The Exchanges

Q when you have the real diversity Diversification that comes with 40, 50, what some may call spray and pray that comes with these very large portfolios. But when we chatted before, you said that you maybe disagree with spray and pray being the only way to make money at seed. So I was interested. How do you think about portfolio construction today when investing and really kind of diversification itself?

A Sure. No praying, no spraying. So one, I don't like the praying part because I would like this to be a lot more rational or logical where you do not have to pray. The second part is that I don't like spraying. Spraying says to me that you're You're shooting the gun without aiming. So that doesn't mean that I don't care about numbers. Numbers do matter, and stats matter. So there's many reasons why it matters. Just from a pure numbers perspective, if there are nonlinear returns on an investment, you probably need to make, as an angel, 10, 20 investments to possibly see, to have a statistically high chance of seeing one of these nonlinear returns. So the graph of market caps is not a straight line, right? So it is a nonlinear graph. And network effects, this really stems from network effects being nonlinear. So if a company managed to get a monopoly over a network effect, which might be a marketplace or a single network, they will see nonlinear market caps. And those market caps end up sometimes hitting a wall, which seems to be about a trillion dollars at the largest scale of companies. So we know that the network effects drive the market caps and market caps can be nonlinear. So you need to find the nonlinear investment. So you need to probably make 10, 20 investments minimum to see it. The second part is that you don't learn. You will learn a lot with each individual investmen…

AI assessment note: “No praying, no spraying. So one, I don't like the praying part”

Q And listen, I'm totally with you there. Andy Radcliffe said on the show, great market, poor founder, market wins. Poor market, great founder, market wins. Is that why you're market driven?

A Yeah, I think you want both. I think a great founder in a bad market will waste a few years switching to a good market. They're going to end up doing a pivot or starting a new company. So you should back that second time founder again. That's another thing. Well, back the founder who's failed, but you think it's still brilliant because they will find something. And, you know, if you look at Alex Chu, you know, million dollar homepage, he had that very early success. And then with PopJam, it didn't work. And I think some people had written off, but now with Calm, you know, he's got a unicorn. He was always a brilliant person. He was always a brilliant founder, right? So I think backing the founder, the market part helps as well, like meditation and has been like a great wave to ride, but you know, I think having both is, is important. Otherwise the fat, the great founder can waste a ton of time. And sure. If it's a terrible founder and a great market, some of them can get by if they hit a distribution mechanism early on. And that actually may turn them into a great founder as well. Just writing that scaling, but they're going to have to have some magic for sure.

AI assessment note: “Yeah, I think you want both.”

Q started angel investing, I spoke to one of the legends of angel investing, original OGs, I think it'd be cool. And he said, whatever you do, always write the same size check. Cause quite frankly, you never know what's going to fucking work. I thought it was interesting advice. I haven't necessarily started to it. Would you agree with that advice? And how do you think about check size consistency?

A Yeah. So when I originally started, I played it more of a poker game, but depending on the kind of risk threshold on the board, I would range out there and I would do different amount, different check sizes. The big difference between investing in the poker game is that there's not this feedback loop where the market's going to react to that amount that you put in to try and win that part, but it's not the same game. So actually over time, I've preferred being more stable with the check size and There's different dynamics of it. One is this minimum, like, you know, you've got opportunity cost of your time, so you're going to have a minimum threshold. Now, if you say, okay, well, I'm going to go, I'm going to do two or three or four X larger than that. Well, that comes with a different responsibility bracket, and that may not run into the way that you want to spend your time. So I actually think there's pressure from above on maximum check size, and there's pressure from below on maximum check size because of your opportunity cost. And that means that the dynamics are pointing towards like having a single number is constant. And the other way to look at it is the point you made where you don't know some of your riskiest bets, maybe the absolute best bets. And I realized that, you know, some of the riskier bets I'd done smaller check sizes on, and I realized that was actually not…

AI assessment note: “over time, I've preferred being more stable with the check size”

Q founders then should be angel investing? A lot of investors say, no, I don't like it. It's a distraction. It suggests financial misalignment with the team, whereby they're also potentially making a huge amount of money on the side or losing a huge amount of money on the side away from the team's core goal and incentive. How do you think about the pros and cons of founders angel investing?

