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2:00

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2:28

My guest today is Nico Wiggelswold. Nico is

2:30

the founder of Adjacent, a venture firm that looks

2:32

for what he describes as the adjacent possible for

2:34

their next investment. Nico has zoned

2:37

in on the consumer subscription market as

2:39

his ideal candidates, making early investments in

2:41

Calm, Photo Room, and Oraring. Nico

2:44

does virtually all steps of the investment process on

2:46

his own, as he believes this allows him to

2:48

be as close to finding the truth as possible.

2:51

We discuss sharpening your intuition, evaluating

2:53

the subscription business model, and exploring

2:55

the adjacent possible. Please enjoy this

2:57

conversation with Nico Wiggelswold. So Nico,

3:00

I think a fun place to

3:02

begin our conversation would be a

3:05

lesson you learned, I think from Brian

3:07

Singerman, about how to

3:09

learn as an investor. For

3:12

sure. Brian, as you know, has strong

3:14

opinions and I think

3:16

is pretty good at seeing the

3:19

quintessential point of any specific

3:21

topic. And I actually asked him for advice

3:23

from an investor point of view, but I

3:25

think the answer he gave was the

3:27

advice that he would also give a founder that he's

3:29

working with. And it was essentially I had a situation

3:32

where I had to make a decision on an investment.

3:34

I was already an investor. There was an opportunity to

3:36

do a larger follow-on investment

3:38

pretty quickly after the

3:40

initial investment. And I asked

3:42

him for some advice around that

3:45

and he essentially said, I have no idea

3:47

what you're talking about with the company, but I would just

3:49

trust my instinct because the only way

3:52

that you can learn based on this

3:54

decision is if you actually follow your

3:56

own intuition instead of taking

3:58

somebody else's advice. And I think that

4:01

makes a lot of sense if you think about if you get

4:03

the advice that essentially is the right decision,

4:05

then you also is the judgment and you

4:08

don't really take anything away from it. And

4:10

if you make the wrong decision, you have frustration because you

4:12

listen to somebody else. So I

4:15

think that this key insight there

4:17

was just trying to look within

4:19

and sharpen your intuition and

4:21

instinct versus trying to externalize

4:24

the decision making, which I think

4:27

is a really good approach long term

4:29

if you want to evolve your own unique

4:31

perspective that only you hold,

4:33

which I think is probably the foundation

4:36

for becoming a great investor in the long

4:38

term. It is probably the only

4:40

example where we could spend the entire conversation just

4:42

talking about the name of your firm and everything

4:44

that it means to you and why you chose

4:46

that name and the opportunities that exist in the

4:48

world and why they're well described by the name

4:50

of your firm and all these things. We

4:53

start by just explaining it to

4:55

you as the purest way. Why adjacent? Why is

4:57

that such a powerful concept for you? Adjacent

5:00

comes from the term of the adjacent possible,

5:03

which I first read

5:05

about in Johnson's book, How We Got

5:07

to Now, which was about the six

5:09

innovations that shaped today's world and the

5:11

things that led to them. And

5:14

essentially it picks up the term that

5:16

was previously coined by someone named Kaufman,

5:18

which comes from evolutionary biology and describes

5:21

how the next step of evolution

5:23

is usually a combination of the

5:25

possibilities that are available today. So

5:27

instead of a leap towards something that's

5:29

completely without context, it's

5:32

actually these things

5:34

fall into place at a specific point

5:36

in time and the combination of those

5:38

then enable a further evolution of that

5:40

specific organism. And I think

5:42

looking back into technology and also into some of

5:45

the investments that I was involved in that ended

5:47

up being successful, I think very

5:49

often this was true, that those

5:52

opportunities only opened up in a very

5:54

specific moment in time. And

5:56

I think it's also explains,

5:58

if you look into history. the

6:01

fact that a lot of times those innovations

6:03

happen in different places in the

6:05

world at the same moment in time. So

6:08

it's perhaps much less the individual that combines

6:10

those things, even though that is obviously a

6:12

skill, but it's really that the time is

6:14

right for that innovation, and it comes to

6:17

different people in different places at the same

6:19

time. And so I

6:21

just wanted to find an

6:23

overarching theme

6:25

for my approach where I

6:27

tried to find investments that

6:30

create categories around these adjacent

6:32

possibilities and find them early,

6:34

which means a lot of times it's actually

6:36

things that are very easy to dismiss. They're

6:39

in a new area and in something that

6:41

perhaps only the founder was able to identify

6:43

at a specific point in time. And

6:45

there's a lot of uncertainty often around

6:47

the size of those markets, but there's

6:49

just a lot of dynamic movement and

6:52

vectors that are leading to

6:54

a natural, I call it, macro driver

6:56

of a specific theme

6:58

or vertical or product. And that's something that

7:01

I've been trying to just implement

7:03

into my process. And it's also one of

7:05

the reasons why I tried to move away

7:07

from, I initially

7:09

started out investing mostly

7:11

into enterprise, SaaS and software. And

7:14

I think that is obviously a macro trend that

7:16

has been a good theme

7:19

to invest under for probably two or three decades.

7:21

If you look at inside, I decided 96 and

7:24

they're still doing it. And

7:26

so I think those some of those macro trends are

7:29

really strong and can last for a while. But it

7:31

was important for me as I tried to find a

7:33

positioning for Jason that was somewhat unique and not

7:35

trying to compete with everybody else that's out there that

7:38

follows the same playbooks. And to

7:40

see what is happening now on the

7:42

consumer side in software, where some of

7:44

the learnings from the SaaS and the

7:46

enterprise subscription space transfer. And so I

7:48

decided also not to call it consumer

7:51

subscription ventures, because I think all of

7:53

those teams really have a half life

7:55

on them. And it's really hard

7:57

to know how long they actually endure. But I

7:59

think you have to keep adapting

8:01

and evolving that thesis over time. And

8:04

there might be some laws or common

8:06

elements that stay relevant for a long

8:08

time, but it's really trying to push

8:11

myself, investing at an

8:13

early stage, into keeping

8:15

up with some of those new developments

8:17

and trying to not just go into

8:19

a space that is already very established

8:22

and clearly understood. It seems

8:24

like it's now a pretty well-accepted idea

8:26

that when there's a major platform or

8:28

regulatory shift that you get this new

8:30

batch of opportunity that gets unlocked. It

8:32

was locked and then it gets unlocked

8:35

and that's mobile or cloud or some

8:37

change in regulation or whatever. That

8:39

story is very well told. I think you're

8:41

talking about something much more fine-grained than that.

8:43

I remember the first time we talked, you

8:45

referred to these as ingredients of

8:48

what might be possible that are

8:50

constantly changing. So whether it's a

8:52

new platform like the Vision Pro or

8:54

something like that, curious what you think about that. I

8:56

think that's why I unlocked a certain set of things.

8:59

But talk about those ingredients. How are you

9:02

on an ongoing basis keeping yourself aware of

9:04

what those things might be so that you

9:06

look in the right spots? So

9:08

the adjacent possibilities, abstract

9:10

ideas, this is what is possible

9:13

at a specific point in time. But

9:15

then how you find that is actually a

9:17

very individual adaptation of that

9:19

idea. And so how I express it

9:21

is exploring the adjacent. And

9:24

that's something that I think is both true

9:26

for how I find investments but it's also

9:28

true for a lot of the entrepreneurs that

9:30

I work with and the adjacent that they

9:33

explore. This is a natural curiosity and

9:35

this started when the first iPhones came out for me where

9:37

I just wanted to understand how

9:39

it works, what opportunities it opens up

9:41

and what it creates. And I guess

9:43

a natural curiosity around what that technology enables

9:46

and then playing with it, using

9:48

it and thinking about what could that lead to.

9:50

And this is still true now. This investment that

9:52

I've done with the LiDAR scanner was added to

9:54

the phone which opened up the ability for you

9:56

to scan with your phone any

9:58

3D object and then make a virtual

10:00

space that led to an investment in corporation and

10:03

to a company that is completely focused

10:05

on that. Similarly, gaming

10:07

evolving becoming a streaming service. We talked

10:10

about Backbone a bit and I think

10:12

the idea of, okay, native streaming coming

10:14

to all platforms where you basically skip

10:16

the need to have a hardware component

10:19

like a console, what does

10:21

that open up? What are those opportunities? And

10:23

oftentimes that can just come from

10:25

my own, I guess, exploration of where I like

10:27

to spend time and is ignited by my own

10:29

curiosity. But it can also be the founders

10:32

and what they come up with and then bring to you

10:34

and you just need to understand,

10:36

does it match? What are those ingredients? What

10:38

are the actual unlocks that just happen to

10:41

be falling into place at this

10:43

very moment to create that opportunity? If

10:46

you think about the adjacent idea applied to

10:48

the way you're building the mechanism of the

10:50

business and the investing process, how

10:53

does it work there? I know you're

10:55

really keen on your own density around

10:57

an idea so that you're not just

10:59

coming to something with no context and

11:01

no relationships and no anything. You want

11:04

to build this very clean, adjacent compounding

11:06

curve for yourself. So what does

11:08

that mean? How do you do that effectively? Well,

11:10

I guess I'm still learning, but the way I'm approaching

11:12

it today is just I want adjacent

11:15

to be a group of founders that are

11:17

active in those spaces and it can be

11:19

a lot of different spaces. But every

11:21

founder that is exploring one of

11:23

the adjacent possibilities is also

11:26

very well positioned to give you a

11:28

reference or context or another founder

11:31

that is working within that adjacency.

