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How I Invest with David Weisburd
E227: The Future of Venture: Ryan Hoover on Productizing VC
00:44:27
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- [00:00]
A
As I've gotten to know you recently, Ryan, I could see that you're a product genius and that you basically think of everything as a product.
- [00:14]
B
I love building products that can scale infinitely, that can provide value or help people while I'm sleeping. A lot of what we're looking for is secrets. We're looking for a founder with a secret. What are they seeing that other people aren't?
- [00:24]
A
So the question is, why is your 140 IQ better than another person's 140 IQ? And that's because of your lived experience. You have this, you know, what Ben Horowitz called earned secrets in this specific domain that allows you similarly minded person, as another very similarly smart minded person, to have alpha in that trade that other people don't have.
- [00:41]
B
Helping a founder when no one else would is I think, meaningful and important. The worst thing you could do as a founder is bring on an investor who is net negative and word gets around. Reputation matters.
- [00:50]
A
So when we last chatted, you mentioned that you are productizing LP intros. What did you mean by that?
- [00:55]
B
Yeah, I mean productizing might be a little bit generous. You know, as, as a fund manager. We're on our third fund raised not only as a founder but also as a fund manager raised before and it sucks. Fundraising is no fun for most people at least. And I have a lot of friends and a lot of people that I respect who, who are fundraising. So, you know, what I'm doing is a couple things. One, have a newsletter. It's very basic newsletter, but it reaches about 150 LPs, you know, maybe deploying, give or take $50 million a year. Some of these are small LPs, they're 10K LPs that could be helpful and value add in other ways. Some of them are institutional LPs writing 2.5 plus million dollar checks. So it's a newsletter and I just share what I'm investing in. So I've been investing in funds casually, just personally small checks to support people and for many other reasons. But it's just sharing what I'm investing in. And so there's hopefully a little bit of a signal there if I'm spending my own money and investing my own capital and sharing with these people.
- [01:52]
A
So you have 360 LPs. Tell me about how you went about fundraising from that LP base and tell me about the pros and cons of having such an LP base.
- [02:01]
B
Yeah, it's a lot. So we're, we're a small fund, we're $21 million by design. We like being small means we can write smaller checks and I could talk more about that if that's useful. But we raise from many, many LPs. We first raise a majority of the fund from existing LPs, so fund one and fund two LPs. Some of these are product investors from back in the day, some of these are people I've known for a long time, some of them are institutions. And then we raise the rest of it publicly. So our goal and strategy was we wanted to bring on an army of operators and founders, from salespeople to designers, you know, AI researchers, want to bring them on board into the fund, as is a sort of an extended part of the family of sorts. And so we publicly launched the fund, or maybe not launched, but we announced the fund publicly as if I was C fund, so that we could legally do that, and took applications from LPs. Some of these LPs wrote very small checks. It wasn't about the money. We were already almost at our target goal anyway. It was really about bringing them on board and getting hopefully support with the portfolio, with diligence, with investor intros, deal flow, that kind of thing.
- [03:07]
A
A lot of people might be thinking, oh, I'd love to raise from 360 LPs. We get all this value, add all this network. There's certainly downsides. Where are the downsides of having 360 LPs?
- [03:19]
B
It was, it was our first time raising from that many people. We'd had almost 100 LPs in our last fund. So it wasn't like we started with nothing but, you know, over 350 LPs, quite a lot. So the risk was certainly one. We could have a problem. You know, you never know. You know, when you take someone's capital, there always could be a problem with their expectations. We took applications and transparently, we, we wanted to accept capital from people who really understood what they were getting into. We didn't want someone who was expecting their money back in two years because that's just not realistic in early stage. So some of the questions we asked were to test that out and try to understand are they experienced in investing in funds or early startups. And surprisingly we've had very few issues. We had one lp, funny enough, ask for their money back. This is maybe two years into the fund and initially like, that's not how it works, you know, you can't just ask for your money back. But they had a good excuse. They're going to become a monk. They're like I'm going to be offline, I won't have Internet access in the future. And so we found a solution for them and it was a relatively small amount of money anyway. But yeah, we've had very few issues. Maybe one or two LPs had some issues with capital calls, but. But yeah, overall it's been a net positive for the fund.
- [04:31]
A
So 360 LPs, one month, couple of capital call issues, but other than that, easy. I think about this, the education aspect, the most interesting solution I've seen on that. There's a billion dollar fintech fund and if you're a family office or a high net worth individual, they will not put you as a first product into their 10 year fund. They have a six year fund and they essentially force you to go into the more liquid strategy before you become acquaintance of venture. So instead of having all these issues on the back end, these downstream consequences, they solve for this problem on the front end.
