The Exchanges

Q Does the valuation play a very big role in whether you invest or not? Are you more just focused on, as I think Sheryl Sandberg said, taking a seat on the rocket ship?

A Yeah, I'm more focused on taking a seat on the rocket ship. Um, that said, generally, valuation doesn't play a role in my consideration, um, in terms of, do I feel like I'm getting a deal or not? Because value investing doesn't work in, in private company markets. Where it does play a role is that I try to identify opportunities that have a lot of appreciation potential. So, you know, if you expect that a lot of the investments you make are going to fail, Um, the other ones have to really make up for that loss and then some, right? You know, the, the rule of thumb here is you want to have at least a 10 X, you know, path to, uh, to, for the winners. And I think that's actually low, especially at the seed stage. I think at the seed stage, um, I really look for something that I expect could be, you know, explosive. I like the way Sam Altman put it, which is the best investors in the world lose, uh, lose all of their money most of the time. And, you know, very happily because they've made 10,000 X their money once or twice.

AI assessment note: “Yeah, I'm more focused on taking a seat on the rocket ship.”

Q And I'd love to dive into a quickfire round now. Sure. So your favorite book and why?

A Uh, my favorite book is probably, in terms of like, uh, frequent reference is probably Innovator's Dilemma. Yeah, I think it's just a, I think it's just a fantastic book. In terms of kind of my more personal life, uh, East of Eden is probably one of the most impactful books I read when I was like, 18 or 19, and just like a big, uh, uh, you know, the, the concept of having choice over, you know, how your life unfolds, I think is a big theme, an important theme, and Steinbeck's a great writer. Uh, yeah, I'm looking at my book, I'm looking at my bookcase right now, and like, you know, Foundation by Asimov jumps out, and Accelerando by Strauss jumps out.

AI assessment note: “my favorite book is probably, in terms of like, uh, frequent reference is probably Innovator's Dilemma”

Q In terms of all the eggs in one basket, where do you sit in terms of investor specialization? Do you, do you think it's beneficial for investors to specialize in, in either a funding stage, you know, pre-seed, pre-series A, or in a particular sector, or do you prefer a very diverse portfolio?

A Personally, I prefer a diverse portfolio. Um, I think the, uh, especially as you're learning something new, and I expect to be, you know, in this game, both as an entrepreneur and an investor for, you know, many more decades. Um, so particularly as you're learning, I think there's a lot of value in, in having a diverse base to learn from. I also think that if you're, you know, if one of the core competencies you have is in betting and good people, you may not always have a chance to bet in a great person in a seed round. But that great person, you know, that you see at the Series C or Series D even, um, might just be an obvious bet, right? So there have been investments I've made that are, you know, very, very high valuations, and there are investments that I've made that have been, you know, what is considered now to be an incredible discount by Silicon Valley terms, you know, uh, no, no product, no founding team track record, you know, all of that stuff, and it's a, you know, uh, you know, sub three million dollar valuation or something, which today is considered a discount. So I've got a, I've got a really broad, diverse portfolio. However, I do think that many people can be very successful with a very, um, uh, verticalized and specialized portfolio. So I think it's just a style question.

AI assessment note: “Personally, I prefer a diverse portfolio.”

Q And talking about the nine hands not working out on one, maybe working out out of the 10, that, that often relates to the portfolio, and, and when you look back at the investments you've made in your portfolio, do you think you have a founder type in, in terms of who you invest in, and if so, what is that?

A I do have a founder type that I invest in. Um, I want to invest in people who are uniquely insightful in the market that they're in, so they're discovering something that, that is just new, that the world Doesn't know before, at least that I didn't know before. I tend to like people that are, um, very smart, so I have a bit of a bias for, I don't know if there's an, if there's like an effect for it in Silicon Valley or an architect for it in Silicon Valley, but I tend to have a bias for people when I sit down and go, holy cow, that person's just very, very high IQ and very, very high octane in terms of his thinking, uh, his or her thinking. Um, and so I, that's an area where, you know, that I, honestly, I probably missed some good investments because of that. Um, because maybe there's somebody who just kind of understands their industry and, uh, is just going to kind of grind it out and maybe isn't the flashiest or the, doesn't appear to be the smartest person in the room. Um, but I just, I have a really big bias for people that I, that I think are just high octane. I think the reason behind that is I think it's very hard to kind of hang on and steer one of those rocket ships, uh, if you're not, you know, really flexible in that way.

AI assessment note: “I do have a founder type that I invest in.”

