The Exchanges

Q I would love to kick off this day. And for those that made the terrible sin of not listening to our first episode, tell me, how did you make your way into the world of venture and come to be founder of Z Ventures today?

A Oh, wow. Okay. Started as an engineer at IBM, IBM Research, back in Israel. Done it for a few years. I got an MBA in In France, actually, and came back to Israel. It was in 1994. The whole venture industry just started. There were 10 people. I got hired by Apex. So I was one of the first 10 people maybe in venture in Israel. At some point, I moved to the Bay Area, still with Apex. So I spent my first 12, 13 years in venture with a traditional venture firm. Today it's private equity, but back then it was also venture. And then I retired, and I didn't think I would do it again, but I started investing on my own. And for a bunch of years, like seven or eight years, I invested my own money, but behaved as a VC. So I had a very unique model of investing my own money, but in significant amounts and leading rounds and behaving like a VC, taking board seats, et cetera. And then five years ago, I started also raising funds, basically continuing to do the same thing I was doing with my own money, just a little bit on a bigger scale.

AI assessment note: “Started as an engineer at IBM... hired by Apex... five years ago, I started also raising funds”

Q Can I be blunt? How much of a fund generally are you?

A About 13, 13, 14%. Um, so, so, uh, and I don't have any LP who's more than 10% in any given fund, so I'm always, every single fund, I'm the biggest LP. Uh, and on top of it, I have 30% carry, so, so really I'm forty-something percent of the economics. So, of course, I think as LP, and, and I'm trying to maximize the, the, the long-term value, and I don't want to shortchange myself as an LP. So I, I believe, by the way, in radical alignment with LPs, and this is why I set up, by the way, I pay myself zero. I, I don't see anything, uh, which is very unusual. I don't know any, any VC in the world, as far as I know, that has, uh, zero income from the management fees. Zero, you know, um.

AI assessment note: “About 13, 13, 14%.”

Q Yeah, what did you see that I didn't see?

A Yeah, so I think it's the opposite. I think you may have seen more things that I did, which made you not want to invest, and sometimes it's better not to see some things, but, um, uh, but what I did see is I saw a very basic product with a lot of, you know, unstable, buggy, uh, very little technology. The whole thing was written by Um, the whole code was written by Gideon, the, the younger brother. Um, and, um, and they also had very, very loud, very high churn at that point. However, without any marketing or sales, they were getting five to 10 People a day to sign up and pay 40 dollars a month, which again was too high a price. So, and you know, you don't get, without any marketing and sales, you don't get five to 10 people, totally word of mouth, pay 40 dollars a month if there's no real need for something. So the fact that the product is buggy is not a big problem because it can be fixed. The problem that, you know, that's basic, okay, they'll add to it, but To me, it was very clear that they stumbled upon, ah, a real prod gap, a real need for something like that, because otherwise they would not have got the traction that they had for such a buggy, and such, ah, too pricey, and, ah, ah, ah, and without any sales and marketing.

AI assessment note: “what I did see is I saw a very basic product”

Q And then penultimate question, career highlight for you so far and why? Has there been a moment when you've really kind of appreciated the journey?

A There were a few. I think the, the audible IPO was a big one for me because it was the first major win. And, you know, you never forget the first thing, you know, that was the one that kind of legitimized me, you know, made me like someone who has made it, you know, someone who has a successful track record, even if it's just one deal, it was just one deal at that point. And, and I had, by the way, a couple of exits. Three or four exits before of nice outcomes, but they were base hits. That was my first real home run. So I think that was the seminal moment. I think house is going to be, is going to be my best deal. I think it's going to be massive. I think it's going to be way bigger than people even appreciate today. So people look at it and say, oh, four billion. That sounds like a lot. Are they worth it? I think that people are going to look back at this and say, wow, it's amazing that in For four billion dollars. So, so, uh, so I think it's going to be very, very massive, and it's, uh, in a house, it's not just that the company is massive. I happen to be the main early backer. I, even to this day, I'm, I'm the biggest shareholder other than Sequoia, who I brought to the table nine months after invested. Uh, so I'm the second, second larger investor to this day after they've raised, you know, after six hundred million or more that they raised. So I do think that a house is d…

AI assessment note: “I think the, the audible IPO was a big one for me because it was”

Q If we were to reflect that back on one of your best investments and one of your most concentrated positions, which obviously went public in Navan, would you say that Navan is a beneficiary of AI?

