Lessons from 150 Angel Investments into the likes of Carta

So I have tried many experiments to get into business and understand and also actually align my passions. I have passions around technology, around learning, you know, how the universe might be working from a physics level or math level. And I’ve had these different separate areas that I’ve been interested in. I’ve been interested in instantiation of physics in a kind of technological form, so really hardcore engineering. And I’ve been really interested in super abstract ideas like Godel’s theorem and randomness and computability. And in looking back at a little bit, I was thinking about this last night that I’ve slowly been trying to converge my passions together.

In doing that, I never really wanted to work for someone. I had this allergic reaction to wanting to go to a company and sit there behind a desk, just do what’s being prescribed. I wanted to build things and build interesting things. I really wasn’t aware of the tech scene. When I was in The UK growing up, I wasn’t really aware of the tech scene. I wasn’t aware of what was happening inside the .com booms. Really getting into the business side, there was a bit of a random walk.

So I didn’t really have any kind of particular place to kick off. So we just started to try and make money in university. So when I was around 18, I just had this, like, feeling I wanted to start a company. And I was like, I am going to start a big company and make a massive company. And that that’s just like, that is going to happen. I formed a consultancy with two people from my university. We started to pick up some projects and and get paid for us, get paid some money.

We really needed cash. This So is the third year of university. And one of the projects we came across was taking a large Chinese manufacturer of egg packaging into Europe. So they weren’t in Europe yet. And we wrote a plan of attack of how they could get into Europe. And we gave it to them and said, hey, this plan is so on point that we want you to run the business. So we said, okay, let’s let’s set up the company. So we set up the company.

We and I rang every single farm in The UK to try and make a sale, and it was really difficult. The farmers, like, did not wanna really change a way to a different to a different packet, especially something from outside of Europe. So we end ended up managing to get market share by selling into the supermarkets. But then we realized the margins would raise a thin. There was no margin for us. We weren’t the manufacturer. We were just representing the manufacturer. So the business configuration is completely wrong.

We So decided, okay, we need to get out of this. Let’s try something for Christmas, something that we can do ourselves. We have visited China quite a few times as manufacturing engineers. So we went down there and we decided to try and find a product that we thought lots of people would want in in Europe, that was a digital photo frame. So this is around the kind of 2006 time. So we came into the market, and we started to sell our own brand called Sugar. And we got it into Harrods and Selfridges, which was amazing to actually get it into a high end side of the market.

That was the easier place to get into. We actually found it very difficult to get into the low end of the market, and the high end of the market was actually easier to sell into, which was very surprising. And that led to a lesson of sell high, like your prices should be high. So but what happened with the digital photo frame market is that other competitors came in, the prices collapsed, and we had to get out of it. One of my cofounders had a visa issue.

So, you know, to skip other parts of the story, I rushed over to effectively, I needed lots of money at that point because we invested in in this business that had not worked. So I spent seventy six hours trying to make cash, and I ended up making quite a lot of money on selling Nintendo Wiis, which I imported from Europe. When all the Wiis ran out, I saw this coming and I bought the stock of Nintendo Wiis and I physically sold them at free extra price, and I made a bunch of cash off that.

And that was a good break. That was my first proper break for me. And I rushed out to San Francisco, determined to get into Y Combinator in 2008 and got into YC, and that was the start of my real tech career, trying lots of other things, including, as you said, allude to the egg packaging.

So with with Heyzap, we had raised money from Union Square Ventures who we were in the worst time for raising. This this is a crash of two thousand and eight, two thousand nine. It was April. We had just burnt through all our y c money. We tried to be as frugal as possible, and we ran out of money, and now we had to raise our our seed rounds. Half the half the companies in our batch completely died. They could not raise any money at all. We had another company in our batch called Airbnb, which was ended up being pretty big.

I met with about 300 angels to raise money for Heyzap. I met with so many. I just did a complete tour back to back, like six per day over and over and over again. And everyone was saying no, not just necessarily because of the bit for the business, but because the market was crashed. So I ended up learning that most of these investors were pretty crappy. I’m gonna say it. They they were they were not impressive to me. They would go back on their words. They would try and add weird things into the deal.

They were trying to grab parts of the company and control even for a 50 k check, trying to join the board for 50 k check. Nothing made sense out there. We ended up converging on better investors, people like Union Square Ventures. When we pitched them, we got the deal. And this was a strange thing that we thought it would be easy to close the worst investors. It was actually easy to close the better investors. So we ended up aligning ourselves with Union Square Ventures and Naval Ravikant.