- [05:04]
B
That's smart. Yeah. In our case, for better or worse, we were accepting smaller checks. And so none of these people relied on us to pay for their child's tuition in college. And so that also leads to less headaches potentially in the future.
- [05:22]
A
Having 2020 hindsight, how would you have changed that process of having all these LPs and what parameters or operational improvements would you have made to the process and to the relationship that you've built with those LPs?
- [05:37]
B
So I mentioned a couple capital calls. We had a few issues there. Nothing severe, nothing that has prevented us from deploying kind of our strategy as we expected. However, there are some LPs that maybe just don't understand. When you do commit to a fund, you are committing to future capital calls and it's not optional. And so we've had one issue in particular where it's fine, we worked through it, but we didn't have protections in our LPA against that. So they technically, legally could just stop, you know, committing capital, even though we've allocated and reserved that capital for them. And so in the future we'll, we'll look into that and provide some, some protections for ourselves. Nothing aggressive, but the fact that we do need to deploy a strategy and we set out, you know, our fund strategy from the beginning with an expectation that we'll have that capital in the future and we need to make sure we have some sort of recourse to, to follow through on those commitments.
- [06:31]
A
As I've gotten to know you recently, Ryan, I could see that you're a product genius and that you basically think of everything as a product, whether it's literally starting product hunts, starting your fund. So talk to me about venture capital as a product and what does it mean to have a product like a venture capital fund?
- [06:48]
B
I'm an introvert. I like to be behind the computer. I love building products that can scale infinitely, that can provide value or help people while I'm sleeping. I've always just had that of DNA. And so a lot of what we explored at We Can Fund is, is a number of experiments. Most of them are, are complete failures, to be quite honest.
- [07:04]
A
Could you, could you give me a couple of those?
- [07:06]
B
Yeah. So we did one experiment and I wouldn't call it necessarily a product, but it's, it's more of like a system. It was called Weekend Build. And the thesis was there are so many people who want to build a company who have great ideas, very talented, and they're working on side projects. They might be employed at a thing. Well, I guess we don't call them faang companies anymore, but back when we ran this experiment like at faang companies like a Meta or Apple and they might have these experiments and side projects, but they don't have one, frankly, the conviction to take a leap and quit their job and pursue it. And so long story short, we ran this experiment, it was basically for side project builders, people who were already building something. And we did an eight week, almost like mini accelerator. We didn't take any equity, we just worked with them in Slack and did weekly meetups or I should say syncs with the rest of the community, the people that we brought on board. We had almost a thousand people apply and whittled it down to about five, no, I'm sorry, 10 teams. And it was a failure in the sense that we ultimately didn't. Our thesis was, okay, we'll eventually, over these eight weeks see some founders and find some founders that are compelling, that are building venture scale companies and give them the capital and support to quit their job and pursue it full time. And we ultimately didn't find that. We realized that I think there was a selection bias towards people who maybe hadn't already made that leap. They were working on a side project for some cases over a year and there's probably a reason why they hadn't left already or why they hadn't gotten traction. It wasn't, wasn't necessarily the conviction or support or advice from us per se that was missing. And so I think we selected incorrectly. And we also realized while this strategy could work with some different selection criteria, it does require massive scale, and a lot of that is very difficult to productize. And so to do it well, we'd have to bring on not 10 teams, but maybe a hundred teams in the same amount of time. And so we ended up holding up that experiment. We learned a few things, but it was worth doing at least.
- [09:08]
A
What are some other experiments that you've tried?
- [09:10]
B
So some experiments that have done really well. We built this tool called Rolodexer. And, you know, founders are always asking for intros. It's whether. Whether it's recruiting or I'm a B2B company, I want to reach out and find people at these companies. This is my target list. And the reality is a lot more people know. This is going to sound egotistical. I don't mean it to, but a lot more people know me than people I know. Yeah, it just. It's just the nature of, I guess, tech in some ways. And sort of my. My experience building product hunt. And on Twitter, I have about 300,000 accounts. Let's say half those people are active. That's still a lot of people, 150,000 people, mostly tech. And so we built a tool to search my Twitter followers. And so when a company. The best use case is when a company is looking for introductions to, like, an early design partner, an early customer. What we do is we ask, hey, what are the companies you're looking to target? Let's just make up one. Let's say it's ramp. Let's say I don't know anyone at Ramp, but I can search for ramp, and anyone who's working at ramp that follows me, and then I use that to DM them and make an instruction. And the conversion rate's relatively high. It's much higher than email because there's a lot fewer. When you get an email or I should say DM from someone that you actually follow, you're going to pay attention. You're at least going to read it. You might say no, but the conversion rate, I'd say 30 to 50% of people accept an introduction from those outbound requests.
- [10:30]
A
Your super connector. Maybe an introverted super connector, but a super connector still. What are some first principles for how to become an elite super connector?
