This Week in Startups: State of early-stage VC, finding PMF, Caroline Ellison testifies & more with Zach Coelius | E1826

you got a space, you got customers walking by,

you start with the sandwich shop.

Eh, you know, nobody really likes your sandwiches.

But everybody talks about the ice cream sundae at the end.

And it's just because you made some really unique sundae

and then people start coming in just for the sundae.

You know, hey, want a sandwich?

They're like, no, I'm just gonna go right for the sundae.

And I brought my kid with me.

Oh, and I brought my co-worker.

So wow, what's unique about this sundae here?

Okay, let's put three Sundays on

and let's change the name of the place

from, you know, Zach and Jason's sandwich shop

to Zach and Jason's Sundays.

And then all of a sudden you do this like minor pivot

just based on the feedback.

And now you're running a sundae shop.

Now, if you were the investor and you got sold on,

hey, this is the best brisket sandwich you could ever have.

This is the best, you know, Reuben in the world.

And you come back and say, hey,

we're making an ice cream parlor.

You're like, what?

I didn't invest in an ice cream parlor.

But if you come back and you say, look,

the ice cream sundaes, we charge eight bucks for them,

cost us three, and we're printing money.

And we sold a hundred of them yesterday.

And guess what?

We're certainly find ourselves profitable.

We can pay our rent.

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All right, everybody.

Welcome back to this week in startup today.

My guy, Zach Coleus is back

for another exciting episode of Ask an Angel.

Now, well, we're both VCs really,

but we started as angels.

We write early stage checks.

What is early stage?

I think we would define it, Zach,

you correct me if I'm wrong, as pre-series A.

Those, that would be the earliest seed stage.

We're in agreement there?

Yeah, yeah, from the very beginning,

from an idea all the way up to the point

where the line starts to extend

and any ADA can extend the lines.

If you got six months of month over month growth

and all the metrics that the VCs love to see,

then they'll hit that bid.

But before that, come talk to us.

Yeah, and we would call this starting point.

What are the characteristics of the startups

in the zone where you and I invest this early stage?

What would you say is most characteristic

of the work that gets done during that period

and the startups who make it out of that period?

Yeah, so I tend to think of it as three sort of stages

in the early stage, quote unquote.

You've got sort of what traditionally is called pre-seed

or concept stage or idea stage

or sort of like it's just getting started.

And so that's where the founders are largely able,

if they're able, they raise money from people they know,

people who have learned and watched them over the years

and seeing that they have the ability to perform

and succeed and if they're successful,

then people are very happy to give them capital

because they've done it before.

Sometimes other people we know because they're famous.

So, you know, if Travis was to go start another company,

you and I would be running up there

and be like, hey, hey, hey, please let us invest.

Yeah, some of those people are not famous,

but we know them because we spend a lot of time

with entrepreneurs and we get to see them in the trenches,

in the arena fighting it out.

And, you know, it's easy to bet on those people

if you know them.

So that's phase one.

Phase one is you got an idea and you pass the hat

with your friends and family,

thus the term friends and family around.

Yeah, yeah.

And there are some investors who invest at that stage

from institutional funds or from their own capital.

And even if they don't know you,

you know, one of the most well-known

is a guy named Charles Hudson, a precursor.

So he started doing this super early,

long time ago, when everyone thought he was crazy

and he would write relatively small checks

into lots of startups.

And the idea being, oh, if you invest in enough of them,

some of them will break out and then, you know,

power law being power law, that will return the fund.

And, but traditionally-

I think that's worked out for Charles,

who's been on the program many times, yeah.

Yeah, yeah, Charles is brilliant.

He does good work.

So it's not surprising he's done very well.

Yeah.

All right, phase two.

You got the friends and family pass the hat phase.

You got an idea.

You're in the ideation.

You know, you've got an idea of a market.

What's the next phase in this early stage?

So there were three phases.

So that's what we would call our sort of like

pre-seat traditionally.

Now we're into seed stage.

So seed stage means you have some MVP,

you have metrics, you have validation,

which is like, hey, I've got this idea

and I went to the market

and I figured out if it was any good or not.

Here's my channel.

For instance, I've gone and done marketing tests

to see that, hey, I can acquire customers

and people actually want this thing,

but we don't have any metrics yet.

Like we still, and the MVP maybe works,

maybe you've made it in, you know,

who knows how you made it.

It's not a scalable product,

but it appears that there is a real thing here

that customers want and it appears that we can scale this.

And there's a big, big TAM, big market opportunity,

all the things that seem good, look good, smell good.

Now we've got a potential VC investable opportunity here.

The one thing that you don't have usually at this point

is you don't have significant revenue.

So you're not looking at hundreds of thousands

or millions of dollars in revenue.

You've got something in revenue,

but probably maybe not very much.

You don't have month over month growth rates

and you don't have the core metrics

that most VCs are really interested in,

which is things like retention and churn

and the virality of your product and your CAC LTV

and all the things that, you know,

if you go and spend a lot of time looking at VC metrics,

they're all, they're all at this long list.

You don't have any of those,

but you do have something that seems like it's pretty good.

And this is what we'd normally call the seed stage.

And it's pretty big category.

It's, it can, and the checks there can run anywhere

from hundreds of thousands to millions of dollars

from investors.

Got it.

So phase one, you're doing ideation.

You're raising from friends and family.

Phase two, you're raising from seed funds.

You have an MVP, a minimum viable product, a prototype.

Some people have played with it.

You have an idea of how you're gonna reach them.

That was the channel.

So you got the MVP, you got the channel.

Channel just, hey, where's this stream of users

gonna flow from?

Could be from a forum like Reddit.

It could be from a mailing list.

It could be from a podcast.

It could be from Instagram ads.

It could be from Facebook ads.

Any number of places could be your funnel.

And you do have maybe not the full complement of metrics,

but you may have 10 people using the product

and you can study three of them.

And so you have some idea of how big this could get,

what it is, and how do people like it.

So it's not strong product market fit.

It's not market pull, of course,

where the market is seeking you out,

but it's something that's more than nothing.

Yes, yeah, yeah.

Okay, so now the third phase.

You said there were three phases in the early stage

that you look at broadly.

The third stage is what we would normally call

seed plus or seed extension.

And so what happens here, and this is very, very common,

is a startup will raise some money,

they'll go into the market,

they'll make contact with the market

and the market will rip their face off.

Like, yeah, great, I had this awesome idea.

I went and I built something and it didn't work.

And not only did it not work, I got my ass handed to me.

And most founders quit at that point.

A few, the ones that I really like,

they take that opportunity to look at what they've learned,

they look at what the market is telling them,

and they iterate.

They're like, oh, well, it turns out

that they don't want this game that I built,

but this chat program I built to help me build the game,

everybody loves that.

I wanna start working on that.

And that iteration cycle is messy.

And most investors get really skittish

in that sort of iteration cycle,

because the companies that are flailing

look very similar to the companies

that are doing good things.

And so usually your insiders are the only investors

who wanna invest in you,

or occasionally you get outside investors

who get comfortable in that iteration cycle.

But that iteration cycle is usually

where the most magic things happen.

