This is the 20 min in VC with me. Harry stabbing. Someone is the most talked about topic of the moment the rise of rolling funds by AngelList and one of the first and most prominent was raised by sahil Lavinia and so I'm delighted to Welcome sahil to the hot seat today to discuss the new fund for those that do not know. Sahil. He's the founder and CEO gumroad the startup that helps create his do more of what they love with gumroad. Sahil has raised from some incredible investors including Excel Kleiner Perkins, first round and then on the individual side Max levchin, Chris, sacca Ron Conway.
And Navarra can't name a few have a most recently as I mentioned. So Hills made waves raising one of the first rolling fans on AngelList with his being six million dollars per year. And in the past I Hill has back the lights of Lambda School figma. Hello sign and house to name a few. I'd also want to say a huge. Thank you to Cindy by a money. Sure for some fantastic questions sugestions today. I really do sir preciate that before we move into the show today. I'm sure you've heard about it, but my word there is a product that I love Carter Carter simplifies how startups and investors
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Oh conferencing for video calls group chat webinars annual conference rooms and connect easily from anywhere your mobile phone your laptop or conference room itself Zoom is how business gets done today get your free account at Zoom.com today meet happy with zoom, but that's enough for me. So now I'm very very excited to welcome. Sahil, Lavinia.
You have now arrived at your destination.
So he'll it is such a joy to do this. And I said I've been in a long long fan of your incredible Twitter stream for a while. So thank you so much for joining me today.
You're welcome. Thank you so much for having me
noted too, but I would love to kick off with a little bit on these. I'm going to pretend like I'm blissfully ignorant here. But how did you make your way into the world of startups? And how did you answer the investing world?
Yeah, so I got my start as an early employee at Pinterest. I was the second employee there before that. I was a freshman at USC.
And before that I was in high school making iPhone apps the App Store had just come out and that was sort of this amazing thing for me because I could just make stuff and apple would worry about everything else right the operational legal Finance payments all of that stuff. I could just make apps but them in the store pick a price and then people would pay me and that was really what got me excited about the internet and e-commerce 10-15 years ago as I could just make stuff and people would pay me just strangers. I don't even know who they are and it turned out that there was just not that many people making iPhone apps.
And designing iPhone apps so when that boom started to happen companies like Pinterest and Instagram and GitHub and all these companies needed talent and so bend send me an email. He saw some of my work on Hacker News. Send me an email saying hey, I work on this thing called Pinterest. We're a small team. We've raised a little bit of money. We help people collect organize share the things that they love something like that. We need an iPhone app. Can you help us? So that's how I started is just making Pinterest for iPhone contributed on a few other levels and then got pulled into gumroad had a weekend project that took off again on a Hacker News.
It's sort of been a theme in my life and then decided to raise money and did that for a long time went through the ups and downs. I've written about that raise 10 million bucks from Kleiner Perkins Max left and of all Chris sacca the wunderkind kind of story College Dropout everything like that. And then I was on the rocket ship and then I kind of Hit the ceiling and exploded failed to raise the series be had hundreds of meetings probably with VCS just saying no, it was brutal did round of layoffs 75% of the company went from 20 people down to five people got the profitable got rid of the center.
Cisco office and moved out of San Francisco left six years in moved to Provo Utah just kind of started tweeting a lot more. I learned a lot. I wasn't really comfortable sharing all of that. It was dealing with this sort of the ego hit and finally got comfortable started sharing and people really liked it. So I just kept doing that and then because of my big Twitter audience I after this George Floyd black lives matter stuff. I tweeted out I want to invest in more black Founders ended up investing in for off of that tweet sent three at and of all saying hey, these companies are looking for more Capital. He suggested I should start a
And I kind of went full circle, but that's the sort of the three to four minute kind of Journey.
Isn't I did you just ask you to summarize your life in 3 to 4 minutes? I did a brilliant job. That's inhaled. But I do want to ask you mention your time at Pinterest are an employee number two, and it's such a formative time in your career as well. I'd love to hear how did your time with Ben and Pinterest impact your operating mindset. You think when you look back now?
Yeah, I mean, I honestly wish I knew how unique of an experience that was right because back then it was the only experience that I had.
And it was amazing and now I sort of years on I've been able to notice like, oh, wow like that experience was just super unique being that early in the life of a company. That's that significant, but the simple things like the product-focused like the team back then was so product-focused and I just assumed it was normal that every company was that product focused but in the years since I've noticed that actually that's not true like very very very few companies have that level of attention to detail that Pinterest had and that simplicity.
And was so adamant every time basically I suggested we should build something new it was rejected and he was so good about staying true to the sort of the core mission of the company keeping the product incredibly simple hiring very very carefully these things that every person will tell you you can read blogs about it. You can listen to VC's talk about it, but seeing it in practice, I think really trained me to really know what was really important and what would really matter and I'd say the other thing is as an early employee. There were a lot of things that were made me uncomfortable.
