What next? (Notes from Feb. 17 – Feb 23, 2020)

So, we are into September of the pandemic year. Fires, hurricanes off the Gulf Coast, bubbliness of tech, political turmoil, and chaos in general driving the narratives. I know that it’s been a while since we last talked. Whirlwind of finding a new place (without seeing it in person), hiring movers, figuring out the best way to move, when to pack up from my place, when to pack up everything in the girlfriend’s, moving physically, purchasing new furniture, building and organizing has swallowed almost all of the time and sapped creative energy. Pile on to that that there were fires in southern California that had reached our new paradise, enveloping the sun. Suffice to say, we finally enjoyed a weekend (still very active, though) and now room to breathe this week brought me back to WordPress.

You know how many boxes there are in moving? I can completely relate to streamers or Dave Portnoy’s adventure. It’s rough. Covid seemed to jack up prices, as well, which seemed annoying. People that had moved double the size and similar distances were 30-50% less simply due to covid risks, I suppose? The misunderstanding of how contagious or how volatile the infection is clearly resulted in a few industries that got to take advantage in the name of “safety” (moving holds the same risk as it normally would unless you weren’t being cautious/careful in who you hired and brought onto jobs employee-wise). But hey, in options, you pay for the tail risks or you implode.

I still think drones or a body camera that projects out house / apartment layouts would be fantastic for realtors, buyers, sellers, websites related to the space. However, I’m more convinced now that moving companies could do a quick consultation of job requirements with them, designers could customize spaces with accurate measurements of space (blueprints / measurements of rooms don’t do justice to the nooks and crannies, as well as the ‘efficient’ space there may be with windows, shelves, etc). I know that various websites have independently done ‘customize your room’ with their products but if there’s an easy way to copy/paste urls or route APIs with image requests to an easily-replicable copy of your room (a la body-camera / drone), you may have an easier time selling across many products/offerings/sites.

Again, the drone technology continues to improve, so it’s possible we’ll have this or something from the phone to test out as image and object recognition improve. Could likely hack together something that did this. Attach a camera to one of those Costco drones that are $15 that are supposed to stay above ground upon simply detection of walls.

Anyhow, take a look at these awesome founders and investors that I listened to on various podcasts. The mix of serial entrepreneurs, big tech aspirations and side hustles was very fun to listen to.

• Ashton Kutcher, Founder & GP at Sound Ventures (20min VC 2/17/20)
  • Portfolio including Lambda, Calm, Gitlab, Affirm, Bird and others
    • Ashton’s wins include Spotify, Alibaba, Skype, Airbnb, Optimizely and Time’s 100 Most Influential
  • Started at Univ of Iowa studying biochem engineering – power of a computer and learning to program
    • Piqued his curiosity but he wanted to be an actor – started a production company at 25 (reality TV including Punkd, Beauty & Geek)
    • AOL Chatrooms early on – marketing Dude, Sweet in various rooms – continuation in marketing movie
    • Buffering speeds increasing – content would be digital
  • He wanted to find companies that could quantify distribution of content and accelerate distribution of content
    • Met Sarah Ross over at T/C, working for Mike Arrington – hired her to run his digital divison
      • Introduce me to everyone that matters in the Valley (T/C 50), Jason Calacanis, Mike Cuban, Kevin Rose, etc…
      • Asking all the questions – made his first investment into Optimizely (A/B testing platform)
  • Arianna Huffington as how does he introduce himself – as a father, first, apparently
    • Future of internet are perpetually young, tech capability – learning and an ambition for new/useful/different
    • Cutting edge of technology became his 3 teenage step-daughters so he mined them for ideas (as he was 35+)
  • Major VCs and partners have a technical background, as entrepreneurs formerly or study to allow understanding of tech
    • Toward companies with technical innovation and build company off of it – but isn’t their first lens
      • Cultural narrative that may be important and valuable that you can build a product from
      • Example – #metoo as here to stay or enduring – shift towards filling the void as rightful demand
        • Looking at fertility space as trend for expansion
    • Send a snapshot of the home screens for people’s phone on Twitter/Instagram and source ones he’s unaware of
  • Most brilliant people going to companies – which – did a survey with the founders
    • Distance traveled by an individual – $1k to $1mil, a dime to $100k (as incredible)
    • Growing up, he would probably say that his twin brother going through a heart transplant at age 12