11:34

And so I do think that for me, I

11:36

talk about it as the adjacent cascade where a

11:39

lot of the founders that I'm now working with

11:41

were introduced to me by founders I had already

11:43

worked with. I think one of the things

11:45

that I'm willing to do that maybe especially

11:47

Series A and later Series A investors, maybe even most

11:50

senior investors, I'm not willing to do is willing

11:53

to learn through investing. Well,

11:56

everybody's willing to learn to invest. What I want to say with that

11:58

is I okay. do investments

12:00

in founders or spaces have more uncertainty

12:02

or risk because I do believe that

12:05

that is the best way to actually

12:07

learn about that space. I don't

12:09

think about it always as a singular investment

12:12

but also as a part of how do

12:14

I truly understand that space. So

12:16

I think about the long-term cascade of this

12:18

specific investment, not just about

12:20

one opportunity in itself. One

12:22

of the things that you fully convinced me of in this, what

12:25

exists in that space of the adjacent possible

12:27

today is this idea

12:30

of consumer subscription and whether

12:32

we use Duolingo or Call of Mercy. Some

12:34

obvious example might be helpful as just a

12:36

prototype or something for people to get in

12:38

the right mind space here but I'd love

12:40

to take the chance to do today is

12:42

for you to teach us consumer subscription. Why

12:44

it's such an interesting category to you, why

12:47

you think there can be enormous businesses in

12:49

this space when it's been required or space

12:51

since the earlier days of mobile. You

12:53

can pick the starting point and I'll ask a bunch of

12:56

questions about this really interesting idea. Yeah,

12:58

happy to. And again, also there

13:00

I just want to say that I

13:02

do have a strong thesis around it. I think now

13:05

five years in, there's a lot more data

13:07

that actually there's thesis is valid and I

13:09

can point to those data points but I'm

13:12

still learning with every investment. This thesis is

13:14

evolving all the time. If you had asked

13:16

me five years ago what

13:18

the typical deal looks like and then

13:20

how I think about it today, there's

13:22

permutation of what a consumer subscription company

13:24

can be. I'll give some examples

13:27

of that but just historically, so the way I

13:29

got first exposed to it is that I was

13:31

just super early adopter I guess of the

13:33

iPhone when it first came out. I was still in high

13:35

school. I was young enough to be excited about

13:37

it to see this shift from Nokia

13:39

like phone that had no capabilities to

13:41

a smartphone that gave access to everything

13:44

on the internet and all

13:46

kinds of information and that

13:48

really made me explore what

13:51

was possible in

13:53

terms of software that

13:55

previously we couldn't reach the consumer in the same way that

13:57

we could once the iPhone was there and you had it

13:59

in That came together

14:01

with me spending time at point nine where

14:03

I learned about enterprise software investing, which was

14:05

really what they're still focused on. But

14:08

I saw through the work that we did with

14:10

point nine that big attractive

14:13

parts of the SARS business model are

14:15

that it's high margin recurring revenues, global

14:17

scale from day one. And

14:19

I then saw what was happening on

14:21

the distribution through mobile with Spotify and

14:24

things like Netflix that went from physical

14:26

to digital and started really replicating the

14:28

same business model but on

14:30

the media type content. And so

14:33

we had the subscription aspect and you could

14:35

see that people are starting to pay for

14:37

that. But the business model

14:39

really was not the same because they paid

14:42

most of the money out to the publishers and the labels

14:44

keeping only 20, 30 percent. But

14:46

then slowly after you started having this

14:48

first wave of companies, you mentioned Calm,

14:51

we let the A with insight but

14:53

also Headspace was one of the pioneers

14:55

there where they really out of necessity

14:57

innovated on this model and started charging

14:59

a yearly plan upfront which

15:01

made it a very different business from a casual

15:03

perspective where you could self fund a lot of

15:05

your growth because I pay you 50 bucks

15:08

today that you can then reinvest in marketing and

15:10

if you steer that prospectively, it just gives

15:13

you a very effective way to start

15:15

a consumer business which was always one

15:17

of the big, I guess, disadvantages of

15:19

consumer companies that actually you needed such

15:21

a significant scale to monetize effectively. And

15:24

so here all of a sudden, the

15:26

willingness of consumers to pay for digital

15:28

product increased drastically with pioneers

15:30

like Netflix and Spotify educating the market.

15:33

And that is also what happened in Saas. If

15:35

you look back and I had conversations with Inside

15:38

founded around that when he started in 96 to

15:40

talk about enterprise, Saas, people are like,

15:42

you're crazy. I had this on premise, like you

15:44

pay the license and so slowly this shifted over

15:46

and then if you look at as an example

15:48

to the pricing per seat for product Excel for

15:50

the other enterprise businesses, it has increased

15:53

every year significantly as we realize the

15:55

value as it becomes more of a

15:57

system of record and more integrated and

15:59

stable. I was fortunate and

16:01

I guess my adjacent at that

16:03

time was seeing the rise of the

16:05

phone and app store and then the

16:07

subscription apps and having learned previously about

16:09

the aspect of SaaS and those coming

16:11

together. And so I just started thinking

16:13

about that and trying to understand which

16:15

makes a good business. There's

16:18

obviously disadvantages and advantages but I think what

16:20

really has changed is that you

16:22

can monetize consumer business well with

16:24

subscriptions even if it doesn't hit

16:27

breakout potential. And

16:29

obviously if it does then that is going to be

16:31

a great company. See Duolingo which now is a $10

16:33

billion public company which nobody would have believed. I don't

16:35

know if I would have believed it 10 years

16:38

ago or 5 years ago. And I think those

16:40

things just slowly show that we

16:42

always try to judge the things that are

16:44

possible based on historical values but you have

16:47

to try to anticipate some of those changes.

16:49

I think in consumer subscription that is something

16:52

that we're seeing today where AI

16:54

is a good example. And so we're

16:56

seeing breakthroughs in AI. They're actually technical and obviously

16:58

very innovative from an R&D standpoint. But

17:01

the business model for a lot of those companies. 20 bucks a

17:03

month. So this is a consumer then

17:05

they have APIs. They're like 6 of them right

17:07

now. By the way this is interesting also because

17:09

when I started talking about consumer subscription it was

17:12

mostly even calm and some of the first investments

17:14

we did. A lot of them were just content

17:16

based. And so that can work

17:18

and some of those are big businesses today but

17:20

really it doesn't have to only be content. It

17:22

can be all types of software that you use

17:25

as a person and sometimes as a business. So

17:27

I do a lot of the companies I now

17:29

work with are actually prosumer companies.

17:31

And where the line is very blurry between

17:33

consumer and prosumer and sometimes consumer is the

17:36

distribution but then from there you upsell on

17:38

either teams or API. And

17:40

so that was not clear but that as I

17:42

invested and had companies that figured some of those

17:44

things out try to distill that into playbooks that

17:47

I then also give to new

17:49

founders that I meet to understand how do we actually

17:51

approach this. And so I think we're

17:54

still in the early innings but it's just

17:57

one of the things that happen if you

17:59

expose yourself to those new things. trends is

18:01

that they're very simple to understand and to

18:03

apply to different types of business

18:05

models and innovations because of

18:07

the willingness to pay. But in the end, if

18:09

you want the best person to teach you about

18:12

subscriptions in any of those things, there's

18:14

a chance you think about me. That

18:17

is a key part of what I hope adjacent

18:19

differentiation can be is where it's

18:21

a specific dynamic around subscription, but it applies

18:23

to many different places. And I have an

18:26

energy company, renewable energy company that's charging a

18:28

subscription. It has nothing to do with what

18:30

Korn did, but it's a lot of the

18:32

learning to transfer and a lot of the

18:34

weaknesses that I saw, for example, with a

18:36

company like Korn, I tried to then overcome

18:39

by thinking about how

18:41

do we break specific disadvantages of

18:43

that model and then apply it

18:45

to new spaces. I hope

18:47

that the thesis evolves with every new investment

18:50

so that how I think about this space and maybe a

18:52

company that I invest in in five years looks

18:54

very different than a company that I invest in today, but

18:57

they have this commonality of there's a subscription part

18:59

of it and it's consumer facing. It

19:01

certainly feels that way. As an

19:03

example, myself, someone that pays God knows how many

19:06

10 to $20 per month subscriptions for tons of

19:08

different stuff, tons of different kinds of software now.

19:11

What have you learned getting down almost to the

19:13

tactical level about doing this well? And there's lots

19:15

of ways we could talk about it. One might

19:17

be, okay, I've got a thing that I think

19:19

is valuable to a consumer or prosumer. When

19:22

do I start charging them? How much do I

19:24

charge them? It does seem like lots of these things are

19:26

10 to $20 a month. There's

19:28

some weird reason for that. Maybe let's

19:31

start there about when and how much to

19:33

charge somebody and what you've seen

19:35

work really well and maybe even common mistakes that

19:37

you've seen people make when they try to figure

19:39

this question out. So I think

19:41

that most people undercharge

19:45

because they believe that I

19:47

think it's mostly founders. There's an insecurity of launching

19:50

your product and then having the market respond to

19:52

it. That makes you

19:54

afraid to ask for the

19:56

money that is for us. And I think that's

19:58

okay for the beginning. I

20:00

do think you want to monetize very early.

20:02

For me, I think you learn so much

20:04

from people buying your product and

20:06

then using it and the perfect investment is you have

20:08

at least a few months of data. So you see

20:11

people paying for it and then you see how they

20:13

use it over the first few months. Ideally,

20:15

obviously, you have one or two years because the

20:17

longer you have, the better the data. But

20:20

if you get a few months of data, I think you have a pretty

20:22

good idea of how retentive it is. And I

20:24

have this proxy that I use where

20:26

I think generally the engagement in month

20:28

three or six is

20:31

a pretty good predictor for what retention looks

20:33

like after the first year. Because if you

20:35

use something for three months or six months,

20:38

it's already somewhat habitual.

20:40

And then there's always some churn or some people that don't

20:43

cancel and you don't want to build a business around that.

20:45

But it gives you a good idea of the gravity of

20:47

the business. And so I think trying to find some data

20:49

but do it not just free but actually paid so that

20:51

you understand is it really valuable to the consumer. And

20:54

okay, start maybe lower. I'm a

20:56

big proponent. I think most applications actually

20:58

should charge an annual subscription because of

21:01

this big cash flow advantage, especially when

21:03

you get started to not be dependent

21:05

on crazy amounts of funding and also

21:08

to get to cash flow positive actually pretty quickly,

21:10

which is the superpower if you only have to

21:12

raise if you want to, not if you need

21:14

to. Most I

21:16

think initially could benefit from starting with an

21:18

annual subscription. And it can be

21:21

lower than where you want to be at the

21:23

end of the day. But I think it makes sense

21:26

to have it proven. And then over time, you start

21:28

to play with pricing in a

21:30

way that you try to get to the real

21:33

value of what the product brings to people.

21:35

And I think there's no eternal end state.

21:37

If you look at Netflix pricing, it's on

21:39

average increases 10 to 15% every year. What

21:43

are the reasons for that? One, the content

21:45

is getting better and more plentiful, but also

21:47

your willingness to pay for that content is

21:49

increasing. And that's why I'm such a long

21:51

term believer in this macro trend. Because if

21:53

you look at the kids today or the

21:55

teenagers, the value they attribute

21:58

to digital assets and things even

22:00

in games like Fortnite, Skins, it's just

22:02

such a shift in how we perceive value and what

22:04

we're willing to pay for. It's a very long way

22:06

from everything on the FCS to be

22:09

free or 99 cents. And I think that is a trend

22:11

that will keep on happening. And I

22:13

think that it will just apply to

22:15

many different spaces. And so,

22:17

yeah, I think monetize early, do

22:20

it maybe at a lower price point than you want

22:22

initially. And then you have to

22:24

test a lot. There's a company I'm

22:26

working with, it's an infrastructure company called

22:29

Superwall, which they actually do paywall testing

22:31

for you. You basically can run 100 experiments

22:33

at the same time for different sub segments,

22:35

different countries, different data points, different flows into

22:37

the product. And you can learn what works

22:39

best, what type of paywall. And so, in

22:41

the end, one of the takeaways from that

22:43

is one of the core drivers for conversion

22:45

is how often you see the paywall, which

22:47

makes intuitive sense. It's not rocket science, but

22:49

you have to ask for it. And you

22:51

have to be confident and this is the

22:53

product that you can charge for. I don't,

22:55

there's few products I work with, there are

22:57

some that are doing it successfully that there's

22:59

a hard paywall. So you have to pay

23:01

to use the product. But

23:04

I would say most of the most premium products where 90%

23:07

of people are using it for free and you get

23:09

some organic growth factor from that, maybe even some output

23:12

of using that product that is the viral

23:14

component to it, like photo room. When you

23:16

create a picture, it has a photo room

23:18

branding, if you post it, people, what's this

23:20

and the type forms example from the SMB

23:22

staff site. So I think you want

23:24

to think about that. But at the end of the day,

23:26

you want to start monetizing and you want to make sure

23:28

that the people that really get the value out of the

23:30

product, they also pay for it. And

23:33

you feel confident in doing that. What

23:35

are the most common unforced

23:37

errors or mistakes that you see

23:39

people make as they try to roll one of these things out? One

23:42

thing that I've seen is that it's very

23:45

hard to get people to switch from what

23:47

they perceive to be a free product to

23:49

a paid product, which is why I'm so

23:51

vehement about launching with a subscription. The other

23:54

aspect of it that I think is just

23:56

easy to forget sometimes because we're talking about

23:58

the business model model has to

24:00

be applied to something that actually has

24:03

the right foundation for this business model. So there

24:05

are things that should not be subscriptions. There are

24:07

things that maybe use it for a week or

24:09

a project or something like that. And I think

24:12

forcing a subscription on that can be a mistake,

24:15

because it both hurts retention. And

24:17

it also hurts conversions. Reason

24:19

I like consumer subscription products is that I

24:21

do believe that they're essentially more

24:24

aligned with a consumer's interest, because

24:26

you charge for a period of time. And

24:28

if you don't like the product anymore, you

24:30

just churn. There's no ads or third parties

24:32

that are financing your usage of the product

24:34

that have different incentives than what you want

24:36

to get out of the product. That was

24:38

one of the reasons I left social networks.