A I think if they're having a natural allergic reaction to it themselves on the first point you made, like, oh, it feels like a distraction, then they shouldn't do it because it will be a distraction to them. Whereas I don't think they should do it because of perception of other people. I don't think they should not do investing because they think, oh, my investors are going to be really annoyed with me and think I'm getting distracted. If they feel like they're going to get distracted, they probably will because that person, there are different kinds of people. Some embrace madness, chaos, complexity, And they get a lot out from it, and they get a lot of learning out from it. Some are not like that. Some are craftspeople that need to focus, and don't want, need to learn by themselves, and need to learn by doing. And those type of founders, maybe they should not be investors at this stage. Some learn by mental models, and by abstractions, and by networks, and by analogies, and by anecdotes, and stories. Those people, those operators do get a lot out of it. So for me, it's been invaluable as well for the For building companies and being a better CEO. And for some I've seen, I've met the founders. I think it would be terrible if they got into the game. So I think it depends on the founder type. And that's, you know, when the investor looks at it, they should just look at the real s…

AI assessment note: “I think it depends on the founder type.”

Q comes to VC selection? And I guess very specifically, you know, my partner and I founded Stride, which is a seed fund. And so when it comes to multi-stage funds coming in at seed, we always talk about what percent of the fund is the check. Will you really get GP time? How many resources will you actually get? How do you advise founders on subsequent raise DC selection questions?

A Yes, I think they need to find the gaps that they have as a founding team. You know, what gaps do they want to fill? I think they should break down some of the dimensions of How investors can help. So some might be useful for sales. Some may not. Some may be amazing at products. Some might be great at building teams. I always think about a dream team of investors that the founders should try to architect and not have everybody be the same thing. So if you go off the brands, well, the brands don't have as much time. So you want some brands for signal and for press and for hiring, and you want some non-brands because you want their time. So working out the dimensions that you're trying to get. So you want a bit of brand. There's always a trade-off on these dimensions, right? So I'm trying to think through what the dimensions are, and then someone's really good at sales, they're probably not necessarily going to help you on your API architecture, or maybe they can help you with your pricing policy. So I think building a collection of different spiky T-shaped, I don't know if you've heard of this T-shaped concept of like a great generalist, but very, very, very good at one thing. Trying to find a couple of different T-shapes that all, when you put these T's together, they kind of build a nice little structure of your dream team of investors. And then, you know, Having alignment as …

AI assessment note: “I always think about a dream team of investors that the founders should try to architect”

Q started angel investing, I spoke to one of the legends of angel investing, original OGs, I think it'd be cool. And he said, whatever you do, always write the same size check. Cause quite frankly, you never know what's going to fucking work. I thought it was interesting advice. I haven't necessarily started to it. Would you agree with that advice? And how do you think about check size consistency?

A Yeah. So when I originally started, I played it more of a poker game, but depending on the kind of risk threshold on the board, I would range out there and I would do different amount, different check sizes. The big difference between investing in the poker game is that there's not this feedback loop where the market's going to react to that amount that you put in to try and win that part, but it's not the same game. So actually over time, I've preferred being more stable with the check size and There's different dynamics of it. One is this minimum, like, you know, you've got opportunity cost of your time, so you're going to have a minimum threshold. Now, if you say, okay, well, I'm going to go, I'm going to do two or three or four X larger than that. Well, that comes with a different responsibility bracket, and that may not run into the way that you want to spend your time. So I actually think there's pressure from above on maximum check size, and there's pressure from below on maximum check size because of your opportunity cost. And that means that the dynamics are pointing towards like having a single number is constant. And the other way to look at it is the point you made where you don't know some of your riskiest bets, maybe the absolute best bets. And I realized that, you know, some of the riskier bets I'd done smaller check sizes on, and I realized that was actually not…

AI assessment note: “actually over time, I've preferred being more stable with the check size”

Q founders then should be angel investing? A lot of investors say, no, I don't like it. It's a distraction. It suggests financial misalignment with the team, whereby they're also potentially making a huge amount of money on the side or losing a huge amount of money on the side away from the team's core goal and incentive. How do you think about the pros and cons of founders angel investing?

A I think if they're having a natural allergic reaction to it themselves on the first point you made, like, oh, it feels like a distraction, then they shouldn't do it because it will be a distraction to them. Whereas I don't think they should do it because of perception of other people. I don't think they should not do investing because they think, oh, my investors are going to be really annoyed with me and think I'm getting distracted. If they feel like they're going to get distracted, they probably will because that person, there are different kinds of people. Some embrace madness, chaos, complexity, And they get a lot out from it, and they get a lot of learning out from it. Some are not like that. Some are craftspeople that need to focus, and don't want, need to learn by themselves, and need to learn by doing. And those type of founders, maybe they should not be investors at this stage. Some learn by mental models, and by abstractions, and by networks, and by analogies, and by anecdotes, and stories. Those people, those operators do get a lot out of it. So for me, it's been invaluable as well for the For building companies and being a better CEO. And for some I've seen, I've met the founders. I think it would be terrible if they got into the game. So I think it depends on the founder type. And that's, you know, when the investor looks at it, they should just look at the real s…

AI assessment note: “So I think it depends on the founder type.”