Because when you make contact with the market,

very rarely does the company just go up and to the right

and lock off we go.

Like the first original idea was brilliant

and everything else is good to go from there.

Like for instance, in the video game

turning into the chat, that's Slack.

And it was Twitter, that was a podcasting

that turned into Twitter.

So those iterations are magical.

And there's often, in my opinion,

great opportunities there,

both as an investor and for the entrepreneurs,

when they can learn from making contact

with the market about what the market really wants,

and then they can go build something

that people actually really want.

And then boom, you're off to the races hopefully.

If you find that.

And so what I like to say is,

that moment is the moment

where you have real product market fit.

And by product market fit,

I mean you can cold call a customer at nine o'clock at night

on her cell phone while she's putting her kid to bed,

describe what you do in one sentence.

And instead of her saying,

you why are you calling me?

She's like, oh my God, I need to talk to you tomorrow.

I actually need that.

I want that.

That's like, yes, please.

And that's that product market fit is like,

we could talk about that for hours,

but that's a magical moment.

And I get really excited when I find companies have that.

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And a lot of founders give up.

They try one thing and they give up.

And this is why I think part of the magic

of the early stage is when you have builder founders,

a developer, a designer, and a growth hacker

walk into a startup.

That compliment, they run out of capital

or they're on fumes.

But they're still iterating on the product.

So hey, listen, if we were gonna use an analogy here

of a restaurant, you got a space,

you got customers walking by,

you start with the sandwich shop.

Eh, nobody really likes your sandwiches.

But everybody talks about the ice cream sundae at the end.

And it's just because you made some really unique sundae

and then people start coming in just for the sundae.

Hey, want a sandwich?

They're like, no, I'm just gonna go right for the sundae.

And I brought my kid with me.

Oh, and I brought my co-worker.

So wow, what's unique about this sundae here?

Okay, let's put three Sundays on

and let's change the name of the place from,

you know, Zach and Jason's sandwich shop

to Zach and Jason's Sundays.

And then all of a sudden you do this like minor pivot

just based on the feedback.

And now you're running a sundae shop.

Now, if you were the investor and you got sold on,

hey, this is the best brisket sandwich you could ever have.

This is the best, you know, Reuben in the world.

And you come back and say, hey,

we're making an ice cream parlor.

You're like, what?

I didn't invest in an ice cream parlor.

But if you come back and you say,

look, the ice cream sundaes, we charge eight bucks for them,

cost us three, and we're printing money.

And we sold a hundred of them yesterday.

And guess what?

We're certainly find ourselves profitable.

We can pay our rent.

Now you got the mad, right?

So just keep that in mind, folks.

I think if you figure something out

and you're actually the chef's yourself,

as opposed to just an idea person who has to hire a chef,

you're gonna go a lot further.

So watch the TV show, The Bear.

Great show for entrepreneurship.

All right, let's get to some questions here.

I think it's a really good overview.

And this all, this is the suffering

that we go through with startups.

After you have product market fit

and that the sundaes are flying out the front door

and you gotta line around the corner,

then you need operators, you need to scale it.

You gotta figure out a way to get from a thousand to,

you know, from a hundred to a thousand.

And you gotta figure it from one location to 10, yada, yada.

So, and there are people who have expertise in that.

That's typically when a series A happens.

So let's talk about the state right now.

The state of fundraising, I can tell you.

Zach being out there on the road raising our fourth fund

and we're halfway done with it.

And we'll finish up by the end of the year.

I think we'll be over subscribed again.

But boy, is this a lot more work than previous times.

So maybe you could explain to the audience

what is going on right now in the underbelly,

the plumbing, the back rooms of the venture industry

where limited partners, the people who give money

to general partners, you know, venture firms,

limited partners can take the form

of high net worth individuals, fund of funds,

endowments, sovereign wealth funds, et cetera.

Those LPs and that GP relationship,

those, there's some texture there going on right now.

And then of course, there's what our GP's doing

at venture firms in terms of investing in startups.

Give us the back channel.

What's going on in the back room right now

as you say, Zach, call us.

Yeah, I mean, so the big TLDRs,

everyone got drunk when interest rates were zero

and everything went to the moon.

I mean, any idiot with a checkbook in our job,

literally any idiot in a checkbook

looked like a genius, a genius for almost a decade.

From effectively from 2012 to 2022, everything went up.

So like over those years,

it was like 50% compounding IRR every year,

everything going up, everybody's super duper smart.

And the LPs looked at that and they're like,

look at us, we're geniuses.

We invested in all this venture capital

and look at it go up.

And if you look back a couple of years ago,

there were LPs releasing returns

from their venture portfolios that were just unbelievable.

I mean, it was like, I think MIT was releasing a 50%

plus IRR for their entire portfolio,

largely driven by venture and other things.

But at the end of the day, Zerp zero interest rates

basically drove everything to the moon.

And so like, for instance, I invested over those years

in almost 80 companies

and we only had two go bankrupt in all those years.

So preceding, very strange and like,

and that wasn't cause I was smart.

It was just cause everything got funded again

and again and again and again.

And everything went up and every company had growth.

And it was just like, it was amazing.

It was, it was, there's a funny, it used to be in,

there was a bumper sticker you'd see around San Francisco

in the valley every now and then they would say,

please God, just one more bubble.

And they were referring to the 2000 bubble

and they just wanted to have one

cause it was so good back then.

And now, now we like, it's like,

oh, please God, one more Zerp.

That was, it was like too easy.

It was a weird experience, I have to say.

The lack of shutdowns was always a red flag to me.

And I had many a conversation with founders who,

you know, we said, hey, third, fourth pivot,

big overhang, you've raised a bunch of money,

lots of dilution on the cap table.

You know, maybe after this pivot,

we sell the company or shut it down

and then take a break and go work somewhere

or let's work on our next idea

because there's no way to get over this overhang.

You raised 20 million, you raised 10 million,

no product market fit, it's not working.

And sure enough, there was always another investor,

sometimes a new investor who those founders

who got really good at selling vision

could get to put the incremental million dollar,

two million dollar bridge into.

And in fact, a lot of those companies

maybe should have shut down, it would have been healthier,

but they were able to hang on, but yeah, 2022, 2023,

I'm assuming the two out of 80 changed to 10 or 20 out of 80.

You know, for me, I haven't, I haven't,

we haven't lost one yet, but I mean, God,

we are dancing through a stream of bullets.

I mean, I had a company go through a fundraise

where literally we like, we were ready to do the shutdown,

we went out and like, we did the soft landing attempts,

which none of them, normally we would have had

a whole bunch of yeses and like in this environment,

like nobody wanted to talk to this company.

I mean, it was like full.

Explain the soft landing that we talk about

in the industry, explain what a soft landing is.

Yeah, so what happens with a quote unquote soft landing

is when a company is getting ready to hit the wall

and you know, the product is not working

and the team is tired and the investors are tired

and we're ready to, we're ready to shut this company down.

Usually we have some sort of asset that has built up.

They could be customers, they could be a product,

they could be just a team, they could be knowledge

about how to build a particular thing,

but usually there's some value in that entity

that has accumulated over time.