- [10:41]
B
Oh, in some ways, I don't feel like I am. I guess my. My approach is a little different than some people. The traditional way of doing venture is going to a lot of events, meeting a ton of founders, and spending a lot of time in person. And that's exceptional for, like, extroverted people. Who really get, you know, a lot of energy from that. I would say my partner Vedica, she, she is more like that. I wouldn't necessarily describe her as a pure extrovert, but she's in San Francisco, she's meeting founders every day in person, she's going to events. So she illustrates more of that approach or that mindset. Me, I, I prefer and love being behind the computer and I scale through, you know, social, through products that we build. I do a lot of zoom calls with founders, but they're when it's first time meetings, they're relatively quick because you can get a pretty good sense of if there's time worth investing to be quite transparent in like a 15 minute call, 20 minute call sometimes. And so my approach has been a little bit different. It's a little bit more wide scale and light touch, at least in the beginning before we start partnering up and working with founders directly.
- [11:44]
A
I've given a lot of thoughts to this. In many ways the value of my network is the connections that you make. And I think there's a couple of first principles that I come up to with. One is every introduction you make is either valued accretive or value destructive. There's no introduction that's just literally a zero. So you're either providing value for both parties or not. And there's a couple of first principles and a couple things to avoid. One is you have to look for intrinsic value for both sides. So taken to the extreme, you might connect two CEOs of public companies, they have no way to collaborate. That's a waste of both of their times. Even though on paper that looks interesting. And the opposite is also true. You could do connect two first, first year analysts that actually have a lot of synergies in common that becomes super valuable. And of course the double opt in. I'm a huge believer in it. People sometimes, you know, jab me for doing it. But I think it's so critical for that and I think just policing that. It's this paradoxical traits in the super connectors that are both very, very strict about who they introduce. They must have value on both sides but also have this desire to give and to help people. It's a very small niche of people that are both like super picky and super empathetic towards others that tend to tend to make the best super connectors.
- [13:04]
B
Yeah, something I sometimes do. This isn't specific to introductions all the time, but it might be a piece of information I share, let's say with a founder. Sometimes what I'll say is like, here is a piece of information. I think it might be useful for you. No response needed. And they usually still respond. But I think it lowers the pressure of someone feeling like, oh, I gotta like draft. I mean, Even if it's 10 seconds, 20 seconds, everyone's inbox is super full and if I give them permission to just hit instant archive, it's fine for me, it's fine for them. It's just, it's a little bit lighter touch.
- [13:32]
A
I feel you're truly giving without the expectation of return. You're taking, you're taking that to extreme. You're essentially preempting the need for.
- [13:40]
B
Yeah, they don't, in this particular case, it's a founder, they don't owe me a reply. Well, in this context, I think founders do owe investors replies in certain contexts. But. But yeah, when you're sharing information that's a little bit more proactive. It doesn't require them to take time out of their day. Because the way we approach is we don't bug founders unless we absolutely have to for, let's say, legal or operational reasons. We try to be somewhere in the middle. We don't disappear and we don't bug them. We try to be very proactive, respond to every email, of course, and every investor. We usually respond and try to service their ass. But we're trying not to be distracting. Because the worst thing you could do as a founder is bring on an investor who is net negative and word gets around. Reputation matters.
- [14:19]
A
I think one of the underlying principles to some of the most value added investors on the planet is this concept from the beginning of Infinity from David Deutsch, which is essentially there's an infinite amount of innovation. You could always make something better, you could always improve something so they don't have the scarcity in terms of giving. For example, you're on your third fund, let's say I find you an anchor for your fourth fund, you're going to be happy about that. But guess what? You might want another institutional investor on the fifth fund and the sixth fund. You might want to start a credit fund. There's an infinite amount of value add I could give you or somebody could theoretically give somebody else. So those people inherently do not have the scarcity mindset. And paradoxically, as they give more value they get, they get reciprocity back and they have more value to give. So it's this non zero sum perspective to not only connecting people, but also value add at a higher level. That's I've seen almost every Single, like top superconnector and top person that gives value add has this one principle that they believe in.
- [15:16]
B
Yeah, yeah. The Corlee who is CEO at Product Hunt back in the day, she would describe us like a piggy bank. And not in the sense of it's a transaction, but when you're supporting or working with a team or working with people in general, you're sort of depositing pennies or quarters or whatever currency you want to use and you want to fill up that piggy bank is sort of the goal. And I think this applies especially in venture and tech, where it's big industry, but it's not at the same time. It's like everybody kind of knows each other. It feels like in some ways.
- [15:50]
A
Tell me the secret. In terms of using value add to win deals, do you ever go in and provide a bunch of value add to win deals, or is it always kind of. It's inbound. You decide you want to invest and then you're kind of value add on.