Q to you about investing to be quite blunt. Do you want to ask one final question before the quickfire? And that is the element of the large multi-stage funds and what the future holds for them. In many cases, as you said, with the localization of investor bases, Their structures make them maybe more inflexible, and in some cases outdated. Are these the final good times for the traditional VC?

A I think there's going to be consolidation for the traditional VC, where there's going to be some players that are the main players, and they go on full stack, they're full stack, full service, traditional VC, and all the traditional VC, other ones fall apart. And then, you know, there'll be a bunch of verticalization of extremely deep specialization, in particular, scientific fields or technology fields. And then there'll be this swarm, a massive network of like individuals who can power and get a company off the ground, even do series, like individuals doing series A's. I can see that happening in the future as well. So I think the suits are going to be removed from the game and creators and operators and makers are going to be more empowered with dollars to make it, but there will be giant warehouses. I mean, it's kind of like both players will go to both extreme sides of the board. One extreme side is full stack, Giant company helping you in every different way. Perfect quality. The other ones, lots of individuals, highly creative, highly unique, helping you in a network.

AI assessment note: “I think there's going to be consolidation for the traditional VC”

Q when you have the real diversity Diversification that comes with 40, 50, what some may call spray and pray that comes with these very large portfolios. But when we chatted before, you said that you maybe disagree with spray and pray being the only way to make money at seed. So I was interested. How do you think about portfolio construction today when investing and really kind of diversification itself?

A Sure. No praying, no spraying. So one, I don't like the praying part because I would like this to be a lot more rational or logical where you do not have to pray. The second part is that I don't like spraying. Spraying says to me that you're You're shooting the gun without aiming. So that doesn't mean that I don't care about numbers. Numbers do matter, and stats matter. So there's many reasons why it matters. Just from a pure numbers perspective, if there are nonlinear returns on an investment, you probably need to make, as an angel, 10, 20 investments to possibly see, to have a statistically high chance of seeing one of these nonlinear returns. So the graph of market caps is not a straight line, right? So it is a nonlinear graph. And network effects, this really stems from network effects being nonlinear. So if a company managed to get a monopoly over a network effect, which might be a marketplace or a single network, they will see nonlinear market caps. And those market caps end up sometimes hitting a wall, which seems to be about a trillion dollars at the largest scale of companies. So we know that the network effects drive the market caps and market caps can be nonlinear. So you need to find the nonlinear investment. So you need to probably make 10, 20 investments minimum to see it. The second part is that you don't learn. You will learn a lot with each individual investmen…

AI assessment note: “if there are nonlinear returns on an investment, you probably need to make, as an angel, 10, 20 investments”

Q add is obviously the core Twitter meme that goes around today in terms of value add investor. Having had the perspective of both sides of the table, both now as founder and also angel in over a 180 companies, where do you believe that maybe VCs fundamentally can drive value? And then there are areas where people maybe think they do, but in the majority of cases, they actually don't.

A Every investor is different. So you could say most investors, when they come onto a cap table, don't add that much value. That's actually my current position. And they really should, but they don't. And I would say 50% of investors add into a cap table or just a drag factor on time for their founder. And then maybe another 30% are neutral to slightly positive. And then there are stars that actually are transformational to the company mentioned, hey, you should go in this direction. It was everything they needed. So I think there's a spectrum of this in terms of the value that investors can bring to a company. One of the interesting values that the investors can bring to a company is looking, it's as if If the founder is trying to unlock this massive combination lock, and they've got, like, 20 digits to unlock, where one digit might be the go-to-market strategy, the other, the other five digits might be team culture, you know, tech stack is one of the digits, and some of the features are many of these digits. So they're just trying to unlock this product market fit, which is this giant combination lock. And they're on the inside, they're very, very close to numbers, and they're, like, focusing on one dial, trying to move this one dial up or down to three or seven. And the investor maybe can step back a bit and look at the entire combination lock and say, You know what? The busin…

AI assessment note: “One of the interesting values that the investors can bring to a company is”

Q What's your biggest advice to someone entering the world of angel investing? A 180 plus angel investments. What do you know now that you wish you'd known at the beginning?

A I think I knew this at the beginning. So I'm going to throw this first one out and I'll try one I didn't know at the beginning. So I was going to say back something that you would build yourself. So if you really would build it yourself, you would stop everything to go and found a company around it. That is probably a good investment to make. In terms of something that I learned that I didn't know about in terms of backing, I think prioritize the founder above the idea. Now, I know YC have said this for a long time, but I was very market and product obsessed, and I still am. But I do think that the priority is the founder and the founding team, and especially the founder. Really, really dig deep into that one.