A A hundred percent. I am not sure that the markets, the public market yet sees it that way based on the valuation. So I, I, you know, I think that this is my theory that in general, um, The market feels or believes that many, some or many of the software companies, the incumbents, are gonna get disrupted by AI, and I think the market is right about that. I think that the market is not yet at the point where they discern between the ones who are gonna be negatively impacted and the ones that are gonna be positively impacted. So I think that most software companies are Uh, getting somewhat of a discount because of that justified fear. Uh, as you know, SAS multiples, for example, are lower than they've been in the past 1012 years. Um, but I think over time, what's gonna happen is that for some companies, uh, the suspicion is gonna materialize, and in fact, even with a discount, they're gonna, in hindsight, look very expensive today. And for others, they're going to be beneficiaries. Now, specifically with Navan, which a company I know well, I'm a hundred percent convinced that there's zero chance that we get disrupted by AI, and there is a hundred percent chance that we're huge beneficiaries of AI. I can go into details, but I feel, I just feel very, very, uh, very, very strongly about it.

AI assessment note: “A hundred percent. I am not sure that the markets”

Q Do you think a lot of funds will go out of business in the next few years, be unable to raise and slowly die?

A Yeah. Yeah. I, I think we're seeing it already. I think it's much harder to raise in the last couple of years. I think, first of all, there's less money going to venture, but not only that, a larger percentage of it is going to the platform. So to the platforms. So, uh, if you're not a platform, um, then it's much harder for you to raise. Um, again, and, um, Uh, and I would say that at least 50% of the funds, uh, today, and maybe more, either cannot raise, or at least are not sure that they can raise, or they're trying to stall and, you know, not test the market, and I think many of them are not gonna be able to raise.

AI assessment note: “Yeah. Yeah. I, I think we're seeing it already.”

Q What do you take away from that as a lesson?

A You know, I actually don't, not much, I'll tell you why, because I think that, I think some of the bets are not going to work, you know, I think it's a mistake to judge a decision by the outcome, um, because, you know, it's like, like if you, when you play poker, and again, I'm, I'm, I'm, I'm, I'm quoting from, uh, uh, from, uh, from that book, uh, for example, I'm not a big poker player, but when you play poker, um, you can make the right decision, and the odds are in favor, and, But, you know, the cards that came out, you know, you lost the pot. Doesn't mean that your decisions were wrong. And over time, you know, over time, if you make the right decisions, over time you're gonna win. But in any individual case, luck has a huge role to play. So if you, you know, you can also learn the wrong lesson. So yeah, I took a bet. I, in this case, it was wrong. I, in hindsight, I wasn't aggressive enough in my, you know, in my stress testing. Uh, but does that mean that I should be overly, uh, conservative next time? Not necessarily, because I could have been right. In other cases, I was right. So, yeah, so I just have to be comfortable with Losing money, including big pots, um, every now and then.

AI assessment note: “I just have to be comfortable with Losing money, including big pots, every now and then.”

Q How do you think about proactively selling secondaries and managing the book pre going public?

A I understand why others do it. Uh, I don't. Uh, and again, the reason is motivation. So first of all, in any given moment, anything that I want to sell, I won't be able to, and everything that I can sell, I don't want to sell, ok? Uh, because, you know, the, the, the, the, the things that I cancel are the best positions, and I want to keep, if it works, if it makes sense, you know, the assumption that I'm going to sell something, you cannot assume that the buyers are stupid, so they're only going to buy things that they can think they can, they think they can double or triple within the next two or three years. Now, you know, I'd rather, if it can double or triple in the next two or three years, I'd rather keep it, right? Um, So, so almost by definition, to sell anything, it's possible to sell it, but you have to give a significant discount to the buyer. Otherwise, they're not going to do it. They're not stupid either. Um, so why do people do it? I think people do it again if they need it for the fundraising.

AI assessment note: “I understand why others do it. Uh, I don't.”

Q If we were to reflect that back on one of your best investments and one of your most concentrated positions, which obviously went public in Navan, would you say that Navan is a beneficiary of AI?

A A hundred percent. I am not sure that the markets, the public market yet sees it that way based on the valuation. So I, I, you know, I think that this is my theory that in general, um, The market feels or believes that many, some or many of the software companies, the incumbents, are gonna get disrupted by AI, and I think the market is right about that. I think that the market is not yet at the point where they discern between the ones who are gonna be negatively impacted and the ones that are gonna be positively impacted. So I think that most software companies are Uh, getting somewhat of a discount because of that justified fear. Uh, as you know, SAS multiples, for example, are lower than they've been in the past 1012 years. Um, but I think over time, what's gonna happen is that for some companies, uh, the suspicion is gonna materialize, and in fact, even with a discount, they're gonna, in hindsight, look very expensive today. And for others, they're going to be beneficiaries. Now, specifically with Navan, which a company I know well, I'm a hundred percent convinced that there's zero chance that we get disrupted by AI, and there is a hundred percent chance that we're huge beneficiaries of AI. I can go into details, but I feel, I just feel very, very, uh, very, very strongly about it.

