones may ask for five percent and maybe a hundred K because every day care much more about the equity then about the cash, right? And so and certainly there's going to be a quality difference between these these sort of two poles and so
Only with investors you'll see the same thing, which is that, you know, you basically hiring these investors who are going to be on your cap table for the next 710 years, assuming you're successful and they will be a part of your team for a very long time. So thinking through the trade-off of basically it's dollars for ownership, but then obviously the the investors who consider themselves, you know high value add may expect more ownership. All right, we get back from this quick break. I want to know you talked about the market. We went through team a bunch, which is great. But you also talked about the market and a growing Market doesn't have to be here yet or a big Market that could sustain many players. I think you're a lift investment falls into that. I'm Uber your lift. We're both pretty happy right now. Even the lift had a tough time in their IPO. It's still a 15 billion dollar company. That is nothing to shake a stick at so when we get back, I want to understand how you think about Market size when making an investment when the market
Doesn't yet exist when we get back, Auntie Angela podcast.
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/ Angel okay, let's get back to this amazing episode. Welcome back to Angel. This is the podcast that is a companion to the book. I wrote If you haven't read Angel yet, it's in Chinese Japanese English. What are you waiting for? Go? Learn Japanese and read my book or if you speak English, you could just listen to me for six or seven hours in your ears. I read the book myself. So if there ever was a reason for you to go on audible.com slash twist and get a free book it's to get Angel. Alright, and thanks for the reviews everybody. That means a lot to my mom and me. My guest today been linked. He is founded his own firm bling capital.
After spending six or seven years with legendary vinod khosla.
With the beach issues. Why won't he just let people serve the beach. What's the story there? I refer to this crazy controversy. He bought a Beach Colony where people used to Surf and he doesn't want anybody on his Beach. Is that terrible? Look I told him on Twitter.
Just let people surf the beach but node if you're a billionaire let people serve the beach. What's the story with his Beach thing? What I will say is what I've learned in working with the node is that if you approach him with respect he treats you with respect and if you approach him with a fight with a fight, yeah, which they did. He's you mean that respond so positively but I think that's most people I do I do. I think that's most people also we have blind spots. I think sometimes people don't know when it's a bad look but I understand like iy Red Hill but it was very principled. So he doesn't think he's so principled and when I read his position on it, it actually found myself nodding like if you buy a piece of property, it's your property should have the right to do it or whatever. Somebody else shouldn't be able to property rights or kind of what America is built off of and democracy is built off of but I have a better solution for Evernote but node.
You'll be dead soon. We all will be.
You're going to I don't think you're ever going to go to this beach. Like you've got once or twice put up an ice cream stand give anybody Under 12 years old the free ice cream cone. Let everybody use the beach. It's no big deal be a mensch. In fact the power move for you would be to make it a public park for all eternity after 20 years of using it or something. That would be like the power move. All right, anyway enough advice from an old castle what start your own firm? It was an opportunity as I actually wanted to do it for a very long time. Yeah. I didn't think I had experienced before joining khosla Ventures to actually really understand all the ins and outs of venture and like, you know, the the aspects of understanding the convertible notes the conversions like the followings follow the map around. Yeah, so so on so forth, but after six years of training at KV really gave me an opportunity to sort of Branch out and invest in the companies that I want to invest in. How big is the fund the fund is about 90 million. So it's a 60 million dollar seed fund a 30 million dollar up.
He's fun. What does that mean? For people who don't know what an opportunity fund as well know what a seed fund is that's 250 to two million dollar checks in 2019 dollars. What is an opportunity fund opportunities fund is usually a fund that follows on from the previous fund from the seed fund got it. So if you hit a big winner, you hit a Korra or a palantir again, which you will you can then just plow 10 million or 20 million into it. Does that give you a different level of carry those opportunity funds than the main funds is that why they're separate or is it just separate to there's different sets of LPS that like different types of risk exposure. So certain types of LPS, like the early stage risk exposure and certain ones like later Sage risk exposure. Yeah. So in my opportunities fine, I'll write checks probably around 1 to 3 million. So the idea is like somewhere between the target of about 10 10 companies in Opportunities fund God and those would be series b or something like that. Yeah. That's that's generally the idea got it and investing out of either the seed fund also investing following companies from the seed fund or from any of my previous investors.