24:40

And I was an early investing be real,

24:42

for example, because I think that most

24:45

of these social networks today are just incentivized

24:47

to steal your time, because advertising is the

24:49

business model. And that means that to drive

24:52

more revenue, they have to take more of your time.

24:54

But that is not what you want. You want

24:57

to connect with people. And so if you

24:59

tell me there's an alternatives network where the

25:01

incentives of the network are just to create the

25:03

best experience long term for me, where there's a

25:06

big cord of free users, but also a pay

25:08

cord that then finances that cord. I think that

25:10

is long term where things should be. I

25:13

love the examples of companies you've invested

25:15

in where the company itself has this

25:17

weird unfolding adjacent story happening. This is

25:19

especially true in a couple examples we've

25:21

talked about that are hardware and software

25:23

together. And I'd love to talk

25:25

about both these ideas at the same time.

25:27

Hardware plus software is really interesting consumer. It

25:30

feels like forever, he said the word hardware,

25:32

everyone's just their brains turned off as too

25:34

hard, can't make money, too hard to do

25:36

capital intensive, all these bad things that no

25:39

investors like. But I think you've seen this

25:41

interesting opportunity in consumer hardware and software to

25:43

get bundled together. And that they

25:45

are an especially good example of this idea

25:47

of companies that can themselves become these adjacent

25:49

explorers. So maybe you can pick examples or

25:51

pack it however you want. I

25:54

guess maybe I do it in the way that I invested

25:56

in them because that's also how the

25:58

learning happens usually in my first. big learning

26:00

experience was Aura, where I invested

26:02

just before I started adjacent personally.

26:05

But the opportunity for Aura became clear

26:07

to me because of the investment in

26:10

Calm. Because Calm was a meditation

26:12

app, it was already doing 20 million when

26:14

we did the Series A. But

26:16

then the next year they went to 80 million because they

26:18

launched sleep stories. That was really interesting

26:20

because they looked into the data and they saw

26:22

that people were using it at night to

26:25

fall asleep. It wasn't about calling in your mind, but it

26:27

was not to find peace of mind, but

26:29

it was to fall asleep. We talked about the

26:31

foundation of a lot of, I think, your health

26:34

and happiness and mental security is good sleep. Being

26:36

interested in meditation, exploring the space, investing

26:38

in Calm, then learning about the sleep

26:40

problems that people have in the Western

26:43

world, that then being so clear

26:45

to me that what Aura does is

26:47

a way to actually combat that. And

26:49

then working with them and

26:51

understanding that it's both a

26:53

hardware product, but also a

26:56

software piece that is equally

26:58

as important. Because the hardware product itself, it obviously

27:00

has the sensors and it's what you buy and

27:02

what you see. But really a lot of the

27:04

improvement in the last few years in Aura's case

27:07

specifically came through what they show you with that

27:09

data and how they make sense of that data

27:11

and what they can predict with that data. And

27:13

so the integration of both the hardware and the

27:15

software is what's really interesting. And

27:17

I think that in Aura's case, I was quite convinced

27:19

that a subscription can make sense. So with the former

27:22

CEO, I spent time thinking through that

27:24

and making sure that they at least consider that

27:26

opportunity. And I think they did by themselves, I

27:28

just tried to give them good arguments to do

27:30

it. And that switch happened then from the second

27:32

to the third generation worked very well, where they

27:34

found a way to give you the

27:37

hardware, make a margin on it, but then also

27:39

for the ongoing value that you get from the

27:41

software and also for them to further

27:43

develop that software piece of the product

27:45

experience, you get a subscription

27:47

that aligns you with the people that use it

27:49

for a long time. And the retention that Aura

27:51

has is incredible. It's actually like spotted financial

27:54

type retention. For me trying to

27:56

further overcome the weaknesses of this

27:58

thesis. Retention is one

28:00

of them. It's clear that as a weakness.

28:03

Yeah consumers are not as sticky as businesses

28:05

So one of the clear disadvantages oftentimes is

28:07

that you can see like the majority of

28:09

users turn in year one And

28:11

then most investors just assume that in

28:13

year two that goes to zero But

28:16

really what happens is depending on the product is somewhere

28:18

that is the case But if it's a good subscription

28:21

company What happens is you lose a lot of people

28:23

in the first year But then in the second year

28:25

it almost looks like SARS churn because you lose very

28:27

little and then all of a sudden it stays stable

28:29

or maybe even bounces back up as people come

28:31

Back and so I think one of the core

28:34

insights that I try to transfer from SARS was

28:36

if you Look at it from year

28:38

two or three depending on the business It

28:40

actually looks much more similar to a SARS company

28:42

than you would think gotta get through that cauldron

28:45

And it's hard in some cases depending

28:47

on the acquisition cost that still doesn't make sense

28:49

but it can make sense especially if you recover

28:51

the cost of the first year at acquisition and

28:54

then have a Strong long tail that

28:56

stacks over time It's a very

28:58

profitable business model and it's one that requires very

29:00

little capital Because you can finance

29:02

your own acquisition oftentimes and so I believed

29:04

in that and I guess question how big

29:06

do those some of those companies become but

29:09

hardware specifically was one of the Reasons

29:12

I thought that it could make sense to

29:14

combine both with that I saw that these

29:16

harder products naturally had a really high retention

29:18

And so putting both together just seems to

29:20

make a lot of sense and I now

29:23

have Two companies per fund

29:25

one adjacent fund is roughly 20 companies

29:27

Two of them are hardware plus subscription and

29:30

the hit rate of those companies is very high I

29:32

don't know what that means for the

29:34

future, but I think that at the

29:36

very least They are underrated because nobody

29:38

cares about hardware products and nobody

29:40

believes that they can be Interesting

29:43

software products too. I

29:45

do think there's a good chance that that is possible

29:47

and the entry prices for most of these companies reflects

29:49

that You tell the story of

29:51

bird buddy. I think that's such a beautiful example that

29:53

close this little section of discussion But

29:55

buddy is a digital birdhouse very easy to

29:57

dismiss as funny and in fact, they were

30:00

laughed out of lots of investors, investigate literally,

30:02

he heard them laugh in the next room.

30:04

I always find that interesting, though, because, okay,

30:07

do you just dismiss it? Because it's funny to you?

30:09

Or have you really thought about what

30:11

could be built from here? I think I like

30:13

quirky things. But I also like to think about

30:15

it deeply and then say, but have you actually

30:17

considered those opportunities? And most of the time, dancers

30:19

know, because it's hard to see it at the

30:21

moment. I try

30:23

to think about the potential of

30:26

the business because I'm an early stage investor, I don't

30:28

need all of it to be in place already. And so

30:30

bird buddy is a digital birdhouse, it has a camera

30:32

and a solar roof. So you put it in

30:34

your backyard, and it takes pictures of the birds

30:36

that come and eat the seeds, and

30:39

small videos. And it also there's an eye

30:41

layer to it where it actually recognizes the

30:43

bird. So it's a very easy way to

30:46

interact with nature and birds for you

30:48

and your kids and grandparents. The initial

30:50

idea actually came from Pokemon go, might

30:52

catch them all. Exactly. It's very easy to listen

30:54

to. But every time you talk to somebody, somebody

30:57

buys it. It's such as like, Oh, my

30:59

dad's going to buy kids. Yeah, it's so

31:01

fun. And affordable entry price. And

31:03

so you have this initial product. And then okay, that's

31:06

where you start. How much does it cost? It's 160

31:10

or 70. The entry price, I would get the

31:12

solar roof because then you just don't need to

31:14

charge it. I didn't forget it. Also, we now

31:16

launched a subscription, which allows people

31:18

that are really into birds to go into one of the

31:20

other 150,000 bird feeders that are

31:24

already active out there, and also

31:26

to specific bird bodies in nature

31:28

parks or in exotic locations in

31:30

South Africa. And then

31:32

we also have seasonal seed mix that gives you the

31:34

seeds that attract the most interesting birds in that specific

31:37

season. So you can start expanding from that. And then

31:39

it becomes interesting if they talk about what

31:41

if we are the place that helps

31:43

you to increase biodiversity in your garden,

31:45

because we have already cameras, we

31:47

see the movement of different animals. We

31:50

can also complement that with different types of sensors for

31:52

the soil for how much sun the garden gets, what

31:54

type of plants you have. And then we can actually

31:56

sell you products that you need

31:59

to increase biodiversity. in your garden.

32:02

And that is not just interesting for a lot

32:04

of people that don't know how to

32:06

garden, but it's also actually a very positive mission because

32:08

if they do that properly, what type of influence

32:11

do you have to combat climate change? There's very limited

32:13

room for you to do it. If there's a playful

32:15

way for you to do it and get very easy

32:18

recommendations to do that, and they participate in this but

32:20

also open that for you, it's a

32:22

very rewarding thing to work on. For the

32:24

employees there, for me as an investor, as

32:26

the consumer supporting the business, I think it

32:28

could be much bigger than people think. How

32:31

often are you shocked by the market size? One of

32:33

the things we talked about before was birding

32:36

is insanely common thing and people

32:38

spend tons of money on crazy

32:40

binoculars and all this crazy stuff.

32:43

Is this a common thing that you encounter where

32:45

someone in an investor meeting is laughing them out

32:47

of the room but there's actually a billion people

32:49

that like birds or something? It

32:51

happens for sure. And actually that contrast

32:53

of what you would expect instinctively and

32:56

then what you learned, that's it. That's

32:58

a really big argument for taking a close look.