AI assessment note: “In terms of something that I learned... prioritize the founder above the idea.”

Q Totally get you in terms of that. I guess the two questions that come straight off from that for me is one is the kind of ownership being more VC centric, like architecting rounds. Absolutely. But ownership still does play a big role. How do you think about ownership when investing today? And is it a primary consideration for you?

A At first, I didn't care too much for it. I just cared about taking part in the round. I cared more about optimizing the upside of the company in terms of how it's the maximum market cap that you guys can possibly be. And the two are kind of linked together to like the price sensitivity price and the ownership. And they can be slightly unbundled with some particular moves sometimes. So the more, as I've done more investments and I've become busier, I've definitely thought more about ownership in that there does end up this with this opportunity cost of time for the investor where they have to start picking which ones they're really going to back. So I think once you've booted up your kind of portfolio in terms of numbers, and you've kind of seen some of the mechanics, and you've done some learning, then there's going to be maybe a strategy of, like, reducing the number that I've done and increasing, you know, check size, ownership, not necessarily price sensitivity, but, you know, ownership by deploying more dollars, because the ownership can be reached in different ways, either on the pricing side or also legal ways to, like, push through ownership, which I don't really like from a founder's perspective. I like these deals to be pretty vanilla. But ownership is becoming more important, but ownership also brings you responsibilities. If you own a significant percentage, you have…

AI assessment note: “as I've done more investments and I've become busier, I've definitely thought more about ownership”

Q I absolutely love that in terms of the entrepreneurial experiences before. I do have to ask, what was the first angel investment, and how did the angel investing come about?

A So with, with Hazep, we had raised money from Union Square Ventures, who We were in the worst time for raising this. This was a crash of 2008, 2009. It was April. We had just burnt through all our YC money. We tried to be as frugal as possible, and we ran out of money, and now we had to raise our seed rounds. Half the, half the companies in our batch completely died. They could not raise any money at all. We had another company in our batch called Airbnb, which was ended up being pretty big. I met with about 300 angels to raise money for Hazer. I met with so many. I just did a complete tour back to back. Like six per day, over and over and over again. And everyone was saying no, not just necessarily because of the, for the business, but because the market was crashed. So I ended up learning that most of these investors were pretty crappy. I'm going to say it. They were, they were, they were not impressive to me. They would go back on their words. They would try and add weird things into the deal. They were trying to grab parts of the company and control, even for a 50 K check, trying to join the board for 50 K check. Nothing made sense out there. We ended up converging on better investors, people like Union Square Ventures. When we pitched them, we got the deal. And this was a strange thing that we thought it would be easier to close the worst investors. It was actually easier …

AI assessment note: “Now in, in those board meetings and Hayzap, me, Imad, Naval, and Albert”

Q Totally get you in terms of that. I guess the two questions that come straight off from that for me is one is the kind of ownership being more VC centric, like architecting rounds. Absolutely. But ownership still does play a big role. How do you think about ownership when investing today? And is it a primary consideration for you?

A At first, I didn't care too much for it. I just cared about taking part in the round. I cared more about optimizing the upside of the company in terms of how it's the maximum market cap that you guys can possibly be. And the two are kind of linked together to like the price sensitivity price and the ownership. And they can be slightly unbundled with some particular moves sometimes. So the more, as I've done more investments and I've become busier, I've definitely thought more about ownership in that there does end up this with this opportunity cost of time for the investor where they have to start picking which ones they're really going to back. So I think once you've booted up your kind of portfolio in terms of numbers, and you've kind of seen some of the mechanics, and you've done some learning, then there's going to be maybe a strategy of, like, reducing the number that I've done and increasing, you know, check size, ownership, not necessarily price sensitivity, but, you know, ownership by deploying more dollars, because the ownership can be reached in different ways, either on the pricing side or also legal ways to, like, push through ownership, which I don't really like from a founder's perspective. I like these deals to be pretty vanilla. But ownership is becoming more important, but ownership also brings you responsibilities. If you own a significant percentage, you have…

AI assessment note: “ownership is becoming more important, but ownership also brings you responsibilities.”

Q add is obviously the core Twitter meme that goes around today in terms of value add investor. Having had the perspective of both sides of the table, both now as founder and also angel in over a 180 companies, where do you believe that maybe VCs fundamentally can drive value? And then there are areas where people maybe think they do, but in the majority of cases, they actually don't.

