The Exchanges

Q Absolutely, and so you should. But kind of talking about your investment thesis there, when, with regards to the crunch itself, how does the crunch affect valuation, do you think?

A So we have some very clear statistics on this. We're now 54 deals in across three funds, and on average, the valuation we pay is about 20% higher than the post money of the round in front of us. This is a very interesting statistic, and by the way, let me give you the variance. Our rounds are between flat and two X. I don't think we've ever paid more than two X the post money of the prior round in front of front of us. And we've never done a down round in the history of the fund. And so if you're between flat and two X with a, with really the median at 20% above, it's very, a very interesting statement about what the price of the post seed round looks like. It is a slight premium over what the seed post money is, as opposed to a two X or a five X or a, you know, the round after us, by the way, when we're successful, Tends to be three to five XR valuation because the Series A fund is putting in eight, 10, 12, fifteen million dollars into these companies. As a matter of fact, the last five rounds done of our portfolio companies were nine, 15, 18, 18, and twenty million dollar raises. When you raise that much money and your prior raise was only three million bucks from bullpen, you can imagine what a huge change in valuation you have at the backside of navigating the crunch with the bullpen product.

AI assessment note: “on average, the valuation we pay is about 20% higher than the post money”

Q a founder, yeah, and I've got a, I've got a burn rate of a hundred K and, and we've got revenues of a hundred K compared to a founder that's coming to you with a burn rate of two million, but our growth is off the charts. How do you analyze the burn rates when getting to this stage, and what's your perspective when approaching them as kind of investability?

A We have very, very specific requirements around burn rate revenues, et cetera, and we can go chapter and diverse. We, we are, uh, perhaps one of the most analytically oriented venture funds at the early stage of anyone, and so we have very specific rules. So, for example, on the burn side, if we see any company that's burning over about two 50, We immediately ask ourselves on a net basis, by the way, two 50 on a net basis. We immediately ask ourselves if it's a fit for a post seed investment. And we do very simple math. You're burning two 50 net right now. That means you're burning three million all in for a year. And if you need 18 months of money, that's four and a half million dollars. That's on the outside of the size of the round we'll ever want to do. But importantly, if we're going to invest in your company, your burns two 50 right now, we want to invest in sales and marketing and take your burn up a little bit in the short run before it starts coming down. So If you're at two 50, your burn's going to go to 400, you know, now you need a six or eight million dollar round. You're outside of the post seed bucket, which is a three to five million dollar round. So there's a very clear constraint on the size of the round that can be done at post seed, as well as then what the burn rate requirements are. We've done very few deals with burn rates over a 200 net as the result of …

AI assessment note: “if we see any company that's burning over about two 50”

Q a founder, yeah, and I've got a, I've got a burn rate of a hundred K and, and we've got revenues of a hundred K compared to a founder that's coming to you with a burn rate of two million, but our growth is off the charts. How do you analyze the burn rates when getting to this stage, and what's your perspective when approaching them as kind of investability?

A We have very, very specific requirements around burn rate revenues, et cetera, and we can go chapter and diverse. We, we are, uh, perhaps one of the most analytically oriented venture funds at the early stage of anyone, and so we have very specific rules. So, for example, on the burn side, if we see any company that's burning over about two 50, We immediately ask ourselves on a net basis, by the way, two 50 on a net basis. We immediately ask ourselves if it's a fit for a post seed investment. And we do very simple math. You're burning two 50 net right now. That means you're burning three million all in for a year. And if you need 18 months of money, that's four and a half million dollars. That's on the outside of the size of the round we'll ever want to do. But importantly, if we're going to invest in your company, your burns two 50 right now, we want to invest in sales and marketing and take your burn up a little bit in the short run before it starts coming down. So If you're at two 50, your burn's going to go to 400, you know, now you need a six or eight million dollar round. You're outside of the post seed bucket, which is a three to five million dollar round. So there's a very clear constraint on the size of the round that can be done at post seed, as well as then what the burn rate requirements are. We've done very few deals with burn rates over a 200 net as the result of …

AI assessment note: “if we see any company that's burning over about two 50... We immediately ask ourselves”

Q I've got to ask, Paul, it's, it's too tempting. How was the fundraiser itself with such a contrarian model?