- [16:04]
B
Yeah. The question's more around how we win deals.
- [16:08]
A
Yeah. How you win deals.
- [16:09]
B
Yeah, yeah. You know, this is. This is part of venture that I don't like talking about because it makes. I just don't like sounding like I'm pumping my chest, but I guess there's no other way to answer it. I mean, venture and winning deals is partly, you know, it's a combination of things. It's one, it's access to even. Can you even see the company? Of course. Two, can you get a meeting with the founder? And fortunately, I built Product Hunt. Now it's been almost 12 years, but still going. And 100,000, roughly 100,000 makers and founders launch on Product Hunt every. Every year. So it's still extremely active. I don't know if I met a founder who doesn't know what Product Hunt is. Many of them have launched on Product Hunt before. So at the very least, there's a relatively easy in to a conversation through that. And I feel like a lot of founders at least have some respect because they've spent some time chewing glass, as they say. Myself as a founder. And so that's one part of it. And then when it comes to winning deals, part of it is our fun strategy, or rather our fund size, I should say. There's a lot of people who. This is our third fund. It's 21 million. It has grown from our first funds, but our plan actually in our next fund is not to scale it all that much. And our goal is to continue writing smaller checks. And I feel strongly that for us, and this isn't applicable to every investor, of course, but for us, we feel like being a smaller investor, not being a lead and not getting stuck in that middle ground where you're not a lead but you're also having to write 750k check, you know, to, to get meaningful economics. That's really tough. So when we meet a founder, you know, in many cases we're, we're a small enough check where even if they're, you know, tighten allocations, they can make room. And, and then when it comes to like winning those deals, especially when it's like competitive or, or there's not much room, sometimes it's using things like Rolodexer saying, hey, tell us your, your B2B target customer list, like let's go make some introductions like now, um, some of its references. Um, I would say most founders don't ask for references, but occasionally they do and, or I should say maybe they are doing references and we just don't know it. They just don't tell us. Um, and so I like to think we have a pretty good reputation and we've supported our portfolio well. Um, and so it's all those things kind of compound. Uh, it's no, there's no single cookie cutter template, I would say to win deals per se, but a lot of it's custom based on like the founder and the context of the situation.
- [18:25]
A
And when you're using Rolodexer, which is the people that follow you, you're able to introduce them to that founder. Are you doing that ahead of getting allocation? And that's basically you're sampling your value.
- [18:35]
B
Add to the founders sometimes. Yeah, yeah. If it comes up in a conversation or it's. We know that this is a priority for them, then yeah, we'll make that offer. And the honest truth is we normally don't have to show that type of proactive support like before you write a check. And for us to be honest, it's better for us to do that, to secure an allocation and write the check and then do that if we're thinking about sequence of events. But yeah, occasionally we do that.
- [19:04]
A
So tell me about your portfolio construction. You're on your third fund now. Certainly you've learned some lessons. What have you evolved into in your third fund?
- [19:12]
B
Yeah, so we want to keep playing the same game for the most part, but that doesn't mean that we don't experiment with new ideas. And the overall fund construction is going to remain the same for our Next fund roughly. So our average check size 350, $21 million fund. We're securing around 2 to 3% ownership. And while that is a small amount, it's meaningful for us because we're ultimately chasing decacorn outcomes. I mean Yes, a $1 billion outcome is great, but today's, you know, yesterday's unicorns arguably are becoming tomorrow's decacorns. We're seeing the scale of companies, revenue growth like scale tremendously, very quickly. There's also a strong argument to be made that I hate to say it, AI is going to eat more into the services side of gdp. It's just going to eat more of the market in general. And we have seen just more and more large outcomes emerge. And so we are playing the game where we're looking for those big life changing companies. Example that's like deals is one of our seed investments and $12 billion company at this point we invested a 10 mil cap, almost a 400x outcome for us. So we're looking for those types of companies. Obviously most will not be that, but you only need one of those to potentially return a 5x fund. 10x fund.
- [20:36]
A
I've thought a lot about this. Why is yesterday's unicorn, today's DECA unicorn? Why is anthropic raising at hundreds of billions of dollars? And I've thought about it in a, in a simple way, the market size is both getting bigger and companies are penetrating it deeper. So if you think about anthropic, it's coding tools and for every vertical. So they're both getting large share of market and also going horizontal. And that's why it's getting bigger. Same with Palantir and same with some of these companies. Even Tesla today, even public companies are now it's not just a car, it's robots and all these things. When I started 10 years ago, technology was kind of its own industry. So there's like these tech companies when I started investing and now it's like technology is in everything and now it's like AI is in everything. So the AI companies will dominate the entire entire ecosphere. So I think there's this kind of contextualization on technology in general that's just growing by 100x which is why you have these kind of downstream consequences.
