The Exchanges

Q So if I'm a founder asking you advice as a portfolio founder of yours in your angel portfolio, and I say, how do I know when's the right time? What advice do you give me?

A I would say when you feel market pull, when you feel the market, like I gave the example of Starbucks, you know, they're going past all of the processes, they're going past all, like they're seeking forgiveness, not permission to use your product. Um, you're seeing signals that there's more than just A logo. There's a person at that company who feels the pain so viscerally that they've either heard about what your product does or they've tried it themselves. And, um, and now what a salesperson can do is augment and sort of maximize the potential of that relationship. They're not just, you know, cold calling into the fortune 100 trying to get somebody to pay attention to your rinky dinky startup that, you know, more likely than not, even if they got a meeting, they're going to dismiss because they have no intrinsic interest in what you do.

AI assessment note: “I would say when you feel market pull”

Q Any lessons on comp in the hiring process?

A I generally feel like people should comp better than they think. You know, I think especially startups where you have some semblance of funding. We've been lucky that we've gotten, you know, great funding from almost the beginning. So maybe I'm, I, I'm not one to speak for folks who haven't, but you know, I don't think it's fair to say that you should punish people when it comes to cash comp. Um, if they join a startup, you know, obviously they can't match what some of the highest company, you know, opening eyes, paying millions of dollars in Google and Microsoft. You know, you can't match that, but you can still pay, you know, 75th percentile in, in terms of cash, and it shouldn't be a huge lifestyle change just because they're joining a startup. I think that's a, you know, 10 years ago, that was this idea that you're, you're exchanging, you know, risk for reward, and you should, like, punish people when it comes to salary. I feel like if somebody who's great has a choice between working at two startups and one startup gives them a lot of equity and little cash and a lot of equity and a lot of cash, they're going to take the latter, and you want to hire great people, not hire people who are willing to accept, you know, the marginal Efficient, uh, um, uh, salary that you can offer them. So that's my philosophy. I also, I also compensate pretty internally fairly. Like I operate …

AI assessment note: “you can still pay, you know, 75th percentile in, in terms of cash”

Q I, I totally agree with you. Can I ask, you've had some of the best brands benchmark your Andreessen's of the world. To what extent does venture brand being behind you make a large difference to company trajectory or not?

A I think it helps. It doesn't, it's not the difference maker. I think it helps with recruiting. Um, I think that's probably the biggest benefit. You know, great, great talent can work anywhere, and if they had the choice between a company that's got, you know, great marquee investors who, you know, who've done their homework, that de-risks the founder to them, that de-risks the company, so I think that's probably the most tangible benefit. Um, it may be marginally helps with customers. I don't think so. Um, if you're B to B, maybe in the enterprise, it might help, but for the most part, I think it, it helps build A movement and sort of traction and momentum in the market. It probably scares off competitors. Uh, I did notice this, that one of the benefits side, unintended side benefits of the round we raised, uh, I do think kind of, uh, made everyone else's job. Who's a founder trying to compete with us much, much harder because first of all, we had hundreds of investors. So now that all those are conflicted out and you get this sort of momentum is like, oh my gosh, how are you, like all the questions they're getting their appendix, appendix slide number one is how are you going to compete with limitless? You know, how are you going to compete with, Uh, with us, uh, especially given, you know, all of the who's who's invested. So, um, that probably helps. Maybe I don't, I don't ap…

AI assessment note: “I think it helps. It doesn't, it's not the difference maker.”

Q but I guess at this stage, are you not like, I don't really want to work with someone who's got to go up and sell it to someone else? Like Fenton does not have to sell a deal. I mean, like he will present it in the way that Optimizely is and people will see the brilliance, but he's not like selling in the way that we talk about that.

