0:00 [Music] okay Eric um try really hard again to imagine that we're total idiots and we're dumb but some of us are smarter than others yeah yeah he's the dumbest he's imagine we're all him I'm the youngest why are you just accepting this because it's one of those things where if you want to improve you have to accept your fault you want to know the truth you want to know the truth because cuz he could physically kill us right now honestly that's a great way he's a Jiu-Jitsu star because if I wish star was how you would if you're secure enough to let them call you stupid that means you strong as ████ you got a big dick or you're funny no no all three all three wish he's actually the I'm trying to be smart I'm trying to read more books the people who get ripped on the most are the coolest people but he's actually the most lethal person here end our lives whenever he wants to he's a
0:50 pro fighter you have a gun on you and his dick is huge yeah I wish that was true like out of all of it I wish that this will actually benefit you and your comp because you are personal that's why I'm shutting up and I'm listening okay there's something very primitively powerful about the fact knowing that a guy can just beat the ████ out of it when they it's the end all like that's the end of the discussion when the apocalypse happens I want you by my side if you saw how we train you'd be like that guy's not that not that prompting by way is when when startups raise millions of dollars like where is that money coming from yeah let's talk about that cuz you know like as as just like I know I look at myself like I'm so outside of that stuff and then I just hear of a guy go yeah I started this thing and uh we're on our series a funding I got 8 million I'm like where where is that coming from raising money is super ████ weird
1:42 there's two three things that matter and I'll first skip Conta we've raised over 100 million today and that's just to say there's a lot I don't know about how this ████ works but this is the stuff I learned from what we've done okay so Point number one just because you raise money doesn't mean you're going to succeed and when a venture back company raises money it's because the investor thinks there's a small but real chance they're going to be a billion doll company let's go through an example Clubhouse you might remember pandemic oh yeah very early on they raised money and Drayson Horwitz gave them money and the valuation was over $100 million and people were like what the ████ clubhous has existed publicly for like 2 weeks you have like 5,000 users how from a revenue basis could you possibly be worth a $100 million and the answer is yeah cuz it wasn't because when a Dron
2:32 Horus gives that money all they're saying is we think that your company has a 10% chance of being a billion dollars so I'm going to give you money at a valuation of 100 million every investor is just a valuing your chance of being a unicorn and in Drayson horse would rather you have a 1% chance of being a$1 billion company than a 100% chance of being a $5 million one because most of their startups fail they need to hit home runs if you have a successful business you're 5 million 10 million 50 million in Revenue they don't see any exit and so when you raise money when we raised our very very first round the valuation was low from a venture perspective it was less than 10 million that means from a VC perspective they think we have like I don't know like less than like a 0.1% chance of like
3:22 being a billion doll company and then as time goes on every time you raise money you're telling a story of here's why I think we could be a billion dollar company and the way you tell that story is last time we raised money it was to answer this question and if we now successfully proved that out to you here's three more questions we need to answer on the way to where we're a billion dollar business give me money so I can prove the second question in that series let's take our company Cara as an example there's only three or four questions we need to answer if we're really a billion dollar company number one the Creator Market is big and growing guess what if the answer to that is no we're dead in the water and when we raised money for our very first round that's what we were trying to focus investors on if you think this is going to be real give me money and 99% of investors they won't think that and you
4:12 will never convince them you have to find the people who already believe in division and then convince them you're not going to ████ it up so we raised a little bit of money at a low valuation people are like you have a point 1% chance succeeding just based off we're going to show you creators are a real existing Market that's going to grow and this is 2019 so 2020 happens all the creators blow off everyone's like wow these car guys seem really smart and it's like well you know we also got lucky from the market timing the second question is cool creators are businesses because there's a world where every Creator just ends it being a Hollywood celebrity Hollywood celebrities aren't businesses they don't understand what they're doing from a p&l basis because the structure is you will have one Brad Pit and 99 gazillion waiters and waitresses because the costs of getting content out are so expensive that you have to beiter let me
5:03 find the next J Bieber have indry of Agents andr people to find that but on YouTube you could like I don't know be a 25-year-old dude who talks about knitting who lives in Georgia and you can make six figures on YouTube doing that and then we're like okay we think you're a business so number one the market grows the Creator thing is real number two creators are business number three they need help with their business Financial products and we can find that first wedge product that's when we're like look we think it's the card so we raised 1.5 million off that first question then we raised another 3 million on that second question then we raised 11 million in equity off that third question hey we think not only is the creator Market growing and their businesses we found the first product it's this card the biggest creators in the world are organically adopting this we don't pay for influencer activations because why would you trust a influencer product that influencer had to be paid