And you know, historically,

all the way up until the last couple of years,

because tech companies, the big fangs of the world

were growing so rapidly and then all the baby tech companies

that were trying to become fangs were growing so rapidly,

they were always excited to acquire these small startups

because you could get team, you could get tech,

you could get IP, you could get customers,

there's things you could get out of these.

And so we would go to them with a startup

and be like, hey, we got this startup,

it's got 10 engineers, 20 people in total,

they've raised, you know, call it $7 million.

And one of these big companies would buy the company

and usually pay off the investors

so that the investors made some money out of the deal

and got their money back.

Usually you didn't make any money,

but you got your money back.

And then the founders and the team would get a job

going to work for the big company.

So this is traditional, we call it Aquahire.

And I mean, for many years, it was really easy to do.

And we've, I've sold, in my portfolio,

we've sold I think about 15 companies

of the companies we've invested in.

And-

But everybody saves face, it's a nice ending.

The founders can take a win, you know,

sometimes these acquisitions and Aquahires happen

and the investors get nothing

where they get like 10 cents on the dollar.

But, you know, oh, it gets an incredible tech crunch.

Oh, this company's been acquired.

Yeah.

And, you know, we know the truth on the inside,

that was a terrible sale.

To even qualify it as a sale would be dishonest

in some cases, it was a soft landing.

And so, you know, we try to be de minimis in the industry,

I'm sorry, we try to be magnanimous in the industry.

You know, there's no reason to like be like,

oh, wow, this failed or, oh, wow,

you returned two cents on the dollar,

you lost 98 cents on the dollar.

It was, hey, you made an effort.

Hey, you wound up at Google or Facebook

or some other company and, you know, yeah,

we'll see you on the other side

when you come up with your next idea.

Yeah.

But now people are not interested in doing that.

I think in large part because they've laid off 20,000 people

at Google, Facebook, Microsoft,

picked the company sales for us.

They've laid off 10 or 20,000 people.

The idea of going even through the legal of transaction

to bring in, you know, a 10-person team,

a 20-person team, a six-person team,

the juice, it worth the squeeze

because they got a line of people out the door

that they could hire or rehire a boomerang.

So that is the issue as you see it as well, I guess.

Yeah, I mean, it's the sort of Aquahire soft landing market

is, you know, a fraction of what it used to be.

It still happens in the case of

if you built something that's very strategic

and there's a partner who really wants that, you know,

you know, those things do happen,

but, you know, it's not like it used to be.

It's become very challenging to say the least.

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Oh, what a great product.

All right, so let's do a couple of questions here.

How do you describe PMF, product market fit

in the simplest terms possible?

You had a great analogy earlier.

They said, hey, you call this person on a Sunday

and they have no time for you.

They're kid screaming, but they still say, hey, listen,

I don't want to forget this.

Can you email me and send me a calendar invite for tomorrow?

Yeah.

That was a really beautiful description of it.

Let's unpack it a little bit more here.

What else is a good sign that you have product market fit?

So I mean, think back to like when Travis started Uber.

Like, you know, he and I, we were at this party.

They hadn't even started Uber yet and we were at a party

and he told me about it and I was like, oh my God,

push a button, get a car.

Oh my God.

I don't want that so bad.

But then, you know, given how brilliant I am,

I convinced to argue with him for two hours

about why I wouldn't work.

I was like, dude, the taxi lobby's gonna crush you.

They're big, blah, blah, blah, blah.

He's like, I'm a fighter.

I can beat them.

And I mean, I wasn't investing then.

So I don't know what I would have done,

but given the fact that I told him that it was a bad idea,

I probably wouldn't have invested.

So I'm kind of an idiot.

Well, you had cognitive dissonance actually.

So let's pause there for a second.

And this is important for people to understand

who are angel investors or parts of syndicates

or who are on the other side of the table and founders.

A lot of times the best ideas can be polarizing

and you could have conflicting ideas.

One, regulation.

You identified their number one headwind.

It is regulation.

The number one reason it's awesome

is because you wanted it.

You yourself could see using it.

You understood the problem.

So then we're left as investors

or people looking to work at these companies

or founders looking to pivot to say,

hey, is it worth taking on that battle?

Do I want to spend the time to try to solve that problem?

Startups at their core are a series of problems to be solved.

Whether the problem is this product doesn't exist

and I have to write the code

or nobody's ever used a product like this.

So I've got to convince them to try it.

There's all these series of things.

And so that is part of the process.

So I think you did the right thing by identifying those,

but you don't want to overindex on negativity I've learned.

Because a 1% chance at a 5,000 X return

is worth taking implied odds wise, you know?

Let's talk about product market fit.

The one I love most is when somebody who has the product

in a company starts telling other people

in the company about it.

This could be called word of mouth in net promoter.

This could be a promoter as opposed to a detractor

or an indifferent person.

So one way you know you have this

is when people come and start using your product

and you ask them, how did you find out about the product?

If word of mouth is in there, a friend told me,

a colleague told me, my Lord, you've done it.

You've done it.

That is product market fit.

When somebody tells another person to use it,

they use it and they become a customer.

That's it, baby.

That's as good as it gets in my mind

because now your product is growing

while you're asleep and doing nothing.

Like literally your product's growing.

Other signs for you of product market fit

starting to collect things you've actually seen

in the real world where you said,

ah, there's something that's happening here.

That really nails the core of it,

which is when the market starts pulling the product out of you

and needing and wanting the product more

and you are no longer pushing.

When you're no longer having to go out there

and bang on heads and spend a lot of time

trying to convince people to use your product,

but people instead are sending you long emails

about all the things that are wrong with your product

and what they would like you to fix

and how they'd like you to prove it.

And the word of mouth is happening

and all of a sudden there starts to be

this sort of like movement around what you've built.

Then you know, like for instance,

I'll give you a good example.

I invest a long time ago in this thing called Mudwater,

which is a mushroom tea company.

Yes, fantastic product.

It's an unbelievable product

if you want to quit drinking coffee.

Now for many, many years, I've been a coffee drinker

and so like, I'm like, I love it,

but I don't drink coffee.

And then recently I decided to try

to stop quit drinking coffee to see what happened.

And oh my God, Mudwater, it's like magic.

When it comes to like, when I'm really needing coffee,

I have a mud instead and like, it totally solves the problem.

And like that, that's when we get to product market fit

is when you have those sort of magic moments.

And we saw that early on when we invested in the company,

it was like, the company was just like,

it was just growing like crazy.

And the word of mouth was happening

and people were like, I'm so excited about this.

And it was like, that's just magic.

There's fireworks everywhere.

Now what isn't product market fit,

I think is equally as important.

And one thing I will tell you is not product market fit

is you ask your friends or you ask VCs

or you ask civilians about your product,

they give you feedback, they tell you it's amazing.

They tell you it's great.

They tell you all these ideas for your product.

The reason why that's super dangerous

is you've manufactured that feedback.

That's not feedback that's unsolicited,

that is solicited feedback.

When you explicitly start asking people

to give you feedback on your product,

you're giving them permission and people are gracious,

people generally speaking are rooting for entrepreneurs,

they're rooting for underdogs.

So they're gonna give you a bunch of feedback,

but if they don't actually use your product,

what good is their feedback?