A It was as painful as you can imagine, and I know you've had many other GPs on the program. We had very solid, I mean, not only solid, but great numbers coming out of our first couple funds. We had some real home run kinds of companies. We have FanDuel, and we have Ipsy, and we have Namely, and then in Fund Two, we got Classy and Spa Hero. And now these are companies that have raised hundreds and hundreds of millions of dollars. Our underlying portfolio revenue across our companies is well over a billion dollars this year. These are for companies that are on average three to four years old. So, so we really did a good job. And so we went out for Fund Three. I gotta tell you, I brought in my new partner, Eric Wiesen, who was previously at RRE Ventures. We kind of thought, hey, we've arrived. You know, funds wanted to really work. The strategy was really de-risked. Uh, now I got a great partnership set up. Let's go. And I cannot tell you the number of limited partners who said, wow, that's a crazy strategy. That'll never work. Uh, we had one meeting where a limited partner literally said to us, so Paul, how are you really picking these companies? Because the strategy you've described can't possibly work. Uh, I, I look over at my partner, Eric, and I go, well, okay, what do we do with this meeting? I mean, if, if they think we have the secret way that we're picking, as opposed to w…

AI assessment note: “It was as painful as you can imagine”

Q Absolutely, and so you should. But kind of talking about your investment thesis there, when, with regards to the crunch itself, how does the crunch affect valuation, do you think?

A So we have some very clear statistics on this. We're now 54 deals in across three funds, and on average, the valuation we pay is about 20% higher than the post money of the round in front of us. This is a very interesting statistic, and by the way, let me give you the variance. Our rounds are between flat and two X. I don't think we've ever paid more than two X the post money of the prior round in front of front of us. And we've never done a down round in the history of the fund. And so if you're between flat and two X with a, with really the median at 20% above, it's very, a very interesting statement about what the price of the post seed round looks like. It is a slight premium over what the seed post money is, as opposed to a two X or a five X or a, you know, the round after us, by the way, when we're successful, Tends to be three to five XR valuation because the Series A fund is putting in eight, 10, 12, fifteen million dollars into these companies. As a matter of fact, the last five rounds done of our portfolio companies were nine, 15, 18, 18, and twenty million dollar raises. When you raise that much money and your prior raise was only three million bucks from bullpen, you can imagine what a huge change in valuation you have at the backside of navigating the crunch with the bullpen product.

AI assessment note: “on average, the valuation we pay is about 20% higher than the post money”

Q I've got to ask, Paul, it's, it's too tempting. How was the fundraiser itself with such a contrarian model?

A It was as painful as you can imagine, and I know you've had many other GPs on the program. We had very solid, I mean, not only solid, but great numbers coming out of our first couple funds. We had some real home run kinds of companies. We have FanDuel, and we have Ipsy, and we have Namely, and then in Fund Two, we got Classy and Spa Hero. And now these are companies that have raised hundreds and hundreds of millions of dollars. Our underlying portfolio revenue across our companies is well over a billion dollars this year. These are for companies that are on average three to four years old. So, so we really did a good job. And so we went out for Fund Three. I gotta tell you, I brought in my new partner, Eric Wiesen, who was previously at RRE Ventures. We kind of thought, hey, we've arrived. You know, funds wanted to really work. The strategy was really de-risked. Uh, now I got a great partnership set up. Let's go. And I cannot tell you the number of limited partners who said, wow, that's a crazy strategy. That'll never work. Uh, we had one meeting where a limited partner literally said to us, so Paul, how are you really picking these companies? Because the strategy you've described can't possibly work. Uh, I, I look over at my partner, Eric, and I go, well, okay, what do we do with this meeting? I mean, if, if they think we have the secret way that we're picking, as opposed to w…

AI assessment note: “It was as painful as you can imagine”

Q So Paul, I'm gonna, gonna potentially ruin all Mojito buying in the future for me, but how would you respond then if I said that you're a spreadsheet investor?