A Every investor is different. So you could say most investors, when they come onto a cap table, don't add that much value. That's actually my current position. And they really should, but they don't. And I would say 50% of investors add into a cap table or just a drag factor on time for their founder. And then maybe another 30% are neutral to slightly positive. And then there are stars that actually are transformational to the company mentioned, hey, you should go in this direction. It was everything they needed. So I think there's a spectrum of this in terms of the value that investors can bring to a company. One of the interesting values that the investors can bring to a company is looking, it's as if If the founder is trying to unlock this massive combination lock, and they've got, like, 20 digits to unlock, where one digit might be the go-to-market strategy, the other, the other five digits might be team culture, you know, tech stack is one of the digits, and some of the features are many of these digits. So they're just trying to unlock this product market fit, which is this giant combination lock. And they're on the inside, they're very, very close to numbers, and they're, like, focusing on one dial, trying to move this one dial up or down to three or seven. And the investor maybe can step back a bit and look at the entire combination lock and say, You know what? The busin…

AI assessment note: “most investors, when they come onto a cap table, don't add that much value.”

Q of your ability to Get into the very best deals. He backed the likes of Josh at Gusto Benz and payroll and Henry at Carter very, very early without also being the brand name of maybe Naval at the time. So his question was, how did you convince them to take your money? And what do you think you saw before maybe the market did in terms of those propositions?

A Yeah. So from my perspective, I like to think through what companies need to exist. So we knew at the time that ADP and paychecks were We're pretty crappy software companies. Like the software was terrible. There was not a monopoly on either side. Both companies, you know, had roughly equal market share. The org chart was particularly broken with one of them. I forget which one. So from my perspective, I, I put this in one, a blog post of, of ideas I was thinking through that I wanted to see, I think I said a bank simple of payroll. And what I really meant by here simple was regarded as like really amazing UI at the time. And, you know, I wanted to see really amazing UI and a great customer experience of Around payroll. And I think Josh saw the post and reached out to me and we, we met up and we actually talked about culture for one hour. We didn't talk about the software. We didn't talk about the features. We didn't talk about the business model. We didn't talk about any of that. We just talked about the culture that he wanted to build. And I had never been sucked into a conversation for that much time on culture with a founder who was normally pitching the business, pitching the features and business model, go to market plan, all that kind of stuff. So that really impressed me that he was just super, super focused on culture and And it actually is played out, right? So August…

AI assessment note: “Josh saw the post and reached out to me and we, we met up”

Q What an analogy. I love that one. I saw your tweet on Pareto's principle and when to wield it. Subsequently, how do you know when to do something perfect versus not perfect? Yeah.

A So for this one, I was thinking through that. If you think of an Aston Martin, I think there's a particular one seven seven model. They do all the surfaces in a perfect way to a tier a way, including surfaces. So they machine these surfaces, even the ones you can't see, and you will never see. And they do this because people want to buy that product as if it's a perfect watch that's being constructed that you may not be able to see the perfection that's inside it. So they do that because that's what people want to buy. Now in pragmatism, if you don't necessarily have For normal cars, you wouldn't do that. You would not machine surfaces that the user is not going to see in a perfect tier A way. So I think you've got to pick your battles on what you're going to do perfectly and what you're not going to do perfectly. And you can't do everything, absolutely everything to a perfect degree. So thinking through what would be, do you want to shine on the user interface? And you're going to reduce the number of features that you have. How is this going to play out against your competition? Say for it being an investor as well, like what are you going to be perfect on? Are you going to be perfect on response times or strategy? Are you going to be slow, but come back with the right answer? We're going to try and do both perfect strategy and really fast. So some of these things oppose each…

AI assessment note: “you've got to pick your battles on what you're going to do perfectly”

Q early and very active liquidity secondary markets. How do you feel about the very early and liquid secondary market that we have today? And it's interesting, especially with your two hats, because both as a founder, how do you feel about founders taking secondaries early? And then on the flip side, as an investor, how do you think about Now with the opportunity to liquidate earlier, when to actually sell.