I'm not a couch surfing person.

So when Airbnb and the 1.0 came out,

I had a lot of feelings on it.

I was like, this is crazy.

You're gonna wind up on a serial killer's couch.

My, as a 40 year old at the time,

my feedback as a 40 year old

who could afford to stay in hotels

and liked room service and like,

I don't know, fancy, but nicer hotels and nice linens

and had a whole list of things was not pertinent.

Yeah, yeah.

The 25 year old JTOW would have been like,

you know what, I couldn't afford a hotel in Tokyo.

I would have stayed for 10 days.

I would have worked out of there if possible.

This would have opened up a world of possibilities

because I didn't wanna stay in the hostel,

but I would have stayed in an extra bedroom short.

So make sure that the feedback you're getting.

Now Airbnb today, where they have full houses

and I like to bring a family or maybe two families,

bring my sister-in-law or my brother and their family

and you have two families staying at a house.

I have a long list of things.

Yes, washer and dryer is important.

Yes, pre-ordering food, having a barbecue,

all that stuff is great, having kid's toys, whatever.

I have a list of feedback for when I'm there

with multiple families at a house when I'm traveling

that I would love to give and that's valid feedback.

So just make sure you're not getting silly feedback.

The feedback from customers who pay is so important,

especially when they churn.

And so just be careful

that you're not manufacturing product market fit.

I'll leave it at that, okay.

Let's take another question from our audience.

How hard is it for first-time founder to raise pre-seed

any advice to help it or what to wait for?

I'm gonna say, hey, what to wait for as in,

what could improve about your startup?

That would increase your chances.

So let's take it first.

How hard is it to raise pre-seed?

I mean, it really depends on who you know

and how much they trust you

and how much they believe in you.

So if you're the son of a billionaire,

you know somebody rich, it's probably pretty easy.

If you're growing up in a community

that doesn't have access to money

and you don't know a lot of people have access to money,

it becomes a lot harder.

And so if you have to move beyond the people who know you

and you don't know people who have the ability to write checks

to help you get the thing off the ground,

it becomes much, much harder.

And what I like to say is is that ideas are worthless.

So you have an idea, so does everybody else.

It doesn't mean anything.

Validated ideas are priceless.

And so what that means is that if you can show

that that idea could work,

that people want the product,

that you actually have a channel,

that you actually can build it.

If you can demonstrate that this thing is real

and can be big, suddenly you move from something

which is like everybody has an idea

and the hundreds of emails I get every day

from people who have ideas or trying to raise money

and I just hit archive, archive, archive.

But it doesn't matter.

You move from that category to suddenly

to a category of viability

and potentially something that could raise money

from people who don't know you.

Then you kind of broken into that.

But even still, super-duper hard

because there's a whole series of challenges

to get in front of someone like Jason,

get in front of someone like me,

to get into Y Combinator,

to get into any of the other great accelerators

are out there to find people to invest in you.

Like you need to prepare for a full-time job of hustling.

Hustling is harder than you've ever hustled before.

And even then, it could take a very long time.

So like when I, my last company,

it took, we raised $15,000 in the first year.

So from the first year of operation,

we had $15,000.

From one person or two people, three people, five page.

A couple people, a couple small angels and that,

but that kept us alive.

Yeah, so let's pause for a second here.

On raising money, this is a really great insight.

The majority of people do not have a rich network.

So we'll just put it at that, right?

6% of the country are accredited investors

who are legally allowed to invest in private companies.

Now, of course, in the most private friends and family,

people raise money from non-accredited.

So we'll put that aside for now, the legal issues around it.

So, you know, talk about 90% of the company, let's say,

is never invested in a small business,

whether it's a deli or, you know, Airbnb.

So I think going through a test,

who are the 10 wealthiest people you know in your network?

And just emailing them and asking them

or asking them over text.

I'm starting a company.

I have two quick questions for you.

One, have you ever invested in a startup before

or a small business?

Number two, if no, would you consider it?

And just quickly assessing.

And you can tell them, because I'm starting a company,

I just wanted to pitch you on it.

And it's fine to say no.

And so you just get that really quick.

And if one and two are 10 out of 10,

have never done it before,

I think you've got the answer.

They've never done it.

You might be able to convince them to,

but yeah, it's gonna be hard.

If nine out of 10 say, yeah, of course,

I've invested in three or four companies.

And yeah, sure, I'd love to hear your pitch.

Now you know your network is a network

with people in it who do this.

So just run a little A-B test.

To your point about validation,

the more validated you get,

the more credibility you have,

the easier it is to start meeting investors,

angel investors in a Silicon Valley.

So if you have a hundred hours of work

that you can do in the next month, right?

Let's say you're doing this on the weekends.

How would you allocate those hundred hours acts

to validating your product, your thesis,

building out your MVP, or reaching out to investors?

Let's say you have nothing right now but an idea.

Month one, two, and three, you have a hundred hours of work.

I'm only spending hours validating.

Yeah, a hundred percent.

I'm not even spending time working on my idea

until I've validated that people actually want it.

For example, here's a good way to validate it.

Let's say you're building a consumer product.

Let's say you're just building any product.

You go onto Google and you find the keywords

that people would search for your product.

So let's say you're building a new AI video tool

to help parents do cool stuff.

And you go in there and you figure out

what people would type into Google,

because people type everything into Google

to search for that.

And you make an ad for what you're making for them,

what you hope to make for them.

And then you put that ad into Google

and you write the ad for why it works.

And then you make a landing page that says,

coming soon would you like to get on the invite list,

submit your email address.

And then they submit their email address

and then the next page or the next panel is like,

oh, why do you want this?

What's important to you?

And then you just keep asking them questions

until you start noticing them falling off.

And you spend some little bit of money on that.

And boom, you're very quickly gonna realize,

do people click on the first ad?

Because if they don't want it,

they're not gonna click on it.

If they really want it really bad,

they're gonna click, click, click, click, click.

You're gonna have a high CTR

and you're gonna have something really, really viable.

Do they submit the email address?

Do they leave comments?

Like that so quickly will prove

that people wonder about it.

A classic landing page technique

that takes a day of work.

Five hours.

Nobody does it.

Nobody does it.

I see zero startups that come in when they're pitching.

They're like, oh, here's our landing page technique approach.

Here's the outcomes and here's the metrics.

And I'm like, they never do it.

And here I typed in AI tool, video tool,

the auto correct or auto suggests on Google,

added the word free.

So I thought I'd add that.

Sure.

And to your point, the first sponsored ad is from Vimeo.

This product actually exists.

Then one from Adobe, the new Adobe Express,

grab the best AI video maker, it exists.

And then turn video into AI,

create studying videos with AI, video leaf app.

So I don't know who that is.

And what you learn very quickly

is not only is this validated,

but you have two of the largest players in the world doing it.

And then a third person who's a startup right here

with that product and market.

So do you have to validate from that point on?

No, you've got massive competitors.

You're too late to the market, perhaps.

Or perhaps there's a good opportunity

for you to do something that's got a beach head market,

a channel, a bigger niche.

Maybe it's just for parents and baby pictures.

Maybe it's just for family photos.

So there you have it.