33:01

We talked about speechify before. That was something

33:03

for me that I was just so shocked

33:05

how many kids have difficulties

33:07

reading today and how little people read, not

33:09

just kids, also adults. It's so rare to

33:11

find someone that actually still reads books. And

33:13

from my perspective, I read part

33:15

of my process, it's part of my well-being

33:17

to read. So it's hard for

33:19

me to see that but when something is so

33:22

clearly different than what I expected, then

33:24

it actually becomes, oh, this is really interesting. This

33:27

tool here that Cliff, the founder of

33:29

speechify has dyslexia and he started it

33:31

to help him do his homework for

33:33

school and university. And so is that

33:35

a singular case or how much does

33:37

that expand? And then what

33:39

is the mission? Because yes, you

33:41

can help people with dyslexia and

33:43

ADHD to process information but you

33:45

also actually are the bridge between

33:47

everything that humanity has ever written

33:49

to consume that still when people

33:52

don't actually read anymore. Actually, you could say

33:54

that LLMs are a bit of the same where they just

33:56

aggregate all that knowledge and then give it back to you

33:58

in a schematic. But

34:00

this for me was, okay, there is a

34:02

real problem here with people not reading and

34:04

most of humanity's knowledge is in text. And

34:07

so, speechified, the opportunity is much bigger

34:09

and the purpose of it is much

34:12

beyond just people with dyslexia and ADHD.

34:15

Let's keep building on the knowledge that

34:17

we already have to push the adjacent

34:19

forward. One of the

34:21

things that must be a fun part of what

34:23

you do for a living is that you get

34:26

to use lots or all of the products. Try

34:28

them yourself personally versus infrastructure or

34:30

a software person. Pretty rarely probably is

34:32

going to actually be building something with

34:34

the tool or becomes very abstract. So,

34:37

you've looked at, God knows how many products

34:39

yourself personally. How would you sum up

34:41

what you've learned about what it means to be

34:43

a great product? What's the difference between a great

34:45

and a good product or a 10 and a

34:48

9 or whatever frame helps you most think about

34:50

the question. But you've seen a

34:52

lot. You've developed taste. Articulate

34:54

that taste and what great means. A

34:57

lot of it is simplicity of

35:00

the product. It's actually usually

35:04

doing very few things but doing

35:06

them super well and not confusing

35:08

people how to use it. And

35:11

then it's an attention to detail about

35:13

the different aspects of that journey that

35:17

just make you realize that it's just

35:19

very thought through by the founders. And

35:22

so, I think some of that is perhaps

35:24

you can see by talking to users, using

35:26

it yourself and getting a feel for how

35:29

smooth is it, what's the friction to getting

35:31

started and what's the time to having a

35:33

wow factor. The first time you see

35:35

a bird, I mean there's a friction you have to bite a

35:37

thing, put it in the garden. The first time you see it,

35:39

you just immediately get the value. And so, I

35:41

think this is also true for calm is a good example. I

35:44

always use the joke is you pay

35:46

the subscription when 70% of it is silent. But

35:49

the first time it forces you to sit down

35:51

and meditate, you actually notice how much your mind

35:53

is racing and how much you need it because

35:55

we all suffer from overthinking in the Western world.

35:58

It's responsible for a lot of the press. and

36:00

the problems that we have, I think. And

36:02

so I think for me,

36:04

the process is somewhat intuitive, where I want to

36:07

be drawn back to the product, I want it

36:09

to feel clear how you use it, I

36:12

want the details to be thought through. And

36:14

so the simplicity teaches

36:16

you that the founder

36:19

has been incredibly diligent,

36:21

careful, hardworking about what

36:23

matters. So it says something about them. I

36:26

think a great product reflects a

36:29

lot about the founders that build it

36:31

in a way that I actually probably judge

36:34

a founder more by the prior than by the

36:36

interaction with the founder, which I don't

36:38

know if that's a good thing or a bad thing. It's

36:40

just my approach. I think there are some people that are

36:43

really good at understanding the drive

36:45

and the qualities of a founder. And I do think

36:47

that I have an intuition of, is that person authentic?

36:49

Can I trust them? But really, it's what

36:51

have you done? What have you built? How

36:53

does that make me feel? And how does that

36:55

reflect your confidence in what you're building?

36:58

And I think that reducing things

37:00

to the essential

37:03

parts is one of the great

37:05

skills of a good consumer founder. And

37:08

you can always build up on that over

37:10

time. But starting small, having

37:12

a very specific use case hook demographic that

37:15

you want to serve, then from there building

37:17

it up, that is, I think, the

37:20

approach you have to take. As opposed to try to

37:22

do a lot of things, push it all together, confuse

37:24

people, I think always you

37:26

want to involve the data and what

37:28

you learn from the customers to build

37:30

that roadmap and further develop the product.

37:32

But if the quintessential insight is not

37:35

right or doesn't get you to product market

37:37

fit, adding more things will probably

37:40

not help you. That's something that

37:42

I try to understand. What is

37:44

the specific use case and the specific user

37:46

group that this initial product is built for?

37:49

Can you talk about the feeling of doing

37:52

basically everything yourself in an

37:55

investing process versus the

37:57

feeling of being a part of a very

37:59

well-being? well-oiled machine working at a

38:01

big investing firm that has lots

38:03

of resources and division of labor.

38:06

First of all, I do think that

38:08

obviously both can work. I've met people

38:10

that have honed their skill at an

38:12

institution that really is more of a

38:15

machine, but they're world-class, one

38:17

of the attributes that you

38:19

need to be a really good investor.

38:21

Maybe out-hustle in outbound sourcing

38:23

or relationship building or closing the deal.

38:26

For me, that was never so fulfilling.

38:28

And I guess my position there was also

38:31

a somewhat different one because I was leading

38:33

a team. But I want to have, for

38:35

me, to come to the best decision. I

38:38

think you have to touch all aspects of

38:41

the work. And for me, it's even

38:43

more I want to understand all

38:45

the different aspects of the work. I think for

38:47

that, every conversation that you

38:49

outsource removes you further from finding

38:51

the truth because there's another

38:54

filter on it. Back to Brian,

38:56

how I think further hone my

38:58

own perspective and skill as an

39:00

investor as opposed to trusting the

39:02

reference calls that somebody did for

39:04

me. There's the investment decision

39:06

aspect of doing it by yourself. And the

39:08

second part of it is I was also

39:11

pretty siloed from the whole LP and fundraising

39:13

and ops aspect of

39:15

the business. And that's

39:17

fine. And that allowed me to focus more on

39:20

finding investments, doing them, supporting the

39:22

entrepreneurs, which is really what I did for

39:24

the first eight years of my career. But

39:27

I just wanted to understand all aspects of it. Then

39:29

I think that it's scary to go out and raise

39:31

your own fund because there's uncertainty.

39:34

Most people think it's just more comfortable to join

39:36

another firm. And I think, obviously, in

39:38

some aspects, that's true. But on the other hand, I think

39:40

that's a bit of maybe it has shifted. But I think

39:42

it's also a bit of a scare tactic to keep the

39:44

power to the people that have already

39:46

done it. And I just wanted to understand what

39:48

it's like. I wanted to really see could

39:50

I also do the other parts of it. And I

39:53

think they all feed together because, obviously, the piece you

39:55

work with, the thesis that you have, the way you

39:57

make decisions, and all of that together creates a firm.

40:00

And I just wanted to see if I could start my own

40:02

firm. And so that is one part of it. And

40:04

I think the last aspect of this doing

40:07

it solo that I think is important and

40:09

actually intentional for me, it's not

40:11

that I don't think you can hire people that are good, but

40:14

I think that I have a very clear idea

40:16

of how I want to serve founders. And

40:19

that is a very high touch service

40:22

oriented way to

40:24

be available, to always get a

40:26

decision maker that makes decisions, to

40:29

always feel like you are talking to the founder

40:31

of the firm. And so

40:33

you can also some of those aspects to scale

40:35

yourself. I scale myself in other ways. We talked

40:38

about board structure and there's ways that I'm very

40:40

intentional about that. But I

40:42

feel like the core business is

40:45

making founders want to work with you.

40:47

And then the founders that work with you

40:49

tell their founder friends or

40:51

other people that you introduce them to give a

40:53

reference to convince them to work with you. So

40:56

this experience that a founder has working

40:59

with you is very important. And this

41:01

includes all the touch points from what

41:03

they hear about you before you make

41:05

the intro call to how

41:07

does that intro call go to what's the

41:09

feedback after I've said for a few days

41:11

and actually thought and used the product and

41:13

talked to people in the space to

41:15

then after to how does the deal done? What

41:18

are the things you care about? Who writes to

41:20

Hermsheets, which is usually me. And

41:23

what are the terms that are important? What are you

41:25

optimized for? Then once the deal

41:27

is closed, how do you make sure that

41:29

it's not just the lawyers going back and

41:31

forth, increasing the bill and stealing the founder's

41:33

time, but enforcing that process to make it

41:35

tight, seamless without friction to then

41:37

when they start working with you,

41:39

how can they get in touch with you? How long does

41:41

it take to respond to a text or can you be

41:43

on the call even if it's late? And

41:45

for me, those things all come together and I want

41:47

to control the experience and

41:50

I want to make sure that it is

41:52

the best possible way for the founder. That's

41:54

why I also don't have an EA because I

41:56

don't want that to be a person between me

41:59

and the founder. It's me and the founder. And

42:02

that relationship is very important. You

42:05

said something interesting earlier on our

42:07

walk, which was something like greatness

42:09

is looking inward and building on

42:11

your own experience. I'd love

42:13

you to explain what you mean by that. And I guess

42:16

map, you made me think about it with this idea

42:18

around the founders and their relationship to the product. But

42:20

what do you mean by that idea of greatness? I

42:23

think it applies to both founders and investors. And

42:25

I think it's also related to this idea of

42:27

the adjacent possible. But essentially,

42:29

you could also think of the object possible

42:31

from a technical point of view of breakthroughs

42:34

and the ingredients that enable those breakthroughs. But

42:36

you can also think about it as an

42:38

individual perspective of the experiences and the context

42:40

of this person allow them to

42:42

see this way, all of our perspectives are very different.

42:45

And so I think that oftentimes

42:47

people try to adapt the playbooks

42:49

of others, or what the mainstream

42:52

or their parents or bosses

42:54

give them as tools and then apply that

42:56

and just work that, as

42:58

opposed to trying to gain

43:00

confidence in the unique perspective that

43:02

they have and what it enables them to

43:04

do. And so the founder

43:06

that is in the adjacent possible already put

43:08

themselves into a space where they want

43:10

to be somewhere where not everybody's

43:13

already crowding the space, let's try to

43:15

figure out what's happening here, probably the

43:17

curiosity, let them there. But

43:19

it's also true from an investment standpoint where you

43:22

are uniquely suited for specific things.

43:24

And the only way that you

43:26

can actually be at the forefront

43:28

of a specific theme idea adjacent

43:30

possible is if you develop those

43:32

ideas by being in it. I

43:34

think the only way that you

43:36

can create extreme upside is

43:39

if you see something that other

43:41

people don't see yet, because

43:43

that in itself opens up the opportunity that

43:45

there's something being built here that is really

43:47

unique. And the uncertainty around what

43:50

it can become is, at

43:52

the same time, the potential of

43:54

optionality. So this can apply for both

43:56

the founders and the investors. And it goes back to even

43:59

what we talked about. with following your

44:01

own intuition and trying to further develop your

44:03

own sense of what is your deal or

44:05

your company or the opportunity that you're chasing.