A Yeah. So I think there's different scales of liquidity that affects people in different ways. So in San Francisco, something like a million dollars, it's not crazy liquidity. You can just about get a house. So I think when I see secondary, I'm thinking about it from an efficiency standpoint. Does it make the founder more efficient? Does it make them more relaxed, but not too relaxed? So if you look at an athlete running a hundred meter sprint, they have to be pretty relaxed. If they're overstressing, they will not win the gold medal. So, but they can't be too relaxed. So I think it's like this optimal state and, you know, liquidity, if they were taking a hundred million dollars off the table, that's going to completely change their life. They're going to buy a giant house. They're going to start decorating and they're going to get distracted. They're going to have everything. So there's the curve of what things unlock. And I think the first thing for a founder to have some security in a house, they're economically more efficient. They can pay themselves a lower salary. That's a good justification for doing the secondary. I think that kind of secondary is okay. And it's always in proportion to how big the round size is. And, you know, is it on the A, is it on the B? I think on the C, it's not right to do secondary on the C unless they bootstrap the company and they're making loa…

AI assessment note: “when I see secondary, I'm thinking about it from an efficiency standpoint”

Q the proliferation of angels and micro funds that we have seen with the rise of angel list and really the liquidity that's been provided from so many of the big outcomes that we've seen, some say that it's also the end game for angels. How do you think about where we are in terms of the angel ecosystem today and how the market evolves and adapts over the coming years?

A I always like to look at the dynamics that are occurring in the background that lead to the conclusions. So one of them is that we know prices are going up. So pre-seed prices, our previous eight rounds and seed rounds, previous eight rounds, all the prices are going up, but also the headroom on the top is going up as well. And most importantly, the speed to get there, the tooling around software and the leverage that people have, and the playbooks are getting more understood to building a huge unicorn in a shorter and shorter amount of So there's different dynamics, you know, the headroom maybe is going up, the speed, i.e. the IRR, and your rate of return every year is, I would argue, going up. The price is also going up as well. So between these kind of three numbers, you're kind of the X or the IRR that you're going to get as an investor is changing, and it's not necessarily going up. It's probably going down, but the amount of capital in the network is also being, it's being distributed to a lower level. There are many younger investors that are getting into the game, And actually have a massive advantage on some of the older players when it comes to getting into deals earlier, spotting particular trends. So I think with a number of rising investors in total, things are going to become a lot more local. So you have to play to new advantages. And that may be like knowing you…

AI assessment note: “things are going to become a lot more local. So you have to play”

Q the best investors that makes them the best is exactly as you said that the process itself, but I do want to kind of dig in on the algorithm itself, because as I said, when we chatted before, you mentioned the algorithms for investing, which was an interesting phrase. What did you mean by this algorithm for investing and what areas do you want to be highly differentiated in really?

A Sure. So I see kind of like two classes of investors and there's a spectrum between some people are very feelings driven and that feeling may be corrected. The algorithm may be unconscious. So the process, this repeatable process that you could write down and specify, what are you doing? Why are you picking this one? Like, what is your filter for saying no? So I've got lots of different kinds of algorithms. Let's just call it thousands of different ones. So some of them are filters for saying no. So situations that I will always say no. Red flags or black flags. And then the other one will maybe collections of yellow flags or things that you may be able to fix. And the weighting of, oh, that seems a little bit too wrong. I can't fix that, or we can't fix that. So the algorithm is this process that every time we're making investment, we're trying to come up with a hypothesis, we're testing it. It might be a hypothesis you never get to test again. It might be such an unusual business that you're never going to get to know, was this a good algorithm or not? So we know that there's consistency in certain algorithms that we can keep reapplying, i.e. when we look at founding team chemistry, or we look at founder motivation or incentives, and the types of founders that The psychology there, and there's certain models that we can repeat in markets. So markets are shifting. In humans, I…

AI assessment note: “So the process, this repeatable process that you could write down and specify”

Q Do you ever worry about confirmation bias? Because if you can have that thesis of what needs to exist and then anything that supports that thesis, you back, but it may be the wrong thesis and it may be confirmation bias that's suggesting that you do it.

A Yeah. So if it's doing really, really well, it may not be the actual reason. Well, it's difficult to say it wouldn't be the actual main reason if to say that this company built something that people really need if it did well. So if it, if it does really well, that is, that is a confirmation that your hypothesis is correct. If you bank something that you thought needed to exist and it doesn't do well, if it didn't do well for certain reasons, like the founding team fell apart, you can still go again. And I actually go again on the same hypothesis that I think something really needs to exist. I'll bet up to like two, three, four times until it's proven that that is not what someone needs. So if something falls apart investment wise, you should look into the mechanics. Why it didn't work out. Did it not work out because of the founding team? Did it not work out because of the market timing or the specific idea? And what's the idea bad itself? So, so yeah, you've got to be careful about the confirmation bias on the flip side. You've got to use it. You've got to use that information and it's difficult to make this the perfect science for sure. And it's difficult to even make this a statistical science, but you should try at least. Because I think being completely random with it would not be good.

AI assessment note: “you've got to be careful about the confirmation bias on the flip side.”