A Yeah, well, I'm not at all insulted by that. Actually, last year, uh, at our post-seed conference, we had, we had the honor of having John Doerr be one of our keynotes, and when I interviewed him, uh, and I'm a former Kleiner Perkins CEO of Aggregate Knowledge, um, Aggregate Knowledge was a portfolio company of John's time, and, you know, it was funny. He basically leveled the same insult to me at my own conference in front of the whole room of people, and, and I really wore it as a badge of honor as opposed to a, a negative Think about the positioning difference of being kind of a value oriented seed stage investor. Someone really looking at the numbers and paying attention to traction, as opposed to all of the stuff most venture people get caught up in. Oh, is the founder from a sexy school? Is the category in vogue? Are they part of the Silicon Valley elite? Did they build the right prior technology at Facebook? We ignore a lot of that stuff at the front of the screen and just look at the numbers. And what it allows us to do is it allows us to spot a lot of things other people are just missing. Categories, founding teams, and geographies that nobody's paying attention to, because unless you aren't a spreadsheet nerd or geek or whatever word you want to deem me, if you're not looking at the spreadsheet and only looking at kind of these softer, subjective, gut-oriented factors…

AI assessment note: “I'm not at all insulted by that... I really wore it as a badge of honor”

Q Can I also, at that stage, if it is up and to the right, and they just need a few more months runway, maybe six or eight months more runway, is that not the big competition for you in terms of funding that they could just go back to their existing seed investors who will give it to them if the metrics are there?

A You've actually just described exactly why we figured out we would have a good business. So yes, if you were a lifecycle investor, that would be the answer. But if you're a high volume option buyer, you can't do that with the volume of companies that you've invested in. This was the aha insight we had when Mike told us to go look at the data. It's about Christmas of nine, and I'm like, well, wait a minute. If you do 40 companies a year, how are you going to, without third-party validation, pick the ones that you'd give the extra money to? And it turns out many seed investors, if you ask them, if they come on your show and say, hey, seed investor, do you inside bridge your companies? Almost every one of them is going to tell you categorically, no, that's something we don't do. So what in the world do you do with a company that needs that six or eight or 12 months of money, but isn't ready for the series A? So in many ways, seed stage investors were very happy that bullpen came along because we solved a very fundamental portfolio construction problem for them.

AI assessment note: “seed investors... Almost every one of them is going to tell you categorically, no”

Q And talking of kind of fundamental problems in the industry, uh, one I always believe is kind of the herd mentality. Uh, so how do you approach this? You mentioned before about, uh, investing in potentially unpopular industries. What's your approach to this, and why do you think it's so hard to do things differently?

A It is amazing that for, for a group of people that fund disruption to be so oblivious to disruption happening to their own business, it is It has been fascinating to me to see people who fund disruption, not understand that an iceberg hit this business over the last decade. Um, and, and I think part of it is, you know, you're incapable of thinking about what the implications are of a disruption for your own business. And as a result, people end up being herd oriented. And my partner, Duncan loves to talk about FOMO a lot. So many of the later stage investors have fear of missing out of a category of it, Or, or of a team or of a background. We said, well, look, what if we stopped doing that? What if we said, let's go look at not what the cool kids are in YC's graduating class, but let's go look at those companies that have great metrics from three classes ago that nobody's paying attention to. You know, we sat down with some of the incubators, for example, and had this conversation before we started the fund. They're like, yeah, every one of them said, you know, Martino, there's one or two deals that are actually kicking butt nobody's paying attention to. It didn't take too many of those conversations for us to realize that That this contrarian orientation would lead us to superior deal flow because every one of them was dying to introduce us to one or two of those companies. Bu…

AI assessment note: “let's go look at those companies that have great metrics from three classes ago”

Q So Paul, I'm gonna, gonna potentially ruin all Mojito buying in the future for me, but how would you respond then if I said that you're a spreadsheet investor?

