The Exchanges

Q You said it's a nice problem to have. You work with some of the best marketplace businesses of our generation. What are the biggest reasons that you see founders fail to acquire the fragmented supply side?

A Um, you know, uh, depth of value prop, I think, probably. I mean, most, um, markets, even successful marketplaces typically are supply constrained. You know, Airbnb always is looking for new supply, um, to, uh, enhance, uh, the user experience. And so, I, you know, it, there, it clearly is a value prop, but if, you know, if the value prop's not robust, it, it can be very hard to acquire. Um, my partner Andrew Chen wrote the book, uh, The Cold Start Problem. You know, which is the hard side of the marketplace. There are a number of them where you have to start with supply because without supply, you know, the demand is, is uninterested in. So it's really important to get supply right.

AI assessment note: “depth of value prop, I think, probably... if the value prop's not robust”

Q Can I ask, how do you think, I, I totally get you in terms of not wanting to rely on paid. How do you think about when is the right time to really double down on paid, and actually just spend a lot?

A I mean, it's, it's when you know your unit economics and, you know, you're comfortable that it works. Early on, I, I was a big proponent of that e-commerce was going to clean the clock of department stores. I got the thesis half right. Share did shift. Um, no one could make money other than Amazon because of, um, there's just no defensibility, no barriers to entry. So, you know, with the, you know, look at that mattress in a box company got to a hundred million in eight minutes. Well, so did the other nine. And so then they're all fighting for the same customer on the same channels with the same product. And as a result, you know, the cost of acquisition went up and prices capped because you can, you know, you typically are trying to compete in price and the movie ends badly. So, you know, that's the concern.

AI assessment note: “when you know your unit economics and, you know, you're comfortable that it works.”

Q The element that we were talking about demand and supply, bringing them together, what have been your biggest lessons in terms of maintaining equilibrium between the two varying levels of demand and supply?

A That's like the whole game, you know, you have to figure out because, um, you know, I, I have a belief that, um, the demand side is, you know, kind of the, is the more, more strategic side because suppliers typically will go wherever the demand is. And so for me, keeping a healthy demand Bucket, you know, is what, what, what your suppliers are looking for. Cause if, you know, if I list my place on Airbnb and I get, you know, and it's 60% occupied and I make a bunch of money, I'm going to continue using Airbnb. If I go through that agony and I get a, you know, two orders a year, um, it's, it's, it's not worth it to me. So for me, healthy demand results in healthy marketplace typically.

AI assessment note: “suppliers typically will go wherever the demand is”

Q How do you think channel spend changes over the next year, given the macro? I think a lot of people forget that you're always competing against everyone when it comes to channel spend, but the demand will go down. Especially with less venture investment, less, like, liquidity in the ecosystem. How does channel spend change, and how do tax change over the next year, do you think?

A You know, it's, it's been pretty volatile, to say the least. You know, the Apple changes with the input, impact on Facebook, TikTok, and Pinterest, you know, and Snap coming as, as potential new channels. You know, the privacy stuff is, you know, you know, the, um, both, um, both Facebook and Google are definitely are, you know, are, are using the data. Uh, from their ecosystem to, to their advantage. And, um, lots of, uh, lots of, uh, regulators around the world are, um, getting increasingly concerned on that practice. So I think it's going to be super volatile. Um, you know, even, even without the, uh, potential recession impact. And so, you know, just, you, you, you've got to, you know, as an entrepreneur, you gotta be constantly, you know, reviewing saying, okay, what's happening on this channel? What new channels can I try? You know, I love the companies that have, they, they segregate an experimental budget from their core, core acquisition budget, just to, because if you, if you bundle them together, it, it, it, it is a barrier against experimentation. If you're constantly optimizing Google and Facebook, but you're trying TikTok and Pinterest and, and, you know, Snap from Insta from a different budget, it's, it promotes that, you know, channel diversity attempt.

AI assessment note: “So I think it's going to be super volatile. Um, you know, even, even”

Q I want to ask, you know, you have the most incredible operating career as we touched on there. How do you think your operating career positively impacted how you think as an investor today?

