The Exchanges

Q I absolutely love that in terms of the messy career. I do want to dive into the exciting times at Bloomberg Beta State because it's been an incredible journey, but I know you have some news for me relating to the fund, so hit me. What's the news on Bloomberg Beta, Roy?

A We are today announcing our Third fund. And the exciting news is that it is precisely the same as the previous two ventures, a funny occupation where you get to like say, hooray every couple of years when you keep doing exactly what you've been doing. But when we started, we weren't sure if we would get product market fit with the model that we had. The model that we had was focusing on the future of work, trying to be as early as possible, both on trends and in the life of a specific company. And our approach was the founder is the customer. Let's treat that as religion. And now on our third fund, which is also a seventy five million dollar fund, we are going to do precisely the same thing. So yeah, excited to keep going.

AI assessment note: “We are today announcing our Third fund.”

Q Yeah, no, that is true. Thank you very much for that, Roy. Um, so then are there easily accessible repositories of data that startups can get access to?

A Well, sure, there are. I mean, there's the competitions, you know, like ImageNet, and then Kaggle, which is another of our portfolio companies, publishes some of its data sets in public, and so sure, the issue is, if you're looking at the same data everybody else is looking at, Then you really do have to be smarter than everybody else for it to work, which if you're doing a Kaggle competition is kind of the point you're competing to see who can come up with the best algorithm to describe some effect on a particular data set. But if you're trying to build a startup, then it's good to think that you might have some data that might one day be your own.

AI assessment note: “Well, sure, there are. I mean, there's the competitions, you know, like ImageNet”

Q Yeah, no, that is true. Thank you very much for that, Roy. Um, so then are there easily accessible repositories of data that startups can get access to?

A Well, sure, there are. I mean, there's the competitions, you know, like ImageNet, and then Kaggle, which is another of our portfolio companies, publishes some of its data sets in public, and so sure, the issue is, if you're looking at the same data everybody else is looking at, Then you really do have to be smarter than everybody else for it to work, which if you're doing a Kaggle competition is kind of the point you're competing to see who can come up with the best algorithm to describe some effect on a particular data set. But if you're trying to build a startup, then it's good to think that you might have some data that might one day be your own.

AI assessment note: “Well, sure, there are. I mean, there's the competitions, you know, like ImageNet”

Q I totally get you in terms of being trying. There are two elements that I really want to unpack there. I guess the first is over the last six years, obviously with Bloomberg Beta, you've seen a big change in what entrepreneurs expect and want from their VC. How have you seen that change over the last six years for you?

A You know, the fear a few years ago was, would your VC be a bad guy? And so the word then was found, the phrase then was founder friendly. Which implied we're not going to screw you. I mean, I remember a friend we collaborate with on many projects. Greylock led his series A, and he told me the reason he wanted to work with Greylock is Reid Hoffman, I think before he was there as a partner, said to him, Greylock's not going to screw you. At the time, that was wildly differentiating. And now I think we live in a world where among the good VCs, at least, pretty much everybody is behaving honorably most of the time. They're behaving in a quote-unquote founder-friendly way most of the time. We've seen an evolution toward founders, Caring tremendously about the chance that an investor will help them become excellent. We'll make the company, you know, nudge the company's odds upward on the brick road toward greatness. And so if we intentionally say the founder is our customer, not that we're founder friendly, because our job as a vendor of capital is customer success. We want to see those founders have a slightly higher chance if we work with them of building the business of their dreams.

AI assessment note: “We've seen an evolution toward founders, Caring tremendously about the chance that an investor will help”

Q Yeah. I couldn't agree more in terms of that opaqueness. Do you mind your founders angel investing?

A In fact, look, part of the issue is that they often are not in a position to either financially or more often in terms of just their time and focus, or they go in and out, you know, Amal Sarva from Notel is Was an active angel investor. And about six months ago, he said, I'm just focused on no tell now. And so we actually have a list of the founders in our portfolio who have told us that they angel invest to whom we share every deal we possibly can, because we'd love to co-invest with our founders. And I think the small amount of time they might spend on it is so worth it for their own learning, but ultimately they're in the best position to decide that. And we just think they're really valuable co-investors. So selfishly as an investor, we love having them. My favorite co-investor is revenue. My second favorite co-investor is the founder of a venture-backed company in which we invest, and then you get to VCs.