A very simple way for you to validate is landing pages.

And that's the category you want to look at.

Someone needs to know about this.

Like just startup validation.

Just like, here's how to validate your startups.

So like, and just like go through

all of your categories and like...

Just with examples, yeah.

And to your point and to the person's question,

we saw this as an opportunity.

We have this Foundry University, which we did as two days,

which we'd changed to a 12-week program now.

And we had 2,000 people apply, Zach,

for Foundry University for the 12-week course.

We accepted 450 people representing 220 teams.

And I added, would you like to be considered

for the launch fund's $25,000 friends and family investment?

What percentage of people

who filled out their weekly progress report,

do you think, check that box?

You had to pick.

What percentage?

10% just because people are bad at that.

60%.

And this is at a $1 million valuation.

So it is a 25K check at a million dollar valuation.

Six out of 10 people click it every week.

Cool.

And we did that as a test.

So talking about A-B testing and product validation,

I didn't know.

I thought maybe, you know, people have their own 25K.

So they're just, you know,

if I was starting a company today,

I would put 250K in for my own pocket.

You would put 500K in.

You've done really well for yourself.

And then maybe you'd call some of your friends

and say, hey, I'm raising at a $5 million valuation,

$10 million valuation, friends and family around.

I'm putting in 250 myself.

You want to put in 250 again.

Yeah.

But, you know, we forget the days

where you were raising 15.

It's a pretty scary concept to forgive Zach

at that time to find 15K in your own personal account

and then write it to the company.

Yeah, I didn't have that.

You didn't have it.

Yeah.

And so it's just shocked.

You know how, guess how many in the last two classes

we have of those checks we wrote?

Here it goes.

460%.

So 240, you wrote 100 of them.

46.

Wow.

That's awesome.

That's cool.

That's quite awesome portfolio.

46, 25K checks.

And I'm just like, you know,

when this thing gets to 300 of these.

Which is only 7.5 million.

I'm going to be really interested to look at

what you got.

What I got, right?

And just little 25K microchecks.

What's in there?

And then, you know, so we as investors also

AB test concepts and try them

and we'll see what happens, right?

We're running the test.

We got, there's a market for it.

Now let's see if the returns are there, right?

So we'll see very quickly.

That's really fascinating.

It's really different.

It's kind of goes back to the original Charles Hudson idea

of writing really small checks

and really low valuations into a lot of companies

and then seeing what happens from that.

But you've got because of your media empire

and because of the footprint that you have

all the infrastructure and the team

and all the stuff that you've built.

You've got the ability to do that at scale.

Which is like, yeah, I like that idea.

I'm going to be really curious to see

what comes out of that.

That's pretty awesome.

Yeah.

It's going to be interesting.

It's kind of part of my launch forepitch.

If you want to read that launch.co slash memo.

I wrote a deal memo.

But in this third, fourth fund we're doing,

my plan is to have 300 of those checks in the fund.

And then to invest a second time in maybe the top 20% of those.

So maybe 60 of them would get 100 to a 500K check from us.

And then that would put us at, you know,

five to 10% ownership in those companies.

The winners of that company,

if you think of it like a fund.

Yeah, yeah, yeah.

So we'll see.

It's a great way to do it.

I like it.

That's smart.

Yeah, it's an experiment, right?

It will be 7.5% of the $100 million fund.

Hopefully.

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So an interesting question.

Somebody asks that they are going to be coming to the Bay Area

for two weeks, starting Sunday.

Any advice on how to officially meet VCs

and pitch my startup?

Okay, so they're just showing up.

They're showing up and they want to walk down

to San Antonio and just pitch, folks.

Yeah, we'll look for advice there.

Is that exactly how it works?

No.

I would change the expectations.

At the end of the day, Silicon Valley

is a place of relationships.

And it's about, honestly, it's a place of giving,

which is like you, in Silicon Valley,

when you show up, nobody knows you.

And the only way to really break in here,

the best way to break in here is to just do favors.

So it's funny, when Joseph Walla,

who was the founder of Helisine,

he was on my debate team

and my ex-wife and him were really good friends.

And so when he first moved to Silicon Valley,

he was like, what do I do?

How do I break in here?

Look, it's really simple.

You just go to as many events as you possibly can

and you go, there's tons of events

happening in San Francisco every day all over.

You meet people and you just help them.

You figure out ways that you can be useful to them

in scalable ways, like not where you're gonna go work

for them or gonna put hours and hours of work in,

but where you can make an introduction

or you can help them find a customer

or you can do something useful for them.

And you just plant these seeds throughout the city,

throughout the valley.

You're just constantly meeting people and helping.

And you're helping in ways that are valuable to them,

but low cost to you.

And you just do it over and over and over again.

And it takes a long time, but those seeds,

they become an orchard and that orchard bears fruit

like you wouldn't believe.

Because the valley creates so much amazing wealth

and so much promise and potential and awesomeness

that like, if you're out there helping people,

they will give back to you like you wouldn't believe,

but it takes time.

You can't just come here and show up and be like,

I'm just gonna go pitch people

and then every people are gonna give me money.

You need to know that like your time in Silicon Valley,

if you wanna really come here is about relationships.

Now, once you have a company that's scaling

and you're growing and you have month-to-month metrics,

totally different story.

But in the beginning, it's about helping people.

Yeah, I call this the Johnny Appleseed strategy.

Johnny Appleseed, actually a real person.

And what he did was he planted a bunch of apple trees

from apple seeds and then he took those seedlings,

I guess, whatever you call a small tree,

and he sold those or gave them to people

to start their own apple orchards.

And this planting of seeds and being in a minor way

helpful to people really scaled for him.

And that's the strategy you're talking about.

It could be just setting up dinner

with three or four people you know.

And then this was my hack

when I was trying to break into the industry.

I would find one or two people who wanted to have dinner

with me, I would get a reservation for six or eight

out of Mexican or pizza joint somewhere

where I could put a super cheap

and I could put a bunch of food on the table,

Chinese food as well.

And I just say, hey, everybody, I see the two people,

hey, did you know anybody interesting?

I have an extra seed or two.

And I'd ask those two people.

They'd say, yeah, I know this person, this person.

I'm like, okay, great.

Can you introduce me to them?

I'll talk to them on the phone.

Hey, what are you working on?

You listen, you ask a couple of questions,

then you invite them to come to dinner.

And they say, oh, by the way, somebody dropped out.

I have one extra seed.

You know anybody, you had no two or three

interesting people, or you could just cold email people.

Hey, I'm having dinner with three or four people.

Would you like to come to dinner?

I would do this constantly.

I remember one time I was in at Sundance

with David Sacks at Elon Musk.

It was the preview of Thank You for Smoking.

And Walter Mossberg was there.

And I was having coffee with Walter Mossberg.

And I was like, Walter, hey, can I bring my friend Elon?

And Walter, no, Walter Mossberg got a little upset at me.

He's like, listen, I don't want to take pictures.

You know, I'm just here or like, whatever.

And I was like, okay, no, I won't bring you.

And then I didn't bring Elon.

Oh, wow.

Because he called me out on it.

He was sad and he knew I was using his name

and my relationship with him from Engadget

to help Elon, because I wanted him to review the Tesla,

whatever, when it came out.