    • Going through a divorce of his parents that was tough
    • Companies failed that didn’t feel good – not particularly rough since there are multiple
  • Strong intuition in products not familiar – hard to get familiar
    • Eating the dog food – before investing in Airbnb, he lived in them for 6 months
    • Apple-ification of app ecosystem for UI/UX, enterprises getting smart also
      • Consumers would use their enterprise software and to use the nomenclature would be better for their CTR
      • Understanding what people want and simplify that – 3 things on a screen, where would you put the most important
  • Spending time with founders mostly
    • Ability to increase distribution funnel (his 5-10+ million Twitter followers), Spotify gave him an affiliate site with a discount code
    • Largest music management side for partner, collective on branding and helping
    • Versed on being in PR – public mistakes, apologize or utilize to get out of jams, crisis/preventative PR
    • Product-sensibility, where you want to be – business, also – what does a company need to measure
      • Which metrics matter, industry standards on metrics, how to improve them
    • Portfolio manager from growth team on Stripe that works with them – narrative/storytelling
  • Scaling angel to much larger institutional checks – Ron Conway was one of his earlier mentors, as well as Dan Rosensweig
    • Cap table becomes your early board – value add outside of employees, low burn, grow team, disciplines
  • The Undoing Project, Scale by Jeffrey West, Trillion Dollar Coach about Bill Campbell
  • Misnomer about him – he’s cold (social animal, but super awkward)
  • True happiness is being able to take your time
  • Biggest challenge – Building a high quality team is hard with Sound Ventures
  • Celebrity investing rise – lot of people are going to lose money, Wish he’d known: kindness doesn’t always come back around
  • Recent investment with Sound Ventures that he’s excited by – Community (partner helped incubate) – luxury text messaging
• Jude Gomila, Founder & CEO at Golden (20min VC 2/10/20)
  • Self-constructing knowledge database built by AI and human-intelligence
    • Raised from Founders Fund, a16z, SV Angel and others
  • Also a successful angel in 150 companies including Carta, Airtable, Superhuman, Gusto, Linear and others
  • Jude started Heyzap alongside the founder of Mercury, Immad
  • Passions around tech, learning, universe working – physics in tech form (hardcore engineering) or abstract theorems (randomness/computability)
    • Never wanted to work for someone – wanted to build things, but wasn’t aware of tech scene in London
    • In uni, at 18, he wanted to start a company – formed a consultancy with a few friends
      • Large Chinese manufacturer of egg packaging into Europe – wrote a plan to how they could do this
      • They wanted them to run the business – he called every farm in the UK but they didn’t want to change
    • Wanted to find something they could do themselves for a product that people would want with margin
      • Digital photo frames – own brand into higher side of market – surprising
  • April, had burnt through YC money and wanted to raise a round for Heyzap – 6 per day back to back
    • Not impressive investors, go back on their word, converged on better investors instead
      • USV pitched and they got the deal – Naval and USV for board – cool conversations on angel investing
      • Mechanics on legal terms, contracts – part of something larger
    • Put all of his money into angel investing in the next 7 years, advising as well
  • Reality is out there, fairly objective – all follows similar rules, working together
    • Ethics – both sides should have ethical framework/grounds – how to act during exit or bad situation
    • One side making money, one on future – is it to top Roth IRA or something else?
    • VC wants you to win the gold medal – that’s what is important because of model
      • A personal best for you is better risk:reward, $20mln or 50 or 100 that’s fantastic, but not for VC
  • Praying / spraying – he doesn’t like the praying part – more rational
    • Numbers do matter, so spraying doesn’t fit this
    • If there are nonlinear returns, you have to do 10-20+ investments (since network effects are nonlinear)
      • Nonlinear market caps of monopoly or something like this are higher but capped at $1tn, likely
    • Need to see different learning processes for various investments – has a lot of bullets and time
    • Red/black flags for situations that you’ll always say no – yellow flags that you may be able to fix
      • Markets and dynamics shift, but not human behavior – processes that identify these are very good
  • Ability to get in to deals – how did he convince founders to take the money ahead of market?
    • What companies need to exist? Knew that Paychex and ADP were terrible software, similar share, org charts broken
      • Put it into a blog post of ideas that he wanted to see. Simple UI and great CX around payroll.
      • Talked about culture of Gusto that wanted to exist and be unique. An hour of no business stuff, just the culture.