AI assessment note: “we'd love to co-invest with our founders. And I think the small amount of time”

Q love that story. You said that about Ryan Peterson though. And so I do have to touch on that because when it comes to kind of successful founders, you know, Ryan and Flexport are the poster children. So I do want to touch on that. What have you seen happen to the most successful founders with And how is that maybe different to other people that you've worked with, Roy?

A Yeah. There's a myth that once the company starts working, you're on easy street. You can tap dance to the office and everything just unfolds so beautifully. My observation is that as companies become very successful and grow quickly, their founders go through some intense trials. The expectations keep going up. And I think about the growth of companies and Going through some of the folks that we've gotten to work with, like Daniela Perdomo from Gotenna, or Kieran Snyder and Jensen Harris at Textio, David Roger from Masterclass, I think you've had on. I mean, their jobs are really hard, and so there's this moment, or there are these moments, where founders of successful companies deserve even more care from those around them, and it's tough to get your head around it, because you think, well, these are, you just called poster children. These are the poster children, and it's True, but it can be really grueling, and so being aware of that, and not every founder goes through that, and different founders obviously have very different personalities, but part of our job, especially as it gets later, and we're no longer the biggest shareholder, there may be a board by that point, I mean, there usually is. Part of our job is to try to stay attuned for these moments where there's trial, and you know, one of my ways of thinking about it is, if you're gonna, if you're a founder, and you'…

AI assessment note: “as companies become very successful and grow quickly, their founders go through some intense trials.”

Q Real shit show of a day. Tell me, what are you doing? What can I do as a new venture investor to really build that relationship of, like, intense trust and always compassion between the VC and the founder? What can be done to build that relationship?

A It's a great question, and we're always thinking about it and trying to learn, and I think that you being, you know, you, Harry, just as a human being who is clearly a caring person, part of it is just personality. That said, the kinds of things we try to do, so one thing we try to do is put a lot of effort into being open, And transparent, you know, and that's everything from, if you go on our website, you can see our long form deal documents and the questions that we ask in diligence. So we want to get at the truth really quickly. The other thing is that you have to notice the moments where somebody is making a bid for support. And we've had cases where we've failed at this, you know, a founder who sort of said prior to around, Hey, you know, I might want a little bit of capital because I think I might have to make more mortgage payments. And what they're really saying is I'm gas Asking financially, please help. And you got to try to be attuned to those moments and really try to listen. Asking for feedback is a big part of it. Just really caring to do it. And then I'd say when there is a moment going totally overboard. So, you know, for example, yesterday in San Francisco, there were offices that lacked internet because of some of the power outages we've had here in the demilitarized zone of the Bay area. And one of our founders reached out and said like, Hey, our internet sl…

AI assessment note: “one thing we try to do is put a lot of effort into being open”

Q And then two more, your favorite blog or newsletter?

A Media Redefined is the thing I read every day. Jason Hirshhorn's newsletter about the media industry, which I read both because of its content and because Jason as a personality is just amazing. I should also just We were an investor, but I was reading it for years before we invested, and so, uh, I am, uh, I'm a big fan of that, and then, um, there is a newsletter by Azeem Azhar that's called, I think it's called The Exponential, uh, and it is all about technologies that are, the exponential view, uh, all the technologies that are having exponential effects, and obviously focuses on machine intelligence, uh, Uh, and it's just, he finds these things that I don't know where he finds. They're just terrific, and he's got a warm tenor to him. You know, this whole idea of human beings helping us to distill and simplify the world is, you know, despite all my earlier comments about machine intelligence, is a really powerful and wonderful thing.

AI assessment note: “Media Redefined is the thing I read every day.”

Q the hugely important Role that data plays in enabling AI to really have its effect on life and software itself. One very striking issue for me is the incumbency advantage that large players like Google and Facebook have with their massive data sets. So surely there's an instant advantage for them compared to all the little startups with no data sets at all. I mean, how do you view this?

A Yeah, so I think that's true. My partner, Siobhan Zillis, who two and a half years ago was the first one on our team who said, hey guys, machine intelligence is a big deal. Let's start paying attention. And she began by doing this survey that she's now updated annually of more than 2000 machine intelligence startups. And one of her early conclusions was that at least today, access to the data is the limiting factor. Which means, by the way, not only do companies like Facebook and Google have an advantage, but pretty much every old industrial incumbent, if it has a way of getting at its data and making use of it, also has an advantage. In a way, you know, it swings the pendulum back toward the bigger organizations, and so does that mean that startups have no chance? No, there's plenty, there are plenty of opportunities for startups, and I'll give you, um, the warning and the opportunity. The warning is, if you're Startup is, hey, I've got a black box that does machine intelligence. Let me try to apply it to a bunch of different situations. Then I think the going is very hard. You know, you probably have to start with some consulting services. It's, it's just difficult to find examples where that's worked. That said, if your startup is, let me take some pretty well understood AI techniques and apply them to a new user use case, um, where I can get access to the data and then crea…

AI assessment note: “Yeah, so I think that's true.”