5:54 to use and then when we raised our 40 million series B INE Equity the fourth question was now we need to prove we can cross- sell them into other products and services that's what we're doing now into this insights tool into bank accounts and the fifth one will be cool now make it all profitable which is hard you might be sitting here being like why the ████ would someone give you money if you're not profitable and it goes down to that first point I said we have a small chance of being a billion dollar company it's a small one and any startup founder who says otherwise is lying and full of ████ but that's the economic model a venture firm wants there's a chance we literally become square and we blow up and so they're giving us money even though we're not profitable to build out the customer base the underwriting model where all might fall together take Facebook as an example Facebook was not profitable for a long
6:44 time because their main focus was let me acquire users if I acquire people and users on this social network more than anyone else eventually I can monetize via apps but if I prematurely try to monetize before building the user base the exactly and so you need Venture Capital to cover you the only times you should raise Venture money then for your business are when you think you actually have a small chance of being a billion dollar company and you are okay with a very high chance that you will fail we've brought on a lot of creators as Angel Investors on to carrot the first thing I always tell them is I want you to know as an angel investor the odds are this won't make you money because we're a startup and that's risky and Venture Capital firms can afford to do this as a portfolio of bets so you
7:35 should only do this if you're okay losing it because you actually believe in the product and put in a small amount I don't want you to put in more it because I don't need the capital from a Creator I just want the relationship I'll give you everything and I'll be okay with no no don't do it this is where we come back in a few years and he talks about what happened after teral Luna I'm like absolutely I threw 10 Mill in carrot oh do that not even pitching he's like you got it got it we doing business he's like okay just give me a little and don't you know don't Bank on this all right I'm going to give you a lot and I'm not going to care about it yeah goes back to our ear I'm going to Care hella you have to be a special kind of stupid to run a business and when I tell you this yeah I like your little hey look at me my co-founder and I we doing
8:25 this because we truly believe in it we still believe and our team believes too but you have to be able to hold two opinions in your mind as a Founder to both acknowledge why we think this can work why we think people are wrong and also to ackowledge why we might be wrong and go into this knowing the risks and so all of that it is a burden and a responsibility when you take on Venture Capital because that money is not your own that is not my money it is money I've taken on with the expectation of there is a small but real chance we turn it into way more and give it back to the people who invested in than us and this goes back to another Point we've talked about people who own capital and make investments typically make more than people who work from a venture capital perspective they've given me money they've given my co-founder money they've given tons of other companies money now they kind of just wait and we're out here losing our ████
9:18 yeah trying to make it happen and they had the money to start with to see that return the CEO of Nvidia he did an interview recently they asked him it's one of the most valuable companies in the world right now that one Asian dude right yeah exactly you've seen this it sounds like if you could do this again what would you tell yourself and he says go do it it's great it's great don't do it ████ fail yeah so to answer your question when you raise money it it's a game that most of us coming from a traditional background never thought of I grew up thinking you can never convince someone just to give you money you have to like put into the work you have to work yourself the way up and then again I told you I met my friend who raised a million dollars living out of his car and I realized no it's different you can convince people that there's a chance if you tell the story and you have the right context the knowledge relationships but then you also have to accept the other side of it the
10:08 responsibility of it might not work at that scale when somebody gives you like 20 million right you get this angel investor yeah when do they expect to have a return years like is it all listed is it like is your is like the whole timeline written down of percentages or how how much amount it's all down in paperwork it's all categorized and there's a saying if you're a venture capital in investure you have no idea if you're good or not until at least 10 years have passed and what's your um consequence if it doesn't pan out from a liability perspective never walk again that's that's when you sit Kim on me do you have personal guarantees do you have like unless you um there are cases where like you can take out loans with personal guarantee but typically as a Founder there are not personal guarantees on you usually if it's Equity
10:59 money you just lose the money and so the main risk is reputational oh cuz if you want to continue this they're like that guy ████ up that whole thing and sometimes lawsuits sometimes lawsuits you did something wrong like Theos or whatever um but there's like this weird dynamic people ask why is every start founder based in Silicon Valley San Francisco what's so special about these ████ hoodie wearing P right whatever and it's because exactly the pagos there's a culture there in the valley where if you f and you've lost money they'll give money to you again like the we work guy like the we work guy that people that that's insane andon horz put in like a $50 hundred million something crazy into the weor guy after weor didn't work out or here's another example Justin Khan is the co-founder of twitch he's done multiple companies
11:51 after that did not work he did a company called Atrium it was meant to help automate Legal Services he raised over $50 million for that and it didn't work and he shut it down and in the valley that's not viewed as you ████ that's viewed as respect because it's so hard and unlikely he's still trying you're still trying you're taking a bet but that's why there's a difference when you're chatting with someone from the valley versus someone not people in the valley these are Venture investors whose job is to deploy money they expect losses but if you go to someone outside the industry and you're like hey like you want to invest we try not to to take on folks outside the valley because hey if this doesn't work out you might have expected oh there's a 99% chance we're going to succeed when actually venture-backed startups typically don't