A Yeah. My, my thing on this has actually changed quite a bit. I think the best investor you can have for your company is somebody who's on the rising arc of their career. You want a Peter Fenton when he's 35, not 45. You want, not, not going to be ageist, but you want somebody before they've had their first IPO, and you want them to be the person who's going to have that. You're betting on them just as much as they're betting on you, because what happens when somebody's had a lot of success, and no knock on the people, I got to work with amazing investors who had a ton of success, like Peter Fenton and Marc Andreessen, like, they've had a lot of success. Like, for you to truly be the difference in their career or not is pretty unlikely, and so you want somebody where they just, in their bones and in their pocketbook, You are the difference between them reaching the pinnacle of their career. Um, and so that's, you know, the same way that you'd rather get, you know, an NBA player, you know, who's in the prime, not somebody who's on their way out of their career. And they're, you know, they've done great things, but I think you, you get the best out of somebody when they are, when they're aligned around trying to build something with you, not because they're just a fancy logo on their, you know, many logos of public companies they've, they've taken.

AI assessment note: “I think the best investor you can have for your company is somebody who's on the rising arc”

Q Any big other mistakes that you see founders make in fundraising when you look at the founders around you?

A I think they don't, uh, they don't recognize control as, as important thing to maintain. Um, and I think, you know, There's the same Altman camp, which is like, you know, you got to trust people at the, you know, small percent risk that you're going to get screwed over. Uh, this was before he got screwed over. So, uh, he had a very kind of like, you know, you do right for the world and it does right for you. And, uh, I wonder if, you know, I should ask him what he thinks now. Uh, maybe somebody's asking that in one of his interviews, but I do think, you know, it's when you think control and you think governance, you shouldn't view it as you're offending an investor. Like an investor was highly rational. They would also ask for and want as much control, As possible if they were the founder and many former founders who are now investors understand that they wish they had more control. So things like super voting stock, I think you should make sure to ask for multiple board seats. You should ask for not having board members, maybe having board observers instead of board members for certain investors. Um, you know, it's, it's, you know, and it's hard to ask cause it kind of can feel a little personal, I think, because like, well, you don't, you don't trust me, but at the end of the day, you're just being rational. You as the founder of the company are actually As a fiduciary respon…

AI assessment note: “they don't recognize control as, as important thing to maintain.”

Q stay, it's a really freaking hard world to navigate, investing in a world of AI, of Such transients of leadership. One week it's Mistral, the next week it's Llama, the next week it's OpenAI. How do you think about where we are? How do you analyze the landscape today? I know it's broad and shit question, but just help me understand how you think about it and where we are.

A I think the most important thing to do if you're an investor today is find founders who are obsessed with problems, not solutions. You know, today, many founders, especially ex-crypto founders, tend to think of AI as the solution to all the problems in the world, and they're, they're actually technology in search of a problem. I learned this anti-pattern at Google, actually. I started my career there as an associate product manager, and Google's notorious for building products that are technology in search of problems. Google Wave, Google Buzz, Google Glass, like, all of these products were basically some smart engineer or technologist starting the sentence with, Wouldn't it be cool if, dot, dot, dot. So if the startup you're evaluating or the technology you're considering began with the origin of, wouldn't it be cool if, dot, dot, dot, and the cool isn't problem, the cool is technology in search of a problem, then I think that's a very strong anti-pattern. I would focus, and that's the only companies I really invest in today, are companies that deeply care about the problem, and it just so happens that maybe AI or technology can solve it. It's not that they're sort of wed to this ideological idea. You know, for me, for example, we're building a hardware, we're building a wearable, If I can solve the same problems I want to solve without them, all for it. I'd be happy to do tha…

AI assessment note: “find founders who are obsessed with problems, not solutions”

Q How do you advise founders on when to be willing to have a board? Often VCs want a board seat.