Q because more and more we see companies raise when maybe they weren't expected to raise, or maybe they're known to not be doing so well, and there's just questions around why and how that raise got done. Some people suggest kind of Ponzi scheme-like characteristics to the ecosystem today. How do you think about that in terms of the continuous up rounds that we're seeing at sometimes quite extraordinary mechanics?

A Money burns a hole in the pocket, even of later stage VCs and VC is going to VC. And so, yeah, we do have this greater fool dynamic happening in our industry. And one of the challenges is if your strategy, nobody's explicit strategy is this, but if your actions reveal that actually your approach is making money on the greater fool, which is to say the later stage investor marking you up at a higher price, maybe someday buying you out. There are a lot of fools out there and their funds are in size pretty great. And so you can make, that is a viable financial strategy, at least at the time being, and probably will be for a few years. It's not who we are as people and as a fund. And I don't think it's a strategy that survives a market that is less strong than the incredibly strong market we've had since 2008 in startups and VC, but 11 years can feel like a lifetime for people who are just getting going.

AI assessment note: “we do have this greater fool dynamic happening in our industry”

Q Can I ask, are you concerned by the likes of your Sequoias and your NEAs and your big multi-stage funds? Are you concerned by them really dipping into seed as aggressively as they have been?

A I think it's frustrating because we've lost deals for sure. I think we've also won a bunch of deals against them. And when we lose, we lose on a two or three X price difference often because again, valuation is a function of fund size. We did. So that's frustrating. That said, I like having competition. I want to make our case. And I believe that we only make offers when we believe we have a chance to be the best dollar for the founder on the cap table. And so when the founders then pick us and we have a chance to prove it, you know, we had a founder who took money from us and from a very, very big VC doing just that in the same round. And two years later, he called me, um, and it's a really successful company. And he said, yeah, I shouldn't have taken that other money. You were totally right. And I said, what could I have told you at the time that would have convinced you? And he said, honestly, nothing. He said, they had a name that I could turn to my friend and say who funded us. And they'd be happy for me. And I think there's real honesty in that. So it might just take time to shake out. I will also say we did an analysis looking at the top company performers. And what you see is that since the era that seed funds have existed and who funded them at the seed. And what you see is that some of them were funded by seed funds, first round true others funded some of the very big…

AI assessment note: “I think it's frustrating because we've lost deals for sure.”

Q Why do you think that is? Does that not just show conviction in the model early though? And I'm trying to dig deeper because you can see how they would get excited that the VC is just really interesting.

A If I look, I think this is when people say the founder is your customer, like, ah, what does that really mean? And I have a pet peeve about how it does not mean the same thing as founder friendly. What does it mean for the founder to be your customer? One thing it means is if you get excited about something, you're in the first meeting, you're like, wow, this is so cool. You can choose to To do your diligence in a way that benefits your ability to assess it as quickly as possible, or you can choose to do your diligence in a way that benefits the founder as much as possible. And when you call customers is one example of a detail like that, because you go in and yeah, it'd be great, you know, the minute after you have a meeting to go call the customer, but if it turns out you then a day later think differently, or you discover another fact, well, you've just burned a very precious resource for the founder. So yeah, it can be a sign of enthusiasm, but it's up to us to serve our customers, not to live by our enthusiasm. Let me just give you the, there's a funny story on this, which is, I think an exception is when you can be a customer yourself and act quickly. So the first time we met Ryan Peterson from Flexport, I was at the time still the chairman of the company that I'd co-founded, which was a hardware company. And we had used Flexport as a freight forwarder. So you can use the…

AI assessment note: “it can be a sign of enthusiasm, but it's up to us to serve our customers”

Q about meeting later stage investors or series A, B investors, going four meetings deep, really opening up the data chest with them, and then being told, ah, we're actually in a competitor of yours, something that probably could have been said on meeting one. Do you see that often? How do you advise founders on kind of opening up the treasure trove of data when they could have a competitor?