44:07

And I think that's something that requires

44:09

also confidence in yourself and perhaps is

44:12

maybe also a natural step

44:14

in your development after you've gone through

44:16

the other phases and then

44:18

decided that you want to find your own way. One

44:21

of the things that in the ecosystem that

44:23

we work in is so interesting is the

44:25

rise of individuals and adjacent to company but

44:27

it's also primarily you at this stage and

44:30

that might change in the future of course.

44:33

But individuals sometimes under their own name, not

44:35

even under a firm name, having

44:38

control of an allocating huge amounts

44:40

of capital into all

44:42

sorts of companies, established ones,

44:44

young ones, technology, non-technology, whatever. But

44:47

this is a really notable and to me

44:49

interesting trend in the world that

44:51

you have single people that

44:53

are able to run what

44:55

is effectively a scaled up

44:57

investing firm by themselves. And

45:00

at the same time obviously you've got standard huge

45:02

enormous firms and the black sons of the world

45:04

still command most of the world's assets. But

45:07

since you're one of these individuals that is

45:09

allocating lots of capital and it's just you,

45:12

any reflections on that trend as one

45:14

of those people that you think are

45:16

interesting? This is my perspective on

45:18

it. When venture started, a lot of

45:21

the firms were not seeing

45:24

the size of the outcomes that the companies

45:27

eventually could have. I think this is true

45:29

when you look at early memos from firms

45:32

like Inside or Bessemer and Evenpoint Nine.

45:34

The most optimistic case for a lot

45:36

of those outcomes were companies that are

45:38

hundreds of millions, maybe a billion or

45:40

so. And now we have companies that

45:42

are trillion dollars. That development is just

45:44

crazy and I think what that has

45:46

led to though is that there's a

45:48

bit of a retroactive adjustment where a

45:50

lot of those early firms that are

45:53

still very relevant players today have

45:55

then scaled up to become multi-stage

45:57

firms that manage big assets.

46:00

And I think that has a place, I

46:02

think, especially in well-understood verticals like

46:04

SaaS, where you can benchmark everything and you

46:06

have playbooks, and you can build a machine

46:09

around evaluating and supporting those companies that

46:11

has a place. But it

46:14

also, I think, has led to some

46:16

sort of fallacy where you now think

46:18

you can see those type

46:20

of outcomes at a very early stage. And

46:23

I don't think that is so true. So I think those

46:26

big multi-stage firms naturally are gravitating

46:28

towards later stage and better investing,

46:30

because they need more confirmation

46:33

that this is a company that can be

46:35

a generational company or a very big outcome.

46:38

And I think it's very rare that you see it

46:40

at the seed, and I think they didn't see it

46:42

themselves at the seed. That's why their members said, this

46:45

is going to be a $500 million outcome and it

46:47

doesn't tend to be a $10 billion outcome. So I

46:49

think we always get surprised on the upside if it

46:51

works, which is why I decided to formulate a strategy

46:53

around adjacent, whereas I want billion-dollar outcomes, which

46:56

are pretty reasonable in today's world, to

46:58

return the fund. And so if I

47:01

catch a $5 billion or $10 billion outcome, it's

47:03

a home run. But the strategy does not depend

47:05

on it. So I expose myself to this optionality

47:07

of the returns. And so those

47:09

firms get become bigger and they go towards later

47:11

stage. And then you have this new class, I

47:13

guess, of investors that come in and there's been

47:16

seed funds for a long time. So I guess

47:18

that expands more to rise of seed. But

47:20

then you have within that also individuals

47:23

that are mostly being

47:25

known for their name essentially

47:27

emerge of an angel and institutional manager. And

47:29

I think the rise of those multi-stage firms actually

47:31

also gave rise to that class of investors. Because

47:34

what happens if you have that much capital to

47:36

allocate, most of the time you need

47:39

headcount and processes and you build up

47:41

an organization that supports that. But

47:44

through building that up, you move away

47:46

from the individual oftentimes because you have

47:48

a lot of people in the firm, you have a lot

47:50

of partners, you have junior, senior, you have something

47:53

that becomes a bit more of a corporate

47:55

structure oftentimes. But founders themselves

47:58

are rebels, they're independent. thinkers, they're people

48:00

that go against the grain. And of course, there's

48:03

value in having a great brand. And especially if

48:05

you're careful about that brand, and what companies that

48:07

reflect, think that is important. But I think they

48:09

like the underdog. Maybe not all, but the type

48:11

of founders that I try to appeal to oftentimes,

48:14

they appreciate me because I am starting my own firm,

48:16

and because I am only one person, and because it's

48:18

easy to get to know me. And because I'm fast

48:20

to come to a decision. And because there's not loops

48:22

or other people that have to convince, I respect their

48:25

time, I try to take as much of the burden

48:27

of making the decision on me, and do the research

48:29

and then come back with a strong point of view, sometimes even

48:31

before I talk to them, so that I can come in with a

48:33

view, when I just have the

48:35

first conversation. And so I think this upside

48:37

surprising us, the multi stage firms that were

48:39

built around it, the corporate nature of those

48:42

firms, naturally gave the opportunity

48:44

for an anti positioning of that, which is

48:46

a person, and the person that is authentic

48:48

that you can get to know quickly, that

48:51

can make decisions quickly, that is perhaps closer

48:53

to the founder than some of the other people that

48:56

they would meet in the decision making process. And so

48:58

I do think that this is a trend that will

49:00

keep on persisting. I also think that

49:02

it's coming back to this unique perspective

49:04

of you want to find your own

49:06

way to see a specific opportunity and

49:08

the adjacent possibilities that you look into.

49:11

I think the rise of these individual firms

49:13

also serves that super

49:15

well, because those people have

49:17

only themselves. And so they naturally are drawn

49:19

into a specific direction and hopefully are focused

49:21

and not somewhat more generalist, but a lot

49:24

of them just have a specific area of

49:26

expertise. And I think the best do. And

49:29

that just makes sense, because not all of

49:31

the perspectives are concepts

49:33

driven by a large venture firm.

49:35

But to actually see something differently,

49:37

perhaps it's helpful to not make

49:39

a content decision, but to be

49:42

very much focused on, does

49:44

this make sense for me? And

49:46

is that then something that is differentiated to how the rest

49:48

of the market will see it? I think that's

49:50

going to be more. Since I started,

49:53

I've backed probably a dozen solar managers

49:55

that are focused on a specific

49:57

segment, because I'm joking sometimes that it's a bit

49:59

like an alliance of the

50:01

solar founders, like the Rebel Alliance and Star Wars,

50:03

they're the best star which is big

50:06

institution. And then you have this network

50:08

of rebels collaborating and working together. And

50:10

that is an adjacent possible NVC. And

50:12

so if I'm one of the connectors

50:14

of that, that is valuable. And

50:16

so that is something that I am just

50:18

passionate about, because I do think that it

50:21

actually leads to people finding their own perspectives.

50:23

And I think that those funds should be limited in

50:25

size. I don't think how many of them should be

50:27

mega big funds, obviously each is own. I just

50:30

feel like especially four seed, where

50:33

this unique perspective provides the most

50:35

upside, the smaller the fund,

50:37

the higher the return potential, the higher the

50:39

potential that the LPs by

50:41

the way, are flocking also into

50:43

this class. Because your options are

50:46

there's an established brand, and they

50:48

offer two to three acts very

50:50

securely, that is good, especially if

50:52

you have to allocate big LP

50:54

dollars. But where's your alpha coming

50:56

from? It's coming from the smaller funds that

50:58

have a higher return potential. And so,

51:01

for them, it makes sense to move more

51:03

of their exposure into those

51:05

earlier stage VCs. And I think so,

51:07

there is a competitive advantage by

51:10

staying smaller and actually having higher returns. Because that

51:12

is actually what they're looking for. If you have

51:14

a two to three acts fund, even

51:16

if your name is on the fund, what

51:18

really is the differentiation towards one of the big

51:21

firms that have been around for decades? Speaking

51:23

of that idea of specialization and the

51:26

intimacy, if you think about

51:28

the category, I know you don't just do consumer subscription,

51:30

but if you think about that category, what are

51:32

your favorite questions to ask those

51:35

founders, especially very early on? What

51:37

are the most powerful questions that you found? One

51:40

thing that I really like

51:43

to start with is, what

51:45

was your initial hypothesis for

51:47

this company? And

51:49

what have you learned since then? And so,

51:51

that actually goes very much into the direction of

51:53

the things that we just discussed. But it's, what

51:56

is it that you've experienced in your life?

52:00

that makes this an opportunity

52:02

that is really important for you, but

52:04

also that you see more clear

52:07

than other people. And

52:09

then also back into that with the left part of

52:11

the question is, how much did you

52:13

have to iterate on that? Has it all stayed

52:15

the same? Probably not a good sign because the world

52:17

changes all the time. Who knows what

52:20

actually ends up opening up and where you

52:22

should focus in your attention. And

52:24

then also it shows that you're self reflective and

52:26

you're trying to be humble and you're adaptive to

52:28

the environment. Nobody knows what the world looks like.

52:30

And we just know that the

52:32

people that are adapting quickly and are in the

52:35

right spaces. I will take a

52:37

bet anytime on somebody that is self

52:39

reflected, found themselves authentically

52:41

to an opportunity and

52:43

is trying to figure out exactly

52:46

what they're building in that space. But

52:49

they're open about that. And they have maybe

52:51

a first hypothesis and they're testing that, but

52:53

they're experimenting and then making sure that

52:56

they're on the strongest vector in

52:58

that adjacent possible. And that's very

53:00

different than let's say most series A

53:02

investors where they maybe don't like experiments.