So Albert and Naval joined the board. Now in in those board meetings in Heyzap, me, Immad, Naval, and Albert had some really cool conversations. And after the normal board meeting was over, we would talk about angel investing, and we would talk about dynamics and markets and economics and game theory and life. And that to me opened up new doors. And also the mechanics of of these funding rounds, we were going deep on trying to understand all the actual legal terms, reading the contracts. And that that got me into caring about it and thinking these guys are smart and and involved passion of being involved in a wide variety of subjects.

This is you can get to this by angel investing, and you can be part of something larger than just one company. I started advising various companies. So at first, I didn’t have any money. So I started advising companies that gave me equity. And then I decided to put my first $5,000 down, which was a tiny amount. I think I put it into in De Niro. Actually, I would put all my cash. I would run to $0 in my bank account, put every single dollar I had into angel investing for the next seven years.

I would run at complete zero. If there was a deal going down that I thought was really cool, I would still I would even go negative necessarily, which is nuts, right, in anticipation of my next paycheck or whatever. I was, before the exit of Heyzap, I was very, very aggressive in deploying every single dollar I had into startups.

Yeah. So the first common ground should be reality. So both of you should be understanding reality. Reality is out there, and I do think it’s fairly objective in that that, you know, there’s mathematical structures out there and there’s physics out there and there’s computability, and it all follows similar rules that we’re still trying to understand. So both of you should be working in that framework and not be riding against that framework. And outside of that, from a more human perspective, there’s two other parts. There’s the ethics.

So both of you should should have some kind of common framework on on ethical grounds. And you might wanna discuss this before taking investment from them. And, you know, how are they gonna act during an exit? How are they gonna act in a bad situation? The other part is incentives. Like, your common grounds on incentives, you know, are you trying to build a future together? Or is one trying to make money and you’re trying to build the future? Or is it the reverse? Are you just trying to make money and they’re trying to build the future?

So I think talking through the incentives, both of you, why do you do this? Why are you investing? Why do you care? Is it just to top up your rough IRA or is it to build is it to do something else? And so reality, ethics, and incentives are my are my three models in the to have common ground on.

Yeah. I think for a VC, they want you to win the gold medal. The gold medal is only what really matters because they’re portfolio dynamics, and we can go into that in a moment. Whereas for you, getting your personal best on the track is more important to you than getting a single gold medal. And risking tearing your hamstring when running that gold medal or your quad or elacrum muscles is the risk that you run when trying to run that gold medal versus say the personal best.

So if we look at an individual founder’s threshold or a graph of risk to rewards, it’s okay if you have a 20,000,000 exit. That’s a lot of money. It’s okay if you have a 50 mil exit or a 100 mil exit. And most people around the world would say that is absolutely insane. But for the VC, that’s not gonna cut it. It’s not gonna move the needle. The math doesn’t work. They need some much larger exit. Some investors are x driven or ROI or IRR driven, and some are driven by absolute total returns back.

And so I think you gotta dig into it becomes very, very obvious based on scale of the funds and how much capital they’re deploying, what they’ve got to report back to in terms of their LPs, and what the mechanics are to their LPs, what the LPs are looking for, and whether it’s their own personal money. Like, an angel might be okay with a with a 20% IRR over ten years compounds. But whereas LPs, like, they may be looking for something different. If it’s coming from a ten, twenty, thirty year fund or a sovereign wealth fund that’s looking for preserving the wealth of the country, they may be looking for very, very different types of exits.

So understanding those dynamics is important for knowing what you’re entering here and then protecting yourself. If you do know that you’ve got an investor that needs to knock it out the park, then, you know, you need to make sure that you protect yourself as a founder, that you protect yourself from a board perspective, from a from a shares perspective, and you gotta know what you’re getting into. And that’s when you can start asking the questions of of how they’re gonna act in exit, the payout order, the pace they wanna run at, and and a misalignment that may be there between you and the investor or or alignment, hopefully.

spraying. So one, I don’t like the praying part because I would like this to be a lot more rational or logical where you do not have to pray. The second part is that I don’t like spraying. Spraying says to me that you’re you’re shooting the gun without aiming. So that doesn’t mean that I don’t care about numbers. Numbers do matter and stats matter. So there’s many reasons why it matters. Just from a pure numbers perspective, if there are nonlinear returns on an investment, you probably need to make as an angel ten, twenty investments to possibly see to have a statistically high chance of seeing one of these nonlinear returns.