A Yeah, it's a great question. So first of all, for ourselves, we always try to lead with the most difficult thing. So if we think we can't get there on price, or we might be in a competitive company, we aspire. I'm not going to say this always happens because we, but we try to just bring it up upfront and then the founder can decide for themselves. Our policy on competition is it's in the eye of the beholder, meaning the founder gets And I can talk through the different attitudes because the great founders have very different attitudes on how they think about competition. There's no consistent approach or anything. I think with good late stage funds, that hardly ever happens these days. I think part of the issue is there are many bad actors in venture. And so the only thing I think you can do as a founder or as a co-investor, but let's really focus on the founder is you got to go gradually. I call it the egg toss. Of trust. You know, that game kids play where you stand near each other and you toss an egg and then you stand a little bit further away and you toss the egg a little bit further. That is to me, the model is I would be very careful. And there's a reason we only ask for customer calls at the end of the process. Once we really already have strong conviction, because that's a very delicate, sensitive thing. I mean, VCs who ask founders to talk to their customers right off…

AI assessment note: “you got to go gradually. I call it the egg toss. Of trust.”

Q the proliferation of capital that we see in the market, 20 pre for pre-launch is not that uncommon, as we both know, if they've got the right profile founders. I really struggle to get my head around this. So how do you think about your own price sensitivity, and how do you think about when to stretch and when to realize that actually this might just be the new norm?

A While it's important to be aware of norms, I think if you want to have performance as a founder or as a VC that beats the norm, you have to be willing to flat the norm, and so the fact that it's the norm might make us think about something on a multi-year basis about our fund strategy, but hey, fund three is the same size as fund two, which was the same size as fund one, so clearly we are voting with Our fund that the norm has not shifted that much. And when do you want to stretch for a particular company is the hardest choice. Cause we've definitely had cases where we passed on price and the company looks great. And so now we think, man, maybe we shouldn't have done that. I think the issue is if you had to make that choice a hundred times, would it be the right choice? Like that's the way that I think about it. And we're very happy to lose deals on price. We need to be able to be deeply enough enmeshed financially with the winning companies to That we make enough to make up for all of the cases where we take risk and companies don't work out. So I think we're fairly calm about it, even if in the moment it can be a real head scratcher and painful because, you know, you develop a relationship with a founder, you want to see them succeed. You know, they're like, well, if we're a wild outlier, will it really matter if you invested on a 20 post or an eight post? And the answer is, …

AI assessment note: “clearly we are voting with Our fund that the norm has not shifted that much.”

Q And do you think that is a sustainable and effective way to sustain ourselves in society?

A I don't know yet. I, I think it's very hard for us to imagine what that future will look like. So many assumptions will change, and so I think grappling with the questions now And elevating those questions is probably the best we can do, and my view on the nature, on why work matters to people is it matters to people when it is necessary. The nobility of being a farmer when people have to farm in order to eat is extraordinary. You know, the nobility of doing something that becomes unnecessary can be compromised, and we need to figure out how we make sure that people are doing things that feel noble to them. I do think One logical conclusion of this might be what I call the human corner theory, which is that what jobs will human beings do? Well, they'll do the jobs when other people want to buy something specifically because it was made by a person. And we have a word for this, which is handmade. And we might imagine a world where, you know, the, the short story written by a person is intrinsically more valuable to us because it was written by a person than the short story written by a machine. And we live in our human corner and You know, serving one another and having our material needs provided for by a broader economy that is largely run by computers. And, um, I don't know whether that'll be a doomsday scenario or a utopia. Um, but that I think is the biggest question that w…

AI assessment note: “I don't know yet. I, I think it's very hard for us to imagine”

Q with that theme in mind of computers making judgments, it can most definitely be seen as an enabling technology there. So very much like software with its ability to impact every industry when it first arose. When we talk about machine intelligence, are we talking about pure AI? Are we talking DeepMind and Watson with their heavy IP side? Or are we talking about the next wave of software style?

A It's a great question. Yes, I think machine intelligence will eat software. While software is eating the world. And here's the reason why. The biggest advance in software in the last few years on the side of how the software actually works, as opposed to how it's consumed, where the biggest advance is mobile. But the biggest advance in how the software works is the continuing explosion of the volume of data that is available, and slightly more slowly, that is in use. And so the, you know, the quote-unquote big data thing Turns out to have produced a number of very valuable technologies, not that many valuable businesses, um, and part of it is because the data on its own, as everybody knows, is, you know, it's just information. Machine intelligence is the layer that takes all of that data and applies it to things that are useful for us, and so in that sense, I do think it needs absolutely everything. I think whether or not, you know, it can pass the Turing test and be confused for a human being is just a lot less important Then whether it does lots of useful things for us, everything from, you know, beating a human cardiologist in the performance of diagnosing heart issues with an MRI, to, uh, routing us through traffic, to, you know, turning off dangerous processes at a factory, to dot, dot, dot, dot, dot, name your, you know, name your, name your use case.