A Yeah, well, I'm not at all insulted by that. Actually, last year, uh, at our post-seed conference, we had, we had the honor of having John Doerr be one of our keynotes, and when I interviewed him, uh, and I'm a former Kleiner Perkins CEO of Aggregate Knowledge, um, Aggregate Knowledge was a portfolio company of John's time, and, you know, it was funny. He basically leveled the same insult to me at my own conference in front of the whole room of people, and, and I really wore it as a badge of honor as opposed to a, a negative Think about the positioning difference of being kind of a value oriented seed stage investor. Someone really looking at the numbers and paying attention to traction, as opposed to all of the stuff most venture people get caught up in. Oh, is the founder from a sexy school? Is the category in vogue? Are they part of the Silicon Valley elite? Did they build the right prior technology at Facebook? We ignore a lot of that stuff at the front of the screen and just look at the numbers. And what it allows us to do is it allows us to spot a lot of things other people are just missing. Categories, founding teams, and geographies that nobody's paying attention to, because unless you aren't a spreadsheet nerd or geek or whatever word you want to deem me, if you're not looking at the spreadsheet and only looking at kind of these softer, subjective, gut-oriented factors…

AI assessment note: “I'm not at all insulted by that. ... I really wore it as a badge of honor”

Q And you have that kind of discounted valuation, obviously, the 20% on the, on the initial seed, because to a large extent, I think you'll, I hope you'll agree with me in saying the, the second seed is because they haven't hit the initial milestones that were required to hit the A. Is that fair enough?

A That paints a very negative picture that I, I won't say is completely wrong, but I want to make sure you get the nuance of it. These are companies that are working, that are up and to the right, but just took a little bit longer. We, we, we have this saying at Bullpen, Bullpen never does bridges. If you need a bridge for six more months, I'm not your, I'm not your fund. But you know, if it's working and it's early and you need just a little bit more time to hit your series A milestone, I'm the person for you to go see. So paint a picture more of a company that, you know, they were hoping to be doing 200,000 in revenue. They're doing a 100,000 in revenue, but their growth rate once they got the product rate was faster. That's the kind of company we're looking for. So these are by no means distressed properties. We're not, we're not trying to look over the dregs and find the one diamond in the rough. We're looking for those companies that were in an out of favor category or geography that got a little bit overlooked and maybe didn't quite raise enough money, but with another two to three million bucks can blow way past the milestones of a traditional Series A and go right to the supersized Series A. So we look for an entrepreneur who might be thinking about raising five million, but with only two or three from us can go raise 50 Team instead at the end of our money. That's a very…

AI assessment note: “That paints a very negative picture that I, I won't say is completely wrong”

Q Can I also, at that stage, if it is up and to the right, and they just need a few more months runway, maybe six or eight months more runway, is that not the big competition for you in terms of funding that they could just go back to their existing seed investors who will give it to them if the metrics are there?

A You've actually just described exactly why we figured out we would have a good business. So yes, if you were a lifecycle investor, that would be the answer. But if you're a high volume option buyer, you can't do that with the volume of companies that you've invested in. This was the aha insight we had when Mike told us to go look at the data. It's about Christmas of nine, and I'm like, well, wait a minute. If you do 40 companies a year, how are you going to, without third-party validation, pick the ones that you'd give the extra money to? And it turns out many seed investors, if you ask them, if they come on your show and say, hey, seed investor, do you inside bridge your companies? Almost every one of them is going to tell you categorically, no, that's something we don't do. So what in the world do you do with a company that needs that six or eight or 12 months of money, but isn't ready for the series A? So in many ways, seed stage investors were very happy that bullpen came along because we solved a very fundamental portfolio construction problem for them.