Q I would, though, love to start today with a little bit on you. So how did you go from having a significant percent of the egg box packaging market, I did do my research before this one, in London, to making your way into the world of startups and tech, and then also the foray into the world of angel investing?

A So I have tried many experiments to get into business and understand, and also actually align my passions. I have passions around technology, around learning, you know, how the universe might be working from a physics level or math level, and I've had these different separate areas I've been interested in. I've been interested in instantiation of physics in a kind of technological form, so really hardcore engineering, and I've been really interested in super abstract ideas like Goethe's theorem and randomness and Computability. And in looking back at a little bit, I was thinking about this last night that I've slowly been trying to converge my passions together. In doing that, I never really wanted to work for someone. I had this allergic reaction wanting to go to a company and sit there behind a desk, just do what's being prescribed. I wanted to build things and build interesting things. I really wasn't aware of the tech scene when I was in the UK growing up. I wasn't really aware of the tech scene. I wasn't aware of what was happening in say the dot-com booms. Really getting into the business side There was a bit of a random walk. So I didn't really have any kind of particular place to kick off. So we just started to try and make money in university. So when I was around 18, I just had this like feeling I wanted to start a company. And I was like, I am going to start a big co…

AI assessment note: “Really getting into the business side There was a bit of a random walk.”

Q I would, though, love to start today with a little bit on you. So how did you go from having a significant percent of the egg box packaging market, I did do my research before this one, in London, to making your way into the world of startups and tech, and then also the foray into the world of angel investing?

A So I have tried many experiments to get into business and understand, and also actually align my passions. I have passions around technology, around learning, you know, how the universe might be working from a physics level or math level, and I've had these different separate areas I've been interested in. I've been interested in instantiation of physics in a kind of technological form, so really hardcore engineering, and I've been really interested in super abstract ideas like Goethe's theorem and randomness and Computability. And in looking back at a little bit, I was thinking about this last night that I've slowly been trying to converge my passions together. In doing that, I never really wanted to work for someone. I had this allergic reaction wanting to go to a company and sit there behind a desk, just do what's being prescribed. I wanted to build things and build interesting things. I really wasn't aware of the tech scene when I was in the UK growing up. I wasn't really aware of the tech scene. I wasn't aware of what was happening in say the dot-com booms. Really getting into the business side There was a bit of a random walk. So I didn't really have any kind of particular place to kick off. So we just started to try and make money in university. So when I was around 18, I just had this like feeling I wanted to start a company. And I was like, I am going to start a big co…

AI assessment note: “getting into the business side There was a bit of a random walk.”

Q ask, when you said there about the unbundling, so to speak, and I had Naval on the show, and he spoke about the unbundling of capital into many different kind of separate states, including one being governance, one being capital loan, the other being kind of strategic advice. Do you agree with Naval in terms of the future of investing itself being the unbundling of capital into these core pillars?

A I think so. Well, I think there are two parts. There are drivers that unbundle things, and there are drivers that consolidate things. So, you know, a classic monopoly company is consolidating things, and the network affects Has this tendency to want to consolidate things, but there are some things that like to break apart. So, you know, if we think about, I don't know, a rock on the top of a hill, the rock is going to weather, and it's going to fall apart, and it's going to unbundle. But, you know, later down the line, it's going to go into the soil, and like, there'll be some geology processes, and eventually there's going to be some compression, and there's going to be some re-bundling of this thing. So I think on all these dimensions, there are unbundling and re-bundling phases, and they're simultaneously occurring, to be honest. So with capital, I do think the capital is unbundling. And the capital as an instrument for powering a network of information interchange, or like people creating things, it is more efficient when it's liquid. It is more efficient when the capital is distributed into the hands of people that are going to make new things. So if we have these gold bars that represent something that's sitting around in a vault doing nothing, that does absolutely nothing. It doesn't build any technology. It doesn't like write any books. But you know, if you liquidate al…

AI assessment note: “I think so... So with capital, I do think the capital is unbundling.”

Q Do you ever worry about confirmation bias? Because if you can have that thesis of what needs to exist and then anything that supports that thesis, you back, but it may be the wrong thesis and it may be confirmation bias that's suggesting that you do it.

A Yeah. So if it's doing really, really well, it may not be the actual reason. Well, it's difficult to say it wouldn't be the actual main reason if to say that this company built something that people really need if it did well. So if it, if it does really well, that is, that is a confirmation that your hypothesis is correct. If you bank something that you thought needed to exist and it doesn't do well, if it didn't do well for certain reasons, like the founding team fell apart, you can still go again. And I actually go again on the same hypothesis that I think something really needs to exist. I'll bet up to like two, three, four times until it's proven that that is not what someone needs. So if something falls apart investment wise, you should look into the mechanics. Why it didn't work out. Did it not work out because of the founding team? Did it not work out because of the market timing or the specific idea? And what's the idea bad itself? So, so yeah, you've got to be careful about the confirmation bias on the flip side. You've got to use it. You've got to use that information and it's difficult to make this the perfect science for sure. And it's difficult to even make this a statistical science, but you should try at least. Because I think being completely random with it would not be good.