AI assessment note: “I think whether or not, you know, it can pass the Turing test”

Q And speaking of the hype there, how's the recent excitement around machine intelligence been for you as an early investor, an early supporter in the space? How's that affected you and your role as a VC, and have you seen valuation soar because of it, an increase in competition and deals? What's it been like for you?

A I mean, look, as with anything where you are standing in front of a steamroller as it, you know, comes by, there's a dangerous aspect to it and a powerful aspect to it. The powerful aspect is lots more people are thinking about these techniques, and that means lots more founders, and, you know, the world of startups is constrained to By one variable, which is the quality, the quantity of extraordinary founders. And so more people doing this is great. On the other hand, you know, it's not so fun when you work on something and really I credit, you know, my partner, Siobhan, as I mentioned, and also James Cham, um, who is another of our partners with, with opening my eyes to it. That's not so fun when you work on something and then all of a sudden the rest of the world thinks it's almost a cliche, you know, AI, we funded the first, uh, Slack bot company that was funded. Which is howdy, and then, you know, the next Y Combinator class comes, and you have many, many, many chatbot companies. You know, those moments of intense competition tend to produce the biggest winners. It's funny, you know, Peter Thiel has this whole thing, of course, about picking markets in which there's no competition, but Facebook, you know, his most successful single investment ever, started in the year when I think there were 26 other college social networks started that year, and so the competition isn't b…

AI assessment note: “there's a dangerous aspect to it and a powerful aspect to it”

Q And do you think that is a sustainable and effective way to sustain ourselves in society?

A I don't know yet. I, I think it's very hard for us to imagine what that future will look like. So many assumptions will change, and so I think grappling with the questions now And elevating those questions is probably the best we can do, and my view on the nature, on why work matters to people is it matters to people when it is necessary. The nobility of being a farmer when people have to farm in order to eat is extraordinary. You know, the nobility of doing something that becomes unnecessary can be compromised, and we need to figure out how we make sure that people are doing things that feel noble to them. I do think One logical conclusion of this might be what I call the human corner theory, which is that what jobs will human beings do? Well, they'll do the jobs when other people want to buy something specifically because it was made by a person. And we have a word for this, which is handmade. And we might imagine a world where, you know, the, the short story written by a person is intrinsically more valuable to us because it was written by a person than the short story written by a machine. And we live in our human corner and You know, serving one another and having our material needs provided for by a broader economy that is largely run by computers. And, um, I don't know whether that'll be a doomsday scenario or a utopia. Um, but that I think is the biggest question that w…

AI assessment note: “I don't know yet. I, I think it's very hard for us to imagine”

Q with that theme in mind of computers making judgments, it can most definitely be seen as an enabling technology there. So very much like software with its ability to impact every industry when it first arose. When we talk about machine intelligence, are we talking about pure AI? Are we talking DeepMind and Watson with their heavy IP side? Or are we talking about the next wave of software style?

A It's a great question. Yes, I think machine intelligence will eat software. While software is eating the world. And here's the reason why. The biggest advance in software in the last few years on the side of how the software actually works, as opposed to how it's consumed, where the biggest advance is mobile. But the biggest advance in how the software works is the continuing explosion of the volume of data that is available, and slightly more slowly, that is in use. And so the, you know, the quote-unquote big data thing Turns out to have produced a number of very valuable technologies, not that many valuable businesses, um, and part of it is because the data on its own, as everybody knows, is, you know, it's just information. Machine intelligence is the layer that takes all of that data and applies it to things that are useful for us, and so in that sense, I do think it needs absolutely everything. I think whether or not, you know, it can pass the Turing test and be confused for a human being is just a lot less important Then whether it does lots of useful things for us, everything from, you know, beating a human cardiologist in the performance of diagnosing heart issues with an MRI, to, uh, routing us through traffic, to, you know, turning off dangerous processes at a factory, to dot, dot, dot, dot, dot, name your, you know, name your, name your use case.

