Transcript
The nation's favorite car buying site, Dundeele Motors, is home to the largest range of new and premium used cars from all of Ireland's trusted car dealerships. That's why you'll find Frank Keane BMW on Dun Dundeele. Visit the Frank Keane BMW showroom on Dundeele to find your next car. Dundeele Motors, for confident car buying and deals to feel great about from all of Ireland's trusted car dealerships. Visit dundeale.ie today. This isn't your average business podcast, and he's not your average host. This is the James Altucher show on the Stansbury Radio Network. So, Dave McClure, welcome to the James Altitude Show. Hey. How's it going? Good. Good. So, Dave, I'm gonna give a little intro for you just in case, people may or may not know who you are, but you're one of the most well known venture capitalists in Silicon Valley. But you've had, you know, lots of ups and downs. Your your venture capital firm, 500 startups, is invested in over 500 companies. So you have a very particular, approach to venture capital and investing, which we'll get to. But I want to, I wanna talk about some other stuff first. You got actually, it's over 900 companies at the moment, but maybe only 500 that are still alive. You're invested in you're invested in 900 companies? Well, not necessarily personal, but concerned yet. You know, I hate to say this, Dave, but, it does sound a little fuzzy. I can't quite understand everything. Okay. That sounded a little better just then. I'm just holding the, mic up to my mouth on the on the headset or anything. That's perfect. Is that okay if you do that? Sure. Okay. This is fine for me. So your firm's invested in 900 start ups, and I wanna get into your background for a while. But first, let me ask, when you're invested in 900 start ups, what do you feel is the actual there's so much diversity. What do you feel is the actual, you know, alpha there? Like, it like, aren't you just gonna follow basically stock market returns in that case? No. I don't think so. I think we're still quite selective. For some folks, they may feel like 900 companies in the last 5 years isn't being selective. But given that there's probably hundreds of thousands of companies being started every year and, you know, we are probably one of the most active investors in the world. We did about 300 investments last year. We first checked new investments last year. But we still have a pretty selective process. We still screen, you know, probably close to a 1000 companies every quarter for our applications, and we only accept 30. So, you know, at least in that regard, we have a pretty high filter. But the reason that we do a large number of investments is that, you know, the biggest companies are usually outliers and don't show up for anything more often than 1 to 2 percent of the time. And it also provides more kind of predictability for what goes on. We're very early investors, usually a failure at seed stage, and attrition rates are high. So in the long run, we probably expect that only 20 to 30% of our companies ever make it to some kind of exit, probably only that 5 to 10% make it to a very large exit. Okay. I'm gonna I'm gonna get back to that because I think, that high attrition rate is is very interesting on a personal level. But, let me ask you about your personal side. So so when how old were you when you started, 500 startups? Well, I guess when we officially got started 5 4, 5 years ago, I was probably just shy of 44. I think I probably turned 44 within week after week of the 1st closing to the fund and the percent of investments. So you're 44, and a lot of people send me emails. And I don't know if you maybe you get the same emails. A lot of people send me emails, oh, I'm 27, and I don't know what to do with my life. I feel like a failure. I feel like killing myself. And it's just you know, a lot of people feel that way in their twenties, in their thirties, when they hit 40. Like, I remember my 40th birthday was, like, the worst day of my life. I felt like a total failure. And, you know, you wrote this blog in 2012. You're I think you're about 46 years old, and there's one paragraph I'll read back to you. So after so you wrote this. So after 20 years in the valley, I had only made a little bit of money, had some modest accomplishments as a programmer, an entrepreneur, and a marketer. Meanwhile, my peers at PayPal had gone on to create incredible businesses like LinkedIn, YouTube, Yelp, and Yammer, and other kids half my age were seemingly even more ambitious. Most folks thought I was a decent fellow, but over the hill was my best days behind me. And and and it was almost from that moment on that that's how I started hearing from you as just an incredible successful venture capitalist. Like, that was, like, a turning point. And you, like, you kinda called your own bottom in a weird way. Yeah. Well, I would say my my rough years were probably, well, at various different times, but certainly, since 2005 and 2010 was a lot of the, you know, mental challenges and even I think I used that to end off in the blog post that I was sort of facing. What like, like, what mental challenges? Like, what what what what was going on? What happened in 2005? Well, I think just, you know, when you come to Silicon Valley, you're competing against, you know, probably the best folks in the planet in a lot of ways. Certainly working at places like PayPal and and others where, you know, I had a lot of friends and a lot of people that I knew personally even before they had been succeeding successful. And, you know, you just hold yourself up to that mirror, and you're like, wow. I'm not Michael Jordan. And I think, yeah, a lot of us come to the Valley thinking that we're Michael Jordan. You know, I came to Valley about 25 years ago, and I had done very well in in other places with some of my peers at the time. But I think there's just always, you know, higher standards and higher levels of accomplishment that you run into when you, you know, growing up against some of the top actuaries and other investors in the valley. Okay. But So it's it's a difficult sort of story to hold yourself up to the standard and still try to be achieving. And and I was you know, eventually, when I was that close, I I had been here for, you know, for 20 