AI assessment note: “A hundred percent. I am not sure that the markets, the public market yet sees”

Q we look at that decision, I think managers are faced with the decision today. You either need to be really fricking big, a la Andreessen, general catalyst, light speed, a wall of money, or you need to be a real craftsman and boutique. Do you agree that you have to be one or the other, and that is the future of venture, and the messy middle will be painfully suffering?

A I, I, you know, I, I, I, I do agree with it. 90, 90% agree with it. I, you know, I think you have to have something special. You know, I, I think that being middle of the road, you know, you want to be differentiated. So I think that naturally there is a bifurcation. So either you are this, you know, one of these platforms that, um, uh, Like Andreessen, like, uh, Sequoia, like maybe Lightspeed, um, who are bringing a lot to the table and can do things that smaller VCs cannot, um, including myself. Or you're going in the opposite direction, uh, of solo, solo GPs, for example, um, that you have other advantages, um, or I have other advantages. I'm not trying to be better than Andreessen in Andreessen's game. If it's gonna be Andreessen's game, they're gonna win, you know, beat me every time. Uh, no, I've, I, I, I, I, I offer something different. You know, uh, I'm faster than anyone else, for example. I, you know, the other things, there's the personal connection, there's, and then there's, A lot of other things that founders find extremely compelling with, uh, uh, SolarGP and I, and I, and I go for companies or founders that this is what they want. Okay. So, um, and that's differentiation, or you have something else that, uh, differentiates you, but generally speaking, if you are traditional five, six person partnership, uh, without anything, uh, Very, very, very unique and speci…

AI assessment note: “I do agree with it. 90, 90% agree with it.”

Q So are you telling companies that you're on the board of, don't listen to the hype, don't believe the bullshit on podcasts about growth rates needing to be crazy, build healthy businesses today?

A Look, I think growth is super important, and there are some, but yes, in general, yes, grow healthy. Now, there are some, there are some rare situations where you have no choice, because, If you have competitors that are also growing very fast, you don't have the luxury of, no, no, I'm gonna grow healthy. You know, you just have to play the game and, and, and, and, and hope for the best. Um, and, you know, uh, you know, I don't know, Uber versus Lyft would be a good example, 10 years ago, or 50, whatever, 15 years ago. You know, you didn't have the choice of, oh, let's build it slow and make it, uh, healthy. You have to go as crazy as possible, whatever the margins are, and Ultimately, in the case of Uber, come out on top. Um, but, uh, but, but again, I, I look for businesses where this is not the dynamic, and when you have the choice between growing fast in a sustainable manner versus, um, just going crazy and just optimize just for top line, ignore everything else, yeah, I think that the, the latter is a disaster waiting to happen.

AI assessment note: “yes, in general, yes, grow healthy.”

Q When you, when you look at your concentration into Nirvana, ok, which are now a public company, and it's been incredible to see all that they've built, but at times it looked hairy. Yeah? Covid, for example, when travel stopped as a travel company. Do you feel the pressure in those moments?

A Actually, In the case of Nirvana, I never felt pressure. I, you know, I, uh, I, I, uh, COVID was a big one. By the way, even before COVID, we had, uh, we had, uh, in, in, in 2018 or 19, we had, uh, an existential crisis when, uh, Delta Airlines decided that they hated us, and you cannot really succeed as a, as a travel company when one of the three major airlines in the U.S. is not willing to work with you in the swing and all that, and luckily, and it wasn't, it was not obvious that we'd be able to solve it, uh, and luckily we did. Um, and then COVID happened. But, you know, with COVID, I had complete trust in the leadership of Ariel. Uh, I had no doubt that people, because some people were saying, oh, after COVID people are gonna just stop traveling for business and just do everything over Zoom. Never believed it, so I had no doubt that at some point COVID will be behind us. So, And, and, and, and, you know, I always say that, you know, and, and Arielle was such a CEO that as an investor I could sleep well at night knowing that, ah, he's doing, and the leadership is doing everything, ah, and they did a lot actually. Not just on the cost, you know, everything. They reacted so fast. And, and, you know, and they, they, um, ah, adjusted the, the cost. They were the first company to let people go. And they got so much shit on, ah, for it because they fired people Over Zoom, as if …

AI assessment note: “Actually, In the case of Nirvana, I never felt pressure.”

Q Yeah, what did you see that I didn't see?