AI assessment note: “whether or not, you know, it can pass the Turing test... is just a lot less important”

Q And then the final one, Roy, what's the most recent publicly announced investment and why did you get so excited?

A We invested in a founder named Max Simcoff, who was one of our open angels and who I'd known when he was the founder of his previous company, who started a business that helps Other businesses close on home purchase. It's, it's called state's title. And their first offering was title insurance, which is the validation when you buy a home that in fact, the owner of the home, in fact, owns the home and can sell it to you. And they got super big before they even had a website. I mean, he just focused on the things you had to focus on to build this business. And so I don't even know, it might've been two years since we invested. And he's only just, it's only just now coming to light in public and it's a really strong company. And the reason we invested there, this was a weird case. Because I knew Mac so well, and he was thinking about whether to be a VC, and then he kind of went away for a bit. He came back, he said, I have a company, and he did that thing that nobody's supposed to do, which is pulling a rabbit out of a hat of like, here's my case for the company. My jaw kind of dropped, and literally that day, he had in his inbox our deal documents to sign and for us to invest a million dollars or whatever it was that we invested.

AI assessment note: “My jaw kind of dropped, and literally that day, he had in his inbox”

Q about meeting later stage investors or series A, B investors, going four meetings deep, really opening up the data chest with them, and then being told, ah, we're actually in a competitor of yours, something that probably could have been said on meeting one. Do you see that often? How do you advise founders on kind of opening up the treasure trove of data when they could have a competitor?

A Yeah, it's a great question. So first of all, for ourselves, we always try to lead with the most difficult thing. So if we think we can't get there on price, or we might be in a competitive company, we aspire. I'm not going to say this always happens because we, but we try to just bring it up upfront and then the founder can decide for themselves. Our policy on competition is it's in the eye of the beholder, meaning the founder gets And I can talk through the different attitudes because the great founders have very different attitudes on how they think about competition. There's no consistent approach or anything. I think with good late stage funds, that hardly ever happens these days. I think part of the issue is there are many bad actors in venture. And so the only thing I think you can do as a founder or as a co-investor, but let's really focus on the founder is you got to go gradually. I call it the egg toss. Of trust. You know, that game kids play where you stand near each other and you toss an egg and then you stand a little bit further away and you toss the egg a little bit further. That is to me, the model is I would be very careful. And there's a reason we only ask for customer calls at the end of the process. Once we really already have strong conviction, because that's a very delicate, sensitive thing. I mean, VCs who ask founders to talk to their customers right off…

AI assessment note: “you got to go gradually. I call it the egg toss. Of trust.”

Q Can I ask, are you concerned by the likes of your Sequoias and your NEAs and your big multi-stage funds? Are you concerned by them really dipping into seed as aggressively as they have been?

A I think it's frustrating because we've lost deals for sure. I think we've also won a bunch of deals against them. And when we lose, we lose on a two or three X price difference often because again, valuation is a function of fund size. We did. So that's frustrating. That said, I like having competition. I want to make our case. And I believe that we only make offers when we believe we have a chance to be the best dollar for the founder on the cap table. And so when the founders then pick us and we have a chance to prove it, you know, we had a founder who took money from us and from a very, very big VC doing just that in the same round. And two years later, he called me, um, and it's a really successful company. And he said, yeah, I shouldn't have taken that other money. You were totally right. And I said, what could I have told you at the time that would have convinced you? And he said, honestly, nothing. He said, they had a name that I could turn to my friend and say who funded us. And they'd be happy for me. And I think there's real honesty in that. So it might just take time to shake out. I will also say we did an analysis looking at the top company performers. And what you see is that since the era that seed funds have existed and who funded them at the seed. And what you see is that some of them were funded by seed funds, first round true others funded some of the very big…

AI assessment note: “I think it's frustrating because we've lost deals for sure.”

Q I do want to start there, Roy, with those who missed our first episode, so you have a pretty unique background pre-Venture. Talk to me about that. How did you make your way into Venture and come to be at Bloomberg Bater today?

A Yeah, I mean, I've written about this, I call it my messy career, and it's been a lot of pain that I've gone through by writing, but I have worked in running a nonprofit in government, city government, New York city at a big corporation of fortune, 500 corporation, big media. I started a company and now I'm an investor. And the reason that I now landed in VC, which is this is the longest I've been in any occupation. I'm now a seven year old venture capitalist, whether that makes me new or old, I have no idea. And the reason is I just think that startups are my favorite way to make Changes happen, but Mike Bloomberg has this joke that he says that the difference between business and government is that in business, it's dog eat dog, and in government, it's the other way around. I see a lot of parallels, but so yeah, so that's been the path, my messy career.