years without necessarily a huge amount of, of successes. And and okay. I wanna ask you a couple questions about that. First off, everybody can compare themselves to the Mark Zuckerbergs and the Larry Pages and say, oh, I didn't make it. But you also can compare you were comparing yourself to basically the entire PayPal mafia that started YouTube, LinkedIn, and all those guys. And then you worked at Intel, Microsoft, Facebook, PayPal, Mint, oDesk. You you worked everywhere. You also built and sold the company, but you said it wasn't, like, you know, a huge deal. So how did you deal with forget the Larry Pages of the world because they're like beyond, But how did you deal with the the the how did you deal with the basic envy that, oh, this kid just worked next to me at PayPal in a cubicle, and now Google just gave him $500,000,000. Yeah. Well, to be more accurate, I think, Shadden, Steven, Zeller, sold a company for a bigger than that. So I don't know exactly how much they took out. I I think it's different, though, when you're you know, there's a lot of people who probably know of Mark Zuckerberg or know of Steve Jobs and Vendors and other people, and that's a little bit more distant comparison. I think it's quite different when you actually know those people and work with them. Before, they became, you know, super famous. Like, Chad, you you know, Chad, Ethan, and John, every people that I worked with at PayPal hang out with at lunch and, you know, people follow around with. Yeah. Like, you could've like like, literally, you you ate lunch with them, and you could've said, hey. Let's start off this, like, video sharing company. You could've been in that conversation. No. In fact, I mean, I've got, some of the early, you know, iterations of YouTube in, gosh, I think it was April 2005. So I was ex actually selling some of that stuff. I was working at a different company, but, you know, it wasn't, like, theoretical. I was probably one of the first 1,000 people that used, with data and new g two and then, you know, use Twitter. So you kind of did have that opportunity. You were on the ground floor. And that's why I think it's, you know, it's a lot more real when you realize, hey. These people are really amazing, and I'm not so amazing. Well okay. But but but but you are amazing. Right? You've done a lot of amazing things. So so what I'm curious what what's amazing to me is how you move past that point when when you're feeling like, oh, my gosh, I'm at the center of the universe, but somehow the explosion, the big bang is not happening for me. And it happened for the guys right next to me. Like like, everybody around me it's happening to, but not me. So how did you get past I I personally would feel envious at that point. Like, how did you get past that? Yeah. I mean, I don't I don't know exactly the the journey that I sort of took was a weird one. You know, for for me, it was very helpful later in life to have gone through those things, but I don't know if I was rationalizing it. I I had some time Nobody ever rationalizes it. Is that right? Nobody ever says, oh, 6 years from there. Yeah. Sorry. Go ahead. Yeah. Yeah. So, I mean, I've spent time doing a couple different types of work. You know? 1 is a programmer developer, 1 period not fair, 1 period kind of marketing and design, and then, you know, probably a a bit of time as an angel investor. And I think, you know, I kind of kept looking for where's, you know, where's the area that I think I actually am doing well at. Probably, you know, between 2005 to 2010, I still at least up until 2008, but mostly doing angel investing and recreation. I started trying to get 500 up and down in 2008 by the middle of financial crisis, so that was not the best best time to be raising. Another big stroke of luck for you? Yeah. Well, the stroke of luck was really that, you know, Sean Parker had been asking me to come over to Founders Fund, and that was my plan b. And so I I had a really unique opportunity when the rest of the financial world was, you know, crashing down around everyone's ears. I guess, I've been to venture capital in q 4 2008. And, you know, I guess I felt at the time this is kind of one of my I don't wanna say my my last shot. It was an opportunity to, you know, try and make investing a career as opposed to, you know, a recreational path sign. Because you had made you had made and and, Dave, sorry to interrupt, but you had made a little bit of money, so you had opportunity to invest a little bit here and there in some companies as an angel investor? Yeah. Between 2004, 2008, I guess, as I was leaving PayPal after, I probably did about 13 personal investments, about 300,000 in total. You know, at least some of the money that I had made at PayPal, I didn't, make a huge amount like other folks. And I I probably got, you know, a half 1000000, some 1,000,000 that I use for, you know, pretty money out of the house, and I had some leftover that I didn't really know exactly where to put. But I kind of thought I I was modestly good at picking start ups and had you know, that was at least a fun area for me to put that on my floor. So I was just 13 companies in 4 years between just 4, 2, 8. 3 of those eventually ended up working. SlideShare, mint.com, and Mashury all eventually got acquired by various companies for a little over a 100,000,000 each. And, so 3 companies out of 13 ended up performing quite well, and that was where I sort of felt there was some, you know, confidence in trying to make investments more of my, place to make my mark. And then, you know, again, though so you're you're doing some angel investing, but, again, you're you were comparing yourself, and you you admit this in the post. You're you're somewhat comparing yourself again to these guys who it seems like magic, what's happening to them. Like, that's the only way I can describe it. And you must have felt that the magic was not hitting you in some way. Like and I'm just I'm just wondering again, like I mean, I'll I'll give you an example. Like, my junior high school summer camp roommate is an is a seed investor in Uber. And, you know Right. It makes me I can't help it. Like, I think I'm a good guy, and I I work hard on myself, but I can't help but think, wow, I could have been in that room too. And, you