So the graph of market caps is not a straight line. Right? So it is a nonlinear graph. And network effects, this really stems from network effects being nonlinear. So if a company managed to get a monopoly over a network effect, which might be a marketplace or a single network, they will see nonlinear market caps. And those market caps end up sometimes hitting a wall, which seems to be about a trillion dollars at the largest scale of companies. So we know that the network effects drive the market caps, and market caps can be nonlinear.

So you need to find the nonlinear investments. So you need to probably make ten, twenty investments minimum to see it. The second part is that you don’t learn. You will learn a lot with each individual investment, but you need to see different situations from a learning perspective of just like, was my algorithm for investing correct? And, you know, was my process and my logic and my hypothesis correct when I picked this investment? So data points matter, and therefore, I go high, and I don’t treat it as a spray and pray.

I treat it as, like, actually, every shot you take is a sniper rifle. It’s just I have a lot of bullets, and I have a lot of time. I mean, you mentioned the algorithm

Sure. So I I see kind of, like, two classes of investors, and there’s a spectrum between. Some people are very feelings driven, and that feeling may be corrected. Their algorithm may be unconscious. So the process, the this repeatable process that you could write down and specify, what are you doing? Why are you picking this one? Like, what is your filter for saying no? So I’ve got lots of different kinds of algorithms. Let’s just call it thousands of different ones. So some of them are filters for saying no.

So situations that I will always say no, red flags or black flags. And then the other one will maybe collections of yellow flags or things that you may be able to fix and the waiting of, oh, that seems a little bit too wrong. I can’t fix that or we can’t fix that. The algorithm is this process that every time we’re making investment, we’re trying to come up with a hypothesis, we’re testing it. It might be a hypothesis you never get to test again. It might be such an unusual business that you’re never gonna get to know, was this a good algorithm though?

So we know that there’s consistency in certain algorithms that we can keep reapplying, I e, when we look at founding team chemistry or we look at founder motivation or incentives and the types of founders, the psychology there, and the certain models that we can repeat in markets. So markets are shifting. In humans, I would say the human psychology is not shifting for two thousand years, really. Markets are definitely shifting and dynamics are shifting. The mathematics doesn’t shift. The network effect mathematics doesn’t shift. The understanding of how to attach to it is shifting all the time.

So there’s different things that are shifting in terms of what is going out and there are parts that are not shifting. So I think figuring out processes around these parts and what you’re looking for and trying to write it down is really useful. And there may be too many things to write down. So maybe you have to summarize these these rule sets. And and so I got a bunch of rule sets that I look for. Some of them are unconscious, and you’re and you’re trying to it becomes your gut feeling.

Right? And I’m trying to make them conscious. I’m trying to make them so you can write them down and specify them and break them down, find the mechanics of these areas, and come up with principles, and then link it back to an ethical framework so that you become relatively consistent in what you’re doing, and then prove it out by, like, did we make the right decision? And if we didn’t, maybe we should change some of that algorithm. We should modify it. And our algorithm may be wrong.

We may be missing out again. There’s like false positives and and false negatives. We might need to change our algorithm to to check we’re not doing something wrong. So I do that as well. And there’s another component as well that you gotta add a little bit of random in because your algorithm, you won’t be able to learn in the quickest possible way if you unless you you need a little bit of randomness to go against your kind of feelings and and your algorithm.

Yes. There is a situation where the company might change your framework. The way the company impacts the market, like a Facebook situation completely might change the way you think about companies. So I think you gotta be ready for the investment itself changing your algorithm, and it might modify in a doubling down sense. And and you may say, I’m gonna double down. I gave that a weighting of a certain amount. Now I’m gonna give that even more weighting because it turned out to be true, that was the main reason it worked.

So I think always be changing what you’re doing, modifying it slightly in directions and and maybe not going too far because we know people can overshoot as well and overcompensate for things. So it’s finding this kind of optimal balance. We know that everything is changing quite quickly, and I I think the rate of change is higher now from an algorithm’s perspective in investing. Human perspective is not changing as much. And that’s why maybe you can say things like entrepreneur first has really deep angle because they’re focusing in on the part that doesn’t change so much, the people side and psychology side.