AI assessment note: “I have worked in running a nonprofit in government, city government... now I'm an investor.”

Q around itself, it's obviously the Approval of the kind of invested majority on the board to allow it to happen in many cases if you have that governance in place. I would love to touch on the board situation itself. Finally on this week in startups called it board B O R E D. First, why do you call it B O R E D when it comes to boards?

A This is also something I've written about. I researched the history of boards. I talked to one of the legal scholars in the U S who's an expert on the history of boards. Let's just start with history. Boards were originally created for a very different purpose. Boards date back to the Dutch and British East India companies, and they were called joint stock corporations, the structure that resulted in needing a board of multiple owners. And a board was a Republican body, an elected body to represent fractured ownership. Well, okay, then you have a situation where you got two VCs or a VC and some angels or, you know, And it's turned into this advice-giving, checking-in governance body, and at the stage at which we invest, where founders are making critical decisions daily, the idea of meeting once every month, or two months, or three months, and doing a PowerPoint presentation just seems ludicrous. Like, the presentation is, like, what? We tried some more experiments at Product Market Fit. We're still trying. Let's bloviate about the market. Why don't I lose a whole day of my time preparing for the meeting? The best argument I've heard for why founders should have boards at that stage is Is to prepare for having a board later. Man, that seems like a pretty weak argument to me. Like, it seems to me that you have way better things to do with your time than prepare for a meeting you…

AI assessment note: “doing a PowerPoint presentation just seems ludicrous. Like, the presentation is, like, what?”

Q And then what do you do when a founder messes up or doesn't live up to expectations? What's your role then as an investor and maybe lead investor in that situation?

A Yeah, so, and we have many cases where we're the only investor in a company. So here's the thing I'd say, the founders are my customers. So it depends when you say messing up. Every founder struggles performance wise with some aspect of building an early stage company. And so our orientation then is to help them And work very hard. And if we thought that there was a better alternative than the founder for the business, we'd tell the person that. And then if they said, no, no, no, thanks. That's nice. That's your opinion, but I'm going to keep going. Generally, we would back them to keep going. Um, in fact, every case we back them to keep going. Um, and so we're very straightforward about our views, but ultimately the founder is our customer and we work for the founder. There is one other kind of way though, where, which is, you know, when you hire an investor and It's a shotgun wedding often because you've known the person maybe for a month or two, you know, ideally for longer, but, you know, sometimes a month or two in a funding process is a lot, and then you're married, and you can't get divorced, or it's very, very difficult to get divorced, and so the bigger issues tend to come up when around trust, and this has only happened one or two times, but where a founder, it turned out, had misrepresented something to us that was very material, you know, manipulated us, and We're v…

AI assessment note: “our orientation then is to help them And work very hard.”

Q And then what do you do when a founder messes up or doesn't live up to expectations? What's your role then as an investor and maybe lead investor in that situation?

A Yeah, so, and we have many cases where we're the only investor in a company. So here's the thing I'd say, the founders are my customers. So it depends when you say messing up. Every founder struggles performance wise with some aspect of building an early stage company. And so our orientation then is to help them And work very hard. And if we thought that there was a better alternative than the founder for the business, we'd tell the person that. And then if they said, no, no, no, thanks. That's nice. That's your opinion, but I'm going to keep going. Generally, we would back them to keep going. Um, in fact, every case we back them to keep going. Um, and so we're very straightforward about our views, but ultimately the founder is our customer and we work for the founder. There is one other kind of way though, where, which is, you know, when you hire an investor and It's a shotgun wedding often because you've known the person maybe for a month or two, you know, ideally for longer, but, you know, sometimes a month or two in a funding process is a lot, and then you're married, and you can't get divorced, or it's very, very difficult to get divorced, and so the bigger issues tend to come up when around trust, and this has only happened one or two times, but where a founder, it turned out, had misrepresented something to us that was very material, you know, manipulated us, and We're v…

AI assessment note: “our orientation then is to help them And work very hard.”

Q Now, what is it that you most dislike about VCs still to this day?