know, it's difficult. I think, again, a more personal story and direct story of Travis asking you. So I met Travis before you started Uber, for the investor, really. Dave, sorry. Can you speak more quickly? Can you speak a little bit more into the mic? Sure. Yeah. I was gonna say, again, this is, you know, not a theoretical story. I I had met Travis before he became investor actually CEO at Uber. I got an email from Travis in June of 2010 about investing in Deepgram, and we talked about it. And I ultimately decided not to do it, which was, you know, probably the single biggest f**k up in my investing career. Like like okay. If you had like, what was your average investment size at that time? Well, I was just just getting the investment, you know, sort of the firm started at that time. If I'd made it as a personal investment, probably, then, you know, between 10 to 20,000. If I'd done the investment out of the fund, it probably would have been 50 to a 100,000. Okay. So a 100 Even if it'd only been 10,000 personally, I probably would have been worth 10,000,000. If I'd done, you know, a 100,000 out of the fund, it'd probably worth worth a 100,000,000. So so so that's a pretty big miss. And it it's like Warren but it's to be fair, it puts you in the same category as Warren Buffett. Like, his biggest failures, he he admits, were not the things he invested in that then lost money, but the things he didn't invest in. Oh, all the time. Yeah. I don't really look back and worry too much about, you know, making investments that didn't pan out. That happens all the time. And so we're missing the big opportunities, especially the ones right after your house. Yeah. And so okay. So before 2,005, you did kind of, you you know, you had a a consulting company or a software company in the mid nineties. You sold it. What was happening there? Yeah. I mean, I don't know if that was really a startup experience and kind of what a soft business experience, but, you know, a consulting business that I've been doing independently, you know, gradually turned into a larger, TTP. Excuse me. Larger team of people. I think in our night, we were probably about 20 people, maybe 50,000,000 in revenue. But I was still that was kind of my real personal business that I was doing. I kinda made this gradual transition from engineer to, you know, project manager to eventual business owner. And I learned a lot, but I probably made a flat mistake. And, you know, the acquisition was really more because we were having challenges and, you know, we really needed to find a acquirer, I I it was a very small, you know, almost talent based acquisition, and eventually ended up being not, you know, terrible. It was a half $1,000,000 kind of thing, but it certainly wasn't anything to compare to, you know, running a larger business. And I probably would not consider it to be successful except to the extent that I didn't go bankrupt. Yeah. That's always good. That's probably good. Particularly in the mid nineties when everyone else was getting rich. Yeah. And, again, I had friends who, you know, started companies that ended up getting, you know, acquired for 50 to a $100,000,000, and then, you know, the companies they acquired then went public and went for on further. So well, I'll I'll I'll tell you what several plaintiffs who were, you know, huge winners in the late nineties, you know, throughout that period of time. So, again, you know, brushes of greatness, but no personal, wins. I'll tell you what I'm gonna guess was your mistake with the consulting company is that you were you probably were profitable or close to it. Probably what? You you my guess is you were probably profitable in your mid nineties company or or close to it. Well, no. I think we were modestly unprofitable, but, you know, to the tune of maybe making 1.8 or 1,900,000 of revenue on a $2,000,000 expense measure. So I sort of just figured out some financing capital, and it it was not a bad small business, but it wasn't really, insane thing for the start up scene. Although we we did work for a lot of start ups and, you know, a little bit of working for Netscape and, a couple of other companies in their early years. So I got I got to see some some of that stuff happening. So you should've you should've, like, somehow changed your service into a product, IPO'd, and lost $50,000,000. Should've just or I should've just joined Microsoft or joined Intel or joined Yahoo or joined. Yeah. I think you know? But that's alright. I mean, I again, I sort of felt like I got some very interesting experiences, and, you know, those those have served me very well. I think, having been on the engineering and in the marketing side and the investment side, I've I've all been very helpful experiences now as, as VC firms, to figure out, you know, what's in people's hands, what are their needs. Yeah. Absolutely. I mean, you must have had a having any I think a lot of investors and venture capitalists, this is what I see, They because they have no experience running or starting companies, they actually are not very good venture capitalists. I mean, they spread the money around, but they don't really know what they're doing, I find, operationally. Yeah. I think you're certainly seeing that with a lot of the, you know, today's angel investors and c fund managers tend to come more from the operational side. I think if you're doing later stage investment at series a or certainly series b and beyond, then then I think it becomes more of a financial, you know, focused set of activities. But a lot of what we end up working with companies on is really around products development and marketing, and those are areas that, you know, probably are best served having had some operational experience on programming or design or, you know, marketing or sales. And, so so you you also seem to have some interest in expanding globally. Like, you have a lot of, it's almost like you're franchising your your VC firm. Like, in you you have offices in all these different countries. You have a a significant percentage invested around the world. Yep. Yeah. I think that, you know, from the beginning, we had an interest in, you you know, having a little bit more global, field of view. Some of the people on the team also, you know, come from different