Table, it was new to everybody. There is a lot of uncertainty. And so when I started gumroad it was really useful for me because I could say okay, what would early employee Sawhill want? Right because those are my customers. I'm trying to sell to those people and get them to join this company. Now what was intimidating what was concerning to me as an early employee at Pinterest like what could I make easier for folks to understand and that's I think what started so much of this transparency that I've sort of kept as a constant in my life since it's just I want people to really understand and have Clarity around everything because frankly working at it or at least HR
Scary enough you might as well try to kind of make it as easy as possible. Wherever you can
can I ask you questions and it's like you mentioned the product Focus down to interested when investing today and we're meeting Founders today. How do you test for levels of product Focus? What are the signals that indicate High product Focus versus alternate
prioritization? Yeah. I mean honestly using the product its blows me away how many times I sign up for a product and it doesn't do what I thought it would do. It doesn't do what the founder said.
Said it was going to do it's not as beautiful as what's in the deck Etc. I have a story so max levchin. I wanted him on the cap table so bad for gumroad. He was the last person to say. Yes, and he asked for all of these references. It was so intimidating meeting with him. And when he finally said, yes, I asked him afterwards. I was like what God you over the line and he was like, honestly I was on the edge. I didn't know whether to say yes or no, but what I ended up doing is I went to Gummer.com and I tried selling an MP3 some electronic dance music that you made.
And it worked it just did what it said and I was like that's not hard took me a weekend to do that. But I think it just kind of proves the point that like there's actually so few Founders they care so deeply about the product even on a fundamental level of just like doing the things that are kind of on the label and I would say the Nuance of that is I can tell when products aren't being used by the founding team. They build the product they might have built the onboarding but there's just things that you notice like there's for example, the email field isn't using the email attributes. So it doesn't have the @ symbol and the dot on the I
IPhone for example, there are small things room like this is what matters this is what's going to make or break? All of these small touches that show that you really really care about the product experience and the lowering the friction that really matters in my opinion. And so when I noticed that it's hard for me to commit because no one's going to fix that for them. I'm not gonna be able to be that person that's over their shoulder being like, hey fix this fix this fix this fix this there's like a thousand small small
things. I totally agree the question. I always have and I'm sorry for being so scheduled. It's like we don't even guys, you know, you should be embarrassed by your first product in the first shipment.
And bluntly the table stakes in terms of product is so high actually stay in terms of consumer expectation that I sometimes question will can you afford to be embarrassed by your first product release? How do you think about that? You should be embarrassed versus Ash. It needs to be pretty fucking good
today. Yeah, I think read quote was accurate maybe 10 years ago when he probably said something like that, but the truth is the bar for where your product needs to be today is so much higher and yes, you should be embarrassed because I think the best Founders will perpetually be embarrassed Patrick and John from
Jaipur probably still embarrassed but you have to have an insanely high level of product quality. You just do especially around the stuff that really set your product apart like your reset password flow things like that might be a little bit embarrassing the stuff that you might notice as a founder of someone working on the product, but the stuff that the user goes through the sort of like from zero to that magic moment. It has to be virtually perfect in my opinion. It has to be really really really really really
good. No II totally agree with you I do want to ask is well, you know, you mentioned MC Pinterest our nice way to manage before the show.
He told me about your leaving Pinterest without any of your stock lasting I couldn't go to ask about this because it comes into one of my favorite questions, which is like how do you think about your relationship to risk and money? Because that's a big element now looking back at
ya. Definitely it was expensive decision. The way that I think about risk is I really I mean Jeff Bezos I think is kind of famous for those sort of the regret minimization framework, but I think I have one life and I want to spend it doing really interesting things learning lots of
tough working with really interesting people or even just meeting interesting people and not necessarily even having the chance to work with them. I think that's just so much of what gets me excited about my life and getting out of bed starting a company is just fundamentally different from working at a company even as hot as Pinterest was like I just felt like very quickly. I sort of post product-market fit you kind of become a cog in the machine you kind of figured it out and now you're just iterating you're optimizing your scaling and that just wasn't as exciting me as starting the company raising money from it.
Esther's meaning people like Max election, really really figuring out like do I have what it takes to do this? But yeah, it was expensive.