A Well, first of all, I'll just add, I think there are many wonderful VCs. I just think it's that the typical VC is disastrous. What has yet to change Is that we still believe at the very earliest stages that we know more than we can possibly know. We see these as little businesses when I call it quantum startup physics versus Newtonian startup physics. You know, a business that is pre-product market fit What is it doing? What market is it in? What is it working on? You know, these, we don't have language for these very, very young businesses to understand their complexity and their ambiguity and their unknowability. So I think a little more off for the unknown, you know, for all of the people who invested in one business that only succeeded because it turned into something completely different. You know, I think respect for the unknown is the biggest thing that I think we're Um, we're missing as an industry, and curiosity is the way that I think you build more respect for the unknown.

AI assessment note: “we still believe at the very earliest stages that we know more than we can possibly know”

Q And how important then do you think open source will be in the progression of AI as this next generation software?

A I think that when you think about how The future of work is done generally, not just in software. Open source is probably the single most important new method that we as a, as a working culture have invented, period. Um, and let me describe why. One of the things I said earlier is we didn't like that VCs are secretive, and so we try to be the most transparent VC possible. You know, an early way we did that is we said we started writing up our kind of manual for how we would run the fund. You know, what investments would we make? How would we ask diligence questions? All this stuff. And then we decided to publish it, and then we thought, but if we're going to publish it, it's going to change a lot, and we're going to want to invite comments from the community, and it turns out if you want to have a business document that changes a lot in public and collaborates with outsiders and insiders to evolve it, open source actually tends to be a great way to do that, and so we published our manual to GitHub and released it under an open source license, um, and so not just in software and not just in machine intelligence, I think this, um, The open source idea is a very powerful model for interacting, as powerful as the line-managed corporation. Um, there are a lot of misunderstandings about it, but, um, but it can really work. And specifically in machine intelligence, yes, I think that w…

AI assessment note: “And specifically in machine intelligence, yes, I think that whenever developers have attention on an issue”

Q Now this was by no means part of the schedule, but you mentioned your investment in the Slack bot company, Howdy. So I have to ask, what use case do you think will be a sustainable million dollar business built on the platform through the medium? What will that first use case be or look like?

A Isn't that the million dollar literally question? I have no idea, and I don't want to have an idea about it, by which I mean to say I could bloviate and tell you, oh, I think it'll be task management or document retrieval or analytics or sales, but sort of like the early days of the software industry, it is too soon to see exactly how this will shake out. I mean, I think we tend to be obsessed with first in the technology industry, and first loses to best every time. You know, the first, um, iOS app companies were not the best iOS app companies, you know, platform after platform, and I think that's exactly what we're seeing here. What I'm excited by is the world is now a grand natural experiment where founders are just building all kinds of stuff, and as the founder of Howdy pointed out to me, Ben Brown, who's extraordinary, he said, you know, it's a different kind of developer that's building these tools. It's a developer that's more interested in Um, human-oriented design, uh, in, uh, the, the, the experience of it as opposed to the technology, and I think that's exciting because we'll have a wider range of businesses. I mean, one of the fascinating things to me about the startup world is how the nature of companies that get started is so similar to the communities that are starting companies. When you have a bunch of young people starting companies, of course, you know, food…

AI assessment note: “I have no idea, and I don't want to have an idea about it”

Q love that story. You said that about Ryan Peterson though. And so I do have to touch on that because when it comes to kind of successful founders, you know, Ryan and Flexport are the poster children. So I do want to touch on that. What have you seen happen to the most successful founders with And how is that maybe different to other people that you've worked with, Roy?

A Yeah. There's a myth that once the company starts working, you're on easy street. You can tap dance to the office and everything just unfolds so beautifully. My observation is that as companies become very successful and grow quickly, their founders go through some intense trials. The expectations keep going up. And I think about the growth of companies and Going through some of the folks that we've gotten to work with, like Daniela Perdomo from Gotenna, or Kieran Snyder and Jensen Harris at Textio, David Roger from Masterclass, I think you've had on. I mean, their jobs are really hard, and so there's this moment, or there are these moments, where founders of successful companies deserve even more care from those around them, and it's tough to get your head around it, because you think, well, these are, you just called poster children. These are the poster children, and it's True, but it can be really grueling, and so being aware of that, and not every founder goes through that, and different founders obviously have very different personalities, but part of our job, especially as it gets later, and we're no longer the biggest shareholder, there may be a board by that point, I mean, there usually is. Part of our job is to try to stay attuned for these moments where there's trial, and you know, one of my ways of thinking about it is, if you're gonna, if you're a founder, and you'…

AI assessment note: “as companies become very successful and grow quickly, their founders go through some intense trials.”