So I think if the market is changing faster, then we’ll see a lot more verticalization and people focus you know, the algorithms in avert commerce are focused on on particular verticals and markets, and that’s gonna change much quicker. And I think there’s different ways to compete in your algorithm and compete in the algorithm of your help your help style.

Yeah. So from my perspective, I like to think through what companies need to exist. So we knew at the time that ADP and Paychex were pretty crappy software companies. Like, the software was terrible. There was not a monopoly on either sides. Both companies, you know, had roughly equal market share. Share. The theorgorg chart, it was particularly broken with one of them. I I forget which one. So from my perspective, I I put this in one a blog post of of ideas I was thinking through that I wanted to see think I I said a bank simple of payroll.

And what I really meant by here simple was regarded as like really amazing UI at the time. And, you know, I wanted to see really amazing UI and a great customer experience around payroll. And I think Josh saw the post and reached out to me and we we met up and we actually talked about culture for one hour. We didn’t talk about the software. We didn’t talk about the features. We didn’t talk about the business model. We didn’t talk about any of that. We just talked about the culture that he wanted to build.

And I had never been sucked into a conversation for that much time on culture with a founder who was normally pitching the business, pitching the features and business model, go to market plan, all that kind of stuff. So that really impressed me that he was just super super focused on culture, and it actually has played out right. So Gusto have have a unique culture. So I think back to your questions like thinking through things that need to exist, thinking through things that you would build yourself and that you need yourself, and going after those those companies, it’s a decent algorithm to kick off with.

You

Yeah. So if it’s doing really, really well, it may not be the actual reason. Well, it’s difficult to say it wouldn’t be the actual main reason if to say that this company built something that people really need if it did well. So if it if it does really well, that is that is a confirmation that your hypothesis is correct. If you bank something that you thought needed to exist and it doesn’t do well, if it didn’t do well for certain reasons, like the founding team fell apart, you can still go again.

And I actually go again on the same hypothesis that I think something really needs to exist. I’ll bet up to like two, three, four times until it’s proven that that is not what someone needs. So if something falls apart investment wise, you should look into the mechanics, why it didn’t work out. Did it not work out because of the founding team? Did it not work out because of the market timing or the specific idea? Was the idea bad itself? So so, yeah, you gotta be careful about the confirmation bias.

On the flip side, you gotta use it. You gotta use that information. And it’s difficult to make this the perfect science, for sure. And it’s difficult to even make this a statistical science, but you should try at least. I think being completely random with it would not be good.

Every investor is different. So you could say most investors, they come into a cap table, don’t add that much value. That’s actually my current position, and they really should, but they don’t. And I would say 50% of investors add into a cap table are just a drag factor on time for their founder. And then maybe another 30% are neutral to slightly positive, and then there are stars that actually are transformational to the company, mentioned, hey, you should go in this direction. Direction. It It was was everything they needed.

So I think there’s a spectrum of this in terms of the value that investors can bring to a company. One of the interesting values that the investors can bring to a company is looking it’s as if the founder is trying to unlock this massive combination lock, and they’ve got, like, 20 digits to unlock where one digit might be the go to market strategy, the other the other five digits might be team culture, you know, tech stack is one of the digits, and some of the features are are many of these digits.

So they’re just trying to unlock this product market fit, which is this giant combination lock. And they’re on the inside. They’re very, very close to numbers. And they’re like focusing on one dial, trying to move this one dial up or down to three or seven. And the investor maybe can step back a bit and look at the entire combination lock and say, you know what? The business model is wrong. You’re undercharging. And that may be something that the founder getting the perspective of distance, I think, is important from the investors not being too close to the subject.

And sometimes saying very obvious things and not overcomplicating it, or they come up with a genius strategy to to crack something that’s very specific. But I think I think sometimes it’s just the investor pointing out something obvious that, hey, your culture is not working. You’ve got a problem. You you guys are just too slow. You need to be about five x faster. What’s the slowdown? And calling out things that the founder I mean, you could you could say, okay. Well, you could try and apply special relativity to to start ups.

And founders are moving at certain speeds, and investors are moving at certain speeds, and this kind of walks their perspective of every reality around them. And trying to have a different perspective, think, is very important for getting locking into what’s really going on.