A Well, you know, when, um, the, the big, big job upgrade for me was, uh, when I went to eBay and got to manage ebay.com. Um, Meg Whitman was my hiring manager at Disney, Way back in the day and, and was looking for talent and all the talent during the, as the bubble grew, you know, all the talent in Silicon Valley was grabbed up. So she went and found me and brought me into Silicon Valley. And so I think, um, doing eBay early, uh, meant there was no playbook. We had to write the playbook and you get, you get to know a business at such an atomical, you know, uh, way, you know, you're just building it from the ground up and, you know, You're, you're making a ton of mistakes. You're, you're trying to correct them and getting that level of involvement in the network effect business, I think gave me a pretty good sense for, okay, this business has the potential to replicate that network effect. This business doesn't. And, and largely as an investor, I'm a kind of a one trick pony. Everything I would like to talk about as an operator and an investor typically involves a network effect.

AI assessment note: “gave me a pretty good sense for, okay, this business has the potential”

Q Can I ask, how do you think, I, I totally get you in terms of not wanting to rely on paid. How do you think about when is the right time to really double down on paid, and actually just spend a lot?

A I mean, it's, it's when you know your unit economics and, you know, you're comfortable that it works. Early on, I was a big proponent of that e-commerce was going to clean the clock of the department stores. I got the thesis half right. Share did shift. Um, no one could make money other than Amazon because of, um, there's just no defensibility, no barriers to entry. So, you know, with the, you know, look at that mattress in a box company got to a hundred million in eight minutes. Well, so did the other nine. And so then they're all fighting for the same customer on the same channels with the same product. And as a result, you know, the cost of acquisition went up and prices capped because you can, you know, you typically are trying to compete in price and the movie ends badly. So, you know, that's the concern.

AI assessment note: “when you know your unit economics and, you know, you're comfortable that it works.”

Q tough, no turning point, uh, as Jeff Bezos says, you know, one way door decision. You mentioned channel there, and that was the other element that you said was a crucial element in your kind of desire to see in marketplace businesses, which is like really intelligent lead gen in terms of how they acquire their customers. What do you want to see in how marketplaces acquire their customers first?

A Let me, I mean, contrast two things. Yeah. When I got to open table, it was such a good idea. I said, okay, what other industries Can I do this in, you know, just, and, and, and owned a hundred percent at the beginning, not just, not what, you know, the, the measly CEO, uh, package I got. And, um, you know, the lead gen was really important. If, if so, um, say, you, you know, your car repair or hair salon, they typically have a customer that, that is a regular that, you know, I, I go to the same place to get my hair cut each time. If, if you go and say, I want you to pay me a slice of each transaction. Yeah. They're going to just say, no, there's free scheduling tools online. Why would I pay you for, you know, for access to my customer? And so what was wonderful about dining is people crave diversity, the new, new restaurant, the new different cuisine, this, that. And so because they crave diversity, we often were introducing a diner to a new restaurant and the restaurant finds high value in that. So if we were just giving, helping the restaurant, you know, uh, enable digitally enable their own customer. We, we couldn't have charged what we charged. It was that new customer that they valued so much.

AI assessment note: “It was that new customer that they valued so much.”

Q What's the biggest miss and how did it impact your process?

A You know, the biggest miss I think was I had an opportunity to do DoorDash early and, um, I, I loved Tony as a founder. I had the theory, a thesis on the, uh, food delivery market that, uh, you shouldn't, there's no defensible barrier to entry and that, you know, the end state was restaurants with Um, iPads, you know, taking orders from everyone. Uh, so I think I made, you know, this is Andy Duke again. I think I made the right decision. It worked out badly. I did not anticipate, uh, uh, Travis getting capped at Uber Eats. And then in the, the level of consolidation that happened in the industry and DoorDash, uh, Tony created a very valuable product in DoorDash.

AI assessment note: “the biggest miss I think was I had an opportunity to do DoorDash early”

Q You said it's a nice problem to have. You work with some of the best marketplace businesses of our generation. What are the biggest reasons that you see founders fail to acquire the fragmented supply side?

A Um, you know, uh, depth of value prop, I think, probably. I mean, most, um, markets, even successful marketplaces typically are supply constrained. You know, Airbnb always is looking for new supply, um, to, uh, enhance, uh, the user experience. And so, I, you know, it, there, it clearly is a value prop, but if, you know, if the value prop's not robust, it, it can be very hard to acquire. Um, my partner Andrew Chen wrote the book, uh, The Cold Start Problem. You know, which is the hard side of the marketplace. There are a number of them where you have to start with supply because without supply, you know, the demand is, is uninterested in. So it's really important to get supply right.

AI assessment note: “depth of value prop, I think, probably.”

Q Can I ask, how do you think about how like new customer acquisition has changed given the rise of TikTok, given the rise of short form video, given the changing landscape that we have today?