AI assessment note: “seed investor, do you inside bridge your companies? Almost every one of them is going to tell you categorically, no”

Q So in terms of that contrarian approach, I'm intrigued, because you're raising Bullpen three, um, and I heard on Venture Studio that you wanted to put a much more institutional structure in place with Bullpen. Uh, so I'm intrigued, is this not a paradox To the think different contrarian approach to simply adopt an institutional model?

A It's a fair question, and I wish I had a better answer, but once you get into the mechanics of how a venture fund works in terms of the way limited partners give you money, the way that you deal with taxes, etc., it is very difficult to innovate at all on the actual underlying mechanics. Duncan and I spent a lot of time the first year of our fund thinking about if we could actually structure the fund in a different way, and this turned out to be the double secret penalty box of raising money. When you go out and say, I'm going to invest with this contrarian untested strategy called post seed, and I'm going to structure my venture fund in this completely different way. I mean, you talk about having people look at you like you're a space alien. You're a double space alien at that point. And so we quickly realized that the only way we'd be successful in raising the fund is if the fund's underlying structure was very traditional with a very non-traditional strategy. I wish there was a way we could have navigated those waters But we figured out no possible way to have a different fund structure as well as a different strategy. It just seemed like too, too far a bridge to cross over.

AI assessment note: “only way we'd be successful in raising the fund is if the fund's underlying structure was very traditional”

Q And talking of kind of fundamental problems in the industry, uh, one I always believe is kind of the herd mentality. Uh, so how do you approach this? You mentioned before about, uh, investing in potentially unpopular industries. What's your approach to this, and why do you think it's so hard to do things differently?

A It is amazing that for, for a group of people that fund disruption to be so oblivious to disruption happening to their own business, it is It has been fascinating to me to see people who fund disruption, not understand that an iceberg hit this business over the last decade. Um, and, and I think part of it is, you know, you're incapable of thinking about what the implications are of a disruption for your own business. And as a result, people end up being herd oriented. And my partner, Duncan loves to talk about FOMO a lot. So many of the later stage investors have fear of missing out of a category of it, Or, or of a team or of a background. We said, well, look, what if we stopped doing that? What if we said, let's go look at not what the cool kids are in YC's graduating class, but let's go look at those companies that have great metrics from three classes ago that nobody's paying attention to. You know, we sat down with some of the incubators, for example, and had this conversation before we started the fund. They're like, yeah, every one of them said, you know, Martino, there's one or two deals that are actually kicking butt nobody's paying attention to. It didn't take too many of those conversations for us to realize that That this contrarian orientation would lead us to superior deal flow because every one of them was dying to introduce us to one or two of those companies. Bu…

AI assessment note: “What if we said, let's go look at not what the cool kids are”

Q You mentioned there about the runway, you know, you might raise 12 to 18 months, and you need that bit more. I'm intrigued how founders should approach burn rates then. We, we hear The likes of Jeff Clavier say initially you should raise 24 to 30 anyway. What's your thought on how Series A affects burn rate for founders?

A Well, by the way, Jeff's response is an absolutely rational response to the Series A crunch. Six or eight years ago, Jeff would have not been advising companies take 12 to 18 months of money. But with the crunch as deep as it is, with the milestones for Series A so high and the checks so big for Series A, Jeff and a lot of other smart seed stage investors figured out that raising more money was a way for companies To have enough runway to avoid the crunch in certain circumstances. In my opinion, I think 36 months is almost too much money, even for a seed stage endeavor. When you have that much runway, you almost get the wrong mentality as a CEO. You almost want to always have this feeling of, you know, my house is on fire, and if I don't put it out fast, you know, I'm gonna have to, I'm gonna have to go move somewhere else because my house just burnt down. And if you have 36 months, to some extent, it's like, Well, you know, uh, that side of the house is on fire. I can kind of ignore that for the next year. So there's really this kind of very almost Goldilocks spot in between where you have enough money that you have runway to do what you need to do, but you don't have so much money that you can get complacent and lose your entrepreneurial edge. Um, and so I think 24 months is about the most I'd ever advise a startup company taking in an early stage. I think 36 is too much. But…

AI assessment note: “I think 24 months is about the most I'd ever advise a startup”

Q And you have that kind of discounted valuation, obviously, the 20% on the, on the initial seed, because to a large extent, I think you'll, I hope you'll agree with me in saying the, the second seed is because they haven't hit the initial milestones that were required to hit the A. Is that fair enough?