A I've been lucky not to have a board for, um, for Limitless. Um, I do think generally boards are helpful for first time founders. And of course the right board members can be helpful for any company. Uh, I think there's Vinod Khosla who said something like, 80% of venture capitalists add negative value to startups. I don't know if that's true, but he's not a lot more venture capitalists than I have. Uh, and I've certainly worked with a lot of really, really great venture capitalists. Often the best advisors and the best venture capitalists I've had didn't need to be on the board to be helpful. You know, Elad Gil is a good example. I quoted him earlier. Like, that was a very pivotal conversation. That was just somebody who happened to be a small investor in our company, Who I called and he answered and we had a conversation. Those are the kinds of things that can be really meaningful. I do think boards, uh, as a company gets bigger and bigger and closer to going public are really important for governance and accountability. But when the company is so early on, it's very, very hard for a board member to get up to speed. You know, they're, they're showing up once a quarter, maybe once a month. And, you know, you have the context of being the founder, um, that, you know, ultimately the board may not have. So I generally think, you know, if you're a first time founder and you find so…

AI assessment note: “boards are helpful for first time founders”

Q Is that just human ego and humanity? Is that just humanity of raising too much, hiring too much?

A I think the core of it is the kind of person that makes a successful founder is usually pretty nonconformist. It's very hard either because the market has pushed them out from traditional jobs and they just can't succeed in traditional jobs. So they start a company or the entrepreneurship has pulled them in to want to be deeply autonomous and have control over their own destiny. And so it's just very hard. I've actually really struggled with this. I was just talking to my old co-founder from Optimize and getting his advice because he's a YC group partner now, Pete Koeman. I don't really know how to give advice to other founders and have it stick. You know, some of my best investors have Jedi mind tricked me because they've sort of never directly said what they thought. They've sort of influenced me through, you know, persuasion. I think this is why a lot of first time founders make mistakes and don't listen to common wisdom. They're just deeply wired to be nonconformist. And the idea of doing something the old traditional boring way is kind of maybe unexciting. So, and that, and there's naivete. So it's a combination of ego, arrogance, nonconformity, and probably naivete, um, all combined. You end up with a lot of founders who they're not, they're not, they're not You know, gonna kill the company usually, but they, they waste a lot of time and energy on things that ultimately d…

AI assessment note: “it's a combination of ego, arrogance, nonconformity, and probably naivete”

Q I, I totally agree with you. Can I ask, you've had some of the best brands benchmark your Andreessen's of the world. To what extent does venture brand being behind you make a large difference to company trajectory or not?

A I think it helps. It doesn't, it's not the difference maker. I think it helps with recruiting. Um, I think that's probably the biggest benefit. You know, great, great talent can work anywhere, and if they had the choice between a company that's got, you know, great marquee investors who, you know, who've done their homework, that de-risks the founder to them, that de-risks the company, so I think that's probably the most tangible benefit. Um, it may be marginally helps with customers. I don't think so. Um, if you're B to B, maybe in the enterprise, it might help, but for the most part, I think it, it helps build A movement and sort of traction and momentum in the market. It probably scares off competitors. Uh, I did notice this, that one of the benefits side, unintended side benefits of the round we raised, uh, I do think kind of, uh, made everyone else's job. Who's a founder trying to compete with us much, much harder because first of all, we had hundreds of investors. So now that all those are conflicted out and you get this sort of momentum is like, oh my gosh, how are you, like all the questions they're getting their appendix, appendix slide number one is how are you going to compete with limitless? You know, how are you going to compete with, Uh, with us, uh, especially given, you know, all of the who's who's invested. So, um, that probably helps. Maybe I don't, I don't ap…

AI assessment note: “I think it helps. It doesn't, it's not the difference maker.”

Q Do you agree with Marc Andreessen's statement that there's no such thing as a bad idea, only a bad time?

A I think that's largely true. And I find Then when, when I heard that, I think what I think about is, you know, I've had lots of pivots in my startups. Everything I pivoted away from almost always could have worked. You know, it's not so much that it's the unequivocal, at least in my mind, maybe this is my delusional, optimistic founder mind. I never thought to myself, oh my gosh, this would never work. It was always a version of, um, if you draw the analogy, like climbing a mountain, if you're starting a startup at the base of the mountain, and as you climb the mountain, you see other paths to the top that seem a little bit easier and a little bit better, and you've learned a lot along the trip. You're like, oh, I'll just, I'll go down a little bit to go back up that path. It's not to say your current path, you couldn't get to the top of the mountain, you know, eventually you'll get there. It's just going to be much harder. So in that sense, I think it also goes to this idea that, you know, ideas are cheap. It's all about execution. So I, I do think almost any idea can work with enough perseverance. Rarely, very rarely is it just fundamentally broken as an idea. So that's, I guess, yeah, in some ways, I definitely agree.