So he kind of saw right through it and he called me out on it.

I was like, you know, I got Elon with me.

Can I bring him?

Elon didn't ask me to do that.

I was just doing it because I was trying to help Elon out

because the car company was failing.

And so those stories would be helping people,

whether it was Travis before Uber or Elon, you know,

when he had just started the Tesla journey,

those, a lot of those are legendary stories now

of just trying to be helpful to people, be of service,

try to help people.

It all comes back.

So less focus on you, more focus on helping others.

And it all comes back.

It's a huge, giant favor bank here and goodwill.

So keep building up that goodwill every chance you get.

All right, Dave asks,

you discussed money going after everything

in a Zerp environment, a zero interest rate phenomenon,

I think is what the P stands for environment.

What attributes of companies

that are getting funding today, more stable

and break even, different industries,

what is working today?

Great question.

What is the profile?

Let's leave out the type of company like AI.

Everybody knows AI companies are getting funded.

But what is the, what are the attributes,

the qualities of the variables

that you see help people clear market in the seed stage?

Let's put this on seed stage

and then we'll do series A as well.

What are the qualities you see at the seed stage,

any of the three phases we outlined

and then at the series A?

I mean, the biggest thing is that

every, everybody was able to raise money

a few years ago in Zerp.

And raising capital was easy, capital was free.

It was, it was like, it was quite a wild time.

Today, the bar is substantially higher.

And what that means is, is like,

when you go into your buddy, your friend,

you're raising in pre-seed and you go to your friend

and you're like, hey, I got this crazy idea.

I want to do it.

Two or three years ago,

they were getting 0% on their bank deposits.

The stock market was overly inflated.

So, I mean, it didn't make sense to go buy public equities.

Their house prices were through the roof,

so they didn't want to go buy more houses.

They had cash sitting in the bank

and they were like, I don't know what to do with it.

Okay, final investment is crazy startup.

You didn't have an alternative.

Today, you're making six plus percent on your cash

sitting in a, in a, in a very safe investment vehicle.

Houses are cheap, cheap, theoretically cheaper,

depending on where you want to go.

Well, they're on the market for six months.

So you're not like you're having to overpay

and come over the top so you can take your time

and pick the right house for you.

So that's true.

Public equities are all over the place.

So there's some things that are overpriced,

some things that are massively underpriced.

Like there's opportunities everywhere

to deploy capital right now

and smart capital allocators who are sitting on capital,

whether they're your friend, Bob,

who's a dentist who has a couple extra hundred K

or their multi-billion dollar fund,

they've all got places to put their capital.

So you're in competition.

So you literally have gone from a place where the FOMO,

oh, by the way, and two or three years ago,

everything was going up.

Every startup went up 50%.

So like I would feel so dumb when I would pass

on a startup and then see somebody come in

and mark it up at a crazy price.

Every time that happened, I was like,

I'm an idiot, I should have done that deal.

So the FOMO was raging back then.

And now, not so much.

Now, the alternative, we're all looking at startups

that are fighting to stay alive.

And we're looking at-

So what are the qualities of those startups?

The ones that you see getting a 500 K

to a million dollar check from a seed fund.

Let's start there.

Pair, first round, some seed stage fund yourself, me,

well, what are the qualities of those companies?

Yeah, so we could break it into the three groups

if we want or we could just make it simple.

In the beginning, you've either validated an idea

and if you've a validated idea in a big market

and it's a great opportunity and you can prove it,

call me, call Jason, call other people.

You're very quickly gonna figure out

if we are excited about your validation or not,

or I'll tell you, I'll be like,

this is what I need to see.

And that validation, if you have that, great.

Now, it doesn't really matter.

Anyone who validates a big idea in a big market

that has the chops to build it

is gonna find that investors are gonna be excited

to talk to them.

So that second piece, you kind of just subtly put it in there,

has the chops to build it is critically important.

We could build a landing page and validate it,

but if you're just an idea guy or gal

and you're a solo founder, chances go way down.

If you're a team of three, man, chances go way up

because I think investors correctly see teams of three

as having a greater chance of survival

and it's more serious and you've proven that

you can get two other people to come on the journey with you

like Shackleton, getting people to go to the North

or South Pole or wherever we went,

like pretty hard to convince people to come on a journey.

And if two or three of the people,

two out of the three are actual builders

who can actually build the thing

and have the chops to build it

and have previously built stuff

and are in the process of building the prototype

and you can show each week or two,

hey, we made a little more progress.

That's gonna be specifically very attractive to our firm.

We really like builder founders.

We really like multiples of founders

and we really like product velocities,

the internal term we use.

Yeah, I mean, so if you come to me and you're like,

hey, I invented a new battery that runs a thousand miles.

You know, unless you literally are

the world's expert in batteries,

I'm just gonna hit archive on that.

If you come to me and you're like,

hey, I got this idea, this trivial to build

and I can build it really easily,

and there actually is a mode,

that's another hard part,

then suddenly you might find people get interested.

So the question is not so much what are the capacities

of your builders is what are you trying to build

and is it possible to be built by you and your team?

Yeah, and so this is absolutely critical at the series A.

It's pretty straightforward.

You're looking for, I would say 10% month over month growth,

two to three X growth year over year.

So you're doubling from 250K to 500 to 750K,

or you're going from 500K to 1.2 million

or from 700K to 1.7, something in that range.

Two to three X growth in the low millions of dollars

is gonna be interesting for a series A today.

Could be as little as 500K,

could be as much as two or three million

to get a series A, to get that VC to say,

this is one of my 10 boards I'm gonna be on

and this is one of my $5 million,

I have 10, $5 million series A checks to write.

I'm gonna buy 10% of your business,

I'm gonna spend the next 10 years with you if it works.

That's what you're looking at,

doubling your revenue year over year

on a base of let's call 500 to 1 million,

something like that.

Yeah, yeah, minimum.

And one thing that's really important right now

is capital efficiency.

So if you spent $5 million to get $1 million in revenue,

you're gonna find that most investors

are gonna be very skeptical about it.

The unit economics of how you acquire customers

and then what those customers are worth

really, really matters today.

Two or three years ago, nobody cared.

Like you had all sorts of crazy companies

that were being funded that had negative unit economics

where it cost them more to acquire a customer

than they would ever make from those customers,

but people didn't care as long as you had growth,

you were able to raise more capital.

Now people are gonna look very closely

at what is your cost of acquiring customers

and then what is the value of those customers

and what's the long-term value of the business?

Because right now in the public markets,

you can buy SaaS companies very, very cheaply.

Like you can buy SaaS companies at a very low price.

And so if I can-

Five, 10, 15 times revenue, yeah.

Yeah, I mean, it's amazing how cheap they are.

It's amazing, yeah.

I mean, and so if you were in that position

and you, if you were trying to pitch David Sacks

for your Series A or Lemkin, Jason Lemkin,

two really great SaaS investors

and you'd deploy 10 million to get to 1 million ARR,

that is wildly inefficient.

Now, if you spent 3 million to get to 1 million ARR,

they're gonna say, hey, wow, for the first million in,

great, how much is it gonna cost you to get the next million?