A Yeah, so I think it's the opposite. I think you may have seen more things that I did, which made you not want to invest, and sometimes it's better not to see some things, but, um, uh, but what I did see is I saw a very basic product with a lot of, you know, unstable, buggy, uh, very little technology. The whole thing was written by Um, the whole code was written by Gideon, the, the younger brother. Um, and, um, and they also had very, very loud, very high churn at that point. However, without any marketing or sales, they were getting five to 10 People a day to sign up and pay 40 dollars a month, which again was too high a price. So, and you know, you don't get, without any marketing and sales, you don't get five to 10 people, totally word of mouth, pay 40 dollars a month if there's no real need for something. So the fact that the product is buggy is not a big problem because it can be fixed. The problem that, you know, that's basic, okay, they'll add to it, but To me, it was very clear that they stumbled upon, ah, a real prod gap, a real need for something like that, because otherwise they would not have got the traction that they had for such a buggy, and such, ah, too pricey, and, ah, ah, ah, and without any sales and marketing.

AI assessment note: “what I did see is I saw a very basic product”

Q kind of boring from the article in the information which I loved, but if we start with the cadence of deployment, um, this was the striking one, um, you know, raising a five hundred million dollar fund less than a year post the last one. It's pretty unprecedented, Oren. I mean, the deals are fucking fantastic. But it is fast. How do you answer the question on speed of deployment?

A First of all, it's even faster than you think, because in 2000, in 2021, I raised three funds, uh, total, total about a billion, and then now I'm raising another five hundred million. Um, and I, and I don't keep reserves, so I, you know, invested, you know, invested at all. Um, You know, I don't try to manage the pace at all. So I, um, you know, I just try to do great deals when I see them. And if I don't see them, I don't want to do them. So I don't want to miss a great opportunity just because I've invested a lot of money in the past three months. Uh, and likewise, you know, if I, it's theoretical because it hasn't happened, but let's assume that I can't find a good deal deal for a year. Uh, I wouldn't want to do it, you know, make an investment just because I haven't done one in a long time, so I just do not, and I tell LPs if an LP asks at this point, they don't ask, but, you know, if they do ask, I just tell them, you know, I just don't try to manage the pace, you know, it's totally opportunity, opportunity driven.

AI assessment note: “I don't try to manage the pace at all. So I, um, you know, I just try to do great deals”

Q been doing it your way on your own. And I mean this question respectfully, Oren, but you're a little bit more seasoned than me. You've seen a few more crashes than me. When we look at where we are today, what's different and what's the same about the current crash? I'm fascinated given, you know, you've seen 2008, you've seen the dot com. How's this different? How's it the same?

A Well, it's very different from the dot com, which was like really nuclear because Back then, it's not just the valuations collapsed, it's, and really collapsed, not 50%, 95%, but it's also that the business collapsed, there was no business, you know. You could be selling to a certain segment, you know, the market, and overnight, all your customers basically go out of business, for example. So, um, that was something that I think is one in a hundred years, hopefully. I, I hope you never see anything like that again. 2008 was Uh, not as nuclear and big in terms of, uh, the tech, uh, industry. It was maybe bigger if you look at the overall, maybe effect, uh, because it wasn't specific to tech. And like, 2000 when it was specific to tech, 2008 was much more general. So in many aspects, it's the worst, but in tech, it was not, uh, it was not as bad. Uh, but still, there was a lot of real pain. I think that today, Valuations were cut by 50% in the public markets on average, but most of the businesses are still going very strong. You know, most of my companies, we don't see necessarily any weakening of demand. And some companies decide to go a little bit slow because they want to maybe reserve a little bit more. Cash. Uh, but the fundamentals are there. The fundamental demands. If that, if there was a healthy business before, it's the healthy business now. So I don't equate, uh, the c…

AI assessment note: “I don't equate, uh, the current crisis to those two big ones.”

Q deployment pace? I, I have to be honest with you, I am sitting here going, you know what, eight out of 10 deals that we might have done, honestly, we're a very diversified fund, unlike you actually, we're not fucking doing now. It has to be a nine and a half out of 10, and so the bar's just gone up for us. Has it changed your style of deployment?