I’m actually gonna be honest with you. I don’t know the stats. I don’t know the numbers on this. So I wouldn’t wanna judge it from my perspective on the numbers that I see because I don’t think they’re necessarily representative of the entire market. So for a question like that, I’d actually like to see the numbers and see the stats. Something I have seen though, people are as there are more entrants of investors into the market coming into the market, I’m seeing definitely more people having to push to different extremes on this kind of game theory landscape.

So for example, Union Square Ventures, you know, they were in seed and they moved up to the a. And then, you know, we’re seeing many new investors go into this pre seed and trying to shift seed into the new a. So they’re trying to, like some people are moving bases and some people are actually trying to move the base by creating a new category somewhat. So I think and and you could even say there’s gonna be some kind of category creators between the rounds. There’ll be some people that they’re not formally leaving around, and they’re not taking a board seat, but they just wanna go between an a and a b.

And a bridge round will be converted into some kind of new branding where it’s just like a top up round or something. So I’m definitely seeing this new mechanics due to the new players coming in and everybody trying to fit into different parts and differentiate. And so far, ICO’s crypto raising could have had a huge, huge impact on the whole investment game. It didn’t deliver. It kind of failed because of laws. It got blocked by governments effectively, and it failed because there were terrible fake projects out there that ruined things for everybody else.

So we aren’t necessarily heading into the ICO world that people wanted and where we were gonna completely unbundle things like in creditor investor laws. That could have really radically changed it. But we are gonna see, like, the shift of numbers numbers investors all playing out on some kind of game boards and trying to find some new way to differentiate affecting the mechanics.

Yes. I think they need to find the gaps that they have as a founding team. You know, what gaps do they wanna fill? I think they should break down some of the dimensions of how investors can help. So some might be useful for sales, some may not. Some may be amazing at products. Some might be great at building teams. I always think about a dream team of investors that the the founders should try to architect and not have everybody be the same thing. So if you go off the brands, well, the brands don’t have as much time.

So you want some brands for signal and for press and for hiring, and you want some non brands because you want their time. So working out the dimensions that you’re trying to get, you want a bit of brands. There’s always a trade off on these dimensions. Right? I’m trying to think through what the dimensions are, and then someone’s really good at sales, they’re probably not necessarily gonna help you on your API architecture, or maybe they can help you with your pricing policy. So I think building a collection of different spiky t shapes I don’t know we’ve heard this t shaped concept of, like, a great generalist, but very, very, very good at one thing.

Trying to find a couple of different t shapes that all when you put these t’s together, they kind of build a nice little structure of your dream team of investors. And then, you know, having alignment as well. Sometimes for a founder, this is very difficult to do. They’re just trying to raise around, and they can’t actually necessarily architect the round correctly. But I think the best investors will see founders architecting around, and that is another signal to them that, hey. They’re architecting around, they’re thinking this through properly, and they’re really building up the dream team.

And also balance of power. They have to think about, is this person gonna counteract this other investor in terms of power? Because you can’t lump all the you don’t want enemies on your cap table together. But if everyone was a a perfect perfect, perfect ally, that’s not necessarily good from a from a power perspective. You may want someone to go and oppose someone else that’s blocking you from doing an exit and think about how the power might play and how the voices are gonna kind of collect together.

At first, I didn’t care too much for it. I just cared about taking part in the round. I cared more about optimizing the upside of the company in terms of how some maximum market cap that you guys can possibly be. And the two are kind of linked together to to, like, the price sensitivity price and the ownership, and they can be slightly unbundled with some particular move sometimes. So the more as I’ve done more investments and I’ve become busier, I’ve definitely thought more about ownership in that that does end up this with this opportunity cost of time for the investor where they have to start picking which ones they’re really gonna back.

So I think once you’ve booted up your kind of portfolio in terms of numbers and you’ve kind of seen some of the mechanics and you’ve done some learning, then there’s gonna be maybe a strategy of, like, reducing the number that I’ve done and increasing, you know, check size, ownership, not necessarily price sensitivity, but, you know, ownership by deploying more dollars. Because the ownership can be reached in different ways, either on the pricing side or also legal ways to, like, push through ownership, which I don’t really like from a founder’s perspective.

I like these deals to be pretty vanilla. Ownership is becoming more important, but ownership also brings you responsibilities. If you own a significant percentage, you have you have major responsibilities for that company as well.