Is it gonna cost you 2 million to get a million in?

Is it gonna cost you 1 million?

And the closer you get to that one-to-one ratio,

I spent a million to make a million in reoccurring revenue.

I think they're gonna be delighted

when you start to get to 3, 4, 5 times, they're gonna go,

huh, are you just throwing parties

and flying first class to conferences

and just not being thoughtful about the growth?

So if you are lucky enough to have growth,

it has to be thoughtful for growth.

It cannot be spastic, you know, wasteful growth.

So capital efficiency, you're gonna hear that term

all the time, multiple founders and builder founders,

also capital efficient.

The other piece of capital efficiency

that we love internally is the company

doesn't go out of business.

If the company is capital efficient,

they might have 24 months of runway.

When we see people raising money,

they got six months of runway,

they're constantly coming to us, nine months

and they're in a panic,

we're like, this person is not doing great financial planning.

And it's usually because it's three idea founders

who wanna pay themselves 200K each

and then hire a third party dev shop

for a million dollars a year.

That may have worked in ZERF

that you're blowing 1.6 million that way,

not gonna work here.

Hire your own developers, get them internal,

that's the key, or have them as co-founders ideally.

All right, listen, big, big breaking news story

while Zach and I were taping here.

SBF's former romantic partner,

who was the CEO of Almeida Research,

took to the stand for the first time today, Zach,

in the SBF trial, according to reports

from inside the courtroom, it's not televised,

people are reporting from inside the courtroom.

Allison admitted to fraud during her time at Almeida

under SBF's direction.

That's second part, really important.

This is Carolyn Allison, I believe it's her first name.

She placed the blame for misuse of FTX user funds

directly on SBF claiming he, quote,

set up the systems leading to Almeida

taking roughly 14 billion from FTX.

Some more quotes from Carolyn Allison.

Almeida took several billions of dollars

from FTX customers and used it for investments.

I sent balance sheets that made Almeida

look less risky than it was.

Prosecutors made Allison's point,

made Allison point out SBF and say,

everything was under his direction.

And here is an excerpt from Allison's back and forth

with prosecutors, these are from inner city press on X.

Thank you to them, they cover SDNY trials,

that's the Southern District of New York, the hardcore folks.

Prosecutors, how do you know the defendant, Allison?

We met at Jane Street then Almeida,

we dated for a couple of years.

Jane Street, I met the founders of that firm,

really interesting savvy firm.

Prosecutors, did you commit crimes, Allison?

Fraud, what others?

With others, yes.

Prosecutors, do you see Sam Beck with freed?

Allison, he's over there.

Prosecutors, what's his involvement in the crimes?

Allison, he was the head of Almeida then FTACs,

he directed me to commit these crimes.

Prosecutors, what makes you guilty?

Allison, Almeida took several billions of dollars

from FTACs customers and used it for investments.

Prosecutors, what was the defendant's role?

He set up the system and told us to take the money.

How much did Almeida take to repay its lenders?

And the, Allison, in the ballpark of 10 billion,

ultimately around 14 billion.

Prosecutors, how did you defraud Almeida lenders?

Allison, I sent balance sheets that made Almeida

look less risky than it was.

Prosecutors, why was there not enough money

for customers in November 22?

Allison, we had taken it to repay lenders.

Wow.

Well, I guess she's flipped

and is going for a smaller sentence.

But what do you think of this entire crypto space

writ large, did you invest in it?

And what do you think this trial,

which is obviously gonna result

in a massive sentence for SPF?

I think he's getting a life in prison

or at least 30 plus years.

I set the over under 30 years.

Everybody took the over.

So I mean, I didn't set a great line.

But what do you think this case represents

in the bigger picture here?

I mean, I've always been highly skeptical of crypto

because it's fundamentally,

it has beautiful product market fit

for doing illegal, like it's amazing.

It's amazing product market fit for illegal things.

It's so good at that.

And I think a lot of people, like they see the growth

and they see the money that's flowing into crypto

and they're like, oh, there's a real thing here.

It's like, no, it's really good for illegal.

Amazingly good at that.

And I think this is a great example of that,

which is they engaged in a giant fraud

because of the nature of crypto.

Crypto facilitates and makes it so easy to do this.

And they just, it's amazing that they'll have more presence.

It's amazing what digital money

and the ability to create your, pop up your own currency.

If they didn't have this FTT token they made,

if they didn't have the ability to move money around seamlessly,

if people didn't pour money into the system

to gamble in their casino,

they wouldn't have had the opportunity to do this.

If this was actual real dollars,

there would have been real controls in place.

If this was equities, this was people's Netflix shares,

there would be really serious controls in place.

But because they were playing

with an entirely new paradigm shifting,

I'm using air quotes there,

paradigm shifting technology,

all regulation, all controls were removed.

What do you think happens if you play chaos?

And we had a poker game where one time Tramoth and Skydate

and my friends were like,

okay, let's play an orbit of no rules poker.

There's now no rules.

You can do whatever you want.

And so me and Tramoth lead over to each other.

We put our four cards together and said,

we're playing from the same four cards.

Yeah.

And then somebody else said, okay, great.

I get to take two cards from the bottom of the deck

because I'm the button.

The button now I guess I take two.

And it immediately turned into chaos.

It was more of the flies.

And then it was like, okay, if I have a deuce,

I get everybody's stack.

First person to turn over deuce,

and then I turn over a deuce seven and I get everybody's stack.

It was complete chaos.

What do you think when a bunch of young, entitled,

and I don't want to say brilliant,

but above average intelligence, let's say,

and above average tech savvy,

you give them their own casino and say,

do whatever you want, make any rule you want.

And they're like, okay, great.

Let's tell everybody that they are guaranteed

to double their money playing roulette.

And then let's have everybody lose 90% of the time.

Go.

Yeah.

Yeah.

I mean, it's just, the Michael Lewis quotes were just,

did you watch any of the Michael Lewis quotes go by?

Some of the things.

He appeared to have gotten snowed pretty hard.

It's really weird.

Yeah.

I'm really, really interested to see if Tether's

role in all this comes out.

Because then the Tether is literally,

has the ability to print money whenever they want,

wherever they want, at billions and billions of dollars.

And it appears that what they do is they date to take that

and they fund all these exchanges

like the biggest one they had, FTX,

and they give them the ability to print billions of dollars

as a loan, quote unquote.

So that the exchange is able to basically have access

to free capital to go gamble.

And that it appears, what happened here is that FTX,

at the end of the day, they gambled with their loans,

they lost them, and then they had to steal

from their customers to pay them back.

And...

The great part of all this is one of the bets they placed

was on Anthropic.

Yeah, it's crazy.

And apparently, like, I don't know exactly

what the numbers were, but supposedly there's this

$500 million number.

Now I don't know if that's how much they put into Anthropic

or how much their Anthropic stake is worth,

but supposedly they wanted to bring that up in the trial

and the judge is like, you know, the prosecutors are like,

no, you don't get to, you know, do a parlay

with the Jets and the Giants,

and then you hit some crazy parlay

and you win with stolen money.

And then because you paid back the grandma you stole it from

and then gave her interest, you don't, you, sorry.