A It hasn't changed, uh, uh, The way I make decisions, it hasn't changed anything for me, but I'm not immune from the market. I'm not in a, like, I'm not in a different planet, and in my case, uh, by far most of the money is actually being invested in follow-ons, uh, into companies I'm already invested in, and the pace of these follow-ons Um, it's dramatically come down because in 2021, everyone rushed to raise more and more capital because every few months you could double the valuation and people rushed. So, you know, that's the pace of these phones was very, very fast. Now, most companies, even the ones that are doing great, you know, most of them are flush with cash. They, you know, they don't have any reason to, uh, hurry to the market. Why not build more value before they, uh, go back to the market? So So even if I continue to invest at the same pace from a new investment standpoint, that's only about 20% of the cash that I invest. 80% goes into, uh, uh, later stages of companies that I got in early, and, uh, in those, I think these follow-on, uh, rounds are You know, much slower, fewer and far, much farther between. So yes, it's gonna, I assume it's gonna, I expect it to, to impact my, uh, my pace, but not because of some strategic decision of mine to slow down or not because I'm trying to manage it. It's just that they expect the market forces to dictate it.

AI assessment note: “It hasn't changed, uh, uh, The way I make decisions, it hasn't changed anything”

Q been ones where I invested, but I didn't double down because I thought the price was too high. It's too high. It's ridiculous. Now you mentioned that they come back because they can, and you concentrate capital incredibly well, but my question to you is how do you determine whether it's a stretch Or a stretch too far on the price that they're asking and what you're willing to pay?

A So, first of all, I don't make a huge distinction. I don't make a real distinction between a new deal and, uh, and a fall on deal because each deal should have, you know, standards on merit, I, you know, I believe. So, uh, uh, you know, in general, In general, I don't think one should be overly price sensitive. Obviously, you know, you have to have some discipline, but the reality is that if you're dealing with companies that are growing at over a hundred percent per year, and you believe it's sustainable, okay, even if you pay up, let's say by 50%, pay more than you should have by 50%, you know, It will catch up in six months, right? So, uh, it's not a big deal, uh, to have paid more for something that is, that you know, or you feel, or you believe that is, um, um, is gonna continue to grow fast and, um, for many years to come and has a great, uh, you know, and is gonna have a great outcome. So, Uh, so I, I guess, um, yeah, so I would rather make the mistake of paying a little bit more than if I, again, if I have confidence and conviction about the other metrics, I would rather make the mistakes of paying, uh, you know, 50% more than I maybe I should have based on some comp analysis, uh, than, than miss out on the opportunity.

AI assessment note: “if you're dealing with companies that are growing at over a hundred percent per year”

Q You said the element of ownership there in terms of the requirement to have 20% was kind of an, uh, kind of BS element of venture models in particular. Are there any other kind of BS elements of venture models that you find interesting that it's good to shine a light on?

A Yeah, I'll give you another one. Uh, but I don't want to give all my secrets. Well, you know, but I'll give you another one. It's just me and you, don't worry. Well, actually we already covered a few, like vintage diversification and, uh, but, um, uh, you know, general diversification, I think is a way, uh, uh, I, I think by knowledge, uh, funds, uh, over into diversified. And LPs are too diversified in terms of their own, um, uh, the number of, of their GP relationships. But let me give you another one. The concept of protecting your ownership. Okay. Let's assume that I own 17, three percent in a company, and now there's a deal, and it's really important for me, for the typical VC, really important to protect their ownership, meaning to keep it at 17.3. And my, my question is, what's so sacred about the 17.3%? I just made up this number, totally arbitrarily. Uh, if I love the deal, why wouldn't I try to push it and, uh, and get to 20% or 25%? And if I'm Not sure it's a great, you know, opportunity. Why wouldn't I, why would I care so much if I get diluted a little bit? Why, why would I care so much about putting enough dollars to keep the 17.3 versus say, are these dollars really better invested here versus any other opportunity, uh, uh, that I can put this money in new or full on doesn't matter. So I think that's another, uh, idea that to me, it's never about protecting the o…

AI assessment note: “Let me give you another one. The concept of protecting your ownership.”

Q Um, tell me, what's your biggest advice for first-time fund managers today?

A Oh, my, the biggest, the first thing is what I said before, that the customers are the founders, not the LPs. Because, and I'll tell you why. You know, if you have access to the best founders, you'll also get the LPs. If you have access to LP money, doesn't, the founders don't care about it. You know, it's not going to give you any edge. You know, they don't care who your LPs are. And, uh, and, uh, so, so the, the objective is to be the most attractive to founders, because in turn, that will give you an edge. In turn, that would give you performance. In turn, that would, you know, get you, uh, money from LPs and not the other way around.

AI assessment note: “the first thing is what I said before, that the customers are the founders”

Q My, my friend, honesty is everything. Uh, tell me, what have you recently changed your mind on?