A That paints a very negative picture that I, I won't say is completely wrong, but I want to make sure you get the nuance of it. These are companies that are working, that are up and to the right, but just took a little bit longer. We, we, we have this saying at Bullpen, Bullpen never does bridges. If you need a bridge for six more months, I'm not your, I'm not your fund. But you know, if it's working and it's early and you need just a little bit more time to hit your series A milestone, I'm the person for you to go see. So paint a picture more of a company that, you know, they were hoping to be doing 200,000 in revenue. They're doing a 100,000 in revenue, but their growth rate once they got the product rate was faster. That's the kind of company we're looking for. So these are by no means distressed properties. We're not, we're not trying to look over the dregs and find the one diamond in the rough. We're looking for those companies that were in an out of favor category or geography that got a little bit overlooked and maybe didn't quite raise enough money, but with another two to three million bucks can blow way past the milestones of a traditional Series A and go right to the supersized Series A. So we look for an entrepreneur who might be thinking about raising five million, but with only two or three from us can go raise 50 Team instead at the end of our money. That's a very…

AI assessment note: “That paints a very negative picture that I, I won't say is completely wrong”

Q So in terms of that contrarian approach, I'm intrigued, because you're raising Bullpen three, um, and I heard on Venture Studio that you wanted to put a much more institutional structure in place with Bullpen. Uh, so I'm intrigued, is this not a paradox To the think different contrarian approach to simply adopt an institutional model?

A It's a fair question, and I wish I had a better answer, but once you get into the mechanics of how a venture fund works in terms of the way limited partners give you money, the way that you deal with taxes, etc., it is very difficult to innovate at all on the actual underlying mechanics. Duncan and I spent a lot of time the first year of our fund thinking about if we could actually structure the fund in a different way, and this turned out to be the double secret penalty box of raising money. When you go out and say, I'm going to invest with this contrarian untested strategy called post seed, and I'm going to structure my venture fund in this completely different way. I mean, you talk about having people look at you like you're a space alien. You're a double space alien at that point. And so we quickly realized that the only way we'd be successful in raising the fund is if the fund's underlying structure was very traditional with a very non-traditional strategy. I wish there was a way we could have navigated those waters But we figured out no possible way to have a different fund structure as well as a different strategy. It just seemed like too, too far a bridge to cross over.

AI assessment note: “fund's underlying structure was very traditional with a very non-traditional strategy”

Q You mentioned there about the runway, you know, you might raise 12 to 18 months, and you need that bit more. I'm intrigued how founders should approach burn rates then. We, we hear The likes of Jeff Clavier say initially you should raise 24 to 30 anyway. What's your thought on how Series A affects burn rate for founders?

A Well, by the way, Jeff's response is an absolutely rational response to the Series A crunch. Six or eight years ago, Jeff would have not been advising companies take 12 to 18 months of money. But with the crunch as deep as it is, with the milestones for Series A so high and the checks so big for Series A, Jeff and a lot of other smart seed stage investors figured out that raising more money was a way for companies To have enough runway to avoid the crunch in certain circumstances. In my opinion, I think 36 months is almost too much money, even for a seed stage endeavor. When you have that much runway, you almost get the wrong mentality as a CEO. You almost want to always have this feeling of, you know, my house is on fire, and if I don't put it out fast, you know, I'm gonna have to, I'm gonna have to go move somewhere else because my house just burnt down. And if you have 36 months, to some extent, it's like, Well, you know, uh, that side of the house is on fire. I can kind of ignore that for the next year. So there's really this kind of very almost Goldilocks spot in between where you have enough money that you have runway to do what you need to do, but you don't have so much money that you can get complacent and lose your entrepreneurial edge. Um, and so I think 24 months is about the most I'd ever advise a startup company taking in an early stage. I think 36 is too much. But…

AI assessment note: “24 months is about the most I'd ever advise a startup company taking”

Q What sector that everyone else loves are you most excited by? What's the contrarian thesis today?