A The only constant is it's constantly changing. I guess, I mean, think of the advent of mobile. I mean, and, you know, it used to be Google had, you know, the google.com had that monopoly. And so, You just have to keep your finger on the pulse of, okay, what is new? My partner Connie Chen thinks TikTok has a chance, you know, in China is already replacing a lot of the Google use cases, you know, and one of the ones we argue about constantly is restaurant discovery. She says in China, people are discovering restaurants through TikTok. And it's just kind of, that's a different use case than I envisioned for that platform. But, you know, then again, if you're a restaurant, you got to stay current and try to figure out, okay, what's, what's the next thing? What's the new thing?

AI assessment note: “She says in China, people are discovering restaurants through TikTok.”

Q Can I ask, the boards that you sit on, internally, are you saying, shit, we need to get on video, we need to get on TikTok? Like, what do those conversations look like? Because it's coming so thick and fast.

A I think everyone can You're, you're constantly looking for the new channel. I mean, there has been a duopoly for too long between Google and Facebook. Um, and you know, you know, there's this meme in the venture business that, uh, you know, you don't want to fund companies where you're just basically, you know, you transfer money to the company and the company transfers money to Facebook and Google. So, uh, I, I am reluctant to invest in companies that, that require, um, heavy paid marketing to build their audience. Um, you know, the, the best Concepts, uh, typically don't need, you know, they're, they're so compelling, they don't need to buy users. That's not, that's not a categorical rule, because TikTok buys users at monstrous scale. But, you know, Google really didn't buy many users, Facebook didn't buy many users, you know, tick, tick, tick, tick.

AI assessment note: “I am reluctant to invest in companies that, that require, um, heavy paid marketing”

Q you do then if you say, you know what Jeff, me and you're my board member, we're not gonna spend, we've got a great customer base that love it, we're gonna grow sustainably, but we've got a competitor who's raised from a big, big, big institution, and they are spending a ton of money, and they're gonna hoover up all the oxygen just by spending, What do we do then?

A You know, you're, you're faced with a super tough choice that's probably informed by the capital environment. In this environment, a, someone who, you know, raised a round and is spending it hard trying to drive growth that, that, you know, the sentiment is, uh, the pendulum swung a little bit away from that business. You know, we're today counseling our businesses, try to be, uh, try not to need to go to market for as long as you sustainably can without hurting the business. Um, uh, you know, uh, three years ago, it was spend, spend, spend, spend. You know, there, this is an environment where there's unlimited capital behind you. So, you know, you get the Uber Lyft, uh, situation where, you know, billions of dollars went into the building of those two businesses and they're in the United States, they compete with each other. So it, you know, it's, it's a bit of a, you know, a bit of a hamburger Hill, I think is the phrase, uh, I've never, I've never heard of hamburger Hill.

AI assessment note: “We're today counseling our businesses, try not to need to go to market”

Q bit on the paid channels. When we think about kind of big mistakes that we see founders make, I think one of the biggest is actually like messaging and making it resonate with the target customer. I find that many really struggle with this. First, I guess, do you agree? And second, how do you advise founders on really making that initial message resonate with the first cohort of users?

A Yeah. I mean, I, I think it's super important. Um, and, you know, one of the reasons I still do what I do is I get to learn from my founders too. Watching Brian Chesky and the founding team there refine the Airbnb messaging over the years to the point now where I, I actually think it's, you know, it's a spectacular brand that's, you know, that's current, um, positive. It's on the right things. Just watching them continually refine and hone in on the essence of the business. Was just a fascinating exercise for me. That's that, that it was not my core strength and, you know, watching them get it right on a sustained basis. You know, I, I, I learned a ton.

AI assessment note: “That's that, that it was not my core strength and, you know, watching them”

Q You said it's a nice problem to have. You work with some of the best marketplace businesses of our generation. What are the biggest reasons that you see founders fail to acquire the fragmented supply side?

A Um, you know, uh, depth of value prop, I think, probably. I mean, most, um, markets, even successful marketplaces typically are supply constrained. You know, Airbnb always is looking for new supply, um, to, uh, enhance, uh, the user experience. And so, I, you know, it, there, it clearly is a value prop, but if, you know, if the value prop's not robust, it, it can be very hard to acquire. Um, my partner Andrew Chen wrote the book, uh, The Cold Start Problem. You know, which is the hard side of the marketplace. There are a number of them where you have to start with supply because without supply, you know, the demand is, is uninterested in. So it's really important to get supply right.