Investments as an angel or at khosla got it, cuz this I don't know if you had the same experience when you were an angel investor. You didn't take a pro-rata you probably even a pro rata but that rarely gets Savvy and after your next have 250 investment without priority have Pro rata and all of them which may wake up one day with a unicorn this happening to me over and over again. I have companies I invested in at 5 million that are closing around so 250 or a billion and all of a sudden I find myself with a million dollars here a half million dollars here two million dollars here in Pro rata. I got to take that Pro rata, right? Well, sometimes you do sometimes Maybe not maybe not I didn't make that decision if the way that I think about it is that if you if you were to make an initial initial investment in that company in that round, if you're willing to write that check you should do your Prada and if you're not willing to write your initial check in the company, so just put the same criteria you when you made your first check is that makes total sense. Hey when I left our hero that you been I was wondering you mentioned a
Might appear where might emerge an Emerging Market was okay for you to make the bat if the team was great. How does one accurately assess the market opportunity? How does been do it again? This is more of an art than a science and I think there's a certain spidey sense that you have to have in terms of with the way the trends are moving, especially in consumer. I think there's the aspect of where do you think the puck is going to be because you got to ski to where the puck is going to be not where it is right now. So understanding
How consumer behaviors will change so when mobile came out in the late 2000s? I think we all understood that there was a platform shift. So there's a variety of things that would actually bunch of companies that exist on the web. They should exist on mobile. Yeah, it's actually relatively straightforward thisis not that Innovative but the opportunity to invest in a variety of companies that we're taking advantage of that platform shift. So I think that's a perfect example, which is that it's not obvious. It wasn't necessarily obvious to everyone in 2007 that mobile would be as big as it is today. Right? And so anybody but it wasn't but it wasn't. Yeah. So first iPhone came out it was really really slow. Yeah, if you remember like the I think was Edge and kind of do you could barely browse the you could barely browse the web even on Wi-Fi is the web you basically upload a web page then take a couple of bites of your slice of pizza and then pick your phone up again. The web page will be loaded. It was it was like the worst it was a worst back up you could have for loading a web page and your email was loading in the background.
Blackberry faster candidly a much much faster. Actually Blackberry was like much much better for a variety of business related tasks at the time. And so but you had to believe was that both Apple and Android would continue to innovate and Moore's law will kick into place and the price will come down so on and so forth. And then now we have the you know, this multi-billion dollar so multi-billion user platform that didn't exist just 10 years ago and you'd have to make the assumption that consumers would be willing to do Commerce on their phones and that Broadband would work and it's almost like we look at it now like the idea that you would buy movie tickets on your phone or books or Amazon or Groceries on your phone. It's like well, of course you would but there was a moment in time when people looked at the web and I remember people were like, oh, yeah, no people will not put their credit cards on the internet until the 90s. That was the position like what Maniac would ever put their credit card into a website.
Totally that totally the ties into a corollary that that I have which is that defaults matter and this one of the things that I discussed with Founders quite a bit in terms of product design that 90% of users will choose the default that you set and the Amazon example is the exact example I give which is that Amazon had the foresight to say we are going to store your credit card. Yeah, you can go back and delete it if you want but we storing your credit card right in an era when people were like, oh you shop online that's really weird like you trust them with the credit card. Like, you know what I mean? Exactly. What do you do when you get the socks and they're too small and so the conventional wisdom at the time was that oh if I'm running an e-commerce site, I'm not going to store your credit card, right? So because like, you know, it's for your privacy so on so forth, but then it turns out to be that
Amazon did store the credit card and then that's one of the reasons why consumers go back to Amazon because well, I already contain information is already there. So one class of amount of friction. Yeah and by Massive, I mean 30 seconds of reading putting your credits more than 30 seconds because usually have an error and then like you waiting for two loads to minutes right of arduous credit card. It's amazing like today. We consider two minutes of fumbling with a credit card.
For the reward of getting anything you want delivered within an hour to 48 hours as arduous. Yeah, well consumer expectations continue to rise and rise and Rise. So yeah, so it's almost like in a way you should just assume it's all going to work out when you're like looking at a market I have now in my mind your said assume that whatever the technical difficulties are. Whatever the Broadband difficulties are. Just take a moment to assume that all of those things are overcome. So when I looked at like a lot of these VRA our company's I just said to myself, let's assume they get these things down to 200 bucks would people want to do it and I came to the conclusion. Okay? Yeah, we'll get to 200. It's I don't know if it's 5 or 10 or 2 years, but I actually don't find any of the experiences compelling.