I totally got it in terms of kind of meeting those incredible people that you know as investors. We got to meet incredible people incredible Founders for a living which is why I think it's such an incredible job quite frankly and you recently raised a rolling fun with AngelList straight off the bat thought for me is that bluntly sahil? Why did you choose to an angel is rolling fun? When you could have done? It caps normal fun like a micro VC fun like my 20 VC fund and how
Did your
Embrace? Yeah, the truth is I never really intended to be a VC or to have a fund and there's this sort of concept of activation energy and with a fun. You just have to pick a number you have to sort of spend potentially weeks or months raising the capital and you can't tell anyone about it. So I couldn't use my sort of like primary asset which is my Twitter account. It was just work. It would it just felt like I couldn't start small. I mean I could start small, but then I'd be stuck at that small amount right and when they've all told me about rolling funds it
Really just open the door for me because I could start very very low my initial goal was $100,000 a quarter and of all was going to Anchor the funds. So I was already a good chunk of the way there and it just made it easy going back to what we were talking about before. It's that friction piece, right? It's like the onboarding experience. It's the zero to the aha moment an angel is just sort of like destroyed the friction there all these questions like well, what is the cap? Who do you want to raise from? Who are you going to talk to people about like, do you have to make a deck and all of these things that of course I could have done it probably but just the sort of
Of the cognitive overload the cognitive overhead. There was so high and when Angel is said look, you can start at a hundred k a quarter. You can write like one check a quarter and it can grow right it can grow organically over time. And by the way, you can talk about it publicly. So you don't even have to have a hundred meetings with all due people. You can just have one tweet that reaches a hundred thousand people of which a hundred people will want to be LPS and that really sort of was like wait a second that's interesting. So it was a combination I think of the lowering of the activation energy, but then also sort of like very much in my wheelhouse.
House around transparency and sort of being open and talking about stuff on Twitter. It fell like product Market fit.
I totally get not in terms of feeling their product Market fit for you. I guess my question is subsequently that with the removal of friction, you'll see this kind of explosion of new entrance. If you just think about traditional kind of innovation Theory many exciting. This is like the new vehicle that's going to seismically change Venture. How do you feel about that? You think it is this seismic shift or bluntly and I don't mean this Ruby to do you think it is kind of a game of the 1% and you do have the distribution you do have the gum.
Road experience you do have the network. Do you think it's like the theory of the 1% Yeah. I mean, I think
it's really hard to know ultimately. I'm a big believer in democratization. I think gumroad fits very much into that making things that were previously inaccessible more accessible making things cheaper making things faster. I really believe in those tenants and I think you're right. I think it is a little bit of a 1% game certainly just like any sort of democratized system you end up with a power law when you have a few people at the top that are absolutely killing it and then you have sort of like a lot of people that are doing okay.
A and I think that will probably happen with rolling funds. I don't expect to see hundreds and hundreds of hundreds of emerging fund managers all managing these really big large portfolios. I think you'll see probably a dozen or so, but I think it matters at the most critical juncture in Venture, which is early stage, right? We're never going to see hundreds of billions of dollars in Rolling funds in my opinion. But what you're going to see is all of these companies that might have failed that were able to raise a hundred K here 250k. They're from these new emerging fund managers that have these different networks that have these different LP.
Aces that are going to lead to much more interesting different diverse companies getting started and continuing to get to that next stage traditional Ventures find Andreessen Horowitz is not worried about rolling funds taking away their business. I really think it's additive and it's going to create all of this new opportunity for LPS to get into the system, which I think is going to be great. It's going to teach a lot more people about this great asset class that I think is incredibly undervalued still which is early stage Venture. I think it's going to get more GPS in the system. I think Founders are going to like it because they can pick more they can
From a broader pool of people and ultimately I think these will like it because they're going to get more companies are going to get to a series a series B stage because of these rolling funds in my opinion. I think it's a mini great
change. Can I ask them? Why do you think that early stage is still so undervalued because out for me right now. The pricing is just at a level where I've never seen it before what makes you think it's undervalued. I think it's
undervalued as a system. Right? So you're seeing a few of these deals. I get super hot and these yqc companies that raise at least 15 20 million dollar caps.
Soooo, and effectively it sort of product quality Etc like precede stage, but I think there's a much broader group of companies. That should get started employees like me that should leave the companies that they're working at it starting new companies that it's sort of like there's those big Winners and then there's nobody else and I think there needs to be more of the middle there needs to be more people starting companies and I think VCC this I actually think that would sort of depressed prices because certainly like there's only so many amazing startups that those startups are able to come and these valuations and I actually think sort of
Supply demand if you see a lot more interesting companies, you might actually see a depreciation of sort of a depression in the prices and vice versa. Like I think more VCS will do this kind of same thing. I think it's just good for everybody. Simply. I believe in free markets, right? I believe more competition is generally a good thing and I think this is just creating more competition which is going to be better for the customer whether the customer in this case be DLP or the GP or the founder or the employees, right? And also I think employees will have better options in terms of the companies that they going to choose to work for and learn
from I think as
She'll have an impact on series a pricing you're right because with the increasing supply of like good seed companies, obviously the pricing pressure for the a is less because there's less for me personally. So I think you're right. Actually. I hadn't thought about it in that perspective in terms of the downstream pricing pressure. So that's super interesting and I mean on pricing like we chatted before the show about certain companies raising it as we said it kind of high valuations very early with little show for it. I'm interested like especially with the founder had on you notes. I'll it's such a fascinating perspective for me to a ski, but like how do you feel about current pricing now?