countries. And, you know, some of that, I think, is because we feel like the investment opportunity around the world is going to be a really big win, especially over the next 10 to 20 years. But some of it was also just personal interest in getting a chance to learn about different geographies. And, we've kind of woven that into strategy, but I would say some of it's personal interest. Some of it's, you know, economic strategy. Well, it it seems like in Silicon Valley, it's probably my guess is it's hard to get cheap valuations where if you go to, like, Mumbai and India, you're probably gonna get dirt cheap valuations on on decent companies in a billion person market. Yeah. Yeah. I mean, I think valuation is part of the story, but the it's not just getting it at low valuations. I think it's really also seeing big opportunities globally that most other people in the valley are really not paying attention to. And and not to say that the strategies here don't make sense. I think there's, you know, huge businesses that are being created in the Valley every day. And for a lot of folks who are investors in the Valley, there's really no good reason to, you know, move more than 30 mile a 30 mile radius between, you know, San Francisco and Santa Fe. But there's, you know, obviously, some very, very large markets that are fast growing opportunities around the world. And whether or not, you you know, they're gonna birth the next Facebook or Twitter, they might, you know, create very, very large companies that do have, you know, large, economic, you know, outcomes. And those could be in India. Those could be Latin America. Those could be Southeast Asia or the Middle East. So we we felt like there's, you know, really good reasons to be investing in this market, not just for low valuation, you know, that there is really just more, broader universe of opportunity that people here weren't taking as much of, a look at. So so back to the 2005 to 2010 period, like, again, you know Yeah. I sort of feel like a lot of people go through that experience of feeling that, I'm not good enough or I somehow failed to find my purpose and goal? Like, what what you know, you sort of kind of said to yourself at some point, well, I'm I'm I'm pretty good at investing, so this is what I'm going to try to do, and you stuck with it. How do you think people can get to know what what they're good at? And and you sort of figured this out at at what many would consider a fairly late age. Yeah. I mean, for me, that was really early forties, and, you know, I had already spent 20 years in the valley and probably 2 or 3 different careers. And, you know, that's true that I didn't feel like I was a a pretty good programmer, you know, pretty decent entrepreneur. Maybe I was, you know, pretty good at marketing in various various capacities. It just didn't feel like I had found, you know, my my hit my stride in any of those. But, really, I I sort of really enjoyed the investment side. And, again, I kinda had a little bit of a unique opportunity there because I have done both the engineering and marketing side. There weren't that many people doing investing who had both disciplines. So that, you know, was where I kind of said, well, let's try this again. I'm I'm sorry. Try you know, figuring out what what career we're gonna fit. And it was very gradual, I think. You know? Between 2004, 2008, I I was mostly just doing part time investing while I was still operational, in a few other roles at Mint and and helping with other companies. And, you know, I I think in 2007, 2008, I was like, okay. Let's try and put together a fund. Unfortunately, I the first, you know, time at it was right when the market was crashing, and so that became challenging. But Sean gave me a shot, with founder Sean Sean and Peter. And, you know, I think that was kind of where things really started heading my way. You know? You could maybe point to some of the conferences or things I've been doing before that and maybe the Facebook class I taught at Stanford with DJ Fawn. But I really felt like when I first started investing with Founders Fund as a full time sort of, you know, focus, that that's when I think door felt like door started to open. Mhmm. Well well can I hear you? At least 2 years later when we got go ahead. Yeah. Oh, I wanted to ask about that. Like, I I see you all over, you know, Twitter and, you know, to some extent, Quora and, certainly on, like, TechCrunch. You're you're you're a very at least on the Internet, in social media, you're very social. And my guess is even more powerful than your investing skills were probably your social skills, because it seemed like you and and in Silicon Valley, it seems very important. Like, you probably built up a very good network. Like, you you sort of act, like, casually, like, oh, Sean Parker gave me a chance. This is Sean Parker, like, the number 2 guy at Facebook. Like, he doesn't give everyone a chance. He gave you a chance. Yeah. I think I owe him a big, a big debt of gratitude. Well, I Did I hear you say Sean and Peter, as in Peter Thiel? Yes. Okay. So Yeah. But we're just Oh, I called my buddy, Bill Gates and Larry Page, and we flew on the UFO together to Mars. And Well, I mean, I I worked for Peter twice a little bit, you know, for 3 years as PayPal and then, you know, 2 years or a year and a half, I guess, of founders, but I don't have a high bandwidth relationship with Peter. I I just have a you know, I'm I'm probably the 10 or so years maybe now, a little bit longer that that I've known Peter. I probably have, you know, 3 or 4 really substantial long conversations. You know, one of them was when I interviewed at PayPal. I think one was when he left or left PayPal to do something else, and then, you know, a couple times when I was working at Founders Fund. He's, you know, he's an amazing person, and I maybe just, you know, name drops him as if I see him every weekend, but that's not really the case. But still but still, though, it's the power of the because you said there's gonna be, this 80% attrition rate anyway. Like, most start ups are going to fail. It's really the power of the network and the and how you build a personal network that is gonna give you opportunities in the long run. These are the seeds that you planted