Because I have the two thousand dollar version and it's still not compelling to me. So I actually think this is DOA and you know what? I think I called it on this very program because you can look at it and say is this compelling and when I looked at a are thought to myself this is pretty fucking compelling to like when I saw a Are For the First Time 10 12 years ago in Japan. I was like, wow, you can put things in the real world. What if they could put the Yelp rating above the front door of restaurants or what if they could put like a person's Twitter handle above their name unique AR is going to be big as that one. We might look at the same way. We look at mobile and say well it's obvious that market would manifest itself. You know hit hololens is janky right now. But yeah, obviously they'll get that down to $200 and I'll just work. Well it sure your view on VR and I think that
The product experience is so subpar right now that it's not ready for Mass market and I think a lot of people say VR is just the next mobile, but I think those people are too young to realize that there was you know, that mobile there were lots of field platforms before Android and iOS like calm exactly go. He's a cure so many failed members Stony go. What was that called go? I don't even know what was called. It was called go. They have this like go thing where we had like virtual assistants in the 90s. It was like the entire iPad just before yeah. Yeah. It's the concept was right. The timing was was you know, the timing were form factor, whatever wasn't wasn't right for consumers at the time. So, I think the VR experience is far too clunky today and so from an investment perspective. I think it's very tricky because you bear both a platform risk, which platform is going to win and then be Market risk whether consumers are going to adopt right? So and then you have product Market fit row so that you have a ton of layers of
Risk on VR and so that's why I generally avoid investing in VR. I am bullish on. However the major platforms investing billions of dollars in it because I think that actually makes sense. So for Google or Facebook is investing billions of dollars on why not take to have long-term exactly devil. They can take a long-term view 10 years 15 years invested billions tens of billions and maybe they create the form factor that that's excellent on a are. Yeah, I think that certainly there's a lot of value to that. So I haven't seen anything that I really love from a seed stage perspective. It's because tricky in the seed stage particular because I think it requires more Capital. Yeah, then most other I think I figured out have you been to sandbox VR yet? I admit I've seen the videos though. Yeah. Well go I went for the first time and when you play VR as a group it is like going to laser tag or yeah, I'm going to paintball I don't have you ever done those activities, but when people leave those it's a huge rush. They love it.
Right, so it is possible that VR will work I think in a group setting when we're all in the same room and we experience it like a movie. Yeah, we're going to the theater. Well, I think we are does work but I should be more precise. I think VR works, but people call it the next mobile, but it but it's more like to me. I think that there is a market here which is more like, you know video game console sized which is a which is a big big Marsh Oreo Sega Nintendo this these are large companies, but they're not Apple trillion dollar company. Yeah, right. So they're multi-billion dollar companies, which is good. Yeah, but there's there's a difference in terms of scale like two orders of magnitude. I can see it happening in locations because what happens with locations is you get this group phenomenon where we all go do it. We're willing to pay a higher price because it's like going out for beers or something going out for dinner. So you start putting it in a category where $20 a person doesn't seem like a lot right $20 to buy an iPad game that you play for a hundred hours. We were like, oh that's expensive $20 to go out and have a beer or will check.
Wings are a movie. People are like, oh it's a good pair fair trade. I got you know three hours of entertainment. So it's about $7 an hour. Whatever and I think that's how this VR thing will shape up at the a our piece to me just thinking about right now. We're putting this phone in front of our face and it kind of kills everything having the glasses on you can still look people in the eyes, but still have the data, right? So as you were talking we're doing a podcast hear you mention a company here in it could put like a little crunch base profile, you know to the right of your head as you talk about your company's. Yeah, I believe in the theory. I not convinced on the execution and I think there is also an element of consumer consumer vanity that's not accounted for in a are and that's people pay thousands of dollars to have surgery on their eyes and risk side effects, so they don't have to wear glasses. So therefore the bar for people wearing putting on glasses.
Bring something in on their face. I think requires that the experience be in order of magnitude better than what exists on the cell phone. And so I think that's that's the bar for me. Wow. That's a fascinating hurdles a great way to think about it. You have to like I'm you know, what I'll give you another analogy that makes your analogy even more insightful talking to a computer. They're are you know, Alexa by me called me an Uber or hey Siri, call me an Uber like sorry everybody who Bears just called. Sorry. It's it into my own. So I just I'm going to have to pay. Yeah, I know.