AI assessment note: “I think that's largely true.”

Q you think about visibility of problem? And what I mean by that is that everyone's like, oh, AI customer service, AI sales rep are probably two of the most prominent kind of use cases that we see. Yes, there's a problem, but everyone else sees it. How do you think about Differentiation, competition, and actually if it's a problem that the world sees, is there a lower quality of problem?

A Yeah, I mean, I think every problem can expand over time. So I don't think it should be so much, is it the problem big enough or small enough? In some ways, actually, you kind of want to choose founders who are excited about smaller problems, because it tells you that they're, they're not just falling in love with what they saw on Twitter or social media, that there's actually something they care about. And the best version of that story is, hey, at my last company, gosh, it was so annoying that we had to do blah. And now, you know what, I started this company to try to solve blah. And it's like some niche thing. You know, I think Coinbase might've been similar because, you know, Brian had seen things at Airbnb or, you know, and so you want somebody who both firsthand saw that problem and maybe felt it themselves. The best CEO for a AI customer agent is somebody who started their career answering customer support calls. You know, like that's what you're looking for is this founder market fit around the problem, not somebody who's like a McKinsey consultant who said like, if their first slide is here's the market map and here's the market size and, you know, here's the niche we're going to, you know, That's a very, very, to me at least, and I'm, maybe I'm, I'm missing out on good companies, but to me, that's immediate red flag. You want somebody who understands the problem and j…

AI assessment note: “looking for is this founder market fit around the problem”

Q Talk to me about that. I'd love to hear about that. So you, how did that round happen? You met Peter or you met, who did you meet? How did it go?

A Yeah. So this is 2013. Um, and yeah, Peter was the first person I had met. In fact, it was a very memorable conversation. It was also very competitive, and that's why it led to this, I think, uh, them willing to sort of flex, and obviously, you know, they had certain constraints, and I was able to meet them, and it was a negotiation, you know, that's the thing I should say, is that it is a negotiation of which every negotiation, everything is up for negotiation, and in exchange for less ownership percentage, they also got a lower valuation, um, and so I do think that is something to consider, like you, that's maybe if I go, if I zoom out, and just generally around fundraising, I think some of the most common mistakes founders make is they're not empathizing with the investor, They don't understand the world from the investor's point of view. They'll take like a clip of me on your show and say, oh, Dan says get, you know, less than 10%, and they think that their job is to get everything, everything, everything for them, when really, often the best negotiations are when the person on each side of the table is thinking about what motivates and drives the other person to the other table and other side, and if you find common ground, you're able to negotiate one thing that doesn't happen to matter too much to you and matters a whole lot to them, that's a great way to trade something…

AI assessment note: “Peter was the first person I had met. In fact, it was a very memorable conversation.”

Q What worries you most and what are you most optimistic about in the world that they're going to grow up in in 20 years?

A What worries me most about the world they grow up in, and today, frankly, is Doomerism. It is cynics around technology. It is about, it's people who see, uh, who are clinging to a past that cannot and will never exist. Um, and, and, and sort of a, um, approach to technology innovation that is, is cynical. You know, I think there's a time when I started optimizing, in 2010, where it was cool to be a founder. Like, even in San Francisco, it was cool to be a founder. And then I think, you know, after the bus, uh, the Google bus protests, and, you know, it was actually, I think, the movie Silk or Social Network that actually propelled a lot of people, and that brought in a lot of sort of, you know, entrepreneurs. But, you know, you, you had a period of time where, like, being a technologist was cool. Building something Was cool. And I think that was good for society. That was good for entrepreneurs. And, you know, and that's not always true. There's some countries where that's certainly not true today. In the United States in particular, you see what just happened in Florida banning lab grown meat. Like there's a sense, there's a motion, there's a move, a counter movement against technology and against optimism that I think could be really dangerous. And we could go into the dark ages. You know, we have that, that's happened once in, uh, at least once in the history of society. And…

AI assessment note: “What worries me most about the world they grow up in, and today, frankly, is Doomerism.”