53:05

They need to understand specifically

53:07

what is the vision you have for this. And

53:10

that's fine. And that vision becomes clearer over time

53:12

and you have to have a vision at one

53:14

point, I think at least as a guiding star,

53:16

you can still adjust it. But I'm completely okay

53:18

with some uncertainty around that. If I think that

53:21

this founder is someone that adapts very quickly in

53:23

a space that is evolving very quickly and has

53:25

built a product that is very

53:27

opinionated, simple,

53:31

and iterates on it in a way that just makes

53:33

sure that it evolves with the space and what he

53:35

learns from or she learns from users and

53:37

other things that are happening in that market. If you

53:40

think about that constant adaptation required,

53:43

what ingredients have changed the most in the

53:46

entire world landscape that

53:48

are most interesting to you and you think

53:50

most important for companies to be on top

53:52

of whether that's new platform stuff, new technologies,

53:55

new whatever, what's changing in the last six,

53:57

12 months that you think are

53:59

the biggest opportunities and or threats to existing

54:01

ways of doing things. I

54:03

do think that AI changes the game for a

54:05

lot of companies. And I can give you

54:07

some specific I don't have an AI focus, I actually think

54:10

having an AI focus now is like having a crypto focus

54:12

like 2122. It can work and

54:15

there's going to be great companies, but there's going to be a lot

54:17

of a lot of competition, a lot of competition. And for me, that

54:20

is not what I do, I should not go into

54:22

the hype and then try to best the tier one

54:24

funds. But I should go where I think

54:26

there is a lot of opportunity that is underrated. And

54:29

then at the same time, I have

54:31

companies that use AI that have seen

54:33

incredible growth, the more they adopted AI

54:35

features. Probably this is

54:37

true for enterprise companies too, but consumer companies

54:40

just have more data because they have a

54:42

larger end of customers. And if

54:44

they're retentive and engaged, and they have more data

54:46

of how people use that product, and they can

54:48

use that data to make informed decisions and to

54:50

add features to the product that leverage AI. The

54:53

product roadmap in some ways can be dictated

54:55

by AI. And then also

54:57

right now it is for consumer companies, I mean,

54:59

it's always true, but what are your unique ways

55:01

of distributing the product. And one of

55:04

the advantages that a lot of the companies I work with

55:06

have is that they're visual. And

55:08

if people see them, they are interested

55:10

to learn more. It's not true for all companies. But

55:12

if you see a backbone on the plane, or if

55:14

you see a visual of how somebody takes a photo

55:17

of something, then the person appears that where's that thing

55:19

and this happens in a second, it can be magical.

55:21

That lends itself very well to marketing,

55:24

product development, then acquisition. And

55:27

what you show and what response you evoke on

55:29

a paid marketing channel or wherever people see it.

55:32

But then also cost-based. That's companies

55:34

that are doing content production or write

55:36

blog posts or such. But I have

55:38

companies that they have decreased their costs

55:40

to a level that they are cast

55:42

for positive, just by using

55:44

AI to create different parts of content

55:47

for their business. It can go from the feature

55:49

that you add to the product to how you

55:51

do distribution to your own cost-based. It's

55:53

not so much, I mean it is AI in this

55:55

specific example, but it's just what are the most agile

55:58

organizations that use those innovations. quick

56:01

to then create an

56:03

advantage to the rest of the market. The

56:06

companies that are set up to do that well,

56:08

that are small, that are agile, that adopt new

56:10

technologies, that have an open mind to that, they

56:13

will evolve with the space. And

56:15

so that certainly, I think, has an impact on a

56:17

lot of the companies that I'm working with today. What

56:20

about something like the Vision Pro, which I've

56:22

never actually used it so it's probably telling

56:24

that I haven't. It does not certainly seem

56:26

to have landed in any

56:29

sort of ubiquitous way. Everything I've

56:31

heard is an incredible piece of technology. What do you

56:33

think about it? So for me, it

56:36

has landed. What I mean with that is, I think

56:38

this year they expect like 250,000 units sold, which is

56:41

nothing compared to the circulation of

56:44

iPhones and smartphones. So it certainly

56:46

doesn't allow for breakout scaling opportunities

56:48

today. But I think the

56:50

technological leap, the adjacent possible is very

56:52

clear. The things that it can do that

56:54

were not possible before because it really

56:57

does merge

56:59

digital with physical perspectives.

57:02

For me, the laws that I think are clear that it

57:04

will become smaller in form factor,

57:07

the better we will become better,

57:09

the social stigma around it will go

57:11

away with time because that always happens with

57:13

technology. And so maybe three generations

57:15

from now that it actually has mainstream appeal.

57:17

But which are the companies that will benefit

57:20

from that? The ones that are starting building

57:22

now? And which are the ones that are starting

57:24

to build now? The people that

57:26

are in the mobile ecosystem that already

57:28

use Apple's tools to create experiences for

57:30

the consumer. That was part of the

57:32

consumer thesis for Jason from the beginning

57:34

where I thought that the mobile phone

57:36

is not the end state of mobile technology. There's

57:39

going to be different things that we use

57:41

that merge the digital realm

57:44

more with the physical and are less

57:46

disruptive in terms of this and also

57:48

more integrated into our day-to-day lives. And

57:50

I think that's just been true forever.

57:52

And I think that if you

57:54

see that that is starting to become

57:57

real, it is time to think about,

57:59

okay, how do we? expose themselves to that. And

58:01

actually, some of the really interesting companies

58:03

that I have seen today building with

58:05

interesting things for that are companies that

58:07

did 3D work on mobile

58:09

before. And now they're in a perfect

58:11

position to start experimenting with what is

58:13

the form factor? What is it that we have

58:16

to do to also have a hit on the

58:18

vision pro so that in

58:20

three, five, whatever time it takes,

58:23

we are the one that can really

58:25

benefit from when this platform reaches the

58:28

mass market potential. It's

58:30

just about exposure to that generality

58:32

that I'm looking for. I

58:34

always visualize this technology frontier and obviously

58:37

your whole thing is what is on

58:39

that frontier. If you visualize the adjacent

58:41

frontier, and you speculate as

58:43

much as possible, what is

58:45

the most out there thing that

58:47

you're at least curious about it, you don't have

58:50

to have made an investment there. But what's something

58:52

that's at the very edges of

58:54

what's possible today that has

58:56

your attention. This is maybe

58:58

an example that it is out there. So

59:01

it is out there and I have done it and

59:03

it is further from what we talked

59:05

about on the consumer subscription side. But there's

59:07

a company that I'm working with the founder

59:10

of that company was one of the youngest

59:12

fellows ever at Intel and helped them to

59:14

create autonomous chip design. Not today, but decades

59:16

ago, when it was not something that people

59:19

did. And he started a

59:21

company and he sold it after and

59:23

he's now found a parallel between this

59:25

self designing chip circuits and

59:28

buildings. So actually creating

59:32

blocks or pieces and

59:34

software around it that helps you to depending on

59:36

the space and material you want to use create

59:39

the plan for real estate.

59:42

It is not a mobile company is not

59:44

consumer, but it is adjacent in the

59:46

way that it is only possible today.

59:49

It's probably not going to work out because it's

59:51

hard and he transfers knowledge from one area to

59:53

the next. I got to know him in

59:55

a very natural way. I was on a board with him of

59:57

another company. I got to see him operate

1:00:00

execute and I learned about what he has done

1:00:02

with his career so far and then where he

1:00:04

wants to apply it next. And it's very ambitious.

1:00:06

I guess you can say it's outside of the

1:00:08

wheelhouse, but it still fits the criteria of

1:00:11

what I'm looking for. It's much harder to

1:00:13

get to an understanding of does it work or

1:00:15

not, because I can't test it. So

1:00:17

it's difficult. So it's for me also something

1:00:20

where I'm uncomfortable and I have to actually

1:00:22

accept that this is a bit outside of

1:00:24

the core of the thesis so far. But

1:00:26

I also don't want to be confined to

1:00:29

the first thesis that I'm starting with forever.

1:00:31

So I have to find ways within what

1:00:33

I'm comfortable with to expand

1:00:35

that thesis into other things with

1:00:38

the same tools that I've used for most

1:00:40

of my investing. There's other examples a

1:00:42

bit easier maybe to relate to chain analysis for

1:00:44

me when it was an investment we did at

1:00:46

point nine when I was there. Now I got

1:00:48

introduced to crypto and I was interested in I

1:00:50

bought Bitcoin is trying to understand the

1:00:53

space better. But all I knew was fast

1:00:55

investing. But here I find a company

1:00:57

that is doing a SaaS product that

1:00:59

is a proxy on the crypto space.

1:01:01

Chainalysis is an analytics company for crypto

1:01:04

transaction that's today used by most major

1:01:06

law enforcement agencies and governments and such.

1:01:08

So it was a small market, everybody

1:01:10

passed on it. I had no

1:01:12

idea about crypto really. But I knew that

1:01:14

if crypto becomes a thing, this

1:01:16

can be a gold standard for that thing. And I

1:01:18

don't know what SaaS is. And I could talk to

1:01:20

some customers and I could look at the metrics. And

1:01:23

so I could use the tools that my frameworks that

1:01:25

I knew to get closer

1:01:27

to an adjacent space. And

1:01:29

so this would be an example of that, which is a

1:01:32

bit of a leap, but also for me, a bit

1:01:34

of a test of how much does it transfer. If I

1:01:37

ask you to think across the faces of everyone

1:01:39

you work with all the founders, who

1:01:42

comes to mind most immediately, when you

1:01:44

think of someone that's going to be working on the same

1:01:47

problem space 30 years from now?

1:01:49

I guess the way I think about

1:01:51

who's most authentically committed to their vision,

1:01:53

or what they're building, who's authentically passionate

1:01:55

about what they're doing. I think

1:01:57

that backbone is one good example. just

1:02:00

because Manit

1:02:02

is young. He's a

1:02:04

gamer. He saw it as adjacent possible when

1:02:06

he was an intern at Google and saw

1:02:08

the work they did with Stadia and then

1:02:10

saw the future of gaming moving towards streaming.

1:02:12

Before there was any idea

1:02:14

of what a game pass would be

1:02:16

or other types of technology that actually

1:02:18

accesses that. And so every time I

1:02:20

talked to him, the way he thinks

1:02:22

about the space, he's so ahead of

1:02:24

how things will play out. And

1:02:26

obviously, sometimes you have to adjust sometimes things happen faster

1:02:28

or slower than you expect. But he's playing with his

1:02:31

own product when he's not working on it. This

1:02:33

is clearly something that he had the insight,

1:02:35

he built the product that he wanted. And

1:02:37

he doesn't see an end to what it

1:02:39

could be. Because we're still at the very

1:02:41

early innings of all of those things falling

1:02:43

into place. Native game streaming is just now

1:02:45

is arriving on the phones, the tier one

1:02:47

titles are just now coming to the phone.

1:02:49

That's what he cares about is creating an

1:02:52

amazing product experience in that macro.

1:02:55

For me, it's the perfect combination

1:02:57

of we're playing in an adjacent space, there's

1:02:59

a phone there that's driven to build the

1:03:01

best experience and adapt to what is happening

1:03:03

in the space. And I

1:03:05

just I don't think there's a reason for him to stop. At

1:03:07

least I don't see it today. What about

1:03:09

if you flip it a little bit and think about not the

1:03:12

founder, but the market, not

1:03:14

including gaming, so some other market being

1:03:16

addressed by a company that

1:03:18

you're working with that is most interesting or

1:03:20

exciting to you right now. The way that

1:03:22

I think about these things is that either

1:03:25

I have an intuition about a space that is interesting,

1:03:27

I try to find the best company that

1:03:29

encapsulates that opportunity, or it's the

1:03:31

founder that spots the opportunity, and

1:03:33

then I learn that it makes

1:03:35

sense. But then I do the

1:03:37

investment and then I move on. So I don't

1:03:39

actually have a space that I'm super focused on.

1:03:42

That sounds maybe silly if you think I'm all

1:03:44

about consumer subscription. And that is true. But it's

1:03:46

really just a business model

1:03:48

that is so flexible to different types

1:03:50

of opportunities. And the opportunities themselves open

1:03:53

up all the time. An

1:03:55

investment I'm closing now, which I think is super

1:03:57

interesting and is exactly playing into that is a

1:04:00

hybrid phone provider that merges the

1:04:02

cell phone capability with satellite. A

1:04:04

lot of people dismiss this because a

1:04:06

lot of people have cell services, these

1:04:08

virtual providers haven't been traditionally good investments.