Q Does the valuation play a very big role in whether you invest or not? Are you more just focused on, as I think Sheryl Sandberg said, taking a seat on the rocket ship?

A Yeah, I'm more focused on taking a seat on the rocket ship. Um, that said, generally, valuation doesn't play a role in my consideration, um, in terms of, do I feel like I'm getting a deal or not? Because value investing doesn't work in, in private company markets. Where it does play a role is that I try to identify opportunities that have a lot of appreciation potential. So, you know, if you expect that a lot of the investments you make are going to fail, Um, the other ones have to really make up for that loss and then some, right? You know, the, the rule of thumb here is you want to have at least a 10 X, you know, path to, uh, to, for the winners. And I think that's actually low, especially at the seed stage. I think at the seed stage, um, I really look for something that I expect could be, you know, explosive. I like the way Sam Altman put it, which is the best investors in the world lose, uh, lose all of their money most of the time. And, you know, very happily because they've made 10,000 X their money once or twice.

AI assessment note: “valuation doesn't play a role in my consideration”

Q A controversial kind of Bone of contention in the industry relating to founders and experience. I'd love to hear your thoughts on it. Do you like founders with excessive domain experience in the field they're entering? Or do you see that actually as a hindrance as they know the pitfalls that could occur and are therefore overly cautious? Where do you sit on that dichotomy?

A Um, I, I think it's a false dichotomy. So I, I think that there's, there are incredibly talented people that have domain expertise. And there are people that have domain expertise, the expertise that just would be abject failures as entrepreneurs, or that maybe have learned all the wrong lessons and are unwilling to kind of push the envelope. Um, similarly, I've seen a lot of 20 year olds come in and tackle You know, some deep enterprise problem and just be completely flabbergasted at how to do it and take way too long to get to market because they don't have any experience what it's like to work in an enterprise. Um, and so that's a really big downside. At the same point, Aaron Levy didn't know anything about the enterprise before he started box. Um, and that worked out brilliantly well. So I think as a, as an investor, your job is to avoid taking a hard stance on anything that isn't, that is potentially more noise than signal. Because you, what you're looking for are outliers. So Aaron Levy is an outlier. Um, most of the people that don't have domain expertise fail, but also most of the people fail. So most of the people that do have domain expertise fail too. Um, so what you're looking for is outliers. So I try really hard not to take a hard stance on any one of these, this or that areas, because frankly, the vast majority of people in both camps are going to fail. And what …

AI assessment note: “I think it's a false dichotomy.”

Q And before we move into a quick fire round, I'd love to discuss the future of innovation, and it was a recent article of yours, and I absolutely loved it, um, but it's absolutely right, and so why do you believe that people are so negative on innovation and the future of innovation?

A Yeah, so I, I have a theory, I don't know if somebody else is, probably somebody smarter than me has, uh, has written an academic paper about this, but I have a general theory that the world is getting better, I'm optimistic, um, by nature. Um, and if you look at the data, you know, our world and data and all of those sources, uh, you can see, you know, crime rates are massively down, poverty is, is, you know, way down, et cetera, et cetera. Part of the reason all those things are, are, you know, moving in the right direction is because society is focusing on solving those problems more directly. And we have things like, you know, the 24 hour news cycle that highlights these things and, you know, makes them such a huge issue and gets people riled up and then the people Kind of push, you know, government or, or companies or whatever else to fix it. So you're ending up with, you know, again, much more attention focused on fixing humanity's big problems, um, which is fantastic. But the problem is the way that we get that attention focused on the problem is by scaring everyone and telling everyone how bad everything is and highlighting the worst possible things. So you get this kind of sunlight paradox, which is the way you, you cure darkness is by shining light on it. Um, but by shining light on it, you show everyone that the world is dark and people get very scared and very nervo…

AI assessment note: “we get that attention focused on the problem is by scaring everyone”

Q Absolutely. And you mentioned that lessons learned. When you, when you think back to when you started angel investing now, is there anything that you now know that you didn't know back then and you would like to impart on a, on a first time angel or yourself starting out?

A Yeah, there's, there's a few things. Uh, One of which is probably, ah, it's good to start slow. Um, if you think of this as a, ah, 20 year game that you're in, the first couple of years are, are business school. And, you know, the third or fourth year is when you start actually, ah, having some of the lessons. So I think, you know, go slow early on, you know, find mentors you can learn from. So one of the things that I did when I started investing is I interviewed, you know, dozens of people that were successful angel investors. Privately. Like, I reached out and said, hey, can I pick your brain? Or I caught them at an event. You know, I was like the annoying guy that, you know, grabbed them after they were on stage and said, hey, I need five minutes of your time. Like, walk me through some stuff. And, uh, and so I think the more you can do that, the better.