That's not how stealing works.

Unbelievable.

Anyway, yeah, it's, this is absolutely disastrous.

Speaking of disastrous, the city of San Francisco

has lost their mind and I know, correct me if I'm wrong,

but Cruz was one of your great investments of all time.

Am I correct?

It was one of my first.

So we invested as the second investment I ever made.

First, obviously billion dollar eggs that I've ever had.

So I was like, woohoo, look at that.

And you know what?

It really, really makes my heart warm to see them

getting all the progress that they're getting.

Because every year, 40,000 people in America die

from human driver error.

There's no other, the only cause of people dying

from car crashes is humans being stupid.

They're looking at their phone, they're drunk,

they're not paying attention,

they're just driving like morons.

40,000 dead people a year just in the U.S. alone

and robot cars are going to eliminate that.

That we literally have virtually no deaths

from that every day.

It's like curing cancer.

It's like so freaking huge.

So I get really excited when I see them driving around.

Well, and we talked on all in,

if you just look at the top three or four reasons,

people die in car accidents as drunk driving,

speeding, distracted driving, not wearing a seatbelt.

All four of those are opt in by stupid humans.

Like stupid humans getting cars, don't use their seatbelt,

use their phone, drink and speed.

And so cars, just automated cars can't do any of those.

So the top four killers are removed immediately.

What did you see?

That was a deep tech investment that you made,

I think a decade ago, right?

Yeah, yeah, yeah.

Your first investments.

How did you make that deep tech investment

that you knew was gonna be a long bet?

What gave you the courage to do it at that time

and make that long bet?

It was all Kyle.

So Kyle, the founder of Cruise,

I had tried to hire him to work for me

for many, many years for a very decade.

I met him when he first started with Justin TV

and I was like, wow, this guy's brilliant.

He's like, he's really, really good.

And I was like, please come work for me,

and he was like, yeah, no, yeah, no.

He's smart enough to avoid that.

And so when the Justin TV team split off

and they ended up starting Twitch,

they ended up starting Exact, which was Justin's thing.

And then they ended up starting a social cam.

Yeah, Michael's thing was social cam.

And then Kyle went and started Cruise.

I was just like in love.

I'm like, this guy's really good.

And so, and the market is so big.

I mean, you think about the scale of the market

for autonomous driving is like,

I mean, trillions and trillions and trillions

and trillions of dollars.

I mean, it's like, oh, one of the biggest markets in the world.

We have, yeah, the TAM is ridiculous.

So San Francisco is one of the test beds.

A hit-and-run driver hit an individual.

That individual tragically ricocheted off

the hit-and-run driver, the human,

and got pinned under a cruise car.

No problems with the cruise car,

yet the local socialist communist lunatics fringe

in San Francisco, including the San Francisco Chronicle,

which is, I think, a bunch of lunatic,

communist, commie bastards over there.

Feel free to quote this.

They just said they had mind worms.

Their brains have literally like become so convinced

of their own rectitude and righteousness

about the beliefs, the political beliefs that they hold

that they just literally just engaged

in falsehoods constantly.

And the falsehood here was they framed this

as crews was responsible here,

which quickly got debunked.

Your thoughts just on the progress.

How do we continue to accelerate progress

of the human species in the face of a lunatic fringe

trying to, including, sadly, some members of the press,

were part of this lunatic fringe,

which are just so anti-tech.

How does the tech industry deal with this?

I mean, the good news is that we've always had stupid people.

They've always been around.

They've always done stupid things.

And I don't think that they've stopped us before.

They're gonna do the best they can to slow things down,

to try to create their own narratives

and to try to change the future

in the ways that they want them to be.

But if you look back at the history of technology,

it's a history of constant improvement and progress.

You can look at the cost of solar power now.

I mean, it's falling so rapidly that there's a real hope

that we actually will have clean, safe power

that we can use everywhere, everywhere, every now.

It's so crazy you bring that up.

Literally, in Australia, they hit 126% capacity with solar

and now they're having to figure out what to do with it.

So because rooftop solar and solar farms,

they are doing so well,

they're just planning on doing a bunch of batteries.

And the amount of coal being used went down 80%

as wind and solar levels started hitting these record

this summer.

And so congratulations to the people of Australia.

Germany had hit that as well

during some particularly sunny days.

It's not always sunny in Germany.

It's not sunny out there, yeah.

Yeah, Australia's got a lot of sun.

So the southern part of Australia

is just gonna have free energy forever.

And so they're doing a major, major push there.

Yeah, and you can think about all the things

that we could do with free energy.

Like it's like the world could be a very cool place

if we have free, clean, safe energy.

And so you look at,

people have been fighting technological improvement

for the history of humanity.

The Luddites have always been there.

They'll always be there.

And so the people who run San Francisco,

they are Luddites at the core.

They don't want any more housing built.

They want their museum to stay the way it is.

They don't want anything to change

in their little museum city.

And they don't like technology

and they don't like technology companies.

And so like, but at the end of the day,

the cruise is safer, cheaper, better.

It literally is going to replace all human driving.

Like our kids will not drive cars.

Yeah, you know what, we'll be thrilled with that.

Check this out.

This is just so insane.

That's awesome.

The season of renewable records on Australia's main grid

continues a pace with the first days of spring.

Also adding a new milestone for solar in South Australia,

the country's most advanced renewable state.

Combined output of rooftop and large-scale solar

reached a record 120% of local demand

at 12.55 PM on Sunday,

according to data provided, yada yada.

Rooftop solar alone contributed 93.7% of the state's demand

with peak production of 130, 1,332 megawatts.

Large-scale solar added another 23% of 374 megawatts.

This is extraordinary.

The state was reporting more than 400 megawatts

of excess power to Victoria.

So now different, when they say states,

they mean regions of Australia, just scribble.

So different states inside of Australia

are shipping their energy to each other

because they've got so much.

And so abundance is upon us folks.

All we need to do is keep executing.

And what we need most of all is great entrepreneurs

to take money from Zach and Jay Cal.

Let us slide in that 100K, let us slide in that 250,

get on the cap table, 100 exit for us

so that we can keep doing this job

because it is the greatest job on the planet

to be able to sit with entrepreneurs.

Zach, how lucky are we?

Too lucky bastard, you know.

Life does not suck.

It's just great.

Even in this sucky 18 month period

where I have to do five times as many meetings

to raise 10% as much,

it's like a 50X lift I think right now raising the fund.

I mean, we'll get there, it's no big deal,

but how lucky are we even with the shutdowns

and the hard work to get to witness things

like Uber and cruise, change the world, Robin Hood,

whatever you get to invest in, it's just fantastic.

What a job, we're so lucky.

Life does not suck, I like it a lot.

All right, everybody, you know how to get to Zach.

You figure it out, you're an entrepreneur.

And if you wanna come to the Founder University,

I mentioned Founder.University.

We're doing it quarterly now.

So, and I do maybe three in-person sessions with the teams.

So you get to spend, get some FaceTime with Jay Cal as well.

So Founder.University, it's my new passion.

We'll see you all next time.

This week in startups, thanks Zach.

Machine-generated transcript that may contain inaccuracies.