A So, I, I gotta say, I don't have a new one, but I'll tell you about the first deal in my third fund. The first deal, and I can't tell you the name yet because it's unannounced, is in the e-commerce space. We did the deal in July, and this CEO was tearing his hair out. He couldn't understand. He had great numbers. Everything was going awesome, and no one wanted to do an e-commerce deal. We did that deal in July, and the next month, Dollar Shave got bought for a billion dollars, and Jet got bought for three billion dollars, and everybody's knocking on our doors going, Hey, you know, didn't you do that e-commerce deal? Uh, uh, can you introduce that to me? That is what bullpen is all about. Going into that category everybody hates right now, and writing the check off of great metrics, and it's not frequently a month later that all of a sudden the market comes around. Usually it's a year or two later we get, we get, uh, get our dividend. But in this particular case, it was just hysterical. 45 days after that closing, those two companies get bought, and everyone wants an e-commerce investment. So I gotta tell you, I don't know what my new favorite one is, But the way I find my new favorite one is what was cool two years ago that's out of favor now, that's what I'm going to be looking at.

AI assessment note: “what was cool two years ago that's out of favor now, that's what”

Q And so that was the market opportunity you saw at the Series A crunch. And so I'm really intrigued to break it down then into the two kind of different classes with investors and founders. So let's start with the founder side. And what does the crunch mean for founders and how do you think they should look to navigate it initially?

A So what it really means is the following, is that in this new world of option buying and fail fast, what happens when your idea you raise 12 to 18 months of money for, but you really get to your proof point in month 24? Well, you might have an awesome company. You might have a Twitter on your hands, for example, and Twitter's a good example. To some extent, that wasn't up and to the right immediately. It was not a company that in the first year or two everyone thought was a grand slam home run. It's one that became one. Groupon is another example of one at the point in time. The reason I'm pointing out Twitter and Groupon is this was the data that we were analyzing in, in oh nine. Like, wait a minute, you know, Groupon started as another company called the point, and this is a pivot and off of a failed business model. Uh, and that turns out to be a billion dollar company. And so the more we looked, the more we found that the biggest outcomes of the vintage were companies that had either pivoted once or on their second or third business model, or took a little bit more Time and that learning and discovery phrase to use Mike Maple's words. And so what do you do if you're a CEO and you're in month 12 and you know this thing works, but you're out of money in month 15 because you raised a really small seed. And so the Series A crunch is a really existential dilemma to keep your comp…

AI assessment note: “So what it really means is the following, is that in this new world”

Q So then I want to finish today on something that's kind of very interesting for me, and it's what would you like to see change in venture one as a macro, and then what would you like to see change in the LP community?

A Well, on the venture side, I want to see more innovative funds. I want to see more funds structured, different, focused on different things, etc. I don't want to see yet another fund, which is I'm a vertically oriented fund focused on security, and you know what? I'm going to be better at Security than Ted Schlein at Kleiner, who's one of the best security investors. That just seems like a very hard way to go, and I'm not picking on security as a category, but I always like to use that Ted example because he's so known as one of the best security investors around. So showing up as one of the 350 funds with a strategy that I know security better than Ted, that seems like a very hard strategy to implement. It seems like a long-term, very difficult to defend position. Now, on the other hand, You show up with a strategy as different as bullpen or as different as correlation ventures or as different as signal fire. Wow. I want to see more of that. I want to see one more of the one 37 ventures out there of those 350 funds. I would say no more than 25 of them have a truly different strategy other than I'm better in this category. I'm better in this geography than these other people. And so it's crazy to me that less than 10% of all of the newly created funds have a different strategy. I would very much like to see people innovating in the venture side of In terms of the product offeri…

AI assessment note: “Well, on the venture side, I want to see more innovative funds.”