Q I do just want to ask, you know, you're a pro now on fundraisers. Um, when you think about running your process, how do you do it step by step? How do you think about structuring it? Can you just walk me through that?

A Yeah, I, it's actually interesting. Like each fundraise I've done, I think, you know, I've raised probably two hundred and eighty million in my career over two companies. And every time I've done it, I've actually done it a little bit differently. Um, it kind of goes to, uh, you know, it's, it's also very much my process for honing my pitch, which is, you know, like a standup comedian goes to these rinky dinky bars on a Wednesday afternoon or whatever to learn what works and to stick with what works. And so for me, each time I've raised money, I've actually done it a little bit differently. A year ago, the most recent time, what I did very differently and worked really well was I, I broke this sort of conventional wisdom that you should do a fundraise in private. And just, you know, go down and meet the five investors everyone says you should go talk to and hope they say yes. Instead, what I, and so let me just draw an analogy why that's so ridiculous, how like 90%, 95% of companies raise money. When you add an investor to your company, especially if they're a board member, that's like getting married to them. It's actually harder because you can't really get divorced. It's getting married without the possibility of divorce. And if you want to be at your company for five or 10 or 20 years, that's a really, really big decision. Now imagine if your job, if you wanted to marry som…

AI assessment note: “every time I've done it, I've actually done it a little bit differently.”

Q Is that just human ego and humanity? Is that just humanity of raising too much, hiring too much?

A I think the core of it is the kind of person that makes a successful founder is usually pretty nonconformist. It's very hard either because the market has pushed them out from traditional jobs and they just can't succeed in traditional jobs. So they start a company or the entrepreneurship has pulled them in to want to be deeply autonomous and have control over their own destiny. And so it's just very hard. I've actually really struggled with this. I was just talking to my old co-founder from Optimize and getting his advice because he's a YC group partner now, Pete Koeman. I don't really know how to give advice to other founders and have it stick. You know, some of my best investors have Jedi mind tricked me because they've sort of never directly said what they thought. They've sort of influenced me through, you know, persuasion. I think this is why a lot of first time founders make mistakes and don't listen to common wisdom. They're just deeply wired to be nonconformist. And the idea of doing something the old traditional boring way is kind of maybe unexciting. So, and that, and there's naivete. So it's a combination of ego, arrogance, nonconformity, and probably naivete, um, all combined. You end up with a lot of founders who they're not, they're not, they're not You know, gonna kill the company usually, but they, they waste a lot of time and energy on things that ultimately d…

AI assessment note: “it's a combination of ego, arrogance, nonconformity, and probably naivete, all combined”

Q Talk to me about that. I'd love to hear about that. So you, how did that round happen? You met Peter or you met, who did you meet? How did it go?

A Yeah. So this is 2013. Um, and yeah, Peter was the first person I had met. In fact, it was a very memorable conversation. It was also very competitive, and that's why it led to this, I think, uh, them willing to sort of flex, and obviously, you know, they had certain constraints, and I was able to meet them, and it was a negotiation, you know, that's the thing I should say, is that it is a negotiation of which every negotiation, everything is up for negotiation, and in exchange for less ownership percentage, they also got a lower valuation, um, and so I do think that is something to consider, like you, that's maybe if I go, if I zoom out, and just generally around fundraising, I think some of the most common mistakes founders make is they're not empathizing with the investor, They don't understand the world from the investor's point of view. They'll take like a clip of me on your show and say, oh, Dan says get, you know, less than 10%, and they think that their job is to get everything, everything, everything for them, when really, often the best negotiations are when the person on each side of the table is thinking about what motivates and drives the other person to the other table and other side, and if you find common ground, you're able to negotiate one thing that doesn't happen to matter too much to you and matters a whole lot to them, that's a great way to trade something…

AI assessment note: “Peter was the first person I had met. In fact, it was a very memorable conversation.”