You settings tap on my phone and then she's yours Siri. Why are you so pathetic? Why are you not as good as Alexa but what you think about those interfaces? What just happened to me? What my Serie like her being horrible. You feel like such a dork doing it. It's like the Dork Factor like is this and with Alexa it kind of cross the chasm for me. We're asking Alexa for the definition of a word or for the temperature that you know are the weather forecast was so delightful and perfect that it actually made it palatable. So it's almost like the technology has to not make you look like an idiot or dork Ian. You're using it. Yeah, like if it's frustrating to use and you look like a dork wearing a Halo Halo Lance hololens, like just not gonna happen. That's right you invest in consumer a lot. Yes. Correct. Is there I mean you must think because your race to fund around it that there is a massive opportunity. How do you think about Facebook's brutal cop?
Being of every pixel that another company does whether it's that group chat app was that group video app that everybody went crazy for for a minute party something house party house party or SnapChat? Yo, how do you look as an investor at Zilker Berg's ability and Relentless Borg like Microsoft Circa 90s ability to just Target a company for annihilation and never stop. He did it with this. There are many things that I don't agree with and how Facebook is run but that their ability to execute and copy is something that is unparalleled. What does that do to you as an investor? Well, I think that from an investment standpoint It's relatively straightforward you want to invest in things that can't easily be copied or that Facebook is an interested in God. Yeah. We're Google's not interested in and what's interesting, you know, as another example is when I was at Google we would present plans to
Larry and he will see you at the time and the bar was that we had to generate five billion in Revenue per year for it to matter. And so you could see there's lots of opportunities to build really interesting products and services that would do hundreds of millions. If not billions of dollars Revenue, but were quote unquote too small for Google. Wow. And so that also represents a really big opportunity like as an example. I invested in lucidchart, which is basically online Vizio and Google has col Suite of Google docs and my determination at the time. I invested the seed the founders an ex-googler that you know, this would be quote unquote too small for Google. Yeah. And in fact, it's correct. They are now doing I should disclose their their their metrics but they are doing you know, material double-digit Revenue ARR with like, you know, 0 churn and lucidchart. Yeah. You should try. Yeah just to make charts. Well, it's online Vizio collaborative Visio like we're actually yeah so makes
No sense. Yeah, and so there's big companies that could be multi-billion page your duties another example. So I know you paid your duty at the seed at Google we had this system that you know was equivalent some very similar to page. We do everybody likes everybody needed it the internal page your duty was an internal hack together system that developers would put together just so they weren't interrupted on the weekends when they're you know, whatever taking care of their kids soccer plans or whatever. And so those are I think examples of spaces where you know a large company it gets so large that in order for it to matter to them. It needs to be, you know, multi-billion dollars in Revenue, but as for Venture investors, if we have do 200 200 million dollars in Revenue company and were investing at the seed stage. Oh, it'll probably be happy knowing, you know, Thirty fifty hundred X type of company. Hmm. Tell me about the anti portfolio. Tell me about the company's you passed on that make you go. Oh my Lord I see.
Look at this. Well, we as I have Twitter and Zynga and Tesla's my three. Yeah, I wasn't Angel Investing at the time to be fair to myself, but I'm just trying to be fair to myself because I actually could have yeah, so I missed Uber I think as I was in London at the time so I completely just missed it. I didn't understand and I also didn't understand the dynamic because I don't drink so I'm always the deed. I was always the designated driver Ryan San Francisco. So it was the never like, oh, well, I can't get a cab like this not that big of a problem. I'm the yeah, I'm Didi. So so I did I just fundamentally missed like that that sort of usage model. Yeah, we had the opportunity to invest in Carta at the series a I think that that I can can but it was easier if you sure is exactly it washing our conference and I missed it as well again, I wasn't Angel Investing at the time, but I knew--i shares would be huge.
Yeah, he sure seems very interesting like this ability to have all because when you pick my understanding what Carter now Carta and I need to have this fact is that if you sell founder told me that they opted out of Carta because it said if you pick Carta you default to them being your secondary. Oh change interesting. I mean, I don't know if that's true or not if that's the most recent document but we have to fact check that because I thought that was a little Visionary / heavy-handed right the whether the system of record for your cap table and then they would do all ancillary services around it. Right, but why should it default? He said before default matters defaulting to be your default place to do secondary. I mean In fairness you want to have a serious easy exactly and seamless and easy, but maybe you want to use NASDAQ. Yeah, maybe like, I think the Uber secondary that masayoshi son did was from on the NASDAQ. I know because I sold some to him.