Yeah. So when I originally started, I played it more of a poker game. But depending on the kind of risk threshold on the board, I would range out there and I would do different amount, different check sizes. The big difference between investing in a poker game is that there’s not this feedback loop where the market’s gonna react to that amount that you put in to try and win that part, but it’s not the same game. So actually, over time, I’ve I’ve preferred being more stable with the check size.

There’s different dynamics of that. One is it’s minimum. Like, you know, you’ve got opportunity cost of your time, so you’re gonna have a minimum threshold. Now if you say, okay, well, I’m gonna go I’m gonna do two or three or four x larger than that, well, that comes with a different responsibility bracket, and that may not run into the way that you wanna spend your time. So I actually think there’s pressure from above on maximum check size, and there’s pressure from below on maximum check size because of your, opportunity cost.

And that means that the dynamics are pointing towards like having a single number is constant. And the other way to look at is a point you made where you don’t know some of your riskiest bets, maybe the absolute best bets. And I realized that, you know, some of the riskier bets I’ve done smaller check sizes on, and I realized that was actually not the right decision. And the risky bets, you still wanna have the same check size. So I actually have converged, and I talked to a few other master investors who are better than me or at least been in the market for longer than me.

They also play that game as well. But it might be provable with some kind of a statistical theory that you could actually, like, should be consistent in your check sizes.

I always like to look at the dynamics that are occurring in the background that lead to the conclusions. So one of them is that we know prices are going up. So pre seed prices, our previous a rounds and seed rounds, previous a rounds, all the prices are going up, but also the headroom on the top is going up as well. And most importantly, the speed to get the the tooling around software and the leverage that people have and the playbooks are getting more understood to building a huge unicorn in in a shorter and shorter amount of time.

So there’s different dynamics, you know, the headroom maybe is going up, the speed, I. E. The IRR, and your rate of return every year is, I would argue, going up. The price is also going up as well. So between these kind of three numbers, you’re kind of the x or the IRR that you’re gonna get as an investor is changing, and it’s not necessarily going up. It’s probably going down. But the amount of capital in the network is also being it’s being distributed to a lower level.

There are many younger investors that are getting into the game and actually have a massive advantage on some of the older players when it comes to getting into deals earlier, spotting particular trends. So I think with a number of rising investors in total, things are gonna become a lot more local. So you have to play to new advantages, and that may be like knowing you in local markets. So maybe Lisbon would have a bunch of different angels inside it. And I think there’s gonna be angels across the entire world, and there’s gonna be a lot more hybrid players where they’re operators and they’re founders.

And I had a little chat with Josh Buckley about this, another investor out there who I respect. And part of this was about building a brand. And, you know, if you’re gonna build a brand, you could build a brand on content, or you could build a brand on building a unicorn. So if you built a unicorn, you’re gonna have a lot of deal flow. So it does pay it’s not just about the investments and the deal flow. You’re gonna be connected into an ecosystem. So for operators, it is advantageous to also be investors as well.

Jeff Bezos, he’s a major investor in Google. And I think the actual operator investor dichotomy question, it hasn’t really been a question that’s been going on for ages. If you look back through all business time, good business people who build companies have also been investing in things as well. And it keeps the variety high. It keeps things interesting.

I think if they’re having a natural allergic reaction to it themselves on the first point you made, like, oh, it feels like a distraction, then they shouldn’t do it because it will be a distraction to them. Whereas I don’t think they should do it because of perception of other people. I don’t think they should not do investing because they think, oh, my investors are gonna be really annoyed with me and think I’m getting distracted. If they feel like they’re gonna get distracted, they probably will because a person there are different kinds of people.

Some embrace madness, chaos, complexity, and they get a lot out from it, they get a lot of learning out from it. Some are not like that. Some are craftspeople that need to focus and don’t want need to learn by themselves and need to learn by doing. And those type of founders, maybe they should not be investors at this stage. Some learn by mental models and by abstractions and by networks and by analogies and by anecdotes and stories. Those people, those operators do get a lot out of it.

So for me, it’s been invaluable as well for for building companies and and being a better CEO. And for some, I’ve I’ve seen I’ve met founders. The I think it would be terrible if they got into the game. So I think it depends on the founder type. And that’s you know, when the investor looks at it, they should just look at the real situation and be like, is this an advantage for them? Does this help build the network up of the product they’re trying to sell?

Does it help build up their brand and attract more people to the company and attract talent? Does it help them be a better CEO and learn playbooks faster? And and that’s the more nuanced answer where there there are different founders that it’s for and if some that it’s not.