- [21:35]
B
It's in my best interest to believe this, that there's a huge opportunity right now to invest. But we haven't seen this big of a shift in the stack and the ingredients that we have to build companies since I mean some people argue the World Wide Web. In my lifetime in tech, it's mobile. Mobile was like a huge shift that birthed a lot of massive companies and also in some ways not just massive companies, but a shift in shift in status, a shift in tech, a shift in the tool set. It just disrupted a lot of how we traditionally built companies.
- [22:08]
A
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- [23:23]
B
Yeah, so I've actually been investing in funds for maybe 7ish years now. My checks are small, I don't have a ton of liquidity. I'm also as you can imagine, very, very tech illiquid heavy in my personal investment portfolio. That said, I don't necessarily invest for the returns per se. I do invest in funds I think will do well, but I'm ultimately doing it to one support other fellow GPs. Two it's to get some perspective like read their updates, see how they're thinking about the market, what strategies they're deploying. And sometimes this isn't the highest priority, but it's deal flow. Occasionally this goes back to the fund strategy. We're I would say like a collaborative investor in terms of how we invest and our check sizes are small enough where we've invested in between rounds like after the seed or pre seed round is closed. So for that reason I've invested about over 30 funds, mostly smaller funds. Most of what I invest in is like sub $30 million fund size and it's either a combination of very narrowly focused specialized funds or it's funds that are generalists but highly connected. And we think the highly or I think the highly connected piece is very important just because when you're a generalist and you're investing broadly in some ways, you just need to see a lot and be in the right places to see those breakout companies and spaces that maybe are just emerging and not really. There's no blog post for it yet by a vc. For example.
- [24:49]
A
I'm sure you've seen Menlo invested a billion dollars in anthropic rounds into these crazy SPVs. That was via SPV reportedly. Have you thought about how do you get. You get these, you build these deep relationships with the founders at the infancy. How you get those kind of allocations, those SPVs as the companies grow?
- [25:10]
B
Yeah, the. So we have done some SVs in later stage, like Series A B stage companies and those have all been opportunistic. There is, there is a part of me which thinks okay, we should maybe be more proactive and more outbound and make that more of a priority for us. But the honest truth is our game is. Is played more in the early stage. That's where I think we'll, we'll have the best returns and where we're better suited as an investor. So occasionally we will do more opportunistic SPVs, but it's not something that we've pursued all that much in terms of our overall time spent and capital deployed. Now of course you have like breakout companies in the portfolio and doubling down on those companies. We reserve the right to do an SPV in those companies if they're in the fund. And then we invite our LPs get first dibs. I feel like they are the ones that trusted us with their capital and put it up to begin with and so they get first take and then we open it up from there. Oftentimes bring in. Well, we try to bring in strategic angels, let's say angel LPs effectively into these SPVs or angel investors in spaces that may be irrelevant to what the founders need help in.
- [26:24]
A
Let's say you have the next anthropic in your round. You have Series A and Sequoia and obviously Sequoia wants to take all of it. How do you deal with it and do you have to re win it? Is there this assumption that you were there for me from the beginning? This is like something that I owe you from Reciprocity and just double click on how you win those very competitive deals.
- [26:43]
B
So we haven't done a ton of SPVs. Let's say into other companies relative to like our pre seed C stage investing. A lot of it's just based on okay, how have they actually helped us? You know a lot of venture is relationship driven. As much as I love to productize things and you know, scale myself, it is very much relationship driven. And so a lot of that is, you know, have they been helpful? Do I feel like I owe them in some way them as in myself and Vedica.
- [27:10]
A
So as you mentioned, you like to productize yourself. You're always thinking scaling, you're thinking in systems. Give us some of your best practices today. How are you scaling Ryan Hoover? And how are you 3xing 5xing your productivity?
- [27:22]
B
Part of it is it's myself and Dedica so we both you know, are tag teaming and dividing and conquering in many ways. We're, we're also exploring. This is another experiment of sorts, but I think it's one I have high conviction that it will, will not fail or it will continue. Which is essentially our version of a scouts program. We call them weekend partners. And the thesis or perspective there is as one yes, there are millions scout funds out there and there are a lot of options for scouts or investors, let's say to scout for other multi stage funds or others. We don't require exclusivity meaning like we don't require someone to be like okay, you can only invest with us as a scout. We have some people who scout for multiple firms and the reason why that works for us is in part because we're small, we're a smaller check, we're earlier stage. Some of these scouts are also focused more on like series A plus. So this is in some ways for them to, well it's actually a double benefit for them in some ways. They can maybe deploy capital earlier than they otherwise would have and then also get access potentially even more so for their other deployments in later stage rounds. We also have a strong perspective, I do which is it's changing so quickly, tech is changing so fast. And as smart as I think I might be, I only know a little bit. I'm like a product person, community person and having people who have experience and who are actually building products today in maybe their own company. Like Connor for example is a weekend partner. He's sort of mission control hacker house in San Francisco. He's in the current YC batch or I should say the next YC batch with an AI focused company. And so he's scouting for us and supporting us. And he's on the floor speaking with other founders building in this kind of emerging, changing tech ecosystem. And so for that reason, that's one way we're thinking about how do we scale ourselves and how do we see more and get different perspectives beyond just like our own perspective.