Q So then I want to finish today on something that's kind of very interesting for me, and it's what would you like to see change in venture one as a macro, and then what would you like to see change in the LP community?

A Well, on the venture side, I want to see more innovative funds. I want to see more funds structured, different, focused on different things, etc. I don't want to see yet another fund, which is I'm a vertically oriented fund focused on security, and you know what? I'm going to be better at Security than Ted Schlein at Kleiner, who's one of the best security investors. That just seems like a very hard way to go, and I'm not picking on security as a category, but I always like to use that Ted example because he's so known as one of the best security investors around. So showing up as one of the 350 funds with a strategy that I know security better than Ted, that seems like a very hard strategy to implement. It seems like a long-term, very difficult to defend position. Now, on the other hand, You show up with a strategy as different as bullpen or as different as correlation ventures or as different as signal fire. Wow. I want to see more of that. I want to see one more of the one 37 ventures out there of those 350 funds. I would say no more than 25 of them have a truly different strategy other than I'm better in this category. I'm better in this geography than these other people. And so it's crazy to me that less than 10% of all of the newly created funds have a different strategy. I would very much like to see people innovating in the venture side of In terms of the product offeri…

AI assessment note: “Well, on the venture side, I want to see more innovative funds.”

Q And so that was the market opportunity you saw at the Series A crunch. And so I'm really intrigued to break it down then into the two kind of different classes with investors and founders. So let's start with the founder side. And what does the crunch mean for founders and how do you think they should look to navigate it initially?

A So what it really means is the following, is that in this new world of option buying and fail fast, what happens when your idea you raise 12 to 18 months of money for, but you really get to your proof point in month 24? Well, you might have an awesome company. You might have a Twitter on your hands, for example, and Twitter's a good example. To some extent, that wasn't up and to the right immediately. It was not a company that in the first year or two everyone thought was a grand slam home run. It's one that became one. Groupon is another example of one at the point in time. The reason I'm pointing out Twitter and Groupon is this was the data that we were analyzing in, in oh nine. Like, wait a minute, you know, Groupon started as another company called the point, and this is a pivot and off of a failed business model. Uh, and that turns out to be a billion dollar company. And so the more we looked, the more we found that the biggest outcomes of the vintage were companies that had either pivoted once or on their second or third business model, or took a little bit more Time and that learning and discovery phrase to use Mike Maple's words. And so what do you do if you're a CEO and you're in month 12 and you know this thing works, but you're out of money in month 15 because you raised a really small seed. And so the Series A crunch is a really existential dilemma to keep your comp…

AI assessment note: “what happens when your idea you raise 12 to 18 months of money for”

Q What sector that everyone else loves are you most excited by? What's the contrarian thesis today?

A So, I, I gotta say, I don't have a new one, but I'll tell you about the first deal in my third fund. The first deal, and I can't tell you the name yet because it's unannounced, is in the e-commerce space. We did the deal in July, and this CEO was tearing his hair out. He couldn't understand. He had great numbers. Everything was going awesome, and no one wanted to do an e-commerce deal. We did that deal in July, and the next month, Dollar Shave got bought for a billion dollars, and Jet got bought for three billion dollars, and everybody's knocking on our doors going, Hey, you know, didn't you do that e-commerce deal? Uh, uh, can you introduce that to me? That is what bullpen is all about. Going into that category everybody hates right now, and writing the check off of great metrics, and it's not frequently a month later that all of a sudden the market comes around. Usually it's a year or two later we get, we get, uh, get our dividend. But in this particular case, it was just hysterical. 45 days after that closing, those two companies get bought, and everyone wants an e-commerce investment. So I gotta tell you, I don't know what my new favorite one is, But the way I find my new favorite one is what was cool two years ago that's out of favor now, that's what I'm going to be looking at.

AI assessment note: “I don't have a new one, but I'll tell you about the first deal”