    • Difficult to say whether you have confirmation or not – didn’t do well for a certain reason, can go again on the hypothesis (2-4 times)
• David Sellinger, Founder of Deep Sentinel (OkDork w/ Noah Kagan, 2/14/20)
  • Early Amazon work on ad-buying tech & first AI systems, directly with Bezos
    • Started RedFin, real estate, as a side hustle (8pm – 4am)
      • UX as the centerpiece, especially for investment deck:
        • They wanted to build quick, interactive maps, simple straightforward
        • He stumbled into Amazon after doing another ecommerce problem
          • Google AdWords in 2001 – $0.50 per click for niche products with 50% conversion and 100-300% margin
          • VP of Consumer wanted to go thru economics – $0.50 per click, $1 per conversion & repeated
    • Bezos funded Deep Sentinel
      • Provides 24/7 guards that monitor your home and best in market at a reasonable price
      • He’s not in a place to solve climate change or global politics, but can build this safety of people in their homes
  • Looks like Howie Mandel & he can pull it off fairly easily (but taller)
  • Line between crazy and brilliant is quite blurred – Shawn Parker for Kagan
    • Bigger visions? He has AppSumo where it’s like Amazon for software
    • Big problems that are chosen – in-depth interviews (Shawn’s with Fortune) realizing the craziness, intellect, drive to problem selection
    • Safety net for trying things worth trying because you get to rich, or super rich
  • Day he launched RedFin (after year of working on it), was on the front page of Seattle Times in 2004, Imran Real Estate
    • 400k visitors on first day – ISP called saying they don’t support porn sites (didn’t believe traffic numbers)
    • Left Amazon 2 weeks after launching
  • Believes that Amazon is a culture of Bezos – future holds more change than today, destroy the business today and go forward
    • Senior executives to try out and do this – categories that don’t work, Fire Phone, Amazon Music or Photos
      • David says he pays for Google Photos $150/yr – embodying the mantra
      • One day in 2003-04, advertised Madonna book “Sex” and lost $100k Google Advertising Project but they weren’t looking for it
    • Initially, Amazon didn’t run ads at first, for a while
      • If you’re looking at Samsung TV, you’ll find a cheaper or different TV for conversion
        • Had CATE algorithm (ML, Bayesian optimization) – stumbled on ad on website Code Red at Amazon credit card
          • No matter what they showed before that, the most profitable thing to show the user was this ad
        • Proved the ad was the way to do it – data backed it up (after saying it was terrible and they’d never do it as retailer)
    • Balance is always a judgment call – willingness to re-litigate with any suggestion by new data
      • Process of optimization vs innovation, Thomas S Koo by Structure of Scientific Revolutions book
        • s-curve with normal science (optimization – some paradigm to optimize with evidence), build up that the model doesn’t work
          • Early – matter was earth, water, fire and air before coming to atomic model
        • What are the things that don’t fit into the model – the exceptions to figure out a rationalization
  • Jeff giving advice to him while starting at Deep Sentinel, launching
    • Design of the product, speed at which they move, and willing to experiment with the way they interact with customers
    • Design award for being most aggressive camera – top part is LED light ring, battery-powered and was initially designed to not turn on
      • Changed it so that the AI turns on the ring and spins – accidental launch after his team came to him saying it
      • Camera will turn on red LED light on and say “we’re watching”
  • Top of funnel for Deep Sentinel – cheeky top of funnel, but tech is done very well
    • If you shoot someone, you’re the suspect, even if righteously
    • Israeli security system, and he does contracts for background checks – (In California, has to do that) – uses HireSafe once he does that
    • Mentioning that an Uber driver would be a security agent for a billionaire in the bay area – Noah asked him and it was $70k to sleep outside
  • All the pieces but what would keep you from being larger?
    • Markets can be very engrained and it’s a trick to get a customer to buy a different way
      • Enterprise – wiggle your way into customer market and then switch it
    • Nobody searching “cameras with someone that actually protects house” – should be this way, but not since people are used to others
      • Redfin as them figuring out hook – address searches, neighborhoods and data for it – found the customers
      • Have to take people buying burglar alarms and getting the market that they don’t work (99% false alarms)
        • 15% of LA County budget is spent on false alarms – once people pass yard sign, it’s ineffective
  • After his neighbor got burglarized, he went through and called all the security companies
    • ADT, Bay Alarm, Brinks, SimpliSafe, camera people, all standard questions – how does it prevent crime? How does it work? What do you do?
    • Salesman for ADT at his home, what’s the new tech that PREVENTS crime? “The sensor was wireless.”