Ambassador how do you assess price sensitivity having been on the other side of the
table? Yeah, I mean again like kind of like going from an early employee to a founder and having empathy for the early employees. I think hopefully I can have a similar thing being an investor and having empathy for the founders and ultimately look investors like to say that you should raise less money. You should be sort of really careful as a founder and higher sort of really efficiently and be Capital efficient Etc. But the truth is look like VCS want their same rough allocation and that roughly means that a
he's going to get hit with the same dilution if they're raising a million bucks or 5 million bucks or 30 million bucks. Frankly, right? Everyone wants their 10 15 20 25 percent depending and so I think ultimately Founders should raise as much money as they can within reason and the only way to fix that again is to sort of just fix the system just like get more people in the game. I think that's just going to be better for everybody. The truth is look if I have a hundred million dollars to spend as a VC and there's five companies versus if there's 50 companies right? Like each one is going to get a larger chunk. I don't know where things go.
I think people have been calling it a bubble and frothy for a long time. I think often when people say that it's actually the beginning of much more frothiness. I think software is an incredible force and I don't see that going away and I think it might be like Bitcoin where people have been constantly saying it's undervalued or overvalued and it just hasn't been to date right people have been saying this about many Tesla. For example, the core belief I have is like software is amazing software is like the sort of most fundamental shift in society since sort of the printing press and writing and currency before that and
We have yet to see the true impact and software could still be early. It could still be sort of like the first inning per se of the game. I think and so yeah prices might be too high. I think that's probably true for many companies, but certainly there are unicorns being started right now. You just don't know which one is they are so for some of them they're going to look like great deals in hindsight. I remember stripe in 2009. I believe raise their seed round and it was two on 20 and this was 2009. And guess what that was like the best deal you could adopt right? So ultimately I think you mentioned it somewhere else, but you basically have to look deal by deal. You can't have an
Absolutes don't work. I think you have to look at a deal by deal really vet the founders and say look does this make sense for this company at this price and decide to do the deal or not based on
that and ask question that I'd love your advice on Archie and it's something I always late on a lot me. No, I'm not going to do this company we chat about before because of the price it is just so high and let me it's a stretch too far for me personally, but my question she was actually on the turndown bluntly. It's something they haven't nailed if I go into the kind of thinking on the reasoning why I get pushed back and if I don't and I say something very fine. I'm sure.
It but direct I get can you please expand on why not from your perspective and especially again with the founder had on? What's the right way to perfect the no that's super
hard. I don't think there's a good answer what I've done so far as to say. Hey, thanks for the time. It's not a fit for me right now. Thanks. I'll I basically have a canned response. I type it out every time but it's effectively the same one occasionally people will say. Hey, can you expand on this? Currently? I say sorry, like the only feedback I could provide as money if it's a good fit. It would be like going to open a i and being like hey GP teeth
Why did you say this? Right? It's just such a complex equation that's going on in your head that you can't really articulate. So any time you try to do that you're going to fail and it's going to come off as inauthentic or vague. And then even if you really put a lot of thought into it, the founders will often sort of say well, you know, you said it wasn't a big Market actually is a big Market. Are you said this but it actually this and ultimately becomes like sorry the answer is no like I'm trying to leave the party right now and you trying to keep me in or you know kind of thing. I think ultimately what I want to do is write a document that says look these are the reasons that I
pass on companies and then I can just send people this and say hey look I can't tell you in this specific case why I pass on your deal, but I can at least provide you with a sort of aggregate view on as an investor what I look for and when I decide not to invest even after taking one or two meetings, why why that might be I wasn't excited enough about the space or the market. I felt like the go-to-market was going to be really tricky and frankly. The number one reason I passed is the founders. I just am not impressed by the founders and how can you say that right? How can you tell someone to their face? Sorry?
Reason I don't want to invest in you is because of
you then you have the opposite of most people lie and say it's something else and then they iterate on the fuel. That's yeah
wasn't shortly. That's the worst right? You never want to do that in my opinion like that is sort of it's better to say nothing and to sort of lead a Founder off track. And so I hope that my sort of silence is sort of like for this sort of the the perceptive Founders like actually a good signal for them. They can sort of think about it. And this is sort of like me speaking to Founders and I do want this. I do want people to ask me questions, but often
It worries me. When sometimes you have to go to a total stranger that you're asking for money for feedback. Right? You should have people in your life. You should have friends who've done it before you said Founders that you might have built relationships with maybe worked for before you should really have a group of people that you're getting feedback and iterating sort of on their feedback first before you go to VCS and people you're really trying to form a more business relationship with because those people will really have skin in the game within your trajectory your success and tell you the stuff that's really hard for others to the incentives.
Aren't really there for VCS like us to sort of really say look, you're just not impressive enough. You need to go work at a company or do this or do that for a few years before? I really am going to be sold on this opportunity.
I totally agree in terms of the incentive structure if that's the reasons to not do it, you know, if you think about the reasons to do something that's kind of people product and Market could be kind of categorized as three of the main ones and I've had a near a cliff say on the show before I see her amazing Market. Okay, people market wins amazing people. Okay market market wins. How do you think about the prioritization of these?