A What have I recently changed my mind on? You know, I have a company that I mentally, um, an old investment. I mentally wrote it off. Uh, I, you know, I'm done. You know, it doesn't have any effect. It's an old fund. It doesn't have any impact. So very easy to walk away from. And they, uh, somehow survived COVID. And in the last three, four months, I'm starting to see after years, starting to see some signs that I interpret as boy, maybe they're onto something. And, um, so I changed my mind and they came to their investors. Well, with the idea that, uh, they need a few more months or they maybe we can somehow, uh, find between everyone two million dollars and buy them a few more months. And that I, that I don't like because either you play to win or you don't play, you don't play not to lose. And then I surprised them and told them, you know what, I'll do it. But forget all this, everyone chips in and somehow we find two million dollars. Forget that. Uh, I'll put four million myself. I don't care what the others are gonna do, and let's, you know, let's play, you know, let's play to win. In their case, four million is gonna, well, it's not gonna end four million, because when people saw me put four million, it's gonna end up as eight million, and it's actually gonna give them an opportunity to actually play to win, as opposed to just survive for another, you know, a few more mont…

AI assessment note: “I have a company that I mentally... wrote it off... so I changed my mind”

Q the biggest challenge for me is, I've seen everything be done before in a previous iteration, and I've pretty much seen everything fail. And so it's having this mental plasticity to see new opportunities in a new light and not try and attribute kind of past failures to current opportunities. How do you think about having that mental plasticity when you have seen so much, both work and not work?

A I think that many times I see investors derive the wrong conclusion from past events. So I'll give you an example. An investor invests in a husband and wife team and the company fails. And maybe even it failed because they Went through an ugly divorce, and the whole thing imploded. And the conclusion is, for many people, I'm never going to do it again. I'm never going to back a husband and wife team. Now, I think it's the wrong conclusion, because this husband and wife team failed. Another husband and wife team could succeed. Or another example is, someone comes with some idea that was tried 10 years ago and it failed. And so the investor says, okay, seen it before it failed. But this is very shallow thinking, because maybe the idea failed because 10 years ago, The conditions were not there yet, and today they are, for example. So I think it's really going down, double clicking, going down the next level, thinking a little bit deeper, and not draw the wrong conclusions from the past.

AI assessment note: “thinking a little bit deeper, and not draw the wrong conclusions from the past”

Q Listen, it makes total sense. And then final one, Oren, what's the most recent publicly announced investment, and why did you say yes and get so excited?

A I think the last new investment that I made a few months ago is a company called Traverse out of Israel. It's a woman founder, two founders. The CEO is a woman, and Super strong, technically, both of them, and it's in the data infrastructure space. Now, the reason, and it's a seed, by the way, it's a total seed deal, so I don't know how it's going to play out, but what convinced me, and it was, again, a very quick decision, there was very little to check, because there was nothing, it's an idea, is that she was the CTO, and he was the VP R&D of a big analytics company, and basically, they are solving for a problem that they experience themselves, and that every company with a lot of data Is experiencing. So I love it when founders solve for problems they really understand extremely well, because they experience the problem themselves. And I love it when you start with a very strong product and engineering foundation, because you can add the sales and marketing later. The opposite doesn't work. And I think that if you start with very strong technical people, then you have the best DNA from a technology standpoint, an engineering standpoint. And again, it's something that you cannot fix after the fact. And sales and marketing, you can build it three years down the road. By the way, Trip Action was the same thing. House was the same thing. Most of these companies were the same thi…

AI assessment note: “the last new investment that I made a few months ago is a company called Traverse”

Q How do you feel about price sensitivity? How disciplined are you on it? And how cool to that your kind of thinking is it for you when making the investment?

A It's not the most important thing in my mind, because at the end of the day, the biggest wins are not because you pay cheap. You don't win because you pay cheap and you don't lose because you pay expensive. You win because you chose the right team and the right opportunity and the right company. And these companies can go so big, even if you pay twice of what you should have, it doesn't matter because it can still be a hundred X. To me, that's not the issue with hot market. It's not so much that the valuations are higher. It's the other thing. It's just, it's just overheated, overfunded, too many competitors, and it's just the chances that your company is going to be the market leader is just much smaller. That to me is much more of a factor than the valuation. You know, if just like we tell founders that they shouldn't be overly valuation sensitive, and if it's the right, they should go with the right investor who would Help them be successful, and it's true in the other direction as well. I think that if I'm gonna walk away from a deal because it cost me 20% more, then you know what, I shouldn't have done the deal in the first place. That's how I feel.

AI assessment note: “It's not the most important thing in my mind, because at the end”

Q What do you know now that you wish you'd known when you started your career and venture 25 years ago, Orin?