What do you think about foreign money? I've just wrote a piece about maybe it's time to take a pause on the Saudi money given the human rights stuff is headed such a horrible Direction there.
Do you have like money from the Middle East or China? And ya know I didn't think about that because you must have had offers like I have yeah, so you've to politely declined. How do you think about that? I think it's a very important consideration where your money's coming from Wow, because ultimately if you're delivering return for those investors, you're supporting whatever causes or initiatives that they Undertake and so I think that you know as an investor if you were trying to better the world and improve the lives of people generally, I think it's important to consider what your investors what what our LPS essentially are doing with the money and what we'll do they hold we're going to get rich no matter what
But we don't no matter what well with your network in Silicon Valley with your track record. I would say at this point you would have too if you tried to not win. I think you would break even because your deal flow is so great. And your network is so great with the assumption that you're going to do reasonably. Well in double triple quadruple 5x people's money, which is the expectation for these smaller size funds is that we're going to want three four five x that people feel pretty good about us. We can raise another one if you want exit to exit probably not you might be on the wrong side of the conversation raising another fun. But do you want to 5x money for a group of people who are murdering journalists or think so yeah, or you know, arresting journalists and writers and thinkers and artists. I don't think so either. Yeah, I think entrepreneurs should ask where the money's coming from. Well, that's an even bolder.
Yeah, because I had an offer from a fund of funds. Well, I had a discussion it we didn't actually reach formal and I said to them I said I'm just curious. Do you have any money from Saudi Arabia or from other places where like I might disagree whether they have said we have one Saudi family and I said well this is an interesting thing is you know, and I said can I ask like what percentage of your five billion dollar fund to funds it is so it'd be like less than 1% It's just one family's little thing and I was like, okay. Well overall, I would might feel okay with that percentage. And also maybe it's the Saudi family who is super Progressive and they don't agree with murdering journalists and dismembering them in a coordinated hit like happened to khashoggi. Like what is the point of being rich and powerful and notable and getting to the point that we've gone to in our careers where we actually can steer history we can steer where business goes we can still wear Humanity goes even if it's just a little bit on the rudder, right? This is a little bit of fuel. What's the
Point of reaching this level of success. If you have to then have Humanity go backwards. Yeah completely agree. It doesn't make any sense for what for like an incremental like if I had known especially in the world where Cap you there's many sources of capital r i specially in that world, right? It makes it even more perplexing now and I guess why do people do it's just easy.
I don't know. I neither you nor I took money. So you have to ask them. Yeah, it's really interesting. I think what it is is like if you think about it, if you can mark your portfolio up one year out, I guess that feels so good to people that it's easy to take it like as an entrepreneur if you took money from a CEO she's on well, I respect Massa, but I made have problems with 50% of his LP base, which is the Saudi Sovereign wealth fund. I think people need to take a stand right now. Like this is the moment if you're an investor or a Founder if you're a Founder masayoshi song comes you should ask him and his team will you invest in me without the Saudi money when you carve that out? Can you do that? Obviously, they can't but I think that's the message that needs to be sent by the powerful Silicon Valley CEOs. Now now the I think it's something that should definitely be thinking about. Yeah. All right. Well this week in alienating one-third of Silicon Valley. I mean peddling been continued success has been great working with you.
You know, we likewise we get to collaborate on things and it's just refreshing that every time I send a Founder to you they come back and say spent so much time gave me such great feedback whether you invest or not. You always doing the work and taking the time for which I am very grateful because I try to do that as well and I am just perplexed sometimes when I send somebody to a notable firm and they've sent an associate and they spent 20 minutes and that Associates on their phone and they don't know why they're in the meeting you take the time and that's what this is about is putting in the work if you are starting a company you got a little bit of traction whatever Ben is as good as it gets as far as I'm concerned is going to be sitting here in 10 years. I think you're going to be like, you know, right at the top of the list of first people to call and really congratulations on your new fund. I think it's tremendous. It's been great to work with you. Thanks for having me. All right, my pleasure. We'll see you next time on Angel the podcast.