Three. I know he'll add kill you. I'm sure it's probably both of mutual friend of ours very much favors Market. Where do you stand on your
procession? I mean, I think of it like a math equation and I think the simple one is value equals Market times people. And if one of those is a zero, it's not worth it. Right you need both. I think you need a large Market. You also need a team of incredibly qualified people. One thing that I think is underrated in the Venture community. And I think this is part of where the distance between VCS and Founders I think comes from one of
Things is time Horizon, right because like for example gumroad it took me seven eight nine years to get to a place where government kind of is considered like, you know, where 10 million in Revenue doubling every year but that's because of a macro economic shift namely covid that just happened out of the blue and it took nine years to get to and it was sort of considered a write-off literally a write off by Kleiner Perkins two years ago seven years into the company. And so you just never know and I think ultimately the reason the market is so important to be seized is because you need to get from 0 to 1. That one has to be really large.
You have to do that within a relatively short compressed amount of time. Right? Because irr it sort of annual return is really really an important metric for VCS. But is the founder look if I make 50 million bucks and it takes me nine years or 10 years or 15 years. Look I'm going to be alive for a lot longer than that like that's going to be life-changing money for a good chunk of my life regardless, and I think that's part of the reason I think people are so biased on the ventricles sort of investor side to Market is because it's really sort of signaling how fast can you get to this point right? Because if you spent 5 years on a different thing and you have a great team
Profitable you can kind of do whatever you want and then you go solve this problem it just too long. It's just too long for even a billion-dollar potential exit to look really really really meaningful. If it takes you a billion dollars one founder. I talked to he's building a Content company use the example of Marvel. He's like look Marvel built in four billion dollars so company and I'm like that companies 50 years old, right like frankly, if you're talking to a venture investor and you can even guarantee a promise of four billion dollars in 50 years. Most people frankly are not going to be interested in that deal Founders on the other hand might love it employees might love it customers my love it.
Well is obviously a beloved brand but the truth is investors Venture Capital investors who are typically investing in software are not going to be that excited about that kind of
opportunity. I totally agree with you in terms of time Horizon is tough because also you just have like fun life cycles and fun structures only be 10 into and you're like, ah, even if you want to this is what is challenging actually even if you want to is so challenging because you go back to an LP base and say hey we're doing 30-year fun structures. They'll go no way. Yeah, totally it is not see it. Yeah, it's hard.
Question for you, and I've done episodes before with that Brad Feld Jake loner on depression and struggling with personal happiness when you have things like the Kleiner riding you off. How did that feel? So if you don't mind me asking and how did you kind of go through it?
Yeah, I mean it was brutal. I mean I put all my eggs in one basket. It doesn't matter how tried it sounds to say look most companies fail and this and that the truth is when it's you and your life and you have to do a round of layoffs or you have to kind of leave San Francisco because it just doesn't feel like a fit for you. You're basically
You saying like that thing that I spent years and years of my life. Basically one-dimensional Eon was wasted that's what it felt like the time now, I realize it wasn't wasted but at the time it certainly feels like that and it's a public failure like TechCrunch wrote about it and everyone knew about it in the industry and it was just like, oh this kid who raised a bunch of money and was maybe the next XYZ actually wasn't it was hard and honestly took me years of sort of distance physical distance literally to get past it and I think it took being in a community of people specifically
Utah I just started writing and painting and really just not thinking about gumroad more than the four hours a week. I was doing support being around other people who didn't also care that really allowed me to kind of like Port their priorities and they were like, how are you doing? How's your family? Are you married like their concerns kind of over I did mine over time almost like pneumatically and eventually I was like, oh, yeah. I also have a company but that's not the core thing that I'm known for here. And it really helped me kind of like get through that but it was tough it took years and I don't even think I internalized I remember meeting with John Lilly who's one
of my old piece of really great friend of mine and he was like, yeah dude after that when we met up and after the layoffs and everything like I didn't want to tell you but you just like look like death. So it does take a toll and I think there's a sort of a self-defense mechanism that you won't even be able to realize until after the fact how brutally you might have suffered through
it. I have a nice talk about it so much shameful because it really is an insecurity of mine. But you know, you were very young and you achieved a lot of very young definitely no more than me say but I put a lot of weight of expectation on myself especially kind of in the world Adventure and I hear people
Very nice things and I kind of really feel them and feel the weight to perform cats. What would you advise me putting all of that pressure on the weight of expectation and performance?
Yeah. I definitely feel there too. And it frankly it feels great. Right. It feels great that these people that you respect that you respect it for a long period of time are saying that you're doing really really good work and I do think that is sort of an insecurity that you need other people. I have it too. Like I need other people to tell me you're really good at this thing that you do this design or growing a company or hiring.