12:41 but again if you put money into 100 startups and one of them becomes Facebook you actually do great yeah you won yeah right U my question now is obviously now that you guys have heard this you can tell he's probably really good at pitches what is your ratio of people that are like no thanks majority are no thanks when like doing auditions in Hollywood pretty much yeah 100% wow I remember one of her very early pitches in like our preer seat stage we pitched to relatively relatively well-known Silicon Valley firm and the guy at the end of it just said so you work with twitchers what the ████ is a twitcher tweaker twerker that's not even the right terminology and I knew he wouldn't give us money because VCS their job is to make you feel special so they'll take meetings just to learn he wasn't taking
13:31 that meaning to invest in us he was taking that meaning just to learn what's this whole Creator thing that's happening he's getting Intel for himself yes that's the job investors the way they can the landscape exactly they need to know what's happening in the markets and they need to know lots of people so they can make interest they won't always take a meeting and they will rarely tell you your idea sucks because they want to maintain that relationship so the pitch is almost both ways where you're also trying to tell if this guy exactly and so the majority no they're not into it like I said B it's a both you can't convince people to believe in something they don't you have to find the people who already believe and just say I'm the right person to make this happen how do you look for VCS is there like a directory somewhere or like do you look at there's Tinder for that and are you look at companies and you go like oh they've already invested in projects like mine so their ches are higher like
14:21 how do you so there's two ways to think about it the first is in an ideal world yeah you would look through the list of venture capital investors of which you can find these list on online and you reach out to them cold and if your idea has Merit and you're good they will recognize it and they will invest in you this does happen but not often 99% of the time it's through relationships and connections and people you already know and a lot of people see that as privileged and biased to which I would say yes and unfortunately that's how the world Works two people come in they're exactly the same one of them you've known the other you don't we're human beings we're animals we're going to go with the one we already know and so like for us I had spent a lot of time already in the tech ecosystem Network and getting to know people and so my co-founder but I want to reiterate it's
15:12 not like I came in knowing everybody you had to work to build those connections we got into Y combinator which is a top startup incubator that like Dropbox Airbnb Stripe have gone through the way that happened is a great example of how you balance privilege versus making the most out of it I went to a Meetup and the Meetup was for Harvard alumni interested in YC privilege right there I'm grateful I got to Harvard except there are a lot of people there weren from Harvard cuz they hustled and they just went there anyways when we got there I saw one of the partners was from Harvard as well I wanted to pitch him I knew there was like over 100 people in that Auditorium so when the Q&A time came I just made sure to that super obnoxious guy sitting at the front raising my hand to try and get every question and every time I ask a question I stand up say hi my name's Eric way
16:03 it's obnoxious and cringe as ████ but guess what you made a market yes when you don't have reputation to go off of you have to be cringe when you sit down you're like that guy's cringe well maybe they had to cuz they didn't have anything cuz he remembered me now maybe he might have been turned off that's the risk I had to take so immediately after I go up and I talk with him as soon as it nights I just run up to him obviously he rememb me that L is I Eric Wade it is a you remember me from earlier F5 we talk for maybe like only 5 10 minutes he remembers me immediately after I go send him an email and then for the next few months I send him an email like every week every month I have what you need no and I'm basically pitching him ideas I have the email chain and every time he's like this is this is a bad idea and then one day I pitched the idea that eventually becomes car and his reply
16:53 is you free tomorrow 3: p.m. to chat that's tight have you apped for y combinator yet and I'm like I reply I'm like Oh I thought y comary already started we can't even make it he's like take the call and we got into YC because of him wow and that guy after YC became one of our first angel investors who introduced us to our serious a and serious B leads down the line and this is a guy I didn't know this dude and so like yeah there's privileg connections this not like a family this is a guy just met as obnoxious as ████ that I followed up on and so to your point yes there's these V's out there you have to think hard how do I get to them but that's no different even in the con everything is about collaboration well before I met you B I already knew who you were you know F Christian he spoken really highly about you about you Joe yeah exactly right like I knew Graham was like neighbors with you before right we were at an event with Sam and Colby
17:44 like there's a lot of social proof that always comes instinctually when you get to know somebody and that is just how the world works and you have to think about cool I accept this now what can I do to make use of this Eric I just want you to know that my name is Anthony Lee stand up stand up yeah yeah introduce yourself the kjas and yeah dude uh my dance crew the kjas you'll hear of us one day I already know who KES is uh early we work with merch Labs holy ████ Daniel there it is ████ Daniel knows my co-founder really really well ████ privileged well Daniel prints out our t-shirt I know I'm aware that's why I'm saying a lot of it is you spend time in a space and you try and do things right and you get to know people yeah don't for an Le 6 feet tall he's a good guy 512 true six are all are you when I walked in here I was like you
18:35 ████ are all tall no but you were sitting down I wasn't sure you riing on him you RI it on him 56 is pretty tall I think in the video where you're at but you're a professional fire you the ████ out of not even professional a disadvantage in his oh sorry sorry I'm sorry he is Prof shortest guy here wait no Joe how tall are you I think 5' seven or [Music] six
// end of tape