A Oh, wow. Wow. So many things, so many things. Let me choose one. I think that the notion It's all about the founder, and my role is to be the best support system, but my role is not to know better than the founder, and I think early in my career, it was much more important to me to be the smart guy in the room and to have a say. Oftentimes, VCs talk about themselves as partners to the entrepreneurs, and I actually don't like the terminology, because a partner implies that I have a say, he has a say, or she has a say. No, I think I'm more than a partner. I work for them. You know, I adore them. I work for them. You know, I cater to them, and at the end of the day, it's a decision And in my mind, they know better. I'm going to give them my advice, but in the end, I'm totally not attached to whether or not they took it. And I think that maybe early in my career, I was more attached to whether or not the founder listened to me or not. Today, I'm not attached to it at all. So I think this is oneness, and then it's really all about the founder, and it's really all about how attractive you are to the founders, because that will bring you the next deals, much more than who is the smartest person in the room.

AI assessment note: “It's all about the founder, and my role is to be the best support system”

Q that 30 pages makes me want to jump out the window of my high-rise building, but I'm glad that doesn't happen. Can I ask, because another really interesting element of your structure is also kind of the funds themselves, often raised on maybe faster cadences than the three-year fund life cycles, often on annual cycles. Why do you think about this kind of annual cycle, and what are the benefits?

A Yeah, the honest truth is that there's no real strategy around it. It's not that I plan it, Honestly, every time I raise, I think I'm raising for a couple of years, and then I just invested faster than I expected. But I refuse to be held hostage to an artificial timetable to invest a fund. I don't want to manage the pace. I want to be totally driven by the opportunities. And if it takes me three months to invest a fund, so be it. If it takes me five years, so be it. Now, it's very difficult, again, to get away with from the LP perspective, because the LPs hate it. Probably this is the number one reason why I talked to an LP. They don't end up investing or even an existing LP decides not to proceed in the next fund. This is the, by far the number one reason. Many LPs, that's not how they run their business. So they, that totally throws them off and it's very difficult for them. But again, I mean, there's a very privileged position that I don't care. I'm not working for the LPs. I'm working for the founders and for myself. So if it doesn't work for an LP, they're not a good fit and that's it. So I just raised the fund that looks like a good size, and then I invested based on the opportunities, and as it happens in the last, since 2015, I've already done six funds, so you're right, it's even faster than annual, but it's not, you know, it wasn't necessarily my intention.

AI assessment note: “the honest truth is that there's no real strategy around it. It's not that I plan it”

Q Before we dive into what you're doing now, I'm intrigued. You said there about the time you spent with, with Apex. I'm intrigued. You saw, saw the market crash and the bubble. How does that affect how you viewed kind of portfolio construction, diversification, startup earn rates? How did that, not incredible experience, but very memorable experience affect how you view startup investing?

A First of all, I do think it's a great experience to go through. I know in hindsight, at the time, at the time, it feels terrible, but in hindsight, you know, you obviously learn a lot from having gone through the big bust of 2000, and then maybe the mini crisis of 2008, but the main one was obviously 2000. So first of all, I think having gone through it, you know, a few times, I think you get a little bit better identifying when there are signs of danger that things may be, uh, Heading there again. And, but the main thing is not to get too carried away when things are frothy. I will tell you almost everything that I did in 1999 was crap. Scrap the almost everything I did in 1999 was crap. And, uh, and by the way, I was more active in 1999 than any other year in terms of number of investments. So there's an inverse correlation I found between how active you are and how good you are. So to me, the major lesson is not to invest based on momentum of the market, but try to Invest in things that you really believe in, and even if the market was closed for the next 10 years, they would be able to survive and thrive, and not to bet on the greater fool theory. In terms of diversification, if I learned anything, is that the diversification doesn't work, because when things turn south like that, then diversification is not going to save you, because everything goes down, and because every…

AI assessment note: “diversification doesn't work, because when things turn south like that, then diversification is not going to save you”

Q Before we dive into what you're doing now, I'm intrigued. You said there about the time you spent with, with Apex. I'm intrigued. You saw, saw the market crash and the bubble. How does that affect how you viewed kind of portfolio construction, diversification, startup earn rates? How did that, not incredible experience, but very memorable experience affect how you view startup investing?