AI assessment note: “One of which is probably, ah, it's good to start slow.”

Q In terms of all the eggs in one basket, where do you sit in terms of investor specialization? Do you, do you think it's beneficial for investors to specialize in, in either a funding stage, you know, pre-seed, pre-series A, or in a particular sector, or do you prefer a very diverse portfolio?

A Personally, I prefer a diverse portfolio. Um, I think the, uh, especially as you're learning something new, and I expect to be, you know, in this game, both as an entrepreneur and an investor for, you know, many more decades. Um, so particularly as you're learning, I think there's a lot of value in, in having a diverse base to learn from. I also think that if you're, you know, if one of the core competencies you have is in betting and good people, you may not always have a chance to bet in a great person in a seed round. But that great person, you know, that you see at the Series C or Series D even, um, might just be an obvious bet, right? So there have been investments I've made that are, you know, very, very high valuations, and there are investments that I've made that have been, you know, what is considered now to be an incredible discount by Silicon Valley terms, you know, uh, no, no product, no founding team track record, you know, all of that stuff, and it's a, you know, uh, you know, sub three million dollar valuation or something, which today is considered a discount. So I've got a, I've got a really broad, diverse portfolio. However, I do think that many people can be very successful with a very, um, uh, verticalized and specialized portfolio. So I think it's just a style question.

AI assessment note: “Personally, I prefer a diverse portfolio.”

Q A controversial kind of Bone of contention in the industry relating to founders and experience. I'd love to hear your thoughts on it. Do you like founders with excessive domain experience in the field they're entering? Or do you see that actually as a hindrance as they know the pitfalls that could occur and are therefore overly cautious? Where do you sit on that dichotomy?

A Um, I, I think it's a false dichotomy. So I, I think that there's, there are incredibly talented people that have domain expertise. And there are people that have domain expertise, the expertise that just would be abject failures as entrepreneurs, or that maybe have learned all the wrong lessons and are unwilling to kind of push the envelope. Um, similarly, I've seen a lot of 20 year olds come in and tackle You know, some deep enterprise problem and just be completely flabbergasted at how to do it and take way too long to get to market because they don't have any experience what it's like to work in an enterprise. Um, and so that's a really big downside. At the same point, Aaron Levy didn't know anything about the enterprise before he started box. Um, and that worked out brilliantly well. So I think as a, as an investor, your job is to avoid taking a hard stance on anything that isn't, that is potentially more noise than signal. Because you, what you're looking for are outliers. So Aaron Levy is an outlier. Um, most of the people that don't have domain expertise fail, but also most of the people fail. So most of the people that do have domain expertise fail too. Um, so what you're looking for is outliers. So I try really hard not to take a hard stance on any one of these, this or that areas, because frankly, the vast majority of people in both camps are going to fail. And what …

AI assessment note: “I think it's a false dichotomy.”

Q Absolutely. And you mentioned that lessons learned. When you, when you think back to when you started angel investing now, is there anything that you now know that you didn't know back then and you would like to impart on a, on a first time angel or yourself starting out?

A Yeah, there's, there's a few things. Uh, One of which is probably, ah, it's good to start slow. Um, if you think of this as a, ah, 20 year game that you're in, the first couple of years are, are business school. And, you know, the third or fourth year is when you start actually, ah, having some of the lessons. So I think, you know, go slow early on, you know, find mentors you can learn from. So one of the things that I did when I started investing is I interviewed, you know, dozens of people that were successful angel investors. Privately. Like, I reached out and said, hey, can I pick your brain? Or I caught them at an event. You know, I was like the annoying guy that, you know, grabbed them after they were on stage and said, hey, I need five minutes of your time. Like, walk me through some stuff. And, uh, and so I think the more you can do that, the better.

AI assessment note: “One of which is probably, ah, it's good to start slow.”

Q And talking about the nine hands not working out on one, maybe working out out of the 10, that, that often relates to the portfolio, and, and when you look back at the investments you've made in your portfolio, do you think you have a founder type in, in terms of who you invest in, and if so, what is that?