1:04:10

But there also hasn't been this new

1:04:13

adjacent possibility of satellite and actually working on

1:04:15

combining them and the benefits that you have

1:04:17

from that and perhaps some core functionality that

1:04:19

you can add to that as well. And

1:04:21

so, I don't even know

1:04:23

what the end product would be. But if there's

1:04:25

a person that says this is a space that it

1:04:28

makes sense to me that with satellite and capabilities that

1:04:30

SpaceX unlocks and all of that, there's

1:04:32

going to be a shift in communications. And some of

1:04:34

that will be offered by the providers themselves, some of

1:04:36

the big telco companies will go in there. But I

1:04:38

guess my belief is just that every time you have

1:04:40

such a shift, and you are

1:04:43

exposed to that space through a founder that has

1:04:45

thought about it more than you do, but it

1:04:47

checks out. And they

1:04:49

have a consumer sense and they are reflective in how

1:04:51

they're building the product that excites me. But I don't

1:04:53

have preconceived views of I need to be in those

1:04:56

markets. And sometimes I have them for a little bit

1:04:58

of time. So back one actually, how I got there

1:05:00

is that I went through

1:05:02

all these data for revenue on the

1:05:04

app stores. I have exposure to most

1:05:06

categories with adjacent, but 50% of

1:05:09

the revenue is gaming. And I don't think I'm

1:05:11

a good gaming. I'm not like

1:05:13

casual games on mobile is not what I want to

1:05:15

do. Like there's people that do that well, that's great, but

1:05:18

I'm not excited about it. I don't think I would be

1:05:20

good at it. So how do I get exposed to that

1:05:22

part of the business? And so back one was that proxy

1:05:24

for me. I do believe in the

1:05:26

space. I want to work on something that I

1:05:28

find exciting and the benefits from that side of

1:05:30

that market, but also from some of the things

1:05:32

that are just now possible, like cloud and streaming

1:05:35

and the tier one games arriving on mobile.

1:05:37

But I try to sometimes find polls like

1:05:39

that, or have the

1:05:42

founders convinced me that this is an

1:05:44

opportunity, but there's very few ongoing themes

1:05:46

that I've been holding for a long period

1:05:48

of time. Yeah, it's fascinating. What's so

1:05:51

cool about it is you get

1:05:53

exposure to all these different markets, but

1:05:56

really what you're learning is about the person's

1:05:58

ability to explore these new spaces. And.

1:06:01

I'm leaving serious and the consumer subscription side.

1:06:04

If you visualize a big bell curve what

1:06:06

other movies are normally distributed. but if you

1:06:08

look at the price being charged by all

1:06:11

these thanks how well explored or revealed D

1:06:13

V like that bell curve as backed off

1:06:15

at ten or twenty dollar thing. Where did

1:06:17

the prices cluster and what of the extremes

1:06:20

was the highest price for your you seen

1:06:22

for a subscription or something like that? Their

1:06:24

areas to explore into pricing and value curve

1:06:27

Still the thank. Definitely. Path

1:06:29

I think we're super early

1:06:31

it understanding the best and

1:06:33

most accurate value extraction for

1:06:35

these companies. I see

1:06:37

calories from anything. Thirty bucks a year. Two

1:06:40

hundred and fifty bucks a year right now.

1:06:42

but I don't think that that's the ceiling.

1:06:44

I think, especially my approach. premium products lends itself

1:06:46

to the perhaps luxury type positioning for those applications

1:06:48

if you do them right. and if people get

1:06:51

real value from them by the way, that doesn't

1:06:53

have to be only a subscription for his subscription

1:06:55

one of the revenue streams and you have all

1:06:57

these different parts of the business that you can

1:06:59

then serve other groups of, it's hard to you

1:07:01

tear it or do you have ways that you

1:07:03

get the subscription but then you have an on

1:07:06

demand sucked on top of it. vague and prices

1:07:08

culminate and south. I'm not going to be the

1:07:10

one that comes up with those things, but I'm

1:07:12

on a bus and exciting And a girl that

1:07:14

comes. Up with them hopefully it's and then try to

1:07:16

transferred to the rest of the market. If. You

1:07:18

think about the trajectory from. Twenty. Eleven,

1:07:20

the excellence and it was all this.

1:07:22

We are the six price. And.

1:07:26

Then. Fast forward to thirteen

1:07:28

years later and you have companies that charge

1:07:30

hundreds of bucks. Per. Year for the

1:07:32

ads. Work with that. Go.

1:07:34

I don't know, but I like to be exposed

1:07:36

to that. I. Don't think we need

1:07:38

it for the fun to work but is the

1:07:40

specter of you can charge more and you can

1:07:43

find better ways to monetize those users and perhaps

1:07:45

ai is a piece of that and as different

1:07:47

ways that you can expand from consumer only to

1:07:49

prose who went to teams to it the eyes

1:07:51

to it's partnership is. Only. a few

1:07:53

of those things have to work out for it

1:07:55

to make sense and so i do just tried

1:07:57

not to have too many preconceived notions a d

1:08:00

in that space where there's just a lot of things

1:08:02

developing all the time. Another way

1:08:04

to think of is 90% of the apps on

1:08:06

the App Store today are subscription apps and

1:08:08

all consumer software comes through the App Store. And

1:08:11

so all innovation that happens in consumer software fits

1:08:13

my lens in some way. So from

1:08:15

being dismissed to, oh, you only do content apps to

1:08:17

actually, I can't position myself in a lot of ways

1:08:20

to be exposed to the future innovation in consumer software

1:08:22

and then tie in hardware and other types

1:08:25

of the infrastructure for those companies. Then things

1:08:27

like vending spoons that actually aggregate the things

1:08:29

that hit the ceiling earlier. They bought Evernote

1:08:31

and a bunch of other high profile things,

1:08:33

learning about where are the opportunities in the

1:08:35

market that I only understand because I'm so

1:08:37

deep in it. And

1:08:40

then following those, I

1:08:42

think, is exactly exploring the adjacent. What

1:08:45

have you learned about Act

1:08:47

2 and beyond for these companies

1:08:49

that you just said Evernote reached

1:08:51

whatever was natural ceiling of revenue

1:08:54

and couldn't be a $10

1:08:56

billion revenue company or something and

1:08:58

vending spoons is doing something interesting with it. What

1:09:01

have you learned about the natural caps of

1:09:03

the one product and when they need to

1:09:05

go into their next act and any lessons

1:09:07

there? Yeah, definitely. And as always,

1:09:10

I learned more every year with every company. But

1:09:12

currently, I think that the first learning was that

1:09:14

there is a natural ceiling. This is true for

1:09:16

SARS as well. And a

1:09:18

lot of people may, I think, dismiss the fact

1:09:20

that a lot of SARS companies then launch new

1:09:22

products, acquire other products, and that then makes the

1:09:25

revenue mix that actually is scalable. Usually, that's new

1:09:27

part of the product that get added. And

1:09:30

consumer founders have to do the same thing. The first

1:09:32

product that you put out is not the

1:09:34

only product that you have forever. And I think

1:09:36

that's a shift in mindset where the

1:09:39

ceiling that you reach is somewhat determined by

1:09:41

the retention that you're seeing and

1:09:43

the depth of the market and the cost

1:09:45

that is acquiring a user. And

1:09:47

if you have three pieces, you have a natural

1:09:50

ceiling. And so you have to overcome, ideally, all

1:09:52

three, but you have to work on all of them

1:09:54

over time. And so for me, I have a pretty

1:09:56

high confidence based on the lessons I've done that there

1:09:58

are certain benchmarks that if I see them. I know

1:10:01

that this is a company that could get to a

1:10:03

few hundred million of revenue. If you come in at

1:10:05

the seed on early A and you have a small

1:10:07

fund, that makes sense. There's already enough

1:10:09

there for it to work. I want to get

1:10:11

better. I want to help the founders and I

1:10:14

want to further my understanding of what we're doing

1:10:16

and push also maybe the playbook and explore it.

1:10:18

And so I think that

1:10:20

right now it's super important for me that

1:10:22

the product itself lends itself to that expansion

1:10:25

of act two and three. So for consumer,

1:10:27

prosumer products, for example, I think very

1:10:29

clearly the first act is you have to consumer app,

1:10:31

you push it out. Second act is you begin to

1:10:33

bring to web or another platform. And then the third

1:10:36

app is usually something that it could be an API.

1:10:38

It could also be just a more focused

1:10:41

go to market around the enterprise and solutions that

1:10:44

are not possible with the app itself. And

1:10:46

so I now, because of

1:10:48

what I've seen in some of the content focus,

1:10:50

subscription apps, I try very early

1:10:52

to push the urgency of we

1:10:55

need to think about those things and put the

1:10:57

foundation in place around what it could become. PhotoRoom

1:10:59

is a good example of that. The first email

1:11:01

that I sent to mature the CEO after I

1:11:03

invested was actually, do you think we could do

1:11:06

an API around this? And it was probably three

1:11:08

years until we had customers. But now we have,

1:11:10

and you can go on the website, but

1:11:13

it's a very impressive list of customers that

1:11:15

use PhotoRoom for marketing, for scaling, image, and

1:11:17

production. And the press customer, like Warner Music,

1:11:19

Fortune 500 companies, big brands

1:11:21

that use it. And there was no sign

1:11:23

of that early on. But you have to

1:11:26

believe that. So basically, the underlying technology itself

1:11:29

has to be strong enough to come

1:11:31

through in different surface areas. The mobile

1:11:33

component is the first of that. And

1:11:36

it's the easiest to scale. It has reached in

1:11:38

200 countries. And you need a very

1:11:40

small team to do it well. But then

1:11:42

from there, you have to set the right foundation

1:11:44

for the next acts early

1:11:46

enough so that you overcome the

1:11:48

ceiling before you reach it. Because

1:11:51

you don't want to flatten out and

1:11:53

then have to hustle to get the momentum back and

1:11:55

grow it. But basically try to put those things into

1:11:57

place very strategically as you are getting

1:11:59

to the hundredth. The million dollar revenue is already

1:12:01

start working on those stunts. and

1:12:03

some my role now is often times

1:12:06

just reminding foreigners that even though the

1:12:08

growing like crazy in this consumer prose

1:12:10

whom are offering. Probably. We're

1:12:12

not gonna get to billing us and revenue

1:12:14

maybe. Do you want to leave it to

1:12:16

chance? I do. just one. It's sad putting

1:12:18

in place some of the structure and foundation

1:12:20

that allows this organization to go from the

1:12:23

source offering to a second platform or a.

1:12:25

Different. Product that bundles the same capability

1:12:27

and technology in a different ways to

1:12:29

serve different use cases. thinking.