AI assessment note: “you've got to be careful about the confirmation bias on the flip side”

Q I absolutely love that in terms of the entrepreneurial experiences before. I do have to ask, what was the first angel investment, and how did the angel investing come about?

A So with, with Hazep, we had raised money from Union Square Ventures, who We were in the worst time for raising this. This was a crash of 2008, 2009. It was April. We had just burnt through all our YC money. We tried to be as frugal as possible, and we ran out of money, and now we had to raise our seed rounds. Half the, half the companies in our batch completely died. They could not raise any money at all. We had another company in our batch called Airbnb, which was ended up being pretty big. I met with about 300 angels to raise money for Hazer. I met with so many. I just did a complete tour back to back. Like six per day, over and over and over again. And everyone was saying no, not just necessarily because of the, for the business, but because the market was crashed. So I ended up learning that most of these investors were pretty crappy. I'm going to say it. They were, they were, they were not impressive to me. They would go back on their words. They would try and add weird things into the deal. They were trying to grab parts of the company and control, even for a 50 K check, trying to join the board for 50 K check. Nothing made sense out there. We ended up converging on better investors, people like Union Square Ventures. When we pitched them, we got the deal. And this was a strange thing that we thought it would be easier to close the worst investors. It was actually easier …

AI assessment note: “me, Imad, Naval, and Albert had some really cool conversations.”

Q they have. I guess my question kind of subsequently from that, and it relates to an episode we did with Semel Shah, is how do you think about the entrance of multi-stage funds into Seed? And maybe Semel was very corny and saying founders are voting with their feet and choosing these multi-stage funds at Seed. Would you agree with him? And how do you view their entrance into Seed?

A I'm actually going to be honest with you. I don't know the stats. I don't know the numbers on this. So I wouldn't want to judge it from my perspective on the numbers that I see, because I don't think they're necessarily representative of the entire market. So for a question like that, I'd actually like to see the numbers and see the stats. Something I have seen, though, people are, as there are more entrants of investors into the market, coming into the market, I'm seeing definitely more people having to push to different extremes on this kind of game theory landscape. So for example, Union Square Ventures, you know, they were in seed, and they moved up to the A. And then, you know, we're seeing many new investors go into this pre-seed and trying to shift seed into the new A. So they're trying to, like, Some people are moving bases, and some people are actually trying to move the base, but creating a new category somewhat. So I think, and you could even say there's going to be some kind of category creators between the rounds. There'll be some people that they're not formally leading a round, and they're not taking a board seat, but they just want to go between an A and a B, and a bridge round will be converted into some kind of new branding, where it's just like a top-up round or something. So I've definitely seen there's new mechanics due to the new players coming in, and eve…

AI assessment note: “I don't know the stats... Something I have seen, though”

Q they have. I guess my question kind of subsequently from that, and it relates to an episode we did with Semel Shah, is how do you think about the entrance of multi-stage funds into Seed? And maybe Semel was very corny and saying founders are voting with their feet and choosing these multi-stage funds at Seed. Would you agree with him? And how do you view their entrance into Seed?

A I'm actually going to be honest with you. I don't know the stats. I don't know the numbers on this. So I wouldn't want to judge it from my perspective on the numbers that I see, because I don't think they're necessarily representative of the entire market. So for a question like that, I'd actually like to see the numbers and see the stats. Something I have seen, though, people are, as there are more entrants of investors into the market, coming into the market, I'm seeing definitely more people having to push to different extremes on this kind of game theory landscape. So for example, Union Square Ventures, you know, they were in seed, and they moved up to the A. And then, you know, we're seeing many new investors go into this pre-seed and trying to shift seed into the new A. So they're trying to, like, Some people are moving bases, and some people are actually trying to move the base, but creating a new category somewhat. So I think, and you could even say there's going to be some kind of category creators between the rounds. There'll be some people that they're not formally leading a round, and they're not taking a board seat, but they just want to go between an A and a B, and a bridge round will be converted into some kind of new branding, where it's just like a top-up round or something. So I've definitely seen there's new mechanics due to the new players coming in, and eve…

AI assessment note: “I'm actually going to be honest with you. I don't know the stats.”