from 2,000 to 2,010. Yeah. And even and even before that, I would say I had always, you know, done a lot of community, user group work and, you know, conferences. I've probably been doing, you know, user groups and conferences in the Valley for 25 years, at least since the early nineties. And, So so let's You know, I I think Oh, go ahead. The point that she made that I I think was right, probably the other thing that was notable was, like, you know, some of the some of the talk to presentations I did probably starting around 2,005 or 6 or around you know, some of the challenges that I experienced at, at PayPal. Also, I'd simply hired and and admit that, I started doing a stock called startup metrics for pirates, I think, around maybe 2006 and 7. And then I sort of did some other talks and presentations that, you know, actually did a little bit in slideshare. So I I think there was a good bit of social media connectivity, and I don't know if I was really doing it intentionally at at first. Okay. Let let me let me reel that back. Community. Dave, let me reel that back for a second. You said earlier you you taught a class at Stanford about Facebook. So, again, it's not like a casual meetup. It's a class at Stanford you were the lecturer at. Like like, half the class is gonna go on to start, like, $1,000,000,000 companies, and you were the teacher. Again, it was very unique opportunity, and, you know, Beach Day, FOG was a friend of mine. If you've been part of that exactly at Stanford I I don't know how many people get to teach a class at Stanford, but the first teaching opportunity that was very, sort of different. And just because of the timing, we we kind of caught lightning in a bottle there. Facebook had just launched platform. This is fall of 2007, I think. And then we had some really bright bright students, and, you know, they they did the amazing things. I think we just put together our class and an opportunity that, you know, gave them, a door to walk through. And and you're right. There were some amazing companies that came out of that. Certainly, one, you know, that's still today doing doing quite well called share through that was started by some of our TAs and students and a few others that were, you know, acquired for for decent sums. So it was a it was a really amazing opportunities and really great people came out of that, and that that was sort of a stepping stone to a lot of other things. Yeah. So so so you had done all of this, and and, you know, in your post, you're still kinda feeling, maybe because Silicon Valley, the bar is so high, you're still feeling this level of mediocrity. Like you said, you weren't feeling amazing. And, but it was all these combinations of things, and I would say the the strongest was 25 years of of building a network, that allowed you to basically create this enormously successful and and well known, VC company that's still that's still growing. Like, you know, every time I read a new news article, you you raise more money and invest in more companies. Yep. Well, that's our job. So what's what's so given the 80 the the huge attrition rate, you know, the and by attrition, you know, basically means it's a nice way of saying companies are failing. It seems so so I spent some time as a a venture capitalist, and and one thing that I really hated about it was you don't really get a chance to spend time with your good companies. You spend a lot of times answering calls from the companies that are basically about to go out of business because they're terrified and you feel bad at least I felt bad for them. I wanna hold their hand a little bit. Like, how do you deal with all the the failure that you have to deal with still? Well, I mean, I think we have to be somewhat disciplined in where we spend our time. You know, we try and be helpful. A a lot of what we're trying to build at 500 is not necessarily, you know, the typical VC relationship where people sit on boards and, you know, maybe have 5 companies that they're interacting with or managing. In our case, we have, you know, 100. You know, what we try and build is a large community of founders and mentors and, really, a set of platforms that they can use to help each other. But, yeah, you're right. We we run into a lot of failure pretty much constantly, and, you know, we can't we we have to be straightforward. We can't afford to spend time with, you know, the 3 or the 500 companies in our portfolio that are not working. We have to spend time with the, you know, 100 or so, maybe 200, that actually have a shot at, really large outcomes. But we we try and provide a platform where everyone benefits from that, at least, you know, to some extent. Okay. So let's say let's say I think understanding the numbers really drives that approach, which we you know, I think after spending, you know, 5, 6 years as an angel investor and another 5, 6 years as VC, we're doing a very high volume strategy. We we have a practical approach to what the numbers look like, and, you know, we we are designing for scale, but we still have to focus on the things that are working. So let's say I'm one of the 3, 4, 500 who are going to fail, and I call you up and I say, Dave, I'm really depressed. I I have to tell you this is not working out. I'm I'm going bankrupt, and, I don't know what to do next. Like, what what would you tell me? Well, I don't think most of the folks are going bankrupt. Probably what they are facing is, you know, in in different stages, but at least the companies that we work with, they probably have raised a half a 1000000 to a 1000000, maybe some of them raised more than that. And they're probably running out of cash, and they're getting down to their last 3 to 6 months worth of cash. In some cases, we're able to help them find, you know, exits either on the talent acquisition side. Sometimes, you know, they shut down the company, and they go join one of our other companies. Sometimes we tell them, hey. Just, you know, give it a rest, and they'll take a vacation and come back and try it again when you're recharged. What what about But I don't think Mhmm. Sorry. Go ahead. I mean, there's a few cases where we're gonna write there's a few cases where we might write a second check to give them a little bit more runway, but we're not