Yeah. So

different scales of liquidity that affects people in different ways. So in San Francisco, something like a million dollars, it’s not crazy liquidity. You can just about get a house. So I think when I see secondary, I’m thinking about it from an efficiency standpoint. Does it make the founder more efficient? Does it make them more relaxed, but not too relaxed? So if you if look at an athlete running a 100 meter sprint, they have to be pretty relaxed. If they’re overstressing, they will not win the gold medal.

So but they can’t be too relaxed. So I think there’s, like, this optimal state and, you know, liquidity. If they were taking a $100,000,000 off the table, that’s gonna completely change their life. They’re gonna buy a giant house. They’re gonna start decorating, and they’re gonna get distracted. They’re gonna have everything. So there’s the curve of what things unlock. And I think the first thing for a founder to have some security in a house, they’re economically more efficient. They can pay themselves a lower salary. That’s a good justification for doing a secondary.

I think that kind of secondary is okay. And it’s always in proportion to how big the round size is and, you know, is it on the a, is it on the b. I think on the seed, it’s not right, the secondary on the seed, unless they bootstrap the company and they’re making loads of money. And at the end of the day as well, this is a more founder driven world where the founder is getting more power than the investor, and I think that’s okay. I think that’s actually a good thing for innovation, and I think it’s good to to shift the power away from capital more to the kind of compute machine or the consciousness of the human.

I think so. Well, I think there are two parts. So there are drivers that unbundle things, and there are drivers that consolidate things. So, you know, a classic monopoly company is consolidating things, the network effect has this tendency to wanna consolidate things. But there are some things that like to break apart. So, you know, if we think about, I don’t know, a rock on the top of a hill, the rock is gonna weather, and it’s gonna fall apart, and it’s gonna unbundle. But, you know, later down the line, it’s gonna go into the soil, and, like, there’ll be some geology processes.

And eventually, there’s gonna be some compression, compression, and and there’s there’s gonna gonna be some rebundling of this thing. So I think on all these dimensions, are unbundling and rebundling phases, and that’s simultaneously occurring, to be honest. So with capital, I do think the capital is unbundling. And the capital as an instrument for powering a network of information interchange or, like, people creating things, it is more efficient when it’s liquid. It is more efficient when the capital is distributed into the hands of people that are gonna make new things.

So if we have these gold bars that represent something just sitting around in a vault doing nothing, that does absolutely nothing. It doesn’t build any technology. It doesn’t, like, write any books or make any content. But, know, if you liquidate all that virtualize the whole thing, get off I’m not saying necessarily this is a good thing or a bad thing, unlock that value and you put take all that money and you go and power into all these, like, passionate entrepreneurs, it does end up building interesting things, and it gets us away from, like, negative yield curves.

So the capital is more efficient when it’s distributed, not fully distributed. So there’s there’s this once again, this is perfect. When we talk about this balance, there is this, like, the capital needs to be not fully perfectly distributed because you don’t get anything interesting happening if it’s not aligned around creators, makers, decision making. It needs to also map to the incentives and the potential upside of the network. So I think it’s this unbundling, but it’s not perfect randomness of the whole network of, like, every single person having exactly the same number of dollars around the world.

I think there’s gonna be consolidation for the traditional VC where there’s gonna be some players that are the main players, and they’ve gone full stack. They they’re full stack, full service, traditional VC, and all the traditional VC other ones fall apart. And then, you know, there’ll be a bunch of verticalization of extremely deep specialization, in particular scientific fields or technology fields. And then there’ll be this swarm, a massive network of, like, individuals who can power and get a company off the grounds, even do series like, individuals doing series a’s.

I can see that happening in the future as well. So I think the suits are gonna be removed from the game, and creators and operators and makers are gonna be more empowered with dollars to make it. But there will be giant warehouses. I mean, it’s it’s kinda like both players will go to both extreme sides of the board. One extreme side is full stack, giant company, helping you in every different way, perfect quality. The other ones, lots of individuals, highly creative, highly unique, helping you in a network.

really enjoyed Go to Usher Bach. I know a lot of people say this answer as well, and true. And what I like about the book is that it does dance between art and science, and it embeds the science in the art, and it takes the art into the science. Is investing in art or science? I think it’s both. I think the art part is a part that’s hard to specify, hard to verbalize, but it’s still truth. So it is both, and I think there’s a shift.