- [29:15]
A
And what are those structures typically have in terms of scouts and what's industry practice?
- [29:22]
B
Yeah, it's, it varies. So you see some scouts get all the economics. So let's just say there's 20, 20 points carry in a fund. They get all 20 points carry. In some cases there are scouts that get much, much less. We, we do 25% of our carry. And so the economics are not as good as what you might get with like Andreessen Horiz or, you know, Sequoia. But in many ways they're not doing it all for the economics. Yeah, that's, that's a part of it, but it's really to be, you know, part of our ecosystem and support us. At least that's what I think. And, and, and again, it's not exclusive. And so they might be actually scouting and deploying checks of their own. They might be fact. Taro is one of our weekend partners. He has his own, he, he invests, he's invested 150 companies himself. He's actively investing and essentially scouting with us as well. And so it's, it's sort of a no brainer in some ways for people that want to partner and align with us.
- [30:16]
A
One of the things I try to capture on the podcast, what makes really great investors or what makes really great managers, One thing that I've seen in people that scale systems, the most implicit thing is that there's full transparency in their organizations. In other words, you can't scale on non transparent systems. Is that a principle that you live.
- [30:35]
B
By when you say transparent systems? Can you give me an example? Maybe to.
- [30:38]
A
I can give you an extreme example. So I got to meet Alex Hormozi. I've interviewed him multiple times and I walked around in his headquarters and he has these five floors and he's this huge organization, he scales everything and he's, he's putting out, I think he has something like half a billion views on his content per year. And I basically asked him, like, how is this possible? Like, how do you do this? And he said, every one of my employees or my key employees have access to every one of my social networks. I have zero privacy, my text, my Instagram. He's like, what I give up is privacy and what I get in return is scalability. And I found this, you know, I'm not surprised that you answered the question very succinctly on your venture partner program and on your scout program and things like that. I see this as a principle in people that create these systems. Is that something that you see?
- [31:26]
B
Yeah, maybe. Example. It's a small example, but it touches on what you're, you're referring to. So every weekend partners in our, in our slack, in a slack channel with us and when they're sharing deals, they don't DM us, we actually encourage them to put it in the slack channel. And what they typically do is share. Here's a company, here's why I'm excited, here's how I know the founder, here's some other thoughts and of course we'll respond. But we may have somebody else as a weekend partner may say, oh I, here's my thought on that space or here's oh, I know this founder or things like that. And so it does create, just gives us more signal. And, and also it's, it's useful for everyone because part of the motivation for weekend partners and for myself too is I want to see what other people are looking at. Like I'm excited. Like the reason why we invest is because we're excited about new companies. And so even if they don't contribute, I think there's some value in, okay, I can, I can see what, what flow and what, what deals are kind of coming through and, and maybe also learn from my experience or Vedicus experience and, and share it when we share our perspective in those channels. So, you know, we could do it a different way. We could have people DM us. And this is a lot of reasons why I think that's the wrong approach for how we're structuring things.
- [32:34]
A
I was in, in person gathering with Lee Jacobs from Long Journey Ventures and one of the things that he said that if you want to be very early, you have to have huge misses and you have to invest in very weird things that binary a lot of times are just almost complete scams or just do not end up happening. Is that a principle that you believe is necessary in the precede that's investing in things that completely go to zero?
- [32:58]
B
Yeah, I mean, yeah, we've had some zeros. It's the nature of the game and you can't, not ultimately when you're investing this early. I do like weird things and I like Lee. I've known him for maybe a decade now and he's been really supportive of us. And I know some of the weird things they've invested in some of the things that we've actually passed on, they've invested in. I'm sure they've done great. But yeah, I appreciate his perspective. And I also take, I always question myself because it's really easy to get caught up in consensus thinking and not that consensus thinking is necessarily all that bad or I should let me rephrase it. It's not that hot deals are bad, hot deals are often good actually. But if you're only looking at hot deals, then you're only playing the consensus game and you might do well. But you're going to miss some of those weird companies and it's actually the weird companies that no one backed that are going to give you the most status too. Not that that's why I'm investing, but know status and reputation and, and helping a founder when no one else would is, is I think meaningful and important. So yeah, weird stuff is fun. Especially weird consumer stuff. Granted we don't invest in that much consumer because I think it's really, really hard. But I'm constantly wanting to find weird consumer products and companies because I mean it's, it's just so fun. Fun to explore that from a human psychology and technology perspective.