a big investor. Our our typical, you know, check size is around a 100,000. Most of the times, we're the smaller or smallest investor in a lot of the rounds that we do. And so, usually, there are other larger investors who are really the primary person that, you know, invested in the round or that has a board seat. And I think they have, you know, probably a lot more responsibility in how the company does the wind down or, you know, helping them find, dry land. We we try and be helpful in those situations, but we can't, you know, we can't bridge companies, say, that that are failings, and really, you know, be effective in what we're trying to do for our investors and make a return. And and we're transparent about that. I think we, you know, we tell all of our companies, whether they go through our cellular seat program, that we're, you know, we're generally not going to be leading your next round, and we might participate. But they have to be successful and viable businesses for us to really, you know, put more money into them. So so I I wanna ask you what kind of companies you invest in, but but before that, what do you think about the I I I sort of have this theory that nothing is predictable. And so so you look at companies like you look at companies like Twitter, which was originally Odeo. You look at companies like Google, which originally had no concept of AdSense, you know, when they first started. You look at companies like Groupon, which was like, an email marketing list for charities. You know, Instagram Right. Was originally Bourbon. So all of these successful companies, they kinda start with ideas and smart people, but then they 100% change their ideas in some in some cases. Yeah. I think that's true. And, you know, PayPal had probably 4 or 5 different product, focus areas before they found the one that really ended up working for Oh, PayPal's eBay. PayPal's an enormous example. PayPal was like pay with your PalmPilot, like the what would now be considered the worst idea in history. Well, I think that might be coming back into vogue soon, but, I think at the time, they were probably 10 to 15 years early on mobile payments. And, you know, that was already the second iteration. Right? And then, You know? And the initial idea that I need Max was working on. They were around security software, and then later security software for military transactions and then later, you know, mobile payments and then later, you know, payments and then later email payments for eBay, which is really where Yes. Things kinda took off. So, you know, again, there was 2 years, probably 3 to 5 business models, 2 years of shifting, you know, strategies and iteration before they found something that really kind of caught fire. But that's that's pretty typical in that, you know, great founders, I think, move the business to where, move the product to where the business is, and less capable entrepreneurs don't ever make those pivots or don't make those fast enough. So so so so when you evaluate But it's not to say that you can't find success. I I do think that there's you know, within the area that PayPal was initially focusing on, eventually, financial transactions became a focus. Eventually, small business sellers became a focus, and that's where they found the product opportunity and the market opportunity. So when we're when we're generally looking for investments, you know, it's not like somebody has a great piece of code and then go find the customer. You usually, we're looking at people who've got a functional product. They've got a customer base that they're starting to work with, and they still might shift around or, you know, change some of the focus of product in the market. But it's more likely the case that someone might be building a product for, you know, parents and families, and they maybe start with something that might be education focused and might end up with something that's safety or security focused. It's it's usually still within the same customer segmentation and same, you know, product family. But it it seems like it seems like what's what's more important are the people than the business plan because you have to know you're investing in a person who's gonna be able to pivot in the right ways. I think that's true, but it's hard to know the person. I mean, particularly for us, you know, 80% of our companies, probably more, are first time entrepreneurs and don't have a huge track record. And so we don't have, you know, a long history understanding whether they're great entrepreneurs or capable entrepreneurs. What we probably have some visibility into is what's the product that they've built, you know, what's the current level of customer focus, and maybe some indications of where, you know, they've had success in the past either working for a company or, you know, building a product or going even, you know, to some school that hopefully had, you know, good credibility and branding. But it's still a lot of guesswork, and, you know, maybe it's informed guesswork. But we're wrong a lot. I mean, I think that's part of our strategy is just assuming that, you know, we're gonna make 20 bets a year per person, and, you know, probably between 5 to 10 of those might be successful in surviving for longer than a year or 2. And of those 5 or 10 are gonna be the opportunities for us to have, you know, larger outcomes. So so in terms of the the math of that, this is this is where I also question the the the venture capital and even angel investing industries and and private this applies to private equity as well. Essentially, the exits happen when the stock market is when the stock markets are reaching new highs. So so it's very rare that you're gonna have an exit when, let's say, in a 2008 or an early 2009. Of course, that's when the opportunities are, but that's when the opportunities are in the stock market as well, and they're much more liquid. And, you know, so what's the would you make a comparison between venture capital returns and the s and p 500 on steroids? Like, let's say, a leveraged s and p 500. I mean, I certainly think there's correlation between the 2 markets, but, you know, there's there's a lot of variation on that. There are still large options that can happen during that market. I think, you