Or culture or whatever. It's like I do need that and I think that's sort of like almost like comes from a deep place that will never really be resolved. I think there are two things that really helped me one is an emphasis on patients an emphasis on look. I'm going to be alive hopefully for a long period of time and being in a good place long-term is far more important than having a few wins early patients was a really big one and then the other one honestly is that people don't really give a shit about you and I think that's great. I think most people care about a few people their family their friends some other folks in their life, but
Really? You just can't care about everybody. You can love everybody. You can love people kind of like Jesus loved everybody but you can't really sacrifice parts of yourself for other people like a parent would for their children. It's actually been really great for me to know that like look ultimately I want to make people's lives better. I want to give people money. They can go build companies, but it's roughly a business relationship and like we don't need to play pretend. We don't need to pretend to be amazing best friends all the time. And I want to make everybody Rich because they want to be rich and I think that's good. But ultimately like I'm sort of a means to their end and I think this is how I kind of
think about Twitter is like look I'm doing these things. I'm putting these two things out there to help people and if I'm not doing that is useless because that's the only reason I'm not making friends on the internet in a sense. Right? Like I made my friends I have my family. I'm happy I hesitate to talk about this sometimes because I'm not trying to come off as like jaded or cynical. I'm just saying look everyone has their priorities and it's okay. There's a functional sort of relationship in most people's lives and that's totally fine. And it's actually really healthy because then when you do things that are nice for people you're doing it because you want to you're not doing it because you feel like this is what you have to do to me. It feels really empowering to feel like I don't know.
Buddy
anything? Yeah. No, I totally agree. And I think it's a very important kind of insecurity hurdle to get over. So yeah, I think you should probably invoice me afterwards for that one. So I want to ask is you know, she's so much multi-stage money coming into seed now. I'm interested from your perspective. How do you think about the multistage money entering seed and there's a lot of Founders who have multi stage and then more traditional seed Farms. How do you advise them?
Yeah. I mean ultimately what I always tell Founders is luck understand that it's your job to build this company and investors.
Might say they're going to do a lot for you or do very little for you or what have you but in general they're not going to save the company if it's going to fail and they're not going to kill the company of it's going to Succeed In general the people that you raise money from if you're raising from sort of like pretty good investors. So that's the sort of I think super important. So ultimately like focused on the terms get a good price and then get back where I get back to your job building stuff. I think that's sort of super key, but it specifically to your point in general. I try to say look like you want to work with people who care about the early stage who care about precede or seed in my opinion like we raised money our priest
Round or a seed round back then it was called was 1.1 million Excel put 400 K into that frankly. If I could go back in time. I would have said no to them. I would have given that 400k a hundred K to four different people super Angels or Angels or even split it further. This is sort of before the party round became really popular because ultimately I think the most valuable people are founders. Our operators are creative people like you who actually just doing stuff right there not always thinking a hundred percent of the time about investing. I think career investors are just not as valuable because frankly like the sort of on the ground.
Ground experience of building distribution building a product that stuff is just so difficult to read about you just have to do it to to Really grok it and frankly the same thing multi-stage investors like they're so good at like getting from series a to IPO. I'd like I guarantee you I cannot help you IPO your company Bill girly probably can and you should use those resources when you need them and you might be sort of paying for things that you don't need yet. That makes
sense. I mean speaking of pay for things you don't need yet. I mean, I've never seen such aggression towards preempted.
As we see today, it's really not necessarily a negative thing, but it's just mind-blowing. How do you feel about the rise of preempted rounds as aggressively as they are
today? Yeah. It's interesting. I mean I think VC is they know that there's only a couple rounds that a company will raise at sub hundred million dollars, sometimes even less in the case of something like Clubhouse and you need those you need that win. Right? Like if you look at the sort of the last 10 years you look at who Burr and palantir maybe and Pinterest and slack and square and there's probably a dozen sort of 10.
Billion Dollar Plus companies twilio Etc. And you need those if you're a billion-dollar firm. So I just think yeah firms are really trying to make sure that they find those companies early. They're willing to have a portion of their van. Daan sort of option calls per se where they're able to spend millions of dollars alone millions of dollars to sort of get into these companies to know what's going on to have information rights so that when this company is ready to raise twenty Thirty fifty a hundred two hundred million dollars, they're going to be able to get into those rounds. I don't know if that's good or bad in general as I mentioned. I'm kind of sort of a pro cop.
Titian person but it does as investor, I'm like dang it. I'm makes my life a little bit harder because ultimately I can't compete on that level right if you're raising 10 million bucks like yeah. Sorry. My 250k is not going to do anything for
you. And you did it party around cause how do you feel about party rounds? They seem to have come come back in many senses today.
I'm a fan honestly. I mean, I really believe I can speak as a Founder. If I were to raise money again, I would raise from a coalition of people. I just think it's way better to have people like you me J and J Brand came. Well, right.
And Hoover like why would you want a group of amazing people on your cap table? 10, 15 20 people maybe even more than that potentially. Now, there's sort of the reggae plus table you can do crowdfunding for Equity. Like I just think it gets so many more people in your corner. It kind of almost crowds out the market in a sense against competition ultimately again, like the money is money. You're not going to get an insane amount of help from people and so optimized for good signal optimized for a sort of like low touch investors that are going to bug you and a good way to do that is to raise from like a good guy.