AI assessment note: “depth of value prop... if the value prop's not robust, it can be very hard to acquire”

Q How do you think channel spend changes over the next year, given the macro? I think a lot of people forget that you're always competing against everyone when it comes to channel spend, but the demand will go down. Especially with less venture investment, less, like, liquidity in the ecosystem. How does channel spend change, and how do tax change over the next year, do you think?

A You know, it's, it's been pretty volatile, to say the least. You know, the Apple changes with the input, impact on Facebook, TikTok, and Pinterest, you know, and Snap coming as, as potential new channels. You know, the privacy stuff is, you know, you know, the, um, both, um, both Facebook and Google are definitely are, you know, are, are using the data. Uh, from their ecosystem to, to their advantage. And, um, lots of, uh, lots of, uh, regulators around the world are, um, getting increasingly concerned on that practice. So I think it's going to be super volatile. Um, you know, even, even without the, uh, potential recession impact. And so, you know, just, you, you, you've got to, you know, as an entrepreneur, you gotta be constantly, you know, reviewing saying, okay, what's happening on this channel? What new channels can I try? You know, I love the companies that have, they, they segregate an experimental budget from their core, core acquisition budget, just to, because if you, if you bundle them together, it, it, it, it is a barrier against experimentation. If you're constantly optimizing Google and Facebook, but you're trying TikTok and Pinterest and, and, you know, Snap from Insta from a different budget, it's, it promotes that, you know, channel diversity attempt.

AI assessment note: “I think it's going to be super volatile, even without the potential recession impact.”

Q bit on the paid channels. When we think about kind of big mistakes that we see founders make, I think one of the biggest is actually like messaging and making it resonate with the target customer. I find that many really struggle with this. First, I guess, do you agree? And second, how do you advise founders on really making that initial message resonate with the first cohort of users?

A Yeah, I mean, I think it's super important. Um, and you know, one of the reasons I still do what I do is I get to learn from my founders too. Watching Brian Chesky and the founding team there refine the Airbnb messaging over the years to the point now where I actually think it's, you know, it's a spectacular brand that's, you know, that's current, um, positive, it's on the right things. Just watching them continually refine and hone in on the essence of the business Was just a fascinating exercise for me. That's that, that it was not my core strength and, you know, watching them get it right on a sustained basis. You know, I, I, I learned a ton.

AI assessment note: “That's that, that it was not my core strength”

Q Can I ask, the boards that you sit on, internally, are you saying, shit, we need to get on video, we need to get on TikTok? Like, what do those conversations look like? Because it's coming so thick and fast.

A I think everyone can You're, you're constantly looking for the new channel. I mean, there has been a duopoly for too long between Google and Facebook. Um, and, you know, you know, there's this meme in the venture business that, uh, you know, you don't want to fund companies where you're just basically, you know, you transfer money to the company and the company transfers money to Facebook and Google. So, uh, I, I am reluctant to invest in companies that, that require, um, heavy paid marketing to build their audience. Um, you know, the, the best, Concepts, uh, typically don't need, you know, they're, they're so compelling, they don't need to buy users. That's not, that's not a categorical rule, because TikTok buys users at monstrous scale. But, you know, Google really didn't buy many users, Facebook didn't buy many users, you know, tick, tick, tick, tick.

AI assessment note: “I am reluctant to invest in companies that, that require, um, heavy paid marketing”

Q you do then if you say, you know what, Jeff, me and you're my board member, we're not gonna spend, we've got a great customer base that love it, we're gonna grow sustainably, but we've got a competitor who's raised from a big, big, big institution, and they are spending a ton of money, and they're gonna hoover up all the oxygen just by spending. What do we do then?

A You know, you're, you're faced with a super tough choice that's probably informed by the capital environment. In this environment, a, someone who, you know, raised a round and is spending it hard trying to drive growth that, that, you know, the sentiment is, uh, the pendulum swung a little bit away from that business. You know, we're today counseling our businesses, try to be, uh, try not to need to go to market for as long as you sustainably can without hurting the business. Um, uh, you know, uh, three years ago, it was spend, spend, spend, spend. You know, there, this is an environment where there's unlimited capital behind you. So, you know, you get the Uber, Lyft, uh, situation where, you know, billions of dollars went into the building of those two businesses, and they're in the United States, they compete with each other. So it, you know, it's, it's a bit of a, you know, a bit of a hamburger hill, I think is the phrase.

AI assessment note: “counseling our businesses, try to be, try not to need to go to market”