1:12:32

Long term and that way we've got this

1:12:34

great list of guidelines, rules, principles for yourself

1:12:36

and how you operates and to them suck

1:12:38

out to me and they're related. One is

1:12:41

do not compete and the other one is

1:12:43

that you want people to pull you either

1:12:45

want to push. And they're slightly

1:12:47

different, but they're in the same ballpark. What

1:12:49

advice would you give people that want that

1:12:52

seems set up? They. Want to do

1:12:54

great, They want to work hard, they want

1:12:56

to contribute built something. but they want to

1:12:58

do it that way. that's not in that

1:13:01

fierce competitive read oceans and instead wants to

1:13:03

think long term and be willing to act

1:13:05

long term. decreed that kind of setup arts

1:13:07

more of a gravity the you're creating not

1:13:10

a tip, the spirit gotta get and every

1:13:12

battle and site and when all the time.

1:13:15

It goes back to some of the things we

1:13:17

discussed were. first of all, You. Need

1:13:19

to have an awareness of both. Where.

1:13:22

the current market and competition is and

1:13:24

then sell select out of that. Because

1:13:27

I could have also kept going and people forget

1:13:29

it. So funny. Also to me that because I

1:13:31

talk about the two most of his none of

1:13:33

his the that's a lot of for the Jason

1:13:35

is known for us and that's good because that

1:13:37

was the intention but for the majority of my

1:13:39

career invested in and if I suspect. I've.

1:13:41

Learned a lot and the press offer and I to sell

1:13:43

out of that to as a sense but. I.

1:13:45

Understand how most people to date

1:13:47

think about companies and where the

1:13:49

opportunity sites. And then I decided

1:13:52

since everybody uncensored. now I try

1:13:54

to move onto something that is

1:13:56

that understood. And. then how do you

1:13:58

the confidence or on that model i think need

1:14:00

to do investments to actually

1:14:03

learn, does it make sense? I was very

1:14:05

lucky that one of the early investments at

1:14:07

point nine is completely out of character

1:14:09

mobile first consumer company that was the

1:14:11

highest entry valuation we paid, the lowest

1:14:13

ownership and it's probably the highest value

1:14:16

in holding that they have today. So

1:14:18

breaking that model and following that instinct

1:14:20

and then learning that having the positive

1:14:22

feedback loop of actually there's something here

1:14:25

and it is based on the things that

1:14:27

I had experienced prior and the convictions that

1:14:29

I had about a specific category from

1:14:32

other learning I took into that that made

1:14:34

me believe that and that then

1:14:36

giving me more confidence over time with also at

1:14:38

insight I did a lot of enterprise software but

1:14:40

we also did these consumer companies and so more

1:14:42

data points accumulating to then say okay I know

1:14:44

it's a risk and I'm okay with the uncertainty

1:14:47

of maybe those companies are not going to be

1:14:49

as big as some of the SaaS companies or

1:14:51

other types of companies but I have enough conviction

1:14:53

here that small fund companies can do very well

1:14:55

with that. This is my trajectory but

1:14:57

I think the advice would be just understanding

1:15:00

what you're passionate about, understanding

1:15:04

that there's a unique perspective that you probably

1:15:06

have that other people do not have and

1:15:08

understanding that if you share the same

1:15:10

perspective as everybody else, there's probably very

1:15:12

little differentiation and the people that

1:15:15

are already in place and have the biggest brand or

1:15:17

the biggest resources and fund size and people, they

1:15:19

will out compete you because they're doing the same thing and so

1:15:22

what is it that you see or

1:15:24

have experienced or the perspective that you

1:15:26

can bring that perhaps is less known

1:15:28

and that also is more risky because

1:15:30

it might not work out because if

1:15:32

it was known then that opportunity wouldn't

1:15:34

be there and so I think it's

1:15:37

trying to find that intersection of this

1:15:40

is something that I think will

1:15:42

happen in the future, this is the data point that

1:15:44

I can lean on and then having

1:15:47

the confidence to accept some uncertainty around whether

1:15:49

it actually turns out to be

1:15:51

true or not and then hopefully taking a

1:15:53

calculated risk where even if you're

1:15:55

off or it's not exactly where you want it to be,

1:15:58

it's still going to be a success. That's how I play. at

1:16:00

least. Maybe other people would like to be more

1:16:02

aggressive and they just go all out, raise crazy

1:16:04

funds for something. I want adjacent to be a

1:16:06

win for everybody independent of how right I am.

1:16:09

And so I try to leave that room for error that

1:16:11

it's a solid fund. But if Duolingo

1:16:13

keeps rising, and I have a couple of

1:16:15

them, and then it's going to be a

1:16:17

very great fund. And so I think it's

1:16:19

a process of learning and confidence and then

1:16:21

willingness to take that risk and accept the

1:16:23

uncertainty as well. If

1:16:25

you had to name three products that

1:16:27

you've ever personally used and experience, not

1:16:29

necessarily invested in though that could be

1:16:31

the case, that

1:16:33

best exemplified beautiful product.

1:16:37

What three would you pick? I

1:16:39

think one that naturally comes to mind is

1:16:41

type form. Probably it's a software

1:16:43

product. And why I say it's beautiful is

1:16:46

that I mean, it's beautifully designed,

1:16:48

but also it's not just visually beautifully designed,

1:16:50

but it's also designed in such a way

1:16:52

that the usage of the product itself drives

1:16:55

the distribution. Because you go in,

1:16:57

you have this, this is also like you can actually

1:16:59

quantify how much better this if you look into a

1:17:01

completion rates of type form because

1:17:03

it's across that from its beautiful and mobile

1:17:05

is beautiful in the web, it's just much

1:17:07

more conversational than a SurveyMonkey or you just

1:17:09

click the button type of survey. But

1:17:12

then also by using the product, not just does

1:17:14

it actually increase conversions and give more data to

1:17:16

the people that want to use it. But also,

1:17:18

most of the new signups come from people that

1:17:20

were asked. The product itself is designed

1:17:22

in such a way that the experience

1:17:24

of it is great, it has

1:17:26

superior results, it's visually pleasing intuitively

1:17:28

to understand, but also that distribution

1:17:30

baked into all of that. You

1:17:33

can see the design of it touches so many

1:17:35

aspects of what's required for a company to be

1:17:37

successful. That is one that I

1:17:39

like, I probably have to say that the iPhone

1:17:41

also because it was just so important for my

1:17:43

trajectory, the breakthrough from the Blackberry to an iPhone.

1:17:46

It's probably the correct answer. Yeah,

1:17:48

it's just such a combination of the

1:17:50

things. And also, this is the parallel to

1:17:52

the vision process, the big unlock or one

1:17:54

of the big unlocks is this intuitive interaction

1:17:56

with the software. If you hand a child,

1:17:59

I or a phone, it's

1:18:01

very intuitive how you actually engage with it. My

1:18:03

two-year-old was doing things on the iPad, taking

1:18:06

pictures, and I was like, that never could

1:18:08

happen on the desktop computer or a Blackberry

1:18:10

phone. And so I think great technology is

1:18:12

increasing the friction to

1:18:14

interaction of the digital

1:18:16

realm and the

1:18:19

iPhone is a good example, type form is a

1:18:21

good example, Aura Ring is a good example

1:18:23

where it's actually not clear that it is

1:18:25

a technical product. It's very

1:18:27

subtle, there's no screens, but there's

1:18:29

a lot of technology in it, and then it

1:18:32

becomes super powerful in

1:18:34

combination with the phone, where the

1:18:37

data that you get out of it is very insightful

1:18:39

and actually makes your life better. I mean, I

1:18:41

guess for some people they can over obsess on

1:18:43

all of that, but compare this to

1:18:45

any other way to measure all those vitals. You

1:18:48

put it on, it's a small ring that

1:18:50

you can't even properly say that it is

1:18:53

baked with technology, so decreasing the friction to

1:18:55

getting that measurement and then developing

1:18:57

it over time every year, new vitals,

1:18:59

new things that actually I can show

1:19:01

you about your life that make you

1:19:04

sleep better and watch your resilience and

1:19:06

your stress. It has a real impact

1:19:08

on your life, but it's so easy to

1:19:10

get going. I think decreasing

1:19:12

the friction is one of the

1:19:15

major themes that I think helps make consumer products

1:19:17

really great. It's interesting as I

1:19:19

think about you and your portfolio that you're one of

1:19:21

those people that I would probably

1:19:23

be most prone to go into each

1:19:25

portfolio company and go see what they're

1:19:27

building and try it. I remember

1:19:29

doing that when we first met and just being like,

1:19:31

wow, there's all this cool stuff that seems on its

1:19:33

face interesting. And part of that is

1:19:35

that it's consumer, of course, but it's meant as

1:19:37

a complement to the portfolio you've built so far.

1:19:39

I ask everybody the same traditional closing question, what's

1:19:41

the kindest thing that anyone's ever done for you?

1:19:44

Sorry, I thought about this because I know you're

1:19:46

asking that. I do have to give you

1:19:49

three levels to that answer because it would

1:19:51

be unfair otherwise and it's hard to compare.

1:19:53

But I think on a professional

1:19:55

level, I do think that it

1:19:57

was Pavel, one of the founders of Point9. to

1:20:00

show me the world of venture when

1:20:02

I was a university student doing

1:20:04

importing and exporting of iPhones and

1:20:07

reselling them. He saw

1:20:09

that and he believed, I guess, in my

1:20:11

potential and gave me an opportunity to learn

1:20:13

what venture is by first in internship, then

1:20:15

part-time work, and then full-time work

1:20:17

with point nine as I graduated. And I was young

1:20:19

at the time. I had no experience

1:20:21

that warranted that. And there's still a

1:20:23

great relationship. We co-invest and I think that

1:20:25

was really a moment of putting

1:20:28

me on that path that otherwise wouldn't have happened.

1:20:31

On a personal level, I have

1:20:33

to say at least my wife. I'm a complicated

1:20:35

person, but she married me. She's

1:20:37

staying with me. She loves me. And

1:20:40

we have two beautiful kids that

1:20:42

she brought into the world that

1:20:45

you know is probably the highest level of love

1:20:47

you can feel for anything. And so I'll always

1:20:49

be thankful for that. And I

1:20:51

have no question about how real

1:20:53

this relationship is, not just

1:20:55

between us, but also with the family. I didn't have this

1:20:58

experience of a tight intact family when I grew up.

1:21:00

So this is the first time I experienced it. And

1:21:03

it's probably the most important thing that happened in

1:21:05

my life. And then lastly, I

1:21:07

guess, on a spiritual level, I just believe in

1:21:09

a higher power and without naming it, and I

1:21:11

think there's different words and perspectives

1:21:14

on it, I do feel like that power

1:21:16

is looking out for me. I

1:21:18

do feel super grateful about that. I

1:21:20

sense of security and I also feel a

1:21:23

sense of responsibility to actually give

1:21:25

back over the course of my life. And

1:21:28

I just have to remind myself

1:21:31

almost daily for the trajectory of my

1:21:33

life so far and how things have

1:21:35

fallen into place. And I do really

1:21:38

feel an immense sense of gratitude for that.

1:21:40

A beautiful answer. I don't think I've ever had a

1:21:43

three parter like that. I might start asking the question

1:21:45

in that way. It's a wonderful way to close our

1:21:47

conversation. Nico, thanks so much for your time. Thanks

1:21:50

for having me. If

1:21:52

you enjoyed this episode, check out

1:21:54

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