know, PayPal went public in February 2001, February 2002, about 3 months after the 9 11, you know, sort of disaster, and a lot of financial markets were still very, very shaky after the dotcom boom. People were extremely skeptical about PayPal going public at the time, but it went, you know, fabulous as well. Mint dotcom, the company I was an investor in, got acquired in 2009, by Intuit for, you know, I think $140,000,000, you know, which then you could argue it could have been bigger in a boom period. Maybe that's true. But I think that was a very, you know, tough time in the Valley. There wasn't a lot going on in 2009 or so. You know, very shared about the financial real estate market crash. So I think there's, you know, there's exits in a variety of different markets. Sometimes some of the best opportunities to invest happen during down markets. So I don't think it's all completely correlated. There's there's quite a bit of variety that happens within those worlds. Okay. You you convinced me there. I'm I'm a believer. So Yeah. But I think the thing that you point out you know, I was just looking at your bio, and it's funny. The numbers that you quote, you founded or cofounder over 20 companies and failed at 17 of them. I I must admit you had 3 out of 20 successes. Yeah. So I I fit your ratio. I'm I'm like a one man VC fund of myself. There you go. A sequential portfolio. Right. And and my exits happened at market high, so it was, it was tricky. But, Yeah. When when you're because I think that those whether or not they happen during market highs, I think you've got that ratio of 15%. That's probably about what we think about in terms of, you know, what the meaningful exits in our portfolio end up or at least the potential for exit. When I when I was making investments personally, out of the 13 that I invested in, 3 had successes. So, again, sort of in that same, you know, vein of most things don't work. A few things do. So let's say But the problem is if you don't have a portfolio approach to investments, I don't think you have any predictability in getting to those outcomes, whether they're up or down markets. I I agree with that. Like, the one the one thing I learned for myself was in terms of my streams of of income and investments and so on was to get heavily more diversified after all these failures. Like, that was my biggest financial lesson along personal lessons. But if let's say let's say you're a person sitting in, I don't know, Ohio, and you're you're thinking about doing a a start up. What would you recommend people start looking at? Like, what what kind of areas or sectors would would you recommend start ups to start or or or potential entrepreneurs to start thinking about? What would you tell your children? Well, you know, I don't know that I wanna pick, you know, hot sauce, or as we we generally don't try and jump on the trend of the day. I think there's new opportunities that are coming that are interesting. And Like what? You know, if you if you well, I think if you wanna look at over the next 5 years, it seems pretty obvious that virtual reality is going to be an interesting sector. I think if you look at home automation products, that's certainly gonna be a big, you know, category. Hardware, software combinations in general, I think, are gonna be a a big category. But I do feel like some of the enthusiasm in those sectors is a little, overdone. And there's a lot of areas that are very unsexy that we think are great investments, and, you know, most of those businesses are very transactional in nature. They're not the next Twitter or Facebook. They're like, you know, a food delivery business where the Internet marketing phone is online. Or they're a SaaS product for businesses that's helping, you know, provide a marketing or productivity tool and sold the, you know, monthly subscription basis. So those are the less sexy stories that don't necessarily get as much attention as the big ones. But I think if you look at successful businesses, the majority of them, at least on the small and medium side, are are not necessarily breakthrough innovation. They're they're much more incremental innovation and improvements, you know, on really basic things like just, you know, what's overall margin, what's the Internet marketing and customer acquisition channel. A lot of the businesses being built today that are very successful opportunity, let's just pick a few examples like Uber or Airbnb, those are not technologically, you know, sophisticated. I I don't know if they're not sophisticated, but they're they're not you know, starting starting a taxi business or starting a hospitality, you know, part time hotel business, there's nothing technically crazy we knew about those businesses. They've been around for tens of years, if not 100 of years. Yeah. It's really the addition of sort of mobile based products or services or Internet marketing and some, you know, GPS components that drive the innovation in those businesses. Yeah. Did did you ever feel like if you're in Silicon Valley and you start a food truck that has a mobile app, you're gonna be worth 50,000,000? But if you're in Cincinnati and you start a food truck with a mobile app, you're gonna be worth basically what your sales for the day were. I think the difference is whether you scale or not and whether you can get access to the capital that helps you scale. I I certainly do think you could start those businesses in different places. I might I might say the food truck business is more interesting than maybe the LA or New York markets, not necessarily in Cleveland. But I don't think you have to be in the Valley. I think the Valley is a place where people raise money, not build businesses. Right. That's a good point. So, I mean, there's a conversation of capital here that is unparalleled around the world. That's certainly true. There's a concentration of very large technical platform businesses here. But I think more and more of the Internet is a level playing field, and more and more businesses like AngelList and Thunder Club and others like Kickstarter and Indiegogo are also leveling the playing field, at least for the, you know, for the first couple rounds with access to capital. And this is the incredibly important. Today or Thursday. Yeah. In