- [34:22]
A
I think it's exceptionally hard to generate alpha risk adjusted returns in venture in general because everybody's so smart. I had Abe Othman from Angelus and we went over his data set of tens of thousands of companies and things like being a serial entrepreneur, going to Harvard or Stanford cs, that's priced in. There's no alpha there. You don't get an edge by investing in these consensus good things or today I would argue AI as well. But if you truly want, you have to ask yourself, you have to step back and say if I want non consensus returns, you truly need to do something that is seen as non consensus by extremely smart people. And what are you giving up? Sometimes that's structural alpha. So you have like secondary funds, you have continuation vehicles, you have kind of another counterparty on your trade. Oftentimes it's doing things that are politically incorrect or are seen as crazy that's also a source of alpha. So it's like what are you willing to give up that a bunch of other smart people are not willing to do in order to generate that alpha? And it's, it's like one of these Peter Thiel questions are much harder to answer than that. Actually on the surface it seems so.
- [35:26]
B
So part of my think feeling is life experience or experience with a particular problem that a founder is solving is like the best alpha that you can get. And so an example is I mentioned Deal earlier. So we invest in the seed round Product Hunt was a fully distributed team. I'd be building that company before I met Alex for four or five years prior to that. And I'd seen both the pros and cons of building a distributed and remote company. I also had really strong conviction that this was going to be a growing Trend. This is 2018. I had a strong, strong conviction that it was going to be more of the norm. This is obviously pre Covid for a bunch of reasons. Primarily because recruiting in San Francisco is expensive, very difficult to retain talent and just the nature it felt like it was inevitable that we're going to have to hire more than just outside, you know, five square mile, you know, radius. And so based on my experience building Product Hunt that was, that was the reason why we invested and I invested in Deal and a lot of one of the reasons why we're building products too. We're working on something I can't share yet but an investor workflow tool that uses a lot of LLMs and third party data enrichment sources. It's been really fun and frustrating and as a result by building and working on this I've kind of gotten a better perspective of what elements are capable of, where the holes are, what problems emerge. And last thing I'll say in this, this is also going back to the weekend partners component. Like Connors is one he's building a company, he has direct hands on experience and will have perspective that other people won't. And so I don't know, I'm a big believer if you can invest in things that you really understand. Not that everything has to be something. I have direct experience with a lot of companies, they're just outside of my own personal domain. Just the nature of the numbers of the volume of investment we're doing. But it could be very helpful and provide a lot of insight.
- [37:15]
A
Another way to reframe that is if you think of VCs top VCs as 140 IQ plus people. If you put a bunch of 140 IQ plus people in the room, they'll come up with a consensus thesis. So the question is why is your 140 IQ better than another person's 140 IQ? And that's because of your lived experience. You have this, you know, what Ben Horowitz called earned secrets in this specific domain that allows you similarly minded person, as another very similarly smart minded person to have alpha in that trade that other people don't. Have.
- [37:45]
B
Yeah, yeah, that's a more concise way of putting it.
- [37:48]
A
What would you like our listeners to know about you, about weekend fund, about anything else you'd like to share?
- [37:54]
B
If anybody's, you know, founder, of course, or an investor. And you know, we do invest broadly and so we invest in everything from, you know, boring SB tech to weird consumer stuff to everything in between. A lot of what we're looking for is kind of going back to you said secrets. We're looking for a founder with a secret. And one way to kind of concisely frame a lot of the ways that I look at venture, which is I want to back a founder that has a secret or has traction. You know, if it's pre launch, I would like to understand like what is a secret? What are they seeing that other people aren't? If it's post launch, they have traction and I just still don't understand it. Well, I, I'm going to look, I'm going to try and understand like what I don't get because if there's true traction, then something's working. And so obviously, yeah, always looking for interesting early stage, pre seed, seed stage founders.
- [38:41]
A
I've been really obsessed about this concept of information diet. I literally think about it as my diet, as important as it is what I eat, what do I listen to and also, most importantly, what do I not listen to? Highly underrated. What to ignore. What is your information diet? What are some best practices?
- [38:59]
B
Yeah, for better or worse, I'm on Twitter. I have been for years. It's been very useful professionally and personally. Very inspiring. Inspiring in some ways. And so Twitter is a fire hose and a lot of it is serendipitous. So that's certainly part of my information diet. Obviously not a unique one by any means. A lot of the most interesting insights are from conversations though, whether it's with a founder, maybe it's during a pitch, or it's just with a founder portfolio founder sharing what they've learned or what challenges they're encountering. And actually before venture, before product and I used to write a lot, blog a lot, and a lot of my blog posts were inspired by just conversations with smart people. So I don't know, I think conversations is in some ways maybe the ultimate alpha in terms of information diet. It's also harder to scale, of course, but you know, it's the things that people either can't say publicly or maybe haven't had the time to write about that other people don't have access to or very few People have access to.