I would like to shift it to more of a science, but I don’t think you can verbalize everything into it being a science. I think there’s always gonna be some art and a very large part of art into it.

I think as we get more data and we get more analytics, that means more complexity and more opportunity to be analytical. So I think the skill actually goes up. Some of the art maybe goes down, but the skill can go up. So is an f one car today with lots of controls and, like, lots of dashboards and stuff for any you know, is it more skillful or less skillful than driving, like, a nineteen twenties race car, which maybe is more art than than science. So I think they both can be skillful in in different ways.

Yeah. So for this one, I was thinking through that if you think of an Aston Martin, I think there’s a particular one seven seven model. They do all the surfaces in a perfect way to a T Ray way, including surfaces. So they machine these surfaces, even the ones you can’t see and you will never see. And they do this because people want to buy that product as if it’s a perfect watch that’s being constructed, that you may not be able to see the perfection that’s inside it.

So they do that because that’s what people want to buy. Now in pragmatism, if you don’t necessarily have time for normal cars, you wouldn’t do that. You would not machine surfaces that the user is not gonna see in a perfect tier a way. So I think you gotta pick your battles on what you’re gonna do perfectly and what you’re not gonna do perfectly. And you can’t do everything, absolute everything to a perfect degree. So thinking through what would be, do you wanna shine on the user interface you’re gonna reduce the number of features that you have?

How is this gonna play out against your competition? Say for being an investor as well, like, what are you gonna be perfect on? Are you gonna be perfect on response times or strategy? Are you gonna be slow but come back with the right answer? Are you gonna try and do both? Perfect strategy and really fast. So some of these things oppose each other, and you’re gonna have to see the trade offs and and realize that you will not be able to be perfect on every dimension.

What’s

at the beginning, so I’m gonna throw this first one out. I’ll try one I didn’t know at the beginning. So I was gonna say back something that you would build yourself. So if you really would build it yourself, you would stop everything to go and found a company around it. That is probably a good investment to make. In terms of something that I learned that I didn’t know about in terms of backing, I think prioritize the founder above the idea. Now I I know why Steve said this for a long time, but I was very market and product obsessed and I still am.

But I do think that the priority is the founder and the founding team, and especially the founder. Really, really

Yeah. I think you want both. I think a great founder in a bad market will waste a few years switching to a good market. They’re gonna end up doing a pivot or starting a new company, so you should back that second time founder again. That’s another thing as well. Back the founder who’s failed, you think is still brilliant because they will find something. And, you know, if you look at Alex Chu, you know, million dollar homepage, he had that very early success. And then with Pop Jam, it didn’t work.

And I think some people had written off. But now with Calm, you know, he’s got unicorn. He was always a brilliant person. He was always a brilliant founder. Right? So I think backing the founder, the market part helps as well, like meditation and has been like a great wave to ride. But, you know, I think having both is is important. Otherwise, the fact the great founder can waste a ton of time. And sure, if it’s a terrible founder in a great market, some of them can get by if they hit a distribution mechanism early on, and that actually may turn them into a great founder as well just riding that scaling.

But they’re gonna have to have some magic for sure.

Oh, I hate you so much. So the reason why I’m first checking Linear is that Carrie, I have been watching him and jury, and I think they’re amazing for ten years. So it’s been a ten year journey, and they joined companies as employees, and then they came back. And, you know, they tried something before called Kip, and I advised Kip, and it didn’t work. But I still think they were brilliant, and, you know, they got even better as employees. They got better skills and learned from Airbnb and Coinbase.

And when they came back together, just the sheer quality of them as a production team is being able to produce, like, cool products was so high. I didn’t wait for anyone. I said, I’m in. I wanna do it right now. They went I don’t think he had even started formally raising them, like, I wanna do it right now. I wanna back you guys again. And I’d wanted to undo as in some mistakes I had done where I had not re gone back to founder that I thought was great or founding team I thought was great because they failed.

And so done that a few times where I found someone great and they failed, and I didn’t back them again. I should back them again because it is a career investing as well that you you’re gonna back these founders over and over again because they’re trying to get the unicorn. That’s why they’re coming back into the game again. And so I went into that and, you know, the product is great. And now everybody loves it. Everybody’s trying to get into the rounds. It’s impossible to get into the rounds.

But, getting there before anyone is important, and there’s always a ten year journey before it usually or at least something happening before it.