People raise her many no one's writing a huge chunk of the round. And so no one's going to feel sort of super entitled it and there's a lot of pushback a lot of VCS, especially sort of push back on the party round. They say look when you're ready to raise an A or struggling no one's going to do the pro rata or they're not bought in for you. But ultimately like that was the case for me. Anyways, like firms are again going back to what we talked about before. They don't owe you anything. They're going to make the right business decision at the time and I look I just want more Founders in my email list. I want more Founders in my DMs. Like I just like Founders. I like people who build stuff and raising money from a bunch of
Founders be a party around or whatever you may call. It is a good way to do that to kind of get that Financial incentive alignment
going and the truth is if you're not performing bluntly, they're not going to do your a anyway, but exactly an affair and that's a different challenge signaling risk, like people talk about signaling risk
a lot. But ultimately you're right. If you're not performing it's going to be brutal and sort of Optics around your round two years ago is not going to really make or break it in my
opinion totally and I absolutely agree. I also find that actually if you are aligned in terms
Having a purely seed from play or seed investors like us bran jmj round and told you name them. We're incentivised together in a line to get the best price on the next round. If you're a multi-stage fund or a larger Fund in early. You don't want to price optimized for the next round because you want to put a bigger check in it would be against your interest to optimize surprised because you've already got a Jack in and you just want to build ownership. Do you know what I mean? So you'll miss the
line. I mean the way I think about it is look I wanted write a check into a company and then I'm done with the sales process.
I know roughly where my allocation is going to be and now I'm just excited about helping the company build it when they need help and the problem with VCS sort of the multistage folks is they're always thinking about well, they're not done. They're still in the sales process. They're still kind of trying to potentially get in there. It's still sort of in a sense of negotiating and thinking about these things. Whereas I really just I want to clear my head and I just want to be like look cool. I did the math we figured it out. I wired the money. This is what I got. Sure. I'll do a hundred percent of my Pro rata. Hopefully in the next round beyond that I'm done and now I just get to help you build this thing.
And I just think it simplifies a relationship a lot. It just makes it really really really
transparent. I haven't thought about that ongoing sales process before that's fascinating. It also means that you can't have quite so open and free discussions be it co-founder challenges be a head of sales leaving be it. Whatever that invested totally. Yeah, that's interesting. Tell me final thing before we move into the quickfire. If you told you will they start out which is a good sign but in times when you name it the 20-minute VC what an idiot, I was we distribution is kind of quarter both you and me in terms of offerings.
Patrick Collison endorsed yours, I mean my word that street cred and a half, but tell me in terms of like distribution and brand how do you think about it and assess your own personal brand especially stay as an ambassador?
Yeah. I mean, I think and of I had a really great tweet about this he said brand is sort of a lagging indicator of who you are. Right? And I think that's pretty smart. I think you are who you are word gets out. If you're a good person. If you're a bad person. I think you can sort of Quicken that feedback loop if you're really a public and you talk a lot and you write blog posts and Founders talk.
You more often but for example Patrick Collison, like I was helping out with stripe and showed I was a sub hundred user of stripe in 2011 gumroad actually launched before stripe launch and he tweeted about this and is incredibly kind way this year, right? So that's like a nine-year feedback loop of my sort of my quote unquote brand and I do think about it a lot and I think it is really important. But again, it goes back to what I was saying before which is I just want my brand to be I genuinely want to help people and every time I tweet something and I sometimes I break the rule but I really say is this valuable this is valuable for my audience and I think ultimately you're just like a product right?
Look, you can do all sorts of cool stuff stripe as beautiful designs But ultimately is it valuable for your customer? Are you really genuinely solving a problem that they have and that's going to be the tell as a VC for me, right? It's going to take a lot longer. It might take five ten fifteen years to say ho so I was this quality of an investor. No one really knows I can fundraise I can go on this podcast and say hey if you want to be an LP, you can visit shl that vsport /lp and check it out and let me know that's cool that goes in line with my transparent brand but ultimately Founders don't give a crap about that. Right like they want to know that I can help.
Them that I don't annoy them if things don't go badly for them that I don't leak any of their information to the Press etcetera etcetera etcetera and I think we're gets out. I just think ultimately I'm gonna die things will get leaked slack screenshots will get posted on the verge whatever happens will happen. And so all I can do is conduct myself. I like a high level of integrity and work hard and do these things that I already do and the word will eventually get out like Patrick tweeting so nicely about it.
Yeah. No, I thought that was very special to see but as I said, I do want to dive into a quick fire round. So I say short statement hairstyle and you give me your me.
Idiot thoughts about 60 seconds per one. Are you ready to dive in? Yes, but what's the favorite book and why? Yeah, I'm a
nonfiction side. I love how to win friends and influence people. I know it's a terrible title, but I just think it made me self-aware and made me think about in this conversation. How do I sound to the other person? So I absolutely love that book on the fiction side huge fan of books Scifi books, especially doing foundations. No crash Jurassic Park. I think it just helps me be optimistic about the future. I get excited. I work hard when I feel like I can contribute to this larger vision.