AngelList start a business anywhere. Yeah. And AngelList is kind of you're right. Has very much leveled the playing field, and I encourage listeners to to check it out. So if I'm in Ohio and I have a business and I have customers, I have some software, I think I have a unique product and I solve, some urgent problems, how do I how do I basically get you to notice me? Well, for I mean, we actually have invested in a couple of businesses out of Cleveland. And, you know, it's not Cleveland, by the way. I'm just I'm just using Cleveland as an example. No. And I I grew up in West Virginia. So, yeah, you can replace Cleveland with a, you know, maybe of the not top 10 metros around the country, but, you know, numbers 20 to a 100. You know, we have an online application process for our accelerated programs that we run every quarter. We also have, you know, an ongoing seed investment program that we, you know, find opportunities, again, through AngelList, through direct referrals from our existing founders and mentors. I would say it's, you know, it's not as easy for someone to just email us cold and get, you know, a meeting and a potential investment. That happens every once in a while. But most of the time, the investments or the opportunity to take a look at are ones that were sent to us by other other founders and mentors that we already know, and there's some level of screening or qualification that probably happens at that level Right. As well as, you know, each internally once they look at it. So in in a weird way we get a we get a lot of it done. In in a weird way, you investing in 900 start ups is a very clever way, again, using your what I'm calling now your your prime skill, which is your networking ability. Like, you basically have exponentially increased your network by investing in so many startups, and this becomes a filtering mechanism. Don't tell anybody our secret. No. I'm I'm nobody's listening to us. Don't worry. No one listens. Exactly. Yeah. I think that was, maybe unintentional at first, but I I think we realized within the 1st year or 2, by investing in a very large number of companies, we were doing 2 things at at once. We were, you know, building a large community of founders, and we were also, you know, doing a a continuous marketing campaign by investing a lot of small checks in a lot of people. So both of those kind of, I think, give us a a really big platform to, you know, have a voice to the start up community. So so so, again, let's say I'm in in West Virginia now, and and I have to use the state name because I can't name any city names in there. But, let's let's say I'm in West Virginia. Morgantown, Charleston, Huntington. There's there's a few. Every every state has a Charleston, I think, because I would have thought South Carolina there. But, let's say I'm in Charleston, West Virginia, and I wanna improve I I wanna do what you did. I wanna improve my networking, but I'm not out in Silicon Valley. What should I do today? Well, I would probably say, you know, write about what you're doing, and, these are probably you know, that would include multiple different channels that might be pictures on Instagram or Pinterest, might be videos on YouTube or other platforms. But I think, you know, the way that I got started with a lot of, things I was doing, one one was running conferences and music groups. The other one was really writing, online to a blog and doing, you know, talks and presentations on Flightshare. And, eventually, you know, that sort of got to an audience of people that found what I was doing to be helpful. In this case, it was primarily entrepreneurs who were trying to figure out product and marketing strategies, and ways to, you know, present their companies to investors. But I think if you were building a business and you know, let let's just take a look at when we were getting started. Before we even got the product out the door, a lot of what we were doing was collecting, personal finance content on the web through other bloggers and writers and producing some of our own and building a, you know, an online community through, you know, blog posts and maybe infographics and collecting other, you know, great, you know, content we found from other, you know, writers on the web. I think that's I think that's really I think that's really great advice that to to basically not limit yourself to your state, but write writing and sharing and being transparent on the web to build almost an online community for yourself, and that becomes sort of the seeds of a network. Absolutely. And that that's easier than ever before, and, you know, you're limited only by perhaps the language that you write in and the file things you choose to distribute that content. And, but there's people, you know, who can produce content on YouTube or on blogging platforms or on pictures or Instagram that reach billions of people around the world. Well, Dave, I really appreciate you coming on the podcast. I feel like we've, maybe this is part of your networking, skills, but I feel like we've kinda known each other for for years, back and forth. So it was great to finally, meet over this podcast, but, I hope eventually we sit down for a coffee or something and and get to know each other. So thank you very much. Oh, absolutely. James, you're one of the most, fabulous writers. I I love reading your stuff. It's both hilarious and insightful at the same time. And Oh, thank you. They're very, very personal, I think. So, resonating well when I read through stuff. Excellent. Well well, thanks very much, Dave. And and once again, I really appreciate it. I'll talk to you soon. Alright. Have to have a beer sometime soon. Yes. For more from James, check out the James Altucher show on the Stansbury radio network at stansburyradio.com, and get yourself on the free insider's list today. The nation's favorite car buying site, Dundeele Motors, is home to the largest range of new and premium used cars from all of Ireland's trusted car dealerships. That's why you'll find Spirit Volvo on Dundeele. Visit the Spirit Volvo showroom on Dundeele to find your next car. Dundeele Motors, for confident car buying and deals to feel great about from all of Ireland's trusted car dealerships. 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