A I do have a founder type that I invest in. Um, I want to invest in people who are uniquely insightful in the market that they're in, so they're discovering something that, that is just new, that the world Doesn't know before, at least that I didn't know before. I tend to like people that are, um, very smart, so I have a bit of a bias for, I don't know if there's an, if there's like an effect for it in Silicon Valley or an architect for it in Silicon Valley, but I tend to have a bias for people when I sit down and go, holy cow, that person's just very, very high IQ and very, very high octane in terms of his thinking, uh, his or her thinking. Um, and so I, that's an area where, you know, that I, honestly, I probably missed some good investments because of that. Um, because maybe there's somebody who just kind of understands their industry and, uh, is just going to kind of grind it out and maybe isn't the flashiest or the, doesn't appear to be the smartest person in the room. Um, but I just, I have a really big bias for people that I, that I think are just high octane. I think the reason behind that is I think it's very hard to kind of hang on and steer one of those rocket ships, uh, if you're not, you know, really flexible in that way.

AI assessment note: “I do have a founder type that I invest in.”

Q is a very special feature week, um, with Ariel's show, uh, on Monday. And, and you had the chance to ask Ariel some questions. So I let her turn the tables and Ariel's now suggested some for you. And so one of them is what aspects of a startup and founder are essential for you pre-investment compared to elements that you think can be tweaked later on down the line?

A You know, I think this has changed as I've gone through investing. I now think there are a lot of things that can't really be tweaked by the investor. I view my role as to be, uh, as supportive as I possibly can and to give advice and feedback. Um, but ultimately it's the entrepreneur that does, you know, 99.99999% of the work. Uh, now if you're, you know, able to provide even just .1% of value to Uber, uh, That's a very valuable contribution, and you get compensated for it, uh, you know, in the stock that you, uh, you've bought. Um, so I think angel investors and VCs can be very important, can be very valuable, but I don't think they do much of the work, and I really don't think they can save, uh, a ship from going off the wrong course. Um, especially not angel investors when you're not on the board, and you're not, you know, looking at, uh, you know, management inside of the company, right? Um, so I have to really believe in the person before I invest. Um, I'm happy with them. But the other thing I want to keep in mind is that Zuckerberg didn't look like the Zuckerberg of today in 2004. And, you know, I, I know many people that got, you know, I was an angel investing then. I know many people that got that, uh, that investment pitch in 2004 and thought this kid's a joke. No way. You know, that was obviously a massive mistake. Larry and Sergey didn't look like the Larry and Ser…

AI assessment note: “I now think there are a lot of things that can't really be tweaked”

Q Was it YC? It was YC, wasn't it?

A Yeah, it was YC, uh, a couple batches ago. The company is run by an absolutely incredible founder. One of those people, um, who I met and just said, holy smokes, like you're going to figure everything out. She's just incredible. Um, so I think the, you know, a lot of it was like, I believe in this person. Um, again, you know, even if you don't know it all today, you're going to figure it out soon. Uh, probably at a, at a, at a higher rate of learning than the vast majority of your peers. So I just got really like, you know, I think the founder is incredible. Um, I think the mission of the company is great. I think you're actually seeing a lot of people, you know, I think you're seeing a lot of underserved markets finally getting served, you know, um, Walker and co, um, you know, creating, uh, you know, razor blades and shaving equipment and now, uh, clippers and these types of things.

AI assessment note: “Yeah, it was YC, uh, a couple batches ago.”

Q is a very special feature week, um, with Ariel's show, uh, on Monday. And, and you had the chance to ask Ariel some questions. So I let her turn the tables and Ariel's now suggested some for you. And so one of them is what aspects of a startup and founder are essential for you pre-investment compared to elements that you think can be tweaked later on down the line?

A You know, I think this has changed as I've gone through investing. I now think there are a lot of things that can't really be tweaked by the investor. I view my role as to be, uh, as supportive as I possibly can and to give advice and feedback. Um, but ultimately it's the entrepreneur that does, you know, 99.99999% of the work. Uh, now if you're, you know, able to provide even just .1% of value to Uber, uh, That's a very valuable contribution, and you get compensated for it, uh, you know, in the stock that you, uh, you've bought. Um, so I think angel investors and VCs can be very important, can be very valuable, but I don't think they do much of the work, and I really don't think they can save, uh, a ship from going off the wrong course. Um, especially not angel investors when you're not on the board, and you're not, you know, looking at, uh, you know, management inside of the company, right? Um, so I have to really believe in the person before I invest. Um, I'm happy with them. But the other thing I want to keep in mind is that Zuckerberg didn't look like the Zuckerberg of today in 2004. And, you know, I, I know many people that got, you know, I was an angel investing then. I know many people that got that, uh, that investment pitch in 2004 and thought this kid's a joke. No way. You know, that was obviously a massive mistake. Larry and Sergey didn't look like the Larry and Ser…

AI assessment note: “I have to really believe in the person before I invest.”