That humanity is just so early in its life cycle and like life's going to get crazier and crazier and crazier and that that makes me excited if I felt like we're plateaued I just wouldn't be able to really get that excited about working hard. I
think he's most memorable board member you've worked with and
why yeah, so Michael Abbott was on our board at gumroad. He was awesome. He was the VP of engineering at Twitter before he became a partner at Kleiner Perkins, and he was amazing. He let me do whatever I want maybe too much honestly, but he just listened and he pushed me on certain things and I highly highly recommend and when Gummer was going
Through their sort of we're going to have a hard time raising our Series be that sort of a year. Long time. He was like look we can stop doing the board meetings. Like just let me know. If you need me. I trust you to sort of I know that you care more about driving this car than I do. So like I'm Gonna Leave You to it and I and that sort of trust sort of meant the world to me at that
time. What's your biggest strength in your biggest weakness?
I think my biggest strength is that I'm just really confident. I really believe in myself. I think that's really important. I think there's so many people who will tell you not to do that for some reason and I just think that's a big strength.
And I think biggest weakness would be that sometimes I say things that I probably shouldn't have said I said them too early. I had to high conviction to early on. I've been canceled for a couple things that I've said on Twitter, but ultimately I try to turn every weakness into a strength. I think that feedback loop just makes me better and going forward.
What would you guys like to change about the world of venture? So he'll
yeah, I just want to make Venture more open. I think there's so many cool things that I've learned I think venture capital is a phenomenal product. I think it should be way more widespread and I think the tech industry is so amazing because you can see all
These Founders and employees talk and share stuff on Twitter and dribble and hacking use all the time. And I think every industry and including Venture Capital could benefit from more of this stuff. Just being out there and open for everybody to see I think that's going to make everybody
stronger. What do you want to achieve with the rolling
funds? Yeah. I mean rolling funds. I think it's so early to see what really happens there. And obviously there's been in the Zeitgeist a little bit. But look, I'm just excited to see change. I'm excited to see experiments. The truth is look like Venture Capital doesn't innovate that often the fact that it took like a couple funds and not mad.
To funds by any means to really kind of focus as I guys means that probably the Venture Capital industry should be innovating a little bit more we invest in Invaders, but I think we might want to do some of that ourselves a little bit more and I like the idea that I contributed a little bit to sort of making the industry think oh maybe the ways that we currently think about how we've set things up might not be perfect. There might be room for growth and Improvement
here. What is a success? Who's the first person that comes to your
mind? So many I mean like Bill Gates has been a hero of mine for a long time, but I think his rise into the sea of Microsoft and sort of I feel like here
Almost had a rebirth like he figured something out. He went on some trip metaphorical spiritual or literally and figured out that maybe that's not how he wanted to spend his time. And I think making that decision sort of having your identity tied so strongly to a company as big and large and important significant to this sort of history of humanity really as Microsoft. I think must have been a lot of work for him. And so I just think like I want to get there I want to feel like I can sort of really sort of be my own person outside of something as sort of with that gravity as
Microsoft tell me the most recent public. He announced investment and why did he say? Yes and got so excited.
Yeah, Clubhouse is probably the most recently announced one. I did a small check into that company. I have known Paul Davison more recently gone a no Rohan the other co-founder since 2012 when he built a company called highlight and I think I encountered that at South by and it just perfect perfect founder product fit for when you listen to that guy talk about audio in the future of audio and sort of this sort of serendipity of it and the sort of the one degree off connections. There's so many things that he clearly loves and he's clearly thought about for ten plus years of his life that I
I just want to see someone like that like finally get a chance to like take a crack. I'm consumer socialist. So brutal that when someone finally has some semblance of traction and scale and he finally gets to kind of like explore some of his ideas around this to a sort of an execution. I'm just I just look love backing people like that. And I think it's a great product and I think some of the conversations people have been able to have on there people they've been able to meet I think that's sort of the beauty of the internet. I think he's sort of signals like a sort of the end of an era the beginning of a new era on the web and I'm just excited to see what they do
and it's not totally agree with you and I couldn't be more excited.
Also put a check in so that's very good to hear. But listen, honestly say I live audiences from such a long time having been a fan from afar. So thank you so much for joining me today.
You're welcome. Thanks so much for having me.
Absolutely love that discussion with sahil. And if you'd like to see more from us behind the scenes you can on Instagram and H stabbings 1996 with two bees. I always love to see you there. But before we leave you today, I'm sure you've heard about it. But my word there is a product that I love Carter cotton simplifies how startups and investors manage their Equity track Camp tables and get valuations go to kasa.com /to zero VC to get 10% off more than 800,000 employees and shareholders use quarter to manage hundreds of billions of dollars in equity and cotton out.
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