A First of all, I do think it's a great experience to go through. I know in hindsight, at the time, at the time, it feels terrible, but in hindsight, you know, you obviously learn a lot from having gone through the big bust of 2000, and then maybe the mini crisis of 2008, but the main one was obviously 2000. So first of all, I think having gone through it, you know, a few times, I think you get a little bit better identifying when there are signs of danger that things may be, uh, Heading there again. And, but the main thing is not to get too carried away when things are frothy. I will tell you almost everything that I did in 1999 was crap. Scrap the almost everything I did in 1999 was crap. And, uh, and by the way, I was more active in 1999 than any other year in terms of number of investments. So there's an inverse correlation I found between how active you are and how good you are. So to me, the major lesson is not to invest based on momentum of the market, but try to Invest in things that you really believe in, and even if the market was closed for the next 10 years, they would be able to survive and thrive, and not to bet on the greater fool theory. In terms of diversification, if I learned anything, is that the diversification doesn't work, because when things turn south like that, then diversification is not going to save you, because everything goes down, and because every…

AI assessment note: “In terms of diversification, if I learned anything, is that the diversification doesn't work”

Q I'm intrigued, does this not suggest a permanent cheerleader when sometimes a challenger is required, and how do you balance the cheerlead and challenge aspect of being an investor?

A Yeah, I, you know, and cheerleading may not be the best, uh, word, actually, and I know it's my word, so I, you know, I, maybe I should Change it. But what I meant was to be a real support system for an entrepreneur. It's so difficult to be an entrepreneur. I can't imagine what it is to, uh, to have all this responsibility and all these tensions, and it's a very lonely place as well. The last thing you need from a board member is to give you a hard time. Why, you know, so you said that, but you did that, and you know, why this, and why that, and so I think you want to be very positive and supportive. Having said that, definitely, you know, you want to ask the right questions, and, and, and you want to make the, uh, and you would Absolutely want to challenge the entrepreneurs, and entrepreneurs, at least the decent ones, they want to be challenged. They want you to ask them the odd question. They want you to make you in, to be a balancing board. They don't want you to tell them what, what they want to hear. They have enough people who tell them what they want to hear. So I don't confuse being supportive with speaking on mind, giving you a very honest, uh, brutal truth opinion when it's in a constructive manner. That being said, if at the end of the day, let's say I think that direction A is the right direction, the founder thinks direction B is the right direction. I would give …

AI assessment note: “I don't confuse being supportive with speaking on mind, giving you a very honest”

Q Which is the most memorable first founder meeting that you've had?

A Okay, you don't. Okay, I'll give you one. Uh, I've, uh, a relatively recent investment from a year and a half ago, um, Uh, called Sensi, which I think is on fire. It's gonna do great. I love the founder. She's, uh, she's a force of nature. And so I'm cheating a little bit because it's not first meeting, it's second meeting. So I, I met her a year earlier and it was the same company. It was, it already had revenues even then. And I didn't, I, I, I, I, you know, I, I, I, you know, I, I, I, you know, I, I, I found it interesting, but not interesting enough. I had a lot of concerns. And a year later, I almost didn't take the meeting, but I, uh, I, uh, She told me she's in town, and, and can we have coffee, and, ah, and we're, and, and I meet there, and within five minutes, I realized that number one, all my concerns from a year ago were, ah, addressed, um, in, in, in flank collars. And number two, she's a different person. Like she, like, felt so confident. It felt, she, she, she felt so confident because I met her a year earlier and she didn't, ah, convey this confidence. I knew it was real. It wasn't like bullshit confidence. It was real because I also saw her less confident. So within five minutes, the whole conversation changed and, you know, within 24 hours each, by the way, she only had a couple of term sheets from big brand names and I took the deal.

AI assessment note: “I'm cheating a little bit because it's not first meeting, it's second meeting.”

Q Capital diversification is important. You need to bake different vintages in. Are they wrong, or do you just respectfully not give a shit because you don't need to?

A It's probably the latter. I'm going to do my thing, and if it works for them, fine, and if not, they can opt themselves out, and some of them have, and it's fine. Good people opted out, and it's fine. I'm not going to do things differently. And by the way, I'm not investing fast because I want to invest fast. I'm just seeing opportunities I want to do. And then, by the way, sometimes looking back, you know, if I look at 2021, I would say I did, I invested too fast. You know, I wish I didn't, ok? Look, uh, but, but, but, but to answer your question, yeah, it makes their life a little bit, More difficult because it's hard for them, you know, if I, and the thing is, it's not just the speed, it's also the fact that I'm not consistent. So I make it harder for them to plan, you know, because, uh, they're not sure when they put the money, if it's gonna, you know, if it's gonna be good for one year or two years or nine months. So I, you know, so it makes their sizing decision more difficult. Um, so I, you know, I get it, I get it, but, uh, this is something that, you know, if you ask me things that Of all the things that I do that LPs might like less, I would say this is it. But honestly, I don't wanna, I don't wanna not invest in a company when I, you know, when I think it's compelling just because I just made another, you know, so.

AI assessment note: “It's probably the latter. I'm going to do my thing”