    • Value was the slice of time in the interactions – AI changes the business process to make the human part efficient
      • Average home needs 24/7 availability for ~700 seconds of security a day – when people are entering or exiting the property
  • Intense decision for lifetime of relationships – pitched investors, got feedback
    • Bunch of his money in to build his prototype to do first tests, F&F of $1mil for in-market prototypes
      • Put together market research, addressable market, problem and pricing
    • Shasta with Series A went from $7mil to $23mil round, did it over tranches because hardware expense
    • Using other people’s cameras, 3 months, to get to own cameras and prototype about 18 months, then 6 months for market
  • Noah did his own checklist for “Operation Dragon Flame” to keep his house safe – reddit as one of the best in home security
    • CPTED – Crime Protection Through Environmental Design – active crime and other stuff
      • Front door with ivy, for instance, or a fountain with stones in it – rule #1 – answer the door
    • Ring as picking up because insurance policy and Amazon as the biggest thing for packages getting stolen
  • Peleton as interesting because of being expensive enough to only get people with the money, so they don’t even notice the subscription
    • Choosing to not give away the camera because of attracting the wrong customers
  • For Deep Sentinel in the future – looking at small business offerings and working on making AI faster, as well as faster hardware
    • New one coming out in 6 months, new stuff broadening platform
• Emmett Shear, Twitch co-founder and CEO (20min VC 2/21/20)
  • Starting Kiko calendar, just wanting an online, collaborative calendar
    • Getting funding and going to YC with a $15k fund for the summer – felt like they were doing something
    • Eventually raised $60k, used to build it out until Google launched their calendar
      • Went to sell on ebay – had a bid for $50k – took listing down because of 2 links they had
      • Ended up getting traction and selling for approx $250k – seemed like it was worth it compared to other classmates
  • Took the money and made Justin.tv with his cofounder – other cofounder had a visa issue and had to work elsewhere
    • Turned it into Twitch, saw how they had to change around 400 to managing people, letting go of product control
• Gabriel Weinberg, founder & CEO of DuckDuckGo (20min VC 2/14/20)
  • Physics major who didn’t want to do academia and startups seemed the thing to do in 99-00
    • Idealistic right out of college – started an educational software co that went nowhere – liked the industry, though
    • Tried to raise money but failed – started next company in the bust and didn’t think about raising
      • Sold but didn’t have investors or employees – just him and a partner
    • Didn’t take venture until series A
  • Bootstrapped DuckDuckGo until series A in 2011, 4 years in
    • Relatively risk averse, world heading toward data collection and saw privacy
    • Wrote every line of code, marketing and such
  • Some founders have lots of net worth tied up into company (uses himself as 12 years in to DDG) – take some money off the table
  • Data monopolies that underlie the data duopoly due to the network effects
    • He did a “do not track” litigation and he tried to put teeth to automatic parts for browsers
    • Scale of market and advertising auctions in place are much stronger than the previous generations of tech strength
  • One channel often drives the bulk of a winning strategy – experimentation in different channels
    • Diversification play for doubling down – ends up as creative solution
    • Andrew Chen’s “Law of Shitty Click Throughs” – over time, channels saturate and CTR go down
      • CTR used to be 30%, now 1-2% – with a new channel, can be through the roof
        • He was one of the original Reddit advertisers
    • Constant measurement to see if it’s reaching a diminishing return – trying to find next channel
    • Avoid spreading yourself too thin
  • Market is pretty big & DuckDuckGo has crossed 30% for market awareness – standard of trust online, be the consumer priv. brand
  • Traction trumps everything – metrics depend on business you’re in
    • Generally, if you have highly engaged users, you’ll attract anyone – no numbers/tractions is all narrative/storytelling
    • Numbers there – storytelling can be terrible and you’ll still be able to get funding
    • Marketing will only get you so far – PMF underneath – constantly find counter-metric of retention/inbound funnel
      • Look at both – for Gabe, his metric was # of searches (was public as DDG.com/traffic) and now they have apps/extensions for privacy
      • Tracker blocking, private search, browser extension and now look at MAU’s (and can’t track their users as policy)
  • Key is to keep business processes going – everyone on same page, develop them as 15 employees because of a distributed company
    • Scaled nicely once they figured it out but was chaotic at first – Advantage by Patrick Lencioni
    • Building a remote team – all organized and tactical – everything in one place so people can see
      • For them, it’s Asana (big view called “Our Current Objectives” – all projects and anyone can follow along, owner/responsibility)
  • Feedback mechanisms and culture of accountability – has to be built into the values of the company
    • Experimental mindset – fails are good if the hypothesis and data is there at the end, running a good post-mortem for experiments
  • Post-mortems for every single project – no stigma for them in the first place
    • Good projects have no blame – what could have been done better? What could change and nobody to blame?
    • Action items, templated and what went right/wrong/different
  • Wrote a book called Superthinking on Mental Models – what he learned is that you can skip to the strategic thinking
  • His first check into DDG was his own, but angel was Scott Banister that was a user who followed and emailed him to reach out
  • Tons of people that are great in Philly, but distributed surpasses this because being open to this creates a talent pool