- [40:01]
A
I think also conversations are highly contextual to you. So it's like a podcast made just for you on exactly what you're thinking about, exactly what you're worried about. It's like this fully customized, just in time, information for what you're dealing with today.
- [40:17]
B
Yeah, it's like Notebook LLM, but like old school, like with real humans.
- [40:26]
A
If you could go back in 2017 when you were just starting your first fund, which was $3 million, what one piece of advice would you give your younger Ryan then that would either accelerate your path or keep you from making mistakes.
- [40:40]
B
In the beginning, I made zero investments actually before I raised a fund. Part of that was because I was building Product Hunt. And at the time, pre2017, it was, it wasn't socially acceptable to invest as a CEO or founder. It was like, oh, you're distracted, you're not, you know, focusing on your company. I raised the fund after Product Hunt was acquired by Angellist. I was still CEO at the time and ran Weekend Fund and Product Hunt, you know, for many years after that together. But. But yeah, I'd made zero investments. And so in the very beginning, I have very few data points. You know, I'd spoken to a million founders, I'd seen a gazillion launches. But it's very different when you're thinking about it from here's a cool product versus here's a great business. Like, it's a very different muscle. And so if I was to go back and tell myself, I think I would have emphasized that importance. Meaning sometimes I get excited about back then, get way too excited about the product and almost impart my own excitement on it and own vision in a sense versus thinking, trying to learn from the founder and what is their actual plan, why are they building this company and what might this look like from like a business perspective? Not just like a, oh, this is a cool product. So that, that's probably the biggest shift or, or challenge, I suppose, that I had to unlearn or revise in in the early days.
- [42:04]
A
The paradox there is that you have to see it as a steady state, like, where is the founder today? And if they're extremely self, self driven and able to solve problems, then ironically, that's who you want to help. So you want to help the people that essentially need you the least and you want to avoid helping people that need you the most. It's not something that people say out loud, but it's one of the first principles, especially for product. Product turned for CEO turned DC that's one of the common, common mistakes that they make.
- [42:32]
B
Yeah, yeah. And you can feel really good about yourself when you're like, I just gave this person so many good insights, and they're, like, nodding their head. And what you kind of want is you want to give and take, and you want to contribute, but you also want the founder to be like, actually, no, I don't think that's right. And here's why. And then, oh, actually, that's a good idea. But, like, let's twist it and, like, modify it based on, like, you want it to be more of a conversation. Not like, I'm not a lecturer. Like, and if founder is, like, listening to everything I say, then I'm concerned.
- [43:00]
A
How much of being a great seed investor is about just finding the best product in business and how much of it is portfolio construction. Just all these fun things that you have to learn on the job.
- [43:10]
B
Fund construction matters as much as, like, I would love to just, like, throw any check at anything that is interesting or exciting or promising. You know, historically, we've avoided writing very small checks where a $10 million outcome doesn't even return the fund. And part of that's because the economics part of it is because, you know, when we write those checks, it could actually conflict us out for maybe the right investment in the future. We are rethinking some of that strategy, to be quite honest. As the market is changing, we're seeing companies grow very fast and just an explosion of companies. I think this is only going to accelerate, too, with how quickly it takes, with how little it takes to actually bring something to market. Um, but yeah, a lot of. Lot of it relies on. On a construction that is realistic. And what I mean by that is, how many checks can you realistically deploy? You have to kind of work backwards and say, how many people do I have to meet? Do I even have time to meet that many, many people? Because you're not going to have a 10% conversion rate from, let's say, meeting to. To check writing. If you do, you have, like, the most ridiculous access and deal flow of all time. And so part of it is thinking through that, part of us thinking through how many portfolio companies can you manage and support effectively? And so for us, we're looking at about 50 companies or so per fund, which is quite a few, but it's very manageable because, again, we're not a lead investor. We are very responsive and in some cases, proactive, but we're not on boards. We're not pinging the founder every week, so we're we're able to scale ourselves. And then that's also why we have products. Every founder has access to rolodexter, the tool I mentioned earlier, and they could use it to search by followers, and even their followers too, if they have a following. And so that's one way for us to support and help without requiring any of our time.
- [45:00]
A
Well, Ryan, you've literally helped launch hundreds of thousands of startups. I don't think I've ever met anybody that had that feat. You've inspired me from afar. It's been great getting to know you and look forward to continuing conversation live.
- [45:13]
B
Yeah, thanks David